Discussion of the Draft Report on Technology Transfer

Remarks as prepared.

Dr. Clough, thanks very much for inviting me to appear before you today. I am feeling a bit like an honorary PCAST member, with this my third appearance before your technology transfer working group. I remain honored to contribute to such an important effort, and I credit the multiple invitations to the outstanding work and thought put into these issues by the professional staff in my office, most particularly Mark Boroush, John Raubitschek and Karen Laney-Cummings.

Once again I will try and balance my three perspectives:

• An Administration official who works with technology industry leaders on a daily basis;
• The leader of the office chairing the Interagency Working Group on Technology Transfer with statutory responsibility for federal tech transfer reporting and regulation; and
• A Presidential appointee charged with identifying and promoting policies that maximize technology's contribution to American economic growth and global competitiveness.

I first testified before you last year May 9, when you were examining the Bayh-Dole Act. At that time I suggested that PCAST should "first do no harm," the Bayh-Dole legislative framework was not broken, and substantial overhaul was not warranted. I urged PCAST to focus on the entire technology transfer system (not just one element, university licensing, in isolation) and to consult extensively with federal labs, universities and industry.

On December 12, at the RAND forum, I suggested that PCAST's final recommendations should include:

1. seeking better analysis of how the unprecedented global competition for research and innovators is impacting the tech transfer process,
2. supporting efforts to develop more meaningful metrics and expectations for tech transfer;
3. ensuring our federal labs have the resources and motivations to prioritize tech transfer; and
4. studying the impact of increased licensing activity on University research and partnering, especially in light of its growth and the concerns of some in industry.

My team and I have reviewed the draft report and we are most gratified that so many of our recommendations are included. We are also pleased to see PCAST's confidence in the Commerce Department, with four of the nine preliminary proposals tapping our expertise. We are excited about the opportunity and, in the future, will be more careful what we wish for!

With respect to the draft report, you have asked for the Technology Administration's feedback on the recommendations that involve our Department. (Regrettably we did not have time to consult across all Commerce following the invitation to appear on Friday).

Recommendation Two says "Federal agencies, government contracting laboratories and the Department of Commerce need to formalize their oversight of and accountability for technology transfer." This is an absolute necessity. Congress thought so too, as reflected most recently in the Technology Transfer and Commercialization Act of 2000 (TTCA). Among other things, TTCA requires all Departments with federal labs to prepare annual plans and performance reports on their technology transfer activities. These reports are supposed to be submitted together with Department budgets, and the law mandates that the Secretary of Commerce assemble these reports annually for submission to the President and Congress.

So, by statute, Congress has already established some formal Commerce oversight, and the annual report remains a promising vehicle for enhanced accountability. In addition, Commerce's reporting effort is enhanced through our leadership of the Interagency Working Group on Tech Transfer (IAWG), a forum that shares metrics, challenges, and best practices. However, Commerce cannot pull this train alone.

To gain greater oversight and accountability over tech transfer, I would suggest two PCAST recommendations beyond what the statute already requires and current practice. First, have OMB clarify the importance of Department reports and require that they be provided to Commerce at the same time that they (and Department budget requests) are sent to OMB. A second idea would be for PCAST to recommend the reconstitution of a senior-level group from federal Departments Assistant Secretary level or higher) to meet quarterly and ensure the IAWG's recommendations and concerns are given appropriate management consideration. Commerce could lead this effort as we have done in the past.

With respect to other types of tech transfer activity - such as university research activities under federal grants - Commerce currently has no formal oversight authority, and I am not aware of any tech transfer accountability reporting requirements. The Association of University Technology Managers (AUTM) prepares an annual report on university tech transfer, although without laws requiring universities to keep and submit information. PCAST's broad recommendation does not indicate whether you are seeking to expand university obligations or federal oversight in this area, so this recommendation might offer greater precision to avoid confusion.

Recommendation Four urges Commerce to "document 'Best Practices' for technology transfer, as well as refine a set of metrics to better quantify practices and their effectiveness." Again Congress agreed, and the TTCA specifically instructs Commerce to document quot;best practices" and work with the agencies to refine metrics. See 15 USC Sec. 3710 (g)(2). Through the annual reporting process and IAWG, we have begun to do just that, and we hope future reports will offer even better guidance and thorough analysis.

With respect to tech transfer metrics, as you know, they are difficult to define, and impossible to generalize across all research entities 1. One size does not fit all, particularly with respect to labs that have different missions and different circumstances, so refining $quot;a [single] set of metrics" may prove less fruitful. The "CRADA bubble" of the 1990s demonstrated the mistake of treating all tech transfer efforts as one-and-the-same, as too many folks pursued CRADAs not because they were the right tool but because headquarters or OMB was counting. We must measure what we value and not value what we measure, and we're working with all the agencies through the IAWG to help agencies identify and improve the best metrics for them.

