R&D PARTNERSHIPS AND INTELLECTUAL PROPERTY: IMPLICATIONS FOR U.S. POLICY
CRS Report for Congress
R&D Partnerships and Intellectual Property:
Implications for U.S. Policy
Updated December 6, 2000
Wendy H. Schacht
Specialist in Science and Technology
Resources, Science, and Industry Division
Congressional Research Service The Library of Congress
R&D Partnerships and Intellectual Property: Implications for
U.S. Policy
Summary
Congressional interest in the value of intellectual property has grown as
technology becomes increasingly important to the United States. It is now widely
accepted that technological progress accounts for up to one-half of the nation’s
economic growth. Concurrently, the role of patents has changed as the use of
cooperative research and development (R&D) expands to facilitate this technological
advancement and generate new products, processes, and services for the marketplace.
Patents protect the inventor’s investments in generating the knowledge that is the
basis for innovation and are intended to promote “science and the useful arts” and
serve as an incentive to the commercialization of new ideas. As R&D has become
more expensive, ownership of title to inventions has been used by the federal
government as a means to encourage cooperative work between the public and
private sectors and among industry, universities, and non-profit organizations.
The relationship between patents and cooperative R&D is important to the
discussion of policies surrounding intellectual property and congressional efforts to
encourage collaborative ventures. Such joint efforts are an attempt to facilitate
technological advancement within the industrial community. Academia, industry, and
government can play complementary roles in technology development. Cooperative
projects attempt to maximize the best work of the participants and to direct these
efforts toward the goal of generating new goods, processes, and services for the
marketplace. They allow for shared costs, shared risks, shared facilities, and shared
expertise. While opponents argue that cooperative activities stifle competition,
proponents contend that they are designed to accommodate the strengths and
responsibilities of these sectors.
A major emphasis of legislative activity has been to augment research in the
industrial community. This focus is reflected in executive branch and congressional
efforts to encourage companies to undertake cooperative R&D arrangements and to
expand the opportunities available for research. Various laws have created an
environment conducive to joint ventures between government and industry, or
between industry and universities, as well as among companies. To date, Congress
has determined that providing title to inventions made under federal funding to
contractors and/or collaborating parties should be used to support innovation. In
return for patent ownership, Congress has accepted as satisfactory the anticipated
payback to the country through goods and services to improve our health, welfare,
and standard of living. These benefits have been considered more important than the
initial cost of the technology to the government or any potential unfair advantage of
one company over another in a cooperative venture. However, as such efforts
become more widespread and as new issues emerge, additional decisions may need
to be made on how to maintain a balance between the importance of bringing new
products and processes to the marketplace and protecting the public investment in
R&D.
Contents
Introduction ................................................... 1
Cooperative R&D...............................................2
Legislative Foundation for Cooperative R&D..........................4
The Role of Intellectual Property in Cooperative R&D...................7
The Research Environment........................................8
Issues and Opportunities.........................................11
R&D Partnerships and Intellectual Property:
Implications for U.S. Policy
Introduction
Congressional interest in the value of intellectual property has grown as
technology becomes increasingly important to the United States. It is now widely
accepted that technological progress accounts for up to one-half of the nation’s1
economic growth. Concurrently, the role of patents has changed as the use of
cooperative research and development (R&D) expands to facilitate this technological
advancement and generate new products, processes, and services for the marketplace.
Patents protect the inventor’s investments in generating the knowledge that is the
basis for innovation and are intended to promote “science and the useful arts” and
serve as an incentive to the commercialization of new ideas. As R&D has become
more expensive, ownership of title to inventions has been used by the federal
government as a means to encourage cooperative work between the public and
private sectors and among industry, universities, and non-profit organizations.
This paper explores the relationship between patents and cooperative R&D
within the context of attention to policies surrounding intellectual property and
congressional efforts to encourage collaborative ventures. Such joint efforts are an
attempt to facilitate technological advancement within the industrial community.
Academia, industry, and government can play complementary roles in technology
development. Cooperative projects attempt to maximize the best work of the
participants and to direct these efforts toward the goal of generating new goods,
processes, and services for the marketplace. They allow for shared costs, shared
risks, shared facilities, and shared expertise. While opponents argue that joint
ventures stifle competition, proponents contend that they are designed to
accommodate the strengths and responsibilities of these sectors.
A major emphasis of legislative activity has been to augment research in the
industrial community. This focus is reflected in executive branch and congressional
efforts to encourage companies to undertake cooperative R&D arrangements and to
expand the opportunities available for research. Various laws have created an
environment conducive to joint ventures between government and industry, or
between industry and universities, as well as among companies. Beginning in 1980,
with the passage of legislation mandating the transfer of technology from government
laboratories and permitting certain contractors to retain title to inventions made under
federal funding, and continuing today in laws designed to make additional alterations
1National Institute of Standards and Technology, Technology and Economic Growth:
Implications for Federal Policy, by Gregory Tassey, October 1995, 6-12.
to policies regarding government-owned intellectual property, there has been
congressional interest in facilitating innovation through collaborative R&D.
