FEDERAL GOVERNMENT TECHNOLOGY TRANSFER AND COMMERCIALIZATION PROGRAMS Y4.B 22/1:103-82 Federal QoverRnent Techaolog} Trans... HEARING BEFORE THE SUBCOMMITTEE ON ECONOMIC GROWTH AND CREDIT FORMATION OF THE COMMITTEE ON FINANCE AND BANKING, URBAN AFFAIRS HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION OCTOBER 21, 1993 Printed for the use of the Committee on Banking, Finance and Urban Affairs Serial No. 103-82 U.S. GOVERNMENT PRINTING OFFICE 73-204t^ WASHINGTON 1994 : ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-043644-3 ^ FEDERAL GOVERNMENT TECHNOLOGY TRANSFER AND COMMERCIALIZATION PROGRAMS 4.8 22/1:103-82 leril Governneit Techaologi Trans... HEARING BEFORE THE SUBCOMMITTEE ON ECONOMIC GROWTH AND CREDIT FORMATION OF THE COMMITTEE ON FINANCE AND BANKING, URBAN AFFAIRS HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION OCTOBER 21, 1993 Printed for the use of the Committee on Banking, Finance and Urban Affairs Serial No. 103-82 APR / 9 19m V^ry U.S. GOVERNMENT PRINTING OFFICE 73-204±^ WASHINGTON 1994 : ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice.Washington.DC 20402 ISBN 0-16-043644-3 HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS HENRY B. GONZALEZ, Texas, Chairman STEPHEN L. NEAL, North Carolina JAMES A. LEACH, Iowa JOHN J. LaFALCE, New York BILL McCOLLUM, Florida BRUCE F. VENTO, Minnesota MARGE ROUKEMA, New Jersey CHARLES E. SCHUMER, New York DOUG BEREUTER, Nebraska BARNEY FRANK, Massachusetts THOMAS J. RIDGE, Pennsylvania PAUL E. KANJORSKI, Pennsylvania TOBY ROTH, Wisconsin JOSEPH P. KENNEDY II, Massachusetts ALFRED A. (AL) McCANDLESS, California FLOYD H. FLAKE, New York RICHARD H. BAKER, Louisiana KWEISI MFUME, Maryland JIM NUSSLE, Iowa MAXINE WATERS, California CRAIG THOMAS, Wyoming LARRY LaROCCO, Idaho SAM JOHNSON, Texas BILL ORTON, Utah DEBORAH PRYCE, Ohio JIM BACCHUS, Florida JOHN LINDER, Georgia HERBERT C. KLEIN, New Jersey JOE KNOLLENBERG, Michigan CAROLYN B. MALONEY, New York RICK LAZIO, New York PETER DEUTSCH, Florida ROD GRAMS, Minnesota LUIS V. GUTIERREZ, Illinois SPENCER BACHUS, Alabama BOBBY L. RUSH, Illinois MIKE HUFFINGTON, California LUCILLE ROYBAL-ALLARD, California MICHAEL CASTLE, Delaware THOMAS M. BARRETT, Wisconsin PETER KING, New York ELIZABETH FURSE, Oregon NYDIA M. VELAZQUEZ, New York BERNARD SANDERS, Vermont ALBERT R. WYNN, Maryland CLEO FIELDS, Louisiana MELVIN WATT, North Carolina MAURICE HINCHEY, New York CALVIN M. DOOLEY, California RON KLINK, Pennsylvania ERIC FINGERHUT, Ohio Subcommittee on Economic Growth and Credit Formation PAUL E. KANJORSKI, Pennsylvania, Chairman STEPHEN L. NEAL, North Carolina THOMAS J. RIDGE, Pennsylvania JOHN J. LaFALCE, New York BILL McCOLLUM, Florida BILL ORTON, Utah TOBY ROTH, Wisconsin HERBERT C. KLEIN, New Jersey JIM NUSSLE, Iowa NYDIA M. VELAZQUEZ, New York MARGE ROUKEMA, New Jersey CALVIN M. DOOLEY, California PETER KING, New York RON KLINK, Pennsylvania ERIC FINGERHUT, Ohio (II) CONTENTS Page Hearingheld on: October 21, 1993 1 Appendix: October 21, 1993 51 WITNESSES Thursday, October 21, 1993 Atkinson, Robert D., Senior Analyst, Industry and Technology and Employ- ment Program, Office ofTechnology Assessment 11 Johnson, Donald, Director, National Technical Information Service, U.S. De- partment ofCommerce 7 Joseph, Antoinette, Acting Director, Office of Laboratory Management, U.S. Department ofEnergy 13 Kammer, Raymond G., Deputy Director, National Institute of Standards and Technology, U.S. Department ofCommerce 3 Schmid, Loren C, National Chairman, Federal Laboratory Consortium for Technology Transfer 4 Von Atta, Richard, Special Assistant for Dual-use Technology Policy, Depart- mentofDefense 15 APPENDIX Prepared statements: Kanjorski, Hon. Paul E 52 Atkinson, Robert 79 Johnson, Donald 72 Joseph, Antoinette 90 Kammer, Raymond G 54 Schmid, Loren C 62 Von Atta, Richard 108 Additional Material Submitted for the Record Johnson, Donald: Written response to questions submitted at the hearing with letter of transmittal dated November 2, 1993 116 Copy ofLicense Agreement 120 Comparative Study of Selected Private Sector Technology Transfer and Patent Management Organizations, June 13, 1986 132 (HI) FEDERAL GOVERNMENT TECHNOLOGY TRANS- FER AND COMMERCIALIZATION PROGRAMS THURSDAY, OCTOBER 21, 1993 House of Representatives, Subcommittee on Economic Growth and Credit Formation, Committee on Banking, Finance and Urban Affairs, Washington, DC. The subcommittee met, pursuant to notice, at 10:20 a.m., in room 2222, Rayburn House Office Building, Hon. Paul E. Kanjorski [chairman ofthe subcommittee] presiding. Present: Chairman Kanjorski and Representative Klein. Chairman Kanjorski. The hearing will come to order. The subcommittee meets today for the first in a series of hear- ings on the potential for stimulating economic growth and new job creation in the United States through the private sector commer- cialization of federally held patents and technologies. In my opin- ion, an effective program in this area can result in the creation of a large number of high-paying jobs which offer real opportunities for future advancement. Many of us in Congress are searching for new initiatives to revi- talize our economy and encourage new