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Capitalizing on New Needs
and New Opportunities:
Government-Industry Partnerships in
Biotechnology and
Information Technologies

CHARLES W. WESSNER, EDITOR

Board on Science, Technology, and Economic Policy

Policy and Global Affairs

National Research Council

NATIONAL ACADEMY PRESS

Washington, D.C.
NATIONAL ACADEMY PRESS • 2101 Constitution Avenue, N.W. • Washington, D.C. 20418

NOTICE: The project that is the subject of this report was approved by the Governing Board of
the National Research Council, whose members are drawn from the councils of the National
Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The
members of the committee responsible for the report were chosen for their special competences and
with regard for appropriate balance.

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of
the author(s) and do not necessarily reflect the views of the organizations or agencies that provided
support for the project.

International Standard Book Number 0-309-08257-9

Limited copies are available from Board on Science, Technology, and Economic Policy, National
Research Council, 1055 Thomas Jefferson Street, N.W., Suite 2014, Washington, D.C. 20007;
202-334-2200.

Additional copies of this report are available from National Academy Press, 2101 Constitution
Avenue, N.W., Lockbox 285, Washington, D.C. 20055; (800) 624-6242 or (202) 334-3313 (in the
Washington metropolitan area); Internet, http://www.nap.edu

Printed in the United States of America

Copyright 2001 by the National Academy of Sciences. All rights reserved.
 National Academy of Sciences
National Academy of Engineering
Institute of Medicine
National Research Council

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of

distinguished scholars engaged in scientific and engineering research, dedicated to the
furtherance of science and technology and to their use for the general welfare. Upon the
authority of the charter granted to it by the Congress in 1863, the Academy has a mandate
that requires it to advise the federal government on scientific and technical matters. Dr.
Bruce M. Alberts is president of the National Academy of Sciences.

The National Academy of Engineering was established in 1964, under the charter of the
National Academy of Sciences, as a parallel organization of outstanding engineers. It is
autonomous in its administration and in the selection of its members, sharing with the
National Academy of Sciences the responsibility for advising the federal government.
The National Academy of Engineering also sponsors engineering programs aimed at meet-
ing national needs, encourages education and research, and recognizes the superior
achievements of engineers. Dr. Wm. A. Wulf is president of the National Academy of
Engineering.

The Institute of Medicine was established in 1970 by the National Academy of Sciences
to secure the services of eminent members of appropriate professions in the examination
of policy matters pertaining to the health of the public. The Institute acts under the respon-
sibility given to the National Academy of Sciences by its congressional charter to be an
adviser to the federal government and, upon its own initiative, to identify issues of medical
care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medi-
cine.

The National Research Council was organized by the National Academy of Sciences in
1916 to associate the broad community of science and technology with the Academy’s
purposes of furthering knowledge and advising the federal government. Functioning in
accordance with general policies determined by the Academy, the Council has become the
principal operating agency of both the National Academy of Sciences and the National
Academy of Engineering in providing services to the government, the public, and the
scientific and engineering communities. The Council is administered jointly by both
Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. Wm. A. Wulf are
chairman and vice chairman, respectively, of the National Research Council.

iii
 Steering Committee for Government-Industry Partnerships for
the Development of New Technologies *

Gordon Moore, Chair William J. Spencer, Vice-Chair

Chairman Emeritus, retired Chairman Emeritus
Intel Corporation International SEMATECH
and STEP Board
M. Kathy Behrens
Managing Partner Mark B. Myers
Robertson Stephens Investment Senior Vice-President, retired
Management Xerox Corporation
and STEP Board and STEP Board

Michael Borrus Richard Nelson

Managing Director George Blumenthal Professor of
The Petkevich Group, LLC International and Public Affairs
Columbia University
Iain M. Cockburn
Professor of Finance and Economics Edward E. Penhoet
Boston University Dean, School of Public Health
University of California at Berkeley
Kenneth Flamm and STEP Board
Dean Rusk Chair
in International Affairs Charles Trimble
LBJ School of Public Affairs Chairman
University of Texas at Austin U.S. GPS Industry Council

James F. Gibbons John P. Walker

Professor of Engineering Chairman and Chief Executive Officer
Stanford University Axys Pharmaceuticals, Inc.