As cooperative efforts have expanded, various questions have been raised
regarding the outcome of these ventures. Among the concerns are issues associated
with the dispensation of certain intellectual property rights when federal funding is
involved. What has been the effect of implementation of the legislative mandate? Are
current government policies generating the intended results in facilitating joint
activities or are there additional consequences that might need to be addressed? The
information provided in this report is intended to offer background for congressional
debates over incentives to collaborative research, patent reform legislation, and other
bills associated with assignment of patents and licenses resulting from federally
supported R&D.
Cooperative R&D
Collaboration in research and development permits work to be done which is too
expensive for one company to fund or of marginal value for any given firm. As new
technologies are generated and their impact more widespread, it has become ever
more resource-intensive for industry to perform R&D. Concurrently, shortened
product cycles have led to expanded demands for new technology and higher costs
for technology development as reflected in the average 8.9% yearly increase (in real
terms) in company support for such work between 1994 and 1998.2 The rising
expense of research and development has been juxtaposed with increasing
international competition and shareholder demands for short-term returns.
Companies have developed alternative means of acquiring new technologies
while controlling the requisite costs. Various firms have increased efforts to tap
outside sources for the research underlying their products, particularly basic research.
For example, over 90% of life science companies in the United States have had a
cooperative relationship with universities.3 Basic research is typically performed with
little certainty that it will produce results in the future. Cooperative ventures permit
businesses to develop a critical mass of human, technical, and financial resources.
External alliances allow access to innovations without the expense and risks of
generating them independently. Such arrangements also let large firms reduce losses
if a collaboration does not work by terminating the joint activity, rather than altering
in-house research with its attendant large fixed costs.4
Joint ventures allow for R&D that crosses traditional boundaries of expertise and
experience. Such projects make use of existing, and support development of new
2National Science Foundation, Science and Engineering Indicators 2000, available at
[http://www.nsf.gov/sbe/srs/stats.htm] (Pdf format p. A-19).
3David Blumenthal, Nancyanne Causino, Eric Campbell, and Karen Seashore Louis,
“Relationships Between Academic Institutions and Industry in the Life Sciences — An
Industry Survey,” The New England Journal of Medicine, 8 February, 1996, 369.
4Erica Whittaker and D. Jane Bower, “A Shift to External Alliances for Product Development
in the Pharmaceutical Industry,” R&D Management, July 1994, 257.
resources, facilities, knowledge, and skills. Collaboration is a means to stimulate
innovation. Ideas, expertise, and know-how are combined, facilitating a mix that may
lead to more creativity and invention. It appears that “merging technological5
knowledge and skills from different companies improves the innovation process.”
In addition, it has been argued that, for certain industries, the more extensive a firm’s
emphasis on external sources of technical knowledge, the greater its total factor
productivity growth.6 It should be noted, however, that joint ventures are not always
successful due, in part, to cultural differences between companies or organizations,
as well as managerial and financial issues or conflicting goals and objectives.
In addition to joint projects among companies, industry-university cooperation
in R&D provides another important means to facilitate technological innovation.
Universities educate and train the scientists, engineers, and managers employed by
companies. Traditionally, much of the basic research integral to certain technological
advancements is performed in academia. Such institutions generally undertake
fundamental research as part of the educational process without concerns associated
with producing for the marketplace. The risks attached to work in this setting are
fewer than those in industry where companies must earn profits.
Companies are increasingly looking to the academic community for research
assistance. Prior to World War II, industry was the primary source of funding for
basic research in academia. This financial support helped shape priorities and build
relationships. After the war the federal government supplanted industry as the major
financial contributor and became the principal determinant of the type and direction
of the research performed in academic institutions. Thus, the connection between the
university and industrial communities was broken. However, in the past 15 years, this
break has been bridged for all the reasons discussed above. Industry funding for
university R&D has expanded substantially. Between 1980 and 1998, there was an
increase of 285% (in real terms); between 1990 and 1998, the growth was 35% (in
real terms).7 A study by Edwin Mansfield of the Wharton School of Business,
demonstrated that “...over 10% of the new products and processes introduced in [the
8 industries explored] could not have been developed (without substantial delay) in
the absence of recent academic research.”8
The federal government represents another source of expertise, knowledge,
technology, and advanced research facilities for industry. In certain cases, the
government laboratories have scientists and engineers with experience and skills, as
well as equipment, not available elsewhere. The government also has a vested interest
in technology development. It does not have the mandate or resources to
manufacture goods, but has a stake in the availability of products and processes to
5Francis Bidault and Thomas Cummings, “Innovating Through Alliances: Expectations and
Limitations,” R&D Management, January 1994, 33.
