Background Just after World War II, VA developed affiliations with medical schools to  improve acute care and physical and mental rehabilitation for veterans.  As part of the relationship, VA medical centers have contributed to the  education of medical students and residents. Besides medical students  and residents, other dual appointees—clinicians and researchers—spend  either a full 40-hour week or a fraction of the work week at VA and other  time at the affiliated university. On January 23, 1950, Executive Order 10,096 established that the  government shall obtain the entire right, title, and interest in and to all  inventions made by government employees during working hours; with a  contribution by the government of facilities, equipment, materials, funds,  or information, or time and services of other government employees on  official duty; or which bear a direct relation to or are made as a  consequence of the employee’s duties. Since the early 1980s, the  federal government has taken several actions related to technology  transfer from federal laboratories. Technology transfer is the process of transferring scientific findings from  one organization to another for the purpose of further development and  commercialization. In this regard, federal agencies are authorized to issue  licenses to outside entities granting rights to make, use, or sell  government owned inventions. One of the first technology transfer laws,  the Stevenson-Wydler Technology Innovation Act of 1980, articulated the  need for a strong national policy supporting domestic technology transfer.  The law requires federal laboratories to establish an office of research  and technology applications and devote budget and personnel resources  to promoting technology cooperation and the transfer of technologies to  private industry and state and local governments. In addition, the act  requires federal agencies that operate or direct federal laboratories to  report information on technology transfer performance annually to the  Office of Management and Budget, as part of their annual budget  submission. Copies of those reports should be transmitted to the  Secretary of Commerce who must submit a summary report to Congress  and the President. For many years after the Stevenson-Wydler Technology Innovation Act of  1980, VA waived ownership rights to inventions generated by its  researchers, leaving the responsibilities for patenting, marketing, and  licensing with the inventor and the VA medical center’s university partner.  As a result of this practice, according to former VA officials, some VA  research was not commercialized because VA did not have a technology  transfer program or other means to promote commercialization. In 2000, VA created the VA Technology Transfer Program to facilitate the  commercialization of VA inventions to benefit veterans and the American  public. VA developed technology transfer agreements with universities to  help facilitate technology transfer. Under the terms of the agreements, the  universities can take the lead on patenting and commercialization, and  VA can retain joint ownership of inventions. Among other things, the  original agreements gave the universities the right of first refusal to apply  for and manage patents, market the technologies, negotiate licenses, and  collect royalties to be shared with VA. As of November 2017, the VA Technology Transfer Office, located in  Washington, D.C., employed five technology transfer specialists  responsible for all technology transfer activities for VA’s solely owned  inventions. These inventions may come from more than 3,000 VA  researchers at over 100 VA medical centers, as well as from VA  employees at other VA locations. In addition, the technology transfer  specialists are responsible for coordinating with universities on inventions  made by dually appointed researchers. According to VA officials, VA  relies on affiliated universities for most of the technology transfer efforts  connected with such inventions, since the universities have their own  offices with expertise in technology transfer and are usually willing to take  the lead. Under a Veterans Health Administration 2002 policy on invention  disclosures, which was revised in January 2017, VA employees who  invent something are directed to disclose those inventions to VA using a  disclosure form and complete a certification form to certify whether VA  resources were used. VA employees are to disclose inventions to VA  even if they were not created with VA resources. Affiliated universities  may also require dually appointed researchers to disclose inventions to  the university. Under agreements between the universities and VA,  universities are required to disclose a dually appointed researcher’s  invention to VA, as an additional assurance to aid VA in capturing  relevant inventions. Similarly, VA is to notify the university when a dually  appointed researcher’s invention comes to its attention. According to VA policy, researchers’ supervisors or research  administrators at VA medical centers are to review the disclosure forms  and send them to the VA Technology Transfer Office. The office  evaluates the information and provides a recommendation to VA’s  General Counsel on whether VA should assert ownership. If General  Counsel’s review finds that VA should assert ownership, the General  Counsel notifies the VA researcher’s and the VA medical center’s  research and development office of the determination. The Technology  Transfer Office then notifies the researcher’s university about VA’s  ownership of the invention. At this point the department expects the  university to include VA as an owner during the patenting process,  according to VA officials. Figure 1 shows VA’s process for determining  ownership of inventions created by dually appointed researchers,  according to VA policies. If the university takes the lead on an invention of a dually appointed  researcher, original VA agreements require universities