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73–604PDF 2012

FOSTERING THE U.S. COMPETITIVE EDGE: 

EXAMINING THE EFFECT OF 

FEDERAL POLICIES ON 

COMPETITION, INNOVATION, AND JOB GROWTH 

HEARING 

BEFORE THE

SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION 

COMMITTEE ON SCIENCE, SPACE, AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

TUESDAY, MARCH 27, 2012 

Serial No. 112–71 

Printed for the use of the Committee on Science, Space, and Technology 

( 

Available via the World Wide Web: http://science.house.gov 
(II) 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HON. RALPH M. HALL, Texas, Chair 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

PAUL C. BROUN, Georgia 

SANDY ADAMS, Florida 

BENJAMIN QUAYLE, Arizona 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

E. SCOTT RIGELL, Virginia 

STEVEN M. PALAZZO, Mississippi 

MO BROOKS, Alabama 

ANDY HARRIS, Maryland 

RANDY HULTGREN, Illinois 

CHIP CRAVAACK, Minnesota 

LARRY BUCSHON, Indiana 

DAN BENISHEK, Michigan 

VACANCY 

EDDIE BERNICE JOHNSON, Texas 

JERRY F. COSTELLO, Illinois 

LYNN C. WOOLSEY, California 

ZOE LOFGREN, California 

BRAD MILLER, North Carolina 

DANIEL LIPINSKI, Illinois 

DONNA F. EDWARDS, Maryland 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

JERRY MCNERNEY, California 

TERRI A. SEWELL, Alabama 

FREDERICA S. WILSON, Florida 

HANSEN CLARKE, Michigan 

SUZANNE BONAMICI, Oregon 

VACANCY 

VACANCY 

VACANCY 

SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION

HON. BENJAMIN QUAYLE, Arizona, Chair 

LAMAR S. SMITH, Texas 

JUDY BIGGERT, Illinois 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

E. SCOTT RIGELL, Virginia 

RANDY HULTGREN, Illinois 

CHIP CRAVAACK, Minnesota 

RALPH M. HALL, Texas 

DONNA F. EDWARDS, Maryland 

FREDERICA S. WILSON, Florida 

DANIEL LIPINSKI, Illinois 

BEN R. LUJA ́ N, New Mexico 

SUZANNE BONAMICI, Oregon 

VACANCY 

EDDIE BERNICE JOHNSON, Texas 
(III) 

C O N T E N T S 

Hearing Date 

Page 

Witness List ............................................................................................................. 2 

Hearing Charter ...................................................................................................... 3 

Opening Statements 

Statement by Representative Benjamin Quayle, Chairman, Subcommittee on 

Technology and Innovation, Committee on Science, Space, and Technology, 

U.S. House of Representatives ............................................................................ 8 

Written Statement ............................................................................................ 9 

Statement by Representative Donna Edwards, Ranking Minority Member, 

Subcommittee on Technology and Innovation, Committee on Science, Space, 

and Technology, U.S. House of Representatives ............................................... 10 

Written Statement ............................................................................................ 11 

Witnesses: 

Mr. Ron Cohen, President and CEO, Acorda Therapeutics 

Oral Statement ................................................................................................. 13 

Written Statement ............................................................................................ 15 

Mr. Mick Truitt, Vice President, Ludlum Measurements, Inc. 

Oral Statement ................................................................................................. 28 

Written Statement ............................................................................................ 31 

Mr. Thomas M. Brandt, Jr., Senior Vice President and CFO, Telecommunications Systems, Inc. 

Oral Statement ................................................................................................. 47 

Written Statement ............................................................................................ 50 

Mr. Richard Bendis, Interim CEO, Biohealth Innovation, Inc., and President 

and CEO, Innovation America 

Oral Statement ................................................................................................. 63 

Written Statement ............................................................................................ 66 

Discussion 71 

Appendix 1: Answers to Post-Hearing Questions 

Mr. Ron Cohen, President and CEO, Acorda Therapeutics ................................. 83 

Mr. Mick Truitt, Vice President, Ludlum Measurements, Inc. ........................... 89 

Mr. Thomas M. Brandt, Jr., Senior Vice President and CFO, Telecommunications Systems, Inc. ............................................................................................ 93 

Mr. Richard Bendis, Interim CEO, Biohealth Innovation, Inc., and President 

and CEO, Innovation America ............................................................................ 95 

Appendix 2: Additional Material for the Record 

TechAmerica: Technology Roadmap for America .................................................. 102 

(1) 

FOSTERING THE U.S. COMPETITIVE EDGE: 

EXAMINING THE EFFECT OF 

FEDERAL POLICIES ON 

COMPETITION, INNOVATION, AND JOB 

GROWTH 

TUESDAY, MARCH 27, 2012 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION, COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY, Washington, DC. 

The Subcommittee met, pursuant to call, at 10:15 a.m., in Room 

2318 of the Rayburn House Office Building, Hon. Benjamin Quayle 

[Chairman of the Subcommittee] presiding. 
2 

U.S. HOUSE OF REPRESENTATIVES 

EDDIE SE.'RNICE JOHNSON, TEXAS 

RANKING MEMElER 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

2321 RAYBURN HOUSE OFFICE BUilDING 

WASHINGTON, DC 20515-6301 

1202) 225-6371 

Subcommittee on Technology and Innovation Hearing 

Fostering the U.S. Competitive Edge: Examining the Effect of 

Federal Policies on Competition, Innovation, and Job Growth 

Tuesday, March 27, 2012 

J 0:00 a.m. - 12:00 p.m. 

2318 Rayburn House Office Building 

Witnesses 

Dr. Ron Coben, President and CEO, Acorda Therapeutics. 

Mr. Mick Truitt, Vice President, Ludlum Measurements, Inc. 

Mr. Thomas M. Brandt, Jr., Sr. Vice President and CFO, TeleCommunications Systems, Inc. 

Mr. Richard Bendis, Interim CEO, BioHealth Innovation; President and CEO, Innovation 

America. 
3 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION 

HEARING CHARTER 

Fostering tlte U.S. Competitive Edge: Examining tile Effect of Federal Policies on 

Competition, Innovatiotl, and Job Growtlt 

I. Purpose 

Tuesday, March 27,2012 

10;00 a.m. 12:00 p.m. 

2318 Rayburn House Office Building 

On Tuesday, March 27,2012, the Committee on Science, Space, and Technology Subcommittee 

on Technology and Innovation will convene a hearing to better understand how Federal policies 

and regulations affect competition, innovation andjob growth, and to solicit input from leaders 

of innovative companies on ways to improve Federal economic and regulatory policy. 

n. Witnesses 

Dr. Ron Cohen, President and CEO, Acorda Therapeutics. 

Mr. Mick Truitt, Vice President, Ludlum Measurements, Inc. 

Mr. Thomas M. Brandt, Jr., Sr. Vice President and CFO, TeleCommunications Systems, Inc. 

Mr. Richard Bendis, Interim CEO, BioHealth Innovation; President and CEO, Innovation 

America, 

m. Background 

Competitiveness and innovation are crucial to ensuring economic growth and job creation in a 

global economy. Historically, the United States proved to be an excellent place from which to 

launch a new business, cultivating domestic entrepreneurship and attracting talent from around 

the world. The U,S. is home to a multitude of innovative companies in various high-growth 

sectors. U.S.-headquartered companies make up a disproportionate share on the lists of global 

companies by market capitalization, such as the Financial Times Global 5001

• The U.S. is also 

horne to \4 of the top 20 universities, according to the Times Higher Education World University 

Rankings2 

1 httpJ/media.ft.com/cms/33558890-9Sd4-11eO-bd66-00144feab49a.pdf 

2 http://www.timeshighereducation.co.uk/world-university-rankings/2011-2012/top-400.htm I 
4 

The United States continues to have the largest economy in the world. According to the 

Organization for Economic Co-operation and Development (OECD), the U.S. 's 20 10 Gross 

Domestic Product (GDP) was nearly 43 percent higher than China's. the second country on the 

list, in terms of purchasing power parity. 

However, recent trends suggest that other countries are catching up in terms of economic growth 

and competitiveness. In fact, a study by the Information Technology and Innovation Foundation, 

a non-partisan research and educational institute, ranks the U.S. sixth out of 40 countries in 

overall il1l1ovation-based competitiveness4 

According to The Conference Board, a global independent business membership and research 

organization, U.S. GDP is estimated to grow at an average annual percentage rate of2.3 in the 

years 2012-20165

, below the post-World War II average on.25 percent". Unemployment 

currently sits at 8.3 percent, according to the February 2011 Bureau of Labor Statistics Report.) 

Some economists predict that China's GDP will surpass that of the United States in terms of 

purchasing power parity in 2016 and in market exchange rate value by 2018.s 

Policymakers from different countries recognized the success of innovative companies in the 

United States (includi.ng small, medium, and large companies) and implemented policies to 

cultivate innovation-led growth in their own countries. These policies cover a wide spectrum 

including tax, research, regulation, human capitaL and trade policies, among many others. 

Today's hearing is intended to examine how Federal policies and regulations affect 

competitiveness, innovation, and job growth. Witnesses will discuss the advantages and 

disadvantages of current Federal policies, and will make recommendations on how changes to 

Federal policies can improve the cOltntry's competitive profile to ensure that the U.S. remains the 

preeminent country in which to launch or expand a business. 

rv. Federal Policy and Competitiveness 

In a developed economy such as that ofthe United States, private sector innovation is critical to 

economic growth. Studies have demonslratl.:d that innovation leads to mid-term and long-tenn 

employment and income growth." indeed, according to the Information Teehnology Industry 

Council, an association of information and communications technology flrms, il1l1ovation has 

• http://stats.oecd.org!index.aspx?queryid=5S6 

4 R. Atkinson and S. Andes, "The Atlantic Century: Benchmarking EU & U.S, Competit;veness." Inlormation 

Technology and Innovalion Foundation, 2009. 

, http://www.conlerence·board.orgjdata/globaloutlook.cfm 

• http://www.tradingeconomics.com/united·states!gdp·growth·annual 

7 http://www.bls.gov/news.release/pdf/empsit.pdf 

, http://www.economist.com/blogs/dailychart/20 1 O!12/save _date 

'11. Atkinson, D. Castro. S. Andes, S. Ezell, D. Hackler, and R. Bennett, "Innovation Policy on a Budget: Driving 

Innovation in a TIme of Fiscal Constraint." Information Technology and Innovation Foundation. September 2010 

2 
5 

been resfonsible for approximately 80 percent of the growth in the U.S, economy since World 

WarH.1 

Other countries recognize the importance of promoting innovation-led growth and have adopted 

policies intended to increase foreign direct investment and domestic development and 

production. 

Today's hearing will examine the effects of the following policies (among others) on 

competitiveness and innovation. 

Corpol'ate Tax Policy 

The U.S. currently has the second highest marginal corporate tax rate in the OECD at 35 percent 

(39,2 percent including state and local taxes).ll Many OECD countries have lowered corporate 

tax rates over the last 20 years to improve their competitiveness. Indeed, if Japan changes its 

corporate tax rate on April I as expected, the U.s. will have the highest marginal corporate tax 

rate in the OECD (see figure I), Even after accounting for credits and deductions, the U.S. 

effective tax rate is more than 5 percentage points higher than the effective tax rate for the rest of 

theOECD. 12 

Fi.!!lI!.e 1: Corpora!,!! Tax. R.~!e~..lht!p:[l1Al~.:.oec!!.orgL .. __ ...... , _ ..... __ , __ .. 

50% ,---'------.------

40% 

30% 

20% 

10% 

0% Japan United States fn'lflCe 134.4%i 

Belg".lm(34%) 

Germany ~30,2.%) 

Australia (30%) 

Me)(lto{30%) 

New Zealand (30%) 

spalol30%} 

Canild .. {29SM.) 

luxembourg (28.5%) 

NorwavI28%) 

Uflitf;!d Kinsdom (28%) 

Italy {275%) 

Portugill (2{).5%) 

Sweden (26.3%) 

Finland (26%1 

Netnt!-r!ands (15,5%) 

Austria (25%) 

Denmark (25%) 

Israt"d(25%} 

Korea (201,2%) 

Greet¢ (24%) 

Switlerland (21,2%) 

Turkey j20%} 

Slovenia {2.0%) 

Cledl Republic (19%) 

Hungary i19%) 

Poland (19%) 

Slovak R~pllblit (19%) 

Ch11e1l7%i 

Iceland {lS')1.) 

Ireland (12.5'%) 

Other tax policies that affect competitiveness and innovation include the tax treatment and filing 

status of companies, as well as different countries' policies on taxation of foreign earnings for 

exporters. 

10 Information Technology Industry Council (www.itic.org) 

11 http;J!www.oecd.org/document!60/0.3746.en_2649_34533_1942460_1_1_1_1.OO.html#C_CorporateCaptial 

12 http://bus; nessrou ndtable .org!uploads!studies-reports/down loads/Effective _Tax_Rate _StUdy. pdf 

3 
6 

Regulation 

Federal regulations alIect the cost of doing business for companies and therefore affect 

competitiveness. Regulations can have different effects on different sized businesses. A 2008 

study commissioned by the Small Business Administration detennint::d that small businesses 

faced an annual regulatory cost of$1O,585 per t::mployee, which was 36 percent higher than the 

regulatory costs facing large firms.1J The Committee will examine the effects of regulatory 

policy on U.S. competitiveness for small, medium, and large firms. 

Research 

R&D Tax Credit 

The U.S. was the first industrialized country to adopt a comprehensive research and development 

tax credit in 1981. This credit provided incentives to businesses for conducting research which 

might lead to potential new products and st::rvices, even though the benefits of this research could 

accrue beyond the company conducting the research. Many countries followed suit and now 

offer more robust credits to fund research activities at private companies. France has enacted an 

R&D tax credit six times more generous than that of the U.S.'s (see figure 2) 14. 

Figure 2: R&D Tax Credit {OECD Science, Technology and Industry Scoreboard 2009· OECD © 2009) 

, Large firms 

0,5 r---------,------·---------,---------------, 

0.4 

03 

0.2 

0.1 

0,0 

-0.1 

::.tTt_,l1-:-", -,·~-::·l·::--,-:-,=filli=~, -,=::,::.::::,::.=, ,,=,~,-:,:::, ~.'=,,:::=:::~,,-, :::,:,~~, --==:::::::::::::::::::::::::::::::::::::::::= 

.- -- .. -- JJ~; i ........ [ ..• +.I.] ... L .. ~ .. _· ... t-.. -.·· .. · ..... -........... · ............. -_ ............ _IT_ 1l1, ...llll_ .1--"-_~ __ ~ "~~~"~-.-w' 

~1>('~«q,~~~'#~J.~~t~~~fb~~~o\0~~~:~~~~t-&\'11~~~:~'b:~~~O~q 0 

« «~,<-0 ~ c,'l" o.§i' X:-';;Q0~ t:{-~ 't~4,-$'o.; 

u'Y0Ci Cj ..::;~'>$i 

IndusttylFederal Fundingf()r Research 

According to Batelle, a major research and development organization focused on scientitic 

discovery and application, u.s. funding of research and development totaled $427.2 billion in 

2011, of which $270 billion came from industry, $128 billion from the Federal Government, and 

$30 billion from academic and other sources. J5 The Committee will examine prioritization of 

13 http://archive.sba.gov/advo/research/rs371tot.pdf 

14 www.oecciilibrary.org/content/ book!sti_scoreboard.2009-en 

15 2012 Global R&D Funding Forecast 

4 
7 

Federal funding tor basic and applied research programs within the context of the challenging 

budget environment. 

Human Capital 

Innovative companies in knowledge-based economies depend on a talented workforce to develop 

new products and services or to improve existing products and services. Science, Technology, 

Engineering, and Math (STEM) education and immigration policies have an effect on 

competitiveness and innovation and the Committee will seek input from witnesses on these 

Issues. 

Trade 

Innovative companies that export products and services depend on access to foreign markets, 

Trade policies affect the cost of doing business for companies in global markets. The Committee 

will examine Federal trade policies, including existing and potential trade agreements, 

V. Questions for Witnesses 

Witnesses have been asked to: provide recommendations on policies the Congress should enact 

to improve American competitiveness and to promote innovation; describe whether current 

Federal policies inhibit their companies' ability to innovate and, if so, recommend steps that 

Federal policy-makers can take to alleviate this burden; describe how Federal policy or 

regulatory uncertainty affects their companies' ability to make business decisions; and describe 

how individual country's economic policies influence their companies' decisions to establish or 

expand business operations. 

5 
8 

Chairman QUAYLE. The Subcommittee on Technology and Innovation will come to order. Good morning. Welcome to today’s hearing entitled ‘‘Fostering the U.S. Competitive Edge: Examining the 

Effect of Federal Policies on Competition, Innovation and Job 

Growth,’’ which is being held to examine the effect of federal policies on U.S. competitiveness and innovation. In front of you are 

packets containing the written testimony, biographies and Truth in 

Testimony disclosures for today’s witnesses. I now recognize myself 

for five minutes for an opening statement. 

Today’s discussion is the fourth in a series focused on advancing 

U.S. innovation in a constrained budget environment, following 

hearings on cloud computing, startup companies, and principles of 

effective standards development. 

At the Committee on Science, Space, and Technology, we are fortunate that we have the opportunity to influence the Federal Government’s investments in basic research, which can result in gamechanging innovations 10, 20, even 30 years down the line. We also 

influence science education policy, helping to ensure our Nation’s 

future workforce remains competitive in the global economy. 

While these policy areas are vital to U.S. competitiveness and innovation, there are several other policy areas that affect our country’s competitive standing. 

These areas include taxes, regulation, trade, protection of intellectual property, and human capital, among many others. According to House Rule X, Clause 2(c): ‘‘Each standing committee shall 

review and study on a continuing basis the impact or probable impact of tax policies affecting subjects within its jurisdiction.’’ 

As part of carrying out our oversight responsibilities, the Committee reviews laws, programs, and government activities that affect the country’s competitiveness and innovation. Therefore, as we 

hear a range of policy recommendations from our witnesses today, 

it is imperative that we understand how these many issues affect 

our Nation’s economic competitive position. 

As of April 1, the United States will have the dubious honor of 

having the highest marginal corporate income tax in the industrialized world. This tax rate harms competitiveness by taking money 

away from companies that could be better used to conduct research, develop new innovations and create jobs. And it encourages 

companies to look for more favorable business environments 

abroad. 

Policy uncertainty can also make private sector business and investment decisions more difficult. For instance, the Research and 

Development Tax Credit has expired 14 times since it was first authorized under President Reagan in 1981. While the Congress has 

repeatedly extended this credit, it generally has not done so until 

the end of each year, adding a layer of uncertainty to company investment decisions. 

Excessive regulations and red tape increase the cost of doing 

business and create uncertainty for private sector companies. A 

study commissioned by the Small Business Administration in 2008 

calculated that small businesses faced annual regulatory costs of 

$10,585 per employee. In the first three years of the Obama Administration, the Federal Government imposed 106 new major regulations with annual costs of more than $46 billion. By piling on 
9 

new hoops for employers to jump through, we are simply increasing 

costs that are passed on to consumers. Finally, our country’s deficit is projected to exceed $1 trillion for the fourth straight year, and our gross national debt exceeds $15 

trillion. This fiscal path is unsustainable. It is bad for business, 

and it is just plain wrong. Clearly, we must do better. As policymakers, we need to foster an environment that allows U.S.-based 

innovators to compete and to flourish. We should enact policies 

that ensure this country remains the best place to launch or expand a business. 

Today, we will be examining how federal policies and regulations 

affect competition, innovation and job growth and we will be hearing recommendations from leaders of innovative companies and 

technology transfer organizations on ways to improve federal economic and regulatory policy. 

We thank our witnesses for being here today, and we look forward to your testimony. 

At this time, I am going to submit for the record Tech America’s 

Technology Roadmap for America. Without objection, so ordered. 

[The prepared statement of Mr. Quayle follows:] 

PREPARED STATEMENT OF SUBCOMMITTEE CHAIRMAN BENJAMIN QUAYLE

Good morning, I’d like to welcome everyone to today’s hearing, which is being held 

to examine the effect of federal policies on U.S. competitiveness and innovation. 

Today’s discussion is the fourth in a series focused on advancing U.S. innovation 

in a constrained budget environment, following hearings on cloud computing, startup companies, and principles of effective standards development. 

At the Committee on Science, Space and Technology, we are fortunate that we 

have the opportunity to influence the Federal Government’s investments in basic research, which can result in game-changing innovations 10, 20, even 30 years down 

the line. We also influence science education policy, helping to ensure our Nation’s 

future workforce remains competitive in the global economy. 

While these policy areas are vital to U.S. competitiveness and innovation, there 

are several other policy areas that affect our country’s competitive standing. 

These areas include taxes, regulation, trade, and protection of intellectual property and human capital, among many others. According to House Rule X, Clause 

2(c) ‘‘Each standing committee shall review and study on a continuing basis the impact or probable impact of tax policies affecting subjects within its jurisdiction . . . 

