Cooperative Research and Development Agreements (CRADAs)

CRS Report for Congress
Cooperative Research and Development
Agreements (CRADAs)
Wendy H. Schacht
Specialist in Science and Technology
Science, Technology, and Medicine Division
Summary
A Cooperative Research and Development Agreement (CRADA) is a mechanism
established by P.L.99-502, the Federal Technology Transfer Act, to allow the transfer
of technology, knowledge, and expertise from government laboratories to the private
sector for further development and commercialization. It also provides a means for
federal scientists and engineers to obtain state-of-the-art technical information from the
industrial community. The work done under a CRADA must not detract from the
mission responsibilities of the laboratory. The government provides support in the way
of overhead for research and development (R&D) performed in the federal laboratory
and is prohibited from providing direct funding to the partner in the collaborative effort.
Currently, over 5,000 CRADAs have been signed (including NASA Space Act
Agreements). As the 106^th Congress begins the debate over its approach to science and
technology, the role of CRADAs is expected to be discussed within the context of
federal support for R&D.
Rationale
In pursuit of mission requirements, federal departments and agencies spend
approximately $76 billion per year on research and development; almost a third of this to
support R&D performed in the government laboratory system. Such an effort has resulted
in new and improved technologies and manufacturing techniques that may provide
additional benefits beyond specific mission-related use. For example, while the major
portion of total federal R&D spending has been in the defense arena, government-
financed work has led or contributed to new commercial products and processes
including, but not limited to, antibiotics, plastics, jet aircraft, computers, electronics, and
genetically engineered drugs (e.g., insulin and human growth hormone). Technology
transfer is one way, proponents argue, that federally funded R&D can be further
developed and applied by the private sector to meet other national needs associated with
economic growth. The increasing competitive pressures on U.S. firms in the international
marketplace, coupled with the government’s requirements for goods and services, can
make the collaboration between federal laboratories and industry through technology

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transfer beneficial to both sectors. Although opponents may argue that these activities
detract from budgeted research, the knowledge base created by agency-supported R&D
may serve as a foundation for additional commercially relevant efforts in companies while
the government research enterprise is advanced through interaction with innovative firms.
This transfer is facilitated by cooperative research and development agreements
(CRADAs), a particular legal instrument created by the Federal Technology Transfer Act
of 1986 (P.L.99-502).
The Federal Interest¹
The movement of technology from the federal laboratories to industry is achieved
through technology transfer, a process by which technology developed in one
organization, in one area, or for one purpose is applied in another organization, in another
area, or for another purpose. Technology transfer can have different meanings in different
situations. In some instances, it refers to the transfer of legal rights, such as the
assignment of patent title to a contractor or the licensing of a government-owned patent
to a private firm. In other cases, the transfer endeavor involves the informal movement
of “know-how” (information, knowledge, and skills) through person-to-person
interaction. A successful transfer is in the actual use of the product or process. Without
this, the benefits from more efficient and effective provision of goods and services are not
achieved.
The federal interest in the transfer of technology is based on several factors. With
the rapid pace of technological advancement in industry, the expertise, skills, products,
and processes necessary for the agencies to meet their mission requirements often is only
available in the private sector. Thus, cooperative activities with industrial scientists and
engineers can be critical to the laboratory’s successful completion of its research agenda.
The government also requires certain goods and services to operate. Much of the research
it funds is directed at developing the knowledge and expertise necessary to formulate
these products and processes. However, because the government has neither the mandate
nor the capability to commercialize the results of the federal R&D effort, it must purchase
technologies necessary to meet mission requirements from the private sector. Technology
transfer is a mechanism to get federally generated technology and technical know-how to
the business community where it can be developed, commercialized, and made available
for use and adaptation in the public sector.
Federal involvement in technology transfer also arises from an interest in promoting
the economic growth that is vital to the Nation’s welfare and security. It is through
further development, refinement, and marketing that the results of research become
diffused throughout the economy and can generate growth. Economic benefits of a
technology or technique accrue when a product, process, or service is brought to the
marketplace where it can be sold or used to increase quality and productivity. When
technology transfer is successful, new and different products or processes become
available to meet or induce market demand. Transfer from the federal laboratories also
can result in substantial increases in employment and income generated at the firm level.

¹For a detailed discussion of the technology transfer issue see: Congressional Research Service,
Technology Transfer: Use of Federally Funded Research and Development, by Wendy H.
Schacht, CRS Issue Brief 85031.

