| Home | People | Projects | Publications | Places | Technology Transfer Guidelines: These Guidelines present technology transfer information concerning the commercialization of VA-funded research. Introduction This document has been prepared in an effort to assist and inform those who are about to take on responsibility for the transfer of technology from the laboratory to a manufacturer while operating within a government owned, government operated (GOGO) Federal Laboratory, particularly within the Department of Veterans Affairs. It is based partly on my past experience as a research engineer in the private sector, during which I found myself to be an inventor/employee as a result of my research on the measurement of blood pressure. That experience, turned out to involve negotiations, first with my employer and then with subsequent licensees, patent applications both here and abroad, and consulting for each of those licensees during testing and product development. It is also based on my subsequent experience within the VA, first as a research engineer, then as consultant to the VA Rehabilitation R&D Center here in Palo Alto, and finally as Section Chief of Technology Transfer at the Rehab R&D Center. As a result of those experiences, I have become aware of a number of the problems and situations that relate to technology transfer in general, and also of those that seem peculiar to the VA in particular. It must be understood at the outset that technology transfer (TT) involves many disciplines and many fields of expertise. It is therefore a team sport, although it is also referred to as a "contact" sport, since so much of it revolves around personal contacts and personal interactions. The fact is that no one person can make technology transfer occur, but personal contacts and communications are essential, and each transfer situation is usually different from any other. It is perhaps for that reason, as well as the importance of prompt action, that accomplishing TT from within a large and impersonal organization becomes so complicated. Since an important part of the mission of our Rehabilitation R&D Center is to design and develop techniques and devices that will improve the quality of life for disabled veterans, and since the government by law cannot compete with private industry, technology transfer becomes essential to the accomplishment of our mission. To this date, we have at this Medical Center succeeded in commercializing eleven products, which are listed in Table 1. It is my hope that this document, along with your own private thoughts, notes, and experiences, will help you to accomplish a similar or better record of commercialization. I have included a number of Appendices with information that we have found useful in our TT activities, and I am sure that you will find others to add for your particular situation. Hence the loose-leaf binding. I hope that you will find TT as challenging and educational as I have, in more ways than I could possibly explain. Finally, I realize that I have been somewhat blunt in some of the statements, opinions, and suggestions made in this document (in order to be honest and helpful). Such statements are clearly my own, arising from my own personal experience and observations, and do not in any way represent any official position of DVA. However, Section XVIII on Center Policy has been reviewed and approved by the R&D Center Directors. Alvin H. Sacks, Ph.D. Contents
I. Who should read this?This Handbook is written primarily for one who is either setting up or running a program for transferring products developed within a VA Government Laboratory to a private sector entity which will take on the manufacturing and marketing of the product. Presumably, such a program or group also has the responsibility of seeking collaborators in the commercialization process and of negotiating agreements with these parties. Such groups are usually referred to as Technology Transfer groups, and automatically assume the responsibilities of all of the legal and business aspects involved in the technology transfer process, including patents, patent disclosures, nondisclosure agreements, Cooperative R&D Agreements, negotiations, marketing studies, government regulations, software protection, product selection and evaluation, etc. If there is no such group at your Medical Center, it may be that the inventor or Principal Investigator (or perhaps ACOS/Research) will need to handle technology transfer (TT) issues, at least for a particular invention. For these reasons, this document will attempt to touch upon all the above subjects, but obviously cannot cover them in any significant detail. Rather, an attempt will be made to produce a source book, from which one may be introduced to the various subjects, referred to other, more extensive documents, and perhaps warned about some of the problems, complications, challenges, and pitfalls that might arise in performing the job of transferring government technology to the private sector. The reader is also referred to Facilitating the Transfer of Rehabilitation Technology [Weisgerber and Armstrong, 1989], which was prepared under contract for us and covers more of the basic fundamentals of TT prepared especially for investigators working here at our Rehab R&D Center. II. DefinitionsCooperative R&D Agreement (CRADA) An agreement between a particular local Federal Laboratory and one or more private companies, universities, or individuals under which money to support R&D can be accepted by the Federal Laboratory in exchange for the right to manufacture and market any patentable devices that may be developed during the agreement. These agreements were authorized under the Technology Transfer Act of 1986 (Public Law 99-502) and also provide for royalties flowing into the agency (i.e.,VA Central Office) to then be distributed among VA laboratories, after first paying at least 15% of the total to the individual employee/inventors (see Appendix A). The distribution of such royalties has since been modified by the National Technology Transfer and Advancement Act of 1995 (See Appendix N.). Copyright The right to reproduce, distribute, and sell original intellectual property that may or may not be patentable; e.g., literary works, music, software, motion pictures, videotapes, etc. This right can be simply asserted by the author or originator by affixing to the work the inscription of the circled letter "c", followed by the year and the originators last name. If the work was developed over a period of years, there may be multiple years listed. However, such materials developed by a government employee while performing his/her official duties are not copyrightable by anyone (See Section XV). Disclosure The act of disclosing the details of a new idea or invention. Disclosures are assumed to be made without compensation and without any restriction on the receiving party in the absence of a non-disclosure or confidential disclosure agreement. An "enabling" disclosure is one which would be sufficient for a person knowledgeable in the field to replicate the product or process which is disclosed. A "non-enabling" disclosure is not. The patentability of a device or process is dependent on the date of the first non-confidential enabling disclosure (See Section XIV). Federal Laboratory (as used in the TT Act of 1986) A laboratory owned by the Federal Government and authorized to negotiate and enter into CRADA's. In the VA, this means your VA Medical Center, not your individual group or laboratory. Infringement The act of manufacturing and marketing a product for which another person or entity holds a valid issued patent that has not expired in the country in which those activities occur. (The question of whether a certain patent is actually valid and includes a particular product is a legal decision, often leading to prolonged and expensive litigation.) Invention A new and useful process, machine, manufacture or composition of matter, or any new and useful improvement, finding, or product which clearly advances the state of the art or practice and may be patentable. Inventor The originator of, or a principal contributor to the concept(s) contained in a specific invention. The legal definition requires that this individual be personally responsible for at least one of the claims listed in the patent. Investigator A scientist or engineer who is a member of a research or development team, either on the laboratory staff or the staff of a contractor, and who plays a key role (other than as a consultant) in a given project. Know-how The specialized knowledge required tointerpret and apply a finding, perform a process, or develop or manufacture or market a product. License An agreement under which one party (the licensor) permits another party (the licensee) to make, use, offer for sale, sell, import and distribute the product in question in return for a specified schedule of royalties, fees, or other forms of compensation. Nondisclosure Agreement An agreement between the developer of an invention (either the RR&D Center or the inventor) and the party to which the idea is to be disclosed on a confidential basis. It provides conditions under which the receiving party may or may not disclose to a third party (see Appendix B). Patent A document issued by the U.S. Patent and Trademark Office (or corresponding office of any other government) which prohibits any other person or entity within its jurisdiction from making, using, offering for sale, selling or importing the patented product without payment of royalties to the inventor(s) named on the patent, or to the owner(s) if assigned. Patent application A document filed with the U.S. Patent and Trademark office (or a corresponding office in some other country), usually filed by a registered patent attorney or agent, which requests the issuance by that office of a patent on a specific product or process which is considered to be patentable. Patentability A process or product which satisfies certain specific criteria is said to be patentable. The criteria for patentability are: Novelty, utility, non-obviousness, and non-disclosure (See Section XIV). Principal Investigator The lead investigator with primary responsibility for the project. This role may be shared by two investigators, in which case they are co-Principal Investigators. Technology Products, processes, or related findings that are tangible, reproducible, and scientific or technical in nature. Technology transfer as used herein (a) for products, the transfer from the laboratory to a private company for manufacture, marketing, and sales; and (b) for research, the transfer of information in the form of a paper or publication which is then used by another laboratory, researcher or clinician. III. The MissionBecause of the organization of the Palo Alto Rehabilitation R&D Center and its mission, the mission of the TT group has been two-fold:
IV. The GoalsThe specific goals of the TT group have been:
V. Rules of the gameThe challenge of carrying out successful Technology Transfer (TT) from a government laboratory is actually a balancing act of attempting to follow the rules of good business practice while being mindful of the restrictions of government regulations. One must, insofar as possible, be sure to follow the former as closely as possible without running afoul of the latter. Good basic rules are:
It is important to note that item 5 above has a rather special meaning within the government. In particular, it includes giving fairness of opportunity to companies to participate in the TT of government inventions. This means that, no matter how simple or unpatentable an item may be, one cannot simply pick up the phone, call a company, and offer them the opportunity to manufacture it, unless the contact is initiated by the company as part of their proposed new product plan. We are in fact required to assure that a significant number of companies have been made aware of the opportunity. This can be done by publication in the Commerce Business Daily (a government publication), or by publication in a professional or trade journal, by showing at an exhibit, or by posting an announcement on the Internet. After that, it seems quite permissible to talk to anyone about it. As an alternative for rehabilitation technology, one can simply search AbleData or a similar database (see Appendix C) for the most likely manufacturers of a particular product, then write identical letters announcing availability of the product, and choose among those who show an interest in commercialization. Be sure to document this process. In the case of an invention which is already owned by the government (e.g., by virtue of an issued or pending patent), any licensing of such invention must follow the explicit rules laid down in 35 USC 207 and 209 [Samuels, 1993]. These particular laws include very specific requirements and procedures, especially for granting exclusive rights to any government-owned invention. It is worth noting, however, that the VA has in the past usually granted to the inventors all rights to inventions made within the VA. I believe this practice will gradually change because of the new climate created by the TT Act of 1986, which is discussed below. VI. Pertinent government regulations and the lawA number of laws have been passed by the Congress which relate to TT, but perhaps the most significant is the Technology Transfer Act of 1986 (PL 99-502) [Appendix A], which actually amends the Stevenson-Wydler Act of 1980 [Appendix D]. The significance of PL 99-502 is that it authorizes a collaboration between the Government Laboratories and private industry that would have previously been considered a conflict of interest. In particular, the 1986 act permits each Agency to allow its local Federal Laboratories to:
In addition, a government employee-inventor can share in any royalties received by the Agency, and must by law receive at least 15% of such royalties off the top. This is in addition to salary and is not considered a conflict of interest. As of this date, the VA has been paying inventors at the rate of 50% of all royalties received. This is all accomplished through the mechanism of a Cooperative R&D Agreement or CRADA. It is important to note that this is not a contract and therefore does not involve any government funds being paid out to the collaborating party. For this reason, it avoids most of the red tape, delays, and all competitive bidding, as well as many of the issues relating to conflicts of interest. As for conflict of interest questions, the main issues are covered (for the VA) by an earlier regulation in Title 38 of the Code of Federal Regulations (CFR), Part 0 titled "Standards of Ethical Conduct and Related Responsibilities" (see Appendix F). Note that VA employees are to avoid both conflicts of interest and any appearance thereof. But PL 99-502 specifically encourages (both by words and rewards) the government employee-inventor to participate in the commercialization of a product that he/she may have developed for the government. This is a significant change from previous law regarding commercialization. A word of caution regarding Cooperative R&D Agreements: Under the TT Act of 1986, the Department of Veterans Affairs has decided to require that the negotiated agreement cannot be signed by the VA Medical Director (i.e., the Federal Laboratory Director) until the entire agreement has been submitted to the Office of General Counsel in Washington, D.C., and has been officially approved by that office. This subject will be discussed further in Section XVII. The VA has developed a generic CRADA to be used as a guide for all VA Medical Centers in entering such agreements. This generic agreement is presented in Appendix E, with some additions and modifications we have made here at Palo Alto. Please bear in mind that this agreement is simply a model, and should be modified as needed for any particular situation. Some items may be completely inappropriate in dealing with very small business firms who might not be able to supply any funds, but might be willing and able to furnish personnel, special marketing expertise and/or specialized facilities or know-how. Clearly, there are these and other areas which can be negotiated. Such deviations from the generic agreement should be pointed out and justified to GC when it is submitted for approval (see Appendix G). It should also be noted that PL 99-502 [Appendix A] requires that all royalty income be sent directly to the agency, which first pays the inventors their share off the top, and then distributes the rest to various Agency laboratories, with the majority of the remainder going to the lab where the invention or discovery was made. This point is not mentioned in the generic agreement as written. More recently, in March of 1996, the National Technology Tranfer and Advancement Act of 1995 (PL104-113) was signed into law to further facilitate the transfer of Federal technology to the private sector. From the viewpoint of the Federal employee, the highlights of this more recent Act are as follows: 1. Handling of income from royalties or other payments from collaborators in commercialization efforts:a. Such payments may be retained by the laboratory in which the invention was made.b. Agency or laboratory shall pay each year the first $2000 and thereafter at least 15% to inventors or co-inventors.c. Laboratory may use such funds as incentives to reward other laboratory employees who are not inventors but have contributed significantly to the value of the invention.2. Royalty income to inventors:Maximum limit of $100,000 per year (in addition to regular salary) is increased to $150,000 per year. Higher amounts can be paid only with approval by the President, as in PL99-502. From the viewpoint of the collaborating parties, there are also some very important features which give those parties more and better defined licensing rights, as well as further protections against public disclosure of trade secrets. The entire text of the National Technology Transfer and Advancement Act of 1995 is included herein as Appendix N. VII. Dealing with the bureaucracyGovernment Laboratories are run on the basis of rules known as Government Regulations. Further, these regulations are evidently written under the assumption that government employees are of questionable character and cannot be trusted. Therefore, one finds that nearly all the regulations spell out precise activities which are prohibited. Since the number of ways that one could imagine to cheat the government are essentially without limit, so are the regulations. Therefore, it makes no sense to set out to study "the regulations". Rather, when one conceives of a plan to follow in order to accomplish Technology Transfer (TT), it makes sense only to try to determine whether there is a specific regulation forbidding such action or any part thereof. Also, keep in mind that (1) it is easier to apologize than to obtain permission; and (2) there are many ways to accomplish any given goal. In most government agencies, there are many layers of authority that are expected to sign off before one can take any meaningful action. This has a direct effect on trying to accomplish TT, particularly since so many of the questions that arise are legal questions. Thus, within the Department of Veterans Affairs (VA), for example, any inquiry to District Counsel must be in writing and must go through regular channels. That generally means that your written inquiry must go through and be signed by the Director (and lesser officials) of the Medical Center in which you work. Consequently, there are not only time delays, misunderstandings, and a lack of interaction, but if District Counsel is involved, they will very likely refer your question (by letter or memo) to General Counsel (at Central Office in Washington, D.C.). This will involve further delays. But worst of all, the final written answer will be sent to the Medical Director, not to you! Therefore, there is no guarantee that you will ever get an answer at all. In my own experience, I once tried simply calling District Counsel on the telephone for some kind of information to assist me in doing TT. I did not get an answer to my question, but I did receive (a few days later) a written reprimand from the Director of my own Medical Center for not going through the proper channels. Following that experience, I decided that for verbal questions relating to TT, I would simply call someone in the General Counsel's office in Washington. I discovered that once you find the right individual for the particular topic, their office is generally both cooperative and helpful. Of course, if you are seeking a legal ruling rather than a simple answer to a question, that must be in writing and must go through channels. But I believe you will get a faster and more reliable response if you write directly to General Counsel rather than to your District Counsel. Also, in writing the letter (to be signed by the Director of your Medical Center), be sure to include a paragraph asking that any questions regarding the letter be directed to you, giving your position and your business phone number. Further, I have found it invaluable to have an outside (i.e., non-government) attorney with whom I can discuss such questions. This can be accomplished by the formation of a TT Advisory Board (serving on a voluntary basis without charge), and finding a qualified attorney who will serve on your Board. Such an attorney should ideally be an experienced patent attorney with experience in (or knowledge of) Federal Laboratories, Federal Regulations, and TT, particularly negotiating license agreements. In a memorandum dated September 17, 1996 to all VA employees, it has been stated that the entire VA healthcare system is currently undergoing a sweeping reorganization under which the District offices are being eliminated and field treatment facilities become part of new management and operational structures called Veterans Integrated Service Networks (VISNs). Just how this new reorganization will affect Technology Transfer is not yet clear, especially since VA headquarters in Washington has also been downsized and reorganized. Therefore, the comments in this section referring to District counsel may no longer be applicable. Much will depend on how Technology Transfer is to be treated within the new structures. Nevertheless, it should be borne in mind that any intermediate structures through which Technology Transfer matters must go means more possibilities for misunderstandings and delays. After the passage of the Technology Transfer Act of 1986 (PL 99-502), which actually amends the Stevenson-Wydler Act of 1980 (PL 96-480), each Agency of the Federal Government was to issue guidelines for implementation. In so doing, the VA issued a lengthy document (VHS&RA Manual M-3, Part 1, Chapter 13 - see Appendix G) which illustrates some of the difficulties within the bureaucracy. For example, there