to provide annual  reports to update VA on commercialization activities, such as progress in  licensing inventions or collecting royalties from licensees. While less  commonly used, alternative processes for commercialization are shown in  appendix I. We and others have identified a number of challenges associated with  technology transfer from federal research facilities. For example, we  found that technology transfer is often not a priority for laboratory  managers; researchers may not understand the potential commercial  applicability of their innovations; or the technologies are often not  developed enough for use in market-ready products and may require  investment of additional time and money to develop. We also have  reported that pharmaceutical inventions in particular may take a relatively  long time to develop. For example, the entire discovery, development,  and review process of a new drug can take up to 15 years. VA Has Taken Steps  to Educate  Researchers and  Universities about  Requirements but  Could Enhance  Researchers’ Training VA Has Taken Steps to  Educate Researchers but  Reported that  Researchers Have Not  Always Disclosed Their  Inventions Although VA has taken steps to educate researchers about disclosure of  inventions, VA officials reported that the researchers have not  consistently disclosed inventions to the department because they did not  always fully understand VA’s disclosure policy. Officials from VA’s  technology transfer office told us on multiple occasions that they believed  researchers did not consistently disclose inventions. For example, in  December 2016, VA officials said that once the technology transfer office  began sending researchers e-mail notices about the need to disclose  inventions, the number of disclosures increased, which they said  suggested underreporting had been occurring. In March 2017, the  officials told us that many of the inventions from more than 50  researchers during a 5-year period at one university had not been  disclosed until VA checked with the university and discovered the error.  By November 2017, VA technology transfer officials thought disclosure  had improved throughout VA, but they were still not able to describe the  extent of the problem. The researchers we interviewed at the six medical centers in our sample  generally believed that they had properly disclosed inventions. However,  according to VA officials, a university official, and two VA researchers,  there could be several reasons that contributed to researchers not  consistently disclosing their inventions to VA, including the following: Researchers may have disclosed inventions to their university,  assuming the university would disclose them to VA on their behalf. Researchers may have disclosed their inventions to the university  because it was more convenient than disclosing to VA, as the  university’s technology transfer officials were more accessible to  answer questions. Researchers were not familiar with VA’s invention disclosure process  because the process was not routine to them. Researchers may have believed they did not use VA resources and  did not realize they were still required to disclose to VA. VA research administrators may not always have reminded  researchers of the need to disclose inventions, as they did not  consider this requirement a priority. VA made efforts since fiscal year 2016 to inform researchers about its  disclosure policy. For example, according to VA officials, the department  has increased its in-person communication with VA researchers. In the  first 8 months of fiscal year 2017, VA staff made 26 visits to universities  and VA medical centers to meet with researchers to encourage the  disclosure of inventions. However, VA officials said participation rates  among researchers at these voluntary meetings were low in some cases.  At one medical center, only the research administrator and one other  researcher attended the meeting, according to the administrator. In addition, VA established an online training program in 2017 covering  the invention disclosure process, but the training is not mandatory. VA  provided us with a report from October 2017 indicating that out of over  3,000 eligible researchers, 130 had taken the training (about 4 percent).  One VA research administrator said that mandatory training would be  helpful. Under federal internal control standards, management is to  internally communicate the necessary quality information to achieve the  entity’s objectives, such as by communicating that information down and  across reporting lines to enable personnel to perform key roles in  achieving those objectives. Given that VA has not made the meetings or  online training on disclosure policy mandatory, its importance may not be  clear to all researchers. Also, because researchers do not make  discoveries every year, and the process is not routine, taking such  training once may not be sufficient to educate users. Without requiring  researchers to take online training on the invention disclosure process  annually, researchers may not be fully informed about the requirement to  disclose inventions, which can result in lost technology transfer  opportunities and lost royalties for VA if the inventions are not disclosed. VA Has Taken Steps to  Make Universities Aware  of VA Researchers and  Disclosure Requirements Based on our interviews with VA and university officials in our sample,  since fiscal year 2016, the department took steps to make universities  aware of VA researchers and their disclosure requirements in an effort to  improve university disclosures to VA. We reviewed 16 agreements  between VA and affiliated universities, including the five universities with  agreements in our sample, and all of the universities agreed to disclose  joint inventions to the department. However, VA officials we interviewed  said that universities may not always disclose all inventions to VA.  