Copyright Law Constraints on the Transfer of Certain Federal Computer Software With Commercial Applications

Published by the Government Accountability Office on 1990-04-26.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   United   States General Accounting   Office

For Release        Copyright Law Constraints     on the Transfer of Certain
on Delivery        Federal Cafiputer Software    With Commercial Applications
wcted      at                                                                                  Y

9:30 a.m. EDT
April 26, 1990

                    Statement of
                    John M. Ok, Jr., Director      in the Resources,   CCXItIunity,
                      and Economic Developent      Division

                    Before the
                    Subccmnittee on Science, Research, and Technology
                    Ccxrnnittee on Science, Space, and Technology
                    House of Representatives

GAO/T-RCED-90-63                                                       GAO Form 160 (1214371
Mr.        Chairman     and Members of the       Subcommittee:

        I am pleased to present           our views on the law's prohibition
against     copyrighting     the federal       government's   computer software.
My statement       today is based on our ongoing work for the
Subcommittee       on Courts,     Intellectual      Property  and the
Administration        of Justice,      House Committee on the Judiciary.         At
the Subcommittee's        request,       we are examining    (1) federal  agencies'
efforts   to comply with the prohibition         on copyrighting    works of the
government,    (2) the extent to which copyright          law has constrained
the transfer     of federal    software,   and (3) the pros and cons of
amending copyright      law to allow federal      agencies    to copyright
computer software.        This review follows     up our March 1988 report       to
the Chairman,     House Committee on Science,       Space, and Technology,       in
which we identified       copyright    law as one of four constraints       to the
transfer    of federal    computer software    to U.S. businesses.l

        In our most recent work, we examined the extent                  that the
copyright      law has constrained       the transfer        of federal    software     at
six federal       agencies    that fund about 89 percent           of the research       and
development       (R&D) performed      at all government-operated           laboratories
in fiscal      year 1989.2       These agencies      are the Department        of
Agriculture,       the Department      of Commerce, the Department            of Defense,
the Environmental         Protection    Agency, the National         Aeronautics      and
Space Administration,           and the National      Institutes     of Health.       I
would like to summarize the results              of our work, which we will
include      in a soon to be released        report:

ITechnolosv            Transfer:     Constraints  Perceived   bv Federal          Laboratory
and Asencv            Officials    (GAO/RCED-88-116BR,    Mar. 4, 1988).
2We        also    interviewed     Department     of Energy officials,          who stated
that         the   copyright    law has not     constrained      their    efforts    to
tranSfer           software    because very     little    research-related        software     is
developed           by federal     employees.

      --   We found     no evidence   that federal   agencies               are   copyrighting
           software     developed   by federal  workers.

      --   Efforts    at the six agencies       to transfer     software      with
           potential    commercial    applications      to U.S. businesses          have
           been constrained       to a significant      but not precisely
           determinable     extent   because the government         cannot copyright
           and license     software.     In particular,     federal      laboratories
           are having only limited         success in encouraging          U.S.
           businesses    to collaborate       on developing     software,       through
           cooperative     R&D agreements,      because of businesses'            concern
           about whether they could sufficiently            protect      their
           investment    in developing      and marketing     the software.

           Authorities       to copyright        and license       federal     software      and     c
           share any royalties            with federal       employees would stimulate
           the transfer        of federal       software     with commercial
           applications.         In determining          whether to grant a
           nonexclusive,        partially       exclusive,      or exclusive        license,
           the federal       agency could provide            a business       protection
           commensurate with its investment                  in further       developing       and
           supporting      the software.           However, officials          of the
           Information       Industry      Association,        which represents
           businesses      that create        and distribute         information,
           expressed     concern that providing              copyright      and licensing
           authority     for software         could,     among other things,           limit
           public    access to federal           scientific      and demographic          data
           bases that software            provides.


       Copyrights   protect     literary      and artistic expression      by giving
authors,    for a limited     period     of time, the exclusive     right,    among
other things,     to reproduce       and sell copies of their      copyrighted
work and prepare     derivative        works.    But under 17 U.S.C. 105, the
U.S. government         is prohibited        from copyrighting        any of its works,
including      technical      publications,        computer software,        and data
bases.       The law's legislative           history   states    that this prohibition
is intended       to place all works of the federal                government    in the
public     domain.      Most federal        computer software       is generated      by
federal      agencies'     laboratories        as part of their       research   mission.
This software        is primarily       distributed      through    the National
Technical      Information       Service      (NTIS) and other software
distribution        centers    operated      by the Department        of Energy (DOE) and
the National        Aeronautics      and Space Administration            (NASA).