is no mention of a Technology Transfer Officer (although one is required by the Stevenson-Wydler Act for Laboratories with more than 200 scientific engineering and technical employees). Rather, it is assumed that the only person on the technical staff involved in entering a Cooperative R&D Agreement with a company is the Principal Investigator (PI) on the project. All of the other people involved, and through whom everything must pass and be approved, are administrators! The result of such procedures is a document constructed by the PI, the Associate Chief of Staff for Research, and the Medical Director (or their delegates). In all probability, none of these has any experience in TT, let alone in negotiating and entering such agreements. Further, the PI (who may also have no experience in TT) may have little or no interest in spending his/her time in such an endeavor. In reality, such activities are best carried out by a TT Officer (if there is one), but none of the official correspondence (usually written by that officer) goes through him/her, nor is there any mechanism for the TT Officer to receive any copies! (This situation stems from the underlying assumption that there is no such person.) Clearly, this system leaves many possibilities for delays, misunderstandings, omissions, oversights, and other undesirable consequences in dealing with industry. The fact that the rules and regulations are often written by people with little or no experience in TT does not help. But perhaps the biggest lesson here is that, unless there is one person solely responsible for getting the job done on schedule (an absolute necessity in TT), it probably will not happen. In my opinion, this is the single biggest problem in a bureaucracy like the VA. Both the structure and the function of the organization are hierarchical, which means that one person is responsible for everything. (In reality, this means that no one is responsible.) When signatures on a piece of paper say more about a persons status than about who to call with questions, then quality and performance suffer. Therefore, if you are a PI or an inventor at a VA Medical Center where there is no one person in charge of TT, and you want your invention to be successfully commercialized, then you must act as if you personally have been assigned that responsibility (i.e. the responsibility of a product "champion"), or it will not happen. In other words, behave as though this document is written for you. For the situation where there is a TT Officer, I have been following a somewhat different process for negotiating and entering CRADA's, which is given in Appendix H. A suggestion that might be helpful in this environment is: If there is a choice, do not leave anything to chance. This means, for example, when there is a choice of using the phone or the mail or memos, use the phone! When there is a choice of sending something through local channels by memo or hand carrying it to get the necessary signatures, hand carry it! But this is touchy, since some people are either offended or threatened by being rushed (especially in the government). One must combine pragmatism with a little diplomacy. If you know that one person is like that, don't rush into that office for a signature, but leave it (personally) with the secretary. If things do not seem to happen in a timely manner, often the case in government, make discreet inquiries. But make sure that your job gets done as quickly and efficiently as you can make it happen. One of the best ways to do this is to know the key people, whether they be secretaries, confidants, assistants, or whatever, and establish a good working relationship with them. Get them to keep you informed as your paperwork passes through the system and ask whether you can help to speed things up. An example of unnecessary (and sometimes unacceptable) delays by the bureaucracy is the procedure for the hiring of consultants. Not only must the consultant fill out all of the same application forms as a regular Federal employee, but the process goes through all the people in personnel involved in the hiring process. In dealing with TT issues and with industry in general, delays can be costly or downright disastrous. In a recent instance, I had a most enthusiastic and eager consultant come talk to us about transferring technology from Federal Laboratories. I was so impressed with his presentation that I discussed hiring him, and the group agreed that he had a unique and worthwhile contribution to make to our program. I attempted to get him working ASAP. (He was even willing to give us a surprisingly low hourly rate, far below his usual charge rate.) But about a month later, I found he had still not received a notice of his appointment as a consultant to our Lab. He called in my absence, and explained that he could no longer afford to reserve time for us without assurance of being paid, since he had a long list of waiting, paying customers. After checking around, I found that the appointment letter had a typo in it and was waiting on someones desk for correction. No one was willing to give us an estimated date of mailing, although we had been told two weeks before that he was officially approved for hiring. This is an instance in which the problem might be resolved by using an account in the nonprofit foundation on your VA station if you have one. That is, while the administration is getting its act together, one might pay the consultant from such an account provided you have one into which that activity fits. (See Appendix I for the Federal Law which authorizes the establishment of such private, non-profit research corporations at VA Medical centers.) One important point to bear in mind about the Bureaucracy is that for many Federal employees, the telephone is a course of last resort. That is, if there is a problem with anything that you have ordered, requested, or written a memo or letter about, the person spotting the problem will most likely not simply call you on the phone and talk with you. Instead, that person may write a memo (not necessarily to you!), or put it on the bottom of the pile, or simply return to the office that sent it. This can easily result in delays of days or weeks. This is why it is so important, particularly if you deal with industry, that you stay on top of every important thing you send out to make sure that what you have promised actually happens within the expected time frame. If it doesnt, it is both wise and courteous to let your counterpart in industry know what is happening. Because of the numerous delays mentioned above in the processing of official documents, we have initiated here at Palo Alto a special system for the handling of TT documents such as a negotiated CRADA requiring official approval from General Counsel or requiring official signatures for execution. Such documents are first prepared here in the RR&D Center with the cover letter typed up in the very specific format and style required by our Medical Center Director. The cover letter is sent by fax to the Center Directors secretary, she then faxes necessary corrections, we make the corrections and assemble the package in the usual brown folder covered by a special Dark Green transparent folder, with both a green routing slip and pink Expedite slip attached. This package is then hand-carried to the Associate Chief of Staff (Research) for signature, then hand-carried to the secretary of the Chief of Staff and left for signatures, with instructions to call me when it is ready for mailing. The package is then picked up (yes, get up and go there to retrieve it) and mailed from here (i.e., the RR&D Center) so that we can retain copies and a record of when it is mailed. It is also highly advisable to use overnight mail if at all possible. This too will avoid unnecessary delays. All of this may seem extreme, but the result has been a saving of one to three weeks of unnecessary delays while the document might otherwise sit on someones desk or in an in-basket waiting for action (e.g., correction of format or typos, affixing of a signature, or waiting for the internal mail system). Needless to say, this extent of expediting is to be reserved for very important, legal documents involving private companies. Over-use would of course render the special green cover meaningless, and the request for special handling would be ignored. VIII. Working with TTS in BaltimorePerhaps one of the most important aspects of successful technology transfer for rehabilitation devices is the clear demonstration that the device is safe and effective. This can only be done through appropriate clinical testing, particularly field testing under realistic conditions. At the present time, we at Palo Alto do not have a clearly established procedure or method of accomplishing this formidable task. Rather, we usually find ourselves trying to sell one of our products to a manufacturer with only limited experimental data using laboratory prototypes. But there is a mechanism, procedure, and organization within the VA specifically set up to handle this type of field testing within the VA system. That organization is the VA Technology Transfer Section (TTS) in Baltimore, located at 103 So. Gay Street, Baltimore, MD 21202. It was in fact set up originally to give small manufacturers an opportunity to build a few pre-production prototypes under contract to VA, thereby setting up the necessary tooling and making the first few prototypes at no cost to the company. The procedure involves the following: We can submit a Request for Evaluation (RFE) to obtain funds for awarding a contract to a manufacturer for the construction of several prototypes for field testing at various VA Medical Centers across the country. The contract is awarded out of Palo Alto, but the resulting prototypes are delivered to TTS in Baltimore. Then TTS Baltimore decides upon the test sites, arranges for the testing, oversees the testing, collects and analyzes the data, and issues a final report. We at Palo Alto have submitted three such RFEs for field testing and evaluation of our prototypes; namely: the Handbike, the Ultrasonic Head-Controlled Wheelchair, and the Desktop Vocational Assistant Robot (DeVAR). The Handbike RFE was submitted in January of 1986, with the final report completed by Baltimore in December of 1991. That product is now on the VAs list of prescribable devices which can be purchased for VA patients upon prescription. For the Wheelchair evaluation, RFE submitted in June of 1985, the final report was issued in February 1995. The DeVAR RFE was submitted in 1989, and the final report was received in October, 1994. During these field tests, our investigators have worked closely with the staff in Baltimore to furnish assistance in the form of instruction manuals, test protocols, on-site assembly if necessary, and trouble-shooting. This relationship has been successful in a qualitative sense, but the time required from the first submission of the RFE to the final completion of testing and reporting has been, in my opinion, unacceptably long. Therefore, if you are to use the service in Baltimore, you should certainly not put the project or product on hold pending their final report, unless you have no other choice. In all fairness, it must be noted that the above time frames include the process of awarding a contract to the potential manufacturer. This can be quite time-consuming, particularly if the size of the contract is over $25,000, in which case the contract must