Although they said they could not identify the extent of the problem, the  officials highlighted one university in our sample that had not disclosed  inventions to VA for at least 5 years. This university did not disclose  inventions to VA, as agreed, until prompted by VA’s technology transfer  office late in fiscal year 2016. Responsible university officials said they  had assumed the dually appointed researchers were disclosing the  inventions to VA. According to VA officials, when the VA technology  transfer office received a report from the university in fiscal year 2017 that  covered 5 years of disclosures, VA learned it had not received 80 percent  of the disclosures from that university for that period. VA officials said  they had not contacted the university sooner because their technology  transfer office had been understaffed until early in calendar year 2016. VA  officials from the technology transfer office had not identified a similar  problem of this magnitude with the other universities, including those in  our sample. According to our interviews with VA and university officials, some of VA’s  university partners may not have been aware of which researchers were  also VA employees because the universities’ lists of VA researchers were  not current and universities generally relied on the researchers to disclose  whether they were VA employees. Furthermore, in some cases, the  university disclosure forms did not specifically ask whether the researcher  also worked at VA. For example, two of the six forms used by universities  in our sample did not specifically ask the researcher to indicate whether  they were VA employees. Upon recognizing some shortcomings in  universities’ disclosures to VA, the department provided current lists of  VA researchers at affiliated VA medical centers to their respective  universities in fiscal year 2017, and VA technology transfer officials said  they intend to provide such updated lists to the universities semi-annually.  VA officials said that universities may not be using these lists, but they will  not know until time has elapsed. VA technology transfer officials said their  site visits to VA medical centers—they conducted 26 visits in fiscal year  2017—along with other communications with their counterparts at the  universities should help the disclosure process. VA Increased  Communication with  Universities about  Reporting  Commercialization  Activities but Has Not  Ensured that Such  Activities Are  Consistently  Reported VA has increased communication with universities since 2016 to help  ensure that universities report information about commercialization  activities for joint inventions, but universities’ reporting remained  inconsistent as of January 2018, according to VA. Under the original  agreements, such as the ones in our sample of eight agreements,  universities have the exclusive right to license and commercialize joint  inventions. VA’s awareness of the commercialization of such inventions  depends on universities providing this information through annual reports,  as required by the agreements. However, according to VA officials, prior  to 2011, only about 20 percent of the 79 universities with which VA has  agreements submitted annual reports. According to VA officials, VA made  an effort to increase annual reporting, and by 2013 it was up to 80  percent. The officials said, however, that the percentage of universities  submitting annual reports dropped again after losing staff in the  technology transfer office—the office retained only three staff in  subsequent years until fiscal year 2017 when there were 11 staff,  including 5 technology transfer specialists. In addition, VA officials we interviewed said that there was some  confusion among universities regarding when they needed to submit  annual reports. For example, they said that some universities may not  have understood whether they needed to provide annual reports during  years when there was no new patenting or licensing activity. The officials  said that this was at least part of the reason some universities did not  submit annual reports. VA officials told us that they expect universities to  provide annual reports even when there is no new patenting or licensing  activity, and in fiscal year 2016 technology transfer officials e-mailed  universities to clarify this expectation. The officials also said that in  October 2016 they sent a letter to each of the 79 universities with which  the department has agreements to remind universities to submit the  required annual reports. Further, as stated earlier, VA staff made 26 visits  to VA medical centers and universities in the first 8 months of fiscal year  2017 to discuss reporting and disclosure requirements. However, VA  reported that 24 percent of the 79 affiliated universities provided annual  reports in fiscal year 2017 even after VA’s outreach. Because they did not  always receive annual reports, VA officials said they were often not aware  of a joint license until the university sent VA the first royalty check for a  joint invention. VA officials said they plan to conduct audits to check the  accuracy of university information. Beginning in fiscal year 2015, VA began creating new agreements with  universities to give VA enhanced responsibility in licensing and  commercialization of joint inventions. By the end of fiscal year 2017, VA  had new agreements in place with 11 of the 79 universities. Based on our  review of 8 of the new agreements, VA will now, for the first time, have  the option to take the lead in licensing joint inventions. For inventions for  which VA does not take the lead role, under the new agreements, it will  have the right to review and provide input on all joint licenses. This new  provision improves VA’s awareness of any joint licenses created in the  future. However, because original agreements did not include this  provision, VA will still need to rely on accurate and updated annual  reports from universities for information on licenses negotiated under  