           In response to the rising                 concern about the U.S. trade deficit
and the ability                of U.S. businesses         to compete in world markets,               the
Congress and the administration                       have taken actions            to strengthen
the links             between U.S. industry           and the nation's           research     and
technology             base.     These actions        include      stimulating        the transfer     of
technology             from federal      government-operated              laboratories,       which
funded about $15.8 billion                   in R&D in fiscal             year 1989, to U.S.
businesses.               To support     this goal,        legislation        over the past 10
years has authorized                 federal     agencies       to (1) grant        nonexclusive,
partially             exclusive,     or exclusive        patent      licenses;       (2) negotiate
rights          to intellectual         property      under a cooperative             R&D agreement;
and (3) give federal                 inventors       a share of any royalties              from a
licensed            invention.       Although      this legislation           has facilitated       the
COlTllllerCiali~atiOn             of federal     inventions,         it has not addressed
federal           computer software --computer               programs and supporting
documentation--              which currently         cannot be copyrighted.


31ntellectual         property    rights    result         from   the    physical
manifestation         of original      thought.
        We found no evidence          that federal        agencies       have improperly
copyrighted        computer software         developed by federal            workers.       In
fact,    despite     recent emphasis on transferring                 technology       to the
private     sector,     federal    laboratories'         efforts     to transfer        software
through     cooperative       R&D agreements       have been limited           because Of
uncertainty        about the extent         of protection        federal     agencies      can
offer    for jointly       developed      works and because of businesses'
concern that whether this protection                   is insufficient         for their
investment       in developing       and marketing        the software.          Some
Department      of Defense laboratories            have transferred           software      to
U.S. businesses         through    cooperative       R&D agreements.           Since this
software     is not fully       developed      and documented,           the laboratories
have not made it generally              available     through       NTIS.     Further,      it is
unclear     whether this software            would be made available             to others who
might subsequently          request     it.


         According    to officials        we talked     with from seven federal
agencies,       making software        generally     available      allows    for the
adequate dissemination            of most of their         agencies'      software.     They
noted that their        agencies primarily           develop research-related
software      for specific      scientific       applications       related    to their
missions.        This software       typically      has little      commercial
application.         DOE's contractor-operated             laboratories       develop almost
all of DOE's research-related                software,     and the operating
COntraCtOr       can request      authority      from DOE to copyright           commercially
useful     software.

       However, senior       officials     from some agencies          told us that
their    inability      to copyright    and exclusively        license     computer
software     has constrained        the transfer    and use of a certain          portion
of software        that has broader commercial         applications.         These
agencies     are the Department        of Agriculture;       the Department       of
Commerce; the Department               of Defense,         including      Air Force, Army,
and Navy: the Environmental                  Protection       Agency; NASA; and the
National     Institutes       of Health         (NIH).       Software     constrained      by the
copyright      prohibition        includes,         for example,       artificial
intelligence        software      that could assist             doctors      in diagnosing
diseases     or farmers       in making decisions               about irrigating,
fertilizing,        or spraying        their     crops.       While these officials           did
not know exactly          how much of their              agencies!     software      was affected
by the copyright          prohibition,          officials       for four agencies        believe
that a conservative           estimate        would be 10 percent              of all of their

       Just   as businesses        are unwilling      to commercialize         inventions
without    patent   protection,        they are generally         unwilling      to invest
in documenting      and developing         commercial      applications      for federal
software    without    having copyright         protection.         Executives      from two
businesses     that have considered          commercializing         federal     software
noted that a business'           return    on investment       is time-sensitive.             To
prevent    competitors      from marketing       alternative        software     packages
that are potentially          less developed       and less expensive,           their
companies would require           copyright     protection       and exclusive         rights
to federal     software.

        The officials        at the six agencies          concerned       about copyright
law cannot precisely           determine      the extent        to which the government's
inability     to copyright        has constrained         their     laboratories'       efforts
to transfer        software    because cases often do not come to their
attention      in the first       place.      For example, when a business                knows
that it cannot copyright             government      work, it does not seek to
license    the software        or enter into a cooperative               R&D agreement to
further    develop it.         In other cases, senior             laboratory
administrators,         technology      transfer     officials,        and patent     attorneys
never learn of opportunities               to transfer        laboratory      software,       This
OCCUrS    because preliminary           negotiations        between private        and
government       representatives,         which occur at lower levels              within     the
laboratory,     fall   apart early on because of the            government's
inability     to protect    intellectual property.

        The transfer    of software    was constrained        in several     Specific
instances     because a business      could not protect         it by a copyright.
According     to an NIH research      manager, for example, the government's
inability     to copyright     has constrained      efforts     to commercialize         a
computer program that would assist             dermatologists       in prescribing
medications     and other treatments        for medical problems,         such as
acne.     Because the software       needed to be tested          among larger     groups
of dermatologists       before    it could be marketed,         NIH sought a
business    that would assume this responsibility.                 An executive      for
a small business        stated that his company was interested                  in the
software,.    but it clearly        was an early version           that would have to be
further    developed      before     it could be marketed.            His company decided
not to try to commercialize                the software      mainly because it believed
dermatologists       were not ready to accept and use the software.
Another    important      factor     was the company's inability           to obtain
copyright     protection,       which created         uncertainty     over whether it
could sufficiently         protect       its investment        from a competitor     who
might be able to obtain            the same software           from NIH or NTIS.      NIH
has not further        developed       the software       and has yet to attract       a
business    partner     to commercialize          it.