be put out on bid, including announcement in the Commerce Business Daily and a certain waiting period, as required by government regulations. However, despite the long time period between RFE submission and final report, the service in Baltimore represents a useful supplement to our operations here in Palo Alto with regard to TT. Here we do the research and development, usually resulting in a laboratory working prototype. In Baltimore, actual field tests are conducted in which the important questions of safety, reliability, ease of use, and user satisfaction can be systematically evaluated. One problem is that such tests should be conducted on a pre-production prototype in order to be useful. And sometimes, a laboratory prototype, even with some in-house testing and redesign, may be a long way from a pre-production prototype. One might well ask, then, whether it would make more sense if the field testing were done by the manufacturer after the final product development is done under a Coop R&D Agreement. Judging from our experience with the three products that we actually submitted to Baltimore TTS, it would appear that the present system is most practical for a very expensive product, such as the robotic workstation. It is in such cases that the manufacturer might actually want to wait until completion of the field tests before making a decision on manufacturing. In the cases of both the Handbike and the Wheelchair, there were some suggested design changes resulting from the Baltimore evaluation which seemed useful to the manufacturer. Whether a serious manufacturer would have come up with those changes in the natural course of final product design is not known. Of course, it is of considerable use (but not essential) to manufacturers to know whether the VA will be one of their customers, but the answer will be known only when the product either goes on the list of VA prescribable devices or is rejected. It can get on that list either as described above, where the device is tested by Baltimore TTS, or by the manufacturer supplying a production prototype to the group which actually purchases commercially available products for the DVA. That group was formally called the Rehabilitation Technology Assessment Section (RTAS) within the VA Department of Prosthetics, also in Baltimore at the same address. Unfortunately, RTAS was disbanded in October, 1994. But it is significant that Lingraphica, a product developed here at the Center and then developed into a commercial product and marketed by Tolfa Corporation, followed the latter approach, first obtaining FDA approval of the product, and then completing the entire process of VA acceptance in a total time of less than six months. IX. Bringing in business expertiseEver since the passage of PL 99-502 (the TT Act of 1986) [Appendix A], there have been an increasing number of offers to take advantage of various services, offered by conference arrangers, attorney firms, universities, and others claiming expertise in technology transfer (TT), which has now become the new buzz word throughout both the Federal Laboratories and a large number of commercial enterprises. I think one must view these with caution. In my opinion, anyone claiming expertise in TT must be viewed with downright suspicion, since TT by definition includes so many different fields of expertise, including business, law, patents, negotiation, agreements of various types, government regulations, manufacturing, management, engineering, product design, field testing, evaluation, marketing, distribution, sales, maintenance, user training, and on and on. Furthermore, many of these fields themselves include various specialties. So what is an expert in TT? Personally, I believe there is no such thing as an expert in TT. Therefore, one way to bring in the needed fields of expertise is to establish an Advisory Board including experts in the fields you are most likely to need for your operation. I have done this, using a Board of twelve non-government experts. I believe it is essential to use non-government people for this purpose, since they are not subject to the restrictions of government employees in what they say or do. Further, they are more likely to have experience in the "real" world of business, where the most important aspects of TT must occur, and finally, nothing they say is likely to affect their present or future position (i. e. there is no conflict of interest). It always looks impressive to have a Board with notable names on it, but perhaps the hardest job is to make good use of the Board in accomplishing your TT goals. In our case, I soon learned that meetings of the full Board were of limited value, even when I thought I had a clear picture of what was to be accomplished by the end of the meeting. (It seldom was.) I later learned that by far the most helpful and useful person on the Board was the legal member, who is a patent attorney with considerable experience, having worked in the TT office of a large National Laboratory. Further, most of the help was accomplished by telephone with carefully planned, specific questions. In our case, where the subject of transfer is rehabilitation technology, the various members represented expertise in law, business, venture capital, marketing, rehabilitation services, rehabilitation medicine, rehabilitation engineering, product design, manufacturing, third party payers, and end users. A second way to bring in expertise is through the use of consultants. I have also used this mechanism with varying success. But through careful screening, and a willingness to switch consultants when appropriate, one can get very satisfying results. It is important, of course, to have a clear idea of why the consultant is being hired, what you want him/her to produce, how soon, and for how much money. Sometimes, though, it is difficult to tell how helpful the consulting is until the final result or product is presented, usually in the form of a meeting or a written report. The experts brought in as consultants so far in this operation have been in marketing, strategic planning, product design, and document production. Perhaps the best way to learn about the realities of business and marketing is through discussions with those parties who come to the lab to discuss possibilities of collaboration or commercialization of specific products. It is largely through their questions and answers that one gains an understanding of what is needed or wanted by a potential partner before entering any arrangement or agreement. X. Developing a TT teamNot all R&D groups can afford the "luxury" of a person or group of people whose primary or sole responsibility is technology transfer, although as of this writing, it is considered a very important function. All too often, the task is simply added to the responsibilities of one of the investigators, or even of the Director. But a recent survey of Rehabilitation Engineering Centers (REC's) across the nation showed that the amount of successful TT accomplished is determined primarily by whether there is a person specifically assigned to do only TT. If you are given that assignment, you may not get to select the members of your group (if you have one). In fact, you may find that some of the existing personnel are simply assigned to spend a certain percentage of their time working in your group. On the other hand, if you do get the opportunity to form a group of your own, it is important to make a first cut at how you want that group to operate and what expertise that operation will require. Since TT is certainly not a science, and is largely based upon communication skills, experience, and contacts, as well as knowledge of the technology, it is not easy to specify the best types of people that one would ideally want in a TT group. However, since it must be a team effort in most cases, it is essential that the members of the team respect one another, as well as the investigators and their work, and that they work well together. There will certainly be "lone rangers" out there in the rest of the organization, but such individuals do not generally contribute as much to the TT effort as others. It is clearly advantageous to have people who have already had experience in at least some aspects of TT, as well as sufficient technical knowledge to speak intelligently about the devices or technologies to be transferred. On the other hand, one should keep in mind that no one will have the detailed knowledge of the inventor or developer, which will most likely be needed at some point before transfer can be successfully accomplished. For this reason, our TT group does not usually pursue TT opportunities for a product whose developer or principal investigator is no longer working here at the Center. If that person is now at a different institution, we may suggest that the interested company contact him/her directly. It is unrealistic to expect TT team members to be experts on every product being developed. Somehow, within the TT group one needs to have available some level of expertise on all of the subjects discussed in this booklet, whether through direct experience, training, or education of the group members themselves, or through consultants or an Advisory Board. (Having all three is certainly possible and beneficial). In this particular RR&D Center, we are fortunate in that many of the investigators themselves are not only well trained technically, but also have had personal experience in some aspects of TT. This may be in the form of running a business, developing and licensing a product, taking out a patent, or actually developing and transferring a product of their own design. Further, most of our investigators are quite experienced at making technical presentations (a definite plus for successful TT). Some of the more subtle, although very important, requirements are the ability to communicate in laymans terms with people unfamiliar with the field, the willingness and ability to strike up conversations with likely collaborators or licensees who may be total strangers, and the ability to see connections between people or organizations (and their technologies) and what they might be able to accomplish together in TT. As to the most desirable size of a TT team, it will of course depend upon the size and nature of the technical side of the organization it serves, and upon its productivity in terms of things that need TT activity. In other words, the size will be dictated primarily by the TT workload. But I would think the minimum size would be one person full time, assuming a lot of cooperation from investigators, and a largely advisory role for the one TT Officer. On the other hand, the TT team can be too large to work effectively together. Our team in this TT Section has generally consisted of one Chief and five other people, all part time. All of us, with one exception, have strong backgrounds in engineering, some in research, some in design, and each has had personal experience in at least one aspect of TT. The other person is an Information Specialist who is essential for the preparation of professional materials for distribution in connection with TT activities. The total TT effort was at its peak at a level of 3.6 Full-time Equivalents (FTE), and served a technical team of about 50 investigators, including technical, design, and laboratory personnel. XI. Strategic planningHaving a strategic plan for TT may be even more important than in any other R&D activities, since it involves so many