ISSUES AND POLICIES
PROGRESS REPORT II
Division of Agriculture
Committee on Biotechnology
National Association of State Universities
and Land-Grant Colleges
EMERGING BIOTECHNOLOGIES IN AGRICULTURE:
Progress Report II
Division of Agriculture
Committee on Biotechnology
National Association of State Universities
and Land-Grant Colleges
ISSUES AND POLICIES
DIVISION OF AGRICULTURE
COMMITTEE ON BIOTECHNOLOGY
Dr. Frank B. Armstrong
Department of Biochemistry
North Carolina State University
Raleigh, NC 27650
Dr. Durward F. Bateman
Associate Dean and Director of the
North Carolina Agricultural
North Carolina State University
Raleigh, NC 27650
Dr. Bill R. Baumgardt
Associate Dean and Director of the
Indiana Agricultural Experiment
West Lafayette, IN 47907
Dr. Charles B. Browning
Dean and Director of the Oklahoma
Agricultural Experiment Station
139 Agriculture Hall
Oklahoma State University
Stillwater, OK 74074
Dr. Lee A. Bulla, Jr.
Associate Dean of the College of
Agriculture and Director of
Agricultural Experiment Station
University of Idaho
Moscow, ID 83843
Dr. Neville P. Clarke
Director of the Texas Agricultural
Texas A & M University
College Station, TX 77843
Dr. Neil E. Harl
Charles F. Curtiss Distinguished
Professor in Agriculture
Professor of Economics
Department of Economics
Iowa State University
Ames, IA 50011
Dr. Charles E. Hess
Dean of the College of Agriculture
and Environmental Sciences and
Associate Director of California
Agricultural Experiment Station
228 Mrak Hall
University of California
Davis, CA 95616
Dr. Theodore L. Hullar
Director of the Cornell
Agricultural Experiment Station
and Director for Research,
College of Agriculture and Life
Ithaca, NY 14853 ciC
Dr. Richard J. Sauer
Deputy Vice President and Director
of the Minnesota Agricultural
220 Coffey Hall
University of Minnesota
St. Paul, MN 55108
DIVISION OF AGRICULTURE
COMMITTEE ON BIOTECHNOLOGY
Dr. Samuel H. Smith
Dean of the College of Agriculture,
Director of the Agricultural
Experiment Station and Director of
Cooperative Extension Service
The Pennsylvania State University
University Park, PA 10302
Dr. Leo M. Walsh
Dean of the College of Agriculture
and Life Sciences
University of Wisconsin
Madison, WI 53706
Charles F. Hess Chairman
Durward F. Bateman
Samuel H. Smith
Education and Manpower
Charles B. Browning Chairman
Frank B. Armstrong
Richard J. Sauer
Dr. James S. Wershow
Professor of Agricultural Law
Food and Resource Economics
1130 McCarty Hall
University of Florida
Gainesville, FL 32611
Dr. F. Aloysius Wood, Chairman
Dean for Research and Associate
Director of the Florida
Agricultural Experiment Station
University of Florida
Gainesville, FL 32611
Funding & University/Industry
/Neville P. Clarke Chairman
J/Neil E. Harl
/Theodore L. Hullar
James S. Wershow
National Program Leadership &
Theodore L. Hullar Chairman
Bill R. Baumgardt
Lee A. Bulla, Jr.
Lee A. Bulla, Jr. Chairman
Frank B. Armstrong
James S. Wershow
This Committee gratefully acknowledges the assistance of Dr. John F. Fulkerson,
Principal Scientist, Cooperative State Research Service, Washington, D.C. 20250.
The Division of Agriculture Committee on Biotechnology was appointed by
the.chairman of the Division of Agriculture of the National Association of
State Universities and Land-Grant Colleges in April 1982. The Committee
was charged to advise the Division on the following:
1. Policy matters including legislation that would impact on the
ability of Division members to develop strong programs in biotechnological
research and related education activities.
2. Any special problems that might emanate from industry providing
support for biotechnological research in agriculture in land-grant
3. Budgeting matters that should be addressed by the Division's Policy
and Budget Committees.
4. Other related matters that should be brought to the attention of
Committee membership includes individuals with varying degrees of
administrative responsibility for agricultural research and education
programs in land-grant institutions and attorneys versed in agricultural
laws and relevant tax and patent laws and codes.
The overall activities of the committee have been divided into five
1. Land-grant institution structure and agricultural and biotech-
nological research program capability.
2. Education and manpower needs in biotechnological research and
3. University/Industry relationships.
4. National Biotechnological research program development, coor-
dination and evaluation in the State Agricultural Experiment Station
5. Moral and ethical issues related to application of the new
biological research techniques to agriculture.
Subcommittees have been established in each of the above areas and the
division will be provided with a report annually and with interim reports
as significant committee efforts are completed. This report represents a
statement of progress since November of 1982. The report contains infor-
mation derived from surveys, literature reviews and an examination of the
rules, regulations and codes applying to tax and patent law. The data in
this report are provided as background information for the development of
policies and the settling of issues related to the development of bio-
technological research and education programs. The committee has not
attempted to develop a series of policy statements or a specific set of
guidelines in the various problem areas simply because of
the infrastructural differences between and among institutions. It is our
hope and intent that a discussion of the basic issues involved in a given
problem will provide institutions with background information necessary to
the formulation of sound policies at the institutional level.
Finally, this report represents the second annual progress report of
the committee and we would appreciate receiving your overall reaction to
the report with emphasis on suggestions of additional issues that we might
TABLE OF CONTENTS
1. Introduction 1
2. Biotechnological Research Program Commitments by the 5
State Agricultural Experiment Stations and the Agri-
cultural Research Service
I. Introduction 5
II. Survey Procedures 5
III. Survey Results 6
IV. Summary 19
3. A National Program for Basic Research in Biotechnology for 20
Agriculture and Food
I. Introduction 20
II. Definition of Biotechnology 21
III. Rationale 21
IV. Proposal 26
V. Program Areas 26
VI. Major Grant Categories 27
VII. Funding 30
VIII. Administration 32
IX. Summary 33
4. Income Tax Credit for Increasing Research Activities 35
I. Introduction 35
II. Basic Provisions of 44F 35
III. Conclusion 40
5. Income from Patents and Certificates of Plant Variety Pro- 47
tection: A Source of Support for Research
I. Introduction 47
II. Review of Patents and Certificates of Plant Variety 47
III. Persons Entitled to Receive Patents 49
IV. Loss of Patent Rights 50
V. Mechanics and Procedures 50
VI. Examination and Prosecution 51
VII. Record-Keeping 53
6. Guidelines for the Development of a University/Industry 56
I. Introduction 56
II. Memorandum of Agreement 56
III. General University Purpose 57
IV. General Purpose of the Sponsor 57
V. Scope of the Research Project 58
VI. Duties of the University 58
VII. Duties of the Sponsor 59
VIII. Publications, Copyrights, and Trade Secrets 60
IX. Press Releases 61
X. Patent Rights 61
XI. Project Assets 62
XII. Mutual Cooperation and Modification of the Agreement 62
XIII. Termination Rights 63
XIV. Arbitration 63
XV. Exclusivity of Funding 63
XVI. Assignment 64
XVII. Insurance 64
XVIII. Notices 65
XIX. Integration, Severability, Headings, and Contract Terms 65
XX. Governing Laws 66
XXI. Definitions 66
XXII. Research Agreement 67
XXIII. Funding Arrangements 68
7. Faculty Consulting for Pay in the Private Sector 69
I. Introduction 69
II. Potential Positive Effects of Consulting 69
III. Potential Negative Effects of Consu-lting 70
IV. Disclosure/Review of Consulting Contracts and Arrange- 71
8. Other Committee Activities During 1982-83 72
I. Introduction 72
II. Interaction with Industrial Biotechnology Association 72
III. Lawsuit-Civil Action 83-2714 72
IV. Other Committee Efforts 74
9. Executive Summary 76
10. Appendices 79
A. Questionnaire on the Involvement of Land-Grant Colleges 79
in Biotechnology in Agriculture
B. Final Questionnaire on the Involvement of Land-Grant 82
Colleges in Biotechnology in Agriculture
C. Questionnaire on the Involvement of the Agricultural 83
Research Service, USDA in Biotechnology Research in
D. Industrial Biotechnology Association Member Companies 85
Biotechnology, the use of living organisms or their components in
industrial processes,1 is not new to agriculture. Biotechnologies in the
form of improved plants and animals have been the center piece of agri-
culture production for at least 80 years and in a rudimentary way for the
past several thousand years. Plant and animal improvement was signifi-
cantly enhanced by Mendel's discovery in the mid-1800's that character-
istics of plants were transmitted from one generation to the next in an
orderly fashion and that entities within the individual controlled the
expression of a given trait. These entities have become known as genes.
The amazing success of American agriculture is largely a result of the
application of the science of genetics to plant and animal improvement.
The new techniques include plant cell and protoplast culture, plant
regeneration, somatic hybridization, embryo transfer, recombinant DNA
approaches, including gene identification, characterization, splicing,
replication, regulation and transfer. Thus, "biotechnology" refers to the
improved or modified organism, microbe, plant or animal, and "new research
techniques" or "technology" refers to contemporary "tools" available to
scientists for the purpose of biotechnology development. For purposes of
this report, biotechnologicall research" describes research utilizing these
.new research techniques.
Recently, research efforts of thousands of scientists throughout the
world have resulted in an enhancement of our understanding of genes. We
can now chemically describe genes, after they have been isolated and repli-
cated in the laboratory in bacteria. Genes can be transferred from the
parent to another organism that is not necessarily closely related to the
parent organism. For example, the antivirual substance interferon which is
produced in animal tissues in response to virus infection is controlled by
a gene which has been chemically defined, reproduced in the laboratory and
transferred to bacterial cells. The animal gene for interferon causes the
bacterial cells to produce interferon. Several additional genes, for
example, those controlling the synthesis of growth hormones and insulin
have been successfully transferred to bacterial cells with the resultant
synthesis of these molecules by the bacterial cells.
Genes consist of deoxyribonucleic acid (DNA). Recombinant DNA
techniques provide the capability for the movement of genes from plant to
plant, animal to animal, or animal to plant bypassing normal sexual repro-
duction. Thus, it is now possible to bring together populations of genes
that heretofore have been kept isolated by barriers imposed by the neces-
sity of sexual reproduction. Thus, the opportunities for plant and animal
improvement utilizing these techniques are ultimately unlimited.
Production of plants by regeneration from protoplasts or somatic
hybridization represent additional new techniques available to scientists
interested in developing new agricultural biotechnologies. Protoplast
regeneration of plants involves the development of normal mature plants
from single protoplasts derived from cells taken from various organs or
tissues of a plant. For example, normal mature plants have been obtained
from protoplasts taken from tomato, potato, tobacco, carrot, or petunia.
Work with asexually propagated species such as potato, has revealed that
individuals derived from single protoplasts of a given potato leaf appear
to vary phenotypically. This is in contrast to the uniformity one might
have expected from plants derived from tissue culture and reveals a new
potential source of genetic variability.
Regeneration of plants from protoplasts provides a mechanism for the
introduction of genes prepared by recombinant DNA techniques. This might
be accomplished at the protoplast stage and should result in the develop-
ment of a mature plant composed entirely of cells which contained recom-
bined genetic material.
Somatic hybridization involves the fusion of protoplasts derived from
different plants. In some instances, for example, potato and tomato inter-
generic crosses have been obtained which were not possible by conventional
plant breeding approaches. Thus, somatic hybridization provides a method
of assembling genes in combinations that heretofore were impossible.
In the area of animal improvement, monoclonal antibodies and hybridoma
techniques can be used to develop a better understanding of various
hormonal systems such as those associated with reproduction. The animal
immune system can also provide superior methodology for disease control
through vaccine production.
These new research technologies are based on our knowledge of molecular
and cellular genetics and developmental biology. The genetic material of
all living organisms consists of DNA. Hence it is theoretically possible
to transfer genes from any organism to another organism.
Application of the new research technologies to agriculture will
require the efforts of scientists trained in microbiology, physiology and
biochemistry who understand gene structure, function, regulation, and
transfer. It will require that these scientists collaborate with plant and
animal geneticists, plant pathologists, entomologists, agronomists, horti-
culturists, foresters and breeders in the identification of agriculturally
important genes and in developing an understanding of the function and
expression of such genes. Finally, potential new varieties will have to be
tested in the field just as in traditional breeding programs.
Maximum success in the application of the new research technologies to
the enhancement of agricultural productivity will require an integration of
the basic sciences (molecular biology, biochemistry, microbiology, bio-
physics) with the disciplines of traditional agriculture science (entomo-
logy, nematology, plant pathology, weed science, soil science, forestry,
agronomy, horticulture, and aquaculture). Integration of the basic
sciences with these disciplines in the application of new research techno-
logies to agriculture will require different kinds and degrees of program
coordination depending upon the hierarchical structure of the academic
institution. By their very nature and structure, the land-grant univer-
sities provide an ideal setting for the application of advances in biotech-
nological research to agriculture.
The proprietary nature of biotechnological research has spawned an
array of new firms (approximately 200) in the private sector. Most of
these firms have been funded by venture capital raised since 1979. As of
this writing, approximately 25 percent of these firms have failed, however,
there is no question that the new biotechnologies have "arrived" as far as
"Wall Street" and the private sector are concerned. In addition to these
developments, many traditional agri-chemical and agricultural industrial
firms in the United States and abroad have developed programs utilizing the
new research technologies. These developments along with efforts on the
part of a number of state and land-grant universities and private institu-
tions to expand programs have the potential to place stress on the market-
place. This has resulted in an increased degree of competition among
academic institutions and between academic institutions and the private
sector for qualified scientists.
The general shortage of talent available to conduct biotechnological
research coupled with the growth of new firms and the development of
similar research programs in mature firms has resulted in a special demand
on academic institutions, such as the land-grant universities, for consul-
tants. In some instances, consultations or requests for consultations have
surfaced apparent or real conflicts of interests associated with the pro-
prietary nature of the biotechnological product of the firms involved.
The timely and efficient application of the new research technologies
to agricultural production also requires additional significant investment
of capital in research and in particular research programs of the State
Agricultural Experiment Stations (SAES) in land-grant institutions. The
overall trend of a reduction in support for basic research in the tradi-
tional agricultural research enterprise at the federal level, the diffi-
culty, at least under current economic conditions, of obtaining support for
such research from state legislatures, and the fact that high technology
research is innately more costly to support, demands that the private
sector provide a larger proporion of support for this research. New legis-
lation is needed at the federal level to provide incentives to industry for
investing in basic research in the public sector. Also, there is a need
for a new national program of basic research in biotechnology for agricul-
A. To assess the nature and magnitude of the biotechnological research
program in the SAES and ARS.
B. To assess manpower needs in this area of science in the land-grant
colleges and state universities, the U. S. Department of Agriculture
(USDA) and the private sector.
C. To determine the need for additional educational programs in this and
related areas of science.
D. To examine university-industry relationships with emphasis on consul-
ting, contractual, partnership and patent, and licensing arrangements.
E. To develop legislative proposals that will provide additional incen-
tives for industrial investment in biotechnological research in public
institutions and in particular, as applied to agriculture.
F. To examine university-federal government agency relationships including
an evaluation of regional and federal research program coordination by
Cooperative State Research Service (CSRS) and the potential for coordi-
nation and development of a regional and national land-grant institu-
tion based biotechnological research program in agriculture.
G. To determine the need for research and education programs arising from
biological and socioeconomic externalities emerging from new research
technology applications and developments.
Genetic Technology, A New Frontier (Office of Technology Assessment,
WestView Press, Boulder, Colorado, 1982), 331 pages.
BIOTECHNOLOGICAL RESEARCH PROGRAM COMMITMENTS BY THE STATE AGRICULTURAL
EXPERIMENT STATIONS AND THE AGRICULTURAL RESEARCH SERVICE
The State Agricultural Experiment Stations (SAES) of the land-grant
colleges and the Agriculture Research Service (ARS) of the U. S. Department
of Agriculture have a unique opportunity to help achieve full utilization
of the new biotechnological research capabilities for the benefit of
humanity. As is apparent from a brief review of plant and animal
engineering, agriculture is taking advantage of the new concepts and tools
to achieve a highly efficient system for producing food and fiber. There
is a large reservoir of knowledge about the traits of plants and animals
important for agricultural research in the SAES and ARS. Coupling that
knowledge to the new techniques in molecular biology will provide the most
favorable environment for the rapid translation of the new theories and
concepts into practice for the benefit of humankind. The land-grant
colleges, in addition to research, also provide training for the majority
of agricultural scientists serving the United States and many developing
Cooperative Extension, the education and technology transfer component
of the land-grant system, is the delivery system which ensures that new
knowledge and technology will be placed in the hands of users as quickly as
possible and also provides the feedback mechanism which brings new problems
back to the researchers.
Effective planning in any area requires an accurate understanding of
the current situation. Hence, before attempting to answer questions such
as what the needs are in biotechnological research as they relate to
agriculture, and more specifically what are the manpower and support needs,
what are the educational requirements, etc. it is essential to know the
nature and magnitude of current programs. An estimate of projected
commitments to such programs also would be useful.
II. Survey Procedures
The Division of Agriculture Committee on Biotechnology, as part of an
overall study of the issues and policies associated with biotechnology,
assessed the investment of the SAES of the land-grant colleges and the ARS
of the U. S. Department of Agriculture is making in the area of biotech-
nological research. A survey was conducted by sending a questionnaire (see
Appendix A) to each SAES requesting information about the investments which
are currently being made in biotechnological research and requesting
information about future needs. For purposes of the survey, the following
definition of "biotechnology" was used: The application of cell and tissue
culture, protoplast fusion, embryo manipulation and transfer, molecular
biology and gene transfer to agriculture. After the data were collected
and tabulated, they were returned to the SAES for an accuracy check.
At this time a refinement regarding funding of biotechnological
research by Hatch Funds as compared to other federal funds was obtained.
In May 1983, additional information about the loss of faculty in
biotechnological research to other academic institutions, government
agencies or the private sector was requested. This questionnaire appears
in Appendix B.
Similar information about the ARS programs in biotechnological research
was provided by the ARS administrator. The survey form appears in Appendix
C. Minor modifications were made in the original questionnaire in order to
adapt it to the ARS organizational structure. The definition of
biotechnology used in the ARS survey was the same as that used for the
III. Survey Results
The survey results reveal that the SAES and the ARS are making a major
commitment to biotechnological research.and are planning to expand research
activities in this area. Forty-two of the 52 SAES reported biotechnology
projects as defined in the survey. The list of states is shown in Table 1.
The 42 SAES reported a total of 579 biotechnology projects. The
faculty commitment to the projects represents 283 FTE as shown in Table 1.
It should be pointed out that since most of the SAES are associated with
colleges of agriculture scientists may have joint appointments between
research and teaching or research and extension. Therefore, in a follow-up
survey we requested the ratio of faculty FTE's to headcount; in other
words, how many minds were actually devoted to the biotechnology projects
represented by the FTE data. The SAES reported that for faculty involved
in biotechnological research, each FTE represents a headcount (minds) of
2.3. Therefore, the total number of people working on the biotechnology
projects was approximately 650. The FTE/headcount ratio for all scientists
in the SAES was 1.7 which indicates that scientists conducting
biotechnological research have larger than average commitments to teaching
undergraduate and graduate students. The percentage of scientist FTE's
conducting biotechnological research compared to all the scientist FTE's in
the reporting SAES was 4.4%.
Table 1. State Agricultural Experiment Stations' reporting biotechnology
research projects and their personnel commitments.
Total Number Number of Personnel (FTE) Commitment
of Research Biotechnology
State FTE's* Projects Faculty Student Staff
Arizona 141.7 21 10.6 4.2 16.3
Arkansas 181.0 1 .2 0.0 1.0
Berkeley 105.0 12 3.9 -- --
Riverside 117.0 8 5.5 17.4 12.6
Davis 280.0 34 11.8 48.7 20.7
Total 502.0 54 21.2 66.1 33.3
Colorado 116.0 22 7.1 15.6 5.7
Florida 405.0 44 21.9 30.0 41.6
Georgia 209.0 4 1.3 1.0 5.0
Hawaii 100.0 3 1.5 0.0 0.8
Idaho 84.0 6 3.0 0.0 5.7
Illinois 162.0 11 5.4 -- 19.3
Indiana 198.0 16 10.5 33.6 10.3
Iowa 127.0 20 9.3 20.1 27.8
Kansas 198.0 13 3.3 8.7 0.6
Kentucky 115.0 9 7.0 12.5 12.3
Louisiana 223.0 12 5.5 -- --
Maine 60.0 5 2.3 1.8 1.6
Maryland 80.0 6 2.7 0.8 2.8
Massachusetts 42.0 3 1.3 2.0 2.0
Michigan 158.0 18 18.5 20.7 36.6
Minnesota 155.0 9 3.6 10.3 14.0
Mississippi 217.0 9 5.2 3.0 4.5
Missouri 93.6 15 3.8 10.1 13.5
Montana 93.0 6 1.4 4.0 1.5
Nebraska 169.0 15 6.0 10.0 20.0
New Hampshire 27.1 2 -- -- --
New Jersey 120.0 6 3.3 0.0 6.7
New Mexico 83.0 3 3.0 0.0 0.0
New York 371.8 64 39.7 46.3 73.9
North Carolina 242.0 28 11.1 44.6 24.1
Ohio 145.0 4 1.9 6.0 4.0
Oklahoma 123.0 8 5.2 0.0 12.2
Oregon 132.0 15 7.8 3.5 3.5
Pennsylvania 136.0 12 7.2 6.3 11.9
Puerto Rico 44.0 3 2.0 0.0 0.0
Rhode Island 33.0 7 2.3 2.5 5.2
South Carolina 97.7 7 2.5 2.8 3.7
South Dakota 110.0 11 7.7 2.0 0.8
Tennessee 103.0 2 1.8 2.2 3.8
Table 1. Cont.
