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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems 4 Intellectual Property and Export Control It is noted earlier in this report that funding for materials development for propulsion systems has been on the decline. This decline has occurred as the pace of major system development has slowed and as the cost and schedule problems on major programs have worsened. Also, in recent years greater emphasis has been placed on the development of new and exotic materials. The Materials and Manufacturing Directorate of the Air Force Research Laboratory (AFRL) has significantly redirected its emphasis and funding toward non-engine materials research and development (R&D), in areas such as electronics and nanomaterials. It is also pointed out above that the propulsion materials cycle is considerably longer than the actual engine development cycle. As a result, decision makers are faced with a need for extraordinary patience and tenacity in resource decisions. If engine materials development is to continue, government funding organizations and corporations must be willing to bear these long-term, critical resource burdens. Materials development, by its nature, is a very expensive proposition, which companies are understandably reluctant to fund on their own. An alternative, which is increasingly attractive to engine companies, is collaborative materials development with other domestic corporations, international partners, and universities. This chapter briefly discusses some of the issues with U.S. capabilities, difficulties with international collaboration brought on by export control regimes, and some examples and possibilities for pre-competitive collaborations in order to address one of the tasks in the committee’s statement of task: “Consider mechanisms in place that retain intellectual property (IP) securely and how IP might be secured in future R&D programs” (see Appendix A for the full statement of task).
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems The committee did consider the commercial engine market, since it powers many military platforms. 4.1 COLLABORATIVE MATERIALS DEVELOPMENT AND INTELLECTUAL PROPERTY As recently as the 1980s, engine rivals did not engage in collaborative materials development. Materials engineering interactions among competitors were limited largely to participation in engineering standards committees and professional society technical symposiums and committee meetings. Engine company managers, acknowledging the need and benefits, endorsed participation in such meetings, and participating materials engineers understood well the importance of not divulging competition-sensitive or proprietary information. It was a competitive era during which engine manufacturers made significant investments in advanced materials that provided real competitive advantage, and therefore they did not disseminate technical information related to their work prior to obtaining patent protection. Additionally, aerospace corporations were, then as now, further constrained by U.S. antitrust laws. Although these laws focus principally on anti competitive behavior such as price-fixing or cooperative marketing, more generally they pertain to any interaction among competitors deemed as anticompetitive, even those interactions involving engineers and strictly technical matters. In an effort to minimize compliance risk, corporate legal staff often monitor and regulate the contact of employees with those from rival companies. Oversight and concern are lessened when it is clear that interaction among engineers from competing companies involves pre-competitive technology, and particularly when the interaction occurs by invitation of the U.S. government. Basic research to expand materials science knowledge, such as that typically conducted by universities, generally is understood to fall within the bounds of the pre-competitive classification. In contrast, technology and information gained through product-centric materials R&D are traditionally classified as competition-sensitive and are protected by controls on proprietary information or by legal patents. Materials and processing inventions are protected by patents, whereas materials information critical to the design of the engine product (such as company specifications, quality plans, drawing notes, design data practices, materials property minimum curves, and materials-related design practices) is protected through safeguards for proprietary information. Toward the late 1980s and early 1990s, engine companies began to collaborate with universities, government laboratories, suppliers, and even competitors in the area of materials research and technology development. Three factors led to industrial cooperation in materials research programs. First, engine manufacturers were reluctant to accept individually the full cost of developing new materials because