.’’ 

As part of carrying out our oversight responsibilities, the Committee reviews laws, 

programs and government activities that affect the country’s competitiveness and 

innovation. Therefore, as we hear a range of policy recommendations from our witnesses today, it is imperative that we understand how these many issues affect our 

Nation’s economic competitive position. 

As of April 1, the United States will have the dubious honor of having the highest 

marginal corporate income tax in the industrialized world. This tax rate harms competitiveness by taking money away from companies that could be better used to conduct research, develop new innovations and create jobs, and it encourages companies to look for more favorable business environments abroad. 

Policy uncertainty can also make private sector business and investment decisions 

more difficult. For instance, the Research and Development Tax Credit has expired 

14 times since it was first authorized under President Reagan in 1981. While the 

Congress has repeatedly extended this credit, it generally has not done so until the 

end of each year, adding a layer of uncertainty to company investment decisions. 

Excessive regulations and red tape increase the cost of doing business and create 

uncertainty for private sector companies. A study commissioned by the Small Business Administration in 2008 calculated that small businesses faced annual regulatory costs of $10,585 per employee. In the first three years of the Obama Administration, the Federal Government imposed 106 new major regulations with annual 

costs of more than $46 billion. By piling on new hoops for employers to jump 

through, we are simply increasing costs that are passed on to consumers. 
10 

Finally, our country’s deficit is projected to exceed $1 trillion for the fourth 

straight year, and our gross national debt exceeds $15 trillion. This fiscal path is 

unsustainable. It’s bad for business, and it is wrong. 

Clearly, we must do better. 

As policy makers, we need to foster an environment that allows U.S.-based 

innovators to compete and to flourish. We should enact policies that ensure this 

country remains the best place to launch or expand a business. 

Today, we will be examining how federal policies and regulations affect competition, innovation and job growth and we will be hearing recommendations from leaders of innovative companies and technology transfer organizations on ways to improve federal economic and regulatory policy. 

We thank our witnesses for being here today and we look forward to your testimony. 

Chairman QUAYLE. I now recognize the gentlelady from Maryland, Ms. Edwards, the Ranking Member, for her opening statement. 

Ms. EDWARDS. Thank you very much, Mr. Chairman, and thank 

you for calling this hearing on competition, innovation, and job 

growth. This hearing is an important follow-up to one that we held 

back in November on small business creation. 

I am pleased that we are taking an in-depth look at these issues 

as we seek to identify the best federal policies for fostering innovation and job growth and preserving our competitive edge in the 

global economy. And I thank the witnesses for being here today. 

Without a doubt, regulatory, tax, immigration, and economic policies have an unquestionable impact on innovation and competitiveness. And there are important steps that we can and should take 

in Congress to address these issues, including policies that I have 

long advocated, such as increasing and making permanent the research and development tax credit and providing incentives for 

businesses to co-locate their research and development and manufacturing activities here in the United States. 

In addition, I am strongly supportive of efforts by policymakers 

and business leaders in my home State of Maryland to enact a 

measure to make more companies eligible for the State’s biotech investment tax credit and to streamline the application process, aiding countless small- and medium-sized businesses. 

Locally, in Montgomery County, which I represent along with 

Prince George’s County, the biotech investment tax credit, the first 

such program at the local level anywhere in the country and modeled after the State’s program, has helped facilitate nearly $6 million in local investment for a number of local biotech companies. 

These are very promising programs that ought to be replicated 

elsewhere. 

However, for our purposes of today’s hearing and despite my advocacy for some issues that do not fall under this Committee’s jurisdiction, I think it is most worthwhile for us to focus on the areas 

and programs within our committee’s jurisdiction, and these can 

have an important impact on innovation and competitiveness. 

We have legislative authority over many programs throughout 

the Federal Government that are seeking to partner with the private sector, State and local governments, academia, and others to 

promote innovation- and technology-based economic development. 

For example, in the America COMPETES Reauthorization Act of 

2010, we authorized the Office of Innovation and Entrepreneurship 

and the regional innovation strategies program at the Economic 
11 

Development Administration. These programs are up for reauthorization next year. I think it would be a valuable use of our time 

to check in on the progress of these programs and to hear from our 

witnesses today about how they might be improved, enhanced, or 

expanded. 

The truth is that there is much that can be done in the area of 

regional innovation beyond the critical aspect of creating linkages 

between and amongst the various stakeholders in a region. There 

are interesting ideas involving shared facilities, collaborative research and development, and commercialization that we ought to 

be exploring in an effort to enhance regional innovation and economic development. That is why I am particularly pleased that Mr. 

Bendis is joining us today as a witness. I am very interested in the 

BioHealth Innovation initiative, and I am very supportive of efforts 

to formalize and accelerate development of a biotechnology cluster 

in the Central Maryland region. We have extraordinary and unparalleled biotech assets in Central Maryland that can be and ought 

to be leveraged to make the region a truly global force in biotechnology. 

In addition to EDA’s efforts with respect to regional innovation 

and economic development, there are also some very relevant, 

White House-led policies under way that deserve some examination 

and review. These include the President’s Public-Private Start-Up 

America initiative and his recent efforts to enhance and improve 

technology transfer from our federal labs. 

We have jurisdiction in this committee over these programs and 

policies, and we should make the effort to evaluate their effectiveness to determine if there are steps that we could take by legislatively strengthening or improving them. 

I think it would also be worthwhile for us to take a serious look 

at what is going on with our international competitors. Other countries, including Germany, Singapore, and China, are pouring significant amounts of money into programs to spur innovation and 

are trying out some interesting new models. We should seek to better understand these models, the lessons learned and the best practices, and explore the possibility of piloting some of them here in 

the United States. 

I look forward to hearing from our witnesses today and hope we 

have an opportunity to touch on some of these important issues, 

and I yield the balance of my time. 

[The prepared statement of Ms. Edwards follows:] 

PREPARED STATEMENT OF RANKING MINORITY MEMBER DONNA EDWARDS

Mr. Chairman, thank you for calling this hearing on competition, innovation, and 

job growth. This hearing is an important follow-up to the hearing we held back in 

November on small business creation. I’m glad that we are taking an in-depth look 

at these issues as we seek to identify the best federal policies for fostering innovation and job growth and preserving our competitive edge in the global economy. And 

thank you to the witnesses for being here. 

Without a doubt, regulatory, tax, immigration, and economic policies have an impact on innovation and competitiveness. And there are important steps that we 

can—and should—take in Congress to address these issues, including policies that 

I’ve long advocated such as increasing and making permanent the R & D tax credit 

and providing incentives for businesses to co-locate their research and development 

and manufacturing activities here in the United States. 
12 

In addition, I’m strongly supportive of efforts by policymakers and business leaders in my home state of Maryland to enact a measure to make more companies eligible for the State’s biotech investment tax credit and streamline the application process, aiding countless small- and medium-sized businesses. Locally, in Montgomery 

County, which I represent along with Prince George’s County, the biotech investment tax credit—the first such program at the local level anywhere in the country 

and modeled after the State’s program—has helped facilitate nearly $6 million in 

local investment for a number of local biotech companies. These are very promising 

programs that ought to be replicated elsewhere. 

However, for our purposes today, I think it is most worthwhile for us to focus on 

those areas and programs within our Committee’s jurisdiction that have an impact 

on innovation and competitiveness. We have legislative authority over many programs throughout the Federal Government that are seeking to partner with the private sector, State and local governments, academia, and others to promote 

innovation- and technology-based economic development. For example, in the America COMPETES Reauthorization Act of 2010, we authorized the Office of Innovation 

and Entrepreneurship and the regional innovation strategies program at the Economic Development Administration. 

These programs are up for reauthorization next year. I think it would be a valuable use of our time to check in on the progress of these programs and hear from 

our witnesses how they might be improved, enhanced, or expanded. 

The truth is that there is much that can be done in the area of regional innovation beyond the critical aspect of creating linkages between and amongst the various 

stakeholders in a region. There are interesting ideas involving shared facilities, collaborative research and development, and commercialization that we ought to be exploring in an effort to enhance regional innovation and economic development. 

That is why I am particularly pleased that Mr. Bendis is joining us today as a 

witness. I am very interested in the BioHealth Innovation initiative and am very 

supportive of efforts to formalize and accelerate the development of a biotechnology 

cluster in the central Maryland region. We have extraordinary and unparalleled biotechnology assets in central Maryland that can be, and ought to be, leveraged to 

make the region a true global force in biotechnology. 

In addition to EDA’s efforts with respect to regional innovation and economic development, there are some very relevant White House-led policies underway that deserve some examination and review. These include the President’s Public-Private 

Start-Up America initiative and his recent efforts to enhance and improve technology transfer from our federal labs. We have jurisdiction over these programs and 

policies, and should make the effort to evaluate their effectiveness and determine 

if there are steps that we could be taking legislatively to strengthen or improve 

them. 

I think it would also be worthwhile for us to take a serious look at what’s going 

on with our international competitors. Other countries, including Germany, Singapore, and China, are pouring significant amounts of money into programs to spur 

innovation and are trying out some interesting new models. We should seek to better understand these new models, the lessons learned and the best practices, and 

explore the possibility of piloting some of them in the United States. 

I look forward to hearing from our witnesses today, and hope that we will have 

an opportunity to touch on some of these important issues. I yield back the balance 

of my time. 

Chairman QUAYLE. Thank you, Ms. Edwards. If there are Members who wish to submit additional opening statements, your statements will be added to the record at this point. 

At this time, I would like to introduce our witnesses, and then 

we will proceed to hear from each of them in order. 

Our first witness is Dr. Ron Cohen, President and CEO of Acorda 

Therapeutics. In his current position, he oversees a public biotechnology company aimed at bettering the lives of those afflicted 

with a variety of neurological conditions. Next we will hear from 

Mr. Mick Truitt, Vice President of Ludlum Measurements, Inc. In 

this capacity, Mr. Truitt has dealt with the extensive growth in the 

international markets. Our third witness is Mr. Thomas Brandt, 

Jr., who is the Senior Vice President and Chief Financial Officer 

of TeleCommunications Systems, Inc., a wireless technology solutions provider. Mr. Brandt is also here on behalf of TechAmerica, 
13 

an association of diverse U.S. technology companies. Our fourth 

witness is Mr. Richard A. Bendis, the Interim CEO of BioHealth 

Innovation, Inc., and President and CEO of Innovation America. 

These current roles allow Mr. Bendis to lead two innovation intermediaries which help bring together the range of organizations and 

knowledge necessary to spur innovation. Thanks again to all of our 

witnesses for being here this morning. 

As our witnesses should know, spoken testimony is limited to 

five minutes each. After all witnesses have spoken, Members of the 

Committee will have five minutes each to ask questions. I now recognize our first witness, Dr. Ron Cohen, for five minutes. 

STATEMENT OF DR. RON COHEN, 

PRESIDENT AND CEO, ACORDA THERAPEUTICS 

Dr. COHEN. Chairman Quayle and Ranking Member Edwards, 

Members of the Committee, it is my privilege to be here today to 

discuss ways to foster biomedical innovation in the United States. 

My name is Ron Cohen and I am the President, CEO, and founder of Acorda Therapeutics, Inc. I have over 25 years of experience 

in the biotechnology industry, and I am appearing before this Committee on behalf of the Biotechnology Industry Organization, or 

BIO, where I serve as Chairman of the Emerging Companies section of the Board. 

Acorda is a small biotechnology company located in Hawthorne, 

New York. I founded the company in 1995 with one mission, to develop therapies that could restore neurological function to people 

with multiple sclerosis, spinal cord injuries, and other conditions 

that affect the nervous system. 

In 2010, after 15 years of effort, we obtained FDA approval for 

Ampyra, a drug that improves walking in people with MS, a significant improvement in a basic function that affects the lives of 

MS patients. 

Our company went public in 2006, and today we employ over 330 

people who are working on a pipeline of innovative medicines that 

could be transformative in the lives of patients afflicted with these 

terrible diseases. 

America has developed more cures and breakthroughs than any 

other country. However, this position will not be sustained without 

a concerted policy focused on supporting and incentivizing the next 

frontiers of biomedical discoveries, treatments, and cures. Unfortunately, investors are now decreasing their funding in early-stage 

companies, such as ours, developing potential medical breakthroughs. Even as we are decreasing our investment in early-stage 

biotechnology in the United States, we are facing unprecedented 

competition from around the globe to be the leader in biomedical 

research. In 2008, China pledged to invest $12 billion in drug development, and in 2011, the Chinese government named biotechnology as one of seven industries that will receive $1.7 trillion 

in government funding over the next five years. The competitive 

gap is getting smaller. 

The U.S. biotechnology industry is poised to be a major driver in 

an innovation-driven economy, and we offer real solutions to our 

most pressing healthcare needs: curing diseases, reducing costs, in-
14 

creasing quality, and ensuring that people enjoy not only longer 

lives but better and more productive lives. In fact, today the Nation’s biotechnology industry employs 1.42 million people and supports an additional 6.6 million jobs. 

In order to truly realize these potential benefits, we must have 

a policy environment that fosters innovation. My written testimony 

discusses five policy areas that would better enable us to do this. 

For my oral testimony today, I want to focus on two areas, tax policy and regulatory environment. 

In the past, Congress has provided tax incentives that mitigate 

risk and enhance the returns of innovative development projects 

like those found in our companies. The growth of the industry in 

the early 1980s was due in part to the ability of growing companies 

to pass through various tax incentives, including credits and losses, 

to their investors. This sponsored and promoted a great deal of investment in the industry. Allowing certain tax incentives stemming 

from R&D to flow through life science projects to their investors 

would result in immediate tax benefits to investors and encourage 

further investment. 

On the regulatory front, we need to have a strong successful FDA 

and a transparent FDA. It is imperative that the FDA have the resources that it needs. In 1992, Congress, industry, and the FDA 

created the PDUFA, or the Prescription Drug User Fee Act. This 

ensured that the FDA would have the wherewithal to hire the reviewers it needed, to expedite the drug development process. And 

this year, the fifth reauthorization of that very successful program 

is up for renewal, PDUFA V. This PDUFA V legislation will further 

streamline the activities of the FDA, and I encourage Congress to 

pass that. 

In addition, Congressmen Stearns’ and Townes’ Faster Access to 

Specialized Therapies Act, or the FAST bill, would create a robust, 

accelerated approval pathway that would enable the safe and expeditious development of the next generations of modern medicines. 

I encourage passage of the FAST Act and the benefits that will accrue from it. 

Thank you very much for the opportunity to speak to you today. 

[The prepared statement of Dr. Cohen follows:] 
15 

PREPARED STATEMENT OF DR. ROY COHEN

Bio 

BIOffCHNOLOGY 

INOIlSll{Y ORGAl'il7 A nON 

TrSTIMONV OF RON COllEN, M.D. 

PI~ESI\)ENI' & CHIEF EXECUrlVE OIiFIClm, ACORDA THERAPHJTICS 

ON BEllALHWTHII BIOTECIINO/,()(;Y INIJUSmV ORGANIZATION 

HOUSE COMMITTEE ON SCIENCE, SPACE, ANO TECHNOLOCY 

SU1\cOMJI1I'f'TEE ON TECHNOLO(;Y AN!) INNOVATION HFARINC ON: 

"FOSTERING THE COMPETITIVE EDCE: EXAMININU THE EFFECI' OF FEDERAL POLICIES ON 

COMPETITION, INNOVATION. AND JOll GIWWTI1" 

Mal'cll17, 21JI2 

Umirman ()uayle and Ranking Member Edwards, Member, of the Commillee. it is my privikg<: 

to provide testimony today on the crudnl issue or Cll'Ilrillg we foster biomedical innovation in 

the United Stak,. My nmne is Ron Coilen and [Hmlhc President, 0;0. and [()lIntier or Aeortia 

Therapeutics, fnc Prior In [<lUIlLIing Awrda, I was a principal in Advanced Tissue Sciences, 

Inc .. a hioll'chnoillgy company engaged in the growth of human organ lhsucs for lramplantation. 

I have over 2'1 yean' of experiencl' in the hiolcchnojogy inliuslry anL! currently serve as a member 

or the Colwllhia-Presbytcrian Hcalth SciCIlCl:S Advisory l\lllndi. t am a recipknt of the Ernst & 

Youllg I'ntreprellcur or the Year Award for tile New York MetropolilUll Region anti am all 

indudcl' of the National Spinal C(inJ Iniury /\ssm:iation's "Spinal Cord Injury Hall of Faille." 

:1111 appearing lwfmc thh COlllmitlee on hehalf of tllG Biowchnohlgy Indtblry Organi/.alion 

(BID). where I serve ns Chainnan nf the bn<:rging Companic~ S<:,'lioll (Jnv<:rnint! B\liml. BIO 

reprcsents more than 1.100 companies, academic institutions, statc bintechnolOllY c<:ntcrs, and 

related nrganirmiolls in all 'iO stmes. 

Acorda b a smnll hiolccbnology company IO(llt<:d in Hawthorlll.?, \'"w York. ! t()!lfld~ct til" 

CIl!11IXl1l)' in 199'1 with \\nl' 1l1is,ioll [0 develop therapies (hal could restore nCllI'u)ogical 

lun.:tioll1lnd improve the lives Ilf people with Jnultiple sclerosis (;vlS), spinal cord injury (SCI). 

,md 1}lher disprd"r, oflhc nervous system. We laulll:!lcd our i'irsll'DI\-apprnvcd 11l\'dkal;"n. 
16 

lana/lex Cal}Sllies, in lOti:;: /"Ilwlkx is 11 drug lha! help~ with the In<ll1llgemenl or spastidty. In 

201 0 we nhtaillcd FDA approv,,' I,)!" ;\mpym, a drug that impmves willking ill people with MS: 

the maim)ly pII[ienl, afi1iclcd with this discHse experience impainncili in [heir ahility to walk, 

In addilion h' 

Ilcrv~s inlhe spinal cord or hrain li'O!1\ the consequenCe's or traumatic injury or stroke, reg,~lwmlc~ 

Jlcllwl ,;(lIlllfctions ill existing injuries, and a,klress dmlll!ge to or los, or mydin (the insulating 

layer or cdls Ina! SUl'fOll(Klnerve nhcrs). 

Our cnmpally weill puhlit: in 2006 Hllllloday we have :no employees who an~ working on our 

pipeline of innovutive medicines that (.Could be lranSronm!tivc in the lives or patients afflined 

with l1eufologil:lll disl'ases. A!lhollgl1lhc wmpany hilS m:ttured lind m1ll1y or OUf cmployees m\' 

hased at Ollr heatlquarters in ! !awthorne, NY, we have remained true tn our origins as a 

c(lilahonttivc ""wrnll,q' -" hoth wi/hia tile C(lmpany and with external par!ner~ in academia und 

industry, with whom wc shart' a sense or missIun. This unusually high kvd or \cmllwork has 

.:on!rihutcd substantially [n ollr ahility \0 innovate succcssfully, from product kkntilkalion in 

pl'edinical, dinical, and commcrda! d('vdopmcllL 

! am bere loll,.y til talk a\>oullile statc nf the biott'clmnlogy induiill'Y in tilt' United SlaW, and \0 

discuss police,:; that have been enacted or are currently bdng considered by Congre,s that would 

~'nstlrc we have ,\ rohust biotech illdu1'try in thc U,S. lill' the f()l'csccablc rU!lln~, 

Tim UN!Tf;;I~ STATES I.hon:CHNOI..O(;)" INDUSTRY; IMPOIHANn: 01' DEVELOPING POLK:m" 

THAT FOSTHI.INNOV AnON 

It is irnpentlivt; that we have pnlki(:s thaI encourage rCh\;an:t1 and development o( lll(' nexl 

gencratlPIl of trCalillcnb and cures. America has developed l11\ll\' cures <llld brcakthrollgll 

medicines than allY <,!Iwr (oull(ry ul1(j is home to (\V,~r 2,:;00 biotech n)mrank~. However, this 

POSi!i(I!l (',mlh\t he ~1I,laiIlCd wl,hmt! (on,','rled polic)! on supporting <lnti 

ahe next frontkr "I' 11t0n1l'dica! di;;~~\w\~rie" In:nimenh, alld cur,"" R,~e.:nlly thcn:: have becn a 

rew llem.Hin.:s !nt[ting lm;n;ased jnvcslm.:nt ill Ill;;; llkllu",lical field. Unfofl!lnmdy, tht',';c 

Illo<ldlinc> (lvtT:iimplify rhe uClllal sU:ltc or afhlirs, The National Vt:nlmc Capital A""ctmi(ll1 

ll'-.'VC/\) rl'el'!I!fl' rekusl'd lilt'll' fourth qlliinc;f 2011 numbers 1'(11' VCHam: fhwnring ,)i' 
17 

biokdllloiogy ill Ihe U.S. While tile numbers showed an overall I WIr, ;)](:r,'11'" in invc,;lll1l'lll 

Jj'om 20 I U to 20] I, this is mi,leauillg with I'cgaru to lht.: SitLialiOll lhill 11)OS[ sl1MIL inllo\latil',' 

biokcilllology companies me facing, i The 2() I J investment in hil'tccl1noiogy is arilially Ill!, 

Itwil'r than the peak we saw in 2{~17. and th,: lOwlllllmhcr nf venture financing deals was d,)w:l 

))';; ~ince 201lJ. 1I:1<\;,1 importantly. especiallv to small innovalive companies, the numher or 

venture-funded carly-stage companies fell by I ')<,l ,2 The numher of investments moving away 

from early-stage inllovati vc; projects is an alarming tr,'nd lilal hus h,::cl1 growing {lver the past few 

years in fact, the !lumher or first-time financings for life sciences col11panics is at its I"west 

level since 109(,J 

Over the past yt:ar we have s(.'(,n sevcrallong-timc investmcnt funds announce they will no 

longer be investing in the mcdi,~a! ociente seclors, An October 2011 survey conducted by the 

NVCA and IVleJIC shuwctlthat 4lY,{, of wnture l·'lpitalist.' expect to decrease investment in 

hiopharma (lver the nexllhree year;;, three times as many as the numher who expect to in<.Te;lse. 

