3

Status of ONR Technology Transfer Programs

This chapter provides an overview of ONR efforts to transfer technology. A successful technology transfer program used by the National Aeronautics and Space Administration (NASA) is discussed to provide perspective. The background to the present policy on technology transfer is provided by the Federal Technology Transfer Act of 1986, Public Law 99-502 (Appendix C).

In response to Public Law 96-480 and Executive Order 12591 (Appendix C), the Undersecretary of Defense for Acquisition in 1988 issued a Domestic Technology Transfer (DTT) Program Regulation to “ensure the full use of the nation’s federal investment in research and development (R&D), stimulating improved use by state and local governments and the private sector” (DOD, 1988). A specific policy goal is to “promote the sharing of technology that fosters the advance of science or that has commercial potential and thus should be employed to best advantage for the security and socioeconomic well-being of the United States” (DOD, 1988). SECNAV INSTRUCTION 5700.16 of 27 October 1989, assigns the Chief of Naval Research (CNR) responsibility for military-civilian domestic technology transfer for the U.S. Department of the Navy.

ONR TECHNOLOGY TRANSFER MECHANISMS

In accordance with the regulation and instruction, the CNR issued OCNR Instruction 5700.1 on 24 July 1991 to implement the policy and procedures for the Navy DTT program. The numerous mechanisms formally established to encourage and promote technology transfer are summarized below.



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Expanding the Uses of Naval Ocean Science and Technology 3 Status of ONR Technology Transfer Programs This chapter provides an overview of ONR efforts to transfer technology. A successful technology transfer program used by the National Aeronautics and Space Administration (NASA) is discussed to provide perspective. The background to the present policy on technology transfer is provided by the Federal Technology Transfer Act of 1986, Public Law 99-502 (Appendix C). In response to Public Law 96-480 and Executive Order 12591 (Appendix C), the Undersecretary of Defense for Acquisition in 1988 issued a Domestic Technology Transfer (DTT) Program Regulation to “ensure the full use of the nation’s federal investment in research and development (R&D), stimulating improved use by state and local governments and the private sector” (DOD, 1988). A specific policy goal is to “promote the sharing of technology that fosters the advance of science or that has commercial potential and thus should be employed to best advantage for the security and socioeconomic well-being of the United States” (DOD, 1988). SECNAV INSTRUCTION 5700.16 of 27 October 1989, assigns the Chief of Naval Research (CNR) responsibility for military-civilian domestic technology transfer for the U.S. Department of the Navy. ONR TECHNOLOGY TRANSFER MECHANISMS In accordance with the regulation and instruction, the CNR issued OCNR Instruction 5700.1 on 24 July 1991 to implement the policy and procedures for the Navy DTT program. The numerous mechanisms formally established to encourage and promote technology transfer are summarized below.

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Expanding the Uses of Naval Ocean Science and Technology Navy Technology Application Assessment—A Navy Technology Application Assessment (NTAA) is a documented summary describing the application of technology developed by ONR that is potentially useful to state and local governments or the U.S. private sector. NTAAs are released to the National Technical Information Service. Federal Laboratory Consortium for Technology Transfer—The Federal Laboratory Consortium (FLC), including ONR laboratories, is supported by its component agencies and responsible to the National Institute for Standards and Technology of the Department of Commerce. The FLC identifies and facilitates technology transfer. The level of support contributed by the Navy to the FLC is determined by the CNR (presently 0.008 percent of the total Navy R&D budget). Office of Research and Technology Application—An Office of Research and Technology Application (ORTA) has been established at each Navy laboratory for managing and coordinating DTT activities. Each organization within DOD must establish ORTA functional units of at least one employee’s full-time effort (FTE) if there are between 200 and 1,000 technical personnel and at least two FTEs if more than 1,000 technical personnel are employed. ONR headquarters manages and assesses the ORTA process at each laboratory. Funding support of ORTAs comes from internal laboratory overhead or return on invention licensing and royalties. Cooperative Research and Development Agreement—Cooperative Research and Development Agreements (CRDAs) are agreements between a federal agency or agencies and nonfederal parties to perform cooperative R&D. A CRDA is a legal mechanism for federal agencies to work with private companies to exploit government technology and invention while protecting the title and licensing rights of each party. The federal agency provides personnel, services, facilities, equipment, and other resources with or without reimbursement. The nonfederal party provides similar resources but receives no government funds. Individual Awards and Compensation for DTT Contributions—The Navy offers individual awards and compensation to federal employees who make significant contributions to Navy DTT. Eligibility for patent license royalties is an additional award mechanism. In addition to the above formal DTT mechanisms prescribed by regulations, ONR has several other means for facilitating technology transfer, including the various types of industrial agreements and programs discussed below. Industrial Agreements Other than CRDAs—In addition to CRDAs, ONR uses other agreements with industry that promote technology transfer. These agreements include contracts and grants for which 100 percent of the funding is pro-

