Testimony on the Virtues of the Bayh-Dole Act

Thanks very much for allowing me to appear before you today. It is a real honor to have this opportunity to work with the President's Committee of Advisers on Science & Technology (PCAST). The Commerce Department, and my Technology Administration, look forward to working with PCAST on ways we can together support American innovation, entrepreneurship and global technology leadership.

I am here today wearing three hats:

• an Administration official who works with technology industry leaders on a daily basis;
• leader of the office that chairs the Interagency Working Group on Technology Transfer; and
• senior official from the Commerce Department.

My message, in summary, is that PCAST should first do no harm. The Bayh-Dole legislative framework is not broken - in fact, it is working extremely well in the opinion of many - and thus should not be significantly altered. Certainly substantial changes are not warranted without a thorough review and investigation, tapping the knowledge and expertise of the federal agencies and the private sector. Such an investigation may be more fruitful if focused on the entire technology transfer system and not one element in isolation.

In addition, I am here to offer the resources of my office to PCAST. We spend a lot of time working with experts and practitioners, trying to understand the barriers to and improve the effectiveness of tech transfer, efforts that should help this subcommittee. I'll identify some of our efforts and conclude with some specific recommendations for PCAST going forward.

1. What We're Hearing from Industry

The Technology Administration meets with industry leaders daily. Industry representatives routinely bring their issues and concerns to us. Just as often, we proactively ask them what policy changes might better support their efforts to innovate and create jobs. In fact we advertise ourselves as the tech industry's "portal" to the Bush Administration. During hundreds of discussions, industry has raised issues that range across the spectrum - including spectrum, tax policy, standards, R&D funding, IPR protection, trade and export regulations, e-commerce rules, workforce needs, and broadband, just to name a few. To date, no industry representative has lobbied us on the need to rewrite Bayh-Dole. To the contrary, many industries such as biotech) have clearly indicated that this legislation is working extremely well as is.

Of course everyone in industry we have asked would prefer greater control over intellectual property financed by the federal government. Who wouldn't? And certainly industry representatives have expressed frustration about burdens associated with dealing with the federal government, from contracting to tech transfer to paying taxes. But the Bayh-Dole framework consistently ranks low on the list of problems, well below accounting standards, federal acquisition regulations, alleged federal R&D portfolio imbalances, annual changes in Congressional funding priorities, liability exposure, and difficulties in working with risk averse government lawyers. In regard to federal tech transfer rules and procedures, we do hear about the inconsistent interpretations and practices that exist across the federal departments and agencies, as well as the failure of the agencies to empower tech transfer officials to make deals - before running them through lawyers, committees, and headquarters. But not about the essential principles embodied in Bayh-Dole.

While PCAST should certainly seek direct industry feedback - especially those who are actually transferring technology and ideally not just the big guys - our experience suggests Bayh-Dole is not a top tier concern for most in industry, and that the framework it establishes is working.

2. What We're Hearing from Federal Labs

Our office leads the Interagency Working Group on Technology Transfer IWGTT), comprising technology transfer practitioners and coordinators from all federal agencies with extramural research programs. For almost two decades, this working group has met monthly and played a central role in guiding policy makers on the real-world practices and implications of our tech transfer laws, helping agencies see and consider their colleagues' best practices, and coordinating submission of data for congressional reports.

While PCAST can and should coordinate this question with the federal agencies that have experience working under Bayh-Dole, the feedback we have gotten has overwhelmingly supported the existing Bayh-Dole framework. A few agencies, notably DoD, suggest government may get greater industry partnership for acquisitions by surrendering more intellectual property rights to industry. NIH, by contrast, has had extraordinary success in tech transfer under Bayh-Dole and sees no reason to cede more control to private sector players. Overall, IWGTT representatives share our recommendation to "first, do no harm" to a system that works pretty well. (It is worth noting that there is also some concern about the process at work here, with PCAST requests for all "problems and concerns with Bayh-Dole quot; suggesting a predetermined intention to recommend changes).

3. What We're Hearing from Commerce Department

The Department of Commerce believes that Bayh-Dole strikes the appropriate balance between the public interest and needed market incentives. The wide dissemination and use of the federal science and technology resulting from the taxpayers' substantial investments in government R&D is in the public interest and should be preserved. Strong incentives to the private sector to commercialize the new technologies and innovations that arise from these efforts are also needed and important. Bayh-Dole strikes a very reasonable balance, and we would be concerned that major changes might upset this careful framework. We note that other countries, including Japan and France, have recently adopted Bayh-Dole-like legislation, precisely because it has been so successful in the United States. There may be ways to improve the tech transfer process - such as clarifying or modifying the "substantially manufactured" requirement, improving guidelines for interpreting the "reasonable and necessary" test for granting exclusive licenses to government-owned inventions (at some federal labs such as NIST) and modifying or limiting appeals rights where license applications are denied - but these should be narrowly tailored and carefully considered.

