be closely scrutinized for their future role in a post cold war era, and for the domestic industries which could benefit from worldclass science.

Instructive, I think, would be a few dispatches from the front line. Motorola, a $13-billion-per-year electronics corporation, reports that after 20 months of effort they are still trying to complete one joint research agreement with the Department of Energy lab at Lawrence Berkeley. Their analysis is, and I quote, they "doubt that a smaller business could afford the effort to persevere.

Lanxide Corp., a Delaware-based, high-technology ceramic products manufacturer, with 300 employees, spent 6 months negotiating a single joint research agreement with the Oakridge Labs for a relatively simple processing technology transfer. This is the company's first and perhaps last such agreement unless the legal red tape and process time for these contracts can be reduced. Their analysis: Negotiating technology transfer agreements may be a lawyer's full employment program, but it is one that is disproportionately hard on small business.

Digital Equipment Corp., a major computer manufacturer, reports that although it and the Los Alamos Lab had agreed on a basic contract for joint research to be completed within a prearranged 30-day timeframe, foot dragging by the agency in paying out Federal money supporting the lab's end of the program was delayed for almost a year. Their analysis is that even when the Department of Energy gets a contract signed quickly, dawdling as far as paying the bills can undermine the process and the commercial opportunity.

Cooperation cannot and must not be a one-way street. Industry has to overcome its mistrust of the Federal labs. Part of that unfortunate attitude is the not-invented-here posture of some industries. If the innovation wasn't corporate, maybe it didn't happen; maybe it wasn't useful. While our high technology employers see Federal labs as being mired in red tape, the labs may disdain joint ventures because of the sometimes unrealistic expectations or outright antagonism of some in the private sector.

These presumptions are dangerous, and it is time to build bridges between the labs and industry.

For example, support should be increased for technology transfer projects similar to the Technology Access Pilot Program, an initiative begun 2 years ago in four States. The Chair of this subcommittee was the primary author of the legislation establishing the Technology Access Program of small businesses, and, as a result of this legislation, small businesses now can use electronic data banks and expert network systems, systems that can reach out to the inventors themselves in order to identify and capture technologies appropriate to their manufacturing needs. Federal labs and Federal scientists are a primary resource for these needed innovations.

Unfortunately, and with painful consequences, the Bush administration has tended to equate technology policy with industrial policy. Neither has had the President's support, and so, ideas to encourage more commercialization of Federal technologies have largely been ignored. The result has been the continuation of a regulatory maze at Federal laboratories that even Presidential Science Adviser, Dr. Allen Bromley, described as Byzantine.

Dr. Bromley, in my view, is a case in point because he is a good man, a distinguished and capable scientist, and he testified before this subcommittee more than 3 years ago, acknowledging the problems and pledging remedial action. At that time, Dr. Bromley agreed to report to this subcommittee with his plan to correct the problems that were identified then. Dr. Bromley was never heard from again.

Our Government clearly must do better. Technical innovation and transfer will be at the core of President Elect Clinton's Industrial Renewal Program. The Chair observes that there is no better place to start this task than by the renewal and reprogramming of our Federal lab network. Taxpayers and the Nation have an enormous stake in clearly defining the new mission of labs largely developed for making war. The foundation of that new peacetime role must be in the development of new jobs and a more competitive domestic manufacturing base.

Quite simply, Federal-supported research may represent the keys to the competitive kingdom. Taxpayers now underwrite this technological treasure trove through the investment of $70 billion per year for research and development. More than $20 billion of this total is spent directly in federally owned or operated labs.

Among the largest of these laboratory networks is the Department of Energy, which spends about $6 billion annually for research and development. Because of its size and diversity of research activities, the Department of Energy network has the potential to serve as a model for other agencies.

To this end, the Chair suggests that three substantive and significant changes at Department of Energy labs now be considered. First, each lab director must have the authority to initiate, negotiate, and fully conclude technology transfers. This authority should be extended to contract managers of federally owned labs, the socalled Government-owned, contractor-operated facilities.

Second, each laboratory should program a dedicated portion of its annual operating budget for technology transfer activity. This dedicated spending allotment may be from 5 to 15 percent of the lab's total budget.