Total Number Number of Personnel (FTE) Commitment
of Research Biotechnology
State FTE's* Projects Faculty Student Staff
Texas 342.0 7 2.8 10.9 5.9
Utah 69.0 11 6.0 2.0 9.5
Virginia 163.0 7 4.3 1.0 2.8
West Virginia 51.0 3 1.4 4.0 3.0
Wisconsin 170.0 57 20.1 53.0 51.1
TOTAL 6,391.9 579 282.7 441.6 498.3
The ARS reports 94 biotechnology projects with a Scientist-Year (SY)
commitment of 77.8 (Table 2). There are 2,806 SY's in ARS and, the
percentage reported to be involved in biotechnological research was 2.7%.
Table 2. Biotechnology projects in the Agricultural Research Service and
personnel and funding commitments.
Number of SYs Committed to
Total Number of Biotechnology Biotechnology Funding
SYs* in ARS Projects Projects 1,000s
2,806 94 77.8 $13,800
There are 498 FTE's of staff supporting faculty research in the SAES.
Comparable figures were not provided from the ARS survey.
As mentioned above, training of undergraduate and graduate students is
a primary responsibility of land-grant colleges. The survey revealed there
are 442 graduate student FTE's associated with biotechnological research
projects in the SAES. Since most graduate students have only part-time
appointments, it was estimated that 1,105 students are represented by the
442 FTE's. These students are an important. resource for future research
and-training in the universities and for employment in governmental
agencies and the private sector.
The financial investment of the SAES and the ARS in biotechnological
research is also substantial. As seen in Tables 2 and 3, $41,557,400 are
being committed by the SAES and $13,800,100 by the ARS to biotechnology
The funds being expended for biotechnological research in the SAES came
from three sources--state, federal, and private. The percentage distribu-
tion of funds by source was as follows:
Fund Source Amount Percent
State $ 16,225,300 39
Federal $ 19,835,300 48
Private $ 5,496,800 13
TOTAL $ 41,557,400 100
Table 3. Funding biotechnology projects in State Agricultural Experiment
SAES Reporting Fund Sources
Research State Federal Private
Arizona 586.9 886.8 179.8
Arkansas 24.0 22.5 0.0
Berkeley 480.5 309.0 34.0
Riverside 586.9 414.3 39.5
Davis 1,166.3 1,077.9 377.2
Total 2,233.7 1,801.2 450.7
Colorado 76.3 1,455.0 0.0
Florida 1,148.5 1,664.1 231.8
Georgia 82.0 23.0 25.0
Hawaii 81.7 18.2 0.0
Idaho 61.9 137.3 167.6
Illinois 258.1 306.8 51.6
Indiana 480.5 1,141.3 255.8
Iowa 944.9 707.9 144.2
Kansas 127.9 74.0 191.7
Kentucky 524.1 226.3 --
Louisiana 423.9 180.7 98.5
Maine 25.0 92.0 22.0
Maryland 102.4 20.4 0.0
Michigan 1,206.9 288.7 923.0
Minnesota 520.0 424.0 59.1
Mississippi 247.5 99.1 20.3
Missouri 268.4 304.5 36.1
Montana 21.9 0.0 294.5
Nebraska 644.0 156.0 0.0
New Jersey 132.9 23.3 286.1
New Mexico 120.0* 141.8* 39.0*
New York 1,388.9 2,469.0 913.4
North Carolina 613.1 849.1 236.9
Ohio 108.3 157.1 0.0
Oklahoma 383.0 51.9 0.0
Oregon 199.6 806.5 29.5
Pennsylvania 168.5 196.6 169.0
Puerto Rico 17.2 85.0 0.0
Rhode Island 112.2 153.0 1.3
South Carolina 238.0 99.0 0.0
Table 3. Cont.
SAES Reporting Fund Sources
Research State Federal Private
South Dakota 150.9 74.5 20.0
Tennessee 64.0 168.5 0.0
Texas 196.1 120.8 176.7
Utah 185.1 301.1 169.6
Virginia 130.0 253.0
West Virginia 37.6 80.0 1.2
Wisconsin 1,766.4 3,776.1 302.4
TOTAL 16,225.3 19,835.3 5,496.8
The federal funding in the SAES was also subdivided into funds from
federal formulas (Hatch and McIntire-Stennis) and from federal extramural
funds (NSF, NIH, DOE, etc.). Based upon the data provided by 33 Experiment
Stations which responded to the follow-up questionnaire, 25% of the federal
funds reported came from Hatch or McIntire-Stennis and 75% from federal
extramural sources. Collectively, these figures demonstrate the ability of
the SAES involved in biotechnological research to attract both private and
federal extramural funds and that they also receive excellent support from
their state legislatures. In particular, the 13% support from the private
sector is well above the national average of 3-4% support provided by the
private sector for university research in general. The data also
demonstrate the SAES allocate formula funds to areas of high priority
The funding data indicate that biotechnological research requires a
substantial investment. The support levels reported by the SAES scientists
involved in biotechnological research was $146,800 per FTE. The average
support level for the ARS scientists was $142,000 per SY.
In the introduction of this report reference was made to the great
potential that the SAES and the ARS have in the full development of
biotechnology because of the reservoir of talent found in the plant and
animal sciences. Of particular importance are the plant and animal
breeders who have a thorough knowledge of the organisms with which they
work, of the characteristics or traits which are important, and of the
genetic basis of these traits. When this reservoir of knowledge is
combined with the skills of the molecular biologists who can manipulate
individual genes and possibly transfer the genes from one organism to
another, we provide the greatest potential for translating concept into
practice. Therefore, the Committee on Biotechnology requested information
on the number of plant and animal breeders in the SAES and in the ARS. The
results for the SAES are presented in Table 4. They reported 459 FTE's
of research in plant breeding and 157 FTE's in animal breeding. The ARS
reported 265 SY's in plant breeding and 29 SY's in animal breeding. These
represent totals of 724 full-time plant breeders and 186 animal breeders
in the SAES and the ARS, a significant resource for the future of U. S.
The SAES and the ARS were also queried about future investments of
personnel for biotechnological research. The SAES were asked to estimate
the number of new positions they planned to add or the number of existing
positions they plan to reallocate to biotechnological research in the next
two years (by July 1984). The SAES (Table 5) estimated there would be an
increase of 108 faculty FTE's, 161 graduate student FTE's and 181 staff
FTE's. Because SAES FTE's are usually combined with college FTE's for
teaching and/or extension, the actual number of faculty additions in
biotechnological research could be as high as 248.
The ARS estimates 18 scientist SY's and 18 staff SY's will be added to
biotechnological research in the next two years.
The rapid expansion of biotechnological research in the private sector
is not only providing new job opportunities for graduates but also for
University faculty and ARS scientists. The potential "brain drain" from
universities is a source of concern. The Committee on Biotechnology con-
ducted a survey requesting information about the number of faculty lost to
other academic institutions, government agencies and the private sector
since 1980. The results are presented in Table 6.
Table 4. State Agricultural Experiment Station scientists in plant
and animal breeding.
Research Plant Breeding Animal Breeding
Arizona 11.7 2.4
Arkansas 9.5 4.0
Berkeley 0.0 0.0
Riverside 5.6 --
Davis 19.5 3.0
Total 25.1 3.0
Colorado 4.2 3.4
Florida 30.0 5.0
Georgia 13.8 6.8
Hawaii 4.6 1.0
Idaho 7.3 1.8
Illinois 20.0 15.0
Indiana 10.8 5.3
Iowa 13.6 5.1
Kansas 6.2 3.9
Kentucky 14.0 1.4
Louisiana 12.8 5.6
Maine 2.0 0
Maryland 9.5 0.6
Massachusetts 1.0 0
Michigan 13.4 5.1
Minnesota 9.9 3.5
Mississippi 6.0 4.0
Missouri 11.8 1.2
Montana 2.0 2.0
Nebraska 15.0 9.0
New Hampshire 1.6 1.5
New Jersey 4.2 0.2
New Mexico 8.2 2.0
New York 16.7 4.2
North Carolina 22.0 5.0
Ohio 8.5 4.5
Oklahoma 10.1 2.6
Oregon 18.9 6.5
Pennsylvania 21.6 10.6
Puerto Rico 2.0 0.0
Rhode Island 0.2 0.5
South Carolina 9.0 1.5
Table 4. Cont.
Research Plant Breeding Animal Breeding
South Dakota 8.4 2.3
Tennessee 5.8 3.0
Texas 46.0 12.0
Utah 2.0 1.7
Virginia 7.4 4.5
West Virginia 0.5 0.0
Wisconsin 12.2 5.3
TOTAL 459.5 157.0
Table 5. Projection of additional personnel commitments to biotechno-
logical research within the next two years (prior to July, 1984)
by the State Agricultural Experiment Stations.
Projects Faculty Student Staff
Arizona 3.0 2.00 0.0
Arkansas 0.0 0.00 0.0
Berkeley 5.0 5.00 2.0
Riverside 4.0 9.00 4.0
Davis 2.0 7.00 1.0
Total 11.0 21.00 7.0
Colorado 2.0 4.00 2.0
Florida 15.0 15.00 10.0
Georgia 1.0 2.00 2.0
Hawaii 1.0 1.00 0.0
Idaho 0.5 0.00 1.0
Illinois 2.0 5.00 3.0
Indiana 3.0 8.00 4.0
Iowa 3.0 1.00 1.0
Kansas ? ?
Kentucky 5.0 8.00 5.0
Louisiana 1.0 2.00 0.0
Maine 2.0 5.00 5.0
Maryland 1.0 2.00 0.5
Massachusetts 0.5 2.00 1.0
Michigan 4.0 8.00 4.0
Minnesota 1.5 1.50 1.5
Mississippi 1.0 4.00 2.0
Missouri 2.0 10.00 4.0
Montana 0.0 0.00 0.0
Nebraska 2.0 2.00 2.0
New Hampshire 0.5 0.25 0.5
New Jersey ? ? ?
New Mexico 1.0 4.00 2.0
New York 15.0 26.00 25.0
North Carolina 3.6 0.50 8.0
Ohio 4.0 6.00 4.0
Oklahoma 7.0 7.00 7.0
Oregon 3.0 1.50 1.5
Pennsylvania 1.6 1.60 3.0
Puerto Rico ? ? ?
Rhode Island 1.0 3.00 2.0
South Carolina 0.0 0.00 0.0
Table 5. Cont.
Projects Faculty Student Staff
Table 6. Movement of SAES and ARS scientists involved in biotechnological
research since 1980.
Sector Scientist Moved To Scientists
Other universities 36 4
Governmental agencies 2 0
Private sector 34 5
TOTAL 72 9
When scientists in biotechnological research who have changed positions
are compared to the total number of scientists in biotechnological
research, the percentage loss is approximately 25% for SAES and 11% for
ARS. These percentages are substantially above the normal turnover
particularly for faculty in the SAES. The movement of faculty into the
private sector can be viewed as a positive investment in the overall goal
of applying the new tools of biotechnology for the benefit of society.
However, it is critically important that training programs be expanded to
ensure the replacement of those faculty who move away from the univer-
sities' mission of basic research and teaching.
Finally, a question was asked about the collaboration between SAES and
other units on their campuses. Sixty-two percent of the SAES reported
collaborative projects with other campus units. It is recommended that
competitive grant funding be structured so that incentives are provided for
expanding multidisciplinary, collaborative research. As mentioned before,
the potential for the application of the new tools of biotechnological
research for the benefit of society will be realized most quickly when
collaboration of the molecular biologists with plant and animal scientists
is encouraged and facilitated.
The State Agricultural Experiment Stations (SAES) and the Agricultural
Research Service (ARS) are actively involved in engineering plants and
animals for the benefit of humanity and have been since their inception.
The knowledge and understanding provided by Mendelian genetics, molecular
biology and the new tools of genetic engineering are enhancing the ability
of scientists to improve the quality of agricultural products and to
produce them efficiently in harmony with the environment. The SAES and ARS
contain an impressive knowledge bank in the plant and animal sciences which
is critically needed for the translation of new theories and tools into
practice. For example, in the SAES and ARS combined there are 724 plant
breeders and 186 animal breeders.
The SAES and ARS also are making substantial investments in biotech-
nological research. In the SAES, 283 scientist FTE's are working on 579
biotechnology projects funded at the level of $41,557,400. The SAES have
been effective in attracting federal extramural funds and funds from the
private sector for biotechnological research. There are 442 graduate
student FTE's associated with these biotechnological research projects.
The ARS has 78 SY's working on 98 biotechnology projects funded at
The 42 SAES reporting biotechnological research estimated that 108
faculty FTE's, 161 graduate student FTE's and 118 staff FTE's will be added
in new positions or in positions reallocated from other areas of research
to biotechnological research in the next two years (beginning July 1,
1982). ARS estimates that 18 scientist SY's and 18 staff SY's will be made
available for biotechnological research in the next two years.
While there is an active program for training new scientists in the
SAES and land-grant colleges, there has been serious erosion caused by
faculty moving from their home universities to other universities,
governmental agencies and the private sector. Twenty-five percent of the
SAES scientists and 11 percent of the ARS scientists involved in biotech-
nological research have changed positions since 1980.
Sixty-two percent of the SAES conducting biotechnological research
reported collaboration with other units on their campus. The Committee on
Biotechnology recommends incentives be provided to increase the amount of
A NATIONAL PROGRAM FOR BASIC RESEARCH IN BIOTECHNOLOGY FOR AGRICULTURE AND
We have evaluated the implications of the new biotechnologies and have
identified major needs and opportunities for enhancing the application of
biotechnological research accomplishments to agriculture and food. The
Committee believes that these needs and opportunities can, and should, be
formulated into a major new national program for basic research in biotech-
nology for food and agriculture. This plan proposes "A New Initiative in
Biotechnology for Tomorrow's Agriculture."
When established this program will have major benefit for our nation's
agriculture and food system. It will also do much to retain America's
scientific and technological leadership in agriculture and provide con-
current broad national benefits. These benefits include:
A. Molecular biology and associated disciplines will be used to maximum
advantage in our agricultural'and food related sciences.
B. A major role for U. S. food and agriculture in international trade will
C. Our nation's competitive advantage relative to other nations will be
retained to the extent biotechnological research is fully exploited by us.
D. Because of the increase in food security through selective changes
wrought by biotechnological research, our national security will be corre-
This program has been designed to complement current national policies
and initiatives for developing further the United States' technology base.
Specifically this program will:
A. Take advantage of the rapidly emerging scientific and technological
advances being made in molecular biology, molecular and cellular genetics,
and their application to agricultural needs.
B. Provide practical technology for early application.
C. Increase the pool of scientists in the public and private sectors who
are qualified to do research and to teach in the increasingly important new
areas of biotechnological research, and to use this scientific talent to
sustain U. S. technological advances.
D. Help provide some of the scientific equipment necessary for modern
biotechnological research and thereby partially alleviate the increasingly
serious national problem of obsolete research equipment.
For this program to have the required impact and value, it must be
added to the existing research and education programs, and not be a re-
p-lacement or redirection of current programs which are essential in their
II. Definition of Biotechnology
For the purposes of this proposal, "biotechnology" is defined as the
use of living organisms or their components in agricultural, food, and
other industrial processes.
The new biotechnologies are those which have been, and will continue to
be, deveToped through advances in molecular genetics, molecular biology,
and closely associated disciplines, particularly as these research areas
continue to elucidate the molecular details of growth and development.
Biotechnological research uses recently developed research techniques such
as cell and protoplast culture, plant regeneration, somatic hybridization,
embryo manipulation and transfer, and recombinant DNA approaches including
gene splicing, replication, and transfer to organisms.
A. Potentials of Biotechnology
It is now widely acknowledged that biotechnological research offers
direct access to new, potentially valuable high technology opportunities
for agriculture and food production, and also for the pharmaceutical and
chemical industries. Recent discoveries in molecular genetics and their
successful applications show that "high technology in biology" is appli-
cable to agriculture and food and they contribute significantly to "the
molecular revolution" that is basic to many of our industries.
Several applications in agriculture have already emerged. For example,
bovine growth hormone is being produced at commercial scale production
levels. Tissue culture is now being used to produce new varieties of
plants, such as potatoes, clones of elite specimens of other vegetables,
and disease-resistant phenotypes. The vaccine for foot-and-mouth has been
prepared via recombinant DNA technology. The procedure utilizes a viral
coated protein which avoids the dangers inherent in using the virus itself
as the vaccinating agent.
It is essential that all necessary steps are taken--starting with basic
research--to insure that these new biotechnologies are developed and adopt-
ed. American agriculture still has a competitive advantage. It must be
retained and exploited.
Current evidence strongly suggests that the time from basic discovery
to practical application in biotechnological research can be short, often
just a few years. For example, insulin, interferon, and growth hormone are
in commercial production just eight years after the seminal discoveries of
Cohen and Boyer. The major constraint in accelerated application of bio-
technology to agriculture and food production is lack of the fundamental
knowledge of specific genes necessary to develop the specific biotech-
The new initiative proposed here is a major step toward obtaining this
necessary fundamental knowledge.
B. Needs of Agriculture
The current surpluses in U. S. agricultural production may suggest that
more research is not needed, particularly when the new biotechnologies
promise to increase further the efficiency--and productivity--of our agri-
culture and food system. But this avoids the major problems facing agri-
culture in the United States and throughout the world. There is projected
to be 42% more people in the world by 2000, and within the next 40 years
food production must double to keep pace with this increase in population.
Some of the additional required food will come about through increased
efficiency using current technology. However, much of the increase must
occur through more efficient partitioning of nutrients in the plant into
edible food, increased resistance to environmental stresses, reduced losses
from insects and disease, and efficient production using less desirable
The major needs of crops, animals, and the post-harvest sector are well
known and have been documented and affirmed over the past decade. These
include resistance to physical and biological stresses, improvement of nu-
trient composition such as in the cereal grains, development of nitrogen
fixation for nonleguminous plants, major improvements in animal health
through reduction of disease, reduction of reproductive failure in animals,
more effective partitioning of nutrients in food animals, increases in bio-
mass production for fuel and chemicals, and degradation of wastes in the
agriculture and food industries and in society in general.
In each of these needs, the new molecular and cellular genetics re-
search procedures have significant potential for major, selective improve-
ments. For each, however, the knowledge base is still too small to permit
rapid application of these techniques to agriculture.
C. Relevance of Biotechnology for Agriculture
The new biotechnological research capabilities--particularly those that
build on advances in molecular biology and molecular genetics--have partic-
ular advantages for agriculture. They provide a new basis for changing
plant and animal productivity and performance on the basis of the directed
modification of specified genes and gene systems (i.e., "single-gene gene-
tics") rather than the more heterogeneous approach of "whole organism gene-
tics" which may result in compromising desired qualities. It is rapidly
becoming possible to envision plants with dramatically altered resistance
to environmental and biological stress, plants with improved nutritional
quality, animals with highly increased nutritional and reproductive effi-
ciency, new biocontrol agents with much greater specificity than at pre-
sent, and post harvest technologies that decrease present losses in the
This new capability offers exceptional promise, but it cannot be ef-
fective unless it is closely integrated with disciplines such as biochem-
istry, physiology, taxonomy, and ecology and our key agriculture disci-
plines such as plant and animal breeding, agronomy, horticulture, plant
pathology, and entomology. For example, to maximize our understanding and
use of gene expression, much more must be learned about plant biochemistry
and the development and growth of plant tissues. To develop new genetic
approaches to controlling plant disease, the biochemistry and physiology of
the host-plant interaction must be established. To increase efficiency of
feed utilization by animals, the biochemistry and hormonal control of
nutrient partitioning must be better understood.