6Alden S. Bean, “Why Some R&D Organizations Are More Productive Than Others,”
Research/Technology Management, January-February 1995, 26.
7Science and Engineering Indicators 2000. (Pdf version p. A-122).
8Edwin Mansfield, “Academic Research and Industrial Innovation: An Update of Empirical
Findings,” Research Policy 26 (1998): 775.
meet mission requirements. In addition, technological advancement contributes to the
economic growth vital to the health and security of the nation. Collaboration between
government laboratories and industry is not, however, just a one way street. In
several technological areas, particularly electronics and computer software, the private
sector is more advanced in technologies important to the national defense and welfare
of this country. Interaction with industry offers federal scientists and engineers
valuable information to be used within the government R&D enterprise.
Legislative Foundation for Cooperative R&D
Of major significance to the evolution of cooperative R&D was the enactment
of P.L. 96-517, Amendments to the Patent and Trademark Act (commonly referred9
to as the “Bayh-Dole Act” after its two main sponsors). This law was designed to
utilize the ownership of inventions arising out of government-sponsored research and
development to facilitate the commercialization of new technologies through
collaboration among the research community, small business, and industry. It permits
a contractor performing research for the federal government to retain title to any
“subject invention” arising from that work if the contractor is a small business,
university, or other non-profit institution, except under “exceptional circumstances
when it is determined by the agency that restriction or elimination of the right to retain
title to any subject invention will better promote the policy and objectives of [the
law].”10 The institution must commit to commercialization within a predetermined,
agreed upon, time frame. As stated in the House report to accompany the bill, “the
legislation establishes a presumption that ownership of all patent rights in government
funded research will vest in any contractor who is a nonprofit research institution or
a small business.”11
Certain rights are reserved for the government to protect the public’s interests.
The government retains “... a nonexclusive, nontransferable, irrevocable, paid-up
license to practice or have practices for or on behalf of the United States any subject
invention throughout the world ...” March-in rights enable the federal agency to
require the contractor to “... grant a nonexclusive, partially exclusive, or exclusive
license in any field of use to a responsible applicant or applicants ...” (with due
compensation) or to grant a license itself under certain circumstances. The special
situation necessary to trigger march-in rights involves a determination that the
contractor has not made efforts to commercialize within an agreed upon time frame
or that the “action is necessary to alleviate health or safety needs which are not
reasonably satisfied by the contractor.... ”12
9For additional information see: Congressional Research Service, Patent Ownership and
Federal Research and Development (R&D): a Discussion on the Bayh-Dole Act and the
Stevenson-Wydler Act, by Wendy H. Schacht, RL30320, 28 September, 1999.
10P.L. 96-517, sec. 200.
11House Committee on the Judiciary, Report to Accompany H.R. 6933, 96th Cong., 2nd sess.,
12P.L. 96-517, sec. 203.
The government is “authorized” to withhold public disclosure of information for
a “reasonable time” until a patent application can be made. This supplements existing
patent law (35 U.S.C. 205) that prohibits the Patent and Trademark Office from
releasing information associated with a patent until it is issued. Licensing by any
contractor retaining title under this act is restricted to companies that will manufacture
substantially within the United States. Initially, universities were limited in the time
they could grant exclusive licenses to large companies for patents derived from
government-sponsored R&D (5 of the then 17 years of the patent). This restriction,
however, was lifted by P.L. 98-620, the Trademark Clarification Act of 1984.
According to Senate Report 98-662, extending the time frame for licensing to large
firms “. . . is particularly important with technologies such as pharmaceuticals, where
long development times and major investments are usually required prior to
commercialization.”13
In a February 1983 memorandum concerning the vesting of title to inventions
made under federal funding, President Reagan ordered all agencies to treat, as
allowable by law, all contractors regardless of size as prescribed in P.L. 96-517. This,
however, does not have a legislative basis. P.L. 98-620, noted above, further
amended Bayh-Dole by loosening the time limitations for both disclosure of an
invention to the government agency and for the amount of time provided within which
to elect to take title. Non-profit institutions were subsequently permitted to assign
title rights to another organization (e.g., one that markets technology) and
government-owned, contractor-operated laboratories (primarily those of the
Department of Energy) run by non-profits were permitted to retain title to inventions
made in the facility with the exception of those dedicated to naval nuclear propulsion
or weapons development. In addition, the Federal Technology Transfer Act (P.L. 99-
502) allows firms regardless of size to be awarded patents generated under a
cooperative research and development agreement (CRADA) with a federal laboratory.
Bayh-Dole also addressed licensing of government-owned inventions. Among
the objectives of the legislation was the use of “. . .the patent system to promote the
utilization of inventions arising from federally supported research or development; ...