This same survey showed that61 'J!, cited reglliatory chalknges al the FDA as the main rcaS('1l for 

reducing inVl',tll1Cl1ts! Tilis i;: not clllirl'ly 'tlrpri"ing givcn thal thc limc ami costs 10 (!<:vci.,p a 

novel drug have continllccito increase (lve! the past decade. !n lilc!. today, it requires an average 

oj' I () til l'i years and $XOO million to oYer $1 billion 10 dcvci"p a new drug, and that CO,I is 

ccmlinuing to increase at it disturbing rate-"",u 111 part this incrcw;c in \.:ostcan he attributed to 

the increased complexity of n:gulatllry rcquirellll'l1ls. For example, between 1l)l)i) and 200:') (ill' 

average kngth or dinical(rials grew by 70'l ,'J The cnmi1in,[[io!l or Illl'Sl' increased .;"sls, 

! NVCA./P\VC !'v1oney"fr(:"c Rcport: Q4 :?Oi L iJ:t!a provided by Thomson RcuH.:rs . 

.: ··Venttlr~ ('arHat iIH:rca..;,c." in 21)! 1, but. < _" ln~id\..· 1{1() IndiIS!1'Y Analy"i~, 24 Jllll!J:UY 1(112, hltp:f!w\\'\\,.nhYcrhnov" .nrg/husillc~·huH.lwitl\'est rnCIllS/itl,,jde-b.-io-ia!2()} 2/0 J /v.; 201 1 

, NV( :AlPW(' M"'ll'y'l rep Rcpml: ()4 20 I!. Vaia pnlVl:lcd hy filum,,,,, ReIHer,;. 

"NV{,AlM('dlC Survey. Ylilil Signs, Octoo,'r 2011 

~ "R":UJrlh' ~~} R&J> n{): N\.:\l, Drn~ IntnhllJ;..'iitHh til !he ~()gp;:.. .. ' JOU!U,I! of He:!llt: r .... \mom!~:\ 13, n~). -f. ( I~Y)4;: 3~d~ 

40() 

f. (1.(1. (j1abuw~kL J. VCtTH)fL ~llHI I. A> Dilvb:-:.l. ' {{dun;., nll Rf"t',!;'Ch ,H1t' 1)cvr[{'rHnem Ex [!)l.iO.; Ne\v Dn!J;' 

'Pj!artll.!..:oct:nll~)mt('~ 2tL ... npp.:\- ~200::1: 11-·19 

1 Pima!1t ~mt.l H (ir;!b(lwski I "Thl.'"CnSl orlJ.iupharH~;Kl':t.Hk:d R&l): 1\ BiF\Cch. Diffen .. ']b!?·' M<UJ,ti~Cn;d ,tnd 

D:::t..i:-mn h.·,"iP.ijll!H':.~ nn 2~ O(}07): 46'.l-7i) 

'J: Mww\, Bern~ud. "L..('",s.;H1;\ from 60 ~f\:ar$ of p"harmw .. 'l.~utk>alllln~W;HJ~!n." r'Vmufe ~(i"l':r;.' "i nrllR j)i\(on··.t"I,' x., 051:)· 

')6~ (j );:;.:(':n~!·h.~r 200()~. 

" run'.;: ('etHer h)v lIE: SlHdy 01 l)ru~ ~kvdnFmL'nl. :(10(1, "(in)w~ug Prnml..\'J r.\~·.:.:jE}~ ('nmpk.\11.Y Str~s. ... ..:\ 

ltlvt.'.\[i~<HlJr', V<"tlumeers.-< hnpacl Relh)fL tu t 
18 

r~t:llla!nry llI1<:crtainty, and lark of fi;;cai inC:t'IHivcs is 

](lWl'r risk pmp,'siliol1s and/or overseas. 

"Ve at\'· facing lIIlprccedl'l1wd cOlllpetition lrnm "round tile globe to tw the kmkr in hionwdiclli 

research. In 20m\. ('himl pll1dgcd to invest j; 12 hi Ilion in drug devl,lnpnWHC HI and in 2011, till' 

Chinese govllnlmenlUamcd hintet:hnology as (lIlC of seven industries that will receive j; 1.7 

trillioil in grwernmci1t funding over the nexi five years. Tile !:uropean Union's Innovative 

NIet/ieines lnitialivl' i:, pumping $2Ri hillion into Europe's biopharma and lndin's 

Hioeonneet initialive has lundcd OVllr 200 ncw hioplJarl1111 proj<:,c!sU While America has 

developed 1110re cures and hrellkli1wugh medicines (hun any other country, this is not a posilion 

that will bc sustained without contill1l0d investment and policies foclised Oil supporting and 

inccntivizing the next gcncmlilln or biomedical discoveries, treatments. and cures, 

The lLS, biotechnology induslry is poised to h\! a major drivcl' in all innovation-driven t'cnl\omy 

and wc olTer n:al solutiolls (0 nul' 1110st pr(lssmg health (lart! needs: curing disease, reducing 

costs- increasing quality, and ensuring Ihat people enjoy 11(\( (lilly livcs, hut better ltnd 

rnml,l prnliutliVl' lives. Our hioil,dl companies providl' high-wage johs al hoth public reseurch 

im,tilutioll!' and in the biotech companies that typicalJy locate near centers M academic rcscun:h. 

The indirect ,:ITec:ls ofifH.:reascd research runding on the rcgionul economy art' significant. For 

biomedical research directly generales johs in the host institutions, and 

indir(':ct and induced joh cr-:alion in the regio!] mnollnts to additional joh growth. In fiK'l, the 

nation', !A2 million bioscience jobs support an additional6.6milliol1 j()bs in the United Statl~s, 

fewlting in a IOlal employment impal'1 of <'\IeI' R million ,i'lns.l• 

It is ulso ::riticallha! in an environmelll hudgetary -:ol1slraint tin not lose sight or the fact 

thm illlh,vnlive medicines can aCllIally help relluce hcalthcare costs. For exampk, Mcdic:m: is 

('XIX'CiccI to :;penil \lwr $I()O billion ill 2012 nlring ti)!' individullis suffering from Altheimer's 

It" t 'um: n;-n~, r;.t>yek'fHiwlIL"' ('hh:A)h' rn~hy. 9 

lO') 
19 

dise:lse.!' Delaying the Ollset (\1' AI/,hclllWf'S hYJusllive ycar.s would .saw $51) billion p(>r ycar. J(, 

/\ similar CdClllus applie,;, to mU11lTOliS chwnic:. debilitating diseases. including heart !"lilure, 

kidney disc<l;'c. diabetes. and arthritis. Hy 2030. almost one out of every five i\.meIicans some 

72 mii!ioll rcoplc - will he 6:; years or older. !\nd as all11lhl 75 Cl'nts of every health em\' do!!,tr 

slll~nt is ror taking care nf indivilluals sulTcring from a chronic disease. it cuultl 1101 he clearer that 

we have a national imperative to find new solulions ill how Wc' Ire':ll paLients and disl'w;cs, 

In order 10 f,tlly realize these potenlial henefits we mli);t have a policy environment that fosters 

il1l1(lvat1l'1l. There are five policy arca~ neeessary II) enahle liS to deliver the nl'"t froillier Dr 

medical hreakthroughs: I) protection or intellectual properly to prolect the main driver in 

sectlring private Sc(lOr investment: 2) funding j()I' basic research and an c!'l'et:tivc techllology 

transrer system to ensure thalthl: latcst scienlific discoveries an: ahle to be developed by 

industry and l11adc availnhll: {i\ patients: :n funding oppmlllnj(ics 1'01' eady-slape clinical research 

and (kvclopmcilt to ensure that c'arly-stagc discoveries are fostered in on.kr to cl1coll1'age 

priv,lle sector investment; 4) tax and financial services pllli~ics lhat ellcourage investment and 

support biolechnology companies; and 5) a wdl-ftHJdcd FDA with transparenl and C()t1sistl'l1i 

regulatory processes thill enahle the timely, crJ'icicnl, and prnlictah1c review or innovative 

llll'tlkincs and allow for the lISC of modern sciellti l'ic tools and I11c!hnt/olo)'ics thar make the drug 

deV()lopmclll processes more elTkklll. 1\1y teslimony wday will ['OClIS mainly Oil ecollomic alld 

I'l'glllahlry proposab 111111 would serve to preserve ollr positi(l]] as ~lobaJ lcmkrs in bionwdic,11 

in!lovuli(}i1. 

TNTELU<:CTUAL PROPERTY, TECHNOLO(;V TRANSFER, ANI) FUNUlN<.; FOR RESEARCH: 

ENSIJ!HN(; A ROBUST PIPELINE OF BREAKTHROUGH TREATMENTS AND THERAl'lES 

lk[orc I discliss Ill'W capilHI formation and regulatory propusals being <:ol1sid('red by ('ongn",,,, I 

want to highlighll<lur laws currently ill place that ")Sler biomedical innovation. 

'; ,\!ZIN .. -imr;;(, A;:;:-::oLi;tt1\.!11, .M~·tn.'h 2tH2 Etel Sh.;,::eL 

Itt! p: !!W\1..iW .:\II..('rpkLll·umettts_ ctr.;t (;'JlJf2U 12_1 '~KrS-_['l!!Url"::;_I;ncCShJ..'eLpdf 

< J\lunwl ·.4 !Il..:: Amt.'lit<m (rcri;tt,rk::-. So;.;it':iy, 2002, so: 1-7. yja He-"cart:Il:.l\mt[lu~. ·'Fal,:t;\ atwu! ... \Ldltilne(s 

! }i"'l'a \c.:' h! 1[1 :!i\vw\v. f{>'i:c~lfdl~tmcd\.'a,l.Jl ~fuplt b:t(I,/t";!c! ~hl'e~4 alL,hci HH.:fS. pd f 
20 

Intellect/wi Pmperty/Baylt-Dllle 

['irs!. CO!1l,:rL'ss slwuld be applmJ(kd for the 21)1 I pass<l1!c and L'1l,lI;IIl1t:IU of Ihe Leahy-Smith 

,\ruerka invents !\cl, PI' the "patcnt reform hill." Small biolCehl101('gy companies rely heavily 

on lheir palcnl~ to attract inveslmenllO fllnd til" lengthy and expensiw research and 

dcvelopll1t:!1( proct:ss neccssary to hring breakthrough medical therapies ,lIld olher products to 

palie!1\s and collsnmers. Strong intcllectual property proiCction is critical for theic companies, 

und they will benefit from the improvements to our nation's patent system made hy this law. 

HOWL:VC!'. even as we spc<lk th<:!'c continue to he attacks on intellectual property in C()llgre:" und 

in Ih~ Courts that could be dev:1staling to the biotechnology industry, where intellectual properly 

is often lhe only asset a company has while II1('Y spend many years researching and developing 

breakthrough medicinl's. 

In addition to protecting intellectual property, it is imperative that we protect Bayh-Dnle, the law 

thai has ror past three decades enabled Ihe efli.,cliw transfer or ll;chnnlogy Ihnl1 hasic research 

institutiollS 10 industry so lhat sdentifk discoveries nm ill' developed inio products thai will 

bencfillhc public, Prim to ('11<1<.:ll11el1l, th" vast majority nr universily carly-slal,:c research 

languishcd because lilt'H' was n() prot('ction against competition <llllithus Iitlle inccntive ror tile 

private ~eCI()r 10 invest the substaillial Slllm of moncy r<:quired to develop these fint.lings into 

products. The 20lO l\ssGelation or' University Technology Mana;;:ers survey clearly shows (lie 

positive of tile Bayh-Dok A,'I WiI1l4,2))4 licenses executed. 657 new commeR'iai 

products introduced, and (,)1 start-up companies 1()[Illl't! in 20lOrl Additionally, a 200<,) 

G<:(lilomie impact slutiy showed Ihat from ItJ9f, to 2007 universily-lk"nsed products conl!ihuwd 

more Ihnll $))2 billion to tbe (1I)P.l:; This law is working well. 

Therapeutic DiscfJVery Project (TDP) 

[ll Mnrch 01'201{), Congress elwt:!<:d the Therapeutic Discovery Projl'd (TOP), a crilical tax 

credit jJwgram dc~.,igllnl to ;;LinHllm(' invt!slment in hi(IH:dl1Wlogy 1'('se(ll\'h anll Dl'vd(lpmenL 

"'I hc Fcn:H1IHtc ~mp:J.d \ ',f! i(l~ns.t.:tI InVt':Htinns 

D'li,'td Rt)C,>:SHI.T, .k~mHtt:r Hnnd, Sumiye {)kuhl~, & I\'lark PhUHitlg, 5 

in llnivl...'f';'HY Rcscarrh, i'J'}n~2007," 

::m'l~_ 
21 

Under lhis program, ,mal! b10I<o<.:11 t'\Hnpanics r,'ccivcd a mll(:i1-nn:d,'d infusion OfCllpilai to 

aJv~Hl!.:,C their illll<lVativc therapeutic pnljecb while cr~~lting and wSlaininl:! high-paying. highquality American .inh'>, 

In lOlal, the Therapcutk Discovcry l'rojt:C\ awarded $! billion in granls and lax cnxiils tn nearly 

3.000 companies with fewer than 250 cmpillyecs each, Til..".., smallcompcmies wel'(' eJigihle: to 

be reimbursed [()!' up tn 50')(, or lhdr qualified investmc!1l in activili..,s like hiring researchers and 

l'OndlKting clinical trials. The impa<:;\ of this funding WilS felt m:1'OS$ [he American biotech 

industry. as companies in 47 states 1'(;ceivcd awanls. The average wmpany received just over 

'];200.000, an important shol in the arm during economically constrained tim;;s. 

TIll' Therapeutic Discovery Project was a si;!llificant step in the right direction by Congress to 

invest in growing the U.S. hiotech industry ant! keep pace with our global ('<lmpetitllrs. (,iven 

the imbnlancc I",tween the extraordinarily high demand by small hi<1\cch eompllnics and llll' 

limited pool of runds. ! hope Ihul Cungrcss will eXlCnt! and expand lhb ovcrsubscrihcd prugram 

and assisl more American compallies in pursuing life-scrving scientific breakthroughs and 

,upporlillf,! Al11cricanjohs. 

S811? Rell1lthoJ'izatiml 

1.'I"ly, I would like (0 the thank Ihis Committee ror its commend;lhle work nver thc y.;ars ant! 

applaud its suceess in helping rcaulhod/\' the Small Business Innovation Rcsecu-ch (SBlIU 

progl"wll last year. This reauthori/ulion reinstaled eligihility for a vast majorily of companic:-. 

thaI had llecn shut out of lhe prognltll ror lhe past decade. due 10 a regulatory wling lhat madc 

,;mali cnmpanics who huve mulliple vc!1llm~ .:apilal inves[(u·s ineligible. StHR provides a critical 

souree of funding ror emerging bio[echnology companics in (he early development stages of 

medical n.osl',m;!J; the changes included in the rcml!horiz;\fion will enable a larger 11lll11ix:r \)1' 

,;m"U companies 10 ,'ompete Ibr funding. (ilu.'; ensuring l[lilt the program will be ahle ill fund 

,;mall biotc,;.)) companies' projecis thill hillie the grente.sl pI)[enliallo bring innovalive nlc\!lcal 

lr,'atme.nh In the patients who IlcL'd them. BlO looks forward III working with (\)TIgres, ,h theSe! 

rClhms dre imrkl11C11ll,d hy !he Small llusiness J\lil11ini,lm!lol1 and in Ih,' par!icipaung lI),!L'llCics 

and in,;(itDll", 
22 

RF·ENCINEI(lUN(; THE ECONOMIC MotlEL TO INCENTIVIZE RIOMEI)I(;AL INNOVATION 

!\s I pr(vioHsly nolett U.S. biotech companil" ,If(l nlcing financial uncertainty in it climatc wheT" 

(\lller c()umric.s are incn,asing lileir inwsilnenis and enacting intellectual pWp0fty prolL'.c[inlls to 

,'ncpuragl' dome,ric hiotech growth. While we still hold ollr place as the glohai leader. the 

competitive gup is gctting smaller. n)r example, the U,S ClHH'ntly holds the largest numher or 

biotechnology pall'Il!S (lvemll, hut we un: 20'h out or 2.1 <;()ulltries in new hiotech patents, with 

Chinn and India rankin:; rirst and sewnd. 19 The;;e emerging powers are heavily investing in 

scienC0, ant! particularly in bio!echll(,logy. Additionally, many <':ollntries in Weslern humpe are 

implementing hiotech-fricndly lax inccntives, induding lower corporate tax rates for inllovativ(' 

indu,lril's, as it means to gl\IW their 21" Cl'lltury economics. This lag has put LIS at rish (If losing 

,)Hr place at the IIWe/l't1l11 or this critically imput'(mH and innovative l'l'()tlomk drlver. 

Below! will hrie!ly highlight some tax and cap;l,\! formation proposals <.:lIrrcntly heing discussed 

thaI would in<':l'ntivi/.t, invL',lmcllt in small, nnerg;ng I'inlechnoiogy t;ompanics and ilhpirc 

further development on gn.lUlldhn~aking cllres and tH'alments. 

R&D Pllrlnersllip Structures 

Congress has historically provided tax inn:nlives to high-risk industries it, a means I()r 

clluluraging investment in new endeavors. Biotechnology cumpanies have 'l!lH.lOg the largest 

capital hurdclls and longest development pathways or any industry, to determine whClher 111('11' 

technologies will sllccc('li. These high C(lsts and long limdincs can scare DIY inVe'stors wllo may 

be looking for investmelll strategics with CHrlkr prospCClS for success. [ntlle past, CDlli:!H:SS !la;, 

provided lax incentives that mitigate risk and enhance the rcmrns of innovative ,k,vc!opment 

projects like those found in biOl,xhnnlogy companies. In parlit:lllal', the growth of the h1(1(<:l:h 

industry in (lie early 10t\Os WilS due in pmt to (ile ability or growing eompllnks In P"'s through 

Vark!ll$ tax ino;mh'c" indmling \.'redib lind lo,'e~, 10 !!ll'ir inwslOrs, These pas,iw aClivily 

pr"visions allowed investors to realize an "urlier re1urn nn lill'ir imcsllncnL IIms inc('ntivi/illg 

llKm [() invest at::.n carly stage. Amcildill,t Intctllal Revenue (\xie 1l119x6 allow cerwin 

!" "( ;',)n~: l". Cali '! II Pn'm,;~te Mt:Jj!~~ll ~nnpv:Hinn, ('walt Jd)'; :Iud n!llt ('un:" tJ1 Am~'rh.<;l." UK 

B~!!ldk: Tt'chuotogy p;{rjllL'rsliip PnlcttrL', 201n, Plfep:tfct! (or fh\.' Cnunl'iI !tH' An1Cri(~:',n Me-die?!! t!tH\.i\aUt..1u 
23 

would result in illlll1euiate tax bendil;, to illn:stol"s and thus (IUnle! more investment in small 

hiotcdlllology companies. 