Specific examples of the value of biotechnology for agriculture and
food have been described in many recent publications, such as in Science
(Vol. 219, 611-746, 11 February 1983). Some of the major opportunities
identified by the Committee on Biotechnology include:
1. New molecular techniques of recombinant DNA and DNA-sequencing now
permit plant genes to be isolated and subjected to molecular analyses to
obtain an understanding of their structure, regulation, and expression of
individual genes from each genome.
2. New methodologies in cellular and molecular biology provide research
approaches for intensified studies to identify molecular factors involved
in plant developmental processes. Such efforts include identification of
the genes and regulatory elements affecting development and the molecular
mechanisms that coordinately express these genes to assure normal pat-
terns of development. With such knowledge, genetic manipulations and/or
modifications can be undertaken to assess their effects on development
and growth. A molecular understanding of plant growth will provide in-
formation directly applicable to improving crop production.
3. Regeneration of whole plants from individual cells and manipulation
of plant embryos offer major promise in isolating unique genetic mate-
rials and selecting for genetic resistance to environmental and biolo-
gical stresses. These techniques involve plant cell culture, protoplast
fusion, and somatic embryogenesis.
4. At the present time there is one major gene transfer system for
plants, the Ti plasmid (responsible for crown gall disease), that is
being intensively studied as a natural vector for introducing genes into
plant genomes. With the use of plant cell culture, a variety of new
approaches for plant transformation can be tested, e.g., transposable
elements carrying inserted genes (currently being developed for Droso-
phila), microinjection of isolated genes or chromosomes (being done with
mice embryos), or DNA-packages in liposomes. Efforts are needed to
develop new transfer systems.
5. At the present time there is only an elementary understanding of the
genetic, biochemical, and physiological mechanisms involved in plant
resistance and susceptibility to viruses, bacteria, fungi, and insects
and to environmental stresses such as heat and cold, soil salinity,
flooding, drought, and mineral deficiency and toxicity. Of paramount
interest and importance is identification and isolation of agriculturally
important genes for transfer into crop species that lack resistance to
these crucial stresses. These genetic engineering efforts probably offer
the greatest promise for worldwide improvement of crop production.
6. Detailed information on animal genetic systems (nuclear and mito-
chondrial) is needed for new biotechnological research efforts to im-
prove animal production. Thus, as with the plant sciences, increased
research emphasis must be directed toward obtaining detailed knowledge
about the structure and organization of animal genomes and about regu-
lation and expression of their genes. Basic studies on genes responsible
for animal hormones are essential if such genes are to be isolated and
cloned for use in increasing the efficiency of animal nutrition and re-
7. Techniques allowing for the recovery of animal ova, their in vitro
fertilization, and their return to normal utera are potent research
advances that should be widely incorporated into the animal scien;:
The ability to maintain embryos outside the body, for example, now makes
it possible to grow them through several developmental stages under
various controlled conditions to study their development. Studies of
environmental conditions affecting embryonic development will provide
information directly applicable to improving animal development and
8. Use of hormones for positively altering animal growth, development
and performance has been demonstrated as being of major value for com-
mercial purposes and for elucidating complex, poorly understood critical
biochemical pathways and reproductive functions. Yet, such hormones are
extractable from natural sources only with tedious difficulty and in
proportionately small amounts. Vaccines are powerful antidotes to dis-
ease, yet their production from traditional systems often provides unde-
sirable, sometimes injurious, side products. Recent discoveries in
recombinant DNA techniques--through the cloning of genes and use of
bacteria as "microfactories" to produce protein--now make it possible to
use microorganisms to produce hormones and vaccines in large amounts, in
highly purified form, and at relatively low cost.
9. Because hybridomas (produced from spleen-myeloma cell fusion) produce
large amounts of monoclonal antibodies of unique specificities, their
use in both basic and applied plant and animal research are almost limit-
less. The binding specificities of the antibodies make them invaluable
as biochemical reagents, such as for isolation and purification of cel-
lular proteins and for identification of particular antigens. They will
also become more important for the study, diagnosis, and treatment of
10. Microorganisms are now involved as traditional biotechnologies in
the production of many foods and beverages derived from agricultural
crops. But there is major need for improved efficiency and specifically
for new methods not now possible with conventional organisms. As indi-
cated earlier, genes have been transferred from one microbial cell to
another. This component of genetic engineering, coupled with additional
efforts to understand gene regulation in the new microbial cell environ-
ment, will make it possible to enhance existing microorganism capabili-
ties and to endow them with desired new capabilities. This effort will
have major impacts on the development of dairy, meat, vegetable, cereal,
and food products, and also in the beverage and spirits industry.
11. The application of biotechnological research techniques, such as
genetic engineering, provides opportunities to tailor microorganisms to
aid in the degradation of pesticides that might be added to the environ-
ment or to eliminate already existent hazardous situations. The produc-
tion of natural "pesticides" will also be enhanced by the application of
these new technologies.
D. Research Needs for Biotechnology for Agriculture
A number of studies have been published recently that describe major
research priorities for basic biotechnological research of major importance
for agriculture. Among these are studies from the National Academy of
Sciences (1983), Office of Technology Assessment (due in C,.. ,
Board on Science and Technology for International Development (BOSTID) of
the National Research Council (1982), Joint Council on Food and Agricul-
tural Sciences (1983), National Agricultural Research and Extension Users
Advisory Board (1983), and a number of review articles (see Science, 1983).
In addition, the Committee has also examined a wide variety of priority
On the basis of these studies and the Committee's own evaluations, it
is concluded that there are overriding research needs in three broad areas:
1. Structure, function, and organization of plant, animal, and microbial
2. Transfer, expression, and regulation of individual genes and gene
3. Genetic and molecular control of growth, development, and resistance
to physical and biological stress.
It is essential that a major new program of competitive research grants
be established to attract and involve the nation's best scientists in
addressing these pressing needs. At present there is no such program.
In addition it is clear that the maximum effectiveness of a program of
basic research in biotechnology for agriculture should be capable of being
coupled closely to the more traditional agricultural biotechnologies and
the delivery system of research results into practice that is character-
istic of land-grant universities and state agricultural experiment sta-
tions. Thus, it is important that the research program be designed to
capture the interest and long-term involvement of these universities, state
experiment stations, and scientists. A recent study by this Committee
shows there is and will continue to be a significant number of faculty
involved in biotechnological research in the SAES. Also, the SAES plan to
add approximately 100 faculty by July of 1984.
The key to long-term scientific vitality is assuring that strong scien-
tists are trained and then involved in basic research. One of the best
means to do this is to provide for major fellowship support on a competi-
tive basis to top young scientists. This has been recognized by the U. S.
Department of Agriculture and is also being done by the National Science
Foundation for plant biology. Much more is needed.
As mentioned earlier, research equipment in basic research laboratories
is rapidly becoming obsolete in biology as well as in the physical sci-
ences. Modern biotechnological research, particularly that dealing with
molecular genetics and developmental biology, cannot be done without modern
equipment. Thus, the equipment needs are as severe as are the needs for
major sources of new grant support for basic research.
A new national program should be established immediately to insure
adequate basic research in biotechnology for agriculture. This program
A. Include plants, animals, and microbes to obtain a more comprehensive
understanding of the basic principles of their genetics, biochemistry,
physiology, metabolic control, and developmental biology.
B. Complement existing funding programs in the USDA, NSF, and NIH and be
designed to enhance interaction among the program areas and among scien-
C. Include three grant categories: research grants, fellowships, and
D. Allocate all funds solely on a competitive basis, with all applications
being investigator-initiated and peer-reviewed, and with all scientists in
public and private universities, research institutes, and government labor-
atories eligible to apply.
E. Establish a close cooperative effort with all federal agencies having
complementary grant programs.
V. Program Areas
This initiative should be aimed at establishing a thorough understand-
ing of the genetics, biochemistry, physiology, metabolic control, and
developmental biology of plants, animals, and microbes to provide the basic
scientific knowledge needed for the development and application of the new
biotechnological research capability to agriculture and food. Its primary
focus should be basic biological understanding.
The program should also have a strong mission orientation to provide
for tomorrow's food and agriculture. Thus, the basic research should be
done within the context of needs for food and agriculture. In this manner,
this new initiative would be analogous to the basic biomedical sciences
programs established during the past three decades that have contributed so
significantly to major advances in medicine.
Rather than describe at length the many different research areas and
types of specific research questions that should be addressed by this
program, the major research areas essential for effective application of
these new technologies to agriculture are as follows:
A. Structure, function, and organization of plant, animal, and microbial
B. Transference, expression, and regulation of individual plant, animal
and microbial genes and gene systems, including transfer and expression
C. Genetics, biochemistry, and physiology of plant, animal, and microbial
growth, development and differentiation.
U. Genetics, biochemistry, and physiology of major plant, animal and
microbial processes including formation and metabolic control of secondary
E. Biology of plant and animal cells, tissues, and embryo culture.
F. Genetics (emphasis on in vitro) and biochemistry of cellular communi-
cation and recognition.
G. Genetics and biochemistry of plant and animal immune and resistance
H. Genetics, biochemistry, and physiology of animal and plant pathogens,
parasites, and predators.
I. Computer modeling of biological systems, with specific attention to:
1. Importance of environment
2. Cultural factors
3. Economics and marketing
VI. Major Grant Categories
Three major categories of grants are required to accomplish the goals
of the program. They are research grants, fellowships, and equipment
grants and are similar to those in the successful competitive grant pro-
grams of the National Science Foundation, the National Institute of Health,
and the USDA's Competitive Research Grants Program. The following is a
brief description of the grant categories:
A. Research Grants
1. Research grants to individual scientists.
2. Research grants to groups of scientists to conduct multidisciplinary
3. Incentive awards to young investigators.
All research grants should be investigator-initiated and submitted to
peer review as is traditional for current competitive research grants pro-
grams. Renewals, except for the incentive awards to young investigators,
should be permitted and also subjected to the peer-review process.
Each research grant should be of sufficient size and duration to insure
that a significant set of objectives can be accomplished. That is, each
grant should fund a substantial portion of the research effort of the
individual scientist or group of scientists, thereby assuring steady and
close adherence to the objectives of the research. This will discourage
distractions caused by competing demands of other research objectives and
minimize the effort spent on additional fund raising for the same research
objectives, as currently happens with inadequately funded programs.
For grants to individual scientists, an amount of ca. $100-125,000/year
(including indirect costs) and a term of at least th-ree years is needed.
For multidisciplinary grants an amount of at least $200,000/year (including
indirect costs) and a term of at least five years is needed. These levels
and durations for individual and multiple-investigator grants have been
used successfully by the NIH extramural programs and have been shown to be
adequate extramural support for a focused, significant research program in
the biological sciences. NSF also has estimated that ca. $125,000/yr/grant
(including indirect costs) is needed for adequate funding of grants to
individual scientists for its biological science programs. Independent
estimates by SAES directors suggest that minimum funding should be at least
$100,000/yr/grant. Current funding at levels of about $60,000/year (in-
cluding indirect costs) and for only two-three year terms for NSF grants in
biology and about $35,000/year (including indirect costs) for USDA competi-
tive grants have made it difficult for scientists to establish and maintain
a major research program.
These less than optimum levels of funding for NSF and USDA grants are
caused by concluding that it is preferable to provide at least limited
funding to a significant number of the many excellent proposals rather than
full funding of only a few. To optimize the effect of this proposal, low
award levels must be avoided.
Multidisciplinary research must be encouraged because so many of the
necessary research goals in biotechnology and agriculture require the
collaboration of several disciplines for optimum progress.
The incentive awards for young investigators should be analogous to the
highly effective NIH Research Career Development Award program and the
recently established NSF Presidential Young Investigator Award program.
Faculty members within the first three years of their initial university
appointment should be eligible for this program. Each award should be for
a nonrenewable term of up to three years. Each grant should be for up to
$25,000. There should also be an "industrial challenge grant" component of
this award program, similar to the counterpart NSF program, wherein an
additional award of up to $37,500 can be made on a matching basis with
"new" funds from industry for the specific research proposed by the appli-
The research grants should also include sufficient funds for essential
equipment, over and above the direct and indirect research costs, so that
an awardee is assured of adequate instrumentation to accomplish the re-
search project goals. Currently, insufficient funding for equipment in
many awards is a major hindrance to research progress.
A major program for pre- and post-doctoral fellowships should be estab-
lished for the specific purpose of substantially increasing the number of
young scientists thoroughly trained in the new biotechnological research
areas--such as molecular biology and related disciplines--of direct rele-
vance to agriculture and food. Fellowships should have terms up to three
years and should be renewable for an additional year. This program must be
in addition to the pre- and post-doctoral program currently being proposed
by the USDA for training in the agricultural sciences in general. Both
programs are needed.
A senior post-doctoral fellowship program should also be established to
encourage industrial scientists and senior university faculty to learn and
use these new techniques and approaches. Each fellowship should be for one
Rather than training grants to provide institutional support for devel-
opment of major graduate research training programs, it is believed more
appropriate to incorporate graduate research training through graduate
student participation in the research grants component of this program. In
that way, students "learn by doing" from successful, highly motivated fac-
ulty who are working on major basic research topics.
C. Equipment Grants
Biotechnological research requires sophisticated equipment, which often
is not available, even in laboratories considered modern just a few years
ago. Conservative estimates are that at least $125-150,000 are required to
equip a laboratory for a new faculty member doing biotechnological re-
search. Major specialized equipment is rapidly becoming essential instru-
mentation. It is estimated that more than 100 new faculty will be hired in
the SAES of the land-grant universities and others will be hired in other
universities within the next five years to do biotechnological research.
In addition, other faculty members are redirecting their research programs
to biotechnology and have similar equipment needs. These needs will become
even more critical in the next few years.
To meet these needs a major equipment grants program must be estab-
lished, with each grant being made on a competitive, peer-reviewed basis.
Such a program will insure that adequate funds are available to provide
equipment for strong research programs.
As an adjunct to direct funding of equipment, a "challenge grant pro-
gram" should also be considered. In such a program federal funds would be
provided only if new matching funds were provided by the applicant. Two
alternative modes should be considered: (1) shares from the university and
federal government and (2) shares from the university, federal government,
and industry. This would encourage stronger university-industry relation-
ships, which is an established federal goal. The challenge grant concept
is already being used by NSF in its young investigators program.
Funding for the program must be in addition to research funds already
provided to the USDA and other federal agencies for related research pro-
grams. The primary purpose of the program is to provide a basic biotech-
nological research augmentation to current agricultural research.
Initial annual funding of at least $70 million should be provided for
this program, expanded in subsequent years as needs warrant, and adjusted
annually to compensate for inflation. The proposed budget is presented in
Table 7. Critical areas of need for basic research in biotechnology for
Type of Grant Support Level
Research Millions of Dollars
Individual research grants 24.0
This would provide for 210 grants at $100,000/
year/grant* (average) and would include $3 million
for equipment essential for the individual
research grants. Each grant would be for three
Multidisciplinary research grants 16.0
This would provide for 70 grants at $200,000/year/
grant* (average) and would include $2 million for
equipment essential for the research. Each grant
would be for 5 years (average).
Young investigator incentive awards 1.0
This would fund 20 awards at $50,000/year.
This would provide some supplement for salaries
and a major starter grant for research.
Includes indirect costs
Pre-doctoral fellowships 1.2
This would provide 80 fellowships at $15,000/year/
fellowship. Each fellowship would be for 3 years
(maximum). The award would provide for tuition,
fees, and research support.
Post-doctoral fellowships 2.8
This would provide 80 fellowships at $35,000/
year/fellowship. Each fellowship would be for
3 years (maximum) and would provide stipend
and research support. This is significantly
more than the current NSF awards (ca. $25,000/
year) because major research support is also
Table 7 (continued)
Senior post-doctoral fellowships 1.0
This would provide 20 fellowships at $50,000/year/
fellowship. Each fellowship would be for one year
and would provide for salary and research support.
Equipment Grants 24.0
Grants for major specialized equipment and for
start-up equipment for new faculty in
biotechnological research should be awarded based
on need and excellence of the proposed research
programs. This program could be coupled with a
challenge grant program to universities, if desired.
*Includes indirect costs
An annual base budget of $70 million will provide funding assistance
for only a small portion of the research programs and the research and
education efforts. This conclusion derives from the necessary size of the
awards, the grant categories that should be established, and the assess-
ments made by this Committee of the number of faculty and students cur-
rently involved in biotechnological research and those expected to join
biotechnological research in the next two-three years (Committee on Bio-
technology, "Progress Report," November 1982). Using just the faculty and
students involved currently in biotechnological research in the SAES (650
current faculty, 1100 current students, 251 new faculty, 402 new students),
the $70 million will provide research support for only 23% of the faculty,
6%.of the pre-doctoral students, and 8% of the new faculty at the desirable
award levels. When the faculty and students from outside the SAES system
are included, the fraction of support becomes even lower. This low frac-
tion of potential support demonstrates clearly the need for the funds and
assures there will be strong competition for the grants. In addition, the
size of the grants and the small number will provide strong incentive for
high quality grant proposals.
The Department of Agriculture would be responsible for this program.
The program should be established using current accepted principles and
procedures such as those in the USDA's Competitive Research Grants program,
NIH and NSF extramural programs. Close cooperative relationships should be
established between this new program and complementary programs in other
federal agencies such as the NSF, NIH, Department of Energy, Department of
Defense, and the USDA's Agricultural Research Service. In addition, the
Department should establish close, very strong cooperative relationships
between this program and SAES, their associated land-grant universities,
and other universities involved in biotechnological 'research.
Principles and procedures that should be used in administration of this
A. Peer-review of all applications using acceptable standards and proce-
dures. Study sections or peer-review panels should be established for this
review. Rigorous attention must be paid to quality. No consideration
should be given to geographic location.
B. Eligibility of all scientists in public and private universities
research institutes, and government agencies, as now permitted for the USDA
Competitive Research Grants Program.
C. Demonstrable relevance between the research proposed and the needs of
The program should have a program director drawn from the academic
community on a rotating basis. He should be responsible for program qual-
ity and direction. A permanent associate director, expert in the general
field, should be responsible for administration of the program. This
approach is used by NSF and has worked well. It is also being used by the
USDA's Competitive Research Grants Program.
A program council should be established, comprised of leading scien-
tists with a broad view of basic research for agriculture. The council
should evaluate the grants awarded and examine the relationships between
grant programs and the mission needs of agriculture.
Basic research in biotechnology for food and agriculture is needed to
develop and use new biotechnological research findings to meet the needs
for food and agriculture. A new major national program is proposed for
this purpose--with emphasis on molecular biology, molecular and cellular
genetics, and developmental biology.
There should be three. broad subject areas in this initiative, from
which more specific program emphases can be drawn. These areas are:
A. Structure, function, and organization of plant, animal, and microbial
B. Transfer, expression, and regulation of individual genes and gene sys-
C. Genetic and molecular control of growth, development, and resistance to
physical and biological stress.
The proposal has been developed as a competitive grants program con-
sisting of: research grants, fellowships, and equipment grants. All grants
and fellowships for the program should be investigator-initiated, peer
reviewed, and awarded on a competitive basis. The program should (1) cover
plants, animals, and microbes; (2) be open to all scientists in public and
private universities, SAES, research institutes, and government laborato-
ries; (3) complement existing programs in USDA, NSF, and NIH; AND (4)
establish a close cooperative effort with all federal agencies having
complementary grant programs. The program would complement traditional
federal programs of funding for agricultural research.
To meet the identified needs and opportunities for conducting this
basic research in biotechnology for agriculture, a $70 million program is
needed at the outset. An appropriate initial budget is:
Research grants Million $
Individual research grants 24.0
Multidisciplinary research grants 16.0
Young investigator incentive awards 1.0
Pre-doctoral fellowships 1.2
Post-doctoral fellowships 2.8
Senior post-doctoral fellowships 1.0
Equipment grants 24.0
For this program to have the required impact, it must be added to
existing research and education programs, not be a replacement for or re-
direction of current programs, which are essential in their own right. The
program would be administered by the USDA in a manner compatible with the
competitive grants program. It should have peer-review panels, a program
council of distinguished scientists with a broad view of basic research for
agriculture, a program director drawn from the academic community on a
rotating basis, and a permanent associate director expert in the field
responsible for effective administration of the program.
When established this program will be a major new initiative developing
biotechnology for tomorrow's agriculture.