W. Clark McFadden Patrick Windham

Partner President, Windham Consulting
Dewey Ballantine and Lecturer, Stanford University

Burton J. McMurtry
General Partner
Technology Venture Investors

*As of August 2001.

v
 Project Staff*

Charles W. Wessner
Study Director

McAlister T. Clabaugh Christopher S. Hayter

Program Associate Program Associate

David E. Dierksheide Sujai J. Shivakumar

Program Associate Consultant

Contributors

Paula Stephan Kenneth Flamm

Georgia State University University of Texas at Austin

Grant Black Michael McGeary

Georgia State University McGeary and Smith

Wesley M. Cohen John Walsh

Carnegie Mellon University University of Illinois at Chicago

*As of August 2001

vi
 For the National Research Council (NRC), this project was overseen by the
Board on Science, Technology and Economic Policy (STEP), a standing board of
the NRC established by the National Academies of Sciences and Engineering and
the Institute of Medicine in 1991. The mandate of the STEP Board is to integrate
understanding of scientific, technological, and economic elements in the formu-
lation of national policies to promote the economic well-being of the United
States. A distinctive characteristic of STEP’s approach is its frequent interactions
with public and private-sector decision makers. STEP bridges the disciplines of
business management, engineering, economics, and the social sciences to bring
diverse expertise to bear on pressing public policy questions. The members of the
STEP Board* and the NRC staff are listed below:

Dale Jorgenson, Chair William J. Spencer, Vice-Chair

Frederic Eaton Abbe Professor Chairman Emeritus
of Economics International SEMATECH
Harvard University
David T. Morgenthaler
M. Kathy Behrens Founding Partner
Managing Partner Morgenthaler
Robertson Stephens Investment
Management Mark B. Myers
Senior Vice-President, retired
Vinton G. Cerf Xerox Corporation
Senior Vice-President
WorldCom Roger Noll
Morris M. Doyle Centennial
Bronwyn Hall Professor of Economics
Professor of Economics Stanford University
University of California at Berkeley
Edward E. Penhoet
James Heckman Dean, School of Public Health
Henry Schultz Distinguished Service University of California at Berkeley
Professor of Economics
University of Chicago William Raduchel
Chief Technology Officer
Ralph Landau AOL Time Warner
Consulting Professor of Economics
Stanford University Alan Wm. Wolff
Managing Partner
Richard Levin Dewey Ballantine
President
Yale University
*As of August 2001.

vii
 STEP Staff*

Stephen A. Merrill Charles W. Wessner

Executive Director Program Director

Philip Aspden Sujai J. Shivakumar

Senior Program Officer Consultant

Craig M. Schultz Adam Korobow

Senior Program Officer Consultant

Camille M. Collett McAlister T. Clabaugh

Program Associate Program Associate

David E. Dierksheide Christopher S. Hayter

Program Associate Program Associate

*As of September 2001.

viii
 National Research Council
Board on Science, Technology, and Economic Policy

Sponsors

The National Research Council gratefully acknowledges

the support of the following sponsors:
National Aeronautics and Space Administration

Office of the Director, Defense Research & Engineering

National Science Foundation

U.S. Department of Energy

Office of Naval Research

National Institutes of Health

National Institute of Standards and Technology

Sandia National Laboratories

Electric Power Research Institute

International Business Machines

Kulicke and Soffa Industries

Merck and Company

Milliken Industries

Motorola

Nortel

Proctor and Gamble

Silicon Valley Group, Incorporated

Advanced Micro Devices

Any opinions, findings, conclusions, or recommendations expressed in this

publication are those of the authors and do not necessarily reflect the views of
the project sponsors.

ix
 Contents

PREFACE 1

EXECUTIVE SUMMARY 14

I. INTRODUCTION AND OVERVIEW 21

II. ISSUES IN BIOTECHNOLOGY AND INFORMATION

TECHNOLOGY 33

III. FINDINGS AND RECOMMENDATIONS 51

IV. PROCEEDINGS 71

Welcome 73
Dale Jorgenson, Harvard University

Introduction 76
Bill Spencer, SEMATECH

Opening Remarks 78
Congressman Sherwood Boehlert (R - NY)

Panel I: Biotechnology and Information Technologies:

The Need for a Diversified Federal Research Portfolio 84
Moderator: Clark McFadden, Dewey Ballantine

xi
xii CONTENTS

The View From the Semiconductor and Biotechnology

Industries 85
Gordon Moore, Intel Corporation
Edward Penhoet, University of California at Berkeley
and Chiron Corporation

Discussion 95

Panel II: A Historical Perspective: Federal Partnerships

in Computing and Biotechnology 98
Moderator: Patrick Windham, Stanford University

Partnerships in the Computer Industry 98

Kenneth Flamm, University of Texas at Austin

Partnerships in the Biotechnology Industry 111

Leon Rosenberg, Princeton University

Trends in Federal Research 116

William Bonvillian, Office of Senator Joseph Lieberman

Luncheon Address:
“The Cornucopia of the Future” 120
Dan Goldin, NASA

Panel III: Biotechnology: Needs and Opportunities 129

Moderator: Edward Penhoet, University of California at
Berkeley and Chiron Corporation