employment opportunities. A great amount of attention is focused on the need to retrain work- ers who lose their jobs because of international competition, work- ers who lose their jobs because of reductions in defense spending, and workers who lose their jobs because of changing dynamics in our economy. Yet, the fundamental question remains, retraining for what? Indeed, one of the most recent manifestations of the concerns in this area is the problem the administration is facing in its effort to gain passage ofthe North American Free Trade Agreement. Yet we already have the key to answer this question and the means to unleash a new wave of American technological and man- ufacturing preeminence. Through research over the past 20 years, the Federal laboratories. Federal agencies and colleges and univer- sities have accumulated tens of thousands of patents, licenses, and technologies which are owned in whole or in part by the Federal Government. These represent trillions of dollars worth of assets which can be used to create jobs and businesses to fuel economic growth and re- vitalization. Certainly, there are some efforts already under way at our laboratories and universities to encourage commercialization of (1) these new technologies. Today we will be hearing about many of these, including their strengths and their weaknesses. Nevertheless, the fact remains that today, the primary benefici- aries of America's investment in research are our trade competi- tors, not U.S. businesses. By some estimates, Japanese concerns now obtain up to 90 percent of the licenses to commercialize feder- ally developed patents. Why is this and what can we do to encourage the development of new jobs for Americans, at American businesses, through the com- mercialization of these patents? These are the fundamental ques- tions this subcommittee will be examining in the weeks ahead. As some of today's witnesses may be aware, I have some very specific thoughts and ideas in this area, and I am looking forward to our roundtable discussion today. Joining us today are representatives from several Federal depart- ments and agencies involved in technology transfer and economic conversion efforts. They have been asked to address four important questions: First, what initiatives are presently under way at the Federal level to help facilitate the interagency consolidation of fed- erally funded patent and technology data? Second, do existing Federal level programs fulfill the need for high-technology transfer facilitation? Third, to what extent is there overlap in technology transfer initiatives among the various Feder- al agencies? Fourth, are current Federal financing and credit enhancement programs, along with private sector financing, sufficient to allow startup businesses or existing small to middle-sized companies, to develop federally funded technologies for commercial use? I would like to thank all of the participants this morning for taking the time out of their busy schedules to meet with us and welcome them to the subcommittee. [The prepared statement of Mr. Kanjorski can be found in the appendix.] As I have said, this is an informal roundtable discussion, and I am proud to have as participants today Mr. Robert Atkinson, Senior Analyst, Industry and Technology and Employment Pro- gram at the Office of Technology Assessment; Dr. Donald Johnson, Director, National Technical Information Service at the U.S. De- partment of Commerce; Ms. Antoinette Joseph, Acting Director, Office of Laboratory Management, U.S. Department of Energy; Mr. Raymond C. Kammer, Deputy Director, National Institute of Standards and Technology, U.S. Department of Commerce; Dr. Loren Schmid, National Chairman, Federal Laboratory Consortium for Technology Transfer; and Dr. Richard Van Atta, Special Assist- ant for Dual-Use Technology Policy, Department of Defense. I thank you all for attending. I have had occasion to go over your statements, so that as you make your opening remarks, I would ap- preciate it ifyou could synthesize them so that we can actually get into a question and answer session and an easy flow of comment. The format that we use in these roundtable discussions, and I en- courage you to participate, is that when a panelist says something in our discussion period, do not hesitate to jump in and give your opinion or idea or give us some observations that you have. Rather than just hear boring testimony, quite frankly, I would much rather tap the brightness that you all have and the information and facts that you can make available to the Congress as we start to consolidate programs and put new effort on how we develop our technologies and get them out to commercialization. So first we will start with Dr. Kammer. STATEMENT OF RAYMOND G. KAMMER, DEPUTY DIRECTOR, NA- TIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY, U.S. DE- PARTMENT OF COMMERCE Mr. Kammer. Thank you for inviting me, sir. It is always a pleas- ure to talk about NIST. NIST is a Federal agency with an assign- ment to support the competitiveness of U.S. industry, and the basis for our ability to do this flows from our lab programs. We have about 1,600 technical-professional staff in Gaithersburg, Maryland, and