[and] to ensure that the Government obtains sufficient rights in federally supported
inventions to meet the needs of the Government and protect the public against nonuse
or unreasonable use of inventions ....”14 Title 35 USC section 209 circumscribes the
licencing of these type of inventions. It permits federal agencies to offer non-
exclusive, exclusive, or partially exclusive licenses under certain conditions and with
specific rights retained by the government including the right to terminate the license
if commercialization is not pursued as provided in the business plan or if the
government needs the license for public use. Small businesses are given preference
and licensees must agree that “... any products embodying the invention or produced
through the use of the invention will be manufactured substantially in the United
States.”
13Senate Committee on the Judiciary, Report to Accompany S. 2171, 98th Cong., 2nd sess.,
1435 U.S.C. 200.
Other legislation facilitating collaborative R&D has been enacted. The
Stevenson-Wydler Technology Innovation Act (P.L. 96-480), as amended, created
institutional mechanisms by which federal agencies and their laboratories can move
technology to the private sector as well as integrate industrial expertise into the
federal R&D enterprise. Additional incentives are contained in the Federal
Technology Transfer Act (P.L. 99-502) and the Defense Authorization Act of 1990
(P.L. 101-189) which allow government laboratories to enter into cooperative R&D
agreements (CRADAs) with universities and industry. In pursuing joint efforts, the
laboratory may accept funds, personnel, services, and property from the collaborating
party and may provide personnel, services, and property (but not funds) to the other
organization. The work performed must be consistent with the laboratory’s mission.
Preference for cooperative ventures is given to small businesses, companies which will
manufacture in the United States, or foreign firms from countries that permit
American companies to enter into similar arrangements. To date, over 5,00015
CRADAs have been signed (including NASA Space Act Agreements).
The Research and Experimentation Tax Credit originally mandated by the 1981
Economic Recovery Tax Act (P.L. 97-34), and extended several times (through June
30, 2004), allows a 20% credit for increases in a firm’s qualified research costs above
the average expenditures for the previous 3 tax years. Qualified costs include in-
house expenditures such as wages for researchers, materials, and payments for use of
equipment; 65% of corporate grants towards basic research at universities and other
relevant institutions; and 65% of payments for contract research. It is applicable to
Investments in R&D are often costly, long term, and risky. To encourage
increased private sector activity, various legislative initiatives have been enacted to
facilitate joint ventures among government, business, and academia. It is argued that
collaborative R&D reduces risks and costs, and permits work to be performed that
crosses traditional boundaries of expertise and experience. This is the intent of the
National Cooperative Research Act (P.L. 98-462) which clarifies the antitrust laws
as they relate to joint research and eliminates treble damage awards for those ventures
found in violation if prior disclosure to the government has been made. These
changes came in response to industry’s reluctance to enter into cooperative efforts
because of the threat of antitrust prosecution. According to the Department of
Justice, almost 750 joint research ventures have been filed since passage of this
legislation.
The success of this law in stimulating collaborative work precipitated the
enactment of the National Cooperative Production Amendments Act of 1993 (P.L.
103-42). The legislation extends the provisions of the National Cooperative Research
Act to joint manufacturing ventures with certain reservations concerning location and
ownership of the participating enterprises.
15For more information see: CRS Issue Brief IB85031, Technology Transfer: Use of
Federally Funded Research and Development, by Wendy H. Schacht.
The Role of Intellectual Property in Cooperative R&D
Legislative initiatives to foster collaborative work address the dispensation of
patents arising from federal funding because of their role in providing an economic
incentive for companies to pursue further development and commercialization of the
results of R&D. Studies have shown that research funding only accounts for
approximately 25% of the costs associated with bringing a new product or process
to market. Patent ownership is seen as a means to encourage the additional, and often
substantial investment necessary to create new goods and services for the
marketplace. In an academic setting, the possession of title to inventions can provide
motivation for the university to license the technology to the private sector for
commercialization in anticipation of royalty payments.
The patent system was created by Article I, Section 8, Clause 8 of the U.S.