        Although     NIH has signed about 130 cooperative             R&D agreements,
it is negotiating          its first     agreement that has a major software
component.        Similarly,     of the 140 agreements         that the Agricultural
Research Service         has signed or is negotiating,            none focuses on
software.       The government's         limited     success in developing     and
COmmerCialiZing         software     through     cooperative   R&D agreements    is
generally      believed      to be the result        of the copyright    law's
prohibition       on copyrighting.

      On the other hand, 9 of the 26 cooperative R&D agreements
signed or being negotiated  by the Army Corps of Engineers  involve
the further       development     of its Software.         The Corps, however, has
specific     legislative      authority    to fund up to 50 percent           of the
costs in agreements         negotiated     under a new Construction
Productivity       Research program.         Nevertheless,      Corps officials
indicated      that the inability        to copyright      federal   software    has been
a constraint       to entering      into cooperative       R&D agreements.


        According     to senior  officials      at the six agencies     concerned
about the copyright        law, to improve the transfer         and use of federal
software      with commercial    applications,       the government    should be
allowed     to copyright     and exclusively      license   computer software,      and
federal     researchers    should be able to share in any royalties             from
licensed      software.    With such changes, businesses          could protect
their    investment     in developing       and marketing   the software,    and
federal     researchers    would have an incentive        to work with businesses
in developing        and documenting      the software.

          The authority        to copyright        and share royalties         would provide
federal       computer programmers             with opportunities        for career,
financial,          and intellectual          recognition     similar    to those for
federal       researchers        whose inventions         are patented.        In addition,
these authorities             could improve public           access to federal       software
because the software               might not otherwise         be sufficiently       developed
and documented for general                  dissemination.        Several    agency and
labOratOry          officials      also noted that copyright           authority     would
further       their      agencies'     missions     to improve public        health   and
safety      because they could better               control    the software's       quality   and

        Some federal laboratory  managers and researchers,   however,
oppose amending the copyright     law.   In their view, copyrighting     and
licensing    federal computer software   would (1) distract  researchers
from the laboratory's             basic research     mission,     (2) interfere       with
informal     exchanges between federal             and university      scientists,       and
 (3) interfere        with the government's         existing    policy    of publicly
disseminating         technical      information.      In addition,     Information
Industry     Association        representatives       oppose allowing       federal
agencies     to copyright         computer software       because agencies         might use
this authority          to either      restrict   access or give favored           access to
federal     scientific       and demographic       data bases, such as those at
NIH's Library         of Medicine        or the U.S. Census Bureau.

                                         - - - -

       In summary, we found no evidence               that federal       agencies    are
improperly      copyrighting     software     developed       by federal     employees.
Furthermore,       federal   software     is generally        available    to the public.
However, officials         at four agencies        stated that at least          10 percent
of their     laboratories'      software     may not be effectively           transferred
and used because of the copyright               prohibition.         This software      may
have significant         commercial    applications        with potentially        important
technological        and economic benefits         to our nation.

       Effective     transfer  of this software       is an appropriate      goal
that could be achieved by amending the copyright               law to provide
copyright      and licensing   authority.        Such a fundamental     change,
however,      must be balanced    against     the concern that it might reduce
the public's      access to federal       data bases and shift      the federal
laboratories'      basic research     mission.

        To accommodate these concerns and still                achieve effective
transfer,    it may be appropriate           to provide     copyright  authority  for
software    with wider commercial           applications     that needs further
investment     to be effectively         transferred.       This could be
accomplished     by amending the copyright              law (17 U.S.C. 105) to allow
federal    agencies   to copyright         and grant nonexclusive,      partially
exclusive,     or exclusive     licenses       to computer software     on a case-by-
case basis    if such protection   would stimulate    the software's
effective   transfer   and use.   Alternatively,   the Federal    Technology
Transfer   Act (15 U.S.C. 3710a) could be amended to authorize
federal   agencies   to copyright  and grant licenses    to federal
software   under a cooperative    R&D agreement.

         Under either        option,     consideration         should be given to amending
the Federal        Technology        Transfer     Act's     royalty-sharing       section     (15
U.S.C. 3710~) to allow               federal    employees who develop software               that
is subsequently          commercialized         to share in royalties.             In addition,
if the copyright           law were amended, consideration                  should be given to
instituting        procedures        similar    to those required           for granting
patent      licenses     (35 U.S.C. 209) to ensure fairness                    in granting     an
exclusive        or partially        exclusive      license     to a nonfederal       entity    and
diligence        by the licensee          in commercializing          the software.

      Mr. Chairman, this           concludes  my remarks. I would be happy to
respond to any questions            you or other Members of the Subcommittee
may have.