Exploiting the Biotechnology Revolution: Training

and Tools 129
Marvin Cassman, National Institute of General Medical
Sciences, NIH

The New Frontier: Bioinformatics and the University 135

Rita Colwell, National Science Foundation

Emerging Opportunities and Emerging Gaps 139

Paula Stephan, Georgia State University

Discussant: Greg Reyes, Schering-Plough 144

Stephen Dahms, San Diego State University
CONTENTS xiii

Discussion 145

Panel IV: Information Technology: New Opportunities

– New Needs 146
Moderator: Dave Goldston, Office of Congressman Boehlert

Biofutures for Multiple Missions 146

Jane Alexander, DARPA

Meeting the Needs: Realizing the Opportunities 149

Paul Horn, IBM

New Information Technology Research Initiatives 152

Tom Kalil, National Economic Council

Discussants: Charles Trimble, Trimble Navigation 155

Richard Rosenbloom, Harvard Business School

Discussion 157

Panel V: Capturing New Opportunities 160

Moderator: Michael Borrus, Pektevich & Partners, LLC

Computing and the Human Genome 160

Mark Boguski, National Center for Biotechnology Information

NanoFrontiers 165
Alton Romig, Sandia National Laboratories

Defense Interests and Applications 169

Timothy Coffey, Naval Research Laboratory

Discussion 171

Panel VI: Intellectual Property and the Public Domain:

Sectoral Perspectives 173
Moderator: Jorge Goldstein, Stern, Kessler, Goldstein & Fox

Sectoral Variations in the Role of Intellectual Property 174

Wesley Cohen, Carnegie Mellon University

Post Bayh-Dole University-Industry Relationships 179

Maryann Feldman, Johns Hopkins University
xiv CONTENTS

Intellectual Property and Biotechnology 183

Robert Blackburn, Chiron Corporation

Discussion 189

Concluding Remarks 191

Gordon Moore, Intel Corporation

V. RESEARCH PAPERS 193

The Federal Partnership with U.S. Industry in U.S.

Computer Research: History and Recent Concerns 195
Kenneth Flamm, University of Texas at Austin

Public Research, Patents, and Implications for Industrial

R&D in the Drug, Biotechnology, Semiconductor and
Computer Industries 223
Wesley M. Cohen, Carnegie Mellon University
John Walsh, University of Illinois at Chicago

Bioinformatics: Emerging Opportunities and Emerging Gaps 244

Paula E. Stephan, Georgia State University
Grant Black, Georgia State University

Recent Trends in the Federal Funding of Research and

Development Related to Health and Information Technology 261
Michael McGeary, McGeary and Smith

VI. ANNEX 319

A. Biographies of Contributors 321

B. Participants List 327

C. Bibliography 335
 Preface

As we begin the twenty-first century, many believe that we are also witness-
ing the start of a new era—one where humankind will increasingly expand its
understanding of the building blocks of life, and one which will rely on ad-
vanced information technologies to process, analyze, and share the results of
such research. This era may well rest on what some call the new economy – that
is, an economy where higher sustained growth rates are fed by productivity
improvements made possible by the application of new knowledge and new
technologies. This state of affairs depends on continued public and private sector
investment in productivity-enhancing technologies. It also requires substantial
and expanded investment in basic research. Increased allocations of public re-
sources to research, though, are not sufficient; continued progress also depends
on government participation in the maintenance of a policy framework that sup-
ports the development of new technologies.
Government funding of research—especially university-based research—is
an essential part of this framework of support. Policies encouraging partnerships
and other cooperative arrangements among universities, industry, and the gov-
ernment have proved, in some cases, to be effective measures to foster the devel-
opment of new productivity-enhancing technologies.1 Such policies are often
related to specific government missions and procurement in sectors such as

1See National Research Council, The Small Business Innovation Research Program: An Assess-
ment of the Department of Defense Fast Track Initiative, Washington, D.C.: National Academy
Press, 2000; and National Research Council, The Advanced Technology Program: Assessing Out-
comes, Washington, D.C.: National Academy Press, 2001.

1
 2 CAPITALIZING ON NEW NEEDS AND NEW OPPORTUNITIES

health, transport, and defense. In other cases, limited support of promising tech-
nologies with widespread applications may be the most appropriate approach.

