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FACILITATING LICENSES TO FEDERALLY-OWNED INVENTIONS: A LEGISLATIVE HEARING ON H.R. 2544, THE TECHNOLOGY TRANSFER COMMERCIALIZATION ACT
TUESDAY, MARCH 17, 1998
U.S. House of Representatives,
Committee on Science,
Subcommittee on Technology,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:05 p.m., in room 2329, Rayburn House Office Building, Hon. Constance A. Morella, Chairwoman of the Subcommittee, presiding.
Mrs. MORELLA. I'm going to call the Technology Subcommittee of the Science Committee to order and I want to welcome and thank all of you for joining us.
This afternoon, we're going to—we're holding our legislative hearing on H.R. 2544, the Technology Transfer Commercialization Act, which was introduced by me last September.
H.R. 2544 continues the Science Committee's long and rich history of advancing technology transfer from our federal laboratories to help boost United States' international competitiveness.
Beginning in 1980, enactment of the Stevenson-Wydler Technology Innovation Act to the Federal Technology Act of 1986 to the passage of my National Technology Transfer and Advancement Act in the previous Congress, this Committee has worked diligently in a bipartisan manner to promote greater partnerships between government and industry.
As a result of these laws, in almost 2 decades, the ability of the United States to compete in the global marketplace has been strengthened. A new paradigm for greater collaboration among the scientific enterprises that conduct our Nation's research and development—government, industry and universities—has been developed and the quality of life for the American people, from medicine to materials, we believe has been improved. This has been done by encouraging the transfer of technology that is generated in our Nation's over 700 United States federal laboratories to industry for commercializing new processes and products. By spinning off and commercializing federally-developed technology, the results of our federal research and development enterprise are used today to enhance our ability to compete in the global marketplace.
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This is a third hearing on technology transfer that this Subcommittee has held in this Congress and it's the second one discussing this bill, H.R. 2544. Our first hearing was held last July; we focused on one of the federal technology transfer success stories which is how research from our federal laboratories has improved the functional capabilities of the 49 million people in the United States with disabilities (See Serial No. 105–26). And then, last September, we discussed the effectiveness of our federal technology transfer laws and, specifically, this bill, 2544 (See Serial No. 105–27).
I was pleased that the witnesses in September all endorsed the concepts behind the bill and expressed their support for streamlining and making technology licensing more effective. H.R. 2544 seeks to remove the legal obstacles to effectively license federally-owned inventions created in government-owned, government-operated laboratories by adopting the successful Bayh-Dole Act as a framework.
Under the bill, agencies would be provided with two important new tools for effectively commercializing on-the-shelf, federally-owned technologies; either licensing them as stand-alone inventions, under the bill's revised authorities of Section 209 of the Bayh-Dole Act, or by including them as part of a larger package under a cooperative research and development agreement. In doing so, this will make both mechanisms much more attractive to the United—to our country—to our companies here in the United States that are striving to form partnerships with federal laboratories.
I believe that H.R. 2544 is yet another important step in refining our Nation's technology transfer laws to remove existing impediments to enhanced government and industry collaboration and I'm going to push for its enactment before the end of this Congress. To reach this goal, I intend to work closely with the Administration, members of the Minority, in the next few days to fashion consensus revisions to the original bill that incorporates the concerns of all affected parties. This Committee's previous technology transfer efforts have been successful in part because of the collaboration and the bipartisan nature of the legislation. I see no reason why this bill should be any different.
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I was pleased to have received, a few weeks ago, the Statement of Administration Position on H.R. 2544. The Statement of Administration Position—forgive me, but it's—the acronym is SAP—[Laughter.]—indicates the Administration's strong support for the goals of H.R. 2544 to simplify the requirements imposed on federal laboratories in the licensing of their inventions and offers a series of suggested revisions to better achieve that objective. So, I can ensure the Administration that these views will be sufficiently considered as we move to consider the bill in the House.
To further assist us in our consideration of H.R. 2544, I want to welcome our distinguished panel of witnesses. There will be one panel of three witnesses featuring Administration witnesses, a representative from large industry, representatives from small business, and the witnesses will be Ray Kammer—whom we know full well on this Committee—Director of the National Institute of Standards and Technology, Department of Commerce; Mr. Randolph Guschl, Director, Technology Acquisitions of DuPont, Wilmington, Delaware—also no stranger to this Subcommittee—and Ms. Elizabeth Kraftician, Chief Executive Officer of Touchstone Research Laboratory in Triadelphia, West Virginia. I look forward to hearing their testimony, and it now gives me pleasure to recognize the distinguished Ranking Member of this Subcommittee, the gentleman from Michigan, Mr. Barcia.
Mr. BARCIA. Thank you, Chairwoman Morella. I want to welcome everyone to this afternoon's hearing and say that I am very pleased that we are holding a second hearing on House Resolution 2544, the Technology Transfer Commercialization Act. House Resolution 2544 strives to build upon the landmark Bayh-Dole Act which was our major—first major step toward a unified federal patent policy. Bayh-Dole has done much to ensure taxpayers investments in federal labs are disseminated and utilized as widely as possible.
In many ways, the Bayh-Dole Act is the cornerstone of our technology policy. We all agree with the goals of House Resolution 2544; we all want to see that the products of federal labs are commercialized as quickly and efficiently as possible. However, we do not want to create new problems as we solve the old ones. House Resolution 2544's approach of cutting out public notice before exclusive licenses are granted and cutting back on the government's information about what a company will do with a license is counterproductive. During our Full Committee hearing last week on government-industry partnerships, Dr. Lou Branscone summed up the situation as follows: ''It seems to me that federal resources, namely smart people in facilities, are being used to work with companies. You ought to be sure that the benefits are captured by the public at large and not just by a single firm. Notice requirements make sure that everyone has a chance to make his case for a license before exclusive rights are awarded. Business plans from those wanting exclusive licenses help agencies to meet the licensee's need while not precluding other companies from developing other useful products from the same invention. Fairness to all taxpayers and making sure the public interest is protected are always our challenges when we work on technology transfer issues.''
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The Administration has raised some valid concerns about the legislation as drafted. Every federal agency with major research laboratories, including NIH, USDA, FDA, DOD, DOE, NASA, NOAA, and NIST, were involved in developing the Administration's views. These agencies believe that eliminating existing checks in the system won't necessarily speed up the licensing process. The checks are quite speedy when compared to actually negotiating the license and negotiations will just become more difficult and protracted if the government has trouble getting the information it needs to conduct them.
If the government doesn't provide public notice of its intent to grant exclusive licenses, companies who should benefit from federal technologies will not know to come forward and stake their claims. The Administration testimony makes clear that this will result in overbroad licenses that preclude or delay the development and marketing of other life-saving drugs and medical devices. These are not the results that any of us want from this legislation.
We feel the concerns raised by the Administration are serious enough that they should be addressed before the bill goes forward. Chairwoman Morella understands the Administration's concerns and has stressed the need to develop a consensus on House Resolution 2544. We look forward to working with her on perfecting this bill, including consideration of amendments by some of our members to update the CRADA mechanisms so that it can handle the industry-wide research projects involving federal laboratories which have become so popular in recent years.
I want to commend, at this time, Chairwoman Morella for holding a hearing with a diverse set of views and I also want to thank our witnesses for appearing before us today and I look forward to hearing your comments and, of course, looking forward, again, to working with our outstanding Chair of this Subcommittee on Technology in developing this legislation further and hopefully moving this issue forward in this Congress.
Mrs. MORELLA. Thank you, Mr. Barcia. Flattery will get you almost anywhere.
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[Laughter.]
But, we do, indeed, work together in a bipartisan fashion.
I'm now very pleased to recognize the gentlewoman from Texas, the distinguished Eddie Bernice Johnson.
Ms. JOHNSON of Texas. Thank you very much, Madam Chairwoman. I have no opening remarks. I appreciate your holding the hearing.
Mrs. MORELLA. The—for those of you who are going to be testifying, may I remind you that we do have a policy on this Committee that we swear in those people who will be testifying. So, if you'd stand and raise your right hand——
Do you swear that the testimony that you're about to give is the truth, the whole truth and nothing but the truth?
Mr. KAMMER. I do.
Mr. GUSCHL. I do.
Ms. KRAFTICIAN. I do.
Mrs. MORELLA. Thank you. The record will reflect the fact that you responded in the affirmative. And now we'll start off with the distinguished Mr. Raymond Kammer, the Director of NIST, and if each of you could speak approximately 5 minutes so we have an opportunity to ask questions, great. Thank you. Mr. Kammer?
TESTIMONY OF RAYMOND G. KAMMER, DIRECTOR, NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY
Mr. KAMMER. Chairwoman Morella, Mr. Barcia, Ms. Johnson, thank you very much for inviting me to testify on H.R. 2544, which we all believe would improve the system for moving federally-developed technology into the marketplace.
This Subcommittee has played a central role in the creation of federal technology transfer policies and programs and we expect to continue to work with this Committee to further improve the system.
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I'm here representing a variety of federal agencies that have strong interests in the issues that are contained in this bill. They include Agriculture, Commerce, Defense, Energy, Health and Human Services, Interior, Transportation, and NASA. They have worked together through an interagency committee and developed detailed comments which have been provided to this Committee. I would say the summary of those comments is that there's value in public notification prior to exclusive licensing and that there's value in considering commercialization plans in the process of licensing.
What I'd like to do is share a few examples with you of how the current provisions that call for notification of intent to grant a license and for business plans have had some value.
Just yesterday, NIST announced that Saddleback Aerospace Incorporated, which is a company in Los Alamitos, California, is receiving an exclusive license from NIST to develop a miniaturized portable device—it's about the size of a paperback book—that will detect and measure a variety of chemicals that give fast and accurate results and tests on health, food quality, biological or chemical weapons, illicit drugs, and environmental contamination. The technology, which is going to be, I think, described as a pocket chemistry lab by the company that holds this, could be used, for instance, in meat processing plants to detect and measure the amount of bacteria that might indicate contamination.
In this case, Saddleback learned of the technology when we announced our intent to grant an exclusive license to someone else and Saddleback objected, they provided a superior business plan, and they won. They prevailed, and they now expect to have a commercial version on the market by spring of 1999. The commercial version is going to cost somewhere between $2,000 and $3,000; each of the measurements is going to cost between about $1 and $3. And, if this product is successfully carried to market, it will have a tremendous benefit on the consumers, as in people that purchase meat. We should be in a position where we can virtually guarantee the contamination no longer makes its way through the market chain.
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NIH shared a story with me of a similar sort. NIH had received a request for a broad exclusive license in the field of gene therapy from a startup interested in a relatively old patent related to adeno-associated virus. NIH intended to grant this exclusive license because it was a rather old technology which no one had been interested in previously, but, of course, they followed the public notice process and encountered quite a few objections. Eventually, NIH signed four non-exclusive licenses, none with the original applicant, and one of the companies is now in a Phase II clinical trial for the treatment of cystic fibrosis.
I'd also like to share an Agricultural Research example with you. The ARS invented and patented a new method to immunize poultry by injecting vaccines into the eggs. The ARS announced its intention to grant an exclusive license in this technology to Merieux Laboratories, which is a large, multi-national company. But, they followed the notice requirements and, indeed, they got a response from EMBREX, which is a start-up company of just two employees in Research Triangle Park in North Carolina. They objected and they were subsequently awarded the license on the basis of their qualifications as a small business and their commercialization plan. They—today, this method is protecting 80 percent of the North American poultry market. EMBREX used to employ 2 people and now employs 120 people and they've entered both the European and Asian markets.
We also would like to suggest an addition for your consideration in the legislation. There's a notion in patents called ''bundling'' and this is the idea of associating patents in related areas together and then granting a common license.
Several years ago, NIST sort of learned about ''bundling'' by getting a patent for dental restorative material that resisted shrinkage, was a little less brittle, was superior to what was on the market. But, a University of Southern Mississippi researcher held the patent in a similar area and there was some conflict between these patents that made people reluctant to develop it further because they feared the notion of, you know, ''big lawyer'' later, once they'd put a lot of money into it.
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So, we discussed it with the University and they agreed that we'd ''bundle'' the two patents and issue them jointly. Because of some arcane legal opportunities that only the Department of Commerce has, just one short year later and I don't know how many lawyers, we were able to figure out how to do this. But, it was hard and it would be hard if we had to do it again and the rest of the government doesn't have this opportunity. So, our thought is that you may wish to consider taking ''bundling'' into account as a possible innovation in your legislation.
I hope our comments are useful in shaping your legislation and later on when the other witnesses have responded, of course, I'm available to take questions. Thank you once again for inviting me to give my comments.
[The prepared statement of Mr. Kammer follows:]
STATEMENT OF RAYMOND G. KAMMER, DIRECTOR, NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY
BEFORE THE HOUSE COMMITTEE ON SCIENCE
SUBCOMMITTEE ON TECHNOLOGY
ON H.R. 2544, THE TECHNOLOGY TRANSFER COMMERCIALIZATION ACT OF 1997
MARCH 17, 1998
Chairwoman Morella and other Members of this Subcommittee, thank you for inviting me to testify on your bill to improve the system for moving federally-developed technology into the marketplace. This Subcommittee has played a central role in the creation of federal technology transfer policies and programs, and we hope to continue working with you to further improve this system.
I appear before you representing the Commerce Department's National Institute of Standards and Technology because we have a direct interest in technology development and commercialization policies and procedures. Through our Laboratories, as well as our other programs, NIST works with U.S. industry to develop and apply technology, measurements and standards. Although much of our work is made available to the public, we are regularly involved in matters of intellectual property commercialization through our active role in using cooperative research and development agreements (CRADAs) and, less frequently, through patents and licenses.
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I also am representing a variety of federal agencies which have strong interests in these matters: the Departments of Agriculture, Commerce, Defense, Energy, Health and Human Services, Interior, and Transportation and the National Aeronautics and Space Administration. Through the Commerce-chaired Interagency Committee on Technology Transfer, these agencies have reviewed H.R. 2544 and developed comments that were transmitted to you on February 23, 1998. The interagency committee is very supportive of the goal of this bill—to simplify the requirements imposed on government owned and operated federal laboratories in the licensing of their inventions. We urge that the bill be amended to incorporate the recommendations included in the February 23 comments. I would like to have those comments, which are attached to my testimony, included for the record rather than review them in detail today.
Today's climate is much more hospitable to research and development as crucial contributors to the future health of our economy, national security, and the overall well-being of our citizens. The Administration has proposed a strong R&D budget for fiscal year 1999 and plans for the future call for continued growth of our investment in science and technology. There are a variety of legislative proposals which seek to double the federal R&D commitment over the next several years. But if we are to get maximum benefit from this investment, we must pay close attention not just to the input side of the equation, but also to the end results and how those results make it into the marketplace where they can have real benefits.