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems new materials classes, such as metal-matrix composites, were technically risky, and new aerospace alloys were expected to offer only marginal benefit. Second, customers of the Department of Defense (DOD) and NASA also understood the high cost and risks of materials development; consequently, DOD and NASA sought to encourage industrial collaborative materials R&D and often cost sharing—thereby avoiding duplicative government materials investment while widening the benefit to multiple engine producers. For example, the Defense Advanced Research Projects Agency (DARPA) funded, among others, GE Aircraft Engines and Pratt and Whitney to conduct the High Performance Composites Cooperative Arrangement to develop basic metal-matrix and ceramic-matrix composites technology; and NASA sponsored GE Aircraft Engines and Pratt and Whitney to carry out the Enabling Propulsion Materials Program as part of the High Speed Civil Transport initiative. Third, engine manufacturers began to understand that the competitive advantage of their engine products was only marginally influenced by materials technology. Like other industrial sectors (e.g., automotive) that use a common suite of materials, engine manufacturers emphasized competition based on engine design, performance, and price. Of course, excellence in engine design and performance does require the creative and skilled application of state-of-the-art aerospace materials. An example of a successful industry approach to collaboration is the semiconductor industry, which was at one point in the 1980s in serious decline in the face of fierce international competition. In a research paper on the computer chip industry in general and the success of the SEMATECH consortium in particular, Carayannis and Alexander state:1 The exact mechanism driving the resurgence of the U.S. semiconductor industry is too complex to ascribe to a few factors, but recent analyses have identified several trends contributing to the recovery process [including the following:]. … Increased collaboration among U.S. semiconductor firms and their equipment suppliers. … Improved cooperation, communication, and research collaboration among semiconductor firms, the Federal Government, and universities. … U.S. semiconductor firms demonstrate an unprecedented level of horizontal and vertical cooperation with other companies including domestic and foreign competitors, suppliers, and end users. Since [the 1980s], there has been [a move] toward increasing collaboration. … evident in several areas: Relaxation of anti-trust laws. … Formation of research consortia composed of dominant firms in an industry. … 1 E.G. Carayannis and J. Alexander. 2004. “Strategy, Structure, and Performance Issues of Precompetitive R&D Consortia: Insights and Lessons Learned from SEMATECH,” IEEE Transactions on Engineering Management 51(2):226-232.
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems Increase of industry-sponsored research at universities and industry-supported university research centers. … Emergence of government-university-industry strategic partnerships (GUISP) in research and development to support specific industry sectors. …2 Collaborative materials R&D was and remains a win-win proposition for U.S. government customers and cooperating engine companies. Over the past two decades, numerous such programs have significantly advanced materials technology through the development of new materials and processes, as described earlier in this report. Also, collaborative research has fostered the development of Integrated Computational Materials Engineering (ICME) technologies and their application to accelerate the insertion of materials through DARPA sponsorship. In 2004, a panel discussion was held as part of the 10th International Symposium on Superalloys to discuss collaboration for materials development. The meeting focused on identifying the benefits of collaboration and the essential ingredients for success, including those associated with intellectual property (IP). A published summary of lessons learned included the following:3 Government leadership is important in identifying the collaborative technical domain, encouraging collaboration, and helping foster cooperative, trusting relationships among team members. This governmental leadership also lessens legal concerns. Collaboration among competitors is most successful when each has comparable capabilities and expertise in the chosen research area. When this condition is met, collaborators view sharing ideas as a win-win opportunity. Collaboration can only begin after execution of a legally binding agreement on contractual terms and conditions, statement of work, and intellectual property rights. Importantly, collaborating companies must agree on how IP ownership will be determined and when intellectual property ownership will be shared. Researchers from competing companies must remain ever vigilant to assure that team interactions and information exchange are limited to the research topic of the collaboration agreement. Collaboration between competing companies, focused principally on precompetitive research, has borne numerous successful developments that benefit both collaborating engine companies and, arguably, the entire materials community. It remains essential that engine producers safeguard pre-existing competition-sensitive information and intellectual property and that collaborative agreements fairly distribute or share newly developed IP and data rights. 2 Note that the references cited in the original have been omitted from this quoted material. 3 R. Schafrik, L. Christodoulou, and J.C. Williams. 2005. “Collaboration Is an Essential Part of Materials Development,” Journal of Metals 57(3):14-16.
