STC 383 Session 4

1. STC 383 Session 4 Technology Transfer Policies and Structures PL 96-480

2. Agenda for Session 4 • Class Updates, Questions, Review • In-Depth view of US Technology Policies • Preliminary Survey of Other Country Policies and Regional Policies • Brief Course: Politics 101

3. Remember from Session 1… • The perpetualtension that Vannevar Bush warned of: “Basic research leads to new knowledge. It provides scientific capital. It creates the fund from which the practical applications of knowledge must be drawn…” But, perversely, “applied research invariably drives out the pure”. * • R&D trends: Billions in federal research & corporate research increasing in relation to government funding, but little corporate research is basic. And….

4. From Crow & Bozeman’s Three Competing R&D Policy Models

5. Federal R&D Commercialization • NASA the only early cry in the wilderness with “Technology Utilization” • Relevance and economic development demands awakened in mid-70’s • States began planning efforts and R&D support efforts (R&D parks, university centers of excellence, incubators) • International competition increased • Policy deficits became obvious

6. Valley of Death(AKA The Gap) PositiveCash Flow Passive Informal Investors($25-100K) Active Informal Investors($100-1 M) Institutional Venture Capitalists($2M+) Family & Friends($0-25K) Break-even Sweat Equity & Personal Savings Seed Capital Pre- Venture Capital Venture Capital Concept Sales Product Introduction WorkingModel Production Prototype Engineering Prototype

7. The New Paradigm:Federal Technology Partnerships Industry as customer for government programs Industry as partner in joint government-industry programs Federal Government Technology Programs Joint Government-Industry Technology Programs Industry • Conformance with govern- ment specifications and reg-ulations • Serving agency missions • Development of commercial technology that also meets government needs • Innovation, commercialization, economic growth • Leadership, competitiveness, jobs Source: Adapted from Council on Competitiveness, 1995

8. Evolution of Technology Partnerships 1980-2002 Government as Consumer Industry as Customer Technology Reinvestment Program SBIR Federal Lab ORTAS Research Antitrust Modification Advanced Technology Program RTTCs Federal R&D Contractor Patent Rights GOCO Lab CRADAs SBIR Extended GOCO Lab CRADAs Homeland Defense STTRs MEP Government as Partner Mission Spin-Off 2002 1980 1982 1984 1986 1988 1992 1994 Source: Council on Competitiveness, 1995

9. Wilson’s Policy Cascade Remove Disincentives if not enough, then Provide Incentives if not enough, then Provide Support Structures if not enough, then Provide Programs In my ideal world…

10. Remove Disincentives • Removal of disincentives is usually “easy” and inexpensive to implement. Some examples: • there is insufficient investment capital flowing to new business startups. Lower the capital gains tax rate. • Allow home equity loans (2nd mortgages).

11. Provide Incentives • Providing incentives is a more activist approach which still leaves the onus of action in the private sector. Examples: • R&D tax credits. • Positive scoring for competitive university research grants when they include industry partners in their projects.

12. Provide Support Structures • Providing Support Structures: necessary when the former two steps do not or cannot solve a problem that the government controls or can assist in. Examples: • Development of the National Technical Information Service and FedWorld – government information resource collections designed to be easy to use and geared to private sector use. • Creation of myriad gov’t web sites on their realm of responsibility-- readily available to the public. May include private sector information (e.g. EU web site describing e-commerce capabilities of companies throughout the trading area.)

13. Provide Programs • Providing Programs is what governments should do only when they believe the prior three steps are insufficient to solve a perceived problem. Examples: • Small Business Innovation Research Program • Advanced Technology Research Program • EU 5 & 6th Framework Research Programs

14. From Crow & Bozeman’s Three Competing R&D Policy Models

15. Federal Legislation The Legislation passed in the ‘80’s-’90’s increases in complexity, sophistication, reality and capability in each succeeding year. MOST changes were in response to BUSINESS requests for process improvements In each case, Policy and ProcessesWhat/Why and How are extended

16. Four Foundation Bills • Foundation for all of the US tech transfer legislation since 1984: • Bayh-Dole Bill (Patent and Trademark Amendments Act of 1980, a.k.a. the Uniform Federal Patent Policy Act of 1980) • Stevenson-Wydler Technology Innovation Act of 1980 • Small Business Innovation Development Act of 1982 (SBIR) • National Cooperative Research Act – 1984 (NCRA)

