Section 4.

Utilization of Federal Technology

The House and Senate-passed versions of this section, designed to upgrade the status of laboratory professionals who do technology transfer, were similar. The conferees recommend accepting from the House version, the policy statement that technology transfer is a responsibility of every laboratory's scientific and engineering professional, and the requirement that technology transfer professionals be included in overall laboratory/agency management development programs. From the Senate version, the conferees recommend inclusion among the functions of technology transfer professionals, participation, where feasible, in state, local and regional technology transfer efforts. The House requirement of technology transfer reports as part of agency annual budget submissions is retained.

Section 5.

Functions of the Secretary

The conferees recommend acceptance of the Senate's two additions to the bill's lists of duties of the Secretary of Commerce. The Secretary is required to submit biennial reports to the President and the Congress on the use by agencies of Stevenson-Wydler Act authorities. The original Stevenson-Wydler Act required one such report. The Secretary also is required to submit a one-time report to the President and Congress on copyright provisions and other types of legal barriers which limit the transfer of federally funded computer software and on the feasibility and cost of compiling and maintaining a current and comprehensive inventory of federally funded training software. The report is to identify recurring problems rather than to attempt to compile a comprehensive list of barriers facing individual software projects.

Section 6.

Rewards for Scientific, Engineering, and Technical Personnel of Federal Agencies

This section is identical in the House and Senate versions of this legislation.

Section 7.

Distribution of Royalties Received by Federal Agencies

Both the House and Senate-passed versions of this section direct agencies to retain royalties from the licensing or assignment of inventions and to allocate them to their government-operated laboratories. Both versions have identical limits on the amount of money the laboratories may retain. Both have similar uses to which the laboratory directors may allocate the money, one of which is to reward employees of the agency for innovative work, both in furtherance of the agency's mission and in advancing inventions with commercial potential.

The Senate bill additionally directs agencies to allocate at least 15% of royalties from an invention to the inventor or coinventors, before allocating the remainder to its laboratories. The House had chosen not to include a percentage royalty share, preferring to leave maximum flexibility in rewarding inventors with laboratory management.

The conferees recommend acceptance of a compromise provision, which requires agencies either to allocate 15% of royalties from an invention to the inventor or coinventors, or to promulgate regulations providing an alternative set of rights in the inventor whose invention produces royalties for the government.

The conferees believe agencies should have the flexibility to formulate royalty payments to employees that best meet the unique circumstances of each agency and that meet the purpose of the Act. At the same time, the conferees agree that providing a predictable, guaranteed reward from royalties to inventors provides a strong incentive to report, develop, and help license inventions with commercial potential.

The conferees agree that royalty sharing alone, although effective, is an imperfect tool in promoting technology transfer. The process of turning an invention into a successful commercial product is complex, and involves the work of more than just the inventors. Within a laboratory a team of scientists and engineers, beyond those involved in patenting an invention, may contribute to its development and licensing, and their contribution may be as important to the commercial success of the invention as that of the inventors. In addition, a single, fixed royalty share may be an inadequate reward for an inventor, depending on the amount of royalties received.

Therefore, the conferees believe that laboratory directors should use the authority in section 14(a)(1)(B) to reward those employees who contribute to innovative work, in mission-related work with or without commercial potential. Similarly, agencies that choose to promulgate rules to set alternative royalty percentages should consider tiered allocation of royalties, which give more weight to the inventor's contribution when royalty income is small, but which also recognize the contributions of a wider team.

In the Federal laboratories, depending on size, a percentage of royalties could be allocated to the research team or project, in addition to the inventor's share, before the remainder is allocated to the Laboratory Director. Such an allocation is possible without formal rulemaking, provided the allocation is in addition to the minimum inventor's share of 15% under section 14(a)(1) or 14(a)(2).

The initial 15 percent allocation from royalties is to take effect on enactment of the bill unless an agency plans to do rulemaking. The 15% or any alternative allocation is to apply to all royalty income received by an agency in a given year, including that from inventions patented and licensed before the date of enactment of this Act, and is to continue for as long as the agency receives income from an invention, including after the inventors may have left the agency. The compromise provides that a Federal employee may not receive more than $100,000 per year in royalty income without the approval of the President. This coincides with the limits on agencies' statutory authority to make cash awards to employees.

If an agency's rulemaking is completed within two years after enactment and the 15 percent royalty sharing has not gone into effect, the effective date of royalty sharing under the rule is to be the effective date of the Act. If there is no rule within two years of enactment and royalty sharing is not in effect, 15% mandatory royalty sharing is to go into effect for that agency retroactive to the date of enactment. If a rule goes into effect more than two years after enactment, the effective date of the royalty sharing under the rule for that agency is to be the same as the effective date of the rule.

The conferees wish to stress the flexibility of the compromise on royalty sharing. It is intended to give each agency the freedom to devise different employee award systems that accomplish the purposes of the Act and that best meet the unique needs, cultures, and technology transfer problems of the agencies' laboratories. In order to strengthen the program so that all agencies can benefit from what is learned in the varying approaches to royalty sharing, a Comptroller General report has been mandated evaluating the first five years of this royalty sharing program.

The conferees value the licensing activities that have been performed by the National Technical Information Service for other agencies including other parts of the Department of Commerce. Section 14(a)(6) has been added to permit NTIS to continue this work without interruption after enactment.

The conferees are in agreement that there are inherent differences in the way public sector and private sector employees can be rewarded. Furthermore, they have provided agencies with flexibility in the establishment of programs to reward inventors. The conferees, therefore, do not expect any particular agency's approach for rewarding inventors, whether it includes 15 percent mandatory royalty sharing or not, to be viewed as setting a precedent for the private sector.

Section 8.

Employee Activities

The Conferees recommend acceptance of this provision from the Senate version of the legislation with two clarifying changes. The