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Expanding the Uses of Naval Ocean Science and Technology vided by the federal government, and cooperative agreements involving cost sharing (e.g., Technology Reinvestment Programs, called TRPs). These efforts, in general, focus on defense needs. Some of the technologies developed, however, may have potential application in the nonmilitary sector. The industry partner does, in those instances, have a direct opportunity to market the technology. Small Business Innovation Research—The Small Business Innovation Research (SBIR) program is intended to encourage small business to meet specific needs identified by federal agencies. The process often involves a Navy laboratory or headquarters component working with a small business that accomplishes technology transfer. The business retains the option for commercializing the product for use in other sectors. Manufacturing Technology Centers of Excellence—Manufacturing Technology Centers of Excellence facilitate the development of manufacturing technology to address Navy applications. The centers provide a direct opportunity for industry to collaborate and exploit technology developments for commercial applications. Industrial Consortia—Industrial consortia may involve collaboration by several competitors to advance the overall capability of industry in a given field. A successful example is the industrial consortium associated with the Navy Powertrain Technology Center, in which both defense and commercial industries participate. Conferences and Symposia—Technical conferences and journals are excellent opportunities to share research results and transfer technology. Such outlets form the basis for documenting the evolving state of scientific knowledge related to ONR-supported programs. Patents and Licensing Agreements—Patents held by the government can be exploited for commercial application through licensing arrangements. Technology is therefore made available while generating revenue. Coordinating Committees—ONR uses coordinating committees as a formal mechanism for working with other government agencies (e.g., the National Oceanic and Atmospheric Administration). These committees provide an opportunity for mutual planning and benefit. TECHNOLOGY TRANSFER AT NASA To achieve a better understanding of the variety of mechanisms used to facilitate technology transfer in other federal agencies, the committee examined

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Expanding the Uses of Naval Ocean Science and Technology the NASA DTT program. The stated mission of the NASA DTT program is to focus directly on industrial development and growth to secure national economic competitiveness for space technology. The Navy ’s mission of national defense is significantly different from NASA ’s mission of space exploration; however, the mechanisms and procedures used by NASA may provide useful models and lessons for ONR technology transfer efforts. NASA has recently undergone a significant change in position regarding domestic technology transfer. This change was driven by a top-down formulation of strategic goals for achieving the stated mission of NASA’s DTT program. One of the goals is to share “the harvest of space technology with the U.S. industrial community ” through domestic technology transfer (John Mansfield, NASA, personal communication, 1995). The significance of this approach is the priority attached to DTT and the high level of commitment to achieving it. Along with the strategic goal, quantitative objectives (or metrics) have been set to provide NASA a target for expected levels of performance. Performance is then measured against these goals by examination of detailed information collected for this purpose (e.g., number of inquiries received on the Internet, number of commercial partnerships, financial contribution to commercial partnerships). Keys to the success of the NASA plan for facilitating technology transfer include specific actions and activities in six areas: Policy—NASA established new policies for technology investment; partnerships; SBIR grants; federal, state, and local alliances; and R&D procurement. Metrics—NASA developed a set of commercialization measures (or metrics) of performance. Data collection tools and reporting processes were also developed. Marketing—NASA targets specific technology segments, as well as broad-based technology diffusion, using a variety of marketing mechanisms (e.g., industrial consortia, NASA Advanced Materials Centers, the Tech 2005 Conference, and Innovation Magazine). Business Practices—NASA developed seven principles of operation designed to be compatible with the way the private sector conducts business (e.g., contractor-developed technology commercialization, small business technology development, and regional alliances with industry and universities). Training and Education—NASA employees in field centers and headquarters are trained to conduct commercial technology transfer. Electronic Network—An electronic network links NASA field centers and headquarters with each other and with the commercial sector. The new NASA initiatives appear to have achieved a clearer focus on the DTT process and results. Since 1992 technology partnerships have increased from 328 to more than 3,000 and investments have increased from $174 million