A look back at the past 2 decades of federal technology transfer and commercialization policies shows that we have made important progress. But as the agencies and industry have gained experience with new mechanisms of technology commercialization, we have learned how difficult the task can be. Your proposed legislation would address several of these shortcomings. As I said before, the interagency committee is supportive of the goals of the bill. The interagency committee also expressed concern about some provisions of the bill and believes some changes are needed so that the bill will speed technology commercialization while continuing to ensure that federal agencies can exercise proper stewardship over the transfer of government technology. I would like to touch on a few key points.
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Licensing under CRADAs. The agencies support the bill's provision authorizing agencies to license pre-existing inventions as part of a CRADA. We agree with the limits placed on such licensing to pre-existing intellectual property that is related to the statement of work under the CRADA. We suggest that these licenses be subject to the current notification requirements when an exclusive license is proposed.
Simplified notice procedures for agency patent licensing and required business plans. Handling patent licenses is a key part of the process for transferring federally developed technology, and it should be made as easy as possible while still protecting the public interest. This bill's provision for a single public notice in connection with granting an exclusive license could save significant time—time that is critical when technology and markets change so rapidly and are so global. To ensure that maximum advantage is taken from licensing federal inventions, the interagency committee recommends requiring the public notice be made at the time they are considering granting an exclusive license to one particular firm. You are absolutely correct in noting that agencies are making far better use of the Internet today to advise potential users of federal technology. They can and should publicize productive areas of research and results as soon as possible, and the Internet is becoming a mainstay in agency outreach strategies. Having said that, the current procedure calling for the public to be notified when licenses are proposed to be granted carries a variety of benefits that should be retained. We agree with your proposed reduction in public comment from 60 days to 30 days to expedite the process.
The bill proposes to eliminate current requirements for licensees to submit plans for the development or marketing of the licensed technology as part of the license application. This might speed up the licensing procedures, but the agencies have learned from experience that these plans provide an objective basis for deciding on whether the proposer is likely to quickly bring the innovation to market. And just as we at NIST have learned through the Advanced Technology Program—where we expect award applicants to spell out their commercialization plans in advance—these plans provide an incentive for smaller companies, in particular, to think ahead about the challenges to commercialization. The sooner they address these difficulties the greater the likelihood that the federally financed R&D will stimulate development of a viable product.
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I would like to share several examples of how current provisions calling for public notification of intent to grant a license and for business plans have paid off for the agencies and the taxpayers.
Just yesterday we announced that Saddleback Aerospace Inc., of Los Alamitos, California, is relying on an exclusive license from NIST to develop a miniaturized, portable device for detecting and measuring a variety of chemicals that will give fast and accurate answers in tests on health, food quality, biological or chemical weapons, illicit drugs and environmental contamination. The process developed and patented by NIST researchers is just as sensitive as existing laboratory tests-and more accurate than current tests used in the field where portability is a major consideration. For instance, the technology, known as a ''pocket chemistry lab,'' could be used in meat processing plants to measure bacteria that indicate contamination and spoilage, or to check for excessive hormone levels in beef or antibiotics in milk. It would have a variety of advantages over current field kits for environmental monitoring, and for patient care in hospitals or doctors' offices where it could be used for early detection of breast cancer risk or to speed results from a variety of other tests.
In this case, Saddleback learned of the technology when we announced our intent to grant an exclusive license. Saddleback objected, provided a superior business plan, and now anticipates having a commercial version on the market by the spring of 1999. The device would sell for just two or three thousand dollars and tests would cost only between one and three dollars. If this company succeeds, consumers will have benefited tremendously, and so will our economy which invests so much in costly medical tests.
The National Institutes of Health has run into similar situations. In 1992, NIH received a request for a broad, exclusive license in the field of gene therapy from a start-up firm interested in a relatively old patent relating to adeno-associated virus. NIH announced its intention to grant the license since no other companies had ever applied. The public notice stimulated a series of comments and objections from organizations now interested in the patent since related gene therapy advances had become of great interest. Eventually, NIH signed four non-exclusive licenses—none with the original applicant—and one of the companies now is in Phase II clinical trials for the treatment of cystic fibrosis.
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In another case, NIH researchers wanted to sign a CRADA in 1996 with a foreign company that had requested an exclusive background license as a condition of signing the research agreement dealing with a cervical cancer vaccine. But when other companies, including several small firms, expressed interest, NIH refused to grant the exclusive background license. Two competing American companies—which were not considered for the CRADA by the scientists—subsequently signed a nonexclusive background license and have started Phase I clinical trials for this important vaccine.
In another example, the Agricultural Research Service (ARS) invented and patented a new method to immunize poultry by injecting vaccines into the egg. The ARS announced its intention to exclusively license this technology to Merieux Laboratories, a large multinational corporation, under the notice requirements of current law. EMBREX, Inc., a start-up company with just two employees in Research Triangle Park, North Carolina, saw the notice, objected, and was subsequently awarded the license on the basis of its qualifications as a small business and its submission of a superior plan for developing and commercializing the technology. EMBREX subsequently developed a system, based on the patented ARS technology, which can inoculate 20 to 50 thousand hatchery eggs per hour. The system was awarded the 1997 New Product Award by the National Society of Professional Engineers. Today this method protects 80 percent of the North American poultry market. EMBREX now employs more than 120 people and has entered both the European and Asian markets.
Another ARS experience is instructive. The agency published a notice of intent to grant an exclusive license to Rohm and Haas Company for four U.S. patents covering a technology developed as a way to manufacture formaldehyde-free permanent press cotton fabrics. A number of companies submitted license applications to develop multiple applications of this technology beyond textiles (e.g., nonwoven materials such as industrial filters and paper products such as currency stock). As a result, there are now three licenses for this technology (Rohm and Haas Company, FMC Corporation and Callaway Chemical Company) and commercial products are expected on the market this year.
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Elimination of Criteria for Setting Scope of License and changes in U.S. manufacturing requirement. Currently, in granting an exclusive license, agencies must assure that the scope of the license is no greater than necessary to encourage commercialization. This requirement provides a useful standard to be applied by the agency in assessing the development plans submitted by applicants. It is particularly important where a technology holds the potential for a variety of commercial applications—each of which requires different resources and different commercial expertise. In the pharmaceutical area, NIH's experience suggests that there are many technologies that provide a basis for further medical research, and licensing them on an exclusive basis would make that research impossible. The agencies believe this requirement is a wise safeguard and should be retained. Likewise, the interagency committee believes that this legislation should keep intact current law regarding U.S. manufacturing by licensees.
There are a number of additional means of expediting agency licensing that might be incorporated in the bill. These are included in the comments submitted to this Subcommittee, and we hope that you will consider these important changes. I would like to focus my attention on just one of those opportunities for improving today's portfolio of technology transfer tools.
Licensing of federal inventions would be considerably improved by the ability to ''bundle'' those inventions with related inventions made by others but necessary or useful in taking full advantage of government inventions. We have run into this problem at NIST and know that it affects other agencies, too.
Several years ago, researchers in our dental materials program developed an improved polymer that resisted shrinkage, was less brittle, and would bond well. We patented the innovation. But a University of Southern Mississippi researcher held an underlying patent on the composition that discouraged companies from licensing our patent. The solution seemed obvious: if we bundled licenses to both patents we would have a win-win situation. The University agreed, but we ran into market-critical delays of more than a year while we searched for a legally acceptable way to do that. We ended up using a special provision that is only available to Commerce agencies. If we want to use this option again, we will have to get formal legal review each and every time. Other agencies do not even have this option available to them. The result is that agencies are often unable to find ways to bring the necessary intellectual property rights together, and they lose opportunities to license and promote the commercialization of their inventions.
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We recommend that your legislation allow bundling. Sometimes the bundling would be done by the agency, while in other circumstances another party, such as a university co-inventor, might assemble the rights and do the licensing. Licensees would then be able to obtain, in one transaction, all the rights needed to be able to derive maximum commercial benefit from the federal invention.
The federal government and industry are still learning how we can better work together to commercialize the results of the taxpayers' investments in R&D. There are many success stories to share, but there are perhaps an equal number of lost opportunities. I hope that our comments are useful in shaping this legislation. I would be pleased to answer questions that you may have or to help refer them to others on the interagency committee.
NIST OFFICE OF THE DIRECTOR
MR. RAYMOND KAMMER, DIRECTOR
Raymond Kammer was nominated by President Clinton on September 4, 1997, to serve as Director of the National Institute of Standards and Technology. After being confirmed by the U.S. Senate, he took office on November 12. An agency of the U.S. Commerce Department's Technology Administration, NIST promotes U.S. economic growth by working with industry to develop and apply technology, measurements, and standards. As NIST Director, Mr. Kammer oversees a staff of approximately 3,300 and a budget of about $700 million. More than half of the staff is composed of scientists and engineers located at the NIST campuses in Gaithersburg, Maryland, and Boulder, Colorado.
Most recently, Mr. Kammer served on an acting basis as the Chief Financial Officer, the Assistant Secretary for Administration and the Chief Information Officer for the Department of Commerce. As Deputy Director of NIST from 1980 to 1991 and 1993 to 1997, Mr. Kammer was responsible for the day-to-day operation of the Institute and for long-range planning and policy development. The primary mission of NIST is to promote U.S. economic growth by working with industry to develop and apply technology, measurements, and standards. This mission is accomplished through four major programs:
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Measurements and Standards Laboratories focused on ''infrastructural technologies,'' such as measurements, standards, evaluated data and test methods; and
a competitive Advanced Technology Program that provides cost-shared awards to industry for development of high-risk, enabling technologies with broad economic potential;
a grassroots Manufacturing Extension Partnership with a network of local centers offering technical and business assistance to smaller manufacturers;
a highly visible organizational improvement program associated with the Malcolm Baldrige National Quality Award.
From 1991 to 1993, Mr. Kammer was Deputy Under Secretary of Commerce for Oceans and Atmosphere in NOAA. In that position, he served as NOAA's Chief Operating Officer and was responsible for overseeing the technical projects of this $2 billion agency which has a staff of over 14,000. NOAA has five major programs—the National Weather Service; the National Marine Fisheries Service; the National Environmental Satellite, Data, and Information Service; the National Ocean Service; and the Office of Oceanic and Atmospheric Research.
Mr. Kammer began his career with the Department of Commerce in 1969 as a program analyst. Prior to his appointment as Deputy Director of NIST, Mr. Kammer held a number of positions at NIST and in the Department of Commerce involving budgetary and program analysis, planning and personnel management. During his tenure as Deputy Director, he also held positions as Acting Director of NIST, Acting Director of the National Measurement Laboratory at NIST, and Acting Director of the Advanced Technology Program at NIST.
Mr. Kammer has chaired several important evaluation committees for the Department of Commerce, including reviews of satellite systems for weather monitoring and the U.S. LANDSAT program, and of the next generation of weather radar used by the U.S. government. He also served on the Board of Directors of the American Society for Testing and Materials, a major international society for the development of voluntary standards for materials, products, systems, and services.
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His awards include both the Gold and Silver Medals of the Department of Commerce, the William A. Jump Award for Exceptional Achievement in Public Administration, the Federal government Meritorious Executive Award, and the Roger W. Jones Award for Executive Leadership.
Mr. Kammer received his Bachelor of Arts degree from the University of Maryland in 1969.
RANDOLPH J. GUSCHL, DIRECTOR, TECHNOLOGY ACQUISITIONS, CENTRAL RESEARCH AND DEVELOPMENT, DUPONT
Mrs. MORELLA. Thank you very much for your comments.
Mr. Guschl, look forward to hearing from you, sir.
Mr. GUSCHL. Thank you. Congresswoman Morella, distinguished members, good afternoon. My name is Randy Guschl and I'm Director of Corporate Technology Transfer for the DuPont Company. I also spent considerable time in Washington, DC., speaking on technology transfer for the chemical enterprise as the Chairman of the government Relations Committee of the Consulate Chemical Research.
I'm very pleased to be here today and I'm glad to be asked to be part of this hearing because DuPont has been very active in technology transfer for nearly 2 decades, since the introduction of the Stevenson-Wydler and Bayh-Dole Acts of 1980. Prior to handling DuPont's tech transfer activities, I served as Technical Director for a number of DuPont's business units, including a 3-year stint at the—as Program Manager at Savannah River Laboratories when DuPont was there, so I have a lot of opportunities to view the government industry partnering interface close at hand from multiple perspectives.
Our experiences have brought learnings which we have shared in the hope of improving the way in which science and technology is translated in this country into wealth for its citizens. I'd just like to point out that throughout DuPont's involvement in Washington on these issues, Congresswoman Morella has been a consistent champion in promoting science and technology and we have appreciated her leadership, including introducing this latest legislation, and holding this hearing.
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The legislation under discussion, H.R. 2544, builds on the Bayh-Dole Act and the Tech Transfer Acts of 1986, 1987 with a significant purpose; that is to expand the sphere of science and technology available from government labs for companies to use and commercialize for the benefit of the U.S. taxpayer. H.R. 2544 proposes to make the intellectual property of so-called ''background research''—that is, the basic research done in government labs and funded 100 percent by U.S. government—available for license. More important, it puts the discoveries of so-called GOGO laboratories on terms equal to those of the GOCO labs. This is an extremely valuable goal and DuPont supports the bill. We would, however, offer the Committee some observations and recommendations.
First, we believe that many companies, large and small, fit the definition of a ''multi-national company'' in that they compete successfully in global markets. We further believe that the degree to which U.S.-based multi-national companies contribute to the U.S. competitiveness is not predicated on U.S. manufacture of their products. In fact, in a globally connected business environment, successfully deploying technology around the world is crucial to the success of company operations in any given country. We create and return wealth to the communities in which we operate based on how successful we are as a global business.
Second, we know that the longest stretch between invention and commercialization occurs after the initial research is done—that the ''D'' part of ''R&D'' is generally 20 to 25 times more expensive than the ''R'' part. The fact of life cuts two ways. On the one hand, it means that careful consideration must be given by licensing agencies in choosing a commercial partner, especially in heavily capital-intensive industries, such as chemicals. There must be a match of both technology strength and financial depth in order to go the distance from laboratory to market. On the other hand, while tech transfer offices in government laboratories are assessing commercialization partners, companies on the other side of the table are evaluating the risk-return equation of tech transfer projects. If the potential return isn't protected by some sort of exclusivity of rights, the risk usually becomes too great and the project likely will not be undertaken.