PCAST might again want to specify whether this recommendation seeks greater federal oversight of university tech transfer, or whether it applies only to federal agency activity. As currently drafted it is unclear.

Recommendation Five urges the Department of Commerce to "include 'education' as a part of its technology transfer mission and task the individual agencies to disseminate related materials specific to their research and development programs." Education is indeed critical and an obvious corollary to best practice dissemination and metric determination.

We agree that improved education and training of tech transfer personnel at all levels should help to promote and improve their effectiveness. Right now the most comprehensive efforts to educate practitioners are led by professional associations including the Federal Laboratory Consortium (FLC), AUTM, Licensing Executives Society, and university Council on Government Relations, among others. Without tasking new resources, if PCAST seeks greater Commerce engagement in the education function it might consider recommendations that bring existing efforts (such as those at the FLC) under Commerce control, direction or supervision.

With respect to Recommendation Eight - Commerce "should study and assess the implications for technology development and transfer in a global environment" - we could not agree more. One of the reasons we initiated the Innovation in America roundtable series last year - a highly successful effort that included PCASTers Vest, Fox, and Marburger, among others - was to study and assess more fully the implications of innovation's globalization for U.S. competitiveness. (We provided the transcripts to PCAST, published them on our web site and continue to work on follow-up activities.) In the late 1960s, 70% of the world's R&D was performed in the United States. In 2001, that percentage was down to 44%, and since we cannot corner the market on smart people or good ideas it will inevitably fall further.

America's ability to commercialize innovations and get the most economic bang for research bucks will determine our future economic strength and technology leadership. As our universities and federal labs compete globally, their ability to attract and partner with the best innovators may turn on the tech transfer terms, intellectual property regime and administrative ease on which such collaborations are based. Your recommendation is timely and important and we are eager to work with you going forward.

In conclusion, I'd like to offer four additional activities we are considering at the Department of Commerce's Technology Administration relevant to tech transfer. We'd welcome PCAST's thoughts or feedback.

• First, we hope to improve and regularize our interactions with industry groups such as the Industrial Research Institute and the National Venture Capital Association. Industry input is essential to getting tech transfer right, since commercialization is an inherently private-sector function. If universities and labs are failing to see their innovations commercialized, industry may have some good ideas why.
• Second, we need more consistent, comprehensive and searchable databases to support tech transfer and partnering.2 Universities and labs are inconsistent in using the web to help private sector parties locate tech transfer opportunities among the outputs of federally funded R&D, especially small and medium enterprises. This is huge logistical challenge, but also a true e-government opportunity. PCAST might recommend that the outstanding e-government task force under Mark Forman's direction at OMB study the issue of federal R&D databases and tech transfer portals, consistent with the E-Government Act recently signed by the President. Commerce and the IAWG would be happy to serve as a partner in this effort.
• Third, we are developing better analyses of ways in which federal labs can best contribute to regional technology-led economic development (while staying focused on their missions). Labs' integration into local economies will help develop the relationships critical to tech transfer, and labs are well positioned to catalyze regional job growth and industry competitiveness.
• Last, we hope to better assess the tech transfer implications of emerging technologies, especially the more complex technologies such as nanotechnology and life sciences. With sciences converging, future partnerships will be more complex - multiple universities, multiple labs, multiple companies in multiple countries. If we think licensing arrangements are complex now, one can only imagine what they'll look like tomorrow. PCAST is right to be concerned about the implications of patenting potential research tools in life sciences, and we hope to look at a range of other tech transfer issues across emerging technologies.

Once again we appreciate your willingness to hear our thoughts and input. We are available to help your staff finalizing this report, and we look forward to carrying out your recommendations.

1 Commerce views the metrics question as involving several distinct kinds of measures: a) program activity indicators e.g., licensing, cooperative R&D relationships, invention disclosure, patenting), b) downstream outcomes (e.g., innovative commercial products and processes, spillover effects on the economy, benefits flowing back to the transferring organization), and c) program productivity e.g., procedural/administrative efficiency, customer satisfaction, overall return from the IP portfolio).

There is a good deal of agreement on what metrics are useful with respect to "program activities," and both AUTM and federal labs regularly publish this information. An increasing amount of information on "downstream outcomes" is also regularly reported by both AUTM and the federal labs. The biggest metrics challenge lies chiefly with measuring "program productivity." Here it appears that appropriate measures are less generalized and much more with tailored performance measures that reflect specifics of an organization's tech transfer programs, how an organization's specific programs relate to its mission and strategic plan, and what is being achieved relative to these plans.

2 Further progress likely depends on a confluence of developments:

• much deeper and more coordinated databases and better search engines;
• better consensus among scientists, engineers, and industry as to the important search parameters;
• improvements in the outreach function by tech transfer office staff; and
• sufficient resources for initiatives and sustained programs to enable these large changes to be achieved.

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