different parties with different functions. In our own case, I had very little understanding of this type of planning, so I called in a consultant whom I had heard speak on the subject at a Federal Laboratory Consortium (FLC) meeting. As I understand the subject now, it basically takes the overall mission, breaks it down into specific goals, and then breaks these out into tasks, which are then spelled out as projects assigned to specific people. This allows the manager to then make specific assignments of people and resources, and to set time tables for each project. It gives the manager a much clearer picture of where the money, time, and effort are going, and whether they are producing the desired results. The Strategic Plan we developed for our group is shown in Appendix J. It can be seen that the goal of bringing products to market has been broken down into Product Recruitment (where the project originates), Product Evaluation (which weeds out the probable losers), and Product Availability (finishing the job). Each of these, in turn, has been divided into specific projects or tasks. The final planning step of assigning people and time is shown in the listing of staff and personnel on the same page, and spells out just what activities are expected to take place in each case. This chart represents only the product side of our dual mission and does not address the publication and public relations side. Further, since this is a plan for the future, the FTE totals do not correspond to those of our current TT staff. It is most important that the entire TT group be involved in the planning process, so that everyone has "bought into" the plan before it is implemented. Then, there can be specific assignments and regular reporting (probably verbal) to make sure that things are progressing as planned. The Strategic Plan, in fact, cannot be cast in concrete at any stage, since situations change, and the plan must be continually modified as necessary to meet these changes. Another aspect of strategic planning has to do with the "big picture" of what the effort is all about. For example, as of this writing, there are several recent and current events and activities that must have an impact on what we are attempting to do in TT here in California. Consider the following list:
Let us ask what these all have in common in terms of underlying threads. With some imagination, we might come up, for example, with the following topics:
This list, in turn, might suggest some possible working partners, such as aircraft manufacturers, train and bus manufacturers, lift manufacturers, Department of Transportation, NASA, etc. In addition, it might suggest some new or broader applications of our rehabilitation technology, or some new ways of looking at rehabilitation problems. For example, is it possible (and legal) for a government laboratory to set up an Industrial Affiliates program (perhaps through a nonprofit foundation) for commercializing products? One example of a new approach to an old rehabilitation problem is the following: It has always seemed to me that the bus lift for wheelchairs is not an intelligent or efficient solution to the problem of getting a disabled person and his/her wheelchair aboard the bus! Wouldnt it make more sense to consider a redesign of the wheelchair (or perhaps the lift) so that the person and the wheelchair might be separately handled by a simpler system? Then, perhaps the person could even be placed in a normal seat and the wheelchair temporarily collapsed and stowed. (The basic seat portion of the chair might stay with the user in this operation.) Such a system might be somewhat limited to, say, persons with paraplegia, while persons with quadraplegia might still need to use a lift, but one might then think in terms of fewer buses having to be equipped with a full lift system. That may or may not be practical, but the idea is to broaden ones view of the overall problem in order to see new opportunities for collaborations and for solutions to more general problems. Another possibility is the so-called kneeling bus which can accommodate not only wheelchairs but elderly infirm persons who may have difficulty negotiating the high stairs in the entrance. This type of thinking or planning might well lead to interdisciplinary brainstorming sessions which could produce interesting and productive collaborative projects, thus broadening both our technology and our TT efforts. But these endeavors would of course require the support and cooperation of the RR&D Center Director, not to mention the technical staff. XII. DocumentationDocumentation is extremely important in any TT activity. Since the entire process depends upon contacts, discussions, agreements, the timing of events, especially inventions and the actions relating to them, it is of utmost importance that one involved in the process keep as accurate, complete, and reliable records as possible. And since these activities often relate to money (or the prospect thereof), people tend to take them very seriously (and sometimes to court). Therefore, it is essential that logs and/or records (above and beyond the usual receipts, checks, purchase orders, and similar abbreviated records) be kept on a regular basis, and preferably in a form that cannot be tampered, altered, or misrepresented. In relation to inventions, the usual preferred form is a bound notebook, with all entries in ink, with no erasures (errors lined out and initialed), and with each page signed, dated, and witnessed by (i.e., "read and understood by") someone who understands what it is that he/she is signing. These can be important when applying for a patent, especially in establishing who was the first to invent, and in showing "due diligence". Realistically, or course, no one wants to be bothered with this sort of meticulous bookkeeping on a daily basis. I would suggest that the potential inventor should go to these lengths only on those days when significant ideas occur, or when important changes to the concept or design occur, and we all know that these do not occur every day. But even small changes are often worth recording, if only to avoid repeating them. You might want to keep a log most of the time, but only bother with witnessing on the entries you feel are important. Unfortunately, that is not always an easy conclusion at the time. In summary, I would recommend an attempt at relatively continuous and complete record keeping for the serious inventor. (It need not be in beautiful prose with perfect diagrams, and can certainly be done by hand with free-hand sketches if that is easier.) In the course of conversations, by phone or in person, it is important to know who talked with whom, when, for what purpose, and the essence of what was said. These matters can be important when negotiating or drafting agreements, even if there is no legal battle. They are even important for reference during subsequent conversations. Further, if a question comes up with regard to the propriety of actions taken, it is always helpful to have the documentation to support the action, or even to show that it was approved by your superior. Certain documents are actually required in connection with patentable inventions by government employees. For example, Section 1.65 of 38CFR [CFR38, 1992] requires that governments employee-inventors must file a Disclosure of Invention [Appendix L] with the VA Office of General Counsel. (This applies to part-time employees, WOC (without compensation) employees and consultants as well). The Office of General Counsel (GC) then makes the determination that either (1) the rights to said invention belong to the Federal government; or (2) the rights belong to the individual inventor(s), with a royalty-free, nonexclusive, paid-up license to the government. The primary reason for documenting work on a patentable device is that in the United States, a patent is awarded to the "first to invent", whereas most other countries award a patent to the "first to file". Hence, the need for documentation comes up in the U.S. if there is an infringement or an interference, in which a second party challenges the validity of your patent on the grounds that he/she is the original inventor and predates your discovery or invention. Good documentation then becomes crucial. However, the U.S. Congress is now considering whether to change the U.S. patent practice to conform with the standards of the rest of the world, in which the deciding factor would then be the first to file for a patent, regardless of who invented the device first. Documentation would not then be a factor in the validity of your patent, but would still be important in establishing your status as a legal inventor (see Section XIV). There are three particularly important points to be made about the requirement of filing a patent disclosure in the VA:
It is important to note that no possible conflict of interest arises if the invention is made under a Cooperative R&D Agreement, since that agreement specifies under what conditions the invention belongs either to the government or to the company, with a portion of the royalties going to the inventor in either case. As Chief of the Technology Transfer Section, I have found it useful to keep a rather detailed running "logbook" of daily activities and interactions, both to document important TT events (including conversations) and to give a time perspective to the sequence of events for future reference. I might even make an entry such as "My spouse stayed home sick today" simply to help me recall the details of that day. Bear in mind, however, that this log (if kept on a computer) may be of limited legal value, since it can easily be altered. One type of documentation that could prove to be very important is the documentation of approval by your superior(s) for TT activities that might later come into question as a possible conflict of interest. It will serve to show that your actions were not a secret, and that they had your bosss approval. Such documentation would ideally show your reasons and justification for such actions. Remember that, according to VA policy [Appendix F], employees are directed to avoid even the appearance of a conflict of interest. XIII. Looking for new TT opportunitiesWhen I first took on the job of overseeing a TT program for the RR&D Center, it looked fairly straightforward. That is, all I would have to do is call someone in each appropriate company nearby, establish a relationship, and then sell them on some of our new products. Well, that is probably true, but it is not that easy. The first question that comes up is what companies do you choose? Well, thats easy; just pick the companies whose capabilities match the products you have to transfer! Unfortunately, I have yet to find a book, catalogue, or database that gives that kind of information. Capabilities are not ordinarily listed, nor are manufacturing equipment or any other such clues. Rather, you will find detailed listings of their Dunn & Bradstreet rating, their present products (maybe), a list of company officers with names and phone numbers, and the companys gross sales figures. It would appear that such listings were prepared primarily for the potential investor or customer, rather than for a company or laboratory looking for a working partner or collaborator. And now that TT has become the national "buzz word" for Federal Laboratories, we are seeing an increasing number of databases and services which give detailed listings of the