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Third, throughout the business world, there is a drive for simplicity in processes, especially business processes. Processes should be nearly invisible. Wherever process gets in the way of achieving intent, it must be simplified or eliminated, and every process should be evaluated on that basis. We are concerned that most problems in the CRADA process are not in the legislation but in the management processes at the labs and in the regional offices.
I'd like to make a few specific comments on those general statements. But, first of all, with regard to U.S. manufacture, regarding exclusivity and manufacture outside the United States, we are glad to see the language of this bill does preempt the manufacture outside of the United States of products developed from a licensed technology.
However, we suggest revising the wording further; specifically, the bill says exclusivity or partially exclusive license shall normally be granted to companies that agree to manufacture ''substantially'' in the United States. If a U.S. manufacture clause is necessary in this bill, we prefer at minimum to return to the language of the current legislation and seriously consider no restrictions.
On exclusivity, we agree with the presenter from your first panel, Joseph Allen, then Vice President in the National Tech Transfer Center. We have seen a steadily improving amount of flexibility working into the system and think that the current recognition of guaranteed exclusivity in particular fields of use is a very good provision of the law.
From a process standpoint, we think that consistent practices across all government laboratories, whether they are GOGO or GOCO, is the theme of my next set of points, too. In many ways, H.R. 2544 simplifies the processes associated with tech transfer and we applaud these changes, particularly the shift from a 90-day-plus-60-day notification process to a 30-day notification process with better explanations and broader announcement of the intent of the legislation.
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We think the standards set for what I call ''due diligence'' on the part of commercialization partners—that is the business and marketing plans, reporting requirements and so forth—need to be there. We agree they are needed but that the carrying out—we have experienced extreme variation in how different labs interpret these requirements and creating, sometimes, extremely time-intensive and resource-intensive processes.
Finally, something must be done about the management processes behind existing and future legislation. We deal with many of the tech transfer offices at many labs and find that they have all evolved into capable business-like organizations, making good decisions. Unfortunately, individual deals are still bogged down on a case-by-case basis because of the individuals who are not aligned with the intent of the policy or labs that are trying to second guess the approval of a regional office, and sometimes researchers who are pushing for unreasonable business data.
Furthermore, some labs have allowed overlapping CRADAs which put the individual inventor in the awkward position of working on several CRADAs in the same area with different companies and ideas have been found to jump across CRADAs.
In closing, we support this legislation as an improvement to the tech transfer process of government inventions. We have suggested some upgrades and look forward to continued involvement of DuPont and other companies working with universities and government labs. Thank you.
[The prepared statement of Mr. Guschl follows:]
REMARKS BY RANDOLPH J. GUSCHL
DIRECTOR-CORPORATE TECHNOLOGY TRANSFER, DUPONT
BEFORE THE SUBCOMMITTEE ON TECHNOLOGY
COMMITTEE ON SCIENCE
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U.S. HOUSE OF REPRESENTATIVES
''Facilitating Licenses to Federally-Owned Inventions: A Legislative Hearing on H.R. 2544, the Technology Transfer Commercialization Act of 1997''
Good afternoon. My name is Randy Guschl and I am Director of Corporate Technology Transfer for the DuPont Company. I was very pleased to be asked to address this hearing. DuPont has been active in technology transfer for nearly 2 decades, since the Stevenson-Wydler and Bayh-Dole Acts of 1980 first established the practice. Prior to heading up DuPont's tech transfer activities, I served as Technical Director for several of DuPont's business units. This included a 3-year assignment as Program Manager at Savannah River Laboratories which DuPont formerly operated for the government, so I have had the opportunity to view industry-government partnering close at hand and from multiple perspectives.
Our experiences have brought learnings which we have shared in the hopes of improving the way in which science and technology is translated in this country into wealth for its citizens. I should like to point out that, throughout DuPont's involvement in Washington on these issues, Congresswoman Morella has been a consistent champion in promoting science and technology. We have appreciated her leadership, including introducing this latest legislation, and holding this hearing.
The legislation under discussion, H.R. 2544, builds on Bayh-Dole and the Tech Transfer Acts of 1986 and '87 with a significant purpose—that is, to expand the sphere of science and technology available from government labs for companies to use and commercialize for the benefit of the U.S. taxpayer. H.R. 2544 proposes to make the intellectual property of so-called ''background research''—i.e., basic research done in government labs and funded 100% by the U.S. government—available for license. More important, it puts the discoveries of so-called GOGO (government-owned, government-operated) laboratories on terms equal to those of GOCO (government-owned, contractor-operated) labs. This is an extremely valuable goal and DuPont supports the bill. We would, however, offer the Committee some observations and recommendations.
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As we consider the language of the bill, DuPont works from some basic principles. I'll list them, then elaborate.
First, we believe that many companies, large and small, fit the definition of a ''multinational company,'' in that they compete successfully in global markets. We further believe that the degree to which U.S.-based multinational companies contribute to U.S. competitiveness is not predicated on U.S. manufacture of their products. In fact, in a globally-connected business environment, successfully deploying technology around the world is crucial to the success of company operations in any given country. We create and return wealth to the communities in which we operate based on how successful we are as global businesses.
Second, we know that the longest stretch between invention and commercialization occurs after the initial research is done—that the ''D'' part of R&D is generally 20-25 times more expensive than the ''R'' part. This fact of life cuts two ways. On the one hand, it means careful consideration must be given by licensing agencies to choosing a commercialization partner, especially in heavily capital intensive industries such as chemicals. There must be a match of both technical strength and financial depth in order to go the distance from laboratory to market.
On the other hand, while Tech Transfer offices in government laboratories are assessing potential commercialization partners, companies on the other side of the table are evaluating the risk-return equation of tech transfer projects. If the potential return isn't protected by some sort of exclusivity of rights, the risk usually becomes too great and the project likely will not be undertaken.
Third, throughout the business world, there is a drive for simplicity in processes, especially business processes. Processes should be nearly invisible. Wherever process gets in the way of achieving intent, it must be simplified or eliminated. And every process should be evaluated on that basis. We are concerned that most problems in the CRADA process are not in the legislation, but in the management processes at the labs and in regional offices.
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With these principles in mind, let me turn to H.R. 2544.
U.S. Manufacture
With regard to exclusivity and manufacture outside the U.S., we are glad to see the language of this bill does not preempt the manufacture outside the U.S. of products developed from a licensed technology. However, we would suggest revising the wording further. Specifically, the bill says exclusive or partially exclusive licenses shall normally be granted to companies that agree to manufacture ''substantially'' in the United States.
Current legislation requires U.S. manufacture of goods only for U.S. use or sale, but this bill would apply that requirement to both domestic and foreign sales and distribution. This change in language should be rectified because it is very contrary to the interests of U.S. multinational companies.
If a U.S. manufacture clause is necessary in this bill, we prefer at minimum to return to the language of the current legislation, and to seriously consider no restrictions. Let me clarify with an example why we believe the whole clause is an unnecessary caveat. DuPont built a greenfield site in Asturias, Spain, and installed state-of-the-art technology to manufacture ''Kevlar'' and ''Nomex'' brand aramids and intermediates for our ''Lycra'' spandex business. The deployment of this new technology in Spain has strengthened these global businesses and led to an expansion of staffing in the U.S. and other countries.
We suggest that, if the intent of the bill is to ensure that benefits of government-funded technology are returned to the taxpayers, that better language would be to require the earliest practical deployment of the technology in the U.S. This, it seems to me, delivers the desired goal without hamstringing companies and limiting their options to compete.
In coaching soccer for almost 20 years, I have learned that a team with a weak offense can only hope to win by keeping the scores close and focusing on defense. I would rather have a stronger offense and a slightly weaker defense and win most games after giving up a goal or two, but scoring more goals in return. To defend U.S. competitiveness, we need a good offense which means putting strength outside our borders to return wealth back into the country.
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Exclusivity
On the issue of exclusivity, we agree with a presenter from your first panel, Joseph P. Allen, then Vice President in the National Technology Transfer Center. We have seen a steadily improving amount of flexibility worked into the system, and think that the current recognition of guaranteed exclusivity in particular fields of use is a very good provision of the law. It should apply to government-owned, government-operated labs just as it applies to government-owned, contractor-operated labs.
We also believe that arguments against exclusivity can be better addressed by issuing several exclusive licenses, each for a distinctly different field of endeavor, where appropriate.
Process
Consistent practice across all government labs, whether they are GO–GO or GO–CO, is the theme of my next set of points, too. In many ways, H.R. 2544 simplifies the processes associated with tech transfer, and we applaud those changes, particularly:
—the shift from a 90-day+60-day notification process to a 30-day notification process. This saves valuable time. We also concur with previous testimony that the scope of notification should expand beyond just the Federal Register to encompass the Internet or other appropriate outlets. What we advise most strongly, however, is to be sure that all government labs be instructed to follow the same procedures so that companies are not left confused by varying methods of notification.
—the standards set for what I call ''due diligence'' on the part of commercialization partners—i.e., business and marketing plans, reporting requirements, etc. We agree that these things are needed to help measure a company's commitment and ability to carry out commercialization of technology. What we have experienced, however, is extreme variance in how different labs interpret those requirements; some creating extremely time-intensive and resource-intensive processes.
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—the ability to ''bundle'' background inventions directly related to the CRADA Statement of Work. This heightens the attractiveness of CRADAs by making a much larger body of research available to companies. At the same time, we think it's a good thing for the labs, because the industrial partner has had to get involved and commit resources before getting access to the background technology.
Finally, something must be done about the management processes behind existing and future legislation. We deal with many of the technology transfer offices at many government labs and find all have evolved capability and are able to make good decisions. Unfortunately, individual deals still can get bogged down on a case-by-case basis because of individuals who are not aligned with the intent of the policy, labs which are trying to second guess the approval of a regional office, and researchers who are pushing for unreasonable business deals.
Furthermore, some labs have allowed overlapping CRADAs which put the individual inventor in the awkward position of working on several CRADAs in the same area with different companies, and ideas have been found to jump across CRADAs. The labs are learning how to prevent this, and are better educating their employees. Please consider empowering the tech transfer directors to make quick and final decisions for their labs, but also put in place a simple and quick appeals process for those few cases which go beyond a reasonable time. Perhaps an annual audit by a congressional staff committee of the whole process would help you see what is working and what needs attention. This is done by the university program through the audit that is published by the American University Technology Managers Association.
In closing, we support this legislation as an improvement to the tech transfer process of government inventions. We have suggested some upgrades and look forward to continued involvement of DuPont and other companies working with universities and government labs.
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*Kevlar, Nomex and Lycra are registered trademarks of the DuPont Company.
BIO
Name: Dr. Randolph J. Guschl
Title: Director, Corporate Technology Transfer
Dept: DuPont Central Research & Development
Div: Corporate New Business Development
Address: DuPont Company
Route 141 & Henry Clay Road
Experimental Station 356 / Room 261
Wilmington, DE 19880-0356
Phone: 302–695–3654
Fax: 302–695–9840
Email: randolph.j.guschl@usa.dupont.com
Randy joined Du Pont in 1973, as a research chemist in Pigments R&D at the Experimental Station, after receiving a PhD in Inorganic Chemistry from the University of Illinois.
Following additional assignments in the pigments businesses at Newport and Chestnut Run, Randy transferred to Potomac River in 1978, where he was involved in Technical Service and Technical Supervisory assignments in explosives. R&D assignments in Nylon Intermediates include Research Supervisor at the Experimental Station (1980) and Director of the Sabine River Laboratory (1983). As Program Manager at Savannah River Laboratory, Atomic Energy Division, he was responsible for technical development efforts in support of chemical processes and environmental protection. In 1987, he returned to commercial DuPont as Technical Manager for intermediates for nylon, polyester, acrylonitrile, ethylene, and PPDA for Kevlar*. With the creation of DuPont Chemicals, he was named Director-R&D for the same areas, then Director-R&D for Chemicals and Intermediates. In 1993 Randy joined DuPont Central Research & Development as Director, Corporate Technology Transfer.
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Randy serves on numerous Technology Transfer advisory boards & committees, including those of IRI, ASME, and as chair of CCR's government Relations Committee.
Randy resides in Kennett Square, Pennsylvania, with his wife, Charlotte, and four children.
*DuPont Kevlar is a Registered Trademark.
Mrs. MORELLA. Thank you very much, Mr. Guschl.
Ms. Kraftician?
TESTIMONY OF ELIZABETH N. KRAFTICIAN, CHIEF EXECUTIVE OFFICER, TOUCHSTONE RESEARCH LABORATORY
Ms. KRAFTICIAN. Madam Chairwoman, honorable members, I am Elizabeth Kraftician, Chief Executive Officer——
Mrs. MORELLA. Just a little bit closer. Good.
Ms. KRAFTICIAN. I'm Elizabeth Kraftician, Chief Executive Officer and Co-founder of Touchstone Research Laboratory in Triadelphia, West Virginia. We're a small company that specializes in providing new product and process development, industrial problem solving, and materials testing to American manufacturers.
I am grateful for the opportunity to visit you today to offer my strong support for H.R. 2544 because of the positive impact I believe it will bring to moving new federal technologies to the marketplace through public and private sector partnerships.
My perspective is a relevant one in consideration of this legislation. Touchstone Research Laboratory is a small company my husband and I started 18 years ago in the basement of a former monastery. We worked for years to make the company profitable and have been able to expand to a modern, state-of-the-art facility. In fact, we started the research park in which we now operate. Along the way, Touchstone has been recognized nationally as one of the more successful, innovative, and fast-growing private companies in the United States.
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We have received national recognitions including the ''National Blue Chip Enterprise Award''—that is the U.S. Chamber of Commerce's top national business award—nomination twice by USBI as its ''NASA Subcontractor of the Year,'' and nomination by 3M as its ''Small Business Subcontractor of the Year'' 3 years in a row.
Each year, Touchstone provides research and development and industrial problem solving for hundreds of manufacturers in the United States; providing companies with technical support to boost competitiveness, develop new products, and increase efficiency. In addition, my husband took a leave of absence from his Touchstone duties to serve as interim Executive Director of the National Technology Transfer Center, an organization which, as you know, works hard to help commercialize federal technologies for the U.S. marketplace.
With him in that capacity, we learned firsthand the capabilities of many of our more than 700 federal laboratories, their technologies, and their personnel. The fact that these laboratories represent great sources of information and assistance for small companies in the private sector is not lost on us. I have drawn upon that knowledge and experience in preparing what I have to share with you today.