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems 4.1.1 Finding Finding: Aerospace materials researchers (from engine manufacturers, sup pliers, academia, and government laboratories) have successfully instituted acceptable terms that provide for the disposition of and properly safeguard intellectual property and have participated in successful collaborative research programs to develop precompetitive materials technology while reducing community-wide development risk and cost. 4.2 GLOBALIZATION The value and need for increased collaboration are recognized in Section 4.2, but it must be further noted that the United States is no longer the leader in many areas of materials technology. As a result, this nation must consider not only the imperative of collaboration among U.S. companies but also, where appropriate, international agreements. Presented here and in the sections that follow are assessments extracted from the 2005 National Research Council report Globalization of Materials R&D: Time for a National Strategy that remain timely with respect to the topics addressed in this chapter.4 The United States and other leading industrial nations are experiencing the globalization of MSE [materials science and engineering] R&D. While R&D is moving offshore to support manufacturing facilities in central Europe and Asia, a much more important aspect of globalization is the massive and accelerating investments that foreign governments, most notably China and India, are making in their own R&D infrastructures. … This trend is occurring at a time when such investments in the United States are falling. … Even if the United States makes great efforts to maintain control of U.S.-generated technologies, knowledge, and capabilities, other governments’ investments in their own MSE R&D will challenge the ability of the United States to lead technologically. It is, therefore, in the long-term interest of the United States to participate in international partnerships in MSE R&D and thereby ensure U.S. access to cutting-edge knowledge and technology. 4.3 CRITICAL ENGINE MATERIALS The United States has been at or near the forefront of the research and development of advanced electronic materials and nanotechnologies and biomaterials, but it has lost or is losing technical capabilities in those areas most critical to advanced propulsion system design and development. 4 National Research Council. 2005. Globalization of Materials R&D: Time for a National Strategy. Washington, D.C.: The National Academies Press, p. vii.
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems 4.3.1 Alloys As pointed out in Globalization of Materials R&D:5 Patent applications in the alloys subfield are dominated by inventors in the United States, Japan, and Western Europe. U.S. activity remained fairly steady from 1979 to 2004, at around 550 patents a year. Japan significantly increased its absolute number of patents (from 251 to 653 in the period reported), and its share (relative to that of the United States) surged, surpassing the U.S. share in the mid-1990s. Western Europe has had a steady increase in activity, with its share relative to the U.S. share increasing by 50 percent over the last 25 years. A 2000 benchmarking report concluded that “in all probability, the U.S. lead will remain, but that is not a certainty.”6 “Research into the production, processing, and development of metallic materials in the United States has continued to decline since 1998. Very little alloy development is being done by metal producers, which formerly did most of this work, and companies in the metal-consuming industries have also decreased their efforts.”7 4.3.2 Ceramics According to Globalization of Materials R&D, “Patents in ceramics are dominated by the United States and Japan. The number of patents with inventors in Japan jumped significantly at the beginning of the 1980s, and activity there recently appeared to be on a par with the United States. … Japan may have equaled or even surpassed the United States in the last decade.”8 Additionally, France has a significant effort in the area of ceramics for high-temperature propulsion needs. 4.3.3 Composite Materials Globalization of Materials R&D states:9 In the field of composite materials there has been a noticeable increase in global research, with patent output from the United States, Asia, and Europe about equal. Activity in Europe is dominated by Germany and France. Patent output by inventors in Italy shows a significant upward trend, while activity in the United Kingdom and Switzerland remains 5 Ibid., p. 36. 6 National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 2000. Experiments in International Benchmarking of U.S. Research Fields. Washington, D.C.: National Academy Press. Referred to hereinafter as the “2000 benchmarking report.” 7 National Research Council. 2005. Globalization of Materials R&D: Time for a National Strategy. Washington, D.C.: The National Academies Press, p. 75. 8 Ibid., p. 37. 9 Ibid., pp. 37-38.