In addition, it may be a way to assist companies that have been dependent on defense
contracts and procurement to convert to manufacturing for the civilian marketplace.
In the past, despite the potential offered by the resources of the government
laboratory system, the commercialization level of the results of federally funded research
and development remained low. There were various reasons for this, one of which is the
fact that many technologies and patents have no commercial application or have little
value in the marketplace. Because federal laboratory R&D is generally undertaken to
meet an agency’s mission or because there are insufficient incentives for private sector
investment in research that the government deems in the national interest, decisions
regarding laboratory priorities reflect public sector, rather than commercial needs. Thus,
transfer often depended on attempts to ascertain new commercial applications of
technologies developed for government use rather than on the development of
technologies in response to market demand.
Additional barriers to transfer involve costs. It has been estimated that research
accounts for approximately 25% of expenditures associated with bringing a new product
or process to market. Thus, while it might be advantageous for companies to rely on
government funded research, there are still significant added investments necessary to
achieve commercialization after the transfer has occurred. However, industry
unfamiliarity with these technologies, the “not invented here” syndrome, and ambiguities
associated with obtaining title to or exclusive license for federally owned patents also
serve to limit technology transfer.
The Legislative Foundation
The legislative basis for technology transfer is P.L. 96-480, the Stevenson-Wydler
Technology Innovation Act of 1980, as amended. This law explicitly states that “It is the
continuing responsibility of the Federal Government to ensure the full use of the results
of the Nation’s Federal investment in research and development.” Technology transfer
was mandated as an expressed part of each agency’s mission. Various institutional
mechanisms were created by which federal departments and their laboratories could
accomplish such efforts.
The initial response to new opportunities for use of federal laboratory resources was
less than expected on behalf of both the private and the public sectors. As a consequence,
additional incentives were considered by the Congress resulting in enactment of P.L. 99-
502, the Federal Technology Transfer Act of 1986. This law established a new tool, the
“cooperative research and development agreement,” to be used for joint work between
federal laboratories and the business community. First limited to government-owned,
government-operated laboratories (GOGOs), the authority to enter into CRADAs was
extended to government-owned, contractor-operated laboratories (GOCOs), generally the
laboratories of the Department of Energy (DOE), by the FY1990 Defense Authorization
Act, P.L. 101-189. In the 104^th Congress, the Technology Transfer Improvements and
Advancement Act (P.L. 104-113), provided additional guidelines to simplify the
negotiation of CRADAs and to reduce any private sector uncertainty in working with the
government.

CRADAs Defined
A CRADA is a specific legal document (not a procurement contract) which defines
the collaborative venture. It is intended to be developed at the laboratory level, with
limited agency review. In agencies which operate their own laboratories, the laboratory
director is permitted to make decisions to participate in CRADAs in an effort to
decentralize and expedite the technology transfer process. However, at agencies which
use contractors to run their laboratories, specifically the Department of Energy, the
CRADA has to be approved by headquarters.
The work performed under a cooperative research and development agreement must
be consistent with the laboratory’s mission. In pursuing these joint efforts, the laboratory
may accept funds, personnel, services, and property from the collaborating party and may
provide personnel, services, and property to the participating organization. The
government can cover overhead costs incurred in support of the CRADA, but is expressly
prohibited from providing direct funding to the industrial partner. In GOGO
laboratories, this support comes directly from budgeted R&D accounts. The Energy
Department generally relied on a competitive selection process run by headquarters which
allocated funding specifically designated to cover the federal portion of the CRADA.
However, the FY1994 appropriations eliminated the line item for technology transfer in
the non-defense laboratories, instructing that such efforts be part of on-going
programmatic activities. The line item still exists in the DOE defense laboratories’
budgets, although at a significantly decreased level of funding.
The legislation does not specify the dispensation of patents derived from the
collaborative work, allowing the agencies to develop their own policies. However, under
a CRADA, title to, or licenses for, inventions made by a laboratory employee may be
granted in advance to the participating company by the director of the laboratory. The
director may also negotiate licensing agreements for related government-owned
inventions previously made at that laboratory to facilitate cooperative ventures. In
addition, he can waive, in advance, any right of ownership the government might have on
inventions resulting from the joint effort regardless of size of the collaborating company.
This latter provision diverges from other patent law which requires that title to inventions
made under federal R&D funding be given only to small businesses, not-for-profits, and
universities. In all cases, the government retains a nonexclusive, nontransferable,
irrevocable, paid-up license “to practice, or have practiced,” the invention for its own
needs.²
Laboratory personnel and former employees are permitted to participate in
commercialization activities if these are consistent with the agencies’ regulations and
rules of conduct. Federal employees are subject to conflict of interest restraints. In the
case of government-owned, contractor-operated laboratories, P.L. 101-189 required that
conflict of interest provisions regarding CRADAs be included in the operating contracts
within 150 days of enactment of the law. Preference for CRADAs is given to small
businesses, companies which will manufacture in the United States, or foreign firms from

²For additional information see: Congressional Research Service, The Bayh-Dole Act: Patent
Policy and the Commercialization of Technology, by Wendy H. Schacht, CRS Report 94-501,

1994.