capabilities and technologies residing in each of the Federal laboratories. The presumption, evidently, is that the companies will usually seek the Federal Laboratories, not vice versa. So the task of the Federal Laboratory TT Officer is apparently cut off at the pockets insofar as targeting and contacting individual companies for collaboration on particular products or technologies. For this reason, attendance at numerous TT meetings, company trade shows, and other technical meetings, exhibits and conferences remains one of the best methods of establishing and maintaining the personal contacts which are the life blood of TT. But this is difficult in a climate of shrinking budgets. There are two approaches which might be taken to overcome these problems, and we have chosen to take both. First is to design and publish a regular newsletter announcing recent developments and potential new products in the laboratory, and second is to bring in a consultant who seems to understand the problem and have a clear method for approaching it. Of course, to distribute the newsletter requires building an appropriate database for that purpose. In our case, we started by collecting from the Principal Investigators (PI's) their own personal lists of names and contacts, and then building on that from inquiries received and from meetings and personal encounters. This has led to a database of some 4,000 names who now receive our TT newsletter. But it is a relatively unorganized collection of colleagues, institutions, hospitals, universities, etc., and does not do a particularly good job of building a database of potential manufacturers. That is where we hope that our consultant will be helpful. He has had considerable experience in raising private and venture capital, and feels that the same approach can be used here. Another possibility for locating potential industrial partners in our case lies in the use of AbleData, a database which offers listings of manufacturers and distributors of rehabilitation products. It also looks as though the World Wide Web will offer even greater possibilities, although how to use it for this purpose is not yet clear. For a listing of information brokers relative to rehabilitation, call NARIC (National AbleData broker) at 800-346-2742. A list of this and other organizations and resources that may be helpful in your TT activities can be found in Appendix C. One important point to note about the TT Act of 1986 is the fact that it authorizes the expenditure of royalty income for the purpose of engaging third parties for the marketing or managing of licenses to inventions. This is certainly a good thing, but shows no understanding of the fact that income from royalties comes very late in the TT game. If any significant royalties are ever received on an invention, they generally come in years after the granting of a license or entering a Coop R&D Agreement. In the meantime, there are a few organizations which will handle the patent process, the licensing process, and even the license management in exchange for the promise of a share of later royalties. After many discussions, visits, and exchanges of proposals with all parties and submissions to VA General Counsel, we did finally succeed in executing such agreements with two private, nonprofit corporations: Research Corporation Technologies (RCT) in Tucson, and Technology Targeting, Inc. (TTI) in Seattle. But in the process, it was necessary to convince GC that such arrangements are indeed permitted by PL99-502 (the TT Act of 1986). More recently, our VA Medical Center in Palo Alto has just signed a Coop R&D Agreement with Stanford University under which any patentable inventions developed by investigators employed by both VA and Stanford, or developed jointly by VA and Stanford personnel on a project funded by the VA, will belong to Stanford. Further, the commercialization of such inventions will be handled by Stanfords Office of Technology Licensing, and royalties will be shared in accordance with Stanfords patent policy. I believe that this agreement could serve as a model for other VA Medical Centers with similar close university affiliations. For that reason, our new agreement with Stanford is included as Appendix M. XIV. Patent protectionA. How far should you go? It is important to recognize that a patent does not do something for you or for the product (except perhaps add value); rather, the primary function of a patent is that it prevents anyone else from making, using, offering for sale, selling or importing your invention. However, it does this only in the countries in which you file for and receive a valid patent. It also serves its function only if the patent is well written. Most often, a valuable patent (i.e., a valid and broad patent) is filed by a patent attorney specializing in the scientific or engineering area of the particular patent, with considerable input from the inventor. For that reason, good patents are expensive and must be filed in each country in which protection is desired. For patent applications and issued patents existing as of 8 June 1995, a U.S. patent is enforceable for 17 years from the date of issue. But very recently, as part of the General Agreement on Trade and Tariffs (GATT), U.S. patent law has been changed in this respect. That is, U.S. patents based upon applications filed after June 8, 1995 are valid for 20 years from the first date of filing the patent application. This will result in either increasing or decreasing the life of the patent, depending upon the time elapsed between the patent application and the issue of the patent.. Limited extensions can be granted for certain delays (e.g. FDA approval). Certainly, not all ideas or inventions are worth patenting. The decision as to whether to file for a patent or not depends primarily on how much chance there is of someone trying to copy and sell the particular product or process. And this, in turn, depends upon a number of factors, such as cost of production, size of the market, and the financial returns likely to be made. Naturally, large companies (with a staff of attorneys) are more likely to attempt this sort of action (i.e., designing around your patent or simply risking infringement litigation), particularly if the market is large and if there is considerable profit to be made. In the field of rehabilitation, however, the likelihood is not as high as in the general field of consumer products. Within the rehabilitation field, we hear different viewpoints regarding the value of patents, but if a considerable investment of time, money, and effort is required to launch a product, then some sort of protection seems appropriate if available, particularly for larger markets (which are unusual in rehabilitation). In the case of inventions to be licensed to other parties, it is often worth initiating the preparation of a patent application, but not worth filing formally with the U.S. Patent Office. The primary reason is that the licensee, if one can be found, is not only in a better financial position to pursue the patent, but actually often prefers to do that so that the licensee can control the process from beginning to end (e.g., how it is written, what is claimed, and what countries to file in). In addition, the contents of the patent are not published (and are therefore unavailable to competitors) until the patent is issued, which is usually many months, or even years, after filing. With regard to patents, especially in a research environment, it is important to recognize that the rules of patenting are often at odds with the wishes and interests of the researcher (or even of the institution). For example, once a full public disclosure of the invention is made (such as in a publication or a public presentation), one then has only one year in which the U.S. patent application must be filed. Furthermore, once such a disclosure is made, all foreign patent rights are immediately forfeited. On the other hand, if there is no such disclosure, one can file for a U.S. patent, and then, up to one year later, file for foreign patents. In the event that one plans to disclose a new invention (e.g., at a forthcoming meeting or exhibit), but has not yet filled a patent application and has insufficient time to file, there is still another possibility for protection of at least some rights, primarily an early filing date. This can be accomplished by filing a Provisional Patent, for which the procedure is easier, faster, and much less expensive than filing for a U.S. patent. However, it is valid for only one year, during which a full patent application must be filed. The procedure and forms for filing a Provisional Patent are given in Appendix O, along with a number of questions and answers regarding such patents. B. What is patentable? There are essentially four specific requirements for patentability [35 USC 101,102,103) see Samuels, 1993]:
The determination of whether an invention is novel is important in two respects: (1) It is a factor in determining whether we might wish to file a patent or to claim patentability to a potential TT partner; and (2) It may in fact already have been patented, in which case we may not have a product we can transfer (depending on the date of the patent), since the manufacturer might then be infringing on an existing patent. Such a situation could be embarrassing and possibly very expensive, and is definitely to be avoided. To avoid such a possibility, a patent search using first one of the computerized services can be quite valuable. If the issued patent is more than seventeen years old (from date of issue), then the invention reverts to public domain and is not an infringement threat. Note that a public disclosure is defined as a disclosure which would enable one skilled in the trade to duplicate the invention. (This is called an enabling disclosure). A non-enabling disclosure (one of insufficient detail to meet the foregoing criterion) is not considered a public disclosure. It should also be noted that even the submission of an abstract of a paper for publication may constitute a public disclosure. In fact, submission of a proposal to a funding agency may also constitute a public disclosure. Therefore, one must be careful, realizing that publication and patenting may have conflicting requirements. The inventor (or his/her supervisor) is therefore often forced to make a decision early in the game. But disclosure to your attorney (or to the General Counsel of a Federal Agency by a Federal employee) is not considered a public disclosure. In the laboratory setting, it is not unusual to have visits by colleagues who are sufficiently knowledgeable to copy an invention if shown and explained in sufficient detail. One must therefore consider how much to disclose, and to whom, and whether to ask such visitors (and others) to sign a nondisclosure agreement or confidential disclosure agreement before making a full disclosure. A confidential disclosure agreement appropriate for a potential CRADA partner is shown in Appendix B. But such an agreement would have to be modified for the case of showing the invention to a colleague or a research group. For example, if a new device or prototype is loaned out to an institution for evaluation, the agreement should state the purpose of the loan and should require some sort of informational feedback, such as test data or suggestions for improvement, in exchange for the loan of the equipment. (You should always keep a signed copy of any such agreement.) The