INCOME TAX CREDIT FOR INCREASING RESEARCH ACTIVITIES
In order to promote scientific research, the United States Congress
included a tax credit in the Economic Recovery Tax Act of 19811 for
increased spending in qualified research activities. Tax credits are con-
sidered particularly favorable incentives to industry because they result
in a direct reduction of an entity's calculated income tax. The credit,
which is set forth in Section 44F of the Internal Revenue Code (I.R.C.),
provides an inducement for private firms to invest in research. The tax
credit holds a potential to help shape future investment in university re-
II. Basic Provisions of Section 44F
A. Amount of Credit
Taxpayers are allowed a credit against their computed taxes in the
amount of 25% of their increase in qualified research expenses for the
taxable year over their average qualified research expenses of the previous
three years.2 Therefore, a taxpayer may subtract from its calculated tax
an amount equal to 25% of the increased qualified research expenditures for
the taxable year. However, the increase may not be greater than half the
expenses for the determination year3, nor may the amount of the credit
under I.R.C. Section 44F for any particular taxable year exceed the amount
of the taxpayer's income tax liability for the year reduced by the sum of
all other nonrefundable credits.4 If the amount of the credit as
calculated exceeds this limitation, the excess can be applied to each of
the previous three years and to each of the next fifteen years.5
B. Qualified Research
Only expenditures for "qualified research" are eligible for the credit.
Qualified research refers to research in the experimental or laboratory
sense. 6 Qualified research expenditures include generally all "costs in-
cident to the development or improvement of an experimental or pilot model,
a plant process, or product, a formula, an invention, or a similar proper-
ty."7 Qualified research includes research aimed at the discovery of new
knowledge or applications of existing research findings or knowledge. Ex-
penditures for ordinary testing or inspection of materials or products, ef-
ficiency surveys, management studies, consumer surveys, advertising, or
promotions do not qualify for the credit. Also excluded is research con-
ducted outside the United States, research in the social sciences or human-
ities, and research to the extent it is funded by a grant, contract, or
otherwise by another person or entity.10 However, research funded by out-
side sources may constitute qualified research where the taxpayer retains
substantial rights in the research. Amounts includable in the research
credit are subject to an allocation formula.11 The costs of obtaining a
patent, such as attorneys' fees expended in making and perfecting a patent
application, are also eligible for the credit..2 The credit is designed to
benefit businesses which increase expenditures on scientific research aimed
at the discovery of new knowledge or improvements, not those which spend
more on routine or ordinary testing, development, or improvement.
The credit is available for in-house research expenses and for contract
research expenses. In-house research expenses consist of wages, amounts
paid for supplies, and amounts paid for the use of personal property.13
Contract research expenses equal 65 percent of amounts paid by the taxpayer
to anyone other than the taxpayer's employee for the performance of
1. In-house Research Expenses
All wages (as defined for purposes of income tax withholding)15 which
are paid to employees for qualified services may enter into the
computation of the credit. If an employee performs both qualified
services and nonqualified services, the taxpayer can only include in
credit calculations those wages which are apportioned to the conduct of
qualified research.16 The entire amount of an individual's wages may be
taken into account if substantially all of the individual's duties
consist of qualified research, support, or supervision.17
Qualified services are either the performance of qualified research
or the direct supervision or support of qualified research activities.8
Direct supervision of qualified research activities means the immediate
supervision of those who are engaged in the actual conduct of qualified
research, such as a research scientist who supervises laboratory experi-
ments.19 Direct support means services in direct support of those en-
gaged in actual research and in direct support of those engaged in direct
supervision.20 Direct support personnel include a secretary who types
laboratory reports, a laboratory worker who cleans equipment, a clerk who
compiles research data, and a machinist who fabricates part of a labora-
tory model.21 Wages paid or incurred to an employee constitute in-house
research (and thus are includable in the computation of the credit) to
the extent the employee engages in qualified services.22
Expenditures for supplies used in the performance of qualified
research and payment for the right to use personal property may also be
included in the computation of the research credit as long as they are
used in the performance of qualified services.23 Amounts includable in
personal property expenses are those paid to another person for the right
to use personal property in the conduct of qualified research
Apparently, lease expenses or other charges for research use of computers
and laboratory equipment qualify as research expenses. Supplies include
all tangible property other than land, improvements to land, and property
that is subject to depreciation allowance.25 Generally, any overhead
expenses such as maintenance, utilities, or administration are indirect
research expenditures and are not includable in the credit.26 However,
expenditures for utilities which are necessary for the research or
experimentation beyond that routinely needed may be entered into the
computation of the credit by the taxpayer.27 Any expenses paid or
incurred directly for qualified research activities are eligible for
computing the credit for increasing research activities.
2. Contract Research Expenses
Contract research expenses include 65 percent of amounts paid by the
taypayer to another person (other than to employees of the taxpayer) for
qualified research, and that amount may be added in the computation for
the research credit. 28 TO qualify, contract research expenses must be
incurred pursuant to an agreement entered into before the qualified
research is performed.29 The agreement must provide that the research is
to be performed on behalf of the taxpayer and that the taxpayer will bear
the expense whether or not the research is successful. 30 The party con-
ducting the research must do so on behalf of the taxpayer, i.e., the
taxpayer must be entitled to the results. 31 The taxpayer may include the
payment only in the year during which the research is actually conducted.32
C. Carrying on a Trade.or Business
Only expenses which relate to a particular trade or business being
carried on by the taxpayer are eligible for the research credit.33 Con-
tract research expenses do not qualify if the taxpayer intends to transfer
the product of the research to another in exchange for a license or royalty
payments, and the taxpayer does not use the product in a trade or business.34
Where the taxpayer is not entitled to the results of the research, i.e.,
retains no substantial rights in the research, the expenses for that re-
search cannot be taken into account for the credit.35 For expenses to
qualify for the credit, the taxpayer must specifically demonstrate that the
expenditures relate to an existing trade or business of the taxpayer.
The proposed regulations, in a provision related to allowance of the
credit to joint ventures, 36 would allow research expenses (other than in
carrying -on a trade or business) to qualify, (1) if all partners are en-
titled to the results of the research and (2) if the partner had carried on
the research that was carried on by the partnership, all the research ex-
penses would have been paid or incurred by the partner in carrying on a
trade or business of the partner. 37 Thus, the trade or business require-
ment for joint ventures is applied at the individual partner level rather
than at the partnership level.
D. Contracts for Basic Research
Corporations38 may add another item to their credit computation; the
requirements for eligible recipients differ in several aspects from the
general provisions. Corporations are entitled to include 65 percent of
amounts paid to specifically defined non-profit organizations, colleges,
universities, scientific research organizations, and research foundations40
for basic research. 41 Basic research is defined as "original investi-
gations for the advancement of scientific knowledge not having a specific
commercial objective." 42 Expenditures do not qualify if the research is
conducted outside the United States 43 or is in the social sciences or
humanities.44 Thus, the payments must be made by corporations to certain
Amounts paid under contracts for basic research are deemed paid "in
carrying on" a trade or business so long as the corporation that incurred
the expenses engages in some trade or business. 4 As in the case of
regular contract research expenses, there must be a pre-existing agreement
between a corporation and a qualified organization. 46 The agreement must
provide that the organization conducting the research will inform the
corporation of the amount of funds expended pursuant to the agreement
within 90 days of the close of each taxable year. 47 Any transfer of
property to the research organization must be contingent on substantial use
of the property for basic research.48 As with ordinary contract research
expenses, amounts are only includable for purposes of the credit to the
extent qualified research is conducted during the taxable year. 49
To qualify as recipients of payments for basic research, colleges and
universities must be educational organizations which are institutions of
higher education, normally maintain a regular faculty and curriculum, have
a regularly enrolled body of students in attendance at the place where
educational activities are carried on,50 and meet the following standards:
(1) admit as regular students only individuals having a high school
graduation certificate or the equivalent; (2) be authorized by the state in
which situated to provide a post-high school educational program; (3) pro-
vide an educational program for which the institution awards a bachelor's
or higher degree, provide a program which is acceptable for full credit
toward such a degree, or offer a program of training to prepare students
for gainful employment in a recognized occupation; and (4) be a public or
other nonprofit institution. 51
Scientific research organizations, to be eligible recipients for
payments for basic research, must be tax-exempt under Section 501(c)(3) of
the Internal Revenue Code (i.e., be operated in a charitable, not-for-
profit manner; net earnings may not inure to the benefit of any individual;
and the organization must not engage in political campaigns or attempt to
influence legislation), must be operated primarily to conduct scientific
research, must not be a "private" foundation, and must perform the re-
A research foundation, to be an eligible recipient for basic research
payments qualifying for the credit, must also be tax-exempt under Section
501(c)(3) of the Internal Revenue Code, be established and maintained by an
organization in existence before July 10, 1981, be organized and operated
exclusively for purposes of making grants to colleges, universities, and
qualified research organizations for basic research, and make an election
to be treated as a private foundation for all purposes except the excise
tax on investment income.52 Research foundations are the only exception to
the general rule that the recipient of the funds must perform the basic
Both scientific research organizations and research foundations must be
tax exempt under Section 501(c)(3) of the Internal Revenue Code.s5 The
regulations state that "an organization may meet the requirements of
Section 501(c)(3) only if it serves a public rather than a private
interest."55 The regulations proceed to state that a "scientific" organi-
zation must be organized and operated in the public interest. 6- The
regulations identify several points as indicating whether research is
carried on in the public interest:
1. Scientific research does not include activities of a type ordinarily
carried out as an incident to commercial or industrial operations such as
testing or materials inspection.57
2. Scientific information is regarded as carried on in the public
a. if the results of the research (including patents, copyrights, pro-
cesses or formulae resulting from the research) are made available to
the public on a nondiscriminatory basis; 58
b. if the research is performed for the United States or a federal a-
gency or for a state or political subdivision;59 or
c. if the research is directed toward benefitting the public such as,
(1) scientific research carried on for the purpose of aiding in the
scientific education of colleges or university students;60
(2) scientific research carried on for the purpose of obtaining
scientific information which is published in a treatise, trade
publication, or in any other form that is available to the interested
(3) scientific research carried on for the purpose of discovering a
cure for a disease; 62or
(4) scientific research carried on for the purpose of aiding a
community or geographical area by attracting new industry to the
community or area.63
Scientific research described in the four subparagraphs immediately
preceding [(c)(1), (c)(2), (c)(3), and (c)(4)] is regarded as carried on
in the public interest even though the research is performed under a con-
tract or agreement giving the sponsors of the research the right to
obtain ownership or control of any patents, copyrights, processes, or
formulae resulting from the research.
3. An organization is not regarded as organized and operated for the
purpose of carrying on scientific research in the public interest and
thus does not qualify as a "scientific" organization under Section
a. it performs research only for its creators which are not tax exempt
under Section 501(c)(3);65 or
b. the organization retains, directly or indirectly, the ownership or
control of more than an insubstantial portion of the patents, copy-
rights, processes, or formulae resulting from its research and does not
make the patents, copyrights, processes, or formulae available to the
public. For this purpose, a patent, copyright, process, or formula is
considered made available to the public if the patent, copyright,
process, or formula is made available to the public on a nondiscrimi-
natory basis. In addition, although the person is granted the
exclusive right to the use of a patent, copyright, process, or formula,
the patent, copyright, process, or formula, is considered made
available to the public if the granting of the exclusive right is the
only practical manner in which the patent, copyright, process, or
formula can be used to benefit the public. In that case, though, the
research from which the patent, copyright, process, or formula resulted
is regarded as carried on in the public interest only if carried on for
a governmental unit, or it is scientific research described in
paragraph 2(c) above.
4. The fact that any organization (including a college, university, or
hospital) carries on research which is not in furtherance of an exempt
purpose described in Section 501(c)(3) does not preclude the organization
from meeting the Section 501(c)(3) requirements so long as the
organization meets the organizational test and is not operated for the
primary purpose of carrying on such research. 67
E. The Base Period
The base period which is used to determine the increase in research ex-
penses for the taxable year is the same for every qualified taxpayer. The
base period research expenses consist of the average qualified research ex-
penses for the three taxable years immediately preceding the taxable year
for which the determination of the credit is being made. Base period ex-
penses can never be less than half the qualified research expenses for the
determination year.69 If the base period expenses equal less than half the
qualified research expenses for the year for which the determination is
being made, the base period expenses are deemed to equal half the qualified
research expenses for the determination year.0 The base period determi-
nation is made by averaging the total qualified in-house and contract re-
search expenses (including basic research expenses) for the previous three
F. Controlled Groups and Groups Under Common Control
For computation of the research credit, all members of a controlled
group of corporations and all trades or businesses which are under common
control are treated as a single taxpayer.7 The credit allowable to each
such entity equals, its proportionate share of the aggregate increase in
qualified research expenses of the entire group.72 These rules are
designed to prevent artificial increases in research expenditures by
shifting expenses among related taxpayers.73 Control is measured by a 50
percent ownership test, either of total voting power or total value of all
shares. 74 The credit due a member of a controlled group or of a group
under common control is determined by taking its proportionate share of the
net increase for the entire group. 7
Despite the many statutory requirements and limitations, the research
credit provides a potentially valuable tool to inspire the expansion of
research.76Although the credit is not as broadly available as the deduction
for research and experimentation expenses,77 it does serve as an added
attraction to investments in research, including university research.
Where an industrial entity wishes to fund a research project at a univer-
sity, the sponsor usually wishes to receive all substantial rights to any
patents that might result from the research in order to take advantage of
the capital gains tax. In that situation, the scenario probably involves a
prearranged sale of the patents in return for license or royalty payments.
A scheme such as this is often contrary to university policy which insists
on pursuing and maintaining all rights to patents. Such an arrangement
would also conflict with the eligibility requirements for the research
credit, in that the research must be intended for the utilization of the
sponsor, not to be transferred away.
The alternatives to the sponsor receiving all substantial rights in
patents could be shaped to take advantage of the research credit. One
possibility is that the agreement provides that the sponsor would receive
an exclusive license to any patents or inventions that result from the
research. An exclusive license should be considered "substantial rights"
in order to qualify for the credit (which does not require the sponsor to
receive all substantial rights). Alternatively, the sponsor could utilize
the basic research provisions to receive the credit on 65 percent of the
research funding. The research credit can provide useful benefits for
businesses if proper tax and business planning is utilized. 78
Pub. L. 97-34, 95 Stat. 241 (1981).
I.R.C. 44F(a)(1)(2). See Prop. Treas. Reg. 1.44F-4(a). As a
general rule, "qualified research" has the same meaning as "research or
experimental expenditures" under I.R.C. 174.
See notes 69 and 70 and accompanying text.
4 .R.C. 44F(g)(1)(A).
5 .R.C. 44F(g)(2)(A).
6I.R.C. 44F(d) states that "qualified research" shall have the same
meaning as "research or experimental expenditures" in I.R.C. 174. For
I.R.C. 174, "research and experimental expenditures" are defined in the
regulations, Treas. Reg. 1.174-2(a). On January 21, 1983, the Department
of the Treasury issued Prop. Treas. Reg. 1.174-2, which restates the old
definition and delineates examples of noneligible activities.
Prop. Treas. Reg. 1.174-2(a).
Ibid. These are prohibited by the existing regulation as well.
0I.R.C. 44F(d)(1)(2)(3); Prop. Treas. Reg. 1.44F-4(d). The proposed
regulations to I.R.C. 44F were published along with Prop. Treas. Reg.
1.174-2, 48 Fed. Reg. No. 15, January 21, 1983.
11Prop. Treas. Reg. 1.44F-4(d)(3). In general, if a taxpayer performs
research for another and retains substantial rights in the research, the
amount paid or incurred by the taxpayer for the research that would
constitute qualified research but for the fact that it is funded (see
I.R.C. 44F(d)(3)) must be reduced by the amount of payments plus the fair
market value of any property to which the taxpayer becomes entitled by
performing the research. The taxpayer may allocate the funding pro rata to
non-qualified and otherwise qualified (i.e., would qualify but for the
funding) research expenses where the taxpayer can establish: (1) the total
amount of research expenses; (2) that the total amount of research expenses
exceeds the funding; and (3) that the otherwise qualified research expenses
exceed 65 percent of the funding. In no event shall less than 65 percent
of the funding be applied against the otherwise qualified research
expenses. The allocation of funding to research expenses shall be applied
separately to each research project undertaken by the taxpayer.
12Treas. Reg. 1.174-2(a)(1), restated in Prop. Treas. Reg.
151.R.C. 44F(b)(2)(D)(i). The term "wages" is defined by reference to
I.R.C. 3401(a) which defines compensation subject to income tax with--
holding. Compensation not subject to withholding is not eligible for the
16.R.C. 44F(b)(2)(B). The total wages of an employee considered to
be in-house research expenses may be calculated by multiplying the total
amount of wages paid or incurred during the year by the ratio of time spent
in the conduct of qualified services to the total time spent by the
employee performing services for the taxpayer. Prop. Treas. Reg. 1.44F-2
(a)(1). If at least 80 percent of an employee's time is devoted to the
conduct of qualified research, no allocation between qualified and
nonqualified services is required. If substantially all of an employee's
services constitute qualified services, all of the employee's wages are
includable in qualified research expenses. Qualified services amount to
substantially all of the services performed by an employee only if the
services equal at least 80 percent of the employee's wages for the taxable
year. Prop. Treas. Reg. 1.44F-2(d)(2).
18I.R.C. 44F(b)(2)(A)(i), 44F(b)(2)(B)(i)(iii); Prop. Treas. Reg.
1.44F-2(c). Prepaid amounts are treated as expenses in the year during
which the qualified research is conducted and not in the year paid. I.R.C.
19Prop. Treas. Reg. 1.44F-2(c)(2).
20Prop. Treas. Reg. 1.44F-2(c)(3).
22Prop. Treas. Reg. 1.44F-2(d)(1).
23I.R.C. 44F(b)(2)(A)(ii)(iii); Prop. Treas. Reg. 1.44F-2(b). The
characterization of personal property acquired under the "safe harbor"
leasing arrangements of I.R.C. 168(f)(8) does not govern for purposes of
the credit. Prop. Treas. Reg. 1.44F-2(b)(3). Also, in-house research
expenses do not include amounts paid or incurred after March 31, 1982 for
the right to use personal property in research, to the extent that the tax-
payer receives or accrues payments as the lessor of substantially identical
property. Technical Corrections Act of 1982, Pub. L. 97-448, Sec.
102(h)(2), 96 Stat. 2372 (1982).
24I.R.C. 44F(b)(2)(A)(iii); Prop. Treas. Reg. 1.44F-2(b)(3).
26Prop. Treas. Reg. 1.44F-2(b)(1).
27Prop. Treas. Reg. 1.44F-2(b)(2).
28I.R.C. 44F(b)(1)(B), 44F(b)(3).
29Prop. Treas. Reg. 1.44F-2(e)(2)(i).
30Prop. Treas. Reg. 1.44F-2(e)(2)(ii)(iii).
31Prop. Treas. Reg. 1.44F-2(e)(3).
321.R.C. 44F(b)(3)(B); Prop. Treas. Reg. 1.44F-2(e)(4). Prepaid
amounts are treated as expenses in the year during which the qualified
research is conducted and not in the year paid. I.R.C. 44F(b)(3)(B).
33I.R.C. 44F(b)(1); Prop. Treas. Reg. 1.44F-2(a)(1). The test for
eligible expenses is not the same as for the research and experimentation
deduction under I.R.C. 174, which only requires that the expenditure be
made "in connection with" a trade or business. Eligibility for I.R.C. 44F
is to be determined by the more restrictive rules of I.R.C. 162
(deductions for business expenses). Thus, certain expenses might qualify
for I.R.C. 174 but not I.R.C. 44F. The rule for I.R.C. 162 is that
"ordinary and necessary expenditures directly connected with or pertaining.
to the taxpayer's trade or business" are deductible. Treas. Reg. 1.162-1.
See Prop. Treas. Reg. 1.44F-2(a)(4)(i). The proposed regulations provide
that the requirement of carrying on a trade or business is to be applied at
the partnership level without regard to the trade or business of any
partner. Research and development limited partnerships that exist
principally for financing purposes are not likely to meet this requirement.
34Prop. Treas. Reg. 51.44F-2(a)(1). Also, while expenses made in
developing a new business or product line would be expenses "in connection
with" the taxpayer's trade or -business and eligible for an I.R.C. 5174
deduction, expenses paid prior to commencing a new business are not paid
"in carrying on" a trade or business and are not eligible for I.R.C. 44F
treatment. Thus, the proposed regulations deny the credit for research
relating to a potential trade or business (or relating to a product the
sale of which would constitute a new trade or business for the taxpayer).
Prop. Treas. Reg. 1.44F-2(a)(2). See Staff of the Joint Committee on
Taxation, General Explanation of the Economic Recovery Tax Act of 1981 122
(1981): "....LNJo credit is available for research expenditures relating to
a potential trade or business which the taxpayer is not carrying on at the
time the research expenditures are made." Neither the proposed regulations
nor the committee reports make clear when the expansion of an existing
business becomes a new trade or business. A contract research expense is
not eligible for the credit if the product or result of the research is
intended to be transferred to another in return for license or royalty
payments and the taxpayer does not use the product of the research in the
taxpayer's trade or business. Prop. Treas. Reg. 1.44F-2(a)(1).