A TRADITION OF PARTNERSHIPS
The government’s role in supporting the development of new technologies
is not new. During the nineteenth century, the federal government had an enor-
mous impact on the structure and composition of the economy. The government
played an essential role in developing the U.S. railway network, and—through
the 1862 Morrill Act and support for the agricultural extension service—the
farm sector.2
This support continued into the twentieth century. In 1901, the federal gov-
ernment established the National Bureau of Standards to help industry. Later, the
federal government provided special backing for the development of (what we
now call) dual-use industries—such as aircraft frames and engines and radio—
seen as important to the nation’s security and commerce. The unprecedented
challenges of World War II generated huge increases in the level of government
procurement and support for high-technology industries.3 Today’s computing
industry has its origins in the government’s wartime support for a program that
resulted in the creation of one of the earliest electronic digital computers, the
ENIAC.4 Following that war, the federal government began to fund basic re-
search at universities on a significant scale, first through the Office of Naval
Research and later through the National Science Foundation.5
During the Cold War, the government continued to emphasize technological
superiority as a means of ensuring U.S. security. Government funds and cost-plus
contracts helped to support enabling technologies, such as semiconductors, new
materials, radar, jet engines, missiles, and computer hardware and software.6

2See Richard Bingham, Industrial Policy American Style: From Hamilton to HDTV, New York:
M.E. Sharpe, 1998 for a comprehensive review.
3David Mowery, “Collaborative R&D: how effective is it?” Issues in Science and Technology,
15(1), 1998, p. 37.
4Kenneth Flamm, Creating the Computer. Washington, D.C.: The Brookings Institution, 1988,
chapters 1-3.
5The National Science Foundation was initially seen as the agency that would fund basic scientif-
ic research at universities after World War II. However, disagreements over the degree of Executive
Branch control over the NSF delayed passage of its authorizing legislation until 1950, even though
the concept for the agency was first put forth in 1945 in Vannevar Bush’s report, Science: The
Endless Frontier. The Office of Naval Research bridged the gap in basic research funding during
those years. For an account of the politics of the NSF’s creation, see G. Paschal Zachary, Endless
Frontier: Vannevar Bush, Engineer of the American Century, New York: The Free Press, 1997, pp.
231. See also Daniel Lee Kleinman, Politics on the Endless Frontier: Postwar Research Policy in
the United States, Durham, N.C.: Duke University Press, 1995.
6For an excellent review of the role of government support in developing the computer industry
and the Internet, see National Research Council, Funding a Revolution: Government Support for
Computing Research, Washington, D.C.: National Academy Press, 1999.
PREFACE 3

In the post-Cold War period, the evolution of the American economy con-
tinues to be marked by the interaction of government-funded research and activ-
ities pursued by innovative entrepreneurs. Government support in this period
has been essential to progress in areas such as microelectronics, robotics, bio-
technology, and the investigation of the human genome. It has also played a
critical role in the development of the Internet (whose forerunners were funded
by the Defense Department and the National Science Foundation [NSF]).7 To-
gether, these technologies underpin the new economy.
In all, both the federal and local governments in the United States have
participated actively in promoting domestic industry in an increasingly global
marketplace. Indeed, the U.S. has a remarkably wide range of public-private
partnerships in high technology sectors.8 In addition to the cases mentioned
above, there are public-private consortia of many types. These can be classified
in a number of ways: by economic objective of the partnership—that is, to lever-
age the social benefits associated with federal R&D activity and/or to enhance
the position of a national industry, and by other objectives, including the need to
deploy industrial R&D to meet military or other government missions.9
The U.S. economy continues to be distinguished by the extent to which
individual entrepreneurs and researchers take the lead in developing innovations
and starting new businesses. In doing so, they often harvest crops sown on fields
made fertile by the government’s long-term research investments.10
Recently, new Internet-based companies and biotechnology firms have been
the source of major innovations. These innovations, and the economic benefit
they provide, are based on information technologies that are more powerful and
less expensive to use than ever before. These technologies promise to remain a
source of substantial growth in the future.
The promise of better health, and the tangible benefits it represents, have
prompted federal support for biomedicine. Progress in biomedicine and drug
research, the development of diagnostic tools such as magnetic resonance imag-
ing, and the rapidly expanding understanding of the human genome give cre-
dence to this promise.
By the late part of the 1990s, this belief steadily gained momentum, resulting in
major yearly increases in federal funding for biomedical research. This tremendous

7National Research Council, Funding a Revolution: Government Support for Computing Research,
op. cit. See, particularly, chapter 7.
8See Chris Coburn and Dan Bergland, Partnerships. Columbus, OH: Battle Press, 1995.
9See Albert Link, “Public/Private Partnerships as a Tool to Support Industrial R&D: Experiences
in the United States.” Paper prepared for the working group on Innovation Policy, Paris, 1998, p. 20.
Partnerships can also be differentiated by the nature of public support. Some partnerships involve a
direct transfer of funds to an industry consortium. Others focus on shared use of infrastructure, such
as laboratory facilities.
10David B. Audretsch and Roy Thurik, Innovation, Industry, Evolution, and Employment, Cam-
bridge, UK: Cambridge University Press, 1999.
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