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems static. The United States appears to have lagged behind Japan in the mid-1980s but has caught up since. Taiwan and Korea have been active, but overall numbers remain low. … 4.3.4 Modeling and Simulation As pointed out in Globalization of Materials R&D:10 The 2000 benchmarking report stated that computer modeling of material processing was the strength of the U.S. industry. Indeed, some industries today are utilizing computer-based models of solidification and mechanical working, but it is not true that the United States is ahead of the rest of the world in this area. Developers and researchers in Japan and Europe have provided many of the models used in the metals industry for process modeling and control. These extracted assessments suggest that the United States appears to be losing its leadership, and there are no indications that this trend is going to be reversed any time soon. 4.4 COLLABORATION AND INTELLECTUAL PROPERTY Collaboration with foreign entities, which may become increasingly important if the United States is to retain access to advanced engine materials and technologies, appears to be very limited. In addition, concerns over the handling and protection of intellectual property dominate the thinking of U.S. firms. Again, as noted in Globalization of Materials R&D:11 Respondents who reported some international element to their research activities were asked to clarify the international nature of their work (Table 2.1). TABLE 2.1 Nature of International Collaboration Type of Collaboration Share of All Collaborations (%) U.S. academic-foreign academic research 54.5 U.S. corporate-foreign corporate research 14.1 U.S. academic-foreign corporate research 6.5 U.S. corporate research carried out by foreign affiliates of the U.S. corporation 12.3 U.S. corporate research carried out with joint ventures and/or by contract with foreign corporation(s) 12.6 NOTE: Results of questionnaire sent to MSE researchers who self-identify as being in the United States and carrying out research with an international aspect. (These data are indicative only and not based on a statistically relevant sampling.) 10 Ibid., p. 75. 11 Ibid., p. 42.
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems Globalization of Materials R&D also states:12 Thirty-eight percent of the respondents said that robust protection for IP was critical and entered into their decision on where to base R&D more than any other business factor. Another 46 percent of respondents ranked it number 3 or 4 on the 5-point scale of importance used in the survey. Although China was ranked as the number 1 planned destination for new R&D, respondents to the survey expressed concern about the level of IP protection there. Along with IP concerns, 51 percent of the respondents said attracting top R&D talent was very important or critical, ranking it number 4 or 5. Other important challenges were identified: effective collaboration between international teams and compressing the time to commercialization. 4.4.1 Export Regulations Even if corporations and universities are able to work out arrangements for the protection of the intellectual property and are able to enforce those agreements, a dampening effect on international collaborations will be that of export control regulations of the U.S. government. Globalization of Materials R&D summarizes the situation as follows:13 The primary sources of export regulation—the Department of State’s International Traffic in Arms Regulations (ITAR) and the Department of Commerce’s Export Administration Regulations (EAR)—are considered by some in industry as a barrier to the global conduct of business. To compete in the global market and maintain a comparative advantage, U.S. industry must have access to both domestic and foreign technology, and manufacturing and export controls could be considered as hindering this access. Critics of the current export regulation regime maintain that foreign companies are executing contracts while U.S. companies are still seeking regulatory approval. Over the past 20 years most congressional activity on the export regimes has been to add sanctions and restrictions rather than to substantively review the underlying statutes. … International Traffic in Arms Regulations ITAR applies to items on the Munitions Control List—that is, to military end items, components, and the underlying technical data. In all cases a license or other authority is required prior to any export. … Approval is by no means assured and may be accompanied by conditions and limitations. The result is that where export approval is required, U.S. industry can find itself unable to plan with certainty, because there is no way of knowing when approval may be granted or how the license provisos may impact planned performance. … While ITAR is clearly critical for protecting the nation’s interests in the systems and knowledge it covers, the ITAR regime can lead to schedule uncertainties, cumbersome 12 Ibid., pp. 46-47. 13 Ibid., pp. 95-97.