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Expanding the Uses of Naval Ocean Science and Technology to more than $450 million (John Mansfield, NASA, personal communication, 1995). OBSERVATIONS REGARDING TECHNOLOGY TRANSFER AT ONR The focus of ONR activity is improvement of the defense posture of the nation; therefore, much of the technology transfer effort is in direct support of that mission. The commercialization of ONR-developed technology is consequently dominated by defense industry participants. There are mechanisms presently in place to facilitate domestic technology transfer. The question remains, however, “How well does the process work?” For a narrow range of industrial needs and a small number of technology areas, the process seems to function well. The connections with the defense industry are well-established and technology transfer occurs seamlessly. One way that ONR research and development is indirectly transferred to the nonmilitary sector is through the adoption of Navy specifications based on ONR-supported activities (e.g., marine vessel design) by engineers outside the Navy. In certain science areas (e.g., signal processing, acoustics, and materials) the results of ONR-sponsored research are well disseminated through published technical journals, conferences, and symposia. There remains, however, a sizable segment of industry that could use ONR technology for nonmilitary purposes but is poorly served by the present technology transfer process. ONR possesses significant technology that warrants commercialization (see Chapter 2), but the process for identifying and exploiting that technology is not effective. The burden of transferring technology to the private sector falls heavily on the team leaders of the ONR divisions. These leaders are skilled, technically competent scientists with an excellent understanding of fleet needs. For knowledge of the potential industrial market for ONR products in the nonmilitary sector, ONR team leaders must rely on the Industrial Programs Department (ONR 36). ONR 36, however, makes insufficient effort to develop an understanding of the needs of nonmilitary users or to market the products of marine technology research. The department has focused more on obtaining technology than marketing or transferring ONR technology to the nonmilitary sector. This emphasis on obtaining technology has resulted in a decidedly one-way exchange of information. This arrangement is of little benefit in terms of informing the in-house scientists and managers (i.e., the individuals responsible for meeting the requirements of the various government mandates) about the technology needs of the nonmilitary, industrial sector. In ocean science and technology, for example, a large segment of U.S. industry that could benefit from ONR-sponsored technology has little or no interaction with ONR. This segment includes both major corporations (e.g., Chevron USA and Amoco in the oil and gas industry) and small companies (i.e., companies with

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Expanding the Uses of Naval Ocean Science and Technology annual revenues less than $30 million or fewer than 100 employees). Evidence of this lack of involvement appears in several areas listed below. The committee did not develop, nor does it recommend, specific values for the metrics listed below (only a subset of potentially useful measures), and it did not conduct quantitative analysis of such measures. Such standard setting should be conducted by ONR upper management. ONR’s performance in technology transfer should be comparable to the overall performance of DOD in technology transfer (i.e., the technology transfer efforts of any DOD R&D program, as gauged by any given metric, should be roughly proportional to that program ’s share of the overall DOD R&D budget). Indicators of the effectiveness of present ONR technology transfer efforts include the following: Participation in CRDAs—Of the 413 CRDAs involving DOD in 1993, ONR participated in 80, approximately 19 percent (David Rossi, ONR, personal communication, 1995), which compares favorably with ONR’s portion of the DOD budget (18 percent). Only seven of the 80 ONR CRDAs involved offshore technology, however, (and most of these seven involve short-term consulting or ONR facilities rental). The total number of CRDAs involving ONR has increased to more than 280 as of July 1995 (David Rossi, ONR, personal communication, 1995). Although this increase in the cumulative number of CRDAs in which ONR is involved may suggest a significant improvement in technology transfer in this area, specific information on the type of CRDAs represented (i.e., by category such as ocean science, aerospace, etc.) was not available for the post-1993 period. This lack of specific information makes comparison of ONR performance before and after 1993 difficult, even for this single metric. ORTA marketing tools—The main marketing mechanism used by ONR is the CRDA (see above). Examination of brochures and advertisements distributed by ONR suggests that ONR’s interest in ORTA is more as a vehicle to market ONR laboratory facilities and personnel than to transfer ONR knowledge and technology to the private sector for commercial development. Proliferation of terms—Broad understanding of technology transfer policy appears to have been hampered by conflicting rhetoric (e.g., conversion, uni- and bi-directional transfer, dual-use, spin-on, spin-off, technology-push, market-pull). Several responsible ONR officials are still uncertain about what qualifies as “domestic technology transfer.” Low number of patents licensed—Less than 2 percent of patents awarded to DOD are in ocean science and technology (80 of 4,600), despite the fact that ONR (i.e., Navy S&T) funding accounted for approximately 18 percent of total DOD S&T funding in 1995. Lack of effective marketing programs—ONR has designed a pilot program at the University of Maryland to use MBA students and faculty to identify technologies with promise for commercialization and to perform market research.