America's small businesses, like mine, are not seeking mechanisms that would lead to the Federal Government simply handing over technologies willy-nilly, no rules or exceptions. However, I do not believe it is too much to expect a clear and uniform application of meaningful rules to all processes related to creating public and private sector partnerships for technology commercialization purposes.
There are a number of roadblock examples I'd like to cite that are preventing many small companies, like ourselves, from becoming active partners with the sources for federal technologies. As I recite these obstacles, you must bear in mind that the leaders of small companies like mine must count upon speedy action and clear decisionmaking to remain in business. I make decisions every day that have profound effects on my company's success. Anything that impedes that clear and decisive action process represents a roadblock. Here are a few examples.
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Item one: the cumbersome bureaucratic language. The kind of detailed explanations of the differences between GOGOs and GOCOs, frankly, make small business people's heads swim and do little to create progress.
Item number two: slow action by federal partners. When small companies work with the government, they need to know if there is a deal on the table or not, what the scope of that deal is, and whether we can expect prompt action to keep the deal vital and competitive in our world market.
Item three: can we as a small company protect our investment in the pending deal? It's critical for companies in the private sector to be able to protect its investment with adequate exclusivity to intellectual property. When we begin the process of turning federal research into marketplace product—and, let me note, there is much time and effort invested between idea and market—we must be confident we can protect our investment.
Item four: the current system's cumbersome processes are skewed in favor of larger companies. I could go as far as to say that the current system is anti-small business. Even though the laws, on their faces, purport to favor alliances with small companies, the notification process—procedures more than offset that intent.
Companies like Touchstone do not read the Federal Register looking for partnerships; we simply do not have the staff, time, or revenues to pursue such a costly and time-consuming endeavor. While I am sure that larger companies do not enjoy the current procedures any more than I do, they are better equipped than we are to read the Register and, perhaps, wait for months until the bureaucracy can decide to grant an exclusive license. We can't invest that time, we're just not on the level—we're not on a level ground to compete.
I congratulate Representative Morella for the assistance her bill provides in streamlining the kind of bureaucracy that roadblocks private industry and discourages pursuit of federal technology answers to research problems. H.R. 2544 is important to small businesses such as mine because it will effectively allow the government to notify Americans that federal patents are available for licensing and it allows the market to determine the scope of the license, whether it is exclusive or non-exclusive. That makes it easier for Federal Government-owned and government-operated laboratories to bring existing inventions into joint R&D projects with private industry.
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The bill would also take an important step in the direction of leveling the notification playing field between large and small companies looking for federal information. Too often, when a company like Touchstone has to endure rounds of public notices—some of which even include our name in the Federal Register for our competitors to see if we are seeking an exclusive license—the initiative is stopped dead in its tracks.
One final thought: legislation cannot dictate good management. This bill should be enacted and will be very helpful. However, public institutions must be held accountable for what they wield—for how they wield the authority they are given. They must be willing to make decisions and take risks. Many public institutions are fearful that they will be criticized for selecting one company over another and that is understandable. But, that is no excuse for not acting at all.
I am accountable not only to myself but to my employees for the decisions and authority I use. This is the fact of life in the private sector. If we are truly going to have productive public or private sector economic alliances, both sides must be willing to take and accept personal risk and responsibility.
I want to thank you again for this opportunity to share my thoughts and perspectives on the legislation. On behalf of all the small companies throughout America interested in working with the Federal Government to commercialize promising new technologies, I appreciate the legislation under debate and the chance to participate in this discussion. Thank you.
[The prepared statement of Ms. Kraftician follows:]
STATEMENT OF ELIZABETH N. KRAFTICIAN, CHIEF EXECUTIVE OFFICER AND CO-FOUNDER, TOUCHSTONE RESEARCH LABORATORY, LTD.
Ms. Kraftician, Chief Executive Officer and Co-founder of Touchstone Research Laboratory, Ltd., is recognized in her home State and throughout the United States as a leader in innovative small business management and technology. She has been actively involved in industrial problem solving since 1980, when she opened a facility to provide new product and process development, industrial problem solving, and materials testing and development to American manufacturers. Ms. Kraftician also currently serves on the Business Advisory Board of the Federal Reserve Bank in Cleveland, is one of West Virginia's two representatives on the Southern Technology Council, serves on the Small Business Advisory Council of the Small Business Administration, and is active in her community as a board member of the local business and industrial development council and Wheeling Jesuit University. Ms. Kraftician was named as her State's Small Business Person of the Year in 1996 by the U.S. Small Business Administration and in 1992 was named West Virginia's ''Entrepreneur of the Year'' by Ernst & Young.
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Madam Chairman, Honorable Members. I am Elizabeth Kraftician, Chief Executive Officer and Co-founder of Touchstone Research Laboratory in Triadelphia, WV, a small company that specializes in providing new product and process development, industrial problem solving, and materials testing and development to American manufacturers.
I am grateful for the opportunity to visit with you today to offer my strong support for H.R. 2544 because of the positive impact I believe it will bring to moving new federal technologies to the marketplace through public and private sector partnerships.
My perspective is a relevant one in consideration of this legislation. Touchstone Research Laboratory is a small company my husband and I started 18 years ago in the basement of a former monastery. We worked for years to make the company profitable and have been able to expand to a modern state-of-the-art facility. In fact, we started the research park in which we now operate. Along the way Touchstone has been recognized nationally as one of the most successful, innovative, and fastest-growing private companies in the U.S. We have received national recognitions, including:
The ''National Blue Chip Enterprise Award''—the U.S. Chamber of Commerce's top national business award,
Nomination twice by United Technologies/USBI as its ''NASA Subcontractor of the Year,''
Nomination by 3M as its ''Small Business Subcontractor of the Year'' 3 years in a row.
Each year, Touchstone provides research and development and industrial problem solving for hundreds of manufacturers in the United States—providing companies with technical support to boost competitiveness, develop new products, and increase efficiency.
In addition, my husband took a leave of absence from his Touchstone duties to serve as Interim Executive Director of the National Technology Transfer Center, an organization which, as you know, works hard to help commercialize federal technologies for the U.S. marketplace.
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With him in that capacity, we learned first-hand the capabilities of many of our more than 700 federal laboratories, their technologies, and their personnel. The fact that these laboratories represent great sources of information and assistance for small companies in the private sector is not lost on us. I have drawn upon that knowledge and experience in preparing what I have to share with you today.
America's small businesses like mine are not seeking mechanisms that would lead to the federal government simply handing over technologies willy-nilly with no rules or expectations; however, I do not believe it is too much to expect a clear and uniform application of meaningful rules to all processes related to creating public and private sector partnerships for technology commercialization purposes.
There are a number of roadblock examples I can cite that are preventing many small companies from becoming active partners with the sources for federal technologies. As I recite those obstacles, you must bear in mind that the leaders of small companies like mine must count upon speedy action and clear decision making. I make decisions every day that have profound effects on my company's success. Anything that impedes that clear and decisive action process represents a roadblock. Here are a few examples:
Item One: Cumbersome bureaucratic language. The kind of detailed explanations of the differences between GO GOs and GO COs frankly make small business people's heads swim and do little to create progress.
Item Two: Slow action by federal partners. When small companies work with the government, they need to know if there is a deal on the table or not, what the scope of that deal is, and whether we can expect prompt action to keep the deal vital and competitive in the world market.
Item Three: Can we as a small company protect our investment in the pending deal? It is critical for companies in the private sector to be able to protect its investment with adequate exclusivity to intellectual property. When we begin the process of turning federal research into marketable products (and there is much time and effort invested between idea and market), we must be confident we can protect our investment.
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Item Four: The current system's cumbersome processes are skewed in favor of larger companies. I could go as far as to say that the current system is anti-small-business. Even though the laws, on their faces, purport to favor alliances with small companies, the notification procedures more than offset that intent.
Companies like Touchstone do not read The Federal Register looking for partnerships. We simply do not have the staff or the time to pursue such a costly and time-consuming endeavor. While I am sure that larger companies do not enjoy the current procedures any more than I do, they are much better equipped than we are to read the Register and perhaps wait for months until the bureaucracy can decide to grant an exclusive license. We can't invest that time.
I congratulate Representative Morella for the assistance her bill provides in streamlining the kind of bureaucracy that roadblocks private industry and discourages pursuit of federal technology answers to research problems.
H.R. 2544 is important to small businesses such as mine because it will effectively allow the government to notify Americans that federal patents are available for licensing and it allows the market to determine the scope of the license—whether it is exclusive or non-exclusive.
That makes it easier for federal government-owned and government-operated laboratories to bring existing inventions into joint R&D projects with private industry.
The bill would also take an important step in the direction of leveling the notification playing field between large and small companies looking for federal information.
Too often, when a company like Touchstone has to endure rounds of public notices—some of which even include our name in The Federal Register for our competitors to see if we are seeking an exclusive license—the initiative is stopped dead in its tracks.
One final thought. Legislation cannot dictate good management. This bill should be enacted and will be very helpful; however, public institutions must be held accountable for how they wield the authorities they are given.
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They must be willing to make decisions and take risks. Many public institutions are fearful that they will be criticized for selecting one company over another, and that is understandable. But that is still no excuse for not acting at all.
I am accountable not only to myself, but to my employees for the decisions and authority I use. That is the fact of life in the private sector. If we are truly going to have productive public/private sector economic alliances, both sides must be willing to take and accept personal risks and responsibilities.
Thank you again for the opportunity to share my thoughts and perspectives on this legislation. On behalf of small companies throughout America interested in working with the federal government to commercialize promising new technologies, I appreciate the legislation under debate and the chance to participate in the discussion.
Mrs. MORELLA. Thank you and congratulations on your company. You proved that hard work and commitment with the right idea can be successful.
Let me just pose some questions and then Mr. Gutknecht has joined us and I'll recognize him soon and Ms. Johnson is with us.
Laboratories, including NIST, are now fully utilizing the Internet as a form of notifying potential industry collaborators of new technologies. I just wonder, isn't there a role for the Internet for notification which might supersede the Federal Register notification requirements? In other words, how can we best utilize these modern technologies to expedite the process and break down the barriers that industry senses there—that help to prevent licensing federal technology as rapidly as it should be? I guess I'll start off with you, Mr. Kammer.
Mr. KAMMER. I think that using the Internet offers an awful lot of advantages. Ms. Kraftician was pointing out that it just isn't in the cards that she's going to read the Federal Register every day. But, what if you had the opportunity, over the Internet, to have a search engine bring to your attention things that were focused on the concerns of your company so that you weren't swamped with—I don't know if you—you've seen, I'm sure, the Federal Register and it's thick every day.
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[Laughter.]
Mr. KAMMER. That's impossible for anybody to deal with but if you only had the Federal Register notices served up that had key word topics that were of interest to you that might be possible, you know, to take 10 minutes a day and take a look through them. That's an advantage you'll never get in paper copy——
Mrs. MORELLA. Just like us reading that Congressional Record every day, even though we vote on the Journal——
[Laughter.]
Mrs. MORELLA (continuing). —of the proceedings of the day before.
Mr. GUSCHL. I have to support the movement away from reading large volumes of paper because even in big corporations that staffing seems to have disappeared in the last few years. So, in most cases, our businesses are functioning almost autonomous, except for a few of us who are in corporate roles where we're supposed to monitor all these things and, in that sense, we do not every page of the Federal Register every day.
The Internet would be a definite upgrade and there might even be other forms of communication. I think more of a shotgun approach of getting the message out with a relatively short period of time as reasonable because, in most cases, we're anticipating when things will be made available and looking for them in the right places.
Ms. KRAFTICIAN. In that definition of GOCO, you know, certainly being a company that is managing a government facility where there may be a lot of production of intellectual property, you are in a proximity and certainly can take advantage of it and it's a most natural thing to happen. I believe that the Internet sort of levels the field for all the small companies and even medium, large companies—brings us onto one level playing field. It becomes a virtual proximity. If you're interested in something, you can certainly go out and search for it. You don't have to live next door to it and I've become more aware of it, again, because of the NTTC functioning as that.
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Mrs. MORELLA. Is there anything that we can do to utilize it even more? Is it——
Mr. KAMMER. Well, the current practice——
Mrs. MORELLA (continuing). —by casting——
Mr. KAMMER (continuing). —is you can use the Internet to supplement but you still have to——
Mrs. MORELLA. Right, yes.
Mr. KAMMER (continuing). —publish in paper form. I sort of feel that if you do use the Internet, that does justify some reduction in the amount of time that a notice has to stand up. Again, because of the searchable nature of it, you can be reasonably confident that it will get into the hands of people that are interested in the topic. And, in consideration of most of these patents being in very high technology fields, it's reasonable to suppose that the people that are capable of exploiting them are also somewhat Net-literate.
Mrs. MORELLA. Um-hum. The concept of the bill is, you know, to try to sort of move away from that to utilizing the Internet. And then, several of you talked about this whole concept of ''bundling.'' My recollection of the bill is that it doesn't say that you cannot the ''bundling.'' Maybe you'd explain it a little bit more.
Mr. KAMMER. There is currently an absence of authority for all of the Federal Government except the Department of Commerce to ''bundle.''
Mrs. MORELLA. Um-hum.
Mr. KAMMER. And the notion that I was suggesting was possibly you ought to consider creating that kind of an authority for all the federal agencies so that they could ''bundle'' in circumstances that were advantageous. I understand that the reason why Commerce can do it is a pretty complex legal thing that I don't, you know—what I understand is the lawyers told me it's legal. I don't understand why it was legal or how but it looks like an opportunity to further simplify and, since that's the theme of this legislation, I thought it might be appropriate for you to consider.
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Mrs. MORELLA. Um-hum. You mentioned it also, Mr. Guschl.
Mr. GUSCHL. Right. I'd like to look upon a tech transfer field as something that didn't exist 20 years ago and has rapidly appeared and in the last 5 years has become almost a mature business so that it's getting better. So, we don't want to look at the mistakes of 10 years ago or 5 years ago. But, as I look at how DuPont's doing tech transfer, if somebody comes to us and wants to license or acquire a technology package, it's usually not one patent. It's usually a collection of patents and we ''bundle'' them together and negotiate a deal on that ''bundle.''
When we go to the government and want to do the same things, we're usually restricted in that some of the pieces can't be put in there for some of the reasons that your bill addresses and, in that sense, if it's truly background technology ''bundled'' in, it makes it a cleaner tech transfer deal.
Mrs. MORELLA. Um-hum.
Mr. GUSCHL. I think that you have to be careful, though—and again, this is where the maturing of the field is—make sure the ''bundle'' includes necessary pieces and not extra bonus pieces that don't belong there.