Constitution to encourage new discoveries and their reduction to practice, commonly
known as innovation. The grant of a patent provides the inventor with a means to
capture returns to his invention through exclusive rights on its practice for 20 years
from date of filing. This is intended to encourage those investments necessary to
further develop an idea and generate a marketable technology. At the same time, the
process of obtaining a patent places the concept on which it is based in the public
domain. In return for a monopoly right to specific applications of the knowledge
generated, the inventor must publish the ideas covered in the patent. As a disclosure
system, the patent can, and often does, stimulate other firms or individuals to invent
“around” existing patents to provide for parallel technical developments or meet
similar and expanded demands in the marketplace.16
The utility of patents to companies varies among industrial sectors. An
assessment of the aircraft and semiconductor industries found that patents were not
the most successful mechanism for capturing the benefits of investments. Instead,
lead time and the strength of the learning curve were determined to be more
important.17 In contrast, patents are perceived as critical in the drug and chemical
industries. That may reflect the nature of R&D performed in those sectors, where the
resulting patents are more detailed in their claims and therefore easier to defend.18
The degree to which industry perceives patents as effective is “... positively correlated
with the increase in duplication costs and time associated with patents.”19 In certain
industries, patents significantly raise the costs incurred by nonpatent holders wishing
16For more information see: CRS Report 97-599, Patents and Innovation: Issues in Patent
Reform, by Wendy H. Schacht.
17Richard C. Levin and Alvin K Klevorick, Richard R. Nelson, and Sidney G. Winter.
“Appropriating the Returns for Industrial Research and Development,” Brookings Papers on
Economic Activity, 1987, printed in The Economics of Technical Change, ed. Edwin
Mansfield and Elizabeth Mansfield. (Vermont, Edward Elgar Publishing Co., 1993), 253.
18Ibid., 255 and 257. See also: Edwin Mansfield, “Intellectual Property Rights, Technological
Change, and Economic Growth,” in eds. Charls Walker and Mark A. Bloomfield, Intellectual
Property Rights and Capital Formation in the Next Decade, (New York, University Press
of America, 1988), 12 and 13.
19Appropriating the Returns for Industrial Research and Development, 269.
to use the idea or invent around the patent — an estimated 40% in the pharmaceutical
sector, 30% for major new chemical products, and 25% for typical chemical goods
— and are thus viewed as important. However, in other industries, patents have
much smaller impact on the costs associated with imitation (e.g., in the 7%-15%
range for electronics), and are considered less successful in protecting resource
investments. 20
Despite questions as to their efficacy, firms continue to patent their inventions.
The number of domestic patents granted to U.S. inventors is growing.21 This activity
appears to be the result of additional perceived benefits including royalty payments,
delays to imitators, and the ability to use patents as bargaining tools to meet22
alternative priorities of the firm. The low expiration rate of high technology patents
relative to patents on less sophisticated technologies may indicate the value that
companies assign to such protection, even in industries where the life cycle of
inventions is short.23
The Research Environment
The considerable growth in joint ventures in industry over the past 10 - 15 years
has been influenced by various factors. The numerous mergers and acquisitions that
took place in the business world during the latter 1980s led to restructuring that
produced consolidations and laboratory closings and forced companies to look24
elsewhere for research. The increased collaboration brought on by these factors has
been accompanied by increased industry spending on R&D as noted previously. Such
measures were accompanied by the congressional legislation described above.
Partnerships also are a result of “... today’s complex technologies, intense
competition, and information overload [that] have required new approaches” beyond
the funding of scientists to pursue their own interests.25
Many companies now only support in-house R&D designed to augment the core
businesses of the firm. This is reflected in the shift in corporate strategies from basic
to applied research and from corporate toward division-level, line-of-business26
research. The emphasis is on technology to increase productivity and decrease time
to market. However, technology outsourcing is not intended to end corporate R&D
20Edwin Mansfield, Mark Schwartz, and Samuel Wagner. “Imitation Costs and Patents: An
Empirical Study,” The Economic Journal, December 1981, in The Economics of Technical
Change, 270.
21Science and Engineering Indicators 1998, A-373.
22Intellectual Property Rights, Technological Change, and Economic Growth, 14.
23Donald J. Quigg, “Safeguarding Intellectual Property — Stimulus to Economic Expansion,”
in Intellectual Property Rights and Capital Formation in the Next Decade, 40.
24Emily Smith, “Glimpsing the Future in the Numbers,” Business Week, 15June, 1990, 194.
25John Carey, “What Price Science?” Business Week, 26 May, 1997, 168.
26Irwin Feller and David Roessner, “What Does Industry Expect from University
Partnerships?” Issues in Science and Technology, Fall 1995, 81.
but to increase the capability to do it.27 Typically it is more costly and risky to
develop new technologies than to improve upon existing ones. Thus, collaboration
permits firms to acquire the basic research they need from other organizations. In
house work supported by firms, an increase from 3.6% in the early 1990s and under
2% in the early 1980s.28 It appears that 20% of largest U.S. corporations outsource
technology development.29
Recent studies by PricewaterhouseCoopers (formerly Coopers & Lybrand)
identify numerous benefits that have resulted from partnering including increased sales
of existing products; improved competitive position; development of more new
products or business lines; and better operations or technology. Of the fastest
growing U.S. firms, nearly two-thirds are involved in strategic partnerships.30 have
partnered in the past three years. Firms that partner:
!invest in more new product development;
!have less new products, although the ones that emerge are big winners;
!grow larger than others in terms of employee size and gross revenues;
!demonstrate a higher productivity rate; and 31
!experience “explosive growth.”