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Expanding the Uses of Naval Ocean Science and Technology No quantitative results from this pilot program were presented to the committee; therefore, its effectiveness was impossible to judge. Lack of matching grants—ONR does not appear to be involved in any state or local matching grant programs to promote industrial diversification. Presence of ONR barriers—The majority of small and large companies and venture capitalists without roots in defense contracting do not pursue technology transfer with ONR for a variety of reasons (e.g., perceived excess costs of the effort, transfer often hindered by ONR, ONR insensitivity to the crucial importance of timeliness in the international competitive marketplace, exclusion from the process by administrative edict). Of 18 small innovative companies known by the committee to be engaged in offshore technology, none participate with ONR in joint projects or technology transfer (John Johnson, Perry Tritech, personal communication, 1995). One of the largest companies engaged in offshore oil, gas, and pipeline operations (Chevron USA), has no history of technology transfer with ONR (David Clementz, Chevron Petroleum Technology Company, personal communication, 1995). ONR has a decidedly mixed record in transferring technology to the potential nonmilitary commercial user. Conversely, transfer to the academic community seems to be well developed, making use of the traditional ad hoc procedure of shared interests between scientists in the respective organizations. The transfer is generally on a one-to-one basis and is fostered by each community. The transfer normally begins and is nurtured by presentations at professional society meetings and forums. Transfer to the commercial sector, however, appears to be marginal at best. The Oceanographer of the Navy has signed a memorandum of understanding with the National Oceanic and Atmospheric Administration to allow civilian access to the Naval Oceanographic Data Distribution System; however, this understanding is a recent initiative and the commercial community appears to be essentially unaware that access is possible. Few cooperative agreements exist with the commercial sector. The only ONR CRDA that could be found in the area of computer modeling was completed in February 1995 with KTAADN, Inc. The purpose of this CRDA was to perform systematic testing and application of high-resolution meteorological modeling while assisting the U.S. effort to defend the America’s Cup. Despite being a high-profile activity and possessing positive public relations value, this cooperative effort is not likely to generate new growth in the economy. Recent attempts to develop such cooperative relationships have met with mixed success. It is clear from this experience that ONR and NRL do not have effective procedures for initiating, implementing, and monitoring such agreements. Examples of successful technology transfer involving ONR appear to be limited to ventures based on person-to-person contacts in which both individuals share a sense of gain. Formal efforts to declassify existing Navy databases for the collaborative

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Expanding the Uses of Naval Ocean Science and Technology use of the ocean science research community are a primary example of the type of mutually beneficial exchange enjoyed by academia and naval research personnel. Reports and initiatives in this area, however, make no provisions for the nonacademic, domestic commercial sector (e.g., MEDEA, 1995). Transfer of ONR-supported technology to the academic community appears, in summary, to work well for both groups. The same cannot be said, however, for transfer from ONR to the commercial sector. Despite the high potential for transfer between ONR/NRL and the commercial sector, and the Navy’s existing mechanisms to perform the transfer, the exchange is relatively low and episodic at best. The principal reason for this poor exchange appears to be a lack of ONR/ NRL commitment and incentives to maintain the interaction necessary to foster vigorous technology transfer with the commercial sector. The Chief of Naval Research should make it clear that technology transfer is a major goal for the Department of the Navy, and therefore for ONR. Technology transfer should become a part of the mission objectives for the Navy and be incorporated as an integral part of the Navy Strategic Plan. The elements of the technology transfer plan should be embraced by the senior management responsible for its development and implementation. Specific metrics in performance and scheduling should be established and reviewed quarterly by the Chief of Naval Research. Recognition and rewards need to be established at the level of the Chief of Naval Research to acknowledge the importance and accomplishments of efforts to promote technology transfer. Finally, the use of electronic networking and active participation in nonmilitary trade shows and professional meetings are absolutely vital to ensure a successful technology transfer program.