countries that permit American companies to enter into similar arrangements. According
to the Senate report (S.Rept. 99-283), which accompanied the legislation, “the authorities
conveyed by [the section dealing with CRADAs] are permissive” to promote the widest
use of this arrangement. To date, over 5,000 cooperative research and development
agreements have been signed across all federal departments and agencies (including
NASA Space Act Agreements which are similar, but mandated by different legislation).
It should be noted here that CRADAs are only one form of cooperative activity, but
because they can be easily identified and quantified they tend to be the most visible.
Other mechanisms include personnel exchanges and visits; licensing of patents; work for
others; educational initiatives; information dissemination; the use of special laboratory
facilities and centers set up in particular technological areas; cooperative assistance to
state and local programs; and the spinoff of new firms. Currently, federal laboratories
legislatively are prohibited from competing with the private sector and can only offer the
use of expertise and equipment which is not readily available elsewhere. Technology
transfer and cooperative efforts are expressly forbidden to interfer with the laboratories’
R&D mission-related activities.
Observations and Issues
Over the past 15 years, the Congress has enacted various laws designed to facilitate
cooperative R&D between and among government, industry, and academia. These laws
include (but are not limited to) tax credits for industrial payments to universities for the
performance of R&D, changes in the antitrust laws as they pertain to cooperative research
and joint manufacturing, and improved technology transfer from federal laboratories to
the private sector.³ The intent behind these legislative initiatives is to encourage
collaborative ventures and thereby reduce the risks and costs associated with R&D as well
as permit work to be undertaken that crosses traditional boundaries of expertise and
experience leading to the development of new technologies and manufacturing processes
for the marketplace.
There has not been an independent, cross-agency evaluation of CRADAs, in part
because of the inherent time lag between research and commercialization and in part
because of an absence of standardized departmental measures of success. The General
Accounting Office (GAO) reviewed 10 CRADAs among a group selected by agencies as
having achieved their goals. In this December 1994 study,⁴ GAO found that the benefits
of collaboration include new commercial products, advancements in R&D programs, and
assistance in meeting agency mission requirements. Noting that the CRADAs studies
were not necessarily representative of all such efforts, the report concluded that CRADAs
can be a “valuable asset” and “... government-industry collaboration can have a positive
impact on certain economic, health, and environmental needs of the United States.”
In both the 104^th Congress and the 105^th Congress there were indications that a
majority of Members favored refocusing federal funding to support basic research rather

³For additional discussion see: Congressional Research Service, Cooperative R&D: Federal
Efforts to Promote Industrial Competitiveness, Wendy H. Schacht, CRS Issue Brief 89056.
⁴General Accounting Office, Technology Transfers: Benefits of Cooperative R&D Agreements,
Washington, D.C., 1994, RCED-95-52, December 1994.

than technology development. Indirect measures to encourage technological advancement
in the private sector (e.g., tax incentives) appeared to be preferable to direct federal
spending. CRADAs, in particular, are a means to take government funded basic research
from the federal laboratory system and move it to the industrial community for
commercialization to meet both agency mission requirements and other national needs
associated with the economic growth which comes from new products and processes. It
should also be recognized that the government is expressly prohibited from providing
direct financial support to partners in the cooperative venture under a CRADA.
Therefore, this approach may meet the criteria expressed as acceptable to the Congress.
As the new Congress determines its approach to science and technology, the role of
CRADAs is expected to be debated. The recent increase in the number of cooperative
research and development agreements and the expanded industry interest in this activity
implies that both the public and private sectors see value in this activity. The fact that
companies must invest time and money in technology transfer projects helps to insure that
the R&D is relevant to industry needs. Support for CRADAs from departmental R&D
budgets is designed to guarantee that the work is consistent with the missions of the
federal agencies.
However, the successful implementation of the technology transfer mandate has
raised issues related to specific CRADA arrangements and thus led to additional
questions.⁵ Is the technology transfer mandate in conflict with other governmental
objectives such as economic security? Because industries and companies are
interdependent, can the technology transfer interests of U.S. firms that have a
technological lead be balanced with those that do not? How does the government balance
the interest of one industry or one company with another? How can the government’s
interests be balanced with those of industry? Does the current system allow both the
laboratories (thus, the American public) and the private sector to achieve commensurate
benefits? The way in which these issue are resolved and the manner in which specific
circumstances are addressed may influence whether or not CRADAs continue to be a
viable mechanism to transfer technology from the federal government to the private sector
and from industry to the federal laboratories.

⁵For additional discussion see: Congressional Research Service, R&D Partnerships and
Intellectual Property: Implications for U.S. Policy, by Wendy H. Schacht, CRS Report 98-862
and Congressional Research Service, Cooperative Research and Development Agreements and
Semiconductor Technology: Issues Involving the “DOE-Intel CRADA,” by Wendy H. Schacht
and Glenn J. McLoughlin, CRS Report 98-81.