From the work undertaken by PricewaterhouseCoopers, it appears that “...
collaborative growth firms are spending more on new product development while
focusing more on bigger winners and on innovation ... [and] ... are not reluctant to go
outside their organization to work with others in the development of their innovative
new products.”
Increasingly, industry is looking toward academia for the research necessary for
product development. There has been significant growth in industrial support of
university R&D. According to figures provided by the National Science Foundation,
the private sector has funded an increasing percentage of the total amount of R&D
performed in academia since the early 1960s. Throughout most of the later 1960s and
1970s, the business community was the source of 3% of total research and
development performed in universities. By the mid 1980s, this had risen to 6% and
in the 1990s to 7%. Industry payments to universities for R&D have been expanding.
27John W. Verity, “Let’s Order Out for Technology,” Business Week, 13 May, 1996, 47.
28John E. Jankowski, “R&D: Foundation for Innovation,” Research/Technology Management,
March-April 1998, 17.
29Let’s Order Out for Technology, 47.
30PricewaterhouseCoopers, “Strategic Alliances Give Big Revenue Boost to America’s
Fastest-Growing Companies,” Trendsetter Barometer, November 30, 2000, available at
[http://www.barometersurveys.com].
31PricewaterhouseCoopers, “Technology Businesses Making Big Commitments to Joint
Ventures, But Important Planning is Being Overlooked,” Trendsetter Barometer, September
L.L.P., “Partnerships Pay off for Growth Companies,” Trendsetter Barometer, 6 January,
In 1998, it is estimated that the private sector provided almost $1.9 billion to
universities and colleges. Between 1985 and 1998, private sector funding of academic
R&D experienced growth of over 100% as measured in constant dollars. [Note:
comparisons of data prior to 1985 are unreliable since the National Science
Foundation changed accounting procedures that year.] Preliminary figures show a 5%
increase in financing between 1996-1997 and an increase of 6% between 1997-1998.32
The benefits to industry of R&D partnerships are apparent.
PricewaterhouseCoopers found that “growth companies with university ties have
productivity rates almost two-thirds higher than peers ....”33 In the pharmaceutical
industry, over one-quarter of new drugs depended on academic research for timely34
commercialization. The research performed in institutions outside of industry has
relevance to and is often incorporated into the work of the private sector. Of the
papers cited in patents granted to U.S. companies during the years 1987-1988 and
public facilities. Work prepared for the National Science Foundation by Francis
Narin and his associates indicated that “... public science plays an essential role in
supporting U.S. industry, across all the science-linked areas of industry, amongst
companies large and small, and is a fundamental pillar of the advance of U.S.36
technology.”
Universities also are expanding their interaction with the private sector through
licensing of inventions generated within academia. It is estimated that 19% of37
university research is done in conjunction with industry partnership efforts. Between
FY1991 and FY1995, university invention disclosures increased 29%, patent
applications increased 53%, and licenses and options executed increased 66%.38 In
1998 alone, universities granted 3,668 licenses, filed 4,808 patent applications, and
received 3,224 patents. This compares with the ten years between 1975 and 1984,
32Science and Engineering Indicators, 2000.
33Coopers and Lybrand L.L.P., “Growth Companies with University Ties Have Productivity
Rates Almost Two-Thirds Higher Than Peers,” Trendsetter Barometer, 26 January, 1995,
34Nathan Rosenberg and Richard R. Nelson, “American Universities and Technical Advance
in Industry,” Research Policy, May 1994, 344.
35Francis Narin, Kimberly S. Hamilton, and Dominic Olivastro, “The Increasing Linkage
Between U.S. Technology and Public Science, paper presented to the House Committee on
Science, 17 March, 1997, 2.
36Ibid., 15.
37Wes Cohen, Richard Florida, and Richard Goe, “University-Industry Research Centers in
the United States,” Report to the Ford Foundation, 1993 referenced in Rosenberg and Nelson,
American Universities and Technical Advance in Industry, 323.
38Information in this paragraph from: Association of University Technology Managers,
“Licensing Survey FY1991-FY1995, Executive Summary,” Association of University
Technology Managers, Inc., Norwalk, 1997 and Association of University Technology
Managers, “Academic Research Helps Drive U.S. Economy,” December 2, 1999, available
at [http://www.autm.net].
when universities applied for a total of 4,105 patents and were granted 2,944 patents.
Analysis by the Association of University Technology Managers shows that the
commercialization of academic research in 1998 generated $33.5 billion in economic
activity and resulted in 280,000 jobs and the creation of 364 new companies. This is
a “direct result” of the Bayh-Dole Act.