Mrs. MORELLA. Um-hum, um-hum. I appreciate your also talking about the shift in terms of notification processes being a good move—30-day.
I'm curious about how will H.R. 2544 change your businesses practices with federal laboratories. I'm guess I'm pretty much—Mr. Guschl and Ms. Kraftician?
Ms. KRAFTICIAN. Well——
Mrs. MORELLA. Ms. Kraftician?
Ms. KRAFTICIAN. If passed, and I hope that it is in this form, I think we would be more apt to seek out to license a technology with less fear that someone is going to scavenge, produce a lower document basically, and bump us out of the picture. We have very limited funds when we think about marketing a new technology and there's always the threat of expending a great deal of money, which could be used in developing something else, being lost.
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Mrs. MORELLA. Um-hum.
Mr. GUSCHL. I think I ought to look at what might be different than where we already are and, in preparing for this testimony, we had to put a list of our existing CRADAs and it turned out to be 46, which is a sizable number. But, in almost every one of those CRADAs, the DuPont Company rarely gets money from the government.
We're usually going into a partnership where we're putting money into a partnership with a government lab to do something together and, as we do those, we find it very easy to find the partner lab and the partner scientist because we like to match our strengths in the technology with the strength that's in the government. Then, months later, we look at the bureaucracy that's gone through the process to finally put the CRADA together, identify U.S. manufacturing rights, and so forth.
I would hope in those deals that we'd be simplifying the process so we could have a common understanding very quickly to put the paperwork behind the deal we want to have in the first place. And, I believe, by including the GOGO technologies as well, it will be easier for us to access technologies which we somehow manage to work in collaboration with but it will be a broader spectrum for intellectual property.
Mrs. MORELLA. Um-hum, um-hum. Let me ask you, Mr. Kammer, agencies have had a difficult time kind of establishing the objective metrics for deciding about how affected technology transfer is and the performance. I just wonder, how do you think government should measure technology transfer success?
Mr. KAMMER. By manifestations in the marketplace: increased economic activity and more jobs are the metrics that we look at for ourselves. And, if a transfer is successful, it's being practiced in the marketplace and, since we're a federal agency, it should confer a benefit on a lot of the Nation, rather than simply a narrow economic benefit. Many times, that's possible, both for the individual company to profit and also for there to be a new product in the marketplace that benefits everybody.
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Mrs. MORELLA. Do you agree—do you both agree with that kind of measurement?
Ms. KRAFTICIAN. Definitely. We're a small company. As we develop or help to develop new products for the marketplace with partners or bring our own products to market, the only measure really is an economic one and it is certainly a positive effect in producing jobs and revenue.
Mrs. MORELLA. Um-hum.
Ms. KRAFTICIAN. I might also mention that it's—it would be a devastating effect for us or any small company to have to wait by virtue of these publications in—as they occur now. Running from 90 to 150 days to find out whether you have a deal or not can kill a small company's revenue for maybe 2 years looking for another technology to invest in.
Mr. GUSCHL. Let me answer that question just a little bit different and a metric I don't think you want to measure. And that's the number of dollars in royalties that the National Labs acquire in the course of doing this all——
[Laughter.]
Mr. GUSCHL (continuing). —and again, I mentioned I represent the Council of Chemical Research which is the three parts; the universities, the government labs, and industry. Theoretically, one of those three is supposed to make money and profit and the other two are supposed to provide very important parts of our society. When you look at the Bayh-Dole Act, it's usually measured by a group called UTTM, University Tech Transfer Managers. They do an excellent job of auditing that process across all the research universities in this country and the number of deals—and actually trying some kind of measure of the number of jobs or companies that are created is a much more important measure than the royalties.
And, in fact, I think the last report says that maybe eight or nine universities are breaking even, royalties versus cost of doing tech transfer, and I think that's the same direction this legislation should go. There's nothing wrong with royalties for a national lab, especially where the value is there. But, if the negotiation is going so heavy-handedly to get as much royalty as it does that it kills the deal, that the commercialization of that technology never occurs, I think you've gone too far. So, it's that kind of balancing that I think is important.
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Mrs. MORELLA. Including the jobs created as one of those tangible measurements, too. Great.
I'm going to later ask you about how you envision future technology transfer laws, how we can enhance them further, even beyond this. But now, in the interest of time, I'd like to recognize Ms. Johnson for any questioning, and note that Ms. Rivers has joined us.
Mr. Gutknecht, delighted to recognize you.
Mr. GUTKNECHT. Thank you. Thank you, Madam Chairwoman. I think I understand this, and let me speak on behalf not as a member of just this Subcommittee, I'm also on the Budget Committee, and so royalties may not be a good way to measure things from your perspective—[Laughter.]—but every year we have to justify this and I'm not sure who to start with but I think I sort of understand how this works, but could, Mr. Kammer, could you sort of walk us through?
Let's say in a hypothetical situation, and, as was indicated, sometimes it takes 150 days, can you sort of tell me how this process works so I can explain it to other members of the Budget Committee?
Mr. KAMMER. The process, as it currently exists: First of all, the government invests in research and that will be, maybe millions of dollars. And out of that research, in addition to the mission that they were trying to satisfy, might very well come inventions that could be practiced in a for-profit way. The government, having decided to patent—which means that they decided that there's a believe on their part that——
Mr. GUTKNECHT. Who would make that decision?
Mr. KAMMER. It's within the federal agencies. The level at which it's made varies among agencies. In some agencies, it's made at headquarters of the department. In other agencies, it's a delegated responsibility.
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For instance, NIST is in the Department of Commerce, but we have complete authority to make our own decisions; we don't have to consult with the Department, which reduces the cycle time significantly.
Having made a decision to patent, we receive a patent. We then might advertise the patent's availability and ask if there's people that would like to practice this patent. We could either make a decision to grant a nonexclusive license or an exclusive license; it's far more likely that people are willing to invest their own money if it's an exclusive license.
As Mr. Guschl pointed out earlier, the research that got us to the patent is probably a twentieth to a thirtieth of the costs of what it's going to take to carry it from a research existence to a marketplace existence. All the cost is in that part. So they want an exclusive license so if they hit a home run, they'll get the benefits of it.
The advertisement process, at this point, is divided into two parts: an intention to grant a license and then having so, and that, I believe is 90 days; and then there's a 60-day process that follows a decision that an individual company might be the winner where we announce that——
Mr. GUTKNECHT. But, now, do you set up, for example—I'm familiar with bidding laws—do you set up specs? Or do you just ask for RFPs?
Mr. KAMMER. We ask for a number of things in the response. Probably the most telling is your commercialization plan. And if you use a commercialization plan, you can often then make decisions on: Is this really going to go to the marketplace quickly? Is it going to be practiced in the United States? Do we think that the full potential of the invention is being exploited?
And we have a sort of fiduciary responsibility, as the government, to try and make sure that the population as a whole gets a benefit and that's why I responded to Chairwoman Morella that I think it's jobs and economic activity that you really end up judging the success of this on.
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H.R. 2544, I think, would try and compress this 5 months of advertising into a 30-day process, which I personally think is quite possible. I think one might want to think exactly how to do it, but a guaranteed waiting time of 5 months is an unreasonable hardship, I think, especially on a small company, but probably on any company.
Mr. GUTKNECHT. Okay. And then in terms of once an agreement is reached, what is the—I mean, how do we determine what is a fair value?
Mr. KAMMER. Well, one of the provisions is that there isn't initially any money given to the government, but there is a concession made that a certain percentage of the royalties would be paid to the government—from the benefit of the patent would be paid to the government.
And as Mr. Guschl pointed out, that's probably not a brilliant way to make decisions on who the winners are. The government's probably already spent several million dollars on developing this technology, and the part that comes back to a specific government agency is only, hopefully, a very small part of the benefit that should be conferred upon the American public as a whole.
Again, I come back to the notion, then, job creation, economic benefit for the country, are the two things I like to see people make the decisions upon.
Mr. GUTKNECHT. I'll tell you how you can be helpful to me and my colleagues on the Budget Committee, if you could provide us with—once in a while we need to brag about our successes, and what really has been accomplished, and I think sometimes what people aren't up on, they sometimes get down on. And this is one particular area where it would be helpful if you could provide to us here on this Committee just half-a-dozen good examples of things that have happened in the last several years that we're already starting to see benefits in the marketplace.
Mr. KAMMER. We can easily do that.
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Mr. GUTKNECHT. I have no doubt about that, but——
Mr. KAMMER. And we will.
Mr. GUTKNECHT. In fact, off the top of my head, I can't think of one. Okay? And if I don't have one, then I always suspect that my colleagues probably have no more than that.
Mr. KAMMER. The AIDS test is the single most famous one.
Mr. GUTKNECHT. Okay.
Mr. KAMMER. And also the one that's generated—as you can easily imagine—an enormous amount of money. But NIH alone, has 16 examples where—there's a maximum set on an annual basis on how much the royalty can be that comes back. I think it's $150,000. And NIH has 16 that are maxed on annual basis, at this point.
And ARS, Agriculture Research Service, does extraordinarily well, too. So we'd be happy to provide to the Committee——
Mr. GUTKNECHT. Just half-a-dozen would be real helpful to me because we're in the middle of going through this process right now on the Budget Committee and it would be helpful if I had half-a-dozen good examples to share with them.
Mr. KAMMER. We will do that.
Mr. GUTKNECHT. Thank you very much.
Mrs. MORELLA. Maybe you'll share it with the entire Subcommittee?
Mr. GUTKNECHT. Absolutely.
[The following information was received for the record:]
National Institute of Standards and Technology (NIST)
Examples of Successful Licenses
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A Novel Method For Making Single Crystals Of Proteins
NIST invented and patented a new method for making large crystals of biomolecules, to enable measurement of their structure.
The ability to reliably make large, perfect single crystals of proteins and other biological macromolecules is essential for biotechnology. Protein engineering is built upon uncovering the three-dimensional structure of proteins by using x-ray crystallography. This information is essential to understand how and why a protein (such as an enzyme) works—why it causes a disease or how to design a drug to fight the disease.
The method that NIST invented is particularly well suited for operation in space flight, where the lack of gravity allows the growth of the best crystals for analysis. NIST licensed the invention exclusively to Instrumentation Technology Associates (ITA), a small U.S. company, for use in microgravity and space related research on board the Space Shuttle, the MIR Space Station, the U.S. Space Station, orbital re-entry vehicles, sounding rockets, and low ''g'' research aircraft. ITA is a recognized expert in the field, having commercially demonstrated space-based protein growth technology on several Shuttle missions.
Quality Assurance for Automotive Airbags
Morton International's Automotive Safety Products Division, based in Utah, has adapted a NIST-invented ultrasonic system to inspect airbag inflators. Morton-ASP is the leading supplier of airbag inflators to the automotive industry. Auto makers require quality assurance on these components because of their critical role in passenger safety.
Morton-ASP licensed the NIST invention to inspect the mass-produced inflators, which have complicated welds. A unique feature of this inspection system is the use of electromagnetic acoustic transducers (EMATs) that can test the welds at high speed, without contaminating the part or the environment with couplant fluids. Off-line trials involved examining up to 100,000 inflators, and were so successful that Morton contracted with Sonic Sensors of San Luis Obispo, Calif., to build three commercial units. These units are now installed on the production lines and provide process control information on the welding operations.
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Quality Assurance for Mammography
Each year 200,000 new cases of breast cancer are diagnosed in the U.S. Early detection provides the best opportunity for cure.
The Mammography Quality Standards Act of 1992 requires accreditation of the nation's 15,000 mammography machines. Upon passage of the Act, state clinical health inspectors urged NIST to provide calibration standards for ''kVp,'' the high-voltage applied to mammographic x-ray sources. A variation as small as 1 kVp can lead to false readings.
Researchers in the NIST Atomic Physics Division responded by developing and patenting a self-calibrating curved-crystal spectrometer system which determines kVp to 0.1 kVp. This new device represents an enormous improvement over the precision and convenience of existing non-contact calibration instruments. The technology has been licensed to the Radcal Corporation, and it will be marketed as soon as component supply problems are resolved.
U.S. Department of Agriculture (USDA)
Agricultural Research Service (ARS)
Examples of Successful Licenses
Improved Poultry Vaccination—ARS patented a new method to immunize poultry by injecting vaccines into the egg. This technology was exclusively licensed in 1987 to EMBREX Inc., a start-up company with two employees in Research Triangle Park, North Carolina. The technology allowed EMBREX to develop INOVOJET which can inoculate 20 to 50 thousand hatchery eggs per hour. Today, this method protects 65 percent of the U.S. poultry market and 70 percent of the Canadian producers. EMBREX also employs more than 120 people, and opened an international operation in London where it has entered the European and African markets. The company is also working on similar arrangements with the Japanese to enter the Asian market. EMBREX, which is listed on the NASDQ Exchange, reported $20.6 million in revenues in fiscal year 1996. The company continues to partner with ARS, with seven Cooperative Research and Development Agreements.
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Pathogen Control—Developed by ARS scientists in College Station, Texas, the technology uses beneficial organisms to control the presence of Salmonella and other pathogens in poultry. The patented technology was subsequently licensed to Milk Specialties. When applied to animal feed or water, the technology is designed for rapid growth of beneficial organisms to out compete Salmonella and other pathogens. This technology reduces the risk of animals ingesting pathogenic bacteria to enhance food safety efforts in poultry production. Since the technology was licensed to Milk Specialties, the company has created a BioSciences Division in Madison, Wisconsin that uses the ARS technology as its anchor. Not only does this technology have a positive food safety consequence, but it is also having an impact on new employment in Wisconsin. The product manufactured at the Wisconsin division is also being exported to Japan, bringing the ARS technology to the Pacific Rim. Federal regulatory approval of the new Milk Specialities product will provide poultry farmers with a new tool to combat these pathogens, with an overall benefit to consumers.
A separate technology also incorporates beneficial organisms to control the presence of pathogens such as Salmonella and Campylobacter in poultry. The technology developed by ARS in Athens, Georgia was licensed to Continental Grain of Gainesville, Georgia. The company is developing product lines that can be applied to poultry feed to reduce pathogen growth.