Third, each laboratory director should be required to set aggressive goals and objectives for technology transfer activity. The Secretary of Energy should be required to report to the Congress on their success annually.

Federal research helps citizens live better and longer lives. It helps us more efficiently use natural resources and clean the pollution that jeopardizes the environment. Against a horde of high technology, international, and industrial rivals, it can help our businesses compete for jobs and markets.

The real question is whether Government is strong enough, bold enough, and persistent enough to truly unlock the fruits of federally funded research.

[Chairman Wyden's statement and subcommittee staff memo may be found in the appendix.]

Chairman WYDEN. Our witnesses today include representatives of businesses, large and small, technology-driven enterprises, directors of two large Department of Energy labs, and the head of a business consortium which recently has been studying technology

transfer problems and has made constructive and innovative recommendations for their solution.

Before we go to our witnesses, I want to recognize my friend and colleague, Congressman Camp, who has been a very valuable member of the subcommittee throughout the 102d Congress. We hope that he will rejoin us early next year for the 103d. We welcome him and look forward to any statement he would like to make.

Mr. CAMP. Thank you, Mr. Chairman. I don't have a formal statement at this time but look forward to the testimony of the witnesses here today. Thank you for letting me be a part of this hearing.

Chairman WYDEN. Let us go right to our witnesses then. On the first panel we will have Dr. Charles Shanley, director of Technology Planning at Motorola; Mr. Michael Cummins, vice president for the National Center for Manufacturing Sciences; and Mr. Jeffrey Eagleson, director of Public Affairs for the Lanxide Corp. Mr. Cummins, I gather that you have an associate who you would like possibly to help you answer some questions?

Mr. CUMMINS. Yes, Mr. Chairman; I have Connie Phillips here who is in charge of our day-to-day operations on DOE CRADA's.

Chairman WYDEN. We welcome you. It is the practice of this subcommittee to swear all witnesses. Ms. Phillips, if you don't have any objection, I think it would be helpful to swear you at this time as well, given the fact that you would also possibly be involved in responding to questions. Do any of you four individuals have any objection to being sworn as witnesses? Please rise and raise your right hand.

[Witnesses sworn.]

Chairman WYDEN. We welcome all of you. We thank you for your interest and know that you have been working very patiently with our subcommittee. Why don't we begin with you, Mr. Cummins. We have, as Mr. Camp knows, infernal microphones in this building, so, if you could speak right into it, everyone would be able to hear what is on your mind. I would like to ask that each of you try to confine your prepared remarks to about 5 minutes so that we will be able to have ample time for questions. Mr. Cummins, please proceed. We will make any prepared remarks you have today a part of the hearing record in their entirety.

TESTIMONY OF MICHAEL CUMMINS, VICE PRESIDENT, NATIONAL CENTER FOR MANUFACTURING SCIENCES, ON BEHALF OF EDWARD A. MILLER, PRESIDENT, ACCOMPANIED BY CONNIE PHILLIPS, CONTRACT ADMINISTRATOR

Mr. CUMMINS. Thank you, Mr. Chairman and members of the Subcommittee on Small Business. I would like to express my appreciation to you for the opportunity to appear before this subcommittee on behalf of the National Center for Manufacturing Sciences, known as the NCMS. I am testifying on behalf of Edward Miller, president of the NCMS, who is on his way back from Europe today following an extended but critical international technology negotiation. I ask that his written statement be included in the record in full, and I will summarize the salient points.

My name is Michael Cummins. I am the vice president of the NCMS for Government relations. I am responsible for overseeing all Government-industry interactions of the NCMS, including our CRADA activities with the Department of Energy and other Federal agencies. I am an engineer, and I have spent most of my career in manufacturing. I came to Washington 6 years ago on a fellowship sponsored by the Ford Motor Co. and was an important part in the formation of the NCMS.

I have with me Ms. Connie Phillips, our contract administrator for the DOE CRADA for the NCMS, who is responsible for the dayto-day negotiations on that effort. The NCMS is the Nation's largest manufacturing technology consortium with nearly 200 corporate members. Over 90 percent of our companies are small- and medium-sized businesses.