Issues and Opportunities
As cooperative research and development between the federal government and
the private sector becomes increasingly ubiquitous, intellectual property issues
continue to be explored. The interrelationships between patents and collaborative
R&D are circular and complex. Laws addressing ownership of patents resulting from
federally funded R&D have facilitated collaborative ventures at the same time that
increased joint activities have augmented the importance of patent ownership. The
expanding number and scope of cooperative efforts have given rise to new issues and
opportunities. Since “proprietary technology advantage [is] a key business39
strategy,” there are on-going concerns over the dissemination of patents arising from
research and development supported by the federal government.
There are many benefits associated with the use of intellectual property to
facilitate joint R&D. Federal agencies and major research universities have
acknowledged that the patent provisions of the Bayh-Dole Act have had a positive
impact on collaboration between academia and industry and on the commercialization
of new technologies.40 Perhaps, even more significantly, Dr. Bernadine Healy, former
Director of the National Institutes of Health, argues that Bayh-Dole is responsible for
the development and growth of the biotechnology sector.41 An industry that was in
its infancy 20 years ago, biotechnology now is in the forefront of national
technological progress. This was achieved to a great extent by both the expansion of
cooperative efforts among government, industry, and academia and by the intellectual
property protection provided under the Bayh-Dole Act.
Congressional legislation has provided certain mandates and direction; however,
implementation of these laws has led to new questions as to their impact and any
unintended effects. For example, the recently enacted Technology Transfer
Commercialization Act (P.L. 106-404), addresses on-going issues associated with the
assignment of patents and licenses resulting from federally supported R&D as
established under Stevenson-Wydler and Bayh-Dole. This law makes alterations in
established practice to decrease the time delays associated with obtaining an exclusive
or partially exclusive licence under P.L. 96-517. Previously, agencies were required
to publicize the availability of technologies for three months using the Federal
39Clarence M. Eidt, Jr. and Roger W. Cohen, “‘Reinventing’ Industrial Basic Research,”
Research/Technology Management, January-February 1997, 29.
40General Accounting Office, Technology Transfer, Administration of the Bayh-Dole Act by
Research Universities, GAO/RCED 98-126, May 1998, 2.
41House Committee on the Judiciary, Biotechnology Development and Patent Law, Hearings,
Register and then provide an additional 60 day notice of intent to license by an
interested party. The new legislation shortens the period to 15 days in recognition of
the ability of the Internet to offer widespread notification and the necessity of time
constraints faced by industry in commercialization activities. Certain rights are
retained by the government. In addition, the bill allows licenses for existing
government-owned inventions to be included in CRADAs.
The successful implementation of the legislative mandate to transfer technology
has led to expanded use of CRADAs and to questions involving individual
arrangements under this collaborative mechanism. In March 1997, a consortium of
U.S. semiconductor companies (called the EUV LLC), led by Intel and including
Motorola and Advanced Micro Devices, signed a cooperative research and
development agreement with three Department of Energy laboratories to develop
commercial applications for a semiconductor manufacturing technology known as
extreme ultraviolet (EUV) lithography. However, concerns associated with this
CRADA soon were voiced. Opposition arose over the participation of foreign
equipment suppliers in applying the results of the collaborative work. Critics argued
that the potential for providing foreign firms access to technology developments
originating in federal laboratories would be detrimental to American companies and
hurt national economic security interests. Proponents maintained that the law had
been followed and the requirements for U.S. manufacture and existing export control
regulations are sufficient to address concerns over foreign companies. In addition,
they assert, since the consortium is funding the work in the federal laboratories, it
should have the right to seek out and use the best manufacturing technology
sources. 42
Similarly, as successful collaborations have been established between the
government and companies in the pharmaceutical and biotechnology sectors,
questions are emerging as to the appropriateness of this relationship given the vast
commercial potential of the results. The particular nature of health-related R&D and
the substantial federal investment in this area have caused uncertainty over federal
support of joint ventures in this arena. Many experts agree that closer cooperation
can augment funding sources, increase technology transfer, stimulate additional
innovation, lead to new products and processes, and expand markets. Yet others
point out that collaboration may provide an increased opportunity for unfair
advantages, excessive private sector profits at the expense of the public, conflicts of
interest, redirection of research and less openness in sharing of scientific discovery.
Concerns also have been raised over whether or not industry-university
collaboration alters the direction of academic research, affects the results of the work,
and/or interferes with the dissemination of knowledge. The various laws facilitating
cooperative R&D have the potential for generating conflicts of interest. Within the
context of partnerships, companies and universities are anxious to secure a strong
intellectual property position to protect their financial and resource investments.