Section .182 Net Operating /,08S (NOL) Reform 

TI1\' lOll!!. capilal-in1l'llsivc tlcveh)pmcnt perh)t\ inlrinsk to biott:c!m"logy means that companic:s 

ofwn undergo a decade or more of l'eSl',lr{:h and dcvelopment without any produc1 revenlle 

>:o!lll11crdalizalion. During Ihis time period. >:ompanie'; generate significanllosses. which "Ill 

he used 10 ofl':;cI future gains if the company be>:ome~ profitable, However. Section 3l:l2 of the 

Internal Kevenue Code rcslliclS the INlge or net operating losses (NOLs) hy eOll1p,mic~ that have 

until:rgnlle all "ownership ~I1Hngt," This section was enacted to pn'vent NOL trafficking, btl! 

smilll \1iowdl companies are caught in .i[s scope. as their rcliwlcC \)11 outside finallt:ing and deals 

frequelltly lligger 111" change reslril."li(ll1s, There llrc twO rcl()nns to Sz'c(ioll 3g2 Ihal 

would hc lX:J1didal to small biotechnology eompallies, First. exempt NOts generated by 

qualifying n::scan:h ilnd dcvcl()pm(~fll by a small business [i'om SCl:lion JX2 and second. redefinc 

"ownership change" to exclude ccrtain qUillificd inveslmel1!s, like lhose in rounds or venture 

(banting. These H,rOrmS would a]].lw sm<ll1 hiotech e'Hllpanics to I'ctain their N(ll ,s and allt)1N 

thom 10 indudc them as tax allribtllc, on 1he balance sheel. thus increasing their yaltl,~ wi1('1l 

preparing Cnr additional rounds of financing like mergers or lnitlul public offerings. 

Section 12(J2 CUllital Gains Rejflrtll 

Seetinl1 1202 prnvkks a small husilltcsS investment lax in<.:cnlivc whereil1laxpay\'rs may c);ciudc 

.~O',k, of their gain ['rum lhe ;uh; of a 411alifktl small business sl,)<.'k that has heen held 1'01' ll1or(~ 

lhrlll five y(:ars, Till, lax exclusion could be usci'lll In ')mall biote(.:il comp:lnics hy inccnl.ivi/.ing 

investors to invest carly and hold th{'ir invesllnenls longer. However. due 10 thc valuable 

intclkx;tual pmp{'riY anti successive rDunds or financing il1!wn~nl ill t'lrpi{al-illlCnsive, inllovative 

indlls!ri,~s, Slm,1l DilJ!ecll tornp.mk" !ll)[ Hlecll!le (/e!lnitil)ll nr 'lll,llified ,;malll>usine,;,,'s, 

Thus. Scction i 202 (loes n,'! pHwid<:, illves!Or~ all in>:"nli ve «\ iove:,! in small l>iotech c(lmpl\!lk~. 

Cllal1ging the definition I1f "qllalified small husinc",' it' includc c"mpunics with gross a,s,:l, up 

1\' $J 50 million. index in" tile clIP to inlhtil'l1, and exdlldin~ intellectual pwperty and follow,on 

r<:prcscllt lhe capital, 
24 

intensive nature or innovative industries like biotechnology, Additionally, a graduated increase 

ill tho: exclusion for qualified small husiness stock. rewanJillg investors who hold stock for longer 

and illcentivizing them to continue to do S(l, would be extremely bcndiciaL 

Section 197 Amortization Rejimn 

Early,stage biotech companies often receive investments rrom strategic acquirers that arc 

interested in an ongoing coml11ercial relationship with the company, In such an acquisition, 

business acquircrs often prefer to purchase the assets or a company, During an asset purchase, 

the acquirer may amortize certain intangibles under Section 197 provided that it continues using 

the intangihles in connection with the condw:1 or a trade or business, For intangibles that are 

subject 10 Section I ')7, the amortization or the tax hasis is taken over a 15-yem' period, 

Accelerating this amortization period to a live-year period could encollrage large company 

investors contemplating acquisitions or specific intangible assets of small biotech companies to 

invest at an earlier stage in the companies' research, 

ENABLIN(; MODERN FDA REGULATORY PROCESSES 

PDUFA 'V and Modernizing FDA Legislative Proposals 

As CEO or a small hiotechnology company, I would like to lake a m01llcntto discliss how 

important timely reauthorization of I'DU!'A V is to the United States' hiotechnology industry, 

To truly succeed, we necd to have a strong, successfull'f);\, In 1992, Congress, industry, and 

the FI);\ worked together to create the Prescription Drug User Fee Act (PDUF;\), This program 

ensures that FDA has the ability to hire reviewers to expedite Ihe drug approval process by 

having industry pay "user fees," PDUI'A has been a tremendous Sllceess, This yeaI', the 

program is sct for its fifth reautllOri!,alioll, "PDUI'A V," wbich will work 10 gellhc I'D/\ back 10 

the basics or approving lifesaving thcrapks and cures, PDUI'A V will enhance the drug 

developmcilt and rc'vkw pwcess hy increasing transpmcm:y and scientific dialogue. advancing 

regulatory science, and strengthening p()sl-markct smvdllancl;, !'vhlsl importantly, from the 

slamipoint nf inllovative companies, our hope Ihal PDUFA V will provide patients am! doctors 

wilh earlier access 10 hreakthrough therapies, The FDA's commitment ill the PDUFA V 

technical agreemellt to the principle that timely, illleracliVl' comnHlllicatio!l with biotechnology 
25 

and lire science companies during drug development is it cme Agency activity will he or great 

value. especially to small biotechnology companies such as mine. 

While my testimony tmlay will roclis on Congressmen Stearns' and Towns' Faster Access to 

Specialized Therapies (I 'AST) Act, there are several proposals being considered by Congress 

that I also believe would serve to improve our ability to develop and deliver innovativc 

medicines. 

First, we nced to have a well-runded FDA. While industry uscr rces play an important role in 

supporting FDA's medical prodnct review program, lIser rees should be complementary and 

additive to a sound hase of appwpriated resources for the Agency. and I encourage ongoing 

Congressional support for the Agency. 

Second. FDA's mission statement should be updated to renect the Agency's critical role in 

advancing innovation. This would encollrage FDA to apply its rigorous standards in the most 

inllovation-li'iendly manner. striving to reduce the time of drug development. so that innovative 

treatments are made availahle to the paticills who need them as expeditiollsly as possible. 

Additionally. we nced to provide FDA with the authorities and structure that will bettcr enable 

them to keep pace with the latest scientific advances and ensure innovative tools and approaches 

arc integrated in the FDA review processes to ensure the timely and efficient review (lr 

innovative products, and to inccntivize the development and utilization or modern scientific 

approaches to research and development. 

Third, we need to cm;ollrage FDA to he more clear and consistent in its application of standards 

and its communications with drug developers. Cunclltly, standards often appear to be 

inconsistently applied across different divisions of the Agency. In addition, clem' reasons arc not 

given when drugs arc not approved, and what should be simple, rapid communications between 

the FDA and developers often become hogged down in processes that take months. Finally, and 

not least. critical written guidances for industry often take years to he published. if at all. 

When application of drug approval standards and Agency dcdsion-making arc hard to predict, 

the burden on innovation increases. This is particularly problematic for smaller companics that 

have very limited resources and m'c dependent on only one or two programs. All of these issues 

Page l! nl 1.\ 
26 

serve to prolong the drug development pr()(;ess andlor to inject so much uncertainty that investors 

are discouraged ti'Om investing in medical innovation. 

l'ourlh, Advisory Committee and external expert conflict of interest rules should be rel()rmed to 

provide FI)A with greater flexibility and discretion to select the most appropriate advisors. 

consistent with the rules that apply to other federal agencies. As it stands. the lack of access to 

the best available scientific experts orten deprives the Agency or the first-rate information it 

needs to make the bcst decisions on behalf of patients. 

l'ifth, processcs should he implemcnted to ensure that the views of patient groups are solicited 

and heard within the drug approval process. The FDA is routinely called upon to make rinc 

judgments regarding the balance between risk and benefit. This cannot he fully accomplished 

without consideration of how the patients themselves view a given circllmstance that affects their 

health and lives. While the Agency properly is concerned about the risks of introducing unsafe 

drugs to the marketplace. another key risk in the risk-benefit equation is rarely considered: that 

or not making an elTcctive therapy availabk to patients in a timely man ncr. Currently. patients 

may speak at public Advisory Commillce hearings. but there is no requirement that their input hc 

obtained for all drug reviews. 

Finally, and not least. formal processes should be implemented [0 encouragc the FDA to apply 

the Accelerated Approval pathway mme widely. The Accelerated Approval pathway was 

implemented by I'VA in 1992 ill response to patient groups who. alier engaging the puhlic ill a 

dialogue about benefits of new HIV IAIDS tre,lI111ents, were sllccessful in advocating ror earlier 

access to these life-saving medicines. Accelerated Approval allows for earlier approval of ncw 

drugs that providc a benefit for patienls with serious and life-threatening diseases based on a new 

product's effect on surrogate or clinical endpoinls that arc deemed "reasonably likely to predict 

clinical hClldit:·2o Under Accelerated Approval, FDA can approve the marketing of a drug to 

scriollsly ill patients hased 011 earlier cvidence or clTec! with a u)Jllmitment from the SpOllS,\r to 

conduct further post-market studies 10 confirm and define the degree of clinical benefits 

patknts. 

'" I (,.F.R. Ii :\!4'iiXic 2t .FR. S 60lAO 
27 

The Accelerated Approval pathway ha;, been a great sllccess story. in pan. While it;, lise ila;, 

been largely limited to ccrtainlliscase areas (mainly cancer and HIV/AIDS). the pathway has 

benei'itcd patients in those disease areas tremcm!ously hecause it stimulated an explosion of 

investment ill innovation. For example. there are now (lver 20 medicines for HIV/A!I)S on the 

market. In oncology. I'I)A has granted Accelerated Approval to 49 new indications for 37 novel 

oncology drug products since 1995. 21 

There arc many other serious and/or rare conditions that have been eftcctively excluded li'olll the 

Accelerated Approval pathway. Accelerated Approval pathway needs to be modernized to 

incorporate the remarkable advances in lilc sciences that bave been and will continue to be made, 

in such areas as genomics, molecular biology. and bioinformatics. These and othcr advances can 

enable now] drug development strategies. employing t(lols such as biomarkers, 

pharmacogcllomics. predictive t(lxicology. clinical trial enrichment techniques. and Ilovd clinical 

trial designs - ror example. adaptive clinical trials. Ciariricalioll of when and how these toois 

can he utili/cd in an Accelerated Approval pathway will not only incentivilC drug development 

for serious and life-threatening diseases. but will encourage the development and utilililtion of 

still 1110re tools and methodologies. 

Enactment or H.R. 4132. the Paster Access to Specialized Treatments (l 'AST) Act would achieve 

these objectives. 

Conclusion 

Today I have discussed laws and proposals that would go a long way ill fostering biomedical 

innovatioll in the United States. The decisions that Congress makes !lOW will playa key role in 

whether or not we hold on to our glohal leadership in this area and maximi;,e the economic and 

public health solutions that the biopharmacclilical industry has 10 olTer. Thank you for the 

opportunity to share my thtlughls with you today. 

'! Dr. Paul Klll"l/. ()])At' I'ehnlary X. 

Advisory Cpmmitll'c (01)A(,) 

Il.S Dwg Administrattion (I<'D.I\) Onl'olo1-!i..: Dru);<.; 
28 

Mrs. BIGGERT [presiding]. Thank you, Dr. Cohen. Mr. Truitt, you 

are recognized for five minutes. 

STATEMENT OF MR. MICK TRUITT, 

VICE PRESIDENT, LUDLUM MEASUREMENTS, INC. 

Mr. TRUITT. Chairman, Ranking Member Edwards and distinguished Members of the House Subcommittee on Technology, thank 

you for the opportunity to testify today. 

My name is Mick Truitt, and I’m the Vice President of Sales, 

Marketing, and Business Development for Ludlum Measurements, 

Inc., a mid-sized company located in Sweetwater, Texas, a town of 

11,000 people. I am here today to testify on behalf of the U.S. 

Chamber of Commerce, where I serve on the Corporate Leadership 

Advisory Council. 

For over 50 years now, Ludlum has manufactured radiation detection equipment. We are recognized internationally for our reliable equipment, excellent customer service, and fair pricing. When 

disaster struck last year in Japan, Ludlum was one of the first in 

line to work hand in hand with the companies and people to help 

meet their needs. We continue to support the efforts being taken 

for cleanup and to ensure people’s safety. 

Mr. Don Ludlum, the Founder and the President, was 29 years 

old when he started the company and today is still a very active 

participant in the business as the Company President. But most 

days, you won’t find him in his business office. You will find him 

in Engineering, working on the next new design that Ludlum will 

present to the world. He told me not long after I started there that 

a company is either growing or dying. You can never just be standing still. That is even truer today in this global economy than it 

was on Valentine’s Day in 1962 when Ludlum first incorporated. 

Why Sweetwater? Simple economics. The people were friendly, 

and the bank was willing to take a chance on this 29-year-old and 

his idea of building a company. Now Ludlum employs 450 people 

in Nolan County and is the area’s largest employer. Mr. Ludlum 

always liked the idea of keeping work in house, so when he needed 

more capacity, he built it internally, from making our own printed 

circuit boards to a full machine shop and plastic injection molding 

facility to specialized divisions that develop and manufacture both 

photomultiplier tubes and organic scintillator material that collects 

the radiation energy and turns it into an electronic signal that can 

be measured. 

Ludlum has a staff of over 30 highly qualified engineers to make 

sure we stay up to date with our products. It is never an easy task 

to convince a young engineer that they should move to a small 

town in West Texas, and sometimes the best-qualified engineers 

are from outside of the United States. This is where the complications really begin. 

Yes, our Nation’s immigration laws impact the business community everywhere in this country and not just the major household 

name companies and the titans of American industry. 

Four years ago, when we were interviewing for an engineering 

position, we had a very bright young electrical engineer who had 

graduated with honors and had then gone on to get his Masters of 
29 

Business Administration from the University of Texas. At that 

time, there were only three manufacturers of photomultiplier tubes 

in the world. He had worked for four years with one of them. This 

was almost too good to be true, but there was a snag. He was a 

Mexican citizen. It seemed that since his professional skill set was 

a perfect match for our needs, that the immigration process would 

be straightforward. However, to date, it has cost our West Texas 

company over $17,000 in government fees and legal services to obtain and maintain lawful status for him. We are sponsoring this 

key employee for permanent resident status, but the green card 

process will take many more years to complete. 

Meanwhile, as a direct result of this hire, we have expanded our 

sales and distribution in Central and South America from a little 

over $200,000 to over $1 million annually. 

In 2007, Ludlum acquired a company in the United Kingdom just 

outside of London. As this group grew, it became apparent we 

would need to expand our operation, but we wanted to expand here 

in the United States and not in the U.K. To do this, specialized 

equipment had to be purchased or manufactured. Once this manufacturing equipment was in place, Ludlum would need a highly 

skilled, qualified production engineer familiar with photomultiplier 

tube production to get the equipment up and operating and to train 

people to operate the equipment and test the end product. As this 

is a highly specialized market, there are few people in the world 

that could do this. Unable to find anyone locally, we depended upon 

our past experience of the people in the U.K. Instead of focusing 

on the fact that we had just completed a corporate acquisition, 

where it should be expected or at least acceptable for us to access 

our newly acquired staff and technology, we were faced with immigration delays. Three months and $7,000 later, we finally were able 

to bring an appropriate engineer over on a regular basis to manage 

all the production line at our Sweetwater facility. This operation 

now employs another 20 Americans. 

Ludlum Measurements now has only one competitor in the 

photomultiplier tube business, and you may have heard of this 

company. It is Hamamatsu. It would be impossible to compete in 

these global markets without engineers like these two, no matter 

where they come from. 

I am running behind. Another barrier to innovation and investment for our company is the uncertainty and potential increases of 

the individual marginal income tax rates. Ludlum is structured as 

a subchapter S corporation, which means that profits are passed 

through to the shareholders in the form of distributions and taxed 

at the individual’s rate of income. It also means the rate of return 

on any reinvestment on those profits retained by the company will 

be impacted by the individual rate. As we attempt to plan for future long-term growth and expansion or paying off the principal on 

existing debt, individual marginal income tax rates do matter. 

Moreover, the uncertainty of whether those rates are dramatically 

increased at the end of this year or will be extended instills yet another layer of risk in the growth and investment decision-making 

process. 

In conclusion, the decisions you make can help or hinder us. By 

that, I mean the laws you create will either cultivate a climate that 
30 

provides small- and mid-sized business owners greater confidence 

and certainty to invest, innovate, grow, and generate new jobs or 

one that does just the opposite. We desperately need elected officeholders who are on the right side of the debate and are willing to 

lead. I served in the United States Navy for 20 years and traveled 

the world aboard nuclear submarines. Between my military and 

business experience, I have been exposed to numerous countries 

and cultures around the globe. I am incredibly proud to be an 

American and strongly believe this Nation is still the greatest place 

to live and do business. 

Thank you for the opportunity to testify, and I look forward to 

your questions. 

[The prepared statement of Mr. Truitt follows:] 
31 

PREPARED STATEMENT OF MR. MICK TRUITT

ON: 

TO: 

BY: 

DATE: 

100 Years Standing Up for American Enterprise 

U.S. CHAMBER OF COMMERCE 

Statement 

of the 

U.S. Challlber 

of COllllllerce 

"Fostering the U.S. Competitive Edge: Examining the 

Effect of Federal Policies on Competition, Innovation, 

and Job Growth" 

The House Committee on Science, Space and 

Technology's Subcommittee on Technology and 

Innovation 

Mick Truitt, Vice President 

Ludlum Measurements, Inc. 

Sweetwater, Texas 

March 27, 2012 

The Chamber's mission is to acivanct' human progress through an economic. 

political and social system hascd on individual tl't;,,:C'tionL 

incentive. lnitiatJ\'(" opportunity and rt'spon~ibili1)'. 
32 

The U.S. Chamber of Commerce is the world's largest business federation, representing the 

interests of more than three million businesses and organizations of every size, sector, and region. 

More than 96 percent of the Chamber's members are small businesses with 100 or fewer 

employees, 70 percent of which have 10 or fewer employees. Yet, virtually all ofthe nation's 

largest companies are also active members. As a result, we are particularly cognizant of both the 

problems with which smaller businesses grapple, as well as those issues facing the business 

community at large. 

Besides representing a cross-section of the American business community in tenns of 

number of employees, the Chamber represents a wide management spectrum across many varied 

types of business and location. Each major classification of American business-manufacturing, 

retailing, services, construction, wholesaling, and finance--is represented. Also, the Chamber has 

substantial membership in all 50 states. 

The Chamber's international reach is substantial as well. In addition to the U.S. Chamber of 

Commerce's 115 American Chambers of Commerce abroad, an increasing number of our member 

companies engage in the export and import of both goods and services and have ongoing investment 

activities. The Chamber favors greater international competitiveness and opposes artificial U.S. and 

foreign barriers to international business. 

Positions on national issues are developed by a cross-section of Chamber members serving 

on committees, subcommittees, and task forces. More than 1,000 business people participate in this 

process. 

2 
33 

Statement on 

"Fostering the U.S. Competitive Edge: Examining the Effect of Federal Policies 

on Competition, Innovation, and Job Growth" 

Submitted to 

THE HOUSE COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION 

on behalf of the 

U.S. CHAMBER OF COMMERCE 

By 

MickTruitt 

Vice President 

Ludlum Measurements, Inc. 

Sweetwater, Texas 

March 27, 2012 

Chairman Quayle, Ranking Member Edwards and distinguished members of the 

Subcommittee, thank you for inviting me to testify before you today on the impact Federal policies 

have on the ability of U.S. businesses and entrepreneurs to compete, innovate and create jobs. I 

commend your efforts in holding this important hearing to better understand the effects this critical 

relationship between the decisions made, or not made, in Washington, DC and decisions made, or 

not made, in America's private sector. 

I am Mick Truitt, Vice President of Ludlum Measurements, Inc. (LMI or Ludlum), a familyowned business headquartered in the West Texas town of Sweetwater which has a population of 

roughly 11,000. At LMI, I am responsible for global sales, marketing and business development. I 

am here to speak with you today on behalf of the U.S. Chamber of Commerce. I have the honor of 

serving on the U.S. Chamber of Commerce's Corporate Leadership Advisory Council. I am also 

active in the Sweetwater Chamber of Commerce where I just rolled off of their Board of Directors. 

The U.S. Chamber of Commerce is the world's largest business federation, representing the 

interests of more than three million businesses and organizations of every size, sector, and region. 

More than 96 percent of the Chamber's members are small businesses with 100 or fewer employees, 

70 percent of which have 10 or fewer employees. Yet, virtually all of the nation's largest companies 

are also active members. Therefore, the Chamber is particularly cognizant of the problems of 

smaller businesses, as well as the issues facing the business community at large. 

Company Background 

Ludlum Measurements, Inc. has been designing, manufacturing and supplying radiation 

detection and measurement equipment in response to the world's need for greater safety since 1962. 

In fact, we celebrated 50 years in business earlier this year on February 14. LMI is a family 

business. Don Ludlum, the company's founder, remains at the helm as President and all of his 

children are now part owners. I joined the LMI family in 2007. Throughout its five decade history, 

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34 

LMI has developed radiation detection technologies and instruments to enhance the safety of 

personnel, secure borders, and protect the environment. 