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems regulatory requirements, and compliance risks that inhibit international collaboration with U.S. suppliers and partners. Export Administration Regulations EAR applies to commercial and dual-use commodities and their materials, components, software, and technology. … The underlying statutory authority, the Export Administration Act, dates back to 1979. … The 2003 attempt to pass legislation failed in large part because it was deemed to not sufficiently strengthen national security controls on exports. As a result, the Department of Commerce is working to increase administrative controls on knowledge/technology transfer and exports. Critics say that the EAR impedes the collaborative efforts necessary for the conduct of global R&D. 4.4.2 The ITAR Fundamental Research Exclusion In 1999 all space satellites were placed on the United States Munitions List (USML) and thereby were subject to the U.S. Department of State’s International Traffic in Arms Regulations (ITAR). This ITAR designation had a chilling effect on university space research because it required ITAR licenses for scientific satellites and associated hardware as well as for technical data. In an effort to mitigate the resulting averse effects on university space research, the State Department amended ITAR requirements to exempt U.S. universities from the need to obtain ITAR licenses for fundamental research activities. Fundamental research was defined as “basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community.”15 Despite this apparent regulatory relief, generally the space science community remained unclear about the dictates of ITAR requirements. For example, university researchers were confused about the publication requirements cited in the definition of “fundamental research” and uncertain about the implications for collaborative scientific research with companies and national laboratories—which were not covered by the fundamental research exclusion. Risk aversion regarding even unintentional ITAR infraction is understandable given the potential for criminal penalties. As a consequence of the general climate of confusion and uncertainty over ITAR, the Space Studies Board of the National Research Council convened a workshop in 2007, with participants from academia, industry, and government. 14 Indeed, many foreign companies resist U.S. content, going so far as to advertise “ITAR-free” products. [Note: This footnote was added in the current writing and did not appear in the original quoted text.] 15 U.S. Congress, International Traffic in Arms Regulations, Section 120.11 (8), April 1, 2007, Washington, D.C.
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems The workshop focused on ITAR requirements as they pertain to space science fundamental research. Issues addressed by the workshop nonetheless have relevance for other scientific and engineering disciplines, including materials science and engineering. Among the many ITAR issues covered during the 2007 workshop were the following:16 The Department of State does not provide general guidance to help academic researchers understand ITAR requirements; all decisions are made on a case-by-case basis. Both students and university professors are dissuaded from pursuing careers in research areas that are encumbered by ITAR. University professors limit instruction for ITAR-related topics owing to uncertainty about regulation requirements, particularly in the presence of foreign students. Compliance with ITAR imposes a high cost on universities. ITAR hampers university-industry basic science collaboration because the fundamental research exclusion applies only to universities. Universities involved in international research formulate suboptimal research plans that limit information exchange in order to mitigate ITAR risks. ITAR-imposed obstacles induce potential international partners to seek alter native foreign research collaborators, such as in China, Russia, and India. The insertion of scientific satellites into the United States Munitions List and the ensuing uncertainties surrounding the fundamental research exclusion have had significant impact on university space science research because of their broad, all-encompassing impact on the discipline. Without question, the fundamental research exclusion has had significantly less impact on the materials science and engineering university community. However, many of the concerns, uncertainties, and issues of confusion expressed during the Space Studies Board’s ITAR workshop in 2007 are also applicable to materials research. Industry-university collaboration under federally funded aerospace materials research programs typically involves the flow-down of ITAR-related contractual terms and conditions when the program involves materials and processes listed on the USML. Because researchers recognize the “open” nature of technical exchange among students within their laboratories (often involving non-U.S. persons), they are reluctant to engage in such research. University contract administrators have similar concerns, leading in some cases to a refusal to collaborate on such ITAR-controlled programs. 16 National Research Council. 2008. Space Science and the International Traffic in Arms Regulations: Summary of a Workshop. Washington, D.C.: The National Academies Press.