Adding to the possibility of competing claims, differing objectives may come into play
42For a detailed discussion see: CRS Report 98-81, Cooperative Research and Development
Agreements and Semiconductor Technology: Issues Involving the “DOE-Intel CRADA,” by
Wendy H. Schacht and Glenn J. McLoughlin.
in industry-university collaborations. While academia promotes the free flow of
information in a learning environment, firms typically prefer to delay publication of
R&D results to provide the lead time sufficient to capitalize on an idea.
Research conducted by David Blumenthal and his colleagues at the Health Policy
Research and Development Unit, Massachusetts General Hospital found that over
or sales as a result of cooperative work. The majority of firms surveyed (82%)
require that academic researchers keep information confidential to allow time to file
a patent. Approximately one-half of the companies surveyed reported that
agreements with universities included requirements to keep information confidential
beyond the time necessary to file for a patent.
A question therefore arises whether or not intellectual property considerations
adversely affect the conduct of research at universities. Additional work by
Blumenthal, et. al. noted that 28% of university scientists engaged in life science
research had received industry support. Comparing the activities of professors funded
by companies with those who were not, the results demonstrated that:
Faculty members with industrial research support are at least as productive
academically as those without such support and are more productive
commercially. However, faculty members who have research relationships with
industry are more likely to restrict their communication with colleagues, and high
levels of industrial support may be associated with less academic activity without44
evidence of proportional increases in commercial productivity.
It appears that collaborative work augments “commercial productivity among some
of the nation’s most distinguished academic investigators” while not compromising45
their academic efforts. Faculty members with research funding from industry had
more peer-reviewed articles published and participated in more administrative
activities at the university. However, there are risks that need to be considered. The
data indicate “that investigators with industrial support are at least twice as likely to
engage in trade secrecy or to withhold research results from colleagues as are
investigators without such support.” Those faculty members with primarily industry
support (over two-thirds of their funding) were less academically productive and the
articles they authored were considered less significant.
As discussed throughout this paper, collaborative research and development
activities have had a significant positive effect on innovation. “Relationships between
industry and academia are essential in order to meet a major goal of public policy: the
translation of research findings into practical applications that improve the health and
43David Blumenthal, et. al., Relationships Between Academic Institutions and Industry in the
Life Sciences — An Industry Survey, 369-371.
44David Blumenthal, Eric G. Campbell, Nancyanne Causino, and Karen Seashore Louis,
“Participation of Life-Science Faculty in Research Relationships with Industry,” The New
England Journal of Medicine, 5 December, 1996, 1734.
45Ibid, 1734-1738.
living standards of the American people.”46 However, as such efforts become more
widespread and as new issues emerge, additional decisions may need to be made on
how to maintain a balance between the importance of bringing products and processes
to the marketplace and protecting the public investment in R&D.
To date, the Congress has determined that providing title to inventions made
under federal funding to contractors and/or collaborating parties should be used to
support innovation. The Bayh-Dole Act specifically states:
It is the policy and objective of the Congress to use the patent system to promote
the utilization of inventions arising from federally-supported research or
development; ... to promote collaboration between commercial concerns and
nonprofit organizations, including universities; ... to promote the
commercialization and public availability of inventions made in the United States
by United States industry and labor; [and] to ensure that the Government obtains
sufficient rights in federally-supported inventions to meet the needs of the
Government and protect the public against nonuse or unreasonable use of
inventions....47
Companies that do not control the inventions arising from their investments tend to
be less likely to engage in related R&D. This idea is reflected in the provisions of the
Stevenson-Wydler Technology Innovation Act, the Bayh-Dole Act, and other
legislation discussed above. In return for providing patent title to the collaborating
party, the beneficiary is expected to commercialize the results of the research and
development. Congress has accepted as satisfactory the anticipated payback to the
country through new products and process to improve our health, welfare, and
standard of living. In addition, commercialization brings increased revenues from
taxes on profits, new jobs created, improved productivity, and economic growth.
These benefits have been considered more important than the initial cost of the
technology to the government or any potential unfair advantage of one company over
another in a cooperative venture.
There are renewed questions as to whether or not the balance created remains
proper. Concerns continue to be raised regarding the right of drug companies to set
prices on drugs that were developed in part with federal funding or in conjunction
with federal agencies. Conflicts have surfaced over federal laboratories patenting
inventions which collaborating parties believe to be their own. In some agencies,
delays continue in negotiating CRADAs because of disagreements over the
dispensation of any intellectual property. Problems have been encountered at the
National Institutes of Health in obtaining for use in government research new
experimental compounds that have been developed and patented by drug companies
because of concerns that the effectiveness of the intellectual property will be
diminished if new applications are discovered. These and other issues may need to
be explored as collaborative efforts among government, industry, and academia
continue to expand.
46Blumenthal, et. al., Relationships Between Academic Institutions and Industry in the Life
Sciences — An Industry Survey, 373.
47P.L. 96-517, sec. 200.