U.S. Commercializes Defense Technology : Incentives in New Law Take Aim at Markets for Science of War

The following health-care innovations are brought to you by the Defense Department:

--The same laser technology that guides missiles and lands Air Force fighter planes now helps doctors reshape a defective cornea in 15 seconds.

--Fluidic stabilizers used on Army tanks have led to hospital respirators that require no electricity and are resistant to X-rays and magnetic interference from other hospital equipment.

--A synthetic membrane developed in a government defense lab may lead to the creation of an artificial pancreas, which could eliminate insulin injections for diabetics.

Free Technology

These spinoffs of military innovations are rare. Since the 1950s, only 5% of the government’s 28,000 patented inventions have been licensed for public use. Most businesses, wary of becoming bogged down in bureaucracy or unaware of the available free technology, steer clear of adapting and marketing federal research.

But now the federal government, as part of its drive to improve the competitiveness of U.S. industry in world markets, is trying to change this. In the Technology Transfer Act, Congress last October established the Federal Lab Consortium for Technology Transfer, a branch of the National Science Foundation, to facilitate access to government research by businesses looking for inventions to market.

Until then, the United States was the only one of the world’s five leading industrial nations--the others are France, Britain, Japan and West Germany--that lacked a centralized government office to coordinate government research activities with industry and academia.

In 1982, a White House panel reported: “The United States can no longer afford the luxury of isolating its government laboratories from university and industry laboratories. The national interest demands that the federal laboratories collaborate with universities and industry to ensure continued advances in scientific knowledge and its translation into useful technology.”

‘National Mission’

Last October’s Technology Transfer Act makes it a “national mission” to share the fruits of federal research with industry.

In addition to setting up the Federal Lab Consortium, the law requires every federal agency that directs one or more research laboratories to devote at least 0.5% of their research budgets to technology transfer. The act also provides government inventors with incentives--including royalties and patent rights, which are unheard of in most corporate laboratories--to make commercial use of their research.

“The new law gives us a formal mandate to do what we had been doing haphazardly for years,” said Clifford E. Lanham, executive secretary of the consortium. In particular, the airline industry has benefited from inventions developed for the National Aeronautics and Space Administration.

The nation’s 755 federal research laboratories--not only free-standing ones but also university and corporate labs that receive all their funds from Washington--now employ 80,000 people--about one-sixth of the country’s scientists and engineers--and account for about half of the nation’s annual $123-billion budget for pure and applied research. Lanham and others call this a vast untapped resource for commercially viable technology.

‘Entirely New Products’

“Technology exists in our federal labs that is not readily available to private industry,” Jack McConnell, corporate director for advanced technology with the Johnson & Johnson Co. pharmaceutical firm, told a Senate hearing recently. “This technology provides the basis for creating entirely new products . . . (and) could be a source of thousands, even tens of thousands, of new private-sector jobs in the U.S.A.”

The new law gives U.S. corporate and university labs that do federally funded research the first option to market innovations flowing from federal research facilities. Only after all efforts to market new products and processes domestically have been exhausted will foreign firms be able to acquire marketing rights.

What the new law cannot do is require American industry to take advantage of opportunities to develop and market the products of federal research laboratories. Critics wonder whether the private sector is up to the challenge.

“The popular analogy is that the federal government is throwing the ball and there’s no one on the other end to receive it,” said Debra M. Rogers, manager of U.S.-sponsored research for Digital Equipment Corp. “Industry isn’t ready to receive it.”

Few Corporations Involved

In 1983, Rogers helped Digital establish the nation’s first corporate office dedicated to using technology developed at government and university laboratories. “Very few corporations,” she said, “have programs such as we do on technology transfer.”

But not everyone is convinced that government research, whether defense or domestic, has much to offer the private sector.

“The notion that what government labs do is just all-out wonderful stuff for industry to commercialize on is a pipe dream that’s been around for a long time,” said Richard Nelson, professor of international political economy at Columbia University. “A lot of folks in Congress have misconceptions about the way technical change proceeds.”

Nelson and others regard the technology transfer effort as a way of justifying the Reagan Administration’s emphasis on defense research as opposed to basic research.

“Diffusing defense research into the civilian sector is simply one more way to ensure more military funding under the guise of the new competitiveness issue,” said Harley Shaiken, an associate professor of communications at UC San Diego.

Costly and Obscure

Federal defense research, he said, tends to be too complex, costly and obscure to apply to the commercial sector.

“We should instead be providing funds for basic research or providing funds for establishing consortia of private companies,” he added. “Then we’re talking about direct links from basic research to the civilian sector.”

The U.S. government now puts about three-quarters of its $61.5-billion annual research budget into defense. Basic non-defense research--estimated to reach $9.9 billion next year--has grown by 120% since President Reagan took office in 1981, according to the National Science Foundation, while total defense research has grown by about 155%.

Lanham, head of the new Federal Laboratory Consortium, said he will work to find civilian applications for defense research. Reagan’s Strategic Defense Initiative, for instance, has a civilian applications office, and Lanham said SDI researchers “will be interested in making spinoffs occur if they can find them.”

Laser Inventory System

Such spinoffs would not be unprecedented. A process developed for the Navy to harden the turbine blades of boat engines is now widely used in the private sector. A Defense Department laser inventory system is being used to tag and count livestock. The federal researchers who developed a thermometer that can withstand being dipped into molten metal have formed a company that is trying to sell the thermometer to American factories.

And then there is the example of the Harry Diamond Federal Labs in Maryland, where defense researchers in the 1950s were trying to shrink large amounts of computer circuitry into artillery shells and bombs so the weapons could sense their targets and detonate as they drew near. Their solution--etching complex circuitry onto tiny silicon chips--gave birth to the microelectronics revolution.

“Hundreds of companies sent people to our labs,” said Saul Elbaum, the lab’s chief intellectual property counsel. “They didn’t call it technology transfer then, but it was a breakthrough of such universality that many companies could immediately take this principle and adapt it in their own way.” The federal researchers who invented the process soon left to market their discovery. One was hired by a small company named Texas Instruments Inc.

To today’s government researchers, such examples show how federal laboratories could yield a lode of technology for industry and universities.