Fantesk Starch-Oil Combination—A variety of food and non-food applications are being commercialized using a stable, nonseparable composition made from starch and oil. Known as Fantesk, it was developed by ARS scientists in Peoria, Illinois. Union Camp Corporation of Wayne, New Jersey, was granted an exclusive license to the technology to make environmentally friendly adhesives, glues, and coatings. The technology could capture a significant share of the $100 million per year adhesive and coating market for wood-based products. Opta Food Ingredients of Bedford, Massachusetts, licensed the technology for a variety of food applications, such as fat replacements. Additional companies are working with Opta on sublicensing the technology to develop commercial products. The total market for fat replacements and food ingredients exceeds more than $300 million per year. The starch-oil combination also attracted the attention of Seedbiotics, Inc. of Caldwell, Idaho, which will use the technology to encapsulate fertilizers and biological pesticides and herbicides in compositions that can be used to coat seeds to reduce surface-level application of these compounds. Additional applications of the technology include pharmaceuticals, lubricants, and personal care products.
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Oatrim—A fat substitute from soluble oat fiber called Oatrim was developed and patented by USDA's Agricultural Research Service. The product, which reduces fat and calories and fights blood cholesterol, is commercialized and is an ingredient in many meats, dairy, bakery and other food items. This development has been licensed by ConAgra Inc., Rhone-Poulenc and Quaker Oats, selling products in excess of $25 million per year. Most recently, the oatrim technology has led to the creation of a new company that was started by two elderly women in San Diego. The two entrepreneurs opened Jean's Posh Pastry, a manufacturer of mail-order cookies and baked goods. Increased demand for the products has led the company to search for expanded manufacturing capacity.
Hypoallergenic Latex—A process to make hypo-allergenic latex products from the domestic guayule plant was licensed to the Yulex Corp. of Philadelphia, Pennsylvania. Latex derived from guayule doesn't contain allergenic proteins found in the Heva plant species, which is the primary source used to make latex products. Yulex intends to manufacture products for the health care industry, such as surgical gloves, condoms and catheters as alternatives to current latex products that contain allergenic proteins. This technology could have a significant impact on the $3.1 billion U.S. latex glove market alone. The Bureau of Indian Affairs is evaluating guayule, a native plant of the desert Southwest, as a way to stimulate economic development on Native American lands.
Super Slurper—Research has opened new markets for the cornstarch-based absorbent dubbed super slurper. Super slurper, which absorbs 2,000 times its weight in water, has proved to be a valuable alternative to petroleum-based chemical absorbents, like carboxymethyl, which was discontinued in feminine hygiene products because it was found to contribute to toxic shock syndrome. At least four companies are manufacturing a variety of environmental products using the starch-absorbent technology. Products currently on the market that use super slurper range anywhere from baby diapers to absorbent mats used to sow grass along construction areas to help prevent erosion, as well as fuel filters.
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One of the company's manufacturing super slurper—Bandz Inc. of Smelterville, Idaho was literally built on the USDA technology. When Bandz was incorporated in 1985 in Idaho's Silver Valley, the region was suffering from 30 percent unemployment. This technology led to the creation of 12 new jobs in this economically depressed region. This year Bandz reported $2 million in sales from its four major product lines and is expected to double its sales next year, as it increases markets both domestically and in the Pacific Rim.
Natural Fungicides—ARS licensed a patented fungicide to Ecogen Inc. of Langhorne, Pennsylvania. The product known as ASPIRE is registered by the Environmental Protection Agency and is an effective control against fruit rot in pears and apples. The technology uses the yeast Candida olephoila as an environmental alternative to methyl bromide and other petrochemical fungicides. Discovered by scientists in Kearneysville, West Virginia, this control is yet another example of how agricultural research is providing business and environmental advantages.
National Institutes of Health
Examples of Successful Licenses
Leading NIH Technologies That Impact Public Health
This listing was determined by analysis of NIH technologies on the market which have improved public health. Reagents, research tools and other technologies that may affect the research enterprise are not included in this listing. The technologies are listed in alphabetical order.
Antibodies Against Human Pneumocystis Carinii
Breast Cancer Monoclonal Antibodies
Cancer Chemotherapeutic Drug, 2-F-AraA
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Clinical Development of Paclitaxel
Diagnostic for Human Malaria
erb-2 Oncogene Receptor
Human Breast Cancer 1 Gene (BRCA–1)
Isolation of Hepatitis A Virus Strain HM–175 (Vaccine)
Serological Detection of Antibodies to HIV–1
Serological Detection of Antibodies to HTLV–I
Specific and Sensitive Diagnostic Test for Lyme Disease
Treatment of HIV with ddC
Treatment of HIV with ddI
Trimetrexate as an Anti Parasitic Agent
Financial Information on NIH Technology Transfer Activities
In FY1997, NIH generated nearly $36 million ($35,692,000) in income from its technology transfer licensing activities
NIH currently administers 718 royalty generating licenses, of which 208 were signed in FY1997
In FY1997, NIH had 16 employee inventors meet the legislative annual cap of $150,000 income from their federal inventions
Additional details on licensing
1. ANTIBODIES AGAINST HUMAN PNEUMOCYSTIS CARINII
Monoclonal antibodies specific to human Pneumocystis carinii can be used to detect the presence of the organism that causes pneumonia in immunocompromised individuals, particularly those with AIDS. The use of these antibodies provides a reliable, efficient, and simple diagnostic tool for detection of this organism, which cannot be cultured in humans. The invention is licensed co-exclusively to three companies.
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2. BREAST CANCER MONOCLONAL ANTIBODIES
This invention describes monoclonal antibodies demonstrating a reactivity with human breast cancers. The invention has been licensed by a large number of companies for diagnostic test kit and therapeutic purposes as well as for research reagent use involving breast cancer and related cancers.
3. CANCER CHEMOTHERAPEUTIC DRUG, 2-F-AraA
This compound, a DNA polymerase inhibitor, has been shown to have potent activity in the treatment of B-cell leukemia. Licensed exclusively to Berlex Laboratories, a subsidiary unit of Schering AG, 2-F-AraA has been approved by the FDA as a cancer therapeutic drug and is marketed under the trade name ''Fludara.''
4. CLINICAL DEVELOPMENT OF PACLITAXEL
Development of an improved method for administering Taxol (paclitaxel) has significantly improved the treatment of cancerous tumors, particularly ovarian tumors and breast cancer. Taxol, a recently identified compound derived from the bark of the Western Yew tree, has been found effective in treating patients with breast cancer and advanced stage epithelial ovarian cancer. This technology was developed under a RADA and has been licensed exclusively to Bristol Myers Squibb.
5. DIAGNOSTIC FOR HUMAN MALARIA
A fragment of PfHRP-II gene of Plamodium falciparum was developed using recombinant DNA techniques. This technology is capable of encoding PfHRP-II protein, a water soluble, histidine-rich molecule that may be effective in the detection, diagnosis, and treatment of human malaria, which is caused by the parasite P. falciparum. This protein may be particularly useful in the development of an anti-malaria vaccine. This invention is licensed to Becton Dickinson and is marketed under the trade name ''Parasight F.''
6. erb-2 ONCOGENE RECEPTOR
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erb-2 is a retroviral oncogene expressed in human breast cancer. Proteins encoded by this gene and antibodies against those proteins are useful as diagnostic tools in the detection and treatment of cancers. This invention has been licensed on a non exclusive basis to several companies.
7. HUMAN BREAST CANCER 1 GENE (BRCA1)
A gene, BRCA1, that causes the inherited form of breast cancer has been isolated and cloned. Women who inherit a mutated form of BRCA1 have an 85% chance of contracting breast cancer by age 65, as well as elevated risk of ovarian cancer. The gene will be useful in a test for BRCA1 mutations. Such a diagnostic test could be used to identify the estimated 600,000 women at risk of developing the inherited form of breast cancer. Exclusively licensed to the University of Utah/Myriad Genetics, Inc.
8. ISOLATION OF HEPATITIS A VIRUS STRAIN HM–175
Hepatitis A is probably the most widespread of viral hepatitis diseases and is an endemic childhood disease in the underdeveloped countries of the world. The vaccine for Hepatitis A is now being sold in the U.S. and abroad by SmithKline Beecham under the trade name ''Havrix.''
9. SEROLOGICAL DETECTION OF ANTIBODIES TO HIV–1
The product from this invention is the AIDS Test Kit, which is used as a diagnostic to determine whether patients are HIV positive and to screen blood supplies. The invention is licensed non-exclusively to a number of companies and sold throughout the world.
10. SEROLOGICAL DETECTION OF ANTIBODIES TO HTLV–1
Infection from Human T-Cell Lymphotropic Virus Type I (HTLV–I) can be diagnosed through the use of test kits based upon the cloned HTLV–I envelop genes of this invention. This invention is licensed on a non-exclusive basis to several companies.
11. SPECIFIC AND SENSITIVE DIAGNOSTIC TEST FOR LYME DISEASE
This invention serves as a probe for lyme borreliosis. Due to the identification of related DNA sequences in Borrelia burgdorferi, this invention is unique because it is not limited in specificity. This technology is licensed non-exclusively to GENBIO and is marketed under the trade name ''Immuno P39 Lyme Diagnostics.''
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12. TREATMENT OF HIV INFECTION WITH ddC
ddC, similar in action to AZT, inhibits the replication of HIV by interfering with the production of the critical enzyme reverse transcriptase. Because it may be better tolerated or have different patterns of toxicity than AZT, patients may find it useful in either individual or combination treatment therapy. Licensed exclusively with Hoffman LaRoche and is marketed under the trade name of ''Hivid.''
13. TREATMENT OF HIV INFECTION WITH ddI
ddI, similar in action to AZT, selectively inhibits the replication of HIV by interfering with the production of a critical enzyme known as reverse transcriptase. Because it may be better tolerated or have different patterns of toxicity than AZT, patients may find it useful in either individual or combination treatment therapy. Licensed exclusively to Bristol Myers Squibb, it completed clinical testing in 1991 and was approved for use by the FDA. It is marketed under the trade name ''Videx.''
14. TRIMETREXATE AS AN ANTI-PARASITIC AGENT
Infections due to Toxoplasma gondii and Pneumocystis carinii, often seen in AIDS patients and extremely refractory to standard therapy, can be effectively treated by administering trimetrexate. This invention is licensed exclusively to U.S. Bioscience and is marketed under the trade name ''Neutrexin.''
U.S. Department of Interior
Example of a Successful License
Desalination Filter—The Department of Commerce licensed nonexclusively eight companies under domestic and foreign patents owned by the Department of Interior on a reverse osmosis membrane invention made by one of its contractors. This has led to extensive use throughout the world of the membrane which has become a standard in the water purification field. The licenses produces about $2 million annually in royalties.
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Mrs. MORELLA. That would be really great. I notice also we've got Doug Comer who was staff on this Subcommittee, who was Director, and now he's out making money.
[Laughter.]
Welcome.
I'm pleased to recognize Ms. Rivers. And indicate, also, that Mr. Gordon has joined us.
Ms. RIVERS. Thank you, Madam Chairwoman. My questions are really around the issue of notification and how you go about doing that because your testimony suggests that people really are being benefited by this requirement to give notice. Do the agencies have information on what works and what doesn't work, relative to getting to small businesses and potential licensees?
Mr. KAMMER. The information is somewhat unevenly distributed across the spectrum of agencies. The legal and procedural requirement is that we use The Federal Register. That is a hard database to mine, as we were discussing earlier, just because it's thick and its agate type. I'm too old, actually, to read The Federal Register anymore; I can't see it. But my agency uses the supplements notification with an Internet publication and we try also to develop lists of people based on prior contact that have expressed interest in topics and will affirmatively bring them to people's attention, if we're able.
However, there's just under 400,000 small and medium sized businesses in manufacturing, which is the most likely target of practicing patents, in the United States, and there is no list of all 400,000 of them. It doesn't exist at the moment. So that serves as a barrier; it's a disadvantage and it's one of those things that I think would probably help but doesn't exist now.
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Ms. RIVERS. Well, do you, if we move forward with these kinds of programs, do you see—how do you see the agencies getting better at doing this?
Mr. KAMMER. I think we have to have more knowledge of the small and medium-sized companies. We know all the big companies in the United States; we know where they are, we know how to deal with them, it's that easy.
In the case of the small companies, there's probably somebody perfect for some patent that we're advertising right now that won't hear about it simply because we don't know about them. And I think we have to get better at developing these lists; that's the key.
Ms. RIVERS. And, conversely, how do these small potential licensees get to know about you?
Mr. KAMMER. Well, NIST has some advantages in that we have the Manufacturing Extension Partnership and, of course, it's their job to reach out to these folks, and they are developing lists which they share with the rest of NIST and they are able to talk with the companies. But other than using the Internet and expecting people to come to you and when you do identify them, acquire them into your database so then you can re-contact them with hopefully interesting information, I don't any more.
Ms. RIVERS. Are you concerned—I mean, you spoke a few minutes ago about contracting the period of notice rather than going with what we have now—are you concerned that contraction of the time period will actually allow you to reach fewer people?
Mr. KAMMER. My belief is that you probably—well. The Federal Register notice, while it is always available once it's published, in all likelihood, if you don't read it on the day it's published or within a day or two, you're not going to read it because there's a new one every day, and 6 inches of paper today, 6 inches tomorrow. It's a nightmare.
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Ms. RIVERS. You're talking about my life.
Mr. KAMMER. Yes.
[Laughter.]
So, if you don't get reached on the day it's published by The Federal Register notice, then your only chance is the Internet. And, again, if you use a search engine—this isn't hard technology, at this point; this is easy technology—then you may even get it downloaded to your e-mail automatically.
I don't—the contraction doesn't worry me. I think 30 days is not an unreasonable period of time. My feeling is that it should precede a final decision on any exclusive license because you're making a point-of-no-return kind of decision.
Ms. RIVERS. Mr. Guschl or Ms. Kraftician, do you want to speak to that? Either of those questions?
Ms. KRAFTICIAN. I see another issue, of course, associated with that, in that, at this point, if I were—if I had made a connection with an intellectual property, and I had proposed an exclusive license arrangement, and it has—and then it reaches The Federal Register, again, I consider that quite a disadvantage because—then again, there are scavengers, there are other situations that could come in and offer a lesser deal, a nonexclusive.
And, I'm not saying—it's always a problem for the person who sits in the agency to make the decision if they have a tighter licensing agreement to address, they may feel more comfortable if a nonexclusive is then proposed by even a larger company or a scavenger company, whatever size, and you get bumped out. I think if it isn't then published, if it looks to be an okay deal, you take the deal. And then again, through other affiliations and networks, you may then attract other partners—the small company or the medium-sized company, or even a large company in that respect. I think it has a way of working itself out, that way.
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It may then actually, put more burden—again, I talked about authority and responsibility—on those people who make that earlier decision without having—if we got away from publishing in The Federal Register the second time, that they would have to take a harder look at the agreement. It might make them feel somewhat uncomfortable early on, but I think they would step up and do that.