LMI services the nuclear power, energy research, medical, metals, emergency response and 

homeland security/defense markets. We are proud to offer one of the largest lines of radiation 

detection instrumentation available from anyone company. After September 11, LMI was selected 

to provide approximately 300 vehicle radiation monitoring systems that are deployed along the 

entire northern U.S. border with Canada. LMI also supplies component parts for use in some of the 

current equipment utilized as part of the security systems in airports and borders around the world. 

In response to the crisis at the Fukushima Daiichi nuclear plant in Japan, our team at LMI was 

working seven days a week to prepare and ship thousands of our instruments to Japan to ensure the 

safety of the people and provide them with a sense of security. We did all we could to support the 

initial containment and will continue to support the Japanese people throughout the eventual 

cleanup efforts, and remain committed to helping make the world safer. 

Ludlum has invested heavily into becoming a vertically integrated radiation detection 

company in order to better control costs, quality, and delivery times. Recent additions of in-house 

automated PC board assembly and plastic injection molding capability, plus photomultipier tube 

and plastic scintillation detector design and manufacturing, all contribute to this succeeding 

philosophy. Ludlum is the parent company and its divisions include: E1jen Technology, which 

manufactures a wide range of scintillator products such as plastic and liquid scintillators, wave 

length shifting plastics and acrylic light guides; ADIT, which designs and manufactures 

photomultiplier tubes for industry and the scientific community; ET Enterprises, which offers a 

wide range of photomultiplier housings, modular signal processing electronics and complete photon 

counting systems; Ludlum Medical Physics, which offers a unique product line created to more 

fully serve the medical physics community; Protean Instrument Corporation, which is a leading 

manufacturer of ultra-high performance sample counting systems for measuring alpha and beta 

activity at very low environmental levels; and West Texas Molding, which offers plastic i~ection 

molding services with an emphasis on short runs, quick tum-around deliveries and affordable 

pricing. 

At our corporate headquarters in Sweetwater, Texas, Ludlum employs 450 people, making 

us the community's largest employer. We also have 100 employees at a facility in the United 

Kingdom and lOin Knoxville, Tennessee. Typically, our annual revenues are $65 million. 

Approximately 20% of our sales are international. We use distributor organizations located in 

country and currently are in over 80 countries worldwide. These numbers squarely put Ludlum in 

the range of companies known as mid-sized or middle market businesses. We are not a small 

business; nor are we a big business. 

This is important to note because I believe many in Washington, DC do not understand the 

complex nature of the U.S. economy and business community. More often than not, those who pass 

the laws and write the regulations hold a simple, binary view of the U.S. business community: you 

are either small or other than small. Such a perspective fails to take into account the dynamic midtier section of American businesses. This is a critical shortfall in understanding when you recognize 

how important mid-tier companies are to the U.S. economy. Consider the following findings of a 

research initiative on the U.S. middle market (defined as companies with annual revenues ranging 

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35 

between $10 million and $1 billion) completed by The Fisher College of Business at The Ohio State 

University and GE Capital: 

• Middle market businesses contribute $3.84 trillion annually to the U.S. private sector 

GDP-the equivalent of the world's fourth largest economy, just behind Japan but 

ahead of Germany. 

• 80% of middle market businesses expect to grow over the next 12 months. 

• More than one-third of U.S. workers are employed by middle market businesses. 

• 82% of middle market businesses survived the recession. 

• One in four big businesses were middle market companies just five years ago. 

With such a sizeable contribution to U.S. employment and GDP, this dynamic middle 

market is clearly a vital segment of our private sector. Yet this is seemingly underappreciated and/or 

not understood by the decision-makers in Washington, DC. As I turn to focus on actual policy 

matters, I would ask that today and going forward you would be mindful of the impacts your 

decisions have, not only on small and big businesses, but on those in the middle as well. It is here 

that a great deal of innovation, sustained growth, and job creation is occurring. 

There are numerous Federal issues that impact LMI's competitiveness both domestically and 

internationally. Today, I would like to focus on three of the most important: high-skilled 

immigration, taxes and trade. It is important to be mindful of the fact that my story, if you will, is 

similar to the stories of millions of small and mid-sized businesses across our nation. 

High-Skilled Immigration 

It may seem surprising, but, yes, a company with 450 employees in Sweetwater, Texas is 

directly impacted by the dysfunction of our nation's high-skilled immigration system. 

Access to Human Capital, Regardless of Nationality 

Perhaps most fundamentally, our high-skilled immigration system doesn't take into account 

the extent to which global collaboration is a premise in the 21 51 century for businesses of all sizes 

and stripes. In today's world, it doesn't take much to become a multinational company and develop 

a need for global collaboration among our own staff and between our staff and our customers. Not 

only do we sell our products in 80 countries, we have staff in two countries and, on occasion, we 

find the best qualified candidate for ajob here in the U.S. doesn't happen to be an American citizen. 

At LMI, we have accepted the reality that the intelIectual capital we need to do business does not 

reside solely in the United States with U.S.-born staff. A federal immigration policy which fails to 

recognize this simple fact does a disservice to America's business community. 

The Chamber recommends an increased recognition of the importance of "human capital" in 

our high-skilled immigration policies. We see that human capital, which any business owner can 

tell you is vital to economic success, is not evenly distributed around the world. While there is 

ample human capital already in the United States, there are also enOl1nous stocks of human capital 

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36 

and potential capital- found overseas in a variety of specialized fields that will greatly contribute to 

productivity growth in America.! 

At LMI, ifit relates to radiation detection instrumentation, we do it and we do it in-house, in 

Sweetwater. When we detennined that we needed to have plastic injection molding capability we 

purchased a company that did that and brought the capability in-house. When we established that 

new types of plastic and liquid scintillators needed to be added to our production process, we 

established a new division that did that and brought the capability in-house. Sometimes, when we 

expand our Sweetwater operations and hire more Americans we also need a special, sophisticated 

skill set that we aren't able to find in the U.S. labor market. Hiring a foreign national to fill this 

need shouldn't be the confusing, difficult and sometimes impossible hurdle it is under current law. 

Instead, there should be a means to facilitate our ability to hire the best qualified high skilled 

professional we can get to come to Sweetwater, regardless of nationality. 

In 2007, Ludlum was given an opportunity to purchase a UK competitor in the 

photomuliplier industry. Purchasing the competitor gave LMI an expanded product line while also 

limiting the number ofphotomulitiplier suppliers to 3 in the world. The purchase ofthe UK 

company also gave Ludlum a research and development group that is not available in the United 

States. As this was a growing market with fewer and fewer suppliers, down to 2 suppliers by 2008, 

we needed to expand the capacity of our UK product line because there was the opportunity for 

market share expansion for Ludlum. 

While LMI could have expanded in the UK, instead we decided to bring that expansion to 

West Texas. To do this, specialized equipment had to be purchased or manufactured. Once this 

production equipment was in place Ludlum would need a highly skilled, qualified production 

engineer familiar with photomultiplier tube production to get the equipment up and operating and to 

train people to operate the equipment and test the end product. As this is a highly specialized market 

there are few people in the world that could do this. Unable to find anyone locally we sought out the 

past experience of our people at the UK facility. Initially, we thought it would be sufficient for one 

of our British engineers to simply attend a few meetings here as a B-1 business visitor, but it 

became evident that we required a production engineer to provide services on behalf of Ludlum in 

Sweetwater in order to establish the new production division. In fall 2009, we started the process to 

secure an L-l A intracompany transfer visa, so that one of our British engineers could come to West 

Texas to manage the new photomultiplier production function here. Three months and $7,000 later 

we were finally able to have the engineering expertise onsite that was needed. Until our British 

colleague was able to travel back and forth to oversee our expansion and direct and advise our new 

technician staff, we were not able to fully take advantage of our acquisition, take our new 

production equipment out of storage, and make new U.S. hires for the new manufacturing 

operation. Today our photomultiplier tube expansion employs an additional 20 Americans. 

In 2008, we were looking for an electronics engineer with experience in the radiation 

detection industry to come to Sweetwater and work in technical sales. It is exceedingly hard to find 

qualified, highly educated professionals who want to live in a small West Texas community. We 

were thrilled when a Mexican engineer who had an undergraduate engineering degree and a 

I The Human Capitallmperatil'e: Bringing More M;nd~' to America, by Nick Schulz, U.S. Chamber of Commerce and 

National Chamber Foundation, Januaty 2012, 

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37 

graduate business degree from the University of Texas accepted our offer of employment. We had 

never had an engineer with an MBA even apply to join our company, so having this skill set in our 

engineering corps was a great asset. Our Mexican engineer graduated with honors in Electronic 

Engineering with the highest grade point average in the electronic engineering program (degree 

from the Instituto Tecnol6gico de Ciudad Victoria), worked for several years in Mexico in the 

radiation detection manufacturing industry, and completed a Masters of Business Administration 

from the University of Texas (at Brownsville). It seemed that because his professional skill set was 

a perfect match for our needs that the immigration process would be straightforward. However, to 

date, it has cost our West Texas company over $17,500 in legaJ services to obtain and maintain 

lawful status for our Mexican engineer. We are sponsoring this key employee for permanent 

resident status, but the green card process will take many more years to complete. Meanwhile, as a 

direct result of this hire, we have expanded our sales and distribution in Central America from a 

little under $200,000 to over $1 million annually. 

Ludlum's experience in having so much difficulty with the high-skilled immigration system 

is not unusual. Despite the fact that our hires of high-skilled immigrants directly contribute to job 

creation here in the U.S., the business community is faced with hurdles. For example, other 

Chamber member companies have experienced the following: 

• A company manufacturing equipment conducts product testing in the United States after 

global teams develop new equipment specifications. A team of American engineers 

collaborating with company staff at design centers in North America, Asia and 

elsewhere comes together to complete product testing in the U.S. before manufacturing 

commences. Products are manufactured principaJJy in the U.S. although some 

manufacturing is also conducted abroad. Products are principaJJy sold outside the U.S. 

and most competing manufacturers in the particular industry are foreign corporations 

manufacturing solely outside the U.S. Visa petitions are denied for the foreign engineers 

working on the design team to come to the U.S. for product testing. Product testing is 

delayed, new product specifications can't be finalized, manufacturing engineering 

processes are delayed, and U.S.-based manufacturing jobs are reduced or new hiring 

delayed, while foreign competition is helped. 

• A company has proprietary game software and a team of engineers working globally on 

updates and expansions to the product, with the product team based in the U.S. A 

foreign engineer already in the U.S. needs an extension of stay to continue his work on a 

key aspect of the game. A lengthy request for evidence is issued in the visa petition 

extension proceedings, questioning whether the worker qualifies to retain the same job 

for the same employer that he is already fulfilling, and in this case happens to hold 

several patents related to the game. 

• A company designs and manufactures precision controls. It has three design facilities in 

the United States, two in Europe, and one in Asia. Individuals working on product 

design are typically in three or more locations, working jointly on different aspects of the 

project. The expertise of the engineers is not narrowly held within the company; instead 

a large number and percentage of the engineers are experts on precision controls and the 

company's proprietary systems. However, the expertise is narrowly held within the 

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38 

industry and work on the design projects cannot be done without the engineers internal 

to the company. The company has regularly received denials over the last few years 

when it petitions for a visa to have an intra-company transfer come to the U.S. to 

continue working on new product designs with American staff. 

• A company has a leadership program where key up-and-coming staff come to the U.S. to 

both facilitate u.S.-centric experience for the future management of the company and 

promote the cross-fertilization of ideas that are needed in a multinational eompany. Visa 

petitions are regularly denied, despite the interest ofthe American company to ensure its 

professional, degreed staff is exposed to American business methods. 

• A company wants to open a fulfillment center in the U.S. where online orders can be 

processed and sent to North American customers. Visa petitions to bring in a handful of 

foreign staff well-versed in the company's internal processes are denied. While the 

foreign staff would have trained new American staff to be hired, the center cannot be 

opened without some experienced internal staff. Instead, the company considers 

opening a fulfillment center in Canada. 

A Modest Proposal: More Green Cards for Scientists and Engineers 

These types of examples show that CUITent high-skilled immigration policies do not help 

foster America's competitiveness. In order to put a spotlight on this, the U.S. Chamber held an 

event in September 2011 to discuss Immigration and American Competitiveness, with a focus on 

high-skilled immigration issues. Mayor Bloomberg was the keynote speaker, and there was a panel 

of Chamber member companies discussing high-skilled immigration with Pia Orren ius, an 

economist with the Federal Reserve Bank at Dallas2 When speaking at the Chamber event, Ms. 

Orrenius opined that "economists typically don't think that free lunches exist; but permitting more 

skilled immigrants to enter and stay is about as close as you can get to a free lunch." 

From LMl's experiences, it does no(,seem our current federal immigration policies are 

aligned to get our nation's businesses at "the lunch table" to benefit from the economic benefit of 

skilled immigration. While broad-based immigration refonn addressing and'correcting the panoply 

of high-skilled immigration issues is not doable before the end of this election year, perhaps 

Congress can bite off one area where it is most obvious that our immigration policies need fixing 

regarding skilled immigrants. There appears to be an emerging consensus that action should be 

taken regarding foreign graduate students in the U.S. receiving Masters or Doctorates in the natural 

sciences and engineering from our fabulous U.S. universities. 

Allocating more green cards for permanent resident status ofthese scientists and engineers 

who have job offers would be very sensible. Such a change would be responsive to one of the key 

, Ms. OITenius has written widely on immigration-related economic analysis. She often co-authors reports with 

Madeline Zavodny, a labor economist on the facuity of Agnes Scott College in Atlanta, Among other books and 

reports, Ms, Orren ius and Ms. Zavodny have co-authored Beside the Golden Door, 20 I O. 

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conclusions of the National Bureau of Economic Research, that "the U.S. economy will generate 

rising demand for highly-educated workers" through 201S.3 

The 2000 census indicated that immigrants constitute approximately half ofthe scientists 

and engineers in the U.S. with Doctorates, "a remarkable statistic given that they otherwise 

represent only 12% of the U.S. population.'" A focus solely on workers who possess a Doctorate is 

misplaced, though, since only about 2% of computer, mathematical, and engineering employment in 

the private sector is geared to individuals who have earned a Ph.Ds Critically, more than 15% of 

workers in computer, mathematical, and engineering occupations in private industry are required to 

possess a Master's degree.6 More specifically, by way of example, in computer science and 

mathematical science occupations, the job distribution is 6.9% of jobs require skills of high school 

diploma or less, IS.7% require skills based on some college, 10.5% require Associates level skills, 

43.8% Bachelor's skills, 17.7% Masters skills, .S% Professional Degree skills, 1.7% Doctorate 

skills.7 

International students presently earn about one-half of all Master's level degrees from U.S. 

universities in fields corresponding to natural sciences and engineering occupations.8 To the extent 

we want to ensure that American businesses have full access to the skill sets needed to create and 

retain jobs here at home, a streamlined process to have access to professionals who have been 

trained here, speak English, are acclimated to our culture and our business and research practices, 

want to stay here, and have ajob offer from a U.S. employer would be a good start. 

Coupling Education Reforms with Immigration Reform 

High-skilled immigrants playa positive role in creating and retaining jobs in America. 

Critically, though, the U.S. Chamber believes that high-skilled immigration reform needs to be 

coupled with education reforms. As the U.S. Chamber pointed out in an Immigration Myths and 

Facts report last May,9 current immigrants make up a disproportionately large segment of both the 

population holding graduate degrees as well as those without a high school diploma. 1O To the extent 

that graduate education or university studies in certain fields is a prerequisite to the specialized 

skills and expertise needed in today's knowledge economy, pushing the interest and development 

1 Future Skill Shortages in the Us. Economy? National Bureau of Eeol1omic Research, July 2011. 

http://www.nber.orglpapers/wl7213 

4 Immigrants' Success in Science Education and Careers, University of California at Berkeley's Center for Research on 

Teaching Excellence, http://escholarship.org/uc/itcm/2m14z6np#page-7 . 

http://www.uschamber.com/sites/default/files/reportsI16628 _ ImmigrationMythFaets _ OPT.pdf 

5 2008 American Community Survey. 

h Distribution of workers possessing a Master's degree: 17.7% computer and mathematical science occupations, 16.9% 

architecture and engineering occupations. 2008 American Community Survey. 

7 Future Skill Shortages in the u.s. Economy' National Bureau of Economic Research, July 2011, at Table 5. 

http://www.nber.org/papers/wl7213 

\0: See, Stuart Anderson, Keeping Talent in America, National Foundation for Amclican Policy, October 20 II, at Page 6, 

and Science and Engineering Indicators 2010, Chapter 2, Higher Education in Science and Engineering (Graduate 

Education, Enrollment, and Dcgrees). 

, Immigration Myths and Facts, U.S. Chamber of Commerce May 2011. 

http://www.uschambcr.com/sites/default/files/reports/ 16628_ I mmi grationMythF aets_ OPT. pdf 

\0 Td. Page I, citing Pia Onenius and Madeline Zavodny, From Brawn {o Brains: Hmv Immigration WorksfhY America, 2010 Annual 

Report (Dallas, TX; Federal Reserve Bank of Dallas, 2010), p. 6-7, http;llwww.daliasfed.orgifedfannualf2010/arlOb.pdfflpage=3_. 

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40 

by U.S. students in these fields is also an economic imperative, starting at the K-12 level and 

continuing into higher education. 

It is not just the "titans of American industry" which are looking for high-skilled workers 

and finding skill gaps in the domestic workforce. Middle market businesses have the same issues. 

For example, as described above, when LMI was looking for a technical sales engineer, the ideal 

skill set was an individual with an electrical engineering degree as well as business school training. 

To find someone with this skill set willing to be based in a small West Texas community is a 

challenge, and we jumped at the opportunity to hire a Mexican citizen with a top notch engineering 

degree from Mexico and a University of Texas MBA. Moreover, LMI needs highly skilled 

technicians, which we also frequently have had difficulty in locating in sufficient numbers. 

Many Chamber companies in various sectors are aware ofthe education reform necessity 

and have their own education support programs. I J For example, one large diversified 

manufacturing company has taken the following steps: While the company typically recruits only 

graduate students for its professional jobs, it also has created a program where it seeks out highly 

qualified candidates with undergraduate degrees who the company puts through a two-year 

corporate professional management program for recruited university graduates in the fields of 

engineering, manufacturing, finance, and other business specializations to expose the participants to 

rotational assignments throughout the organization in order to develop both technical and 

management skills and create a diverse, knowledgeable global talent pool. Additionally, the 

company is a major contributor to U.S. colleges and universities and academic research projects. 

The U.S. Chamber of Commerce has its own educational arm, the Institute for a Competitive 

Work Force (lCW), which promotes the rigorous educational standards and effective job training 

systems needed to preserve the strength of America's greatest economic resource, our workforce. 

Last summer, ICW released a report addressing what kind of business involvement it would 

take to truly make a difference in K-12 schooling. Partnership is a Two-Way Street: What it Takes 

for Business to Help Drive School RejormJ2 explains and analyzes how the business community can 

function as a critical customer, partner, or policy advocate in primary and secondary education. As 

discussed in the report, leaders in Texas, Tennessee, and Massachusetts adopted each of these roles, 

thus stepping up to make a big difference in K-12 schooling. In each case, business leaders talked 

seriously and bluntly with educators. They recruited well-respected experts to lead the reform 

efforts. They built sustainable structures, brought top-level executives to the table, and stayed 

engaged. They tackled tough questions, understood that some steps would be political and 

unpopular, and took the heat when there was pushback. Among its other ongoing activities, ICW 

conducts regional training for local and state chamber and business leaders, to create a leadership 

network in as many states as possible that is focused on the role business can play in improving 

! I See the Compete America coalition website for a summary of what some of the nation's largest high tech companies 

arc doing to support education and workforce development. http://www,compctcamerica.org/worktorcc/amcricanworkforce. 

12 Partnership is a r"Wo-Way Street: What it Takesjbr Business to Help Drive School Reform, U.S, Chamber of 

Commerce, Institute for a Competitive Workforce June 2011 

hltp:llicw.uschambcr.com/sitcs/dcfault/filcslParlncrship%2Ois%20a%20Two%20Way%20Strcct~.2011.pdf 

]0 
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education and workforce training. Also, ICW conducts an ongoing assessment ofK-12 education 

in all 50 states and the District of Columbia through its Leaders and Laggards13 report. 

Another recent report from ICW focuses on higher education. Transforming Higher 

Education through Greater Innovation and Smarter Regulation 14 focuses on how academic 

programs and institutions must be transformed to serve the changing educational needs of a 

knowledge economy. The U.S. higher education system has long been one ofthe country's crown 

jewels. With the right leadership and policy choices, it will remain so. Higher education has not 

changed its basic structure and delivery model because it hasn't been forced to do so. However, an 

array of forces are now working to disrupt the traditional business model of higher education. 

Increasing international competition, a decline in government funding, changing demographics, and 

an increasingly mobile population are just some of the factors threatening the status quo. If 

innovation in higher education is discouraged through funding that fails to reward quality and 

outcomes, or simply thwarted by complacency within traditional intuitions, then the U.S. is likely to 

lose its edge to faster moving international competitors. In encouraging students to be ready for 

post-secondary education, ICW maintains active participation in coalitions focusing on both science 

and engineering as well as K-12 education, including Change The Equation, the Coalition for a 

College and Career Ready America, and the Business Coalition for Student Achievement. 

