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The US Government spends over $100 billion annually on R&D and has significant IP assets.  The white house requested an audit of how these assets are being shared with industry and what barriers could be removed.  If you are unfamiliar with tapping into this resource, drop me a line.  The details are fascinating and could be very beneficial for your business.

With a 25-year career in government R&D and commercialization, I was intrigued by NIST’s recent green paper on increasing the ROI of US R&D.  This is a well-traveled topic in corporate America. Often the results from asking this question (often with the CFO in charge) lead to dramatic cuts in R&D.* This report states explicitly its goal is not economic, however, as the intangibles are hard to count, they will likely not be counted.

NIST does a nice job of breaking the items to be evaluated into 5 buckets.

  • Regulatory Improvements
  • Increased engagement

A federal government internal HR need (though this could be extrapolated to your business)

  • Growing Entrepreneurship

And two other administrative items (this is a NIST report of course

  • Additional tools (generally for reporting)
  • Benchmarking – generally, this follows Drucker truism “If you can’t measure it you can’t improve it. However, it is important to note “Not everything that can be counted counts, and not everything that counts can be counted.” (WB Cameron)

Only the first two items will impact commercial entities.

  1. Government Collaboration agreements are long. They are designed with the government in mind and summarize the related law to avoid future legal issues. Generally, business attorneys focus on 3 terms – Government Use Licenses, March-In rights, and the preference for US Manufacturing.  Though the details are below, my summary of the recommendations are as follows.
  • Provide more clarity on government use and march-in rights.

Expand the preference for US manufacturing to IP generated from other agreements, streamline the waiver process, but leave the necessarily vague “substantial manufacture” language untouched.

2. Bringing in more industrial involvement is key to the commercialization of technology. To that end, the report notes a number of ways to kick-start this process.

  • Harmonize the process of collaboration in a lab, agency and across the agency.
  • Expand the use of existing novel (but siloed) partnership agreements.

The net of these recommendations are

  • collaborating with the government should be clearer and more uniform.
  • there is a strong desire to ensure to engage small manufacturers.

If you are interested in the details of how these may affect you, read on or better yet, drop me a line to discuss.

Gov Use License: The government wants the freedom to operate and does not want to pay usurious fees for the technology they developed. As a result, they ask for a “Royalty Free Use License.”  Clarifying these terms would be a benefit, though it will not have a large impact on the outcome.  There is a concern the government will second source your firm for government projects; however, this is very unlikely.  The report was unable to state when this has occurred.  As the government does not make anything, it would be difficult for them to work around your firm for a technology you developed and get it cheaper.

March-In rights:  As these technologies have been developed for the public good, the underlying legislation anticipated a company might delay development for a vital technology (e.g. pharmaceutical).  The net result is (if the appropriate procedures are followed) the government could compel the licensee to market the product differently.  The report notes these rights have again never been used.  The report states that this term has created unnecessary barriers as licensees do not want the risk of government price controls. I agree for fields such as pharmaceuticals, where the invention is a small part of the development cost, these terms should be clarified.  Not surprisingly the report makes this recommendation, specifically referencing price controls.

Preference for US Manufacturing.  The language here “federally funded invention must agree to manufacture it substantially in the United States in order to use or sell it domestically” is a particularly sticky problem.  It is vague, but its intent is to preclude off-shore manufacturing of products funded by the US Government.  It is viewed as anticompetitive should a foreign firm violate us patent law and sell similar products in the US using cheaper labor. Or, if the company wants to sell abroad, foreign facilities will often be necessary. The undefined ‘substantial’ has led some firms to define it as much less than 50% and sometimes include marketing expenses.  While that is not a generally accepted accounting, the statue is not specific.  Needless to say, this is a section I was most interested in seeing what was developed. The report notes that “substantially” is deliberately vague and does not recommend change. And while it does recommend streamlining the waiver process, I am suspect that the “streamlining” will not occur as this goes against the intent of the statute.  A bit concerning is a desire to extend the preference in other situations. While this would offer an advantage to US manufacturers, it may slow down the process substantially if a waiver is requested.

I applaud the desire to make the government an easier shopping experience, this issue is not a major inhibitor of commercialization.  I am concerned that this effort will take time away from the more important work of accelerating the process in any given institution and/or marketing innovations/capabilities.

The last recommendation to enable more widespread use of other types of entities to incubate the technology on its commercialization path. So much federal IP lays fallow that any effort to bring more of it to light seems well conceived.  These entities usually operate as non-profits and therefore have access to funds not typically available to startups.  This may be a boon to technologies with a better social end than financial.

* Typically, this yields stellar short-term results, costs go down while the benefits from previous investments are tallied up.  This eating of the seed corn is not noticed until the next downturn when said executives are ousted (usually with fabulous severance).

Please note that some of the items above broach legal issues.  I am not your attorney, in fact, no one’s attorney, so this should not be construed as legal advice. That being said, I would welcome the opportunity to discuss how you can exploit federally developed R&D for your firm.

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