35Prop. Treas. Reg. 1.44F-2(a)(3)(i). However, the taxpayer does not
need to retain all substantial rights.
36S. Rep. 97-144, 97th Cong., 1st Sess. 224, reprinted in 1981 U. S.
Code Cong. & Ad. News 314.
37Prop. Treas. Reg. 1.44F-2(a)(4)(ii).
38"Corporation" is defined in I.R.C. 170(e)(4)(D). That section
merely states that corporations do not include Chapter S corporations,
personal holding companies, or service organizations.
40I.R.C. 44F(e)(2). Qualified organizations include educational
organizations as defined in I.R.C. 170(b)(1)(A)(ii) which are also
institutions of higher education as defined in I.R.C. 3304(f) and I.R.C.
44F(e)(4). Qualified organizations also include tax exempt organizations
(defined in I.R.C. 501(c)(3)) that make grants to research organizations
for basic research which are not private foundations.
42Ibid. See I.R.C. 44F(e)(3)(A)(B).
I.R.C. 44F(e)(3)(A). The exclusion covers wages paid or accrued to
businesses which perform otherwise qualified research outside the United
States as well as all contract research conducted outside the United
States. Amounts paid to an employee for services performed both within and
without the United States must be apportioned. Prop. Treas. Reg.
44I.R.C. 44F(e)(3)(B). "Research in the social sciences or
humanities" encompasses all areas of research other than research in the
laboratory science. Prop. Treas. Reg. 1.44F-4(c).
45Prop. Treas. Reg. 1.44F-5(b).
46Prop. Treas. Reg. 1.44F-5(d)(1).
47rop. Treas. Reg. 1.44F-5(d)()).
4Prop. Treas. Reg. 1.44F-5(d)(2)(i).
Prop. Treas. Reg. 1.44F-5(d)(2)(ii).
"Prop. Treas. Reg. 1.44F-5(c).
53 C. 44F(e)(4)(A).
55Treas. Reg. 1.501(c)(3)-1(d)(1)(ii).
56Treas. Reg. 1.501(c)(3)-1(d)(5)(i).
5Treas. Reg. 1.501(c)(3)-1(d)(ii).
59Treas. Reg. 1.501(c)(3)-l(d)(iii)(b).
60Treas. Reg. 1.501(c)(3)-1(d)(iii)(c)(1).
61Treas. Reg. 1.501(c)(3)-1(d)(iii)(c)(2).
62Treas. Reg. 1.501(c)(3)-l(d)(iii)(c)(3).
6Treas. Reg. 1.501(c)(3)-1(d)(iii)(c)(4).
65Treas. Reg. 1.501(c)(3)-1(d)(v)(a).
66Treas. Reg. 1.501(c)(3)-1(d)(iv)(b).
6Treas. Reg 1.501(c)(3)-1(d)(v).
681.R.C. 44F(c); Prop. Treas. Reg. 1.44F-3. Transitional rules apply
to the first two years of the new credit. For the first determination year
ending after June 30, 1981, the base period is the first preceding taxable
year. For the second 'determination year ending after June 30, 1981, the
base period consists of the two immediately preceding taxable years.
70Prop. Treas. Reg. 1.44F-3(c).
I.R.C. 44F(f)(1); Prop. Treas. Reg. 1.44F-6(a).
See Joint Committee on Taxation, General Explanation of the Economic
Recovery Tax Act of 1981 133 (Dec. 29, 1981).
74Prop. Treas. Reg. 1.44F-6(a)(3). The control test is detailed in
75Prop. Treas. Reg. 1.44F-6(a)(4).
76See Damsky, Gerald, "Integration of the Section 44F Research Tax
Credit into the Research Investment Venture," Taxes -- The Tax Magazine 127
(February, 1983); Wood, Robert W., "Research and Developmen- Expenditures
Under the Economic Recovery Tax Act, Taxes -- The Tax Magazine 777
(November, 1981); Feinschreiber, Robert, '"Research Cont-racts Generate Tax
Credit," Taxes -- The Tax Magazine 198 (March, 1982), and "Qualified
Research Contributions Under the '81 Act," Taxes -- The Tax Magazine 4
(January, 1982), and Bravanec, Lorence L. & CTair J-T--- on, "Contract
Research under the New Research Credit," The Tax Advisor 559 (October,
78See Damsky, supra note 76.
See Damsky, supra note 76. n
INCOME FROM PATENTS AND CERTIFICATES OF PLANT VARIETY PROTECTION:
A SOURCE OF SUPPORT FOR RESEARCH
Royalties and licensing fees from patents in general and the legal
protection of new plant varieties provide a potential source of resources
for supporting research. In view of the rather static level of the tradi-
tional sources of support for agricultural research in the public sector,
it is imperative that academic institutions fully explore this potential
source of revenue for supporting agricultural research. With this in mind,
we have developed a concise statement of patent law and considerations as
they apply to patenting in n '-i ;- ; the patenting of genetically
engineered entities such as vaccines, hormones and other agricultural chem-
icals, and new microbial and higher plant life forms. In order to preserve
inventions and discoveries for patent protection, it is helpful to be aware
of the requirements for patent applications and the circumstances under
which patent protection might be denied. This information is presented as
pertinent background material and must be utilized in the context of exist-
ing institutional rules, regulations, and protocols.
Patents are granted by the government to encourage invention. United
States patent law is authorized by Article I, section 8 of the Constitu-
tion, and the first patent law was enacted in 1790. A patent holder is
granted the exclusive right by the government to make, use, and sell the
patented invention. In return for this patent monopoly, the patent holder
must disclose the invention to the public. Rights in patents are con-
trolled exclusively by statute and vary from country to country. In the
United States, the patent monopoly lasts for 17 years. Patents are the
only method of protecting inventions without keeping them secret.
Patentable subject matter is described in the Patent Code (Title 35 of
the United States Code) as "any new and useful process, machine, manufac-
ture or composition of matter, or any new and useful improvement thereof."
All "utility" patents must fall into one of these categories of patentable
subject matter. Separate provisions of the Patent Code cover patents for
designs and patents for plants. Design patents are granted for new,
original, or ornamental designs of articles of manufacture. Plant patents
are issued for new varieties of asexually reproduced plants. New varieties
of sexually reproduced plants are afforded protection similar to patents by
the United States Department of Agriculture through certificates of plant
variety protection. The exact requirements for the issuance of a patent
(or certificate of plant variety protection) depend upon the particular
type of patent that is being sought.
II. Review of Patents and Certificates of Plant Variety Protection
A. Utility Patents
Patentable subject matter includes both processes (methods or means of
producing a certain result) and products (machines, manufactures, and
compositions of matter). The United States Supreme Court has stated that a
discovery is patentable as long as it is the result of human intervention,
i.e., as long as it is manmade.5 This includes living organisms.
After it is determined that the invention constitutes patentable sub-
ject matter, the invention must demonstrate utility, novelty, and non-ob-
viousness. The standard for the demonstration of utility (or usefulness)
is nominal. An invention is useful if it can be beneficially used for its
intended purpose. The invention must not be harmful or frivolous.
The requirement that an invention be novel, or new, is included in the
Patent Code to insure that articles already in use by the public will
remain in the public domain free from any exclusive rights to their use.
An invention is novel unless it was known or used by others before applica-
tion for a patent or made public more than one year prior to the date of
the application.6 An invention is considered to have been known or used by
others when all eilenits or tle invention are found in the prior art. In
order to defeat the novelty requirement in a patent application, a prior
invention must be a complete invention which has been reduced to practice.
If a process or product is in the public domain prior to the applicant's
invention, the invention is "anticipated" by the prior art and does not
meet the novelty test. To grant a patent on a discovery which is in the
public domain--to give someone a monopoly on its manufacture, use, and sale
--would defeat the purposes of the patent system.
Nonobviousness is a finer degree of novelty. A patent application must
demonstrate that the subject matter sought to be patented is so different
from the prior art that it would not have been obvious to a person having
ordinary skill in the art to which it pertains at the time the invention
was made.7 Patent monopolies are only granted to those who in fact advance
the state of the art. To receive a patent, an invention must provide a new
solution or idea which is beyond the knowledge of the ordinary technician
who maintains a full understanding of the relevant prior art.
B. Design Patents
Design patents are granted to protect new, original, or ornamental
designs of articles of manufacture. The intent is to protect the appear-
ance of useful objects. The purpose for including design patents in the
Patent Code is to encourage ornamentation and beautification in the manu-
factured arts in order to increase the saleability of articles and satisfy
the aesthetic sense of the public. If the characteristics of a design have
a useful function, a utility patent should be sought.
C. Plant Patents
The requirements for plant patents differ from those for utility pat-
ents. Only new varieties of plants which are asexually reproduced, i.e.,
propagated by grafting, budding, cutting, layering, cloning, etc., are
subjects for patenting.8 In place of utility, a plant must demonstrate
distinctness9 in order to receive patent protection. The application for a
plant patent must also evidence novelty and nonobviousness. A plant is
distinct when, considering the aggregate of its characteristics, it differs
from all other varieties of plants. The difference might refer to suita-
ability to a particular environment or special milling, grinding, or other
qualities. A person who breeds a plant variety which has been asexually
reproduced, and which is distinct, novel, and nonobvious may be granted a
D. Certificates of Plant Variety Protection
Protection for new varieties of sexually reproduced plants is provided
by the United States Department of Agriculture. The Department of Agri-
culture issues certificates of plant variety protection for sexually repro-
duced plants which are distinct, uniform, and stable.10 A certificate of
plant variety protection affords similar protection to a patent in that its
owner may exclude others from producing, using, and selling the certified
plant. A certificate of plant variety protection lasts for 18 years. The
distinctness requirement is like that for a plant patent.
A sexually reproduced plant demonstrates distinctness where one of its
aggregate of characteristics displays an advantage or difference over all
existing varieties. A new variety is distinct when it clearly differs by
one or more identifiable, morphological, physiological, or other character-
istics from all other varieties of plants in the public domain.
Uniformity and stability are shown through the experimental results of
production of a new variety over three generations. To be uniform, the new
variety must show variations that are describable, predictable, and commer-
cially acceptable. A new variety satisfies the stability test when it
remains essentially unchanged with regard to its essential and distinct
characteristics when sexually reproduced.
III. Persons Entitled to Receive Patents
Only the original inventor is entitled to receive a patent for an
invention.11 To qualify as an original inventor, one must conceive the new
idea which forms the basis of the invention. The status as original in-
ventor is not lost by adopting suggestions made by another during the
course of developing an invention. The threshold question is whether the
invention or discovery is the product of the inventor's own ingenuity and
When an original idea is developed by more than one inventor indepen-
dently, only the one who developed the idea first is entitled to the pat-
ent. The time of formulation of the idea (referred to as conception) is
controlling, as long as the inventor is reasonably diligent in reducing the
invention to practice.12 Conception of the invention is the mental form-
ulation of the invention in every detail, while reduction to practice
refers to actual physical construction and testing of the invention that
fulfills the contemplated utility. Therefore, an original inventor who is
the first to conceive a patentable idea is entitled to a patent on the
resulting invention even though another original inventor may reduce it to
practice first. The requirement is that the first to conceive the idea
exercise reasonable diligence in reducing the invention to practice.13
These rules will differ for patents outside the United States.
If individuals act jointly, there may be more than one first and orig-
inal inventor. In such a case, no single inventor may apply for a patent
alone; all joint inventors must apply together. Joint invention is the
product of collaboration of the inventive endeavors of two or more persons
working toward the same goal. It is not necessary that the entire inven-
tive concept occur at once or that the joint inventors physically work
together; the process may occur step-by-step. One is not considered a
joint inventor who merely carries out instructions of an inventor, who
makes suggestions to an inventor, or who contributes to minor features of
an invention. "Joint inventorship" suggests united efforts of more than
one individual in the conception of the main idea in the creation of an
invention or discovery.
IV. Loss of Patent Rights
Despite completion of the requirements for proper subject matter and
original inventorship, the right to receive a patent may be lost because of
certain statutory bars, or procedural safeguards. After an invention
becomes public, the inventor must apply for a patent within one year, or
the right to a patent is lost. An invention can become public through a
written article which describes the invention.14 Any public use of an
invention starts the one year period running. However, before the inven-
tion functions satisfactorily, public research and experimentation will not
start the one year period. Experimental use is determined by the intent of
the inventor and whether the inventor parts with dominion and control of
the embodiments of the invention. An inventor makes an invention public
through attempts to exploit it commercially.is
Although United States law grants inventors one year following public
disclosure of an invention to file a patent application, this is generally
not the case in foreign countries. However, the filing of an application
for a United States patent will usually allow the inventor one year to file
for foreign patents.
A first and original inventor may also lose the right to a patent by
abandoning, suppressing, or concealing the invention.16 Loss of the right
to receive a patent may be avoided by filing a patent application within a
reasonable time of completion of an invention. What is a reasonable time
is decided in light of the facts of each case.
The purpose of the statutory bars is to require inventors to employ due
diligence in asserting rights to patents. The goal of the patent system is
public disclosure, and delays in that disclosure serve to hinder the pro-
cess. Thus, even where one has developed a useful, new, and nonobvious
process, machine, manufacture, or composition of matter, the right to a
patent monopoly may be lost where proper precautions are not followed in
making application for a patent.
V. Mechanics and Procedures
After an inventor has developed a patentable invention, patentability
must be proved to the Patent and Trademark Office. The application for a
patent consists of a petition, a specification of the invention with claims
for a patent, drawings where necessary, an oath, and the filing fee. The
petition is merely a requirement of the Patent and Trademark Office rules
that the applicant formally request the Office to consider the application.
The specification is a detailed description of the invention. Drawings are
included, when helpful, depending upon the particular subject matter. The
oath that is required is simply a declaration that the applicant believes
himself to be the original and first inventor. Filing of the application
becomes final upon receipt in the Patent and Trademark Office, and the
entire application is held in confidence until issuance of the patent.
The specification must fulfill the requirement for adequate disclosure.
Disclosure is the consideration the public receives in return for a patent
monopoly from the government. The specification must set forth and de-
scribe 1) the invention, 2) the manner and process of making and using the
invention (the "enablement" requirement), and 3) the most efficient manner
of carrying out the invention that the inventor contemplates (the best mode
requirement). The Patent Code states that the invention shall be set forth
"in such full, clear, concise, and exact terms as to enable any person
skilled in the art to which it pertains...to make and use...said inven-
tion."17 The conclusion of the specification must include one or more
claims which particularly and distinctly describe the subject matter which
qualifies for a patent.
The claim or claims define the invention for two purposes. The first
is for application of the conditions of patentability: proper subject
matter, utility, novelty, nonobviousness, freedom from statutory bars, and
adequate disclosure. The second purpose is for determining infringement.
The claims are included in order to show that the invention is a patentable
means of performing a function, not to recite the structure and how to
construct or use the invention, which are described by the specification.
The claims are to be particular and distinct in order to facilitate the
determination of patentability and to provide appropriate warning to in-
Drawings should be included with the application if they facilitate
either the specification or the claims. The Patent and Trademark Office
has wide discretion over this requirement. The current practice, however,
is that models, exhibits, and specimens are neither required nor allowed as
part of the application. These might be required by the patent examiner
during the review of the application.
The entire patent application is kept secret by the patent examiners
until the patent is issued. No information concerning the application is
revealed without the authority of the applicant. Once the patent is is-
sued, all papers relating to the case in the file of the patent are open to
inspection by the general public.
VI. Examination and Prosecution
Once application is made to the Patent and Trademark Office, the Appli-
cation Division assigns the application to an examining group according to
subject matter. The actual examination is conducted by an individual exam-
iner within the particular group. The examiner studies the application to
determine compliance with the statutes and rules. The examiner searches
the prior art in the particular field in order to determine novelty and
nonobviousness. Following the study of the application and search of the
prior art, the examiner notifies the applicant of the findings and reasons
for those findings. The examiner may reject or object to any or all claims
or make further requirements to the applicant regarding the application.
The applicant may then reply to the examiner's findings and request
reexamination. An applicant who responds within six months of the exam-
iner's action to each ground of objection and/or rejection, is entitled to
a reexamination. The applicant's action then consists of: 1) amendment,
addition, or dropping of claims, 2) amendment of the specification, or 3)
presentation of evidence to support the application. An interview with the
examiner may be requested by the applicant to discuss the disposition of
the application. The applicant may choose to abandon the claim.
The examiner reexamines the application after the reply is received.
The reexamination is made with reference to any additional information or
material that is provided by the applicant. Notification of acceptance or
adverse decision by the examiner is made to the applicant. The process of
action and response may continue until the examiner indicates rejection is
final. Rejection is final once a clear issue is developed between the
examiner and the applicant. Action following final action of the Patent
and Trademark Office is limited to: 1) appeal or cancellation of rejected
claims or 2) compliance with all requirements and objections, or petition
to the Commissioner of patents for further consideration.
Amendment of the application is permitted after filing but the intro-
duction of new matter is prohibited. Departure from or addition to the
original disclosure may only be made by filing a "continuation-in-part."
The purpose of amendments is to clarify or complete information which was
disclosed or suggested in the original application.
Appeal of final rejections may be made to the Board of Appeals of the
Patent and Trademark Office. The Board of Appeals can affirm or reverse
the examiner's action. If the Board affirms a rejection, it is permitted
to rely on a different ground than the examiner. The jurisdiction of the
Board of Appeals of the Patent and Trademark Office is limited to adverse
decisions in rejecting claims; it has no jurisdiction to review allowed
From an adverse decision of the Board of Appeals of the Patent and
Trademark Office, a dissatisfied applicant may either appeal the decision
to the United States Court of Appeals for the Federal Circuit or file a
civil action against the Commissioner of Patents in the United States
District Court for the District of Columbia. Appeals to the Court of
Appeals for the Federal Circuit are limited to the evidence that has been
produced before the Patent and Trademark Office. Civil action in the
District Court, on the other hand, is de novo, and evidence may be admitted
which had not been produced to the Patent and Trademark Office in the
original examination of the patent application.
After allowance of a patent application, the Patent and Trademark
Office mails the appropriate notice to the applicant. Upon payment of the
issuing fee, the patent is granted, giving the owner the right to exclude
all others from making, using, or selling the invention throughout the
United States for 17 years.
In addition, maintenance fees must be paid during the life of the
patent for United States and foreign patents in order to keep the patent in
current status. The case is withdrawn from the Patent and Trademark Office
after issuance of the patent except under limited circumstances.18
Efficient records greatly facilitate patent applications and the en-
forcement of patents. The conception and reduction to practice of a new
innovation are proved primarily by laboratory records. Complete and ac-
curate records aid in establishing that the particular invention is patent-
able, that the inventor is the first and original, and that proper proced-
ures have been followed. Once an efficient record-keeping system is made
routine, it will become an invaluable asset for research. Greater assur-
ance against challenges of proof in support of a patent application is
provided by following a formalized system of recording and maintaining
research information. The following are offered as suggestions for such a
A. Good practice is to use bound notebooks, as the security of looseleaf
and spiral bound notebooks is suspect. Each book should be titled and
numbered to facilitate the security of research information.
B. In order to be prepared to prove the elements of the research record,
pages should be numbered consecutively. If both sides of the page are
used, each side should be numbered, and this practice should continue
throughout the book.
C. To insure that there is no question as to which entry belongs to which
day, each entry should be dated on the line immediately below the last line
of that entry. Do not skip space for an idle day; either begin the next
entry immediately below the last one, or make an entry stating that no work
was performed on that day.
D. Handwrite all entries in ink to make a permanent and easily identi-
fiable record. Typewritten notes may present problems of proof, even
though they are accurate and complete. To avoid challenge based upon
allegations that a research record was developed at a later time, write on
the entire page, and draw a line through blank spaces. Errors or other
material to be deleted should be crossed out with a single line. Mistaken
entries should remain readable.
E. All attachments should be affixed permanently to the notebook; staples
and paper clips are susceptible to challenge. These attachments should be
referred to in an entry. Material that cannot be incorporated into the
notebook should be keyed to an entry.
F. Sign and date each page or entry. Each investigator should sign note-
book entries. It is often helpful for support personnel to maintain sepa-
rate notebooks from the researchers.
G. It is helpful in preparing a research record for patent purposes for a
technically knowledgeable person to read the notebook material and period-
ically sign the notebook, indicating an understanding of the material.
This corroboration is especially important after patentable ideas are
conceived. The corroborator or witness cannot be one of the co-inventors,
and he should understand the subject matter of the investigation.
H. A separate notebook for each project provides a much clearer and more
I. Keeping research notebooks in a central location helps insure that
notebooks are used only for research purposes. Ideally, research notebooks
are checked in and out by the researcher. This helps provide accurate and
J. If the researcher sets aside a time for making notebook entries and
faithfully observes it, a routine will develop that will provide an appro-
priate record. Also, by making prior arrangements with colleagues to serve
as corroborators, the record will be properly witnessed.