Taxes 

Another critical issue area for Ludlum is federal tax policy. There is absolutely no doubt that 

tax policy-both the burden and the uncertainty-impacts our competitiveness in what is a very 

competitive global marketplace. I want to focus on aspects of the federal tax code most pertinent to 

our business. 

R&D Tax Credit 

An essential factor in LMI's ability to stay competitive is a steadfast dedication to research 

and cutting-edge product development that has positioned us as a global leader in radiation 

detection devices. As a result of our commitment to innovation, many new, well-paying jobs have 

been created from investments we have made from advances in technology. The research and 

development (R&D) tax credit is one federal government policy that has further incentivized and 

assisted us in devoting additional resources toward research. 

Regrettably, the recent anticipated yearly retroactive reinstatement of the R&D tax credit has 

served to undermine its salutary effects.since it does not provide us certainty prior to our projected 

use. Even though the R&D tax credit has been in the Internal Revenue Code (Code) for many years 

and has been extended multiple times, the uncertainty of expired deductions and credits has had a 

material impact on our commitment to take full use of the benefit. 

1.1 http://www.uschamber.eomlreportcard. 

14 Tran!!forming Higher Education through Greater Innovation and Smarter Regulation, U.S. Chamber of Commerce, 

Institute for a Competitive Workforce May 2011 

http://icw.uschamber.comisites/defaultifileslHigherEducationReport_final_.high%20res.pdf 

11 
42 

Moreover, many research projects are budgeted and planned for on a three- to five-year 

basis. In order for us to map out a long-range business plan for future innovation and investment, 

we need reasonable assurances of the federal government's commitment in reinstating the t~ credit 

beyond one-year increments. Not having a pennanent R&D tax credit erodes the confidence and 

certainty needed to dedicate the maximum amount of resources possible for riskier, yet potentially 

more rewarding, long-tenn scientific endeavors. 

Additionally, we find the complex accounting requirements required to take full advantage 

of the credit creates unproductive and time-consuming paperwork demands that reduce the ability 

for us to use the maximize amount of the credit that we would otherwise be allowed. Simplifying 

the bookwork needed to take advantage of the credit would provide our scientists and engineers 

more time to do what they do best, innovating and creating jobs rather than subjecting them to 

overwhelming paperwork requirements. 

Nevertheless, the R&D tax credit has been in the Code for almost 30 years and is a proven 

incentive for driving investment in R&D, encouraging long tenn capital investment, creating jobs, 

strengthening the economy, and spurring innovation in the United States. 15 In 1981, the United 

States was one of the first countries to add an incentive for research and development to the Code. 

For a period in the 1980's, the United States was at the forefront of R&D incentives. However, 

other countries soon followed, introducing their own R&D incentives. By 2008, the United States' 

R&D tax incentive ranked 17th overall amongst OECD nations. 16 

Other countries have moved to incentivize R&D, through adoption of super deductions, 

credits, and patent and innovation boxes. These countries use these incentives to promote the 

relocation of R&D operations to their countries as part of "innovation-led economic development 

strategiesd7 Thus, the United States' R&D credit must compete with the aggressive incentives 

marketed by other countries. The failure to, at the very least, simply maintain our current credit 

increases the risk that the jobs, capital investment, and intangible property developed in the R&D 

process will move outside our borders. 

Further, as Congress considers changes to the tax code in the context of fundamental 

comprehensive tax refonn they should strive for a more pennanent provision to incentivize R&D. 

Taxpayers need stable and predictable rules they can rely upon until fundamental pennanent 

refonns can be made. We strongly urge Congress to act quickly to extend this longstanding policy 

and prevent unnecessary damage to the economy and job creators. 

15 See, e.g., U.S, Department of the Treasury, "Investing in U.S. Competitiveness: The Benefits of Enhancing the 

Research and Experimentation (R&E) Tax Credit" (March 25, 2011) (noting that the R&D credit in its current form 

offers a cost-effective way to encourage research spending and supports high-wage jobs). See also Carroll, Prante. and 

Quek. "The R&D Credit: An effective policy for promoting research" (September 2011) (estimating the higher wage 

and employment impacts of the R&D credit). 

16 See Information Technology and Innovation Foundation, "Create Jobs by Expanding the R&D Tax Credit," (January 

26,2010). 

17 See Deloitte, "Global Survey of R&D Tax Incentives," (July 2011). 

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The Tax Code and Marginal Rates 

Another barrier to innovation and investment for our company is the uncertainty and 

potential increase of the individual marginal income tax rates. LMJ is structured for tax purposes as 

a Subchapter S corporation which means that profits are passed through to the shareholders in the 

form of distributions and taxed at the individual's marginal income tax rate. It also means that the 

rate-of-return on any reinvestment on those profits retained by the company will be impacted by the 

individual rate. 

As we attempt to plan for future long-tenn growth and expansion or paying off the principal 

on existing debt, individual marginal income tax rates do matter. Moreover, the uncertainty of 

whether those rates will dramatically increase at the end of the year, or will be extended, instills yet 

another layer of risk in the growth and investment decision making process. Any potential increase 

in the rates will increase the cost of capital obtained through the retention of earnings, which in turn, 

decreases the return on any capital investment. Since it is uncertain as to whether or not some or all 

rates will increase, we must also take this possibility into account in determining the feasibility of 

the project. 

The bottom line-any increase in marginal income tax rates and the uncertainty of whether 

increases will take place has a chilling effect on our ability to grow, expand and create jobs. 

Besides individual marginal rates, many other provisions of the Code are currently set to 

automatically increase at the end of the year which will complicate our business decisions. 

Increases in capital gains tax, tax on dividends, the estate tax, the Alternative Minimum Tax (AMT) 

patch, and the uncertainty of how these provisions will be treated going forward will complicate our 

ability to innovate, grow and create jobs. 

Additionally, some lawmakers are discussing undertaking corporate only tax refonn. 

Having a tax system where marginal corporate rates are not synchronized with the individual rates 

pass through entities are subject to, would cause S corporations, such as LMI, to be forced to 

dedicate significant time and resources to financial engineering to address the lack of rate parity. 

Further, if certain tax expenditures were eliminated to fund a corporate rate reduction, pass through 

entities would see a de facto tax increase from the loss of these credits and deductions with no 

corresponding marginal rate reduction. Accordingly, any tax rcfoTIn proposals must be 

comprehensive and address both corporate and individual rates. 

Trade 

For LMI, doing business beyond the domestic U.S. market is a critical part of our existing 

business model as well as a key part of our growth strategy. As I mentioned earlier, through 

distributor organizations we sell our products in more than 80 countries with these international 

sales contributing approximately 20% of our annual revenues. Like thousands of other American 

businesses, we understand the opportunity the global marketplace offers: outside our borders are 

markets that represent 80% of the world's purchasing power, 92% of its economie growth, and 95% 

of its customers. And we know first-hand that trade is not just important to big companies. Often 

overlooked in the U.S. trade debate is the fact that more than 97% of the quarter million U.S. 

13 
44 

companies that export are small and medium-sized enterprises, and they account for nearly a third 

of U.S. merchandise exports, according to the U.S. Department of Commerce. 

Export-Import Bank 

The Export-Import Bank of the United States (Ex-1m) has been of value to LMI in helping 

us complete international deals and generally enabling us to be more competitive globally. In FY 

201 I, Ex-1m authorized more than $4.5 billion in export credit financing for Texas companies, 

supporting over 400 companies in the state, with over half of those being small business. In fact, 

Texas ranks number I in the country for small business financing. Here at LMI, Ex-1m has 

supported $15 million of our export sales over the past five years. 

I want to urge Congress to approve a four-year reauthorization of Ex-1m before its 

temporary reauthorization expires on May 31. Failure to do so would disadvantage Ludlum and 

U.S. companies-small, medium, and larg~in foreign markets. 

Ex-1m has a proven record of success. Far from being a burden on the taxpayer, Ex-1m turns 

a profit for the American taxpayer. Since 2005, Ex-1m has returned more than $3.4 billion to the 

Treasury above all costs and loss reserves, including $700 million in FY 20 II alone. 

Nor does Ex-1m only help big business. In fact, small businesses account for 87% of Ex1m's transactions; further, these small business transaction figures are in addition to the tens of 

thousands of small and medium-sized businesses that supply goods and services to large exporters. 

In FY 2011, Ex-1m provided more than $6 billion in financing and insurance for U.S. small 

businesses -an increase of nearly 90% since FY 2008. Ex-1m has set the goal of adding 5,000 new 

small businesses to its portfolio by 2015. 

Another myth holds that Ex-1m competes unfairly with private financial institutions. In fact, 

Ex-1m covers critical gaps in financing for U.S. exports to developing countries where commercialbank financing is unavailable or insufficient. Ex-1m also acted to fill the void when the availability 

of private-sector trade finance fell by 40% during the 2008-2009 financial crisis. In the aircraft 

sector, a new multilateral agreement doubled the fees for export credit financing, thereby addressing 

the concern that some export credit financing was below market rates. 

Ex-1m lending exposes the taxpayer to very little risk. Borrowers have defaulted on less than 

2% of all loans backed by Ex-1m since its inception in 1934, a default rate lower than commercial 

banks. Ex-1m loans and guarantees present very low risks because they are backed by the collateral 

of real goods for which a buyer has already been found and a price has been agreed. As a result, Ex1m poses none oflhe risks to taxpayers that, for instance, government-sponsored enterprises in the 

hOllsing sector ultimately did. 

Failure to reauthorize Ex-1m would amount to unilateral disal111ament in the face of other 

nations' aggressive trade finance programs. For example, the export credit agency in Canada has 

extended three times as much export financing as Ex-1m; Japan more than five times; and China an 

estimated eleven times. Failure to reauthorize Ex-1m will put billions of dollars in U.S. exports and 

thollsands of American jobs at risk. 

14 
45 

Trade Promotion Authority 

Looking beyond the immediate priority of reauthorizing Ex-1m, a pro-jobs trade agenda that 

includes more market-opening agreements, such as those recently approved with South Korea, 

Colombia, and Panama, should be a focal point for a Congress concerned about the competitiveness 

of U.S. businesses, economic growth and job creation. While I am not a trade specialist, I know 

enough to recognize that first the president needs the authority to negotiate such agreementsTrade Promotion Authority (TPA). Congress has granted every president since FDR the authority to 

negotiate market-opening trade agreements in consultation with Congress. 

TPA lapsed in 2007. That's unacceptable; every American president needs TPA, and every 

president should have it. It sends a wrong signal to potential partners who won't negotiate seriously 

if they know agreements could be picked apart by Congress. 

Without TP A, the United States is relegated to the sidelines as other nations negotiate trade 

agreements without us- putting American companies at a competitive disadvantage. Already, more 

than 300 free trade agreements are in force around the globe, but the United States is a party to just 

14 such agreements covering 20 countries. And that includes the most recent three, which have yet 

to be implemented. To be competitive globally, grow our economy and create U.S. jobs, we must be 

in the game and getting back in it starts with TP A. 

Other Opportunities 

LMI does a considerable amount of business in Asia and Europe. I am pleased that the 

United States has a seat at the table for negotiations of the Trans-Pacific Partnership (TPP) which 

are underway. It's a great place to start. Asia accounts for half of the world's population and is 

projected to account for a large share of its economic growth for years to come. To boost U.S. 

exports and create jobs at home, the United States needs to improve its access to Asian markets. 

Asian nations are designing a new architecture for trade in the global economy's most 

dynamic region threatening to draw "a line down the middle of the Pacific." The TPP is our 

chance to ensure the United States is in the game in Asia. Embracing nine countries today, many 

hope additional countries will accede over time. The United States must be engaged, it is critical to 

our competitiveness and economic growth. 

As we consider new trade accords, Europe calls out for attention. Indeed, the European 

Union is by far America's largest international economic partncr and, in the size of its economy, our 

only true economic peer. It is also an important market for Ludlum. 

Last year, the Chamber supported a study to gauge the potential benefits of eliminating 

tariffs between the United States and the European Union. The study found that eliminating 

transatlantic tariffs would boost U.S.-EU trade by more than $120 billion within five years. It would 

also generate GDP gains 0[$180 billion a budget-neutral boost to the U.S. and EU economies. I 

support the proposal for a Transatlantic Economic and Trade Pact that eliminates tariffs, ensures 

compatible regulatory regimes, and addresses investment, services, and procurement. 

15 
46 

Conclusion 

I am told that given the existing political realities in Washington, DC, it is difficult to find 

common ground and get things done. I want to remind you that business owners across our nation 

and the men and women they employ face great challenges every day as well. Yet we find a way to 

overcome hurdles, make progress, and ultimately achieve solutions. I do not think it is too much to 

ask of our elected officeholders to do the same. Just as we have men and women and their families 

at LMI who directly depend on us for their jobs and livelihood, you have a nation of entrepreneurs 

and business owners who are impacted by your ability (or inability) to foster a policy and regulatory 

environment that encourages risk-taking, investment, innovation and job creation. The bottom line 

is that the decisions you make can help or hinder us. By that I mean the laws you create will either 

cultivate a climate that provides entrepreneurs and small and mid-sized business owners greater 

confidence and certainty to grow and generate new jobs, or one that does just the opposite. 

We despemtely need elected officeholders who are on the right side of that debate who are 

willing to lead. I served in the United States Navy for 20 years and travelled the world aboard 

nuclear submarines. Between my military service and business experience, I have been exposed to 

numerous countries and cultures around the globe. I am incredibly proud to be an American and 

strongly believe this nation is still the greatest place to live and do business. 

I am hopeful that each member of this Subcommittee as well as all of your colleagues in 

the House and Senate will commit to advancing legislation in the areas of high-skilled immigration, 

tax, and tmde policies to boost the competitiveness of U.S. businesses while also coming together to 

eliminate onerous mandates and regulatory burdens which saddle businesses with hurdles that 

actually hamper economic growth and job creation. 

One of the most significant areas where Congress can legislate reforms with a direct impact 

on expanding job creation is high-skilled immigration reform. Thus, there is an economic 

imperative for employment-based immigration reform. 

The Chamber applauds the Subcommittee for holding this hearing, and thanks you for this 

opportunity to testify. I look forward to your questions. 

16 
47 

Mrs. BIGGERT. Thank you, Mr. Truitt. Mr. Brandt, you are recognized for five minutes. 

STATEMENT OF MR. THOMAS M. BRANDT, JR., 

SENIOR VICE PRESIDENT AND CFO, 

TELECOMMUNICATIONS SYSTEMS, INC. 

Mr. BRANDT. Thank you. Mr. Chairman, Ranking Member Edwards, Members of the Subcommittee, I am Tom Brandt, Chief Financial Officer of TeleCommunications Systems, an entrepreneurled, Annapolis, Maryland-based wireless communication technology 

business, which now employs about 1,500 professionals and holds 

more than 200 patents. I am also here before you today representing TechAmerica, the Nation’s leading technology advocacy 

organization representing over 1,000 U.S. companies committed to 

innovation. In my testimony today, I will share TechAmerica’s insights on some policy areas where Congress can act to help advance America’s innovation economy. 

TechAmerica has been working to advance a competitiveness 

agenda for U.S. policy since collaborating with Leader Pelosi and 

others in 2005 when we published ‘‘Losing the Competitive Advantage: The Challenge for Science and Technology in the United 

States.’’ My hope is that these latest recommendations will help to 

inform public discussion and facilitate meaningful debate toward a 

national technology vision and strategy. 

The best hope for the United States to maintain its edge in an 

increasingly competitive world is by fostering and expanding our 

most prized intellectual asset, innovation. Over the past 30 years, 

innovation has given the United States and the rest of the world 

wave after wave of technological advancement and generated millions of high-skilled jobs. On average, each technology job supports 

three jobs in other sectors of the economy. The multiplier effect for 

information technology jobs is even higher, nearly five to one. 

Information technology has a proven track record of economic 

success having recently accounted for more than a third of U.S. 

gross domestic product growth and nearly two-thirds of corporate 

capital investment. 

Access to capital, strong basic research, the best and brightest 

minds, and an infrastructure that supports the entrepreneur are 

four key elements that have allowed the United States to thrive on 

the basis of innovation. 

Foreign governments, however, are increasingly aggressive in 

promoting favorable tax policies, improving their legal accounting/ 

intellectual property structures, and boosting their R&D spending 

to foster innovation in their countries. The United States needs to 

meet the challenge of foreign competitors or risk losing our edge. 

To maintain our Nation’s competitive advantage, we must update 

public policy to support what has made us successful: improving access to capital with smart tax policies, increasing support for our 

basic R&D, improving math and science education, and supporting 

immigration and opening new markets. 

One of the greatest challenges facing new start-up companies is 

gaining access to enough capital to get off the ground in the early 
48 

years and then fueling growth without prematurely ceding control 

to a bigger, less entrepreneurial owner. 

About 25 years ago, my employer started up our company with 

his wife and a childhood friend. Critical steps in growing our company were venture capital investment followed by our IPO 12 years 

ago. We now employ about five times the 295 employees in our 

2000 prospectus, and we were very fortunate to raise our capital 

shortly before changes in the environment sharply raised the bar 

on access to such capital for similar stage companies. 

Reduced obstacles to investor capital for small growth companies 

can make a major difference. The United States also needs to reform the income tax code. Other nations have adjusted their codes 

to incentivize innovation, attract investment, and enhance the competitiveness of companies within their borders. In just days, the 

United States will lead the world with the highest corporate tax 

rate. We need to change that. The R&D tax credit is a modest but 

Byzantine provision that can help incentivize innovation, but it expired again in 2011. The United States needs to make it stronger 

and make it permanent. The last major corporate tax reform took 

place 25 years ago, long before many of today’s U.S. technologybased companies were even in existence. TechAmerica looks forward to working with Congress and the Administration on ways to 

modernize the tax code. 

The government has a critical role in the area of basic research. 

From this pipeline of advances in information technology, life 

sciences, and now clean energy, technology enterprises have historically drawn many innovations. Often, early-stage research into 

new discoveries is first funded with federal dollars in a university 

or government lab and then commercialized by angel or venture investors. 

Prudent application of intellectual property laws can have an important impact on services to the public. For example, I am confident that all here recognize the importance of 911 technology, a 

vital national service that protects the lives and property of every 

American and of which my company is a provider. Today 911 is 

threatened by what the Federal Trade Commission has termed patent assertion entities. These companies have increasingly focused 

on government-mandated 911 services by wireless carriers as proof 

of infringement with significant financial consequences to both the 

carriers and their 911 vendors. I encourage you to investigate and 

resolve the 911 patent problem before it irreparably harms America’s safety and security by disrupting the 911 system. 

In addition to supporting basic research, government must also 

support the entrepreneurial and technical talent that brings this 

research to life. TechAmerica wholeheartedly supports investing to 

improve math and science education for U.S. students, particularly 

in grades K through 12. Other countries have been devoting more 

resources to STEM education for some time. 

It is also critical that we reduce obstacles to the best and brightest scientists and entrepreneurs from all over the world who want 

to come to the United States. The U.S. high-tech industry and the 

5.9 million workers that it employs rely on international trade and 

investment for continued growth, innovation, and job creation. Encouraging international trade buoys our GDP, enhances produc-
49 

tivity and boosts the ability of small businesses to innovate and 

create good U.S.-based jobs. 

In conclusion, the technology industry remains committed to 

doing our part to ensure that the United States remains the leader 

in the innovation race, but we need the right policies in place. 

TechAmerica looks forward to working with Members of this Committee, Congress, and the Administration to support the best and 

brightest ideas that continue to fulfill a robust pipeline of innovation for our country. I thank the Committee for this opportunity to 

discuss these issues with you today, and I am happy to answer 

questions. 

[The prepared statement of Mr. Brandt follows:] 
50 

PREPARED STATEMENT OF MR. THOMAS M. BRANDT, JR. 

Tech • rl 

Prepared Testimony and 

Statement for the Record of 

Thomas Brandt 

Senior Vice President and Chief Financial Officer 

TeleCommunication Systems, Inc. 

On Behalf of 

TeleCommunication Systems, Inc. 

and 

TechAmerica 

Before the 

The Science, Space and Technology Committee 

Subcommittee on Technology and Innovation 

Committee on Science, Space and Technology 

U.S. House of Representatives 

Hearing on 

The Effect of Federal Policies on Competition and Innovation 

March 27, 2012 

2318 Rayburn Building 
51 

TechAmerica Testimony of Tom Brandt before the 

U.S. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 2 

Mr. Chairman, Ranking Member Edwards, and Members of the Subcommittee, my name is Tom 

Brandt, and for the past 15 years I have been the Chief Financial Officer of TeleCommunication 

Systems Incorporated, based in Annapolis, Maryland. Our company is in the wireless 

communication technology business, selling highly reliable and secure solutions to wireless 

carriers and government agencies including military special operations and 9-1-1 services for 

public safety. I work for the founder and CEO, an African American 1978 alumnus of the naval 

academy, who started the company in 1987 and initially grew it with the help of some SBA 

programs. We raised venture money in part from a Small Business Investment Company 

("SBIC") in the late 90s, went public in 2000, and now employ about 1,500 people and hold 

more than 200 patents. 