Our membership includes the automotive, aerospace, computer, and communication industries, as well as the machine tool, software, and materials supply tiers to those major sectors. We are truly a reflection of the makeup of the U.S. industrial base. We have sponsored hundreds of collaborative R&D programs, accessed substantial untapped technology in corporate and Government laboratories, and established the strongest manufacturing technology transfer infrastructure in the Nation,

Our primary mission is to restore strength and competitiveness to our commercial manufacturing industries. One of the main purposes of the National Cooperative Research Act was to allow companies antitrust waivers in R&D in order for them to team together to address problems and opportunities above and beyond those that can be addressed by a single firm. Developing and implementing CRADA's, especially when it comes to small businesses, is something that today is very difficult for any individual firm, as I think we will hear today from other members of this panel.

Ed Miller testified before you 3 years ago on this very same subject. We, that is Government and industry, have made dramatic progress since then. With each step forward we encounter new challenges and new obstacles, however. There is definitely a spirit on all parts to find solutions to each of these difficult areas, and I am sure you will recognize this throughout the morning. I am also optimistic that this committee can find ways to accelerate these collaborative developments.

To facilitate this testimony, we have organized our remarks to address three topics. They include issues of technical difficulties, issues of a legal nature, and issues of funding.

First, let me begin by relating the types of technical difficulties that we and others have encountered. This is by no means a complete listing. As you are aware, Secretary Watkins and Ed Miller signed an umbrella or blanket CRADA. During negotiations of specific NCMS DOE projects under this blanket CRADA, two issues have arisen that we believe demonstrate what every company must confront when dealing with the Department of Energy. These are, one, the interpretation of the U.S. preference laws, and, two, an intellectual properties issue called field of use.

First of all, U.S. preference. U.S. preference is meant to assure that benefits from Federal programs ultimately accrue to the American people, and NCMS fully supports this position, and, in

fact, requires that its member companies be 51 percent owned by North American citizens. Difficulties arise when this requirement is interpreted and implemented, however, by the Department of Energy.

Current DOE interpretations are much more restrictive than statutory requirements. Due to the complexity of international trade there can be no possible guarantee that a technology developed under any given project will not one day, 5 to 10 years from now, appear in the processes used at wholly owned factories located abroad. Participation by our global member companies in major projects coordinated by the NCMS involving DOE facilities results in a barrier if they are to continue their normal international operations. This issue could have some unfortunate ramifications. All of our member companies may use it as a precedent and decide that the benefits of future work with the DOE are outweighed by the cost of the severe manpower resources needed for negotiations. Small companies, in particular, that are considering starting foreign sales might find the costs associated with DOE negotiations intimidating and might not even try to get help from the DOE re

sources.

The second issue, technical issue, is the issue of field of use. Field of use is meant to protect the rights of the lab contractor, of a Government-owned facility, concerning developments done at the DOE facilities under their supervision. The details of how the field of use provisions are applied are quite complicated, and I am only going to try to summarize them.

Basically, the intended use of the developments of a project must be decided in advance. Royalty-free licenses are specifically granted to the participating companies only if the applications fall within this intended field of use. Outside the field of use, the lab contractor is free to license its developments to anyone, and even the participants must obtain licenses for use of these technologies. The lab contractor, however, is not fully restricted by field of use. After a certain period of time, it may actually grant a foreign-owned company licenses to the technology results of the CRADA's for applications that even fall within the field of use.

Ultimately, this provision is meant to prohibit industrial partners in a CRADA from applying the technologies developed to spinoff applications. This could also include possible follow-on development projects in which the lab contractor declines to participate. It should be noted that this is particularly onerous to small businesses which routinely develop and market derivative products based on incremental improvements in same and related fields of use.

The field of use refers to the carefully constructed narrow definition of the ultimate use of the project results and must be settled before the work is started. The difficulties in the provision arise when a project to be done with the DOE facility is cooperatively performed with multiple companies. Field of use provisions mean that one party in the original cooperation can block the application of the end result by withholding access or demanding additional royalty on its part.

In contrast, in the NCMS each collaborative project agrees to freely share all developments amongst all parties involved. Each