17. Key Federal Technology Legislation • Federal Technology Transfer Act of 1986 • Omnibus Trade Competitiveness Act of 1988 • National Technical Information Act of 1988 • National Competitiveness Technology Transfer Act of 1989 • NIST Authorization Act for FY 1989 • American Technology Preeminence Act of 1991 • Morella Bill of 1995 • 1999 Amendments to Tech Transfer Act All build on Stevenson-Wydler

18. Federal Legislation (con’t) • Trademark Clarification Act of 1984 Added to Bayh-Dole • Defense Authorization Act of FY 1991 • Small Business Technology Transfer Act of 1992 Built on the SBIR bill • National Cooperative Production Amendments of 1993 Amended NCRA

19. Bayh-Dole Bill • Policy • Gave small businesses and non-profits (including universities) (contractors) rights to own inventions developed under Federal Funding agreements • Protects private confidential info • Allows federal agencies and GOGO (Gov’t owned, Gov’t Operated) labs to grant exclusive licenses • Reserves government use rights to the technology (“nonexclusive, nontrans-ferable, irrevocable, paid-up license to practice or have practiced…”) • Confirms government “march-in” rights to ensure “utilization” of the IP if the contractor does not pursue application of the technology • Favors manufacturing “substantially in the United States” • Process/Implementation • New contract and grant terms – requires that contractors actively pursue IP protection if they choose to own the technology AND requires them to report to the Federal agency “the utilization or efforts at obtaining utilization…” • New license models and licenses – allows exclusive licenses to small businesses and field of use rights to a broader audience, requires a sharing of royalties between the contractor and the inventor, and requires that net royalties be used “for the support of scientific research or education”. Inventor may elect to own the IP if the contractor chooses not to. • FOIA (Freedom of Information Act) exemptions -- Ensures protection of confidential private business information and IP information

20. Policy Admits there is no “comprehensive national policy” to “enhance technological innovation” Formally promotes cooperation between sectors and assistance from Federal resources “Many new discoveries and advances in science occur in universities and Federal laboratories, while the application of this new knowledge to commercial and useful public purposes depends largely upon actions by business and labor. Cooperation…in such form as technology transfer, personnel exchange, joint research projects, and others should be renewed, expanded and strengthened” “Small businesses have performed an important role in advancing industrial and technological innovation” Processes Creating centers to assist in R&D and tech transfer Creating the National Industrial Technology Board Establishing Off. of Research & Tech Agreements (ORTAs) at national labs “…laboratories shall make available not less than 0.5 percent of the agency’s research and development budget to support the technology transfer function…including support of the” ORTAs. Planning grants Stevenson-Wydler

21. Policy Precompetitive collaborative industrial research is in the national interest and should be supported Processes Public registration and publication of consortial and joint venture efforts Anti-trust relief NCRA Definition: Anti-trust relief does not exempt any consortium or its members from the US anti-trust laws. Rather, it offers them a remedy should they be accused of anti-trust activity. If the consortium ceases anti-trust activity within a specified time, there is no cause for suit. Should the consortium contest the accusation of anti-trust and lose, they could only be charged single damages, not treble damages. Anti-trust suits usually carry treble damages and thus you can see why the term relief is used!

22. Policy Extended the policy of the federal government to “strive to transfer federally funded technology to the private sector” Processes Extended Bayh-Dole to allow contractors rights to patent royalties for use in R&D, awards or education Allowed companies -- all sizes -- to obtain exclusive licenses Extended rights to laboratories run by non-profits to retain IP title Trademark Clarification Act

23. Policy Federal Labs provide developments useful to state & local government and private industry. so… “There is a need to provide means of access and to give adequate personnel and funding support to these means” Processes Mandated that tech transfer is a responsibility of all labs Authorizes and sets up the processes for Coop. Res. And Devel. Agreements (CRADAs) & licensing Incentives: personnel recognition, cash awards to gov’t lab employees, management training, royalty sharing Royalty support of tech transfer activities through each lab’s Office of Research and Technology Assistance (ORTAs) Chartered the Federal Lab Consortium Mandates that government technical information be provided to the National Technical Information Service for public access to the information. (See lesson 6 for more on NTIS) Federal Technology Transfer Act of 1986