In my testimony today, I am also representing TechAmerica, the leading advocacy organization 

for U.S. companies committed to enterprise based on technology and innovation. My company 

is one of about 1,000 member companies of all sizes comprising the technology industry's only 

grassroots-to global network, with presence in state capitals around the United States, 

Washington, D.C., Europe (Brussels) and Asia (Beijing). TechAmerica's roots go back to an 

initiative by David Packard in the late 1940s to link the emerging Silicon Valley to Washington. 

Thank you for allowing me the privilege of sharing with you perspectives on the opportunities 

and challenges surrounding our nation's innovation policies. The U.S. technology industry is the 

driving force behind productivity growth and jobs creation in the United States and is the 

foundation of the global innovation economy. I appreciate this Committee's attention to this 

topic, and I commend you for advancing the dialogue on how our nation's innovation policies 

can drive growth in our economy, and enable American companies to successfully compete in 

the global market to meet demands for the future. 

I would like to submit for the hearing record TechAmerica's "Technology Roadmap," which 

highlights policy areas where Congress can act to help advance America's innovation economy. 

Our hope is that the recommendations included here will help to inform public discussion and 

facilitate meaningful debate toward the development of a national technology vision and 

strategy. 
52 

TechAmerica Testimony of Tom Brandt before the 

U.S. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 3 

The U.S. Innovation Economv 

The importance of innovation-creating new ideas, products, and services-cannot be 

overstated. And in this global, highly competitive economy, it is increasingly the intangible 

inputs of research and development ("R&D"), education, and entrepreneurial risk-taking that 

drive that growth. Innovation is key to creating new industries, and therefore key to the 

creation of American jobs. 

Our country is home to institutions that have nurtured many of the best and brightest minds on 

the planet. And that intellectual prowess has benefited our economy in countless ways. Yet we 

all know that the process of bringing innovation to life is not simple. There is a critical path 

along which many stakeholders - including entrepreneurs, technologists and policy makersplay important roles. 

Historically, our government has helped pave that path with policies that encourage innovation 

on many levels. Yet the global environment has changed significantly in the last decade and the 

United States is no longer as dominant in entrepreneurship and innovation. The best hope for 

the U.s. to maintain its edge in rising global competition is by fostering and expanding our most 

prized intellectual asset: innovation. 

Over the past 30 years, innovation has given the u.s. and the rest of the world wave after wave 

oftechnological advancement and generated millions of high-skilled jobs. 

On average, each tech job supports three jobs in other sectors of the economy. The multiplier 

effect for information technology jobs is even higher - nearly S to 1. Information technology 

has a proven track record of economic success, having recently accounted for more than a third 

of u.s. gross domestic product growth and nearly two-thirds of corporate capital investment. 

Information and communications technologies (leT) generate some of the fastest-growing 

business sectors, based on continuous innovation. The United States is the leading innovator in 

this space, responsible for a third of alllCT-related patents filed and over 70 percent of global 

software research and development. To ensure that successive waves of innovation begin in 

the U.S., and that u.s. workers benefit from "the next big things," we must evolve the 

necessary infrastructure and environment. 
53 

TechAmerica Testimony of Tom Brandt before the 

U.S. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 4 

The ICT sector represented by TechAmerica wants to help ensure that high quality new U.S. 

jobs emerge in a global, competitive and technology-based economy, through encouraging and 

rewarding high skill levels and entrepreneurship. Unfortunately, the U.s.'s ability to adapt, 

compete and innovate alongside emerging workforces in China, India and other countries is 

impeded by a systemically weak education system, a dearth of R&D funding, a visa policy that 

limits access to the brightest foreign-born minds, and a business climate heavy with regulatory 

and tax burdens. Our public policy should be crafted to enable the U.S. to remain the world's 

innovation leader. 

Access to strong basic research, the best and brightest minds, access to capital, and an 

infrastructure that supports the entrepreneur are in fact the precise components that have 

historically allowed the U.S. to thrive on the innovation spectrum. And these same drivers will 

determine our fate going forward. 

It is important to recognize that the global environment for innovation has changed 

dramatically in the last decade creating both opportunities and threats to U.S. innovation. 

Technology has indeed made the world flat and our companies today all employ global 

strategies when it comes to markets, product development and operations. The global markets 

offer our companies tremendous growth opportunities - provided the U.S. maintains open 

trade provisions. Yet, at the same time, there has been a significant rise of venture capital and 

entrepreneurial activity in regions outside the United States such as Asia, Eastern Europe and 

South America. As entrepreneurialism grows on a global scale, we face a new competitive 

environment in which innovation can be developed anywhere. 

Foreign governments are increasingly aggressive in promoting favorable tax policies, improving 

their legal, accounting and intellectual property structures, and boosting their R&D spending to 

foster innovation in their countries. The U.S. needs to meet the challenge of foreign 

competitors or risk losing our technological edge. 

A Tax Code To Help Our Companies Be Globally Competitive 

Many nations have adjusted their tax codes to incentivize innovation, attract investment, and 

enhance the competitiveness of companies within their borders. Yet, in just days, the United 

States will lead the world with the highest corporate tax rate. We need to change that. Lower 

corporate tax rates would help U.S. companies attract capital to compete, as well as encourage 
54 

TechAmerica Testimony ofTom Brandt before the 

U.s. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 5 

foreign companies to invest in the United States, resulting in increased employment and higher 

wages for American workers. 

Other countries are aggressively encouraging research and development activities, but the U.s. 

research and development credit expired - again - at the end of last year. This incentive 

influences the choice of location among companies looking to open or relocate research 

facilities. As foreign governments actively recruit American companies to move their research 

operations abroad, the credit helps to encourage companies to invest in R&D using employees 

in the United States. It is time for Congress to make this incentive clear, predictable and 

permanent. 

In order to grow and compete, U.s. companies must take their ingenuity and investment well 

beyond our borders because 95 percent of the world's population lives outside the United 

States. Today, even small business is global business and our nation's technology companies 

must be able to thrive in the global market or we risk falling further behind other world-class 

competitors in the tax arena. The reality is expanding operations overseas enhances U.S. 

productivity and is essential for future growth, and this is why TechAmerica supports moving 

towards a competitive territorial system. Thankfully, Congress and the Administration have 

begun the process of considering comprehensive tax reform, recognizing the competitive 

disadvantage our current system inflicts on our global businesses. 

A Permanent and Strengthened R&D Credit 

We believe that investing in research, especially during these challenging times, is crucial to 

repowering the American economy. The R&D tax credit has a proven history of encouraging 

additional investments in research and promoting U.S.-based, high-wage job growth in 

companies of all sizes. It is disproportionately difficult, expensive and risky for smaller 

companies to engage in R&D activities, but permanent enactment of a strengthened credit 

would go a long way toward encouraging companies of all sizes to make R&D investments. 

Ultimately, it would stimulate U.S. innovation and lead to growth in jobs, wages, consumption 

and exports - all contributing to a stronger economy and a higher standard of living for 

American workers. 

Strengthening and permanently extending the R&D tax credit, which expired at the end of 2011 

and has yet to be renewed, would provide the certainty and resources business owners need in 

order to be able to plan and invest in U.S.-based research with certainty well into the future. 
55 

TechAmerica Testimony ofTom Brandt before the 

U.s. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 6 

This will help stimulate short-term business investments with long-term benefits to the U.S. 

economy. 

Since the R&D tax credit is only available for certain qualified research performed in the United 

States, it is really a U.s. jobs provision, since more than 70 percent of the benefits of the credit 

are attributable to the wages and salaries of workers performing research in the United States. 

The enactment of a strengthened and permanent credit will serve to both maintain and create 

new high-paying, high-skilled research jobs in the United States. 

Federal Investment in Basic Research 

The government also has a critical role to play in the area of basic research. It is from this 

pipeline of scientific advances in fields such as information technology, life sciences and now, 

clean technology, that the technology industry has historically drawn many innovations. Often, 

early stage research into new discoveries is first funded with federal dollars in a university or 

government lab and then commercialized by angel and venture investors. 

For these reasons, TechAmerica has supported the America Competes Act and continues to 

support the spirit in which it was passed in 2007. In order for the U.S. to maintain its 

competitive advantage and economic leadership, we must continue to aggressively promote a 

public policy agenda that rewards risk takers and embraces innovation at a nationalleve!. The 

United States spends more than any other nation in the world on R&D, but its relative position 

(measured by the share of such investment in national income) has been falling even as other 

countries increase their investments in research. 

Investment in R&D is a significant driver of technological progress and economic growth. U.S. 

industry and the Federal Government are the primary pillars of financial support for the U.S. 

R&D. Sources of these basic research funds have historically included the NIH, NIST, DOD, 

DARPA and, most recently ARPA-Energy. Continuing to support federally funded research 

through these agencies will nurture the symbiotic relationship between the government and 

private investment capita!. Essentially, the private sector picks up where government funding 

leaves off. We hope to see a continued commitment at that level or above going forward, so 

that American companies can bring the exciting work taking place in those labs to the global 

market. We also ask that policy makers continue to exhibit the same patience they have shown 

in the past for the high-risk and long-term nature of the innovation process. This support is 

critical to our ability to see our projects through to success. TechAmerica is pleased to see that 
56 

TechAmerica Testimony ofTom Brandt before the 

U.S. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 7 

federal R&D investment would rise to $142.2 billion under the President's FY 2013 budget 

request, representing a 1.2 percent or $1.7 billion increase above FY 2012 estimated funding 

levels. 

TechAmerica urges the Committee to remain committed to doubling the budgets of the 

National Science Foundation, Department of Energy Office of Science, and the National 

Institute of Standards and Technology labs. The President's Plan for Science and Innovation (a 

key pillar of A Strategy for American Innovation announced in September 2009 and revised in 

February 2011), the America COMPETES Act of 2007 (P.L. 110-69), and the America COMPETES 

Reauthorization Act of 2010 (P.L. 111-358) have all identified NSF, DOE SC, and NIST as critical 

to preserving America's place as the world leader in innovation. Congress and the President 

have shown strong support for these agencies, but appropriations in recent years have not 

achieved the sustained increases authorized by the COMPETES legislation. 

TechAmerica supports the President's FY2013 discretionary funding request for NIST of $857 

million (excluding transfers), an increase of $106 million over FY 2012. More than half of the 

proposed increased funding would be focused on advanced manufacturing research both at 

NIST laboratories and through a new industry-led consortia program. We believe this budget 

request will address pressing needs for standards and measurement work in emerging 

technology areas and provide seed funding to encourage industry and academia to come 

together to address common technology problems too large for individual institutions to tackle. 

Moreover, this budget is consistent with the President's Plan for Science and Innovation and 

the goals of the America COMPETES Reauthorization Act of 2010, both of which call for 

significant increases in basic federal R&D funding to make America more competitive. 

TechAmerica would like to also voice support for a $10 million NIST initiative in the President's 

FY2013 Budget that will support the technological infrastructure, including standards, 

underpinning broadband communications networks, which have become as essential to today's 

economy as the electrical power grid was to the Industrial Revolution. To compete effectively in 

this global business environment, communities and companies will need reliable, secure access 

to huge amounts of data, available anytime, anywhere. However, the U.s. currently lacks the 

technology to ensure adequate capacity to achieve a large-scale network capable of this viSion. 

There has been a 5,000 percent growth in demand for wireless internet data in the last three 

years. Currently, 3 percent of wireless smart-phone customers use up to 40 percent of the total 

available cell-phone bandwidth causing bottlenecks in mobile broadband access. Service 

providers are striving to address the rapid increase in demand, but additional technologies and 
57 

TechAmerica Testimony of Tom Brandt before the 

u.s. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 8 

approaches are needed. Advances in broadband technology or network capacity alone will not 

be sufficient to meet the future needs of a hyper-connected world. 

This initiative will help support continued operations of the 700 MHz Public Safety Broadband 

Demonstration (PSBD) Network and to make modifications to allow additional use as a platform 

for addressing interoperability and performance questions on non-PS next generation 

communications technologies. It will address three key areas to enable significant innovation in 

communications in both the commercial and public safety sectors. Benefits expected from 

funding of the advanced communications initiative include the development of a U.S. 

broadband network with greatly expanded capacity that requires only a marginal increase in 

capital and operating expenditures. In addition, it is expected to establish a testbed and build 

collaboration with the telecommunications industry to help lay the groundwork for an 

interoperable public safety communications network that seamlessly delivers voice, data, and 

video to first responders and other emergency personnel through whatever communication 

avenues are available. My company is engaged in deploying next generation 9-1-1 service in 

several states and has routed about half the country's wireless 9-1-1 calls for the past decade, 

so we are highly interested and involved in ways that technology enhancements can 

significantly improve public safety. 

Refinement of U.S. Intellectual Property Law 

I previously mentioned the 700 MHz Public Safety Broadband Network and TCS's significant 

position as a vendor of 9-1-1 wireless services. I am confident that every member of this 

committee recognizes the importance of 9-1-1 services, a vital national service that protects the 

lives and property of every American. Unfortunately, today 9-1-1 is threatened by what the 

Federal Trade Commission has termed Patent Assertion Entities, or "PAEs." The business model 

of PAEs focuses on purchasing and asserting patents against manufacturers already using the 

subject older technology, rather than the traditional and beneficial practice of developing and 

transferring new technology via purchased patents. PAEs have increasingly focused on the 

mandatory provision of 9-1-1 services by wireless carriers as proof of infringement with 

significant financial consequences for both the carriers and their 9-1-1 vendors, like TCS. 

For the record, as the owner of over 200 issued patents worldwide and more than 300 pending 

applications, TCS supports a strong intellectual property system, and we welcomed the 

September 2011 passage of the Leahy-Smith America Invents Act (AlA) as a watershed 

achievement in advancing the U.S. intellectual property system. However, the problem of PAEs 

and their potential to undermine our national 9-1-1 system remains. Until it is addressed, the 

9-1-1 system is at risk. I strongly encourage you to investigate and resolve the PAE 9-1-1 
58 

TechAmerica Testimony of Tom Brandt before the 

U.S. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 9 

problem before it irreparably harms America's safety and security by disrupting our national 9-

1-1 system. 

A Highly Skilled Work Force 

In addition to supporting the research, government must also support the entrepreneurial and 

technological talent that brings this research to life. TechAmerica wholeheartedly supports 

investing to improve math and science education for u.s. students, particularly in grades K 

through 12. Other countries have been devoting more resources to Science, Technology, 

Engineering and Math (STEM) education for some time. Our understanding is that the U.s. is 

making strides in these areas, but we must continue our commitment to enhance the 

proficiency of our students in these areas. 

In addition to better educating our own students, it is also critical that we ensure that the best 

and the brightest scientists and entrepreneurs from all over the world want to come to the 

United States to innovate and grow their businesses. Investors in entrepreneurial innovation 

have long supported immigration reform that would make it easier for highly skilled foreign 

born nationals to build companies in the United States. 

Yet U.s. immigration policy is restrictive relative to the policies of foreign countries - while at 

the same time those countries are proactively growing their own entrepreneurial and 

innovation ecosystems. As the United States is making it more difficult for foreign scientists and 

entrepreneurs to enter our country, India, China and other countries are welcoming these 

bright minds to their shores. Unless we significantly change immigration policy for highly skilled 

workers, we risk losing the brightest talent to our global competitors. 

For this reason, we enthusiastically support the Start Up Visa initiatives that have been 

introduced in both the House and the Senate. Under these bills, immigrant entrepreneurs can 

obtain a special visa to build their companies in the United States if they have secured venture 

capital financing from a qualified investor. The passage of such a bill would send a much 

needed signal to entrepreneurs around the world that United States wants them innovating 

here. Companies that are formed here drive innovation here. There is no other way to say it. 
59 

TechAmerica Testimony of Tom Brandt before the 

U.s. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 10 

Investment in America's Small Innovative Start Up Companies 

Whether it's a garage, a basement, or a dorm room, every business has humble beginnings. It's 

not about where you start. It's where you end up. No other industry produces more, or relies 

on, startups more than the technology industry. Today, 1 out of every 3 new jobs is created by 

self-employed startup businesses. My entrepreneur employer got started with his wife and a 

childhood friend. According to analysis conducted by the Ewing Marion Kauffman Foundation, 

companies less than 5 years old accounted for nearly all net job creation in the United States 

between 1980 and 2005. New firms create on average approximately 3 million jobs each year. 

Encouraging early-stage investment and growth in these fast-growing, entrepreneurial start-up 

businesses is one of the best ways Congress can help foster an environment to create new jobs. 

One of the greatest challenges facing new start-up companies is gaining access to enough 

capital to get off the ground in the first few years. Recent Congressional action on the JOBS Act 

is a positive step in addressing the regulatory burdens small companies face in their efforts to 

go public. The JOBS Act will encourage and promote economic growth by making it easier for 

emerging growth companies to access capital and by easing the Initial Public Offering ("I PO") 

process for these companies. In particular, by providing an "on-ramp" to the public markets, 

the JOBS Act will provide emerging growth companies with relief from some compliance 

requirements that are particularly challenging and costly for small companies. A critical step in 

growing our company was our IPO 12 years ago, and we now employ about S times the 295 

employees in our 2000 prospectus. We were very fortunate to raise our capital shortly before 

changes in the environment sharply changed access to such capital for similar stage companies 

since then. 

TechAmerica also supports S. 1965, the Startup Act, introduced by Senator Mark Warner (D-VA) 

and Senator Jerry Moran (R-KS). This legislation would further address the challenges faced by 

American startup companies. In 2010, Congress temporarily exempted capital gains taxes on 

the sale of certain small-business stock held for at least five years. The Startup Act would make 

this exemption permanent, giving investors an incentive to partner with entrepreneurs and 

provide financial stability at a critical juncture of firm growth. 

To further encourage business development, the Startup Act also reduces the corporate income 

tax on certain new businesses during the first three taxable years of profit. To fuel access to 
60 

TechAmerica Testimony of Tom Brandt before the 

U.S. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 11 

capital, the Startup Act would examine whether or not Sarbanes-Oxley compliance could be 

eased for small issuers, potentially allowing the market to weigh the costs and benefits. 

Another significant obstacle facing new businesses is the expense and time required to comply 

with government regulations. According to the Small Business Administration, firms with fewer 

than 20 employees spend 36 percent more per employee than larger firms to comply with 

federal regulations. This legislation requires all government agencies to conduct a cost-benefit 

analysis of all proposed new regulations with an economic impact of $100 million or more. This 

analysis will determine the efficacy of the rule and its potential effects on the formation and 

growth of new businesses. 

The Startup Act will help keep entrepreneurial talent and highly skilled workers in the U.S. by 

establishing a new category of visas for immigrant entrepreneurs. It also creates a pathway for 

foreign students who graduate from an American university with a master's or Ph.D. in science, 

technology, engineering or mathematics to receive a green card along with their diplomas so 

they can stay in this country, launch businesses, and create jobs. 

We encourage the Members ofthe Committee to introduce a House companion measure. 

Providing Greater Market Access for U.S. Technology Businesses 

The U.s. high-tech industry and the 5.9 million workers that it employs rely on international 

trade and investment for continued growth, innovation, and job creation. Engaging in 

international trade buoys GDP growth, enhances productivity, and boosts the ability of small 

businesses to innovate and create good, U.S.-based jobs. 

During the past two years of economic distress, exports have helped to keep the economy 

afloat. High-tech exports grew 38 percent from 2002 to 2008, according to TechAmerica 

Foundation's Trade in the CyberStates 2010 Report. These technology exports supported 1 

million U.s. jobs in 2009. In addition, U.S. high-tech exports were the largest overseas exports in 

2009 totaling $188 billion. 

High tech accounts for nearly a quarter of all exporting small businesses, and in 2007, 94 

percent of the companies exporting high-tech goods were small companies with less than 500 

employees. And the role of small businesses in this area has been increasing. My company is 

currently deploying our wireless network technology in emerging market carriers in Latin 

America and Africa. 
61 

TechAmerica Testimony of Tom Brandt before the 

u.s. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 12 

TechAmerica has been supportive of efforts by the Obama Administration to advance the 

Trans-Pacific Partnership (TPP) regional trade agreement. The TPP comprises the United States, 

Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam. These countries 

represent about 26 percent of global GDP and approximately 17 percent of world trade. The 

agreement will underpin the rules for international trade and investment in the region for years 

to come. Ten rounds of negotiations of the TPP agreement were held in 2011, with additional 

rounds scheduled for 2012. TechAmerica is an active member of the High Tech Trade Coalition 

which is monitoring those negotiations. TechAmerica supports new countries joining TPP with 

participants complying with current international norms and obligations, and committing to the 

high standards currently being negotiated for trade and investment, as well as intellectual 

property protection and enforcement, building upon the IP Chapter in the US-Korea FT A. 