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems Significant global investment in materials technologies has led to a highly competitive global environment. Future access to world-class foreign propulsion materials technology may be difficult or impossible to obtain, thereby impacting the U.S. ability to achieve advanced propulsion system capabilities. Findings Finding: Accelerated foreign materials science and engineering innovation and invention threaten U.S. dominance in propulsion materials technology. Finding: Delays and uncertainties associated with ITAR requirements hamper and discourage international research collaboration for propulsion materials. Recommendation Recommendation: The U.S. State Department should reformulate the ITAR fundamental research exclusion to encompass all such research whether performed in academia, industry, or government. This exclusion should also apply to fundamental research activities encompassed within larger research programs that contain other ITAR-controlled elements. 4.4.3 Export Regulation and Technology Transfer On the subject of technology transfer in relation to export regulations, observations made in the Globalization of Materials R&D report are worth repeating here:17 Any transfer of technology or intellectual property typically occurs in one of two ways. The first is a one-way transfer by which the recipient organization is provided training, data, software, or some other intellectual property that enhances its knowledge and capabilities in a specific technological area. The second way is technology collaboration, a two-way transfer of technology in which the companies typically share intellectual property to develop a specific product or technology. In either case, since technology is being transferred out of the United States and into a foreign country, that technology or intellectual property may be subject to ITAR or EAR. … Either set of regulations (ITAR or EAR) can impact the extent to which a transfer or collaboration across borders takes place. … Even if a license is awarded, provisos or limitations are usually placed on the offset activity that can greatly constrain the technology transfer or collaboration. These licenses and provisos can impede global research activities by inhibiting the necessary sharing of intellectual property and results of the research with those in the collaboration. 17 National Research Council. 2005. Globalization of Materials R&D: Time for a National Strategy. Washington, D.C.: The National Academies Press, p. 97.
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems 4.5 INTELLECTUAL PROPERTY PROTECTION MECHANISMS The various intellectual property protection mechanisms that may be operative within an alliance or consortium vary depending on classification. In addition, the type of competition between various stakeholders, such as competitive, precompetitive, or cooperative, will impact the IP protection structure. Representative IP protection mechanisms that have been applied with success include government property rights (GPRs), nondisclosure agreements (NDAs), ITAR, patents (PAs), collaborative agreements (CAs), and Export Administration Regulations (EAR). A representative set of alliances and/or consortiums that may be formed in response to the declining environment of support for propulsion materials R&D is summarized in the Table 4.1. Table 4.1 shows how the various IP protection mechanisms may be used to support alliances and consortiums, thereby generating more R&D opportunities. Such alliances and consortiums enable the acceleration of the development of propulsion materials. This acceleration is due to the opportunities to benefit from relationships in which new and useful ideas, concepts, processes, and practices are made accessible to the U.S. military and industry. The U.S. export controls constraints ensure the prevention of an outflow of critical data. 4.5.1 Findings Finding: Adequate intellectual property protection mechanisms exist. Finding: Existing IP protection mechanisms within export controls are being used to develop and maintain alliances and consortiums that benefit U.S. structural propulsion materials and process R&D. TABLE 4.1 Intellectual Property Protection Mechanisms for Various Types of Alliances and Consortiums Type of Alliance or Consortium U.S. Only International Partners Industry-Industry CA, PA ITAR, CA, PA Industry-University CA, PA, NDA, ITAR ITAR, CA, PA Industry-Government CA, GPR, PA, NDA ITAR, CA, PA, GPR, NDA Government-University CA, PA, NDA, ITAR ITAR, CA, PA, NDA Industry-Government-University CA, PA, GPR, ITAR, NDA ITAR, CA, PA, GPR, NDA NOTE: Acronyms are defined in Appendix F.
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Materials Needs and R&D Strategy for Future Military Aerospace Propulsion Systems 4.5.2 Recommendations Recommendation: DOD funding agencies should identify and support, both financially and through regulatory and administrative relief, opportunities for pre-competitive collaborative research for structural propulsion materials, both domestically and with global partners. Recommendation: For the special case of pre-competitive research with global partners, the DOD, the Department of State, and other U.S. government entities, including the Department of Commerce, should proactively encourage such pre-competitive research opportunities and develop ways to facilitate knowledge transfer within wide, acceptable boundaries.