24. Policy Public/Private cooperation needed to ensure full use of federal R&D investment Federal government should create model programs to promote that cooperation Processes Authorized Manufacturing Technology Centers and Industrial Extension Service (Implemented as MEPS) National Bureau of Standards is reconfigured to become the National Institute of Standards and Technology (NIST) with broader tech transfer role (creates the Office of Technology Policy in Dept. of Commerce to work with NIST which is also in Commerce) Incentive: Extends royalty payments to non-gov’t lab employees Omnibus Trade Competitiveness Act of 1988

25. Policy To improve the legal climate surrounding cooperative production activities To facilitate innovative, efficient joint ventures for production Processes Provides for filing notice for US-based research and production ventures whose members must all (when foreign) operate under anti-trust laws equal to or stronger than US law. Provides anti-trust relief – same as NCRA provisions This relief allows R&D consortial partners to go beyond prototyping stages to actual pilot production for product yield testing, manufacturing methods improvements, and identifying cost, yield, energy, environmental & other factors that could be improved by other research National Cooperative Research and Production Act of 1993

26. Policy Expresses support for the Malcolm Baldridge Awards To increase incentives for government commercialization efforts The Federal government can help US businesses through CRADAs “but the commercialization of technology and industrial innovation...depends on actions by business”. Processes Clarifies CRADA ownership issues Increases cash amounts lab inventors may get from royalties & licenses – the inventor(s) get the first $2000 in royalties and then 15% thereafter, up to $150,000 Allows lab inventors to obtain rights to their IP (increases possibility of inventor-based spin-offs) Directs labs to use common technical standards Morella Bill: National Technology Transfer and Advancement Act of 1995

27. Evolution of Legislation • Understanding increased incrementally • Tools were added and improved incrementally • Responsibility increased incrementally • Use of tools increased incrementally

28. Federal Policy Outcomes/Direct Programs • SBIR/STTR Program • ATP -- Advanced Technology Program • TRP - Technology Reinvestment Program/DOD Dual Use Applications • Manufacturing Engineering Extension Program • Flexible Manufacturing Initiative • RTTCs/NASA • FedWorld – NIST’s electronic/web information service • Federal Lab CRADAs

29. SBIR Program Preamble • Small Businesses contribute to the Nation’s R&D • Conduct of Federal R&D would aid small businesses • Competitive disadvantages to small businesses in purchasing, contracting and competing for grants should be overcome through a set-aside R&D program

30. SBIR Requirements • All federal agencies with extramural R&D in excess of $100 M are required to allocate a set % of their R&D funds (currently set at 2.5%) toward their own SBIR program. SBA collects data and assists in publicizing it and ensuring a level of consistency among agency programs. • The participating companies must be for-profit small businesses by federal definition (generally 500 employees, but each company must check its SIC code definition e.g. A small business in the telecom industry may have up to 2000 employees).

31. SBIR Differences • Each solicitation is run by the sponsoring agency who has latitude to craft the program to its needs. Differences include: • Annual or biennial schedule. • Amount and sequencing of payments • Grants or Contracts • Weights to commercialization and method of assessment • Information can be obtained from the SBA or from each individual agency.

32. Small Business Innovation Research Program • 2.5% of each agency’s R&D budget, channeled to its SBIR program: the small businesses are doing research that the agency needs but which may also benefit or use the expertise of the small business. • Designed to be business-friendly: Simple Paperwork – absolute page limit (including appendices) • Merit review of proposals • 3 Phases – first two funded, 3rd is reporting requirement

33. Small Business Innovation Research Program Phases • Phase I of the SBIR program is designed to show feasibility of the proposal/proof of concept. • normally runs 6 months and can be funded for up to $100,000. Only companies that have participated in phase I of a proposal may apply for phase II funding. • Phase II funding may go as high at $750,000 (with inflation adjustments every 5 years).

34. SBIR Commercialization • At NSF, Phase II proposals are judged • 50% technical merit • 50% quality of the commercialization plan • Former SBIR “mills” are having trouble getting new grants because they don’t have a track record of revenues to prove commercialization...