those agreements. In addition, the new agreements do not improve or clarify language from  the original agreements about what details need to be included in the  annual reports. According to our analysis, these eight new agreements,  similar to the original eight agreements we reviewed, do not contain  details on the specific information and format in which to present the  annual report. For example, both the original and four of the new  agreements we reviewed require universities to provide an annual  report, but four other new agreements state that the universities will  provide annual reports upon request. The original agreements as well as  all eight of the new agreements indicate that reports should include the  status of all patent prosecution, commercial development, and licensing  activity on joint inventions but do not explain whether an annual report is  needed if there has been no commercialization activity. As noted above,  VA officials said universities were confused about whether they were  required to report to VA if they had no new activity in a given period;  however, VA officials told us they still need reports in these situations. Furthermore, based on our analysis of 12 annual reports from eight  universities, the format and content of the reports has been inconsistent.  Four universities submitted reports in a spreadsheet format; two  universities submitted reports in portable document format (PDF); one  university submitted a report in a Word format; and one submitted five  different documents, including both PDF and spreadsheet. In addition to  differences in format, the annual reports differed considerably in the  content they provided—the more detailed annual reports included patent  application numbers, patent expenses, the status of patent applications,  and information about whether the patent had been licensed. In contrast,  the less detailed annual reports did not provide any of this information on  patents for the joint inventions. Moreover, one university only included  active license agreements in its annual report, while other universities  also included license agreements that were terminated. VA officials we  interviewed agreed that the reports are not very detailed or standardized  but said they would like to eventually standardize the annual report format  and content so they can use the reports to track and audit joint inventions  The differences in annual reports exist because VA has not provided the  universities with a standardized method for reporting, including the format  that should be used for the annual reports and the content to include in  them. Under federal standards for internal control, management should  design control activities to achieve objectives and respond to risks. Such  control activities include providing a standardized method that guides  universities in fulfilling VA’s reporting requirements to ensure the  objectives of the program are being achieved. Without providing a  standardized method that clearly guides universities in fulfilling VA’s  reporting requirements for these annual reports, including their format and  content, the department will not be able to ensure detailed and  standardized annual reports that include details about licenses and  royalties. VA officials said that they were working on a template for  universities to use in reporting on commercialization activities for joint  inventions. However it is not clear whether the template would inform  universities of VA’s requirements to submit an annual report even if they  had no new commercialization activity in a given period. Conclusions VA manages a research program unique within the federal government in  that most of its researchers are dually appointed to universities, and their  inventions are jointly owned by VA and the universities, which typically  take the lead on commercialization activities. While VA has taken steps to  educate researchers about requirements for researchers and universities  to disclose inventions to VA, VA officials reported that researchers have  not consistently done so, because they did not always fully understand  the policy. Given that VA has not made its online training on disclosure  policy mandatory, the policy’s importance may not be clear to  researchers. Also, because researchers do not make discoveries every  year, and the process of disclosure is not routine, taking such training  once may not be sufficient. Without requiring researchers to take online  training on the invention disclosure process annually, researchers may  not be fully informed about the requirement to disclose inventions, which  can result in lost technology transfer opportunities as well as lost royalties  for VA if the inventions are not disclosed. VA has also taken steps to improve communication with universities to  increase reporting of commercialization activities, but said that such  reporting by universities is inconsistent, and VA may not have adequate  information to account for all of its licenses and royalties. Without  providing a standardized method that clearly guides universities in  fulfilling VA’s reporting requirements for these annual reports, including  their format and content, the department will not be able to ensure  detailed and standardized annual reports. Recommendations for  Executive Action We are making the following two recommendations to VA:  The Under Secretary of Health should make VA’s online training on  invention disclosure mandatory for researchers and require that it be  completed annually. (Recommendation 1) The Under Secretary of Health should provide a standardized method  that guides universities in fulfilling VA’s reporting requirements for these  annual reports, including their format and content. (Recommendation 2) Agency Comments We provided a draft of this report to the Department of Veterans Affairs  for review and comment. In written comments reproduced in appendix II,  VA agreed with our recommendations. Specifically, for our first  recommendation, VA said it will develop a plan to ensure its researchers  complete online technology transfer training on invention disclosure  annually. Furthermore, the plan will contain contingencies for those who  do not meet the requirements. The department expects to issue a training  requirement, train staff, and also demonstrate training is done by  September 2019. In addition, for our second recommendation, VA said it  will develop a standardized method that guides universities in fulfilling  VA’s reporting requirements for the university technology transfer annual  reports. VA has a target completion date of December 2018. VA also  provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At this time, we will send copies of this report to the  appropriate congressional committees, the Secretary of Veterans Affairs,  and other interested parties. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or neumannj@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this report. GAO staff who made key contributions to  the report are listed in appendix III. Appendix I: Department of Veterans Affairs  Commercialization Process, Revenue, and  Total Joint Patents with Universities The process for commercializing a Department of Veterans Affairs (VA)  invention can take several avenues. Generally a university takes the lead  on inventions of dual appointees who work for VA and a university, and  VA researchers who are not dually appointed rely on VA to patent and  license their inventions. Also, VA can take the lead on joint inventions, for  example, if the university is not interested in ownership. (see fig. 2). VA received about $316,000 in royalties from 45 licenses for its  inventions in fiscal year 2016 (see table 1). VA has U.S. and foreign  patents. From calendar years 2000 through November 2017, the U.S.  Patent and Trademark Office has granted VA 82 patents for which VA is  the sole assignee, according to VA officials. Also, table 2 shows by  university the breakdown of the 206 patents for which VA shares  ownership with an affiliate. Appendix II: Comments from the Department  of Veterans Affairs Appendix III: GAO Contacts and Staff  Acknowledgments GAO Contact John Neumann, (202) 512-3841 or neumannj@gao.gov. Staff  Acknowledgments In addition to the contact named above, Rob Marek (Assistant Director),  Daniel Semick (Analyst in Charge), Ivelisse Aviles, Navaiyoti Barkakati,  Kevin Bray, Ellen Fried, Matthew Hunter, Cynthia Saunders, Dan C.  Royer, Ardith Spence, and Kiki Theodoropoulos made key contributions  to this report.
VA manages a $1.9 billion research program that has produced numerous healthcare inventions, such as the pacemaker. In 2000, VA created a program to help transfer VA inventions to the private sector so that they can be commercialized and used by veterans and the public, while VA retains ownership and collects royalties. Many of VA's 3,000 researchers also hold positions at universities, which take the lead in commercializing inventions developed by these researchers. Researchers and universities are required to disclose such inventions to VA, and universities are to report on commercialization activities according to their agreements with VA. GAO was asked to examine VA's ability to ensure its ownership of inventions made with VA resources. This report examines, among other things, the extent to which VA has taken steps to ensure that (1) researchers disclose inventions and (2) universities report on commercialization activities for joint inventions. GAO reviewed laws; policies; a nongeneralizable sample of university agreements based on backlogs of disclosures, among other factors; and interviews with officials and researchers from VA medical centers and their affiliated universities. The Department of Veterans Affairs (VA) has taken steps to educate agency researchers about its requirements to disclose inventions to VA, but officials reported that researchers have not consistently done so. VA policy requires researchers to disclose inventions to both VA and the university they work for even when they do not use VA resources. GAO found, through discussions with VA officials and researchers, that several factors contribute to researchers not consistently disclosing their inventions, including that VA researchers may have: disclosed inventions to their university, assuming the university would then disclose them to VA; not been familiar with VA's invention disclosure process, because they may not have frequently developed inventions; or thought that invention disclosure was unnecessary when they did not use VA resources to develop their invention. In 2017, VA staff visited universities and VA medical centers 26 times to meet with researchers about invention disclosure. Also, VA created an online training course to educate researchers on the need to disclose inventions, but the training is not mandatory, and about 4 percent of researchers took it. Without mandatory training to communicate invention disclosure requirements—consistent with federal internal control standards for internally communicating quality information—VA researchers may not be fully informed about those requirements, which can result in lost technology transfer opportunities and royalties for VA. VA has improved communication with universities but has not ensured that they are consistently reporting information on commercialization activities for joint inventions. VA reported that about three-quarters of VA's 79 university partners did not submit the annual reports required by VA in 2017. GAO reviewed a nongeneralizable sample of agreements VA has with universities and found that reporting requirements about timing and content of reports were unclear. Without providing a standardized method that clearly guides universities in fulfilling VA's reporting requirements, consistent with federal standards for internal control, VA cannot ensure that it has adequate information to account for its licenses and royalties.