Boulder, Colorado, who regard their primary mis- sion as working with U.S. industry. One of the ways that we do it, that has proved to be quite effective, is something called the Coop- erative Research And Development Agreement. Since 1988 when legislation was passed creating this mechanism, we have entered into 330 such relationships with different firms in 26 States, and in the District of Columbia. That also includes nine in Pennsylvania, which I looked up this morning, I thought you would be interested. That turns out to be one CRADA for every six of our scientists and engineers, or about one CRADA for every $1 million of lab budget that we have. One of the interesting ones that has had a good result was our work with Crucible Materials Corp., which is in Oakdale, Pennsyl- vania,—and they attribute an increase of 30 perc—ent in their product yields they make a powdered metal product to their collabora- tion with NIST, which I take as an encouraging sign that it is pos- sible for the government and industry to collaborate and come to a bottom line result. The second topic I thought I would touch on quickly is manufac- turing extension partnership. We have seven centers across the United States right now that work with small and medium-sized firms. In the 4 years that they have been established, they have worked with about 6,000 firms. We are in the process of doing pilot evaluations now on the re- sults that we are getting from these efforts. We have some results from the first 2 years that suggest that for the companies that we have evaluated so far, their sales were up 34 percent, their employ- ee productivity was up 67 percent, and equally importantly, their employment was up 15 percent. I find this heartening and again suggest that it is possible for these collaborations to be fruitful and have a positive result. By 1997, the President has set us a goal of having 100 such cen- ters, and we hope to have sort of a jump start this year through the technology reinvestment project where we expect to establish 30 new centers, roughly, this year. Finally, I thought I would speak briefly about the Advanced Technology Program. This is an effort by the government to share risk with U.S. industry by providing grants on a competitive basis based on technical merit alone where we select projects that we think have high economic potential and where we think sharing the risk, the financial risk with the company will accelerate the commercialization of a product or of a process that we hope will improve the economy. About half of these awards, interestingly enough, go to small businesses. There is no small business set-aside in this program. However, you do find that the small companies compete quite well with the large companies in this program. By 1997, the President has set a goal of growing this program from its current level of about $70 million to about three-quarters ofa billion. The program has been in operation for 3 years at this point, and while we have a lot of inferential kinds of evaluations, namely the companies report that they are making progress and they seem to be meeting technical milestones, what we do not have yet is impact in the economy, and until we do, we aren't going to be sure wheth- er this is the right approach or not. With that, I will stop, sir, and give your other panelists an oppor- tunity. Chairman Kanjorski. Thank you very much. [The prepared statement of Mr. Kammer can be found in the ap- pendix.] Dr. Schmid. STATEMENT OF LOREN C. SCHMID, NATIONAL CHAIRMAN, FED- ERAL LABORATORY CONSORTIUM FOR TECHNOLOGY TRANS- FER Mr. Schmid. Mr. Chairman, it is a pleasure for me to appear here and talk with you about a subject that is really near and dear to my heart. That subject is technology transfer and commercial- ization of Federal technologies, especially as it relates to entrepre- neurs and small business. Several years ago I became concerned that the Federal laborato- ries were able to work fairly easily with entrepreneurs and small businesses that were in their local region, things like that were happening and we encouraged it. But in addition, there was a greater need. There were some States that did not have Federal laboratories with broad expertise that could respond to some of their questions. So because of that, I decided to turn my personal attention to looking at what initiatives we could institute to better support the small businesses. The large businesses could come to where the lab- oratories were, they had other resources that allowed them to do that. My written remarks focus on the role of Federal laboratories in working with companies. They also describe some examples rele- vant to this hearing, and identify synergies that can occur in filling technology gaps between ideas and commercialization. The latter I believe speaks to how some ofthe Technology Innovation Programs such as the SBIR and the CRADAs relate to each other. Now, my emphasis on all of this is on entrepreneurs and small businesses, because we see a far greater challenge than with other sectors in reaching these small businesses and making them aware that there are Federal technical resources available to them.