35. Small Businesses: Obviously for funding For credibility with funders and other supporters For leverage and access to other government funding Other?? Large Businesses For access to partners and licensable technology Funding for testing or equipment use and possible research subcontracts Competitive intelligence Other?? Using SBIR

36. Advanced Technology Program • Individual companies may receive up to $2 million for their R&D projects for up to 3 years and must cost share 60% • Joint ventures may receive an unlimited amount of funds (dictated by annual budgets) for up to 5 years and must cost share more than 50% of the yearly total. • NIST cautions against startups using ATP... • The proposal and selection criteria are clearly laid out for interested companies to use. For details: email isatp @ NIST.govand their website is http://www.atp.nist.gov.

37. Merit review Diversity Go-old-boyism Regional competiton Anti-competitive practice Equity vs. Merit Agencies’ Internal conflicts Different Metrics Policy and Implementation Blind Spots

38. Blind Spots A detailed review of the technology transfer outputs of federal labs in the mid-1990s indicated that while funding for these organizations was about $25 billion annually, the total number of new licensed technologies was only about 300 per year with very little economic return (less than $10 million annually) to the labs themselves…” (pg. 8, Crow & Bozemen) Is this good or bad?

39. Corporate Welfare – Intersection between Politics and Policy • What is it? • Who benefits? • When is national security a valid rationale? • What elements of the Wilson Cascade are “Corporate Welfare”? • Market Tests – back to Blind Spots…

40. Other Countries’ Policies…

41. EU Policies • “The job of the public sector, both at EU and at national levels, is to create the conditions in which …creativity can flourish, to strengthen the infrastructures necessary to promote and support it – especially among small and medium-sized enterprises – and to ensure that it addresses the priorities of society as a whole, rather than solely those of the business community.” • Clearinghouse for data, studies, benchmarking • Testbed/pilots to define and diffuse best practices • Information services for SMEs (incl. link to EU R&D)

42. EU 5th Framework • Started in mid-1999: The 5th Framework Program is working through “thematic programmes” • Improving the quality of life and the management of living resources • Health, Food And Environmental Factors • Control Of Viral And Other Infectious Diseases • The "Cell Factory" • The Aging Population • Integrated Development Of Coastal And Rural Areas

43. EU 5th Framework (con’t) 2. Creating a user-friendly Information Society: • Systems and services for the citizen • New methods of work and electronic commerce • Multimedia content and tools • Essential technologies and infrastructures

44. EU 5th Framework (con’t) 3. Promoting competitive and sustainable growth: • Products, processes, organization • Sustainable mobility and intermodality • New perspectives in aeronautics • Marine technologies • The city of tomorrow and cultural heritage

45. EU 5th Framework (con’t) 4. Preserving the ecosystem: • Management and quality of water • Global environmental change and climate • Promoting the sustainable use of energy • Development and supply of cleaner, more competitive and diversified energy

46. 5th Framework (con’t) 5. Horizontal Programmes: • Confirming the international role of European research • "Innovation and participation of SMEs" • "Improving human potential“ 6th Framework Program is under construction for launch in 2003

47. 5th Framework Challenges • RELAY system to help with commercialization (US definition) • 2000 first introduction of exclusive licensing ability…! • Merit vs equity policy tension th

48. Other Policies… • The Irish miracle: excellent application of the basics (tax breaks, infrastructure, special skill training) • Brazil: financing and tax breaks for start-up software companies • Taiwan: an aggressive system of science parks, incubators, non-profit research and industrial subsidies. • Eager to see what you dig up for your assignment!

49. Useful Web Addresses to Start With • FedWorld • Federal Lab Consortium • National Tech Transfer Center • NASA Commerical Tech Net • US Business Advisor • U.S. Congress • www.fedworld.gov • http://flc2.federallabs.org/ • http://iridium.nttc.edu/nttc.html • http://nctn.hq.nasa.gov/index.html • www.business.gov • www.house.gov, www.senate.gov

50. More Good Info Sources • AAAS, R&D series--http://www.aaas.org/ • US Dept. of Commerce Technology Admin. http://www.ta.doc.gov/ • US DOC ATP program: http://www.atp.nist.gov/atp/ • Small Business Innovation Research Program -- http://www.sba.gov/SBIR/sbir.html, and just search Google or any other engine for it. • PriceWaterhouseCoopers Surveys: (e.g.Venture Capital Survey, e-commerce in Europe, etc) -- http://www.pwc.com