It is also worth considering the purpose and importance of existing processes to patent (and make public) federally-funded innovations. Ensuring these ideas are widely used and widely disseminated allows further innovation, building upon this public science and ensuring returns on federal investments in science and technology. Recent U.S. industrial patents owe greatly to the results of publicly funded R&D - and particularly so in important industrial sectors such as biomedicine/biotech. The National Science Foundation determined in 1997 that 73% of the scientific papers cited on the front pages of U.S. industry patents came from public science (The Increasing Linkage between U.S. Technology & Public Science, CHI Research, Inc., Mar., 1997, www.chiresearch.com/nltv1.htm). Allowing private companies to hold the fruits of public science as trade secrets would likely diminish the long run productivity of the nation's innovation system underpinned by federal funding of S&T, and we recommend against such efforts.

4. What We're Doing at the Office of Technology Policy, U.S. Department of Commerce

Several of our activities at the Office of Technology Policy (within the Technology Administration at the U.S. Commerce Department) may be of interest to this working group. These include:

• EXAMINING INNOVATION IN AMERICA: We are leading the Innovation in America roundtable series, designed to bring together leaders in R&D and innovation from U.S. industry, universities and government laboratories to explore the changing innovation landscape; to inform R&D policymakers, practitioners and managers; and to identify trends and understand their implications for national R&D and innovation policies and programs. We included PCAST representatives in every meeting, and at the request of Dr. Marburger, we have provided transcripts of these sessions to this subcommittee. We are excited to have Dr. Clough and Dr. Fox joining us in June for our discussion of University R&D, discussions with will include the issues of industry-government-university partnerships, tech transfer and Bayh-Dole.
• TECH TRANSFER. By statute, our office has the federal government lead on examining, reporting on and recommending changes to the 1980 Bayh-Dole and Stevenson-Wydler Acts and related technology transfer policies. These laws have helped distinguish America from other nations with large federal investments in R&D by trying to set a rational, predictable and consistent framework for determining IPR. Our office listens to all sides, trying to ensure the rules continue to maximize innovation and commercialization of federally-funded ideas. Based upon these efforts we believe Bayh-Dole cannot and should not be isolated from the broader tech transfer framework when considering ways to improve the process.
• IWGTT. Our office leads the Interagency Working Group on Technology Transfer, described above.
• CONGRESSIONAL REPORTING. Under the Tech Transfer Act of 2000 and prior legislation, the Office of Technology Policy is tasked with preparing reports to Congress detailing the state of technology transfer. We view our role as much more than merely compiling and forwarding this data, working with agencies to ensure the data has meaning and appropriate interpretation. It is imperative that we find ways to measure what we value and not merely value what we measure, and we try to work with federal agencies to be sure Congress is measuring the right things.
• REPORT ON FOREIGN PARTICIPATION. The Tech Transfer Act of 2000 also required NSTC to prepare a report on foreign participation in federally-funded R&D. NSTC asked our office to put that report together. We are compiling data to evaluate the frequency of agreements between U.S. labs and foreign companies, as well as agency practices in managing such relationships. We are trying to develop recommendations about how to make information about foreign reciprocity in IP and cooperative research more readily available to federal labs and agencies, and developing recommendations for revisions to EO 12592.
• REVIEW OF LABS' ROLE IN COMMUNITIES. We also spend a lot of our time looking at state and regional business climate policies, trying to better explain the dynamics needed to sustain tech-led economic growth. One of our projects under way right now is a review of efforts at 10 federal labs that are partnering effectively with local communities to advance regional economies. We hope to issue this report before the end of the calendar year.

5. Recommendations for Going Forward

In light of two decades of success at Universities, lack of significant or consistent industry concern, and on-the-whole federal agency support, we would recommend against proposing any significant changes to Bayh-Dole at the June PCAST meeting. Instead we'd suggest PCAST

1. reiterate the value and importance of tech transfer in our innovation system;
2. consider Bayh-Dole in context of the entire tech transfer system and not in isolation; and
3. work with the Office of Technology Policy at the Commerce Department to identify what is working and what might be fixed by executive action within the larger framework.

Thanks once again for inviting me here today. I look forward to our discussion.

For technical questions concerning the Office of Technology Partnerships, contact us:

Office of Technology Partnerships, NIST, 100 Bureau Drive, Stop 2200, Gaithersburg, MD 20899-2200
Phone: (301) 975-3084, Fax: (301) 975-3482, Email: otp [at] nist.gov (otp[at]nist[dot]gov)