Ms. RIVERS. Okay. Mr. Guschl?
Mr. GUSCHL. Let me give you a slightly different perspective of how the tech transfer process works in my eyes. Rarely does something just pop out of a national lab that nobody knew it was there, and it's a race for 90 days to see who gets it, or who's reading the iterative, whatever.
In fact, in the technical community, people who are doing like things are aware of each other and that awareness sort of has you hanging around the right places, whether you're a big company or a small company. And in many cases, you're already collaborating in some kind of joint research agreement, or you might even be publishing together, where you're working toward something in the basic platform science when you the get the idea that maybe we ought to have a CRADA together and work on a specific extension of the technology base.
And it's at that point where you might see a bidding process begin where the tech transfer office of that national lab is going to decide which of the possible partners or how many of them they're going to go to work with, which leads to these things. And in some cases, the big companies, obviously, have the advantage of promising big dollars and lots of experts, but that same bigness is, usually means we're risk-avoiding; we're trying to get some guarantees that things are going to happen. And the small companies in many cases have innovative ideas and are more willing to take risks on how they might explore the possibility that might be the better way to go.
So, I don't know. I don't want to belabor the literature searching of the 30-day notification as being the big barrier. I don't think that's the barrier as much as it is the process of once the dance has led the partners, what happens from there.
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Ms. RIVERS. Thank you. Thank you, Madam Chairwoman.
Mrs. MORELLA. Thank you, Ms. Rivers. I'll now recognize Mr. Gordon who was, up until several months ago, the Ranking Member on this Subcommittee, but he's still on the Subcommittee.
Mr. GORDON. Thank you. Is it Mrs. Kraftician? Mrs. Kraftician, thank you.
In your statement—or, you mention that the current system is, ''cumbersome processes are skewed in favor of larger companies. I could go as far as to say that the current system is anti-small business.'' Could you elaborate more on that statement, please?
Ms. KRAFTICIAN. As I mentioned before, one of the aspects of that is——
Mr. GORDON. You may want to speak up a little more into your microphone there.
Ms. KRAFTICIAN. As I had spoken before, one of, just one of the aspects of that is the—a small company not having enough staff simply to address looking at The Federal Register every day. When you talk about an inch of paper coming in. The language itself is not easily read by most small company. It tends toward legalese or government abbreviations and lots of them, so it's very difficult to just simply sit down and read through that. You have to almost set aside a staff to do that, and in that, we just don't have the revenue.
Mr. GORDON. So what would you—what would be your suggestion for an alternative?
Ms. KRAFTICIAN. Well, I still think that the movement towards—small companies exist—you know, it's a computer age, but we're very used to the Internet and I see that the availability that electronic communication—also the companies that are apt to go out and network or look for something are still going to be in communication and they're going to be doing it minute by minute, not waiting for a daily publication to come out. I think there's an impetus there to do that.
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We depended on sheaves of paper 20 years ago because we didn't have this availability, and I think there's just going to be a natural movement away from that. And there's a quicker response time that's necessary.
Mr. GORDON. Should that be in addition to, or should it be exclusive?
Ms. KRAFTICIAN. I don't know how that movement—how that change would occur. I think there still would be the publication for sometime in the future, if that's what you're addressing, and the electronic communication certainly would be available to all of us at a very minimal amount of time and cost, and we can easily cross-reference and pinpoint something that we want, rather than having to look through an inch, 50 or 60 pieces of paper, in order to reach that which we need to see.
Mr. GORDON. Thank you.
Mrs. MORELLA. Back to kind of the question that I was suggesting about how federal technology transfer could be enhanced in the future, I'm also picking up on what—of course, yes, Ms. Johnson.
Ms. JOHNSON of Texas. Mrs. Kraftician, could you explain a little bit more about your business. It sounds like you do engage in a lot of problem solving, small businesses and some are subcontracting for larger businesses rather than product development. Is that——
Ms. KRAFTICIAN. Well, initially, almost 19 years ago, we started as failure analysis company. We—it wasn't really a career we sought, we were on a mission to—we saw a lot of federal laboratories—and large laboratories, rather—taking a different road. And the larger companies were closing down research facilities and we thought that we could possibly meet a need that America had for small and medium-sized companies to compete. And so we started this failure analysis first, and then, just by virtue of the people that we accumulated in our company and some of the ideas that we had, we started to do product development.
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Some of our products are now being produced and marketed—and actually marketed worldwide. They're available in the United States as well as in other countries. And we have been a characterization arm for companies as large as 3–M. We have developed new materials for them; we have tested them. And so we have a lot of different aspects now. We're developing new databases.
We have—we meet the need of a company. And sometimes, internally, they are unable to cost-effectively get something done internally. They can send it to Touchstone and we'll get it done in a very quick amount of time, and usually give them a very favorable product.
Ms. JOHNSON of Texas. Have you seen the comments that the administration has made on this proposed bill?
Ms. KRAFTICIAN. No, I——
Mr. GUSCHL. A few hours ago, I saw them.
[Laughter.]
Ms. JOHNSON of Texas. Okay.
Mr. GUSCHL. And if anything, I think there was some other points I would have brought up if I hadn't seen these because a lot of the comments were more legal in the sense of something was missing to make sure the government still has the ownership right to use a technology. And there are a lot of good upgrades here. I haven't had a chance to go through these and I'm not a lawyer, so I'll take them home and go back over them——
Ms. JOHNSON of Texas. Sure. Did you——
Mr. GUSCHL (continuing). —most of them, I think they're very good upgrades to make it a living, viable piece of legislation as opposed to an outline that would leave a lot of areas which are ill-defined.
If you leave an area ill-defined, that just opens up the door for my lawyer and somebody else's lawyer to spend a lot of time trying to build it. So, I think they're good upgrades but I really am not in a position to comment——
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Ms. JOHNSON of Texas. Could you submit your comments? I'd like to—after you've had a chance to review it. Could you also do that, Ms. Kraftician?
Thank you very much, Madam Chairwoman.
Mrs. MORELLA. Mr. Guschl, would you also submit your own recommendations, in addition to your response to Mr. Bachula's comments for the Administration?
[The information referred to follows:]
Insert offset folios 1-11
Mrs. MORELLA. And I want to pick up on the testimony that you gave because I think it links up with the big issue I'm looking at, and that is that is you say in your testimony that, in terms of barriers, ''unfortunately, individual deals''—you're talking about management processes, and Ms. Kraftician may agree with you—''deals can still get bogged down on a case-by-case basis because of individuals who are not aligned with the intent of the policy, labs which are trying to second-guess the approval of a regional office, and researchers who are pushing for unreasonable business deals.''
Are we therefore talking about a culture that we are hoping to change, and does this legislation begin to move us in that direction and is there further legislation that can be done? Can this be legislated? Because you've got a culture, it seems to me you're talking about sort of a bureaucratic culture and then I can't help but also wonder if we have a risk-aversion culture at the same time. And so I pose that to the three of you, actually, for your comments. Maybe I'll start with you, Mr. Guschl.
Mr. GUSCHL. I enjoy that question because there are a lot of places we go where it's back-to-back transfer. Technology transfer didn't exist as a way of doing business for the companies or for the government labs, and as we're learning how to do it, it's a culture change on both sides.
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There's just as much pain in DuPont—which was historically a company that invented 99 percent of its own technology, pick out that which they needed to develop their products and put the rest on the shelf—to come out and do more collaboration, more partnering, and trust your partner. It's just as painful as it is on the national lab side.
And, again, I was at Savanna River for 3 years to watch this, for them to realize that in addition to their prime objective for the Nation, they're supposed to be partnering with an outside partner and helping them succeed. So there's a lot of growth that's still going on and in that sense, this is a very important step in the right direction. But, no, I don't think it's the final, final thing. That might be the revision 3 or 4 years from now, as we continue to learn from that.
When I look at the cases that fail, and I look at many cases with government labs and universities, I basically find that we all like to tell anecdotal stories about the cases that are failing and not talk about the 90 percent that are going smoothly through the system.
When you look at the ones that are failing, that's where my comments come from that there's lack of alignment of what the program is supposed to do. It can take months to get clarification from Washington about what that program, which is using the CRADA umbrella to implement it, was meant to do. And then you run into the experience of the negotiators, the lawyers, as to whether they really have the experience in a particular deal as opposed to saying: I'm uncomfortable with this one; let somebody else help me.
I believe the tech transfer offices at the labs we're dealing with are mature enough to make their own decisions, and should be allowed to do that as long as there's an appeal process—a quick appeal process—to go if we really hit one of those 5 percent that's out of the league of what was meant to be done. But as long as that tech transfer office has to second-guess what the regional office or somebody in Washington is going to overrule them on, then the second-guessing begins.
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Mrs. MORELLA. We'll continue to look for the solution to that problem. Ms. Kraftician.
Ms. KRAFTICIAN. There's an old and little saying which is: The entrepreneur's code: ready, fire, aim.
And—I was being funny.
Risk aversion is not calculated risk—not usually, I must qualify that. Calculated risk is not an aversion for an entrepreneur, but we are currently in the throws of dealing with a state university and they have a technology which we want to license. They're on a different time line than a small company. They have spent about 9 months trying to decide if they—what answer to give and if they want to give an answer. We provide an absolute marketplace for this product right now; we're willing to find foundation and private dollars, which they say then need and cannot find elsewhere, to do further research—close to $1 million—and, want to hold hands and go on.
They have a lot of difficulty with that and the reason is, you know, we set up universities—when I was growing up, universities were the storehouses of knowledge.
It attracted people who were committed to a lifetime of a very slow, methodical learning. And then along the way, they were set in place. Some of them didn't enjoy teaching, I'm sure, but that was part of the responsibility for getting that paycheck. Some of them enjoyed it.
We are then, and the same with the federal labs. I worry a little bit, as a side issue, that federal labs were set up to, again, build a very continual line of information and research which maybe doesn't have a timely end to it, but along the way, we may find something very useful; we may not, we may have to wait 20 years; and it may be the thing that saves the planet, we don't know.
It seems as though, still, we have put people in those positions and suddenly because of changes in government policy or the pressure from outside economic trends—whether it be Japanese or whatever—we have to quickly account, and so we try to turn them around. We try to make them into something they haven't been for 20 years or 50 years, depending what you're speaking of. And it isn't something—we re-educate a lot of other, a lot of other professions but we don't, maybe, as quickly re-educate, nor as kindly, some of the people that have dedicated their lives—and it's frustrating for a small business person, but I recognize what's going on.
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And so I think you're always going to find entrepreneurs, a few of them in universities—you'll always find a few entrepreneurs in federal labs, but you'll just simply can't write a mandate overnight—and I speak of overnight as 2 or 3 years—to say: Okay, today you're going to be this, and you're going to cooperate.
And you're going to do that when someone's mind set is not that, that's not how they're wired. So it is a problem.
Mrs. MORELLA. And now from the gentleman who represents the laboratory.
Mr. KAMMER. There are still people in government that first learned about their—accepted their cultural norms under policies that started in 1949 and extended to 1980, which said that only nonexclusive licenses could be given for any government intellectual property holding. Of course, that changed with the Stevenson-Wydler legislation.
But 18 years should be long enough to change the culture.
I think what's left is a fair amount of risk aversion, and in some cases, a lot of hierarchical decision making that may extend from a lab that's on the West Coast back to a departmental headquarters that's on the East Coast, and go through the hands of six or seven managers.
What if we've discovered and patented the cure for poverty and we give it away under sub-optimal conditions? What's going to happen to us? And, truth to be told, the government's probably not going to discover the cure for poverty, but, you know, something valuable. And people worry about that a lot. It's easier to be conservative than it is to be aggressive under those circumstances. And there's no punishment for being conservative, but there might be humiliation galore if you were too aggressive and later on, in retrospect, people saw that as a defect.
One of the possibilities that occurred to me—you were asking earlier what one might be able to do—it's possible—I don't quite know how to do it right now, but there's a sameness to many of the agreements, especially the agreements with the small companies.
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In NIST's experience, at least, that most small companies will say, well, what kind of agreement do you most usually sign. And if you show them a couple other agreements, they'll read them over and say, that's fair. Typically, with large companies, you know, they start with a—they're more abundantly supplied with lawyers, as are we, and, you know, it that's the arena in which the discussion takes place, then it's sort of: who can get the slightly better deal than has ever been gotten before.
But, if the people making the decisions had as one option as sort of standard agreement that was blessed by an interagency committee—I don't know legislatively? I'm not sure—that you could pick and then if you happen to license the cure for poverty, and, in retrospect, people were saying, what were you thinking, you know, bureaucratically, an answer—well, I used the standard form—is sort of satisfying. And that might be a way of influencing the culture.
Mr. GUSCHL. Can I add one other—I think, was it Mr. Gutknecht who was here before? Asked a question about success stories? Our favorite success story working with the government labs is when DuPont went from the freon refrigerants to a different refrigerant set called SUVA. That's from the CFC, the chlorinated fluorocarbons to hydrogenated versions that are environmentally better. And in doing that, we did that in 4 years. And two-thirds of the technology was developed by external laboratories including 10 CRADAs with different national labs, and those CRADAs covered were under the existing GOCO CRADA writing, and many of them had no royalty stream because they really were there to expand the basic knowledge of thermodynamics and modeling for molecules that might do this. And this was one of our partners in this.
So what it says when I look at all those different CRADAs that were behind that great success story—because we did something in 4 years that would have taken us 10 years if we tried to do it by ourselves and we would have had to triple our staff size—when we did that, we had a good understanding between all our partners about what we were putting into the pot and the puzzle, and what they were putting into it.
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And I want to build on that puzzle analogy. I think a lot of times none of us has all the pieces of the puzzle to commercialize a technology. We need each other; that's the partnership part of the three parts of the research enterprise.
In some cases, and I am sneaking at the view from the Administration comments, the national labs need the ability to acquire technology as well as license it out. Tech transfer is a two-way street. So that's a part where we might have some of the puzzle pieces of something we've done that we're not going to commercialize, but a national lab might acquire pieces from us or somebody else; they have more of the puzzle that they might then take the package to a third party.
So there's a lot of lessons here, and, you know, on one hand, I think the comment is, we could learn from phrases that cover most CRADAs, but I don't think any two CRADAs are ever exactly alike. That'll leave room for negotiating on some parts.
Mrs. MORELLA. Does that happen now, Mr. Kammer? I mean, does the federal lab pick up an idea from the private sector——
Mr. KAMMER. It is legally permissible and I've done it a couple of times, but a couple of times is literally what I mean, in 28 years. It's unusual. In part, because, I think in the federal lab context, it's sort of an admission of incompleteness that, you know, it's hard for some people to make.