At the same time that the United States is seeking to press foreign governments to open their 

markets and eliminate barriers to trade, we need to look at u.s. policies that could help small 

businesses grow their exports. 

Small technology companies are generally not equipped to deal with the complexities of the 

export controls and can be discouraged from exporting by the risks of not properly complying 

with the rules. We are encouraged by the steps of the Obama Administration to finally move 

forward with changes that we hope will address these concerns and are working with members 

of Congress on updated legislation. 

Small businesses seeking to export to foreign markets must grapple with finding reliable 

business partners in other countries, navigating local laws and cultures, understanding the 

market for their products or services and working out financial issues. We recognize that there 

are many programs designed to help small businesses but feel that more can be done and 

better funding can be provided to strengthen the programs aimed at helping u.s. small 

businesses export their goods and services. 

Small business innovation and new firm formation help ensure U.S. products and services 

remain at the cutting edge. Enforcing existing and pursuing new free trade agreements brings 

down barriers to entry for the goods and services of small businesses and allows them to 

market themselves to new consumers around the world. 

Conclusion 
62 

TechAmerica Testimony of Tom Brandt before the 

U.S. House Committee on Science, Space and Technology 

Subcommittee on Technology and Innovation 

March 27, 2012 

Page 13 

The United States has harnessed innovation to power economic growth, raise standards of 

living and enhance the quality of our standard of living. The federal government has played an 

indispensable role in this success through innovation-friendly policies and incentives. We 

commend those in Congress who seek to foster an ecosystem where risk taking and 

entrepreneurship are rewarded. Yet the bar continues to rise as many foreign governments 

have begun to emulate our success and seek to surpass it. Their successes mean that we no 

longer hold a monopoly on innovation and its benefits. Standing pat means falling behind. 

Make no mistake: The race is still ours to lose. But to maintain our innovation advantage, we 

must rededicate ourselves to what made us successful: increasing support for basic R&D, 

improving math and science education, supporting immigration and opening new markets, and 

improving access to capital through smart tax policies. Without action on these fronts, the 

United States may find itself in the unfamiliar role of also-ran in the innovation race. The 

technology industry remains committed to doing our part to ensure this is not the case. 

TechAmerica looks forward to working with members of this committee, Congress and the 

Administration to support the best and brightest ideas and continue to fill a robust pipeline of 

innovation for our country. 

I thank the Committee for the opportunity to discuss these important issues with you today and 

I am happy to answer any questions. 
63 

Chairman QUAYLE. Thank you, Mr. Brandt. I now recognize our 

final witness, Mr. Richard Bendis, for his testimony. 

STATEMENT OF MR. RICHARD BENDIS, INTERIM CEO, 

BIOHEALTH INNOVATION, INC., AND 

PRESIDENT AND CEO, INNOVATION AMERICA 

Mr. BENDIS. Thank you, Mr. Chairman. Chairman Quayle, and 

Ranking Member Edwards—— 

Chairman QUAYLE. Is your mic on? 

Mr. BENDIS. Thank you for the opportunity to testify before the 

Committee today. My name is Rich Bendis, and I am President and 

CEO of BioHealth Innovation, Inc. It is a private-public partnership that is predominantly funded by the private sector to foster 

biohealth innovation-based economic development and is a unique 

cluster-based model for regional economic development. This initiative could be used as a model program regardless of industry or 

cluster strength. 

BHI is the first regionally focused innovation intermediary created to connect the university and hospital biohealth research 

strengths of Baltimore with the bioscience industry and federal laboratory strengths of Montgomery County. It has entered into a 

Partnership Intermediary Agreement with the National Institutes 

of Health’s Office of Technology Transfer and has created the first 

private-sector funded Entrepreneur in Residence program to identify commercializable science in the 27 institutes of NIH. This program will create new project-based companies and high-paying life 

science jobs. BHI believes this EIR program is applicable to many 

federal agencies that have technology transfer offices and support 

SBIR programs. 

BHI has designed a potential national pilot, the Health-Regional 

Innovation Cluster, H–RIC, model, which will incorporate the best 

innovation-based economic development practices in the United 

States and integrate them into one region in Central Maryland. 

BHI is currently seeking federal financial support from several relevant federal agency partners to accelerate the creation and implementation of this innovative biohealth H–RIC model. 

Over the past 35 years, I have developed and led innovationbased technology organizations in Kansas, Pennsylvania, and currently in Maryland. I also worked as consultant in many States 

and countries to help them with their programs. For example, 

Iowa’s Innovation Council was the recipient of the Economic Development Agency, EDA’s, 2011 i6 Proof of Concept Challenge Grant, 

and Innovation Philadelphia was the recipient of multiple grant 

awards by EDA’s Public Works Grant program. These grants enabled the innovation-based strategies to be successfully developed 

and implemented within these States and regions. 

I have also partnered and served as a member of the United 

States Innovation Partnership, which was formed by the Technology Administration of the U.S. Department of Commerce under 

the Clinton Administration. 

The America Competes Reauthorization Act of 2010 established 

the Office of Innovation and Entrepreneurship with its National 

Advisory Committee on Innovation and Entrepreneurship, and this 
64 

was created to serve as the central location and focal point for 

these activities to foster interagency cooperation. I believe this 

should remain a priority for the U.S. Government, but it needs to 

have higher Administration and congressional visibility and empowerment to lead the innovation strategy for the Federal Government and America. 

The Department of Commerce and EDA should still continue to 

lead this initiative, but it needs a senior official who is empowered, 

fully budgeted and staffed office with clear responsibilities, and 

measurable outcomes. An earlier version of this office was created 

as the Technology Administration Office within the Department of 

Commerce under the Clinton Administration and had Undersecretary Dr. Mary Good leading the office. It was the closest we came 

to having an empowered technology and innovation coordinating 

body for the Federal Government. 

Today’s theme, ‘‘Examining the Effect of Federal Policies on 

Competition, Innovation, and Job Growth,’’ needs to commence at 

the regional level where job creation occurs. It needs to link the 

economically distressed regions together with stronger regions to 

develop the much-needed jobs from the laboratories to the market, 

similar to the i6 program that EDA had created. EDA and the Department of Commerce need additional flexibility in their program 

design and implementation, as every region in the United States 

has their unique assets, strengths and needs. 

There are several positive programs that affect the federal policies on competition, innovation, and job growth. The following are 

examples that have helped mitigate the risk of those companies 

facing the valley of death in commercialization or capital. 

Number one, I applaud the SBIR reauthorization, but there is a 

need for a Phase III commercialization award category, especially 

in high-capital industries such as biotechnology and energy that require extensive R&D investment. 

Second, the National Institutes of Standards, NIST, Technology 

Innovation Program, TIP, was effective and was not corporate welfare as perceived, since it brought together large and small companies and universities to tackle high-risk mission-critical technology 

innovation projects that no other federal program addressed. TIP 

needs to be reinstated because it fills a critical gap in the innovation funding continuum. 

Continued support and growth of the Manufacturing Extension 

Partnership, MEP, is an excellent example of how the Federal Government, States and the private sector can all work together to 

tackle major challenges in our economy, especially in manufacturing. 

We need to create an early-stage seed jobs fund—of—funds to address the innovation capital valley of death that would complement 

the expanded Small Business Investment Company, SBIC, program 

that has really taken off this year. 

A national angel capital credit program to stimulate private 

early-stage investment in high-risk, early-stage ventures funded by 

private individuals is also something that America needs to create. 

Thirty States have programs with angel capital tax credit programs 

today. 
65 

I agree with the permanent reauthorization of R&D tax credit, 

and we should also add a transferability component to the R&D tax 

credit. 

Lastly, we need an expansion of the Treasury program, New 

Markets Tax Credit, for venture capital investment, especially in 

early-stage companies and an expansion of the new State Small 

Business Credit Initiative, SSBCI, that would increase the percentage of allocation to seed and early-stage venture capital. 

Thank you much for the ability to make this testimony, and we 

will stand for questions now. Thank you. 

[The prepared statement of Mr. Bendis follows:] 
66 

PREPARED STATEMENT OF MR. RICHARD BENDIS

Statement of 

Richard A. Bendis 

Before the House Science, Space and Technology 

Subcommittee on Technology and Innovation entitled, 

"Fostering the U.s. Competitive Edge: Examining the Effect of Federal Policies on 

Competition, Innovation, and Job Growth" 

March 27, 2012 

Presented by: 

Richard A. Bendis 

President and CEO, BioHealth Innovation Inc. 

Founder, Innovation America 

Publisher, Innovation Daily 

Richard A. Bendis 

President and CEO 

BioHealth Innovation, Inc 

111 Rockville Pike 

Suite 800 Rockville MD 20850 

Email: rbendis@bendisig.com 

Phone: 240.777.2551 

Fax: 240.777.2517 

Mobile: 215.593.3333 

http://www.biohealthinnovation.org 

Testimony before the House Science, Space and Technology Committee's 

Testimony of Richard A. Bendis Subcommittee on Technology and Innovation 03/2712012 1 
67 

Subcommittee on Technology and Innovation 

Entitled 

"Fostering the U.S. Competitive Edge: Examining the Effect of Federal Policies on 

Competition, Innovation, and Job Growth." 

Presented by: 

Richard A. Bendis 

President and CEO BioHealth Innovation Inc. 

Founder of Innovation America 

Publisher of InnovationDaily 

Chairman Quayle and Ranking Member Edwards, thank you for the opportunity to 

testify before the House Science, Space and Technology Committee's Subcommittee 

on Technology and Innovation on the important topic of "Fostering the U.S. 

Competitive Edge: Examining the Effect of Federal Policies on Competition, Innovation, 

and Job Growth." 

My name is Richard Bendis and I am the President and CEO of BioHealth Innovation 

Inc., (BHI). BHI is a private-public partnership that is predominantly funded by the 

private sector to foster biohealth innovation-based economic development, which 

is a unique cluster-based model for regional economic development. This initiative 

could be used as a model program regardless of industry or cluster strength. 

BHI is the first regionally focused innovation intermediary created to connect the 

university and hospital biohealth research strengths of Baltimore with the 

bioscience industry and federal laboratory strengths of Montgomery County. It has 

entered into a Partnership Intermediary Agreement with the National Institutes of 

Health's Office of Technology Transfer and has created the first private-sector 

funded Entrepreneur in Residence (EIR) program to identify commercializable 

science in the 27 institutes of NIH. This program will create new project-based 

companies and high-paying life science jobs. Bill believes this EIR program is 

applicable to many federal agencies that have technology transfer offices and 

support SBIR programs. 

BHI has designed a potential national pilot, the Health-Regional Innovation 

Cluster (H-RIC) model, which will incorporate the best innovation-based economic 

development practices in the United States and integrate them into one region in 

Central Maryland. BHI is currently seeking federal financial support from several 

relevant federal agency partners to accelerate the creation and implemention of this 

innovative biohealth H-RIC model. 

Testimony of Richard A. Bendis Subcommittee on Technology and Innovation 03/27/2012 2 
68 

As the founder of Innovation America, I publish innovationDAILY, a daily electronic 

newsletter on the pulse of global innovation, entrepreneurship, angel/seed and 

venture capital and innovation-based economic development. InnovationDAILY has 

over 1,000,000 unique visitors in over 185 countries. 

Over the past 35 years I have developed and led innovation and technology-based 

economic development organizations in Kansas, Pennsylvania, and currently in 

Maryland. I have also performed successful consulting engagements including a 

recent engagement with the state of Iowa's Innovation Council and with over 30 

cities, regions, states, and countries. These projects advanced innovation-based 

polices and programs to grow the economies of their respective locations. The 

projects identified the assets of each geographical region, the leadership of the 

stakeholder organizations and developed implementation strategies. 

For example, the Iowa Innovation Council, which was a recipient of the Economic 

Development Agency (EDA)'s 2011 i6 Proof of Concept Challenge Grant and 

Innovation Philadelphia was the recipient of multiple grant awards by EONs Public 

Works Grant program. The funding was provided by EDA on both of these 

engagements, which enabled the innovation-based strategies to be successfully 

developed and implemented. 

As a founding board member of both the State Science Technology Institute and the 

National Association of Seed and Venture Funds, I understand the organizational 

needs of seed and early-stage venture capital that is deployed to emerging 

technology companies. I also have had the opportunity to serve as a member of the 

United States Innovation Partnership, which was formed by the Technology 

Administration of the U. S. Department of Commerce under the Clinton 

Administration. 

Competing globally today, the United States needs to develop a national innovation 

strategy that leverages federal assets and programs with regional academic, 

industry and non-governmental organizations. More importantly, the strategy 

needs an implementation plan and leadership group to make certain America 

regains its innovation leadership and strengthens its position for the future. The 

America Competes Reauthorization Act of 2010 established the Office of Innovation 

and Entrepreneurship with its National Advisory Committee on Innovation and 

Entrepreneurship, which was created to serve as the central location and focal point 

for these activities and to foster interagency cooperation. I believe this should 

remain a priority for the U.s. Government, but it needs to have higher 

Administration and Congressional visibility and empowerment to lead the 

innovation strategy for the federal government. 

The Department of Commerce and EDA should still continue to lead this initiative. 

But it needs a senior official in an empowered, fully budgeted and staffed office with 

clear responsibilities and measurable outcomes. An earlier version of this office was 

created as the Technology Administration Office within the Department of 

Testimony of Richard A. Bendis Subcommittee on Technology and Innovation 03/27/2012 3 
69 

Commerce under the Clinton Administration and had Undersecretary, Dr. Mary 

Good, leading the office. It was the closest we came to having an empowered 

technology and innovation coordinating body for the federal government. The 

recent Jobs Act provides more instruments like Crowdfunding, which was strongly 

supported by most innovation-based entrepreneurial organizations. The passing of 

the Act will enable more small companies to develop the capital they need to grow. 

Today's theme, "Examining the Effect of Federal Policies on Competition, Innovation, 

and job Growth." needs to commence at the regional level where job creation occurs. 

The regional strategy needs support from state-based funding programs and federal 

programs to leverage private-sector resources and knowledge. These functions 

support the commercialization of the intellectual properties being developed by 

university and federal research institutions, entrepreneurs and incubators. The U.S. 

DOC/EDA needs increased appropriations to support and stimulate regional 

innovation strategies. It needs to link the economically distressed regions together 

with the stronger regions to develop the much-needed jobs from the laboratories to 

the market. They also need additional flexibility in program design and 

implementation as every region in the u.s. has their unique assets, strengths and 

needs. 

BHI has developed a vision for a national pilot, the Health -Regional Innovation 

Cluster. President Obama's Memorandum, "Accelerating Technology Transfer and 

Commercialization of Federal Research in Support of High-Growth Businesses" 

directed federal agencies to develop plans that establish performance goals to 

increase the number and pace of effective technology transfer and 

commercialization activities in partnership with private firms, research 

organizations and nonprofit entities. BHI is an organization that will fulfill and 

manage this directive as a regional pilot program with the ability to replicate the 

biohealth innovation intermediary model nationally. 

There are several positive programs that affect the Federal Policies on Competition, 

innovation, and job Growth." The following are examples that have helped mitigate 

the risk of those companies facing the Valley of Death in Commercialization or 

Capital: 

1. SBIR reauthorization - There is a need for a Phase 1II commercialization 

award category, especially in high capital industries such as biotechnology 

and energy that require extensive R&D investment to be successfully 

commercialized. The U.s. SBIR program is the best in the world that many 

replicate and we need to continue to maintain it to keep our competitive 

advantage in innovation .. 

2. The National Institutes of Standards and Technology's (NIST) Technology 

Innovation Program (TIP) program was effective and was not corporate 

welfare as perceived, since it brought together large and small companies 

and universities to tackle high-risk, mission-critical technology innovation 

Testimony of Richard A Bendis Subcommittee on Technology and Innovation 03/27/2012 4 
70 

projects that no other federal program addressed. TIP needs to be reinstated 

because it fills a critical gap in the innovation funding continuum. 

3. Continued support and growth of the Manufacturing Extension Partnership 

Program (MEP), which is an excellent example of how the federal 

government, states and the private sector can all work together to tackle 

major challenges to our economy. 

4. An early-stage seed jobs "fund of funds" to address the innovation capital 

valley of death and would complement the expanded Small Business 

Investment Company (SBIC) program. 

5. A national angel capital tax credit program to stimulate private early stage 

investment in high risk, early stage ventures. 

6. Permanent reauthorization of R&D tax credit and adding a transferability 

component. 

7. Expansion of the New Markets Tax Credit program for venture capital 

investment. 

8. Expansion of the State Small Business Credit Initiative that would increase 

the percentage of allocation to seed and early-stage venture capital. 

In summary, we need to identifY innovation ecosystem gaps where the federal 

government can play a role and design private-public partnership programs to 

leverage industry and the private sector resources. The Department of Commerce 

(DOC), NIST and EDA are effective agencies that need additional resources to fill the 

gaps in the innovation program portfolio to create and support an integrated 

national innovation strategy that engages all stakeholders. 

America has the assets, leadership and innovation capability to develop a long-term 

strategic innovation plan that leverages all stakeholder resources, encourages 

collaboration, reduces redundancy and restructures our federal programs to 

maximize return on investment. We simply cannot afford the alternative. 

Thank you. 

Testimony of Richard A. Bendis Subcommittee on Technology and Innovation 03/27/2012 5 
71 

Chairman QUAYLE. Thank you, Mr. Bendis, and I would like to 

thank all of our witnesses for their testimony today. 

Reminding Members, the Committee rules limit questioning to 

five minutes. The Chair at this point will open the round of questions, and I will recognize myself for five minutes. 

Mr. Truitt, within your testimony you stated that there is absolutely no doubt that tax policy, both the burden and the uncertainty, impacts competitiveness. This includes uncertainty with the 

R&D tax credit as well as tax rate increases. In fact, there are over 

about 200 federal tax provisions that are scheduled to expire between 2010 and 2020. These policies really affect the ability for 

businesses to grow with research projects that are budgeted and 

planned for a three- to five-year basis. How does uncertainty really 

reduce the ability to map out a business plan for future innovation 

and investment? 

Mr. TRUITT. I am not really a tax expert, but what I can tell you 

is that we always have to look at what resources we have available, 

both in people and in money, when we look at how our map goes 

forward and how we produce or develop new products. When we do 

that, you know, a new product that may have some real research 

to it, instead of just development to it, where we have to go in and 

take some real risk to it, we may not be able to take that risk if 

we don’t have this R&D tax credit to go along with it. 

Chairman QUAYLE. Okay. Thank you. And Mr. Brandt, kind of 

along those same lines, there has been a lot of talk about simplifying the tax code, especially on the corporate side, reducing the 

number of deductions and tax credit within the system to get a 

lower rate. Would you be willing to give up something like the 

R&D tax credit for a lower rate at the corporate level? 

Mr. BRANDT. Well, speaking for myself and as a financial officer, 

certainly the cost of compliance with the complex code helps to offset the benefits of something like the R&D credit. The R&D credit 

is somewhat focused insofar as being an incentive for technology 

innovative companies to have a little bit more resources than they 

otherwise would to reinvest in development activities they wouldn’t 

otherwise have the funds for. 

So I happen to be a big advocate for greater simplicity, speaking 

as a guy who has to ensure those forms get completed accurately 

and has to sign them. 

Chairman QUAYLE. Yes, we want to make your job easier. But 

true to course, I think there is, you know, broad agreement on both 

sides of the aisle on the importance of government-supported basic 

research. However, I do get concerned about excessive technology 

transfer funding by the Federal Government that can lend itself to 

picking winners and losers. 

What do you view, Mr. Brandt, as the appropriate use of federal 

funding versus industry funding in tech transfer programs? 

Mr. BRANDT. My observation is they are symbiotic. My company 

in part owes its legacy to DARPA and the investments that went 

into enabling the Internet and the connectivity that has then in 

turn led to the wireless industry and the broadband technology 

that benefits society in a lot of ways. So I like to think it is not 

an ‘‘or’’ but an ‘‘and,’’ and I am sure there is lots of judgment as 

to where the balance is. But I see benefits from both. 
72 

Chairman QUAYLE. Dr. Cohen, do you have any thoughts on 

where it lies within tech transfer, whether on the federal involvement versus the private sector involvement? 

Dr. COHEN. It is a combination, as I think we are hearing from 

the other witnesses. Clearly, I believe most of the drive, the innovation, and the funding has to come from the private sector, but 

there is a time when having a kick start or a balance provided from 

government funding can be very helpful. In the case of my company, which I started out of my bedroom, you know it is now valued at $1 billion and, as I said, employs over 330 people and gives 

additional help to thousands of other people that we interact with 

in terms of their jobs and employment. 

But in the early days, it was very difficult to raise funding. It 

always is in an early startup. And we managed to get some SBIR 

grants. Back then there was the ATