THE FEDERAL TECHNOLOGY TRANSFER ACT OF 1986: THE FIRST TWO YEARS

EXECUTIVE SUMMARY

The Federal Technology Transfer Act (FTTA) of 1986 (P.L. 99-502) was designed to provide a bridge between the superb research facilities of government-owned, government-operated (GOGO) laboratories and the research needs of the private sector. At the time it was pending in Congress, United States citizens were investing more than $50 billion annually in R&D. Many in Congress and the Executive branch believed that this investment, however vital for federal programs, was not returning to the taxpayers sufficient dividends in terms of new products, new processes, new jobs, and enhanced international competitiveness. Reflecting the principle that those who best understand a technology and its economic potential are the ones who created it, the FTTA authorized agency heads to delegate to their GOGO directors the authority to enter into cooperative research and development agreements (CRADAs) with private firms and other appropriate parties, to agree in advance on rights the parties could expect in any inventions made by a federal scientist under the CRADA, to reward the inventor with at least 15% of any royalties received by the agency from the invention, and to review and clarify the missions of their laboratories.

In doing so, the FTTA required a change in prevailing agency practice and management prerogatives by transferring power from headquarters to the field. Some were concerned that the Act could interfere with agency management responsibilities, that it could divert attention from mission-related research, and that commercial considerations could discourage the free exchange of scientific information.

Under these circumstances the Department of Commerce, which plays
a general oversight and coordinating role, was concerned that
the Act would be interpreted in the narrowest possible manner.
Instead, the Department found the following:

Most agencies with substantial GOGO activity are relying on
the FTTA and have completed the necessary internal admin-
istrative arrangements for implementing it. Although the
delegations vary in scope, most have attempted to delegate
authority to the smallest unit that can be realistically
called a laboratory. The National Aeronautics and Space
Administration is the one major research agency whose
organic statutes, rather than the FTTA, guide their
technology transfer policy. The Department of Commerce
will continue to monitor the various agency arrangements
to ensure that the principle of decentralization is
preserved.

As of the close of FY 1988, agencies had negotiated more
than 100 CRADAS and the pace has accelerated in the
current fiscal year. Several agencies believe that even
though some of this research may have occurred under other
authorities, the FTTA nevertheless provides a much more
useful tool for structuring the collaborative arrangements.
The FTTA has spurred agencies to think creatively in
developing technology transfer initiatives. Examples
include USDA's Peoria Biotechnology Consortium and the
Army's Construction Productivity Advancement Research
(CPAR) Program.

The incentives to federal scientists appear to be working
beyond expectations. Agencies have been generous in using
their royalty-sharing authority, in some cases allowing
inventors to retain as much as 35% of the royalty income.
The number of reported inventions increased by more than
40 percent in some agencies between FY 1987 and FY 1988.
Although CRADAs are too new to have generated royalties, the
pattern of payments to inventors under the Bayh-Dole Act
(P.L. 96-517, as amended), including the Department of
Energy's government-owned, contractor-operated facilities,
suggests that substantial royalties may be generated.

Nevertheless, there are still obstacles to be overcome:

Barriers to commercialization of Federally developed software are still a problem. Software often has substantial commercial value which may not be realized because most U.S. firms will not make the investment necessary to bring it to the marketplace without adequate proprietary protection.

Agencies repeatedly report that private sector collaborators worry that proprietary data will be made available to their competitors through FOIA. Such concerns may have deterred some firms from seeking to enter into CRADAS.

The private sector does not always use federal facilities when they might. In order to facilitate identification of relevant areas of cooperation, agencies must continuously examine and define their laboratories' missions, as required by the FTTA, especially in those cases where the program justification is not clear. Foreign entities, on the other hand, are adept at identifying valuable research projects at federal facilities.

In general, agencies heads and laboratory personnel have greeted the Act with enthusiasm. U.S. firms are becoming increasingly aware of its relevance to their needs. The FTTA may well be creating the framework for a new era of scientific cooperation between the public and private sectors.

THE FEDERAL TECHNOLOGY TRANSFER ACT: THE FIRST TWO YEARS

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Enactment of the Federal Technology Transfer Act (FTTA) of 1986 (P.L. 99-502) was largely a response to the increasingly tough international economic competition facing the United States. all accounts, this competition will intensify as more countries, anxious to promote their economic development, enter the high technology competition. This is a healthy competition. The United States, however, will be unable to meet this challenge if it takes its technological leadership for granted.

Remaining competitive in fields such as superconductivity, biotechnology, new materials, pharmaceuticals, and other research-intensive areas could depend in large measure on our ability to link more closely our unsurpassed public research institutions with the needs of the private sector. U.S. industry's cooperation with universities and federal laboratories will become even more critical in determining whether we will be able to remain on the cutting edge of technology.

The Federal Government funds a substantial share of the R&D performed in this country some 47%, according to the 1989 Economic Report of the President. Thus, a substantial share of the world's new scientific knowledge is paid for by the U.S. taxpayer. If this public investment is not translated into new