signing of such a nondisclosure agreement automatically ensures that this is not a public disclosure. A good backup resource for checking existing patents is the local Patent Library (in our case in Sunnyvale, CA) which is computerized, easy to use, and has human assistance for locating materials or answering questions. Anyone can scan patent abstracts on microfilm there, or even print out copies of complete patents if needed. However, if the stakes are high, as in an important medical discovery or a consumer product, one should probably have an exhaustive search performed by a competent patent attorney. This library and other resources related to TT are listed in Appendix C. C. Who is an inventor? This question is not a trivial one. A patent is not like a publication, on which authorship may be offered as an acknowledgement or a courtesy. Rather, the definition of an inventor on a patent is a legal matter, and the inappropriate naming of an inventor (or failure to name a legitimate inventor) can be grounds for a court ruling that the patent is invalid. It is therefore a matter to be taken seriously. By definition, an inventor is one who has contributed substantially to the invention, in the sense that it would not work or would not be as valuable without that contribution. A more specific criterion is that one is an inventor if and only if at least one of the claims listed in the patent is attributable to that person. There is a clear distinction, then, between an inventor and a pair of hired hands. That is, if a persons contribution could have been made by anyone skilled in the trade, then that person is not an inventor. For example, a machinist who makes a prototype is not ordinarily an inventor, unless he has introduced a new idea which actually made the invention feasible. One final point on this issue: An inventor is free to share royalties with anyone he/she chooses (e.g., someone who has furnished valuable services but is not a legal inventor). All such arrangements, of course, should be in writing and signed by both parties, to avoid future misunderstandings. XV. Software and copyrightThe basic rule in a government laboratory is that any copyrightable materials developed by a government employee while performing his/her normal duties cannot be copyrighted by anyone. [17 USC 105, see Samuels, 1993] There is legislation pending as of this writing, however, that would permit a company to copyright such materials if they were developed under a Cooperative R&D Agreement with the Federal Laboratory. And, of course, there is the possibility that a company might want to alter, improve, or make more friendly any software developed, in which case, the material developed or changed by the company would be copyrightable by the company. In practice, this situation can sometimes make the entire software package copyrightable by the company. With regard to software, all software is copyrightable (except as stated above), but there are certain types of software that are also patentable. For example, any software that drives or controls hardware may be patentable. In addition, any software that causes special things to happen on the computer screen may also be patentable. This area is one that is a specialty within patent law and generally requires a qualified patent attorney specializing in software patents to give a definitive opinion. A simple example of patentable software in our own labs is the software that controls our robot (DeVAR). Another example of patentable software is that which is used to call up and manipulate the picture symbols in our computerized visual communication system (C-VIC) for aphasic patients (later licensed, patented, improved, and renamed Lingraphica by the manufacturer). It should also be mentioned that copyrightable materials unrelated to official duties and developed off-duty by government personnel, without the use of any government materials or facilities, are copyrightable by the individual employee (such as a novel, poetry, recipe, or music). XVI. NegotiationsPerhaps the biggest myth about negotiations is that they are some sort of contest, with a winner and a loser. Actually, a successful negotiation is one in which each party succeeds in getting most of what he/she wanted. In other words, it is a win-win situation. The reason is simple: A negotiation is generally the beginning of a working relationship. If one of the parties feels cheated, it is not a good relationship, and there will likely be trouble in carrying out the negotiated agreement. In fact, part of the preparation for, or beginning of, a successful negotiation involves finding out what is important to your counterpart, and seeing whether you can figure out how to give it to him/her without sacrificing what is important to you. One might then look at a negotiation as a sort of huddle of the two parties to work out an agreement that is best for both sides and therefore best for the project. Naturally, in the case of a license, the licensor wants the largest royalty he can get, while the licensee wants the smallest. Their job together, then, is to find an arrangement that will give satisfactory royalties to the licensor, while not killing sales by overburdening the licensee, thereby inflating the price of the product, to the detriment of both parties. It is always worthwhile to prepare for a negotiation by figuring out what you would like to get and what you would settle for. You should also have a believable set of figures to show to substantiate that your desires are reasonable. Logical reasoning works much better in negotiations than hard bargaining, especially if you show that you understand your counterpart and his/her problems and preferences. There is a strong tendency on the part of inventors to think that their invention is worth much more money than anyone is willing to pay. I recall my first negotiation with a potential licensee for my invention, in which I asked for a straight royalty of 10% on a consumer product with a very large market potential. This is an unreasonably high figure, and I finally settled on a sliding scale going from an initial 8% to a final 2% as the volume of sales increased. In attempting to accomplish TT for the government, remember that VERY few patented inventions every make ANY money (my patent attorney estimates one in a hundred), and extremely rare is the big winner. In the rehabilitation field, the odds are even poorer. Therefore, the goal of negotiations with industry is NOT to make the VA or the Center rich from the proceeds, but rather to insure that the product does in fact get commercialized successfully, thereby becoming available to the people who need them. In these negotiations, therefore, it is much more important to link up with a responsible company that will carry through on its promises, and to write an agreement that will produce a friendly, effective team for accomplishing that goal, than it is to maximize the royalty received on every unit sold. Nevertheless, the royalties are important in the sense that (1) they appear to place a real value on the product; (2) they produce an incentive for performance if minimum royalties are specified, and (3) they furnish much needed financial resources to augment the TT effort in ways that are difficult by other means. XVII. Authority of General CounselDespite the TT Act of 1986 [Appendix A], which was a large step toward decentralizing the entire TT process, there remain two important areas where General Counsel (GC) has the final word, with possible important consequences on the resulting situation. One area is in the Cooperative R&D Agreements [Appendix E] which are negotiated locally between the particular Medical Center and the company. According to VHS&RA Manual M-3, Part I, the draft agreement shall contain a clause providing a 30-day period for the Office of General Counsel to disapprove or require the modification of the agreement. In other words, the agreement cannot be signed by the Medical Center Director until the agreement is approved by GC (see Appendix G). Furthermore, since the law makes no provision for what happens if GC exceeds the limit of 30 days, it usually does. (Actual turnaround time, excluding local administrative delays, usually runs more like 3 months.) On the other hand, GC has been generally cooperative and helpful in getting the agreements completed and approved. Sometimes, GC has actually called me on the phone to discuss the agreement and parts of it that they either question or disagree with. On other occasions, they have contacted the attorney for the company involved. This is extremely helpful, and a good reason to include in the cover letter with the proposed agreement your work phone number, perhaps along with the phone number of a key company representative, and the suggestion that either of you be called with any questions. The second area of importance in TT is the action that GC must take upon receipt of a Report of Invention from one of the Medical Centers. With regard to such Reports, the GC has the responsibility (and the authority) to decide whether the subject invention belongs to the Federal Government or to the employee/inventor(s). It cannot belong partly to each. However, even if the rights to the invention are awarded to the individual inventor(s), the government still retains a royalty-free, paid-up license to practice or have practiced the invention throughout the world for government purposes. To my knowledge, this clause has not been a deterrent to transferring a product to the private sector, since the government does not compete with private industry in the commercial market. It is important to note that, until very recently, the GC has routinely awarded the rights to the inventor(s). I believe that this practice is related to the facts that (1) the VA has traditionally been a service-oriented organization dedicated to good medical care for our veterans (as opposed to developing rehabilitation devices); and (2) there are to my knowledge no patent attorneys currently on staff at GC. More recently, in my role as Chief of the Technology Transfer Section at the RR&D Center here, I have occasionally written a cover letter pointing out the advantages of having the government retain the rights to the invention, and GC has generally gone along with our recommendation. (I also included a letter of concurrence from the inventor.) The main advantage, of course, is that we can then bring to bear all of the authority granted to us by the TT Act, and can also take advantage of our working agreement with either Research Corporation Technologies or Technology Targeting, Inc. for handling patenting and licensing (see Appendix C). But once the government releases the rights to the inventor, it becomes private property, and the question of a conflict of interest arises if the work continues in the Federal Laboratory. The rule we have established here within the RR&D Center is that, once the rights to an invention have been released to the inventor, then he/she can no longer work on that project as part of his/her job for the government! That can mean that all development work stops right there, which could kill the project, depending on its stage of development at the time. On the other hand, it is my view that it is in the best interest of both the government and the Center that the invention should be commercialized so that it becomes available to the veterans who need it, since the government has already paid for the development. Further, I see no conflict of interest if the people working to transfer the device have nothing to gain personally from it. Therefore, I conclude that, although the inventor cannot work on the project, there is no reason that the TT group or any of its members cannot work to transfer it, so long as they themselves (or their friends or relatives) gain nothing personally from the transfer. Regarding the filing of a Patent Disclosure, and the question of who should file, a recent case came up within the Center in which a volunteer, working for the Human-Machine Interface group on a Hand Exerciser, came up with a new design (and a working prototype) involving several of his own patentable ideas. He was about to file a Disclosure, when I learned of his status and called our patent attorney TT specialist on our TT Advisory Board. My question to him was: Is this person required to file a disclosure? The answer was that, unless he is an official employee (with or without pay) as recorded in the file of Personnel Office, then he/she does NOT file a disclosure, since the government has no rights to the invention. In other words, there is a clear distinction between a volunteer and an employee without compensation (WOC). If the Section Chief (or the Director) wants to insure government rights at the outset, then he/she must put this person on as an employee or as a consultant, complete with Federal Employment Application. Otherwise, the government has rights only if the inventor voluntarily signs an assignment to the government or some equivalent agreement. GC, however, did not initially agree with this position and insisted that we file a Disclosure of Invention. It was still pending action after more than ten months of correspondence. This situation could have been avoided had we originally established a WOC employment status for all unpaid Center staff who might later be inventors. This is a reasonable precaution in a research setting, and in retrospect would have saved at least six months of valuable time. The above situation is an example of what happens when you are trying to do TT from within the VA and, somewhere along the line, you run into a roadblock in the form of a bureaucrat who either wants to make your situation into a Federal case or simply does not know how (or want) to deal with an unusual situation. That is, when your situation is not covered by some specific government regulation, and therefore requires some thought (possibly even a decision), many government employees would rather simply bury it. When you run into such a person who can literally block any further progress on the project (it only takes one), I believe that you have four choices: (1) try another approach, if there is one; (2) try to talk with the person and come to an accommodation; (3) go around the person who is stopping you; or (4) drop the project and forget it. In the case cited above, I had already tried both (1) and (2) by suggesting an assignment of rights to the VA. This was rejected out of hand, without any real discussion. I also tried (3) by simply calling his boss, who refused to take my call. Another approach, which I have not tried, is to have a member of our TT Advisory Board write to his/her Congressman and ask that he/she look into it, since this situation effectively prevents the distribution of our product to the veterans who need it. (This option is not appropriate for an employee.) Such an action would most likely result in the Congressman writing directly to the Secretary of the Department of Veterans Affairs, who would then quickly pass it on down the line to the appropriate boss for action. The reasons for considering such a drastic action in this case are that: (1) I have had on my desk for some months now a proposed agreement from a private company under which the company would pursue commercialization of the product and would pay all patent expenses in exchange for a percentage of future royalties; and (2) neither our Center nor the inventor can legally enter such an agreement without a clear determination of ownership. Fortunately, just prior to my instituting this action, I received a phone call form the person at GC who had been holding our request, to inform me that GC had decided to award all rights to the inventor. Actually, the official letter received from GC some days later stated that GC really had no authority to make a determination of rights in this case. That is precisely what we had stated in our original letter nearly one year ago! It is very important that rules passed down by General Counsel (or any other Federal authority) be carefully and precisely interpreted before deciding what one can and cannot do to promote TT. For example, because I had just received a grant from our internal nonprofit corporation to study patentability and marketability of specific products, I wrote to GC for an opinion on whether I could legally employ local patent attorneys for a determination of patentability and possibly for filing a patent application. The response was an emphatic NO, claiming that this was the responsibility of GC. After reading the response letter several times, rereading the role of GC in acting on patent disclosures, and discussing it with the attorney on my Advisory Board, it became apparent that (1) we do not agree that GC has that responsibility, since they have no registered patent attorneys and are directed only to determine rights to the invention (Appendix K), and (2) there is no reason that we could not ask a local patent attorney to do some pro bono work (i.e., without compensation) for a worthy cause. We are currently pursuing that possibility. Further, there appears to be no reason that we cannot make use of one of the many patent search database services for a modest fee to investigate patentability (see Appendix C). Note, however, that such searches are necessarily somewhat limited in scope, so in the case of a possible big winner, one is well-advised to seek legal counsel from a qualified patent attorney if possible. (See Section IX.) XVIII. Center policy on Center products and TTThe following Policy statements for the Rehabilitation R&D Center are based upon the change of environment concerning the commercialization of government technology. This change was brought about by enactment of the Technology Transfer Act of 1986, an amendment to the Stevenson-Wydler Act of 1980 [Appendix D].
XIX. Suggestions to the DVA on how to improve and expedite TT:The suggestions to the Department of Veterans Affairs (DVA) which are enumerated below have been prepared based upon seven years of direct experience in attempting to interest private companies in manufacturing and marketing the devices and techniques developed at the RR&D Center of the VA Medical Center in Palo Alto, CA:
XX. General observationsFrom our experiences in transferring the eleven products of Table I from our Laboratory here at Palo Alto to the private sector, we know that its not enough to simply give a few pointers and expect the PI to do all the work of TT. The fact is that TT doesnt just happen, somebody has to make it happen. And it takes a significant amount of time and know-how. Furthermore, it takes a substantial amount of time just to build the ongoing relationships you will need to do successful TT from within the VA, as discussed in Section VII. Therefore, I think there should be one person who is responsible only for TT at every VA Medical Center that does a substantial amount of research and/or development. This is borne out by the nationwide survey conducted by the group at Rancho Los Amigos in Los Angeles, who found that the main ingredient that correlated with the amount of successful transfer was the presence of a single person whose sole responsibility is TT. Unfortunately, in these times of shrinking budgets, I suspect that the task of TT will often fall upon the PI of the particular project to be transferred, which will undoubtedly make the task that much more difficult, especially if the VA awards the rights to the inventor(s). I only hope that the information given in this booklet will be helpful in accomplishing the task. In my opinion, the toughest part of TT, or maybe the ONLY part, is finding the right manufacturer at the right time, with both the means and the inclination to complete the task. Further, once a product is fully developed, its much harder than it would have been to get a company to collaborate earlier in the game, when the other party could have played a role in the design. That is what this Center plans to do in the future, by incorporating the TT function into the design/development function, thereby bringing industry into the game early enough to assure that their inputs are appreciated and incorporated into what will more than likely be a better final product. Perhaps the biggest frustration of TT is that the method seems to be different in every case. I do not believe there is any one recipe that will lead to successful TT. It is more like gardening, in that you till the soil, sow the seeds, cultivate, fertilize, water, and hope that the plants will grow. But whether they actually do is often out of your control. Of the eleven products we have transferred, I do not think the circumstances were quite the same in any two cases.The methods of transfer that we have actually used (or encountered) are:
All in all, the transfer of products is somewhat of a gamble, and the time required for transfer varies greatly, depending on the route. But the odds of success seem to be much higher if TT is an integral part of a project at the outset. In most cases, TT from within a government laboratory also requires some knowledge of the law, as well as government regulations within the particular department, and the needs and behaviors of companies seeking new products. Finally, it is important that we understand the long time constants involved in transferring technology to the private sector and actually realizing any income from it. This is demonstrated by the graph of royalty income vs. years for one of the largest TT Offices on any university campus in the country, the Stanford Office of Technology Licensing (Figure 1). Note that it took some ten years before the income became significant, and that it then grew rapidly. But most of that income is from a single highly successful patent which is soon to expire. So TT is difficult, costly, and takes a long time. But it is essential if a product is to reach the intended user. And, if possible, it needs to start early in the project rather than after a prototype is developed. It also seems that the use of Small Business Innovative Research grants can be of considerable help in working with small businesses, since they offer financial support for small companies in commercializing a new product. XXI. ReferencesCFR 38 - Pensions, Bonuses, and Veterans Relief, U.S. Govt Printing Office, Washington, D.C. 1992 Code of Federal Regulations (CFR) 37 - Patents, Trademarks, and Copyrights. (Rev. 1992), Published by Office of the Federal Register, National Archives and Records. U.S. Government Printing Office, Washington, D.C. Samuels, J.M.: Patent, Trademark, and Copyright Laws. Bureau of National Affairs (BNA) Books, New York and Washington, D.C., 1993 Edition. Weisgerber and Armstrong: Facilitating the Transfer of Rehabilitation Technology. American Institutes for Research, Palo Alto, CA, January 1989. XXII. Appendices
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