Mrs. MORELLA. A risk-adverse concept or culture, I'm reminded it was the famous late Admiral Grace Hopper—and she was very much involved, also, with computers, and the first woman admiral—and she once said, ''A ship in port is safe, but that's not what ships are for.'' And I think this is the kind of thing that we need to generate more of.
I'm going to defer now to our good friend from Pennsylvania, Mr. McHale.
Mr. MCHALE. Thank you, Madam Chairwoman. A series of three questions that I'd like to present. The first is to Mr. Krammer.
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Mr. Krammer—or Kammer, excuse me. The glasses are good, but not great.
[Laughter.]
Mr. Kammer, do you have suggestions as to how the business plan requirement can be made less burdensome for small business? And as a corollary to that, is it necessary to continue to require business plans for small businesses wishing nonexclusive licenses?
Mr. KAMMER. No, I don't think it is. I think that's a very interesting idea. In a nonexclusive license situation, the government is never at the point of no return, and it's perfectly reasonable, I think, in that case. I think that's a very good idea.
Mr. MCHALE. I thank you for the compliment, and so do the staff members who drafted the question.
[Laughter.]
With regard to the first part of it, how can we generally make that business plan requirement less burdensome?
Mr. KAMMER. It's an interesting trade off. Often, small companies prevail because of their business plan. The government is probably starting out knowledgeable about what the large companies are doing, and therefore, thinking, well, we're going to grant this license to ABC Company that we know well.
It's during the notification process, the small companies that come in, when they compete. What they compete on is the goodness of their business plan. I mean, you know, the credibility of a large company is sort of a given. And, you know, if I've never heard of the small company, I sort of—so, I'm sympathetic to the annoyance of the business plan, but I'm somewhat of a defender of it because I think it benefits the small companies.
It might be fair to ask a small company representative as to whether or not I'm right. I mean, I run a pretty big organization so maybe I'm not——
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Mr. MCHALE. I'll accept a good question when I hear it. Yes.
The question is, is he right?
[Laughter.]
Ms. KRAFTICIAN. He's right. He's definitely right; I'm living proof.
Mr. MCHALE. That's great. My second question is similar, and that is—this will be for Mr. Guschl—do you have any problem with agencies continuing to require business plans of applicants for exclusive licenses? Is there any reason to continue to require them when a nonexclusive license is being sought?
Mr. GUSCHL. I don't really have a problem with that, and I think business plans can be a whole bunch of different things. Business plans help researchers, whether they're in industry or a national lab, put their thoughts together and say, what are you going to do with it?
I think one of the reasons small businesses are better prepared is that they have to have a business plan every day as they go to the banks, as they go to look for partners or whatever. And in many cases, a big company, a part of researchers—they don't have a business plan because they've just happily been doing their research funded by the big corporation. Suddenly, they're asked to do it. So, I don't think any of us have a problem with a reasonably timely business planning process.
As I said in my comments, that we run into some organizations that want more and more information—what markets, how do you know the markets are that big—and pretty soon, we're working for them, consuming resources putting together something we would never ask for our own business people to do. And then the mileposts that they put in there, come back every quarter and meet these milestones; it's burdensome. We say, the heck with it, we don't need this. So in that sense——
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Mr. MCHALE. Is there anything we can do to alleviate that?
Mr. GUSCHL. Training. And really this is something where I think it's the responsibility of every tech transfer director, every lab director, to look at their internal processes, and I do see learning going on. But where it's unreasonable, there's usually a pattern of several companies that are walking away from there, not just one.
And it's really the Minority; I'm not saying that this is a problem with the whole enterprise. But there are some places where they're expecting business plans and they've never written one themselves. I think—this is just part of the training and learning process.
As for nonexclusive, I can see why there's no need because you can give out as many nonexclusive licenses as you want, but, as a taxpayer, I'd like to think that those people in the national lab are spending their time on meaningful things, and if they're just giving them out to 8th graders for science projects, that could be time consuming with the resource drain with questions that come later and other things you have to do. So I think a little bit of an outline of a plan from anybody who justifies getting a license, is at least worthwhile having some thought into it.
Mr. MCHALE. A good disciplinary effort in the process.
Mr. GUSCHL. Yes.
Mr. MCHALE. My final question is, is again for Mr. Kammer, but it's basically open-ended, giving you an opportunity to comment. Mr. Guschl has raised a number of concerns about domestic manufacturing, do you have any comments as to his observations, and to what extent are they consistent with the Administration's concerns in this area?
Mr. KAMMER. Well, let me speak for myself first, and then give you the Administration comment. Well, I'll give you the Administration comment first; they should always go first.
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[Laughter.]
They're my boss.
[Laughter.]
In the Administration comments, we urge that there continue to be a concern about domestic practice of the technology.
And then my personal comment is, the world is changing pretty rapidly; technology is a global enterprise. Most of the companies that practice it are or will be global, and it may be that we're setting rules that we are going to discover in a few years, we can't comply with anymore because everybody has changed.
I think it's always a controversial area, but I think we have to be open to more novel business arrangements than we currently are.
Mr. MCHALE. Madam Chairwoman, I thank you. Let me just put in a kind word, if I may, a complimentary word for NIST. Lehigh University is located in my district. We've been extensively involved in technology transfer programs. I have an extremely high regard for NIST, and have been pleased year after year to join with the Chair of this Subcommittee in support of your organization. You do terrific work.
I say that as somebody who's leaving the Congress; I don't have to curry votes, or attempt to please that necessarily appear before the Committee, but I do want to offer you a sincere compliment on the fine work that you and your organization do.
Mr. KAMMER. Thank you for your kind words, sir.
Mr. MCHALE. Thank you, Madam Chairwoman.
Mrs. MORELLA. Thank you, Mr. McHale. The record will show that, on and on, but I value also the statement that you made.
I'd now like to recognize for any questioning, Ms. Johnson. Comments? Okay, great.
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In your earlier comments, about a question or so ago, in talking about what we needed, I wanted to point out to you that industry wanted greater intellectual property rights to justify their investment in a CRADA, government was asking for some greater guidance, and, actually, in the public law, the legislation which is now public law, an industry partner will get, at minimum, an exclusive license in a field of use within a CRADA. Doesn't that sort of, kind of respond to a comment you made about a need that existed there.
Okay, great.
All right, now I'm going to ask you all, kind of as a final question, do you have any comments that you would like to make about what the bill needs to do more of, what we need to do more, just in general, beyond the bill. Any other final comments that you want to make.
We've had the Administration and our great laboratory represented here. We've had major private sector company. We've had a small business. And so the three of you, kind of as a partnership, if you have any final comments you'd like to make for the record.
[Laughter.]
Alphonse and Gaston, who's go first?
Mr. KAMMER. I'll go first. I think the Subcommittee is focusing on this in a very timely way and the objectives of the bill are—we know more, as Mr. Guschl pointed out. We've now had experience; we've—I think we're setting—this bill sets its sights on reducing cycle time, making this a more efficient process, making it a little less onerous. And we know enough, I think, to do that.
When the legislation that was last passed—I guess in 1986—that changed the rules, we thought we were pushing the outer edge then, and I think we're pushing again. I think that's a good thing, and I encourage the Subcommittee to proceed.
Mrs. MORELLA. Thank you. Thank you for being here, too, Mr. Kammer. Mr. Guschl.
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Mr. GUSCHL. Actually, when I became aware of some of the work that's already come in from other agencies with their upgrades of, you know, putting the final words in it, I think many of my other comments are inappropriate because you're addressing them.
There was some nebulous clauses about an appropriate amount of time—what does that mean—which needs to be better clarified. And I see in the comments that those are probably going to come from the agencies, so that will happen naturally. And we'll gladly help you by reading any upgrades you have to see if it really is a workable thing from the industry standard.
But I guess I'd just like to close on this U.S. manufacturing thing since I brought the issue up. In the end, I don't think you should legislate it, I think you need to give freedom to the decision-makers in the tech transfer process at the national labs, because I think there's a big difference between a global company which is based in the United States, and a global company that's based off U.S. soil. We're both global companies, and we're both going to benefit most from a fast deployment of the next generation technology, but if that U.S. company base is there, it's going to be more valuable to the U.S. taxpayers than if it's not a U.S.-based company. That's one differentiation factor that tech transfer decision maker might want to look at. But that might depend, again, on whether it's biotech or chemistry or physics, so I wouldn't want you to legislate a whole bunch of restrictions that make it hard for us to live with it. I'd rather see less restrictions and almost, basically, as open as it is for the universities right now with the Bayh-Dole act in the sense of, you know, preferably deal with, but don't put any restrictions on there.
I think it's very important because technology ages rapidly, and one example we have at DuPont is building a plant in Astoria, Spain, with the next generation of some of our most sacred products—Lycra, Kevlar, Nomex—and this is technology which we invented in the United States but we're deploying in Spain, and it's for the best interest of our U.S.-based business. And already extra jobs have been added in the United States to support the growth of that business because of the deployment in Spain.
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If we waited for the next U.S. deployment of the technology, it might 5 or 6 years later, and we might not even use that variation. So, technology is moving very fast on a global scale, and global companies need to move with it when they have it and the right things will be done, and you need decision makers who understand that to make the decisions.
Mrs. MORELLA. Ms. Kraftician, you have the last word.
Ms. KRAFTICIAN. Oh, my. Well, I want to thank you and the Committee for inviting a representative of small business to attend the hearing. I applaud what you're trying to do. I like some of the changes that I've seen. And I just want to make a comment, I guess, basically, on faith.
Many, many times, Americans, I've heard Americans when I've been traveling, make apologies for the deficits somehow see of themselves when they compare themselves to other cultures, and we have to be very careful that we really measure who we are. I have faith in—people like to see United Technologies who gave a speech one night, which I saw at about 2 o'clock in the morning, and it was riveting. He was talking about 17 different points of business practice which we all agree with, certainly in small business, and about a world economy. And you, you know, it's very hard, as I say, to mandate good behavior or management or anything, you have to rely on education and basically the internal presence of a person.
We as a Nation, certainly right now, export technology at about $26. We import it at $4. We have a very good lifestyle which many, many people around the world envy. Those people who have been CEOs of larger companies and certainly those up-and-coming companies are still—I think they are the caretakers and they proceed very carefully. We have to always just trust that they make the right decisions, and I don't think that is something, again, you can mandate. Thank you.
Mrs. MORELLA. Not long ago, I was in a bookstore and I saw a book called, ''The Book of Values,'' and I thought, this is very appropriate. So I opened it to scan it, it was a book of outlet stores.
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[Laughter.]
That says something about society.
I want to thank the three of you for your excellent testimony, the experiences you brought to it, the commitment to technology transfer, and our Technology Subcommittee is now adjourned.
[Whereupon, at 3:05 p.m., the hearing was adjourned.]
00–000CC
1998
FACILITATING LICENSES TO FEDERALLY-OWNED INVENTIONS: A LEGISLATIVE HEARING ON H.R. 2544, THE TECHNOLOGY TRANSFER COMMERCIALIZATION ACT
HEARING
BEFORE THE
COMMITTEE ON SCIENCE
SUBCOMMITTEE ON TECHNOLOGY
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
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SECOND SESSION
MARCH 17, 1998
[No. XX]
Printed for the use of the Committee on Science
COMMITTEE ON SCIENCE
F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
SHERWOOD L. BOEHLERT, New York
HARRIS W. FAWELL, Illinois
CONSTANCE A. MORELLA, Maryland
CURT WELDON, Pennsylvania
DANA ROHRABACHER, California
STEVEN SCHIFF, New Mexico
JOE BARTON, Texas
KEN CALVERT, California
ROSCOE G. BARTLETT, Maryland
VERNON J. EHLERS, Michigan**
DAVE WELDON, Florida
MATT SALMON, Arizona
THOMAS M. DAVIS, Virginia
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GIL GUTKNECHT, Minnesota
MARK FOLEY, Florida
THOMAS W. EWING, Illinois
CHARLES W. ''CHIP'' PICKERING, Mississippi
CHRIS CANNON, Utah
KEVIN BRADY, Texas
MERRILL COOK, Utah
PHIL ENGLISH, Pennsylvania
GEORGE R. NETHERCUTT, JR., Washington
TOM A. COBURN, Oklahoma
PETE SESSIONS, Texas
GEORGE E. BROWN, Jr., California RMM*
RALPH M. HALL, Texas
BART GORDON, Tennessee
JAMES A. TRAFICANT, Jr., Ohio
TIM ROEMER, Indiana
JAMES A. BARCIA, Michigan
PAUL McHALE, Pennsylvania
EDDIE BERNICE JOHNSON, Texas
ALCEE L. HASTINGS, Florida
LYNN N. RIVERS, Michigan
ZOE LOFGREN, California
MICHAEL F. DOYLE, Pennsylvania
SHEILA JACKSON LEE, Texas
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BILL LUTHER, Minnesota
DEBBIE STABENOW, Michigan
BOB ETHERIDGE, North Carolina
NICK LAMPSON, Texas
DARLENE HOOLEY, Oregon
ELLEN O. TAUSCHER, California
VACANCY
VACANCY
TODD R. SCHULTZ, Chief of Staff
BARRY C. BERINGER, Chief Counsel
PATRICIA S. SCHWARTZ, Chief Clerk/Administrator
VIVIAN A. TESSIERI, Legislative Clerk
ROBERT E. PALMER, Democratic Staff Director
Subcommittee on Technology
CONSTANCE A. MORELLA, Maryland, Chairwoman
CURT WELDON, Pennsylvania
ROSCOE G. BARTLETT, Maryland
VERNON J. EHLERS, Michigan
THOMAS M. DAVIS, Virginia
GIL GUTKNECHT, Minnesota
THOMAS W. EWING, Illinois
CHRIS CANNON, Utah
KEVIN BRADY, Texas
MERRILL COOK, Utah
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JAMES A. BARCIA, Michigan
BART GORDON, Tennessee
EDDIE BERNICE JOHNSON, Texas
LYNN N. RIVERS, Michigan
DEBBIE STABENOW, Michigan
PAUL McHALE, Pennsylvania
MICHAEL F. DOYLE, Pennsylvania
ELLEN O. TAUSCHER, California
*Ranking Minority Member
**Vice Chairman
(ii)
C O N T E N T S
March 17, 1998:
Raymond G. Kammer, Director, National Institute of Standards and Technology
Randolph J. Guschl, Director, Technology Acquisitions, Central Research and Development, DuPont
Elizabeth N. Kraftician, Chief Executive Officer, Touchstone Research Laboratory
(iii)