135 U.S.C. 101.
35 U.S.C. 171.
335 U.S.C. 161.
47 U.S.C. 2321 et seq.
Diamond v. Chakrabarty, 447 U.S. 303 (1980).
35 U.S.C. 102.
735 U.S.C. 103.
Plants reproduced by seed are not eligible for patent protection.
See below on certificates of plant variety protection.
935 U.S.C. 161.
107 U.S.C. 2321 et seq.
135 U.S.C. 102. Only individuals may be granted a patent.
Individuals may assign patents to corporate entities or others.
See Marconi Wireless Tel. Co. v. United States, 320 U.S. 1 (1942).
3See Application of Nelson, 420 F.2d 1079 (C.C.P.A. 1970) and Gould
v. Schawlow, 363 F.2d 908 (C.C.P.A. 1966).
1435 U.S.C. 102(b). The publication or article must describe the
invention clearly and completely to start the one year limit. It
is not enough merely to refer to the invention vaguely or generally.
Sale of the invention or offers to sell make the invention public.
See Piet v. United States, 283 F.2d 693 (9th Cir. 1960) and Akron Brass
Co. v. Elkhart Brass Mfg., 353 F.2d 704 (7th Cir. 1965).
1635 U.S.C. 102(c).
1735 U.S.C. 112.
18Reexamination may occur where examples of the prior art are
discovered subsequently either by the Commissioner of Patents or by
GUIDELINES FOR THE DEVELOPMENT OF A UNIVERSITY/INDUSTRY RESEARCH CONTRACT
Research opportunities with highly potential economic benefits
involving basic and applied research, which colleges and universities are
uniquely qualified to provide, place heavy emphasis upon the relationships
of the university and university personnel to the research funding source.
Even as institutions with somewhat different traditions, cultures, and
short-run objectives, private business firms and higher education generally
share long-term goals. The development of a knowledgeable and informed
citizenry and improvement of levels of living for the entire human family
are objectives generally held in common by the private sector and by
colleges and universities.
The transfer of technical knowledge and skill from educational
institutions to industry contributes importantly to technological advance,
which, in the long-run, is generally viewed as beneficial to society.
Under the assumption that research is a desirable public good, efforts to
reduce the time necessary for such transfers and to expedite the conduct of
research within colleges and universities should be viewed as clearly in
the national interest.
However, close working relationships between university and industry
also pose problems that merit attention as arrangements are developed and
implemented. In particular, careful attention should be given to
protecting the integrity of cooperating universities as institutions of
This guide for the development of a contract is intended to provide
the basis for negotiating a cooperative project between a research
university and an industrial sponsor. In these times of declining
government funding of basic research, it has become necessary to turn *to
the private sector for additional capital. The tax incentives of the
Internal Revenue Code for contributions to research are reflected in the
commentary of these guidelines. Every provision contained herein cannot be
adopted by all universities and all sponsors; but rather a contract of this
nature must be molded to fit within the objectives and policies of the
individual contracting parties. The comments following each section
attempt to highlight the most important policy issues and suggest some
alternatives. This contract outline is merely a guide which ultimately
must be form-fitted to attain individual objectives.
II. Memorandum of Agreement
This memorandum of agreement is entered into on
between (the University) and
(the Sponsor) for the
establishment of a research project entitled,
to be conducted from
to at a total estimated cost of
THE MEMORANDUM OF AGREEMENT SHOULD SET FORTH CLEARLY THE DATES
DURING WHICH THE PROJECT SHALL TAKE PLACE. THE PARTIES MAY WISH
TO STIPULATE THAT THE DURATION OF THE PROJECT SHALL BE MUTUALLY
NEGOTIATED AT A LATER DATE. CONDITIONS UNDER WHICH THE PROJECT
WILL TERMINATE MIGHT ALSO BE INCLUDED. ONE SUCH CONDITION COULD BE
DEATH OF THE PRINCIPAL INVESTIGATOR AND THE INABILITY TO FIND A
MUTUALLY ACCEPTABLE REPLACEMENT.
III. General University Purpose
Whereas the University is a publicly supported institution, the parties
to this agreement must recognize the paramount importance for this project
to benefit the general public. The Sponsor should be rewarded from the
results of the research, but it should not be provided a financial advan-
tage through privileged use of information that is wholly or partly derived
from the use of public funds. It is of great importance for the University
to promote the free flow of information at all stages of research. The
University exists for the advancement of science and technology and for the
furtherance of education; the research project under this agreement should
not be permitted to compromise the purpose of the University in an un-
IV. General Purpose of the Sponsor
The parties to the agreement must recognize that the primary objectives
of the Sponsor are commercial. The Sponsor's purpose as a commercial
entity is to develop products, processes, and services for the generation
of profits. On the other hand, it must be emphasized herein that the
Sponsor (as well as Industry in general) provides intellectual stimulation
and interpretation of research that is valuable to the University. The
research project under this agreement should not be allowed to hinder
unreasonably the Sponsor's interest in protecting and exploiting intel-
lectual property rights which either have originated with the Sponsor or
which originate from the Research Project itself.
COMMENTS--SECTIONS III AND IV
SECTIONS III AND IV ARE INCLUDED AT THE OUTSET OF THE CONTRACT IN
ORDER TO EMPHASIZE THAT THIS IS A UNIQUE AGREEMENT. THERE ARE
IMPORTANT POLICY CONSIDERATIONS THAT MUST BE EVALUATED BY BOTH
PARTIES BEFORE ENTERING INTO THIS TYPE OF RESEARCH PROJECT. THESE
CONSIDERATIONS ARE NECESSARILY CONFLICTING AND MUST BE COMPROMISED
TO SOME EXTENT BY EACH SIDE. ALL THE TERMS OF THIS TYPE OF AGREE-
MENT MUST BE SPECIFICALLY TAILORED TO THE PARTICULAR NEEDS AND
DESIRES OF THE PARTIES INVOLVED. A SIGNIFICANT AMOUNT OF VARIATION
WILL OCCUR DEPENDING UPON THE VARIOUS POLICIES OF THE UNIVERSITY
AND THE SPONSOR.
AN AGREEMENT OF THIS NATURE MIGHT ALSO BE UTILIZED TO FUND AN
ENTIRE RESEARCH PROGRAM, WHICH INCLUDES MANY DIFFERENT PROJECTS.
V. Scope of the Research Project
The research project under this agreement is to consist of
THIS SECTION CAN BE EITHER VERY BROAD OR VERY DETAILED, DEPENDING
UPON THE PARTICULAR PROJECT AND THE DESIRES OF THE PARTIES. THE
UNIVERSITY MAY NOT WISH TO DIVULGE GREAT DETAIL WITHOUT SUFFICIENT
ASSURANCES THAT THE SPONSOR WILL MAKE PAYMENTS. A CLAUSE FOR
MINIMUM PAYMENTS OR FOR PAYMENTS OVER A MINIMUM PERIOD OF TIME
MIGHT PROVIDE A WORKABLE SAFEGUARD. THE SPONSOR MAY WISH TO BE
INFORMED OF THE EXACT SCOPE AND PARAMETERS OF THE PROJECT IN ORDER
TO MEET ITS NEEDS AND TO ASSURE THAT ITS FUNDS ARE NOT DIRECTED
TOWARD NEEDLESS OR FRIVOLOUS INVESTIGATIONS.
WHERE THE SPONSOR IS GRANTED BROAD OR DIRECT RIGHTS TO INTELLECTUAL
PROPERTY WHICH IS DERIVED FROM THE RESEARCH PROJECT, OR WHERE
EXCLUSIVE FUNDING CLAUSES ARE INVOLVED, IT IS DESIRABLE TO DESCRIBE
THE RESEARCH PROJECT IN AN ATTACHMENT TO THE BASIC AGREEMENT. IN
THIS CASE, A SUGGESTED SCHEME WOULD BE TO DEFINE THE RESEARCH
PROJECT AS NARROWLY AS POSSIBLE AND PROVIDE A FRAMEWORK BY WHICH TO
REVISE THE DIRECTION OF THE RESEARCH BY MUTUAL CONSENT OF THE
PARTIES. THESE REVISIONS SHOULD BE DESIGNED TO LEAVE THE TERMS OF
THE BASIC AGREEMENT INTACT. PROGRESS OF THE RESEARCH SHOULD BE
REVIEWED PERIODICALLY, ALLOWING BOTH THE UNIVERSITY AND THE SPONSOR
TO RECOMMEND CHANGES IN THE SCOPE OF THE PROJECT. JOINT
DETERMINATION OF ANY CHANGES SHOULD BE MADE IN AN APPROPRIATE
MODIFICATION OF THE ATTACHMENT.
VI. Duties of the University
The primary obligation of the University is to exercise its best
efforts to achieve the desired results of the project within the estimated
costs. The University will appoint a Principal Investigator, subject to
the approval of the Sponsor, whose duties will be to direct the research
project. The Principal Investigator will insure that periodic reports on
the progress of the project are transmitted to the Sponsor. These reports
shall include research results, projections of the future, prior notice of
publications concerning the research, and an accounting of disbursements of
The University will provide the Sponsor with prompt notice of its
desires to pursue patent protection for research results. The University
will undertake application and prosecution of patents with the necessary
cooperation and aid from the Sponsor. In the event the University does not
wish to pursue patent protection, the Sponsor may do so at its expense and
with University cooperation.
The University cannot insure either that any patentable items will
result from the project or that, if such discoveries do occur, they will
THE DETAILS OF SECTION VI WILL DEPEND MAINLY UPON THE SPECIFIC
POLICIES OF THE UNIVERSITY. THAT THE UNIVERSITY HAVE EXCLUSIVE
CONTROL OVER THE MANAGEMENT OF THE PROJECTS IS OFTEN AN IMPORTANT
CONSIDERATION TO AID THE UNIVERSITY IN SAFEGUARDING THE PUBLIC
GOOD. IT MAY BE DESIRABLE TO HAVE SOME MANAGEMENT INPUT FROM THE
SPONSOR, ESPECIALLY IF THE SPONSOR HAS BEEN ENGAGED IN RELATED
RESEARCH OR IF IT OWNS PATENTS OR OTHER INTELLECTUAL PROPERTY CON-
CERNING THE PARTICULAR FIELD OF RESEARCH. IT MAY PROVE BENEFICIAL
TO INCLUDE THAT THE UNIVERSITY IS ACTING AS AN INDEPENDENT CON-
TRACTOR, AND NOT AS AN AGENT, JOINT VENTURER, OR PARTNER OF THE
SPONSOR. HOWEVER, IN CERTAIN SITUATIONS UNIVERSITY POLICY MAY BE
AMENABLE TO JOINT VENTURES OR PARTNERSHIPS IN ORDER FOR THE SPONSOR
TO TAKE ADVANTAGE OF CERTAIN INCOME TAX PROVISIONS SUCH AS THE
CAPITAL GAINS TAX.
THE UNIVERSITY MAY CHOOSE TO STATE THAT IT MAKES NO WARRANTIES
REGARDING THE OUTCOME OF THE RESEARCH. RESPONSIBILITY FOR ANY
PRODUCTS OF THE RESEARCH IS TO REMAIN THE SPONSOR'S, PARTICULARLY
REGARDING SAFETY, MARKETABILITY, EFFECTIVENESS, ETC.
REASONABLE PRECAUTIONS TO PROTECT THE SPONSOR'S TRADE SECRETS
SHOULD BE DELINEATED, OR THEY MIGHT BE LIMITED TO DISCLOSURE OF
POSSIBLE CONFLICTS OF INTEREST, THE SIGNING OF OATHS OF CONFIDEN-
TIALITY, AND ADEQUATE RECORD-KEEPING.
GENERALLY THE UNIVERSITY RETAINS OWNERSHIP OF PATENTS FOR THE
RESULTS OF ITS RESEARCH.. IT WOULD BE QUITE BENEFICIAL IN MANY CASES
TO HAVE THE SPONSOR PAY FOR PATENT APPLICATIONS. A LIMITED
EXCLUSIVE LICENSE COULD BE GIVEN TO THE SPONSOR IN EXCHANGE FOR
FINANCING OF PATENT APPLICATIONS. IN SUCH CASES THE UNIVERSITY
WOULD RETAIN THE RIGHT TO TAKE OVER THE LICENSE WHERE THE SPONSOR
FAILED TO PROPERLY EXPLOIT PATENTS. THE MAJOR UNIVERSITY OBJECTIVE
IN THE ADVANCEMENT OF KNOWLEDGE WOULD STILL BE UPHELD, AND THE
UNIVERSITY WOULD THEN BE ABLE TO SAVE THE MONEY THAT WOULD NORMALLY
BE SPENT ON THE RISING COSTS OF PATENT APPLICATIONS. THIS OBJEC-
TIVE HAS BEEN MET IN MANY UNIVERSITY/INDUSTRY COOPERATIVE RESEARCH
VII. Duties of the Sponsor
The Sponsor shall provide all funding for this research project in
advance of actual disbursement by the University for research. Funding
will be provided according to the attached schedule which has been mutually
developed by the parties to this agreement. The Sponsor will provide to
the Principal Investigator and the University any knowledge or intellectual
property rights which relate to the subject of this research project which
are in its possession prior to the inception of this agreement and which it
may acquire thereafter. This will include adequate rights to patents in
order to allow the University to use the Sponsor's preexistent expertise
in conducting the research.
IMPORTANT IN SECTION VII IS THAT FUNDS WILL BE PROVIDED TO THE
UNIVERSITY IN ADVANCE. GENERALLY, A UNIVERSITY IS UNABLE TO
ADVANCE MONEY FOR SUCH A PROJECT. IT WOULD ALSO BE USEFUL TO
INCLUDE SPECIFICALLY FOR WHAT THE MONEYS WILL BE SPENT, E.G., ONLY
FOR WAGES, SUPPLIES, AND EQUIPMENT, OR INCLUDING OVERHEAD SUCH AS
MAINTENANCE AND UTILITIES. ALSO, "PROMPT NOTICE" SHOULD BE
SPECIFIC, E.G., WITHIN TWO MONTHS.
MANY UNIVERSITY/INDUSTRY AGREEMENTS HAVE PROVIDED FOR OWNERSHIP OF
PATENTS TO BE HELD BY THE SPONSOR. IN SUCH CASES, THE SPONSOR MUST
BE REQUIRED TO PROVIDE THE UNIVERSITY WITH PROMPT NOTICE OF ITS
DESIRES TO PURSUE PATENT PROTECTION FOR RESEARCH RESULTS. THE UNI-
VERSITY MUST THEN PROVIDE COOPERATION AND AID AND BE ENTITLED TO
PURSUE PATENTS WHERE THE SPONSOR DOES NOT WISH TO DO SO.
VIII. Publication, Copyrights, and Trade Secrets
Publication and dissemination of information are integral to the
purpose of the University. Therefore, the University shall be the sole
judge of what it will publish and have the exclusive right to publish any
and all results of this research project, subject only to such rights of
the Sponsor to protect trade secrets. There shall be no publicity or
disclosure of information about the project without prior notice to the
Sponsor. Any decisions to publish must be made while preserving patent
rights which may be discussed in publications. A copy of any papers or
presentations shall be submitted to the Sponsor for any comments or
suggestions before publication. The University shall have the exclusive
right to all copyrights which result from the research project.
All publications shall give proper credit to appropriate parties to
While free dissemination of information strongly underlies the purpose
of the University, certain information and documentation must remain
confidential for the protection of the Sponsor. Any trade secrets which
the Sponsor has disclosed for the purposes of this project shall be kept in
strict confidence, absent the express, written consent of the Sponsor. All
confidential information shall be conspicuously marked, and all .who work on
the project shall be required to agree to protect all confidential
information. Information that is developed during the scope of this
project shall not be required to be kept confidential beyond the time
necessary to perfect patent rights except to the extent that it involves
the sponsor's basic interest in trade secrets.
IT MAY ALSO BE DESIRABLE OR USEFUL TO INCLUDE LIMITATION PERIODS IN
SECTION VIII WHICH STATE HOW LONG CONFIDENTIAL INFORMATION MUST
REMAIN SECRET. PROVISIONS MIGHT ALSO BE ADDED FOR CERTAIN INFORMA-
TION THAT EMANATES FROM THE PROJECT TO BE KEPT SECRET AT THE
REQUEST OF THE SPONSOR. PROVISIONS MIGHT BE INCLUDED TO REFLECT
UNIVERSITY AND SPONSOR POLICIES REGARDING THE USE OF THEIR NAMES IN
PUBLICATIONS. UNIVERSITIES GENERALLY WILL PROHIBIT THE USE OF
THEIR NAMES IN COMMERCIAL ADVERTISING. IT IS IMPORTANT TO EXAMINE
CONSTITUTIONAL AND LEGISLATIVE PROVISIONS IN CONNECTION WITH THE
DOCTRINE OF PUBLIC PURPOSE IN RELATION TO THIS CLAUSE.
IN CASES WHERE THE SPONSOR RETAINS OWNERSHIP RIGHTS IN PATENTS,
SPECIFIC TIME PERIODS SHOULD BE INCLUDED FOR THE DELAY OF
PUBLICATIONS TO ALLOW TIME TO SUBMIT PATENT APPLICATIONS. A 60-DAY
PERIOD WOULD BE REASONABLE FOR BOTH PARTIES.
IX. Press Releases
Statements concerning the research project conducted under this
agreement shall not be made or released to any medium of public
communication by the Sponsor, except with the prior, written consent of the
University, or by the University, except with the prior, written consent of
the Sponsor. Exception is made hereunder to the regular reports of the
University, which may include the name of the Principal Investigator, the
title of the project, the name of the Sponsor, and the amount of funding
THIS SECTION IS INCLUDED IN ORDER TO PROTECT THE SPONSOR FROM PRE-
MATURE DISCLOSURE OF VITAL INFORMATION AFFECTING PATENT RIGHTS AND
OTHER PROTECTION OF INTELLECTUAL PROPERTY.
X. Patent Rights
The University shall maintain title to all patents which are derived
from this research project. The Sponsor shall receive a right of first
refusal to a license in such patents in return for a reasonable royalty
based on the gross receipts from products manufactured under such
patents. The Sponsor is obliged to exercise all reasonable diligence to
create and promote a public and commercial demand for products which are
developed under license granted by this agreement. In the event the
Sponsor does not fulfill its obligation to exploit patent rights, such
patent rights shall revert to the University to be used in accordance with
its policies. In any event, the right to use the patents for scientific
pursuit and education shall remain in the University. All rights of
researchers to any patents shall be governed by the internal policy of the
THE SECTION OF THE CONTRACT CONCERNING PATENT RIGHTS WILL VARY
SIGNIFICANTLY DEPENDING ON THE POLICIES OF THE UNIVERSITY AND THE
SPONSOR. TRADITIONALLY LICENSE TERMS WOULD BE NEGOTIATED ONLY
AFTER BOTH PARTIES KNOW EXACTLY WHAT IS BEING LICENSED. HOWEVER,
SUCH TERMS MAY BE INCLUDED AS AN INDUCEMENT FOR PRIVATE SPONSORS TO
ENGAGE IN COLLABORATIVE RESEARCH EFFORTS WITH THE UNIVERSITY.
GENERALLY, THE UNIVERSITY WILL WISH TO RETAIN TITLE TO THE PATENT.
SINCE IT IS IMPORTANT TO THE UNIVERSITY'S FUNCTION TO MAINTAIN
MAXIMUM UTILIZATION AND AVAILABILITY OF THE PATENT TO THE PUBLIC, A
CLAUSE MUST BE INSERTED THAT REQUIRES THE SPONSOR TO EXERCISE DUE
DILIGENCE IN EXPLOITING AND MARKETING THE PATENT. THE UNIVERSITY
MAY WISH TO OBTAIN SOME DEGREE OF CONTROL OVER LICENSING AND SUB-
LICENSING BY THE SPONSOR IN ORDER TO PROTECT THE PUBLIC PURPOSE OF
MANY UNIVERSITY/INDUSTRY AGREEMENTS GRANT GENEROUS PATENT RIGHTS TO
THE SPONSOR IN ORDER TO RECEIVE SUBSTANTIAL FUNDING. OFTEN THE
SPONSOR IS GRANTED "ALL SUBSTANTIAL RIGHTS" IN PROJECT PATENTS.
THIS IS QUITE USEFUL IN THE UTILIZATION OF CAPITAL GAINS TAX PRO-
THE UNIVERSITY MAY BE REQUIRED BY POLICY TO RETAIN ALL SUBSTANTIAL
RIGHTS IN THE PATENTS AND ISSUE EXCLUSIVE AND/OR NON-EXCLUSIVE
LICENSES TO THE SPONSOR. ALSO, THE INCOME THAT THE UNIVERSITY
RECEIVES MAY TAKE ON VARIOUS FORMS, SUCH AS, A PERCENTAGE OF THE
SELLING PRICE, A FIXED COMMISSION, A PERCENTAGE OF NET SALES, A SET
ASSIGNMENT FEE, ETC.
CONTRACT MIGHT CALL FOR A DISTRIBUTION OF PATENT RIGHTS BETWEEN THE
SPONSOR AND THE UNIVERSITY. IN THAT CASE, EACH PARTY WOULD RECEIVE
AN UNDIVIDED INTEREST IN ALL SUBSTANTIAL RIGHTS TO THE PATENT.
THERE ARE DIFFICULTIES IN UTILIZING UNDIVIDED INTERESTS, DUE TO
UNCERTAINTY IN REGARD TO TAX STATUS WITH INTERNAL REVENUE RULES AND
REGULATIONS. CAREFUL ATTENTION SHOULD BE DIRECTED TO THE APPRO-
PRIATE PROVISIONS OF SECTIONS 1221, 1231, and 1235 OF THE INTERNAL
REVENUE CODE WHEN EMPLOYING CONTRACT TERMS WHICH DIVIDE ALL SUB-
STANTIAL RIGHTS IN PATENTS INTO UNDIVIDED INTEREST.
XI. Project Assets
All assets which are acquired with funds distributed under this
agreement shall remain the property of the University.
THIS SECTION IS INCLUDED BOTH FOR THE BENEFIT OF THE UNIVERSITY IN
OBTAINING CERTAIN PROPERTY AND FOR THE PROTECTION OF THE SPONSOR'S
RIGHT TO TAX DEDUCTIONS FOR RESEARCH AND EXPERIMENTATION.
XII. Mutual Cooperation and Modification of the Agreement
Both parties agree to assist and cooperate with each other, especially
regarding their respective rights to publication and patent rights. The
parties shall meet at the end of each year to discuss the continued
feasibility of the project and any modifications in funding or scope that
may be necessary or desirable. Any and all modifications shall be in
writing and signed by both parties.
THIS SECTION IS INCLUDED TO EMPHASIZE THE CONFLICTING INTERESTS OF
THE PARTIES AND THE NECESSITY TO WORK CLOSELY TOGETHER IN
NEGOTIATIONS. ALSO, MANY PROJECTS WILL CHANGE COMPLEXION OVER THE
TERM OF THE CONTRACT, AND ADJUSTMENTS MAY BE NECESSARY EITHER WITH
RESPECT TO FUNDING OR SCOPE OF THE RESEARCH.
XIII. Termination Rights
In the event the Sponsor is not satisfied with the progress of the
research project, it may terminate the agreement upon reasonable notice.
The University may terminate the agreement upon proper notice if conditions
beyond its control preclude continuation of the project. If termination
occurs, the Principal Investigator shall direct the conclusion of the
project, issue a final report, and return all unexpended funds. The
disposition of equipment and research material involved with or generated
by the research project should be decided by mutual assent.
THIS SECTION IS EXTREMELY USEFUL IN THE BARGAINING PROCESS.
DEPENDING UPON THE SIGNIFICANCE AND MAGNITUDE OF RIGHTS OR BENEFITS
GIVEN TO THE SPONSOR AND UPON THE LIKELIHOOD OF SUCCESS OF THE
PROJECT, THE SPONSOR OR THE UNIVERSITY MAY WISH TO GRANT OR RECEIVE
TERMINATION RIGHTS. TERMINATION ON THE PART OF THE SPONSOR SHOULD
ALWAYS BE SUBJECT TO A MINIMUM PAYMENT PROVISION, SO THE SPONSOR
WILL NOT BE ENRICHED UNJUSTLY BY INFORMATION THAT HAS BEEN PROVIDED
AND TO PROTECT ANY SALARIES THAT ARE BEING PAID WITH PROJECT FUNDS.
THE UNIVERSITY MAY DESIRE THE RIGHT TO TERMINATE IF IT APPEARS
THERE WILL BE LITTLE BENEFIT TO THE UNIVERSITY PROGRAMS OR TO THE
PUBLIC. THE RIGHTS TO TERMINATE MIGHT BE VERY NARROW OR VERY
BROAD, I.E., THERE MAY BE MANY CONDITIONS PRECEDENT OR ONLY FEW,
DEPENDING UPON THE CIRCUMSTANCES OF THE AGREEMENT.
In the event of a dispute between the Sponsor and the University
concerning the terms or activities of the agreement said dispute shall be
settled by arbitration before a single arbitrator in accordance with the
prevailing rules of the American Arbitration Society, and judgement upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction. The arbitrator shall be appointed by mutual consent.
AN ARBITRATION CLAUSE SHOULD BE INCLUDED IN ORDER TO AVERT LENGTHY
AND COSTLY DISPUTES. THE ARBITRATION CLAUSE MAY BE MODIFIED IF THE
PARTIES SO DESIRE. ONE SUGGESTED CHANGE WOULD BE TO USE THREE
ARBITRATORS INSTEAD OF ONE. EACH ADVERSE PARTY WOULD APPOINT ONE
ARBITRATOR; THE ARBITRATORS SO APPOINTED WOULD THEN APPOINT A THIRD
IMPARTIAL ARBITRATOR BY MUTUAL CONSENT.
XV. Exclusivity of Funding
All funding for this project shall be provided by the Sponsor.
UNIVERSITY POLICY MAY PROHIBIT AN EXCLUSIVE FUNDING PROVISION.
FURTHERMORE, THE UNIVERSITY MAY NOT WISH TO LIMIT ITSELF TO THE
SPONSOR'S FINANCING. THE NEED AND/OR OPPORTUNITY MAY ARISE FOR
ADDITIONAL FUNDING OF WHICH THE UNIVERSITY WOULD WISH TO AVAIL
ITSELF. HOWEVER, THE SPONSOR MAY BE HESITANT TO PROVIDE FUNDS
WHICH WILL BE COMBINED WITH OTHERS, SINCE THE SOURCE OF EXPENDED
FUNDS MAY NOT BE DETAILED SUFFICIENTLY FOR PURPOSES OF TAX
DEDUCTIONS AND RIGHTS TO RESULTING DISCOVERIES.
THE UNIVERSITY WILL OFTEN PAY THE SALARY OF THE PRINCIPAL
INVESTIGATOR AND/OR OTHER RESEARCHERS, IN WHICH CASE THIS SECTION
SHOULD BE ADAPTED ACCORDINGLY.
Either party may assign its rights, remedies, obligations, or
liabilities arising under this agreement provided prior, express, and
written consent is obtained from the other party. The assignee must assume
all responsibilities under the agreement and agreeto be bound thereby.
THE UNIVERSITY MUST RECEIVE PRIOR APPROVAL OF ASSIGNMENT TO PROTECT
ITS PUBLIC PURPOSE RESPONSIBILITY. THE UNIVERSITY MUST BE ASSURED
THAT THE ASSIGNEE WILL CONTINUE TO PROVIDE SUPPORT AND ASPIRE TO
THE GOALS OF THE ORIGINAL SPONSOR. THE SPONSOR, ON THE OTHER HAND,
MUST BE SURE THAT THE WORK CAN BE CONTINUED ADEQUATELY BY AN
The University shall be responsible for maintaining all facilities that
are used for performing work on the research project. The University shall
maintain adequate workers' compensation insurance for its employees working
on the research project. The Sponsor shall maintain adequate products
liability and third party liability insurance in respect to the project.
The Sponsor shall indemnify the University against the claims of third
parties in regard to the specific utilization of any marketed research
THIS SECTION IS IMPORTANT TO DEFINE MORE COMPLETELY THE
RESPONSIBILITIES OF THE PARTIES AND PROTECT THEIR RESPECTIVE
INTERESTS. BY MAINTAINING PROPER INSURANCE TO COVER RESEARCH
FACILITIES AND WORKERS, THE UNIVERSITY IS DEMONSTRATING ITS
EXCLUSIVE RESPONSIBILITY FOR MANAGEMENT OF THE RESEARCH PROJECT.
THE SPONSOR'S MAINTENANCE OF ADEQUATE PRODUCTS LIABILITY AND THIRD
PARTY LIABILITY PROTECTION IS IMPORTANT IN UPHOLDING THE
UNIVERSITY'S PUBLIC PURPOSE RESPONSIBILITIES.
WHERE THE UNIVERSITY IS A SELF-INSURER AND WILL NOT MAINTAIN
OUTSIDE INSURANCE, IT SHOULD BE REQUIRED TO INDEMNIFY THE SPONSOR
AGAINST WORKERS' COMPENSATION CLAIMS WITHIN THE SCOPE OF THE
All notices and communications pertaining to this agreement shall be in
writing. They shall be delivered personally or sent by first class mail to
a) to the Sponsor--
b) to the University--
BOTH THE PERSONS) AND PLACES) FOR NOTICE SHOULD BE SPECIFIED.
FOR THE SPONSOR IT MAY BE THE PRESIDENT OR OTHER EXECUTIVE OF THE
COMPANY AT ITS PRINCIPAL OFFICE. THE UNIVERSITY MAY REQUIRE NOTICE
BE DELIVERED TO THE PRINCIPAL INVESTIGATOR, THE PRESIDENT, OR
PERHAPS THE DEAN FOR RESEARCH. TIME PERIODS IN WHICH NOTICE MUST
BE RECEIVED SHOULD BE INCLUDED AS WELL AS WHEN SUCH PERIODS SHOULD
BEGIN AND END, E.G., UPON RECEIPT, UPON DELIVERY, UPON MAILING,
XIX. Integration, Severability, Headings, and Contract Terms
This agreement and attached appendices and exhibits constitute the
entire agreement between (the
University) and (the Sponsor) with
respect to the research project entitled,
All modifications shall be in
writing and signed by both parties.
All agreements and covenants contained herein are severable, except
those establishing the research project and those regarding protection of
confidential information, publication rights, and patent rights. If any
agreements or covenants, apart from the named exceptions, are held invalid
by a court of appropriate jurisdiction, this agreement shall be interpreted
as if such agreements or covenants were not included.
The headings in this agreement are intended only for convenience of
reference and shall be given no legal effect in construction or
The waiver by either party hereto of any right hereunder or failure to
perform or breach by the other party shall not be deemed as a waiver of any
other right hereunder or of any other breach or failure by said other party
whether of a similar nature or otherwise. The failure of either party to
enforce at any time the provisions of this agreement, or any rights in
respect thereto, or to exercise any election herein provided, shall in no
way affect the validity of this agreement. The exercise by either party of
any of its rights herein or any of its elections under the terms or
covenants herein shall not preclude or prejudice either party from
exercising the same or any other right it may have under this agreement,
irrespective of any previous action or proceeding taken by either party
AN INTEGRATION CLAUSE IS INCLUDED TO INSURE THAT EXTRANEOUS OR UN-
OFFICIAL DOCUMENTS OR AGREEMENTS ARE NOT INTRODUCED TO IMPLY ADDED
CONDITIONS TO THE AGREEMENT. IT IS UNDERSTOOD THAT THE ENTIRE
AGREEMENT IS EMBODIED IN ONE DOCUMENT UNLESS ADDITIONS OR MODIFI-
CATION OCCUR LATER BY PRESCRIBED METHOD. IT IS ALSO DESIRABLE TO
MEET THE LEGAL REQUIREMENTS FOR SEVERABILITY. IN THE EVENT THAT
INDIVIDUAL SECTIONS OF THE AGREEMENT ARE FOUND INVALID BY AN APPRO-
PRIATE COURT OF LAW, THOSE SECTIONS MAY BE DELETED FROM THE AGREE-
MENT WITH THE REMAINING PARTS LEFT INTACT.
XX. Governing Laws
This agreement shall be governed by and construed in accordance with
the laws of
THE GOVERNING LAWS SECTION IS MERELY INCLUDED TO PRECLUDE ANY
JURISDICTIONAL PROBLEMS OR CHALLENGES SHOULD THE AGREEMENT BECOME
SUBJECT TO CONTROVERSY OR LITIGATION. LOCAL STATUTES AND LIMITING
FACTORS IN RELATION TO GOVERNING LAWS SHOULD BE CONSULTED.
"All substantial rights" to a patent means all rights of value at the
time the patent is transferred, which are generally the rights to make,
use, and sell the patented subject matter. An undivided interest in all
substantial rights is an equal percentage of each and every substantial
right. All substantial rights does not include patent rights that are
restricted to particular industries or territories unless the patent is
useful only in those industries or territories.
"Best efforts" means with diligence that reasonably is due an important
"Intellectual property rights" include all patents and applications for
patents as well as trade secrets, copyrights, and trademarks.
A "license" of a patent is the grant of anything less than all
substantial rights. It conveys a covenant by the patent owner not to sue
for the manufacture, use, or sale of that which is covered by the patent.
"Memorandum of agreement" or "agreement" means this agreement between
(the University) and
(the Sponsor) dated for
the project entitled,
and all attached appendices and exhibits.
"Patent rights" shall include all patents issued under Title 35 of the
United States- Code, all foreign patents, as well as Certificates of Plant
Variety Protection issued under Title 7, Sections 2321 et seq. of the
United States Code.
"Principal Investigator" is the project leader and coordinator who is
designated by the University with the approval of the Sponsor. All
management of the project is directed by the Principal Investigator.
"Project assets" are all articles of tangible property which are
purchased with project funds for use by the researchers in performance of
"Project funds" are all moneys advanced to the University by the
Sponsor for use in the project.
"Researchers" are all University employees including the Principal
Investigator, who have been assigned to work on the project and who have
signed a research agreement.
"Research project" or "the Project" is the work entitled,
,and is the subject of this
"Trade Secrets" are any formulae, patterns, devices, or compilations of
inform-ati~oni which are used in the Sponsor's business, provide the Sponsor a
competitive advantage, and are marked "trade secret" and "confidential."
XXII. Research Agreement
In consideration of my selection to participate in the research project
funded by (the Sponsor), and of payments due under
the agreement, I hereby agree:
1. to abide by all terms of the agreement;
2. to communicate all research results promptly and fully;
3. to keep accurate, witnessed, daily records of the research;
4. to assist the University and the Sponsor in any way to pursue patent
5. to maintain in strict confidence all trade secrets that are disclosed
by the Sponsor for use in this project;
6. to reveal any conflicts of interest or potential conflicts of interest,
which I may have, due to either private consulting arrangements or
other associations which may be related in subject matter to the
present attached agreement;
7. to disclose all patents or certificates of plant variety protection
that have been issued in my name or that I have assigned to another
which relate to the project;
8. that I will not seek any outside funds from either a public or private
Sponsor for the work to be performed pursuant to this agreement; and
9. that all rights to inventions and project assets in connection with
this research project belong to the University as described in the
THE RESEARCH AGREEMENT MAY OR MAY NOT BE ATTACHED. IT SHOULD BE
SIGNED BY EACH RESEARCHER, OR SEPARATE AGREEMENTS SHOULD BE SIGNED
BY EACH RESEARCHER. THE PURPOSE OF THE RESEARCH AGREEMENT IS TO
APPRISE EACH PARTICIPANT IN THE PROJECT OF THE FACTS SURROUNDING
THE ARRANGEMENT. EACH RESEARCHER SHOULD BE AWARE OF THE UNIQUE
ISSUES INVOLVED IN THIS UNIVERSITY/INDUSTRY COOPERATIVE EFFORT. BY
VIRTUE OF SIGNING A RESEARCH AGREEMENT, THE RESEARCHERS WILL BE
BOUND TO THE TERMS OF THE AGREEMENT BETWEEN THE SPONSOR AND THE
UNIVERSITY. THIS IS ESPECIALLY IMPORTANT CONCERNING THE TREATMENT
OF INTELLECTUAL PROPERTY.
DUE REGARD SHALL BE PAID TO THE RELATIONSHIPS AMONG GRADUATE
STUDENTS, PROFESSORS, THE UNIVERSITY, AND THE SPONSOR IN THE
FORMULATION OF CONTRACTUAL OBLIGATIONS.
THE RESEARCHERS MIGHT RECEIVE DIRECT PAYMENTS FROM THE SPONSOR IF
UNIVERSITY POLICY DOES NOT PROHIBIT IT. OTHERWISE ALL PAYMENTS
SHALL BE MADE THROUGH APPROPRIATE UNIVERSITY CHANNELS.
IN CONNECTION WITH RECOMBINANT DNA RESEARCH, IT IS INCUMBENT THAT
THE RESEARCHERS STRICTLY ADHERE TO THE GUIDELINES PROMULGATED BY
THE NATIONAL INSTITUTES OF HEALTH (VOL. 48 FEDERAL REGISTER, P.
24556, JUNE 1, 1983).
ADEQUATE PRECAUTIONS MIGHT BE ADDED TO THE RESEARCH AGREEMENT TO
PROTECT ALL FORMS OF INFORMATION WHICH ARE DERIVED FROM THIS
PROJECT. THE NEED FOR SUCH PROTECTION MIGHT ARISE WHEN A
RESEARCHER LEAVES THE EMPLOY OF THE CONTRACTING INSTITUTION FOR A
NEW POSITION. AN APPROPRIATE SAFEGUARD WOULD BE TO PROHIBIT ANY
USE OUTSIDE THE PROJECT OF ANY INFORMATION DERIVED FROM THE PROJECT
DURING ITS TERM AND FOR A SPECIFIC TIME PERIOD FOLLOWING ITS
XXIII. Funding Arrangements
$ shall be paid to the University on the date the project is to
begin. $ shall be paid on the first of each month thereafter,
beginning until the date the project is scheduled to be
THE FUNDING ARRANGEMENTS MAY TAKE MANY FORMS. MONTHLY PAYMENTS MAY
NOT BE PRACTICAL, SO PROVISION FOR QUARTERLY OR SEMI-ANNUAL PAY-
MENTS MIGHT BE MADE. PAYMENTS MIGHT BE MADE AS NEEDS ARISE OR AS
DETERMINED WHILE THE RESEARCH PROGRESSES. IN ALL CASES, THE
FUNDING SCHEDULE MUST BE DEFINITE AND SPECIFIC.
THE AGREEMENT MIGHT INCLUDE PROVISIONS FOR BONUS PAYMENTS FOR
INTERIM ACCOMPLISHMENTS OF THE RESEARCHERS. SUCH ARRANGEMENTS
SHOULD BE SET FORTH IN SPECIFIC AND DEFINITE TERMS.
FACULTY CONSULTING FOR PAY IN THE PRIVATE SECTOR
The general shortage of talent available to conduct biotechnological
research coupled with the rapid increase of new firms has resulted in a
special demand on academic institutions, including land-grant universities,
for consultants. In some instances, consultations or requests for
consultations have surfaced apparent or real conflicts of interest
associated with the proprietary nature of the biotechnological product or
procedure of the firms involved.
At the same time, consulting for pay may be regarded by scientists as
an incentive to remain in or be attracted to faculty positions at academic
Have the recent advances in genetic engineering and other aspects of
biotechnological research raised new questions about faculty consulting for
the private sector? Or have these advances just revitalized and renewed a
dialogue on long-standing issues and continually evolving policies? Do the
pressures and financial temptations that arise from the intense commercial
interest in biotechnology warrant modification of current University
policies on consulting and other outside professional activities of their
faculty? The concern should be one of how University policy can foster
sensible collaboration with outside firms while avoiding distortion of the
University's mission and not inhibiting the ability of faculty to fulfill
We make no effort to specify the proper policies and procedures. The
development of these policies is a matter internal to each University.
Different policies and procedures may well suit the special circumstances
and traditions of different institutions. We do, however, identify the
major pros and cons of consulting. We also provide some general thoughts
on conflicts of interest and suggest how they can be reviewed in advance
and hence minimized.
II. Potential Positive Effects of Consulting
Faculty consulting for outside firms has multiple benefits, including:
A. Benefit to Society In some situations, consulting by a faculty member
may be the fastest and most efficient way, or even the only way, in which
to deliver new technology via a commercial firm to the public.
B. Benefit to the University Through consulting, exposure to the
problems and challenges facing private firms may help faculty members plan
their future research. Thus, the University could have faculty research
and service programs which are more relevant and timely than they otherwise
In addition, provision for consulting opportunities may serve as an
incentive to help attract and retain outstanding faculty members.
C. Benefit to the Faculty Member The personal financial gain associated
with a policy permitting faculty consultation for pay is a factor that
makes the faculty member's academic position financially more attractive.
In addition, the growth and experience gained through consulting can
contribute significantly to a faculty member's professional development and
career advancement (and also make that faculty member more valuable to the
University and hence the public). Stated or viewed in these terms, consul-
ting can be a powerful fringe benefit.
D. Benefit to Students Graduate students in the research program of a
faculty member who consults can benefit from the direct exposure to private
sector scientists as well as from the perspective which the faculty member
brings back to the research program from the cr"'ti-': :-:;:-iences.
Consulting experiences could have a positive influence on classroom
instruction through updated and more relevant lectures and laboratories
which, in turn, benefit both undergraduate and graduate students.
III. Potential Negative Effects of Consulting
Faculty consulting for outside firms can also have negative results,
A. Disruption of intellectual exchange. The informal exchange of research
findings and products with colleagues which is vital to scientific advance-
ment could be seriously affected.
B. Erosion of emphasis on long-term basic research. In the interest of
achieving short-term objectives for the economic marketplace, long-term
research within the University could be deemphasized.
C. Neglect of University duties. Faculty members drawn into significant
commitments through highly lucrative consulting arrangements may neglect
their teaching, research and public service obligations.
D. Effects on graduate education. There could be adverse effects on
graduate education resulting from the importation of proprietary
restrictions on new knowledge which might result in the disappearance of
collegiality or the rise of competitiveness among faculty in the
E. Loss of income to the University. This can occur as patents and
copyrights become vested in private firms rather than in the University.
These dangers, although they may arise in only a few departments within
a university at any one time, pose significant dilemmas to the university
as a whole.
IV. Disclosure/Review of Consulting Contracts and Arrangements
Universities, in carrying out their mission of allocating public funds
in furtherance of public purposes, bear a responsibility to see that the
allocation of personnel, facilities and equipment and funds for current
expenses are allocated objectively and without influence from personal
financial or professional gain. Decisions on resource allocation are more
likely to be made with only public purposes and objectives in mind if
faculty members, administrators and staff members involved significantly in
research or research administration disclose contacts with private firms
sufficient to indicate the nature and extent of direct and indirect,
part-time or full-time employment or consultative arrangements. Such
reports should be reviewed administratively at a level appropriate to
assume meaningful review, i.e., an administrator who is free from
significant ownership, employment or consultative contact with the private
firms disclosed in the reports. Reviewing administrators are then in a
position to identify actual and pot-nt-'' "':-: of interest and take
the necessary steps to assure that the University's reputation for
integrity and objectivity is not compromised either with respect to work
carried on through consultation or employment relationships involving
university personnel, facilities and equipment or current expense funds.
OTHER COMMITTEE ACTIVITIES DURING 1982-83
The preceding chapters provide detailed information on major committee
efforts during 1982-83. The following information represents a brief
description of additional committee activities during 1982-83 with
particular emphasis on the committee's interaction with the Industrial
Biotechnology Association and an evaluation of the lawsuit (Civil Action
83-2714). Information in this chapter should also provide the reader with
an appreciation for the full range of activities the committee is currently
involved in and in particular information on activities initiated in recent
II. Interaction with Industrial Biotechnology Association
In an effort to strengthen communication links between the Division of
Agriculture Committee on Biotechnology and industry, the Industrial
Biotechnology Association (IBA) was invited to participate in a one-half
day meeting with the Biotechnology Committee at its September 1983 meeting.
The IBA is composed of approximately 30 member companies, including
major specialized biotechnology firms and major corporations with extensive
biotechnological research activities. (A list of member companies is
attached in Appendix D.) The Executive Director of the Industrial
Biotechnology Association, and two representatives from member companies,
discussed industry and university relationships with specific reference to
manpower needs, graduate education, applied and basic research priorities,
financing biotechnology research, and consulting.
The committee discussed the need to make as accurate a determination as
possible of current biotechnology research activities in industry and
potential manpower needs. The representatives from the Association agreed
to be a part of this activity and expressed a willingness to help develop a
survey and support the committee in its effort to collect appropriate data
from the private companies engaged in biotechnological research activities.
The IBA extended an invitation for a representative from the Committee
to attend their annual meeting in Washington, D.C. October 19-21, 1983
concerning Washington Perspectives: Regulatory and Development Issues in
Biotechnology. .A member of the Committee participated in the annual
meeting in Washington, D.C. Also, the committee was represented at the IBA
meeting in Colorado on June 21-23 which highlighted social and ethical
III. Lawsuit-Civil Action 83-2714
On September 14, 1983 a lawsuit (Civil Action 83-2714) was filed in the
US District Court, District of Columbia. The objective of the suit was to
prevent the release of genetically engineered microorganisms (Pseudomonas
syringae) that would displace natural ice nucleating bacteF-Ta on the
surface of plants and consequently protect the plants from frost injury.
Plaintiff's in the litigation claim that deliberate introduction of such
"recombinant organisms" into the environment poses a danger to plants,
animals and human health. A number of organizations including the
Foundation on Economic Trends, Environmental Action Incorporated, and The
Environmental Task Force have joined J. Rifkin and M. W. Fox as plaintiffs
in this action. Supporting affidavits were submitted by Drs. Eugene Odum
of the University of Georgia and David Pimentel of Cornell University.
Causes of action in the suit are threefold: (1) Violation of the
Natural Environmental Policy Act, (2) Violation of the Administrative
Procedure Act, and (3) Federal Law Common Nuisance. The complaint asserts
that it should be unlawful to deliberately release "recombinant organisms"
into the environment without an environmental assessment on the impact of
such releases performed as a regular part of the program or regular
component of the approval protocol. It further alledges that no such
assessment was prepared for the genetically engineered Pseudomonas syringae
and therefore release of this bacterium was illegal.
The success of this suit (if the plaintiffs win) would result in a
severe interference with the timely conduct of scientific studies using
recombinant DNA technology. There could also be a dramatic negative impact
on the transfer of this technology to the industrial arena. On the other
hand, the suit provides a forum with established rules that can determine
whether standards and procedures used, to date, are adequate to meet the
requirements of law set forth in the suit. It further provides the
potential for establishing standards by which controversies of this nature
can be settled and hopefully it would result in the development of a
protocol which could be used by scientists when confronted with legal
As this civil action is being argued, it has awakened concern for the
implications of genetic engineering which were prevalent about seven years
ago when the NIH Recombinant DNA Advisory Committee (RAC) was established.
The RAC does not have regulatory authority and its policies and procedures
are binding only on those engaged in research supported by federal funds.
EPA contends that it has authority to regulate recombinant DNA under the
Toxic Control Act, but the scope of the act is not clear and it may require
greater definition from scientific, legal and administrative perspectives.
Ultimately, a decision must be reached as to whether or not DNA fits the
legal definition of a chemical substance and whether or not genetic
engineering changes DNA to a new chemical substance. To some extent, the
EPA has been involved with the evaluating risks associated with the release
into the environment of biological agents. It has under the Federal
Insecticide, Fungicide and Rodenticide Act regulated agents produced and
marketed for the biological control of agricultural pests. The agency has
been concerned with the fate of these agents in the environment, with their
performance, their effects on nontarget organisms, and their residues.
As a consequence of these circumstances, the Division of Agriculture
needs to decide whether it should evaluate and recommend policy and/or
procedural changes that will enable several federal agencies to act in a
coordinated fashion to safeguard the environment and public health in
general while causing a minimum of delay in progress in genetic
engineering, experimentation, and applications in agriculture.
IV. Other Committee Efforts
A. Member institutions of the National Association of State Universities
and Land-Grant Colleges were surveyed during 1983 to determine their
capability in the area of biotechnological research and education. The
questionnaire which was similar to the questionnaire used to obtain similar
information from the SAES was mailed to all member institutions during the
summer of 1983. As of this point, approximately 50% of the institutions
have responded and we are in the process of digesting and evaluating the
information. It is the committees intent to provide the Association with a
summary of the results early in 1984.
B. The committee established a subcommittee on Social and Ethical Issues.
Interest and concern in this area on the part of several elements of
society have been heightened by events of the past year including the
publication by a Presidential Commission entitled "Splicing Life", December
of 1982, publication of Algeny by Jeremy Rifkin, Spring of 1983, and the
lawsuit filed on September 14, 1983. Plaintiffs, in the suit charged that
the NIH did not follow proper procedures in approving the release of ice
nucleating bacterial strains into the environment. They further charged
that these microorganisms would constitute a "nuisance." The subcommittee
on Social and 'Ethical Issues will monitor events in this area and recommend
appropriate actions and/or activities to the parent committee.
C. The committee has interacted with the User's Advisory Board (UAB). A
representative of the committee has attended UAB meetings during 1983 and
the chairman of the UAB will be meeting with the committee from time to
time during 1983-84.
D. The committee was invited to make a presentation to the Joint Council
on Agriculture and did so during January of 1982.
E. The committee was invited to make a presentation by the National
Industry State Agricultural Research Council (NISARC) meeting early in
1982; a general outline of committee activities was presented.
F. Presentation was made to the National Science Foundation Interagency
Committee on Plant Science Seminar in Washington during April of 1982. The
presentation involved an outline of committee activities with emphasis on
the results obtained from the SAES survey.
G. The role of Extension in educating our many publics in Biotechnology
for Agriculture and Food is being evaluated and a position statement is
H. Members of the committee participated in the workshop on Applications
on Biotechnology Techniques to Agriculture which was convened by Dr. Paul
O'Connel of the USDA in Washington, D.C. during early August of 1983.
I. The committee has met with the Assistant Secretary of Agriculture for
Science and Education, and briefed him on activities and developments in
the area of the application of biotechnological research to agriculture and
related teaching and extension programs. The committee has also met with
the Administrator and Associate Administrator of the Cooperative State
Research Service (CSRS), USDA to brief them on committee activities.
J. The committee is currently interacting with Dr. Larry Moore of Oregon
State University who is on special assignment on a part-time basis with
CSRS to examine the equipment and facilities needs in the area of
biotechnological research and education and provide CSRS with
recommendations in this area.
K. The committee surveyed the SAES to determine their ability to attract
NSF and NIH grants. The survey has been completed and the results will be
available during December of 1983.
A survey of the biotechnological research capability of the State
Agricultural Experiment Stations (SAES) and the Agricultural Research
Service (ARS) USDA has been completed. Both SAES and ARS are making sub-
stantial investments in biotechnological research. In the SAES, 283
scientist FTE's are working on 579 biotechnology projects funded at the
level of $41,557,400. The SAES have been effective in attracting federal
extramural funds and funds from the private sector for biotechnological
research. There are 442 graduate student FTE's and 498 staff FTE's asso-
ciated with the biotechnological projects of the SAES. The ARS has 78 SY's
working on 98 biotechnology projects funded at a level of $13,800,000.
The 42 SAES reporting biotechnological research estimated that 108
faculty FTE's, 161 graduate student FTE's and 118 staff FTE's will be added
in new positions or in positions reallocated from other areas of research
to biotechnological research in the next two years. ARS estimates that 18
scientist SY's and 18 staff SY's will be made available for biotechno-
logical research in the next two years.
Additional basic research in biotechnology for food and agriculture is
currently needed and the Committee has developed a proposal for a new major
national program in this area. It will emphasize molecular biology, mole-
cular and cellular genetics, and developmental biology with focus on
plants, animals and microorganisms. The proposal has been developed as a
competitive grants program consisting of: research grants, fellowships and
equipment grants. All grants and fellowships for the program will be in-
vestigator initiated, peer reviewed and awarded on a competitive basis.
The program will apply to plants, animals and microbes, it will be open to
all scientists in public and private universities, the. SAES, research
institutes and government agencies, it will complement existing programs in
USDA, NSF and NIH, and it will establish a close cooperative effort with
all federal agencies having complementary grant programs. In order for
this program to have the required impact, it must be added to existing
research and education programs, and not be a replacement--Tor or redirec-
tion.of current programs. In order to meet the identified needs and
opportunities for conducting this basic research in biotechnology for agri-
culture a $70 million dollar program is proposed.
The United States Congress included a tax credit in the Economic
Recovery Act of 1981 for the purpose of stimulating industrial investment
in qualified research activities. The credit, which is set forth in
Section 44F of the Internal Revenue Code provides an inducement for private
firms to invest in research. The basic provisions of Section 44F and its
potential implications are briefly reviewed in the report. It is concluded
that the research credit can provide useful benefits to businesses if
proper tax and business planning is utilized.
Royalties and licensing fees from patents in general and the legal
protection of new plant varieties provide potential sources of revenues for
supporting research. In view of the rather "static" level of the tradi-
tional sources of support for agricultural research in the public sector,
it is imperative that academic institutions fully explore this potential
source of revenue for funding agricultural research. With this in mind we
have developed a concise statement of patent law and considerations as they
apply to patenting in general and to the patenting of genetically engi-
neered entities such as vaccines, hormones and other agricultural chemicals
and new.microbial and higher plant life forms. In order to preserve inven-
tions and discoveries for patent protection it is helpful to be aware of
the requirements for patent applications and the circumstances under which
patent protection might be denied.
Guidelines for the development of a university/industry research
contract have been formulated. This guide is intended to provide the basis
for negotiating a cooperative project between a research university and an
industrial sponsor. Every provision contained herein cannot be adopted by
all universities and all sponsors; but rather a contract of this nature
must be molded to fit within the objectives and policies of the individual
contracting parties. Comments following each section of the contract
outline attempt to highlight the most important policy issues and suggest
alternatives. The tax incentives of the Internal Revenue Code for contri-
butions to research are reflected in the Commentary of the guidelines. In
this new era of increased industrial support for university research there
will be closer working relationships' between universities and industry.
This in turn poses special problems and as these problems are addressed
careful attention should be given to protecting the integrity of coopera-
ting universities as institutions of higher education.
Universities, in carrying out their mission of allocating public funds
and furtherance of public purposes, bear a responsibility to see that the
allocation of personnel, facilities and equipment is done objectively and
without influence from personal, financial or professional gain. Decisions
on resource allocation are more likely to be made with only public purposes
and objectives in mind if faculty members, administrators, and staff mem-
bers involved significantly in research or research administration disclose
contacts with private firms sufficient to indicate the nature and extent of
direct and indirect part-time or full-time employment or consultative
arrangements. Such reports should be reviewed at an appropriate adminis-
trative level so as to provide a meaningful review; i.e., an administrator
who is free from significant ownership, employment or consultative contract
with the private firms disclosed in the report. Reviewing administrators
are then in a position to identify actual and potential conflicts of
interest. Subsequently they can take the necessary steps to assure that
the university's reputation for integrity and objectivity is not compro-
mised with respect to work carried on through consultative arrangements.
The development of policies regarding consulting is a matter internal to
each institution and we make no effort to specify the "proper" policies or
In an effort to.strengthen communication links between the Division of
Agriculture Committee on Biotechnology and Industry the Industrial Biotech-
nology Association participated in a one-half day meeting with the Biotech-
nology Committee during September 1983. In addition the Committee was
represented at the Industrial Biotechnology Association meetings held in
Washington, D.C. in October 1983. The Industrial Biotechnology Association
has agreed to work with the Committee in obtaining data on industry's
capability and needs in biotechnological research.
On September 14, 1983, a lawsuit (Civil Action 83-2714) was filed in
the U. S. District Court, District of Columbia. The objective of the suit
was to prevent the release of genetically engineered microorganisms that
would displace natural ice nucleating bacteria on the surface of plants and
consequently protect the plants from frost injury. Plaintiffs in the suit
contend there has been a violation of: 1) the Natural Environmental Policy
Act, 2) the Administrative Procedure Act, and 3) Federal Law Common
Nuisance. The Committee has evaluated the suit and its implications and
has recommended to the National Association of State Universities and Land-
Grant Colleges that it get "involved" to the extent of filing an amicus
We are completing a survey of the biotechnological research and
education capability of the member institutions of the National Association
of State Universities and Land-Grant Colleges. We are also in the process
of completing a survey of the State Agricultural Experiment Stations to
ascertain their ability to attract grants from the National Institute of
Health and the National Science Foundation. Data from the latter survey
should be available in final form in early December 1983. The Committee
has interacted with representatives from a number of federal agencies,
professional and industrial organizations and scientists during the past
QUESTIONNAIRE ON THE INVOLVEMENT OF LAND-GRANT COLLEGES
IN BIOTECHNOLOGY IN AGRICULTURE
For the purposes of this questionnaire, the Committee is using the
following definition of "Biotechnology" -- The application of cell and
tissue culture, protoplast fusion, embryo manipulation and transfer, mole-
cular biology and gene transfer to agriculture.
1. What is the total number of scientist FTE in your college assigned to
research? (This includes all research, not just research in biotech-
2. Please list the current projects in biotechnology in your college.
(See attached CRIS printout for reference.)
Title of Project
State Federal Private
Faculty Student Staff
3. Are there research projects in biotechnology in other units in your
university (campus) with which your faculty collaborate? If yes,
please list the projects.
4. In view of the importance of plant and animal breeding in translating
the advances in biotechnology in agriculture to practice, how many FTE
do you have involved in breeding programs?
Plant breeding FTE
Animal breeding FTE
5. Are there examples of accomplishments of biotechnology research in
agriculture on your campus? If yes, please give examples.
6. Do you anticipate any unique applications of biotechnology in agri-
culture in your state within the next two years?
7. Do you anticipate adding new resources (or allocating old) in biotech-
nology in agriculture within the next two years? If yes, please give
an estimate of the FTE as follows:
Graduate Student FTE
8. What is the average level of support for faculty in the biotechnology
area (dollars/FTE)? (Please include all support, e.g., salary,
supplies, staff, graduate students, etc.)
9. Do you have a standard contract for industry support which includes
information about publication rights, patent and license rights, etc.?
If yes, please attach a copy.
FINAL QUESTIONNAIRE ON THE INVOLVEMENT OF LAND-GRANT COLLEGES
IN BIOTECHNOLOGY IN AGRICULTURE
Faculty Research FTE
Total in Biotechnology
1. Faculty Research FTE: FTE Headcount FTE Headcount
2. Federal Support in Biotechnology: (in 1000's)
$ Federal Formulas (Hatch, McIntire-Stennis)
$ Federal Extramural (NSF, NIH, Competitive Grants, etc.)
3. Is the information presented for your state correct? Yes No
If no, please return a corrected copy of your questionnaire and a
corrected copy of Table 1.
NOTE: Figures (FTE and Total Federal Dollars) are from the information
you provided on the questionnaire.
Please return by October 25, 1982 to: Dr. Charles E. Hess, Dean
College of Agricultural and
University of California
Davis, California 95616
QUESTIONNAIRE ON THE INVOLVEMENT OF THE AGRICULTURAL RESEARCH SERVICE, USDA
IN BIOTECHNOLOGY RESEARCH IN AGRICULTURE
For the purposes of this questionnaire, the Committee on Biotechnology
(Division of Agriculture NASULGC) is using the following definition of
"Biotechnlogy" -- The application of cell and tissue culture, protoplast
fusion, embryo manipulation and transfer, molecular biology and gene
transfer to agriculture.
1. What is the total number of SY in ARS in research? (This includes all
research, not just research in biotechnology research.)
2. Please list current projects in biotechnology in ARS.
Title of Project
ARS Other Federal
3. In view of the importance of plant animal breeding in translating the
advances in biotechnology in agriculture to practice, how many SY do
you have involved in breeding programs?
Plant Breeding SY
Animal Breeding SY
4. Please give examples of accomplishments of biotechnology research in
agriculture in ARS.
5. Do you anticipate some unique applications of biotechnology in agri-
culture in ARS in the next two years?
6. Do you anticipate adding new resources or reallocating old to bio-
technology in agriculture within the next two years? If yes, please
provide an estimate.
7. What is the average level of support for scientists in the biotech-
nology area (dollars/SY). Please include all support, e.g., salary,
supplies, staff, etc.
8. Do you have a standard contract for industry support which includes
information about publication rights, patent and license rights, etc.?
If yes, please attach a copy.
9. Do you have a policy on consulting and other outside 'professional
activities? If yes, please attach a copy.
10. Have you lost any scientists involved in biotechnology research since
a. To academic institutions?
b. To other governmental agencies?
c. To the private sector?
(Please give number of scientists lost.)
Please return by
INDUSTRIAL BIOTECHNOLOGY ASSOCIATION
Newbury Park, California
THE BENDIX CORPORATION
BIOTECHNICA INTERNATIONAL, INC.
BP NORTH AMERICA INC.
New York, New York
COLLABORATIVE RESEARCH INC.
Needham Heights, Massachusetts
THE DOW CHEMICAL COMPANY
E. I. duPONT deNEMOURS & COMPANY
EXXON RESEARCH & ENGINEERING
Linden, New Jersey
G. B. FERMENTATION INDUSTRIES, INC.
(Gist-Brocades N.V. Holland)
Charlotte, North Carolina
HOFFMAN-LA ROCHE, INC.
Nutley, New Jersey
JOHNSON & JOHNSON
New Brunswick, New Jersey
MOLECULAR GENETICS, INC.
St. Louis, Missouri
Piscataway, New Jersey
PHILLIPS PETROLEUM COMPANY
Kenilworth, New Jersey
G. D. SEARLE & COMPANY
SHELL OIL COMPANY
STANDARD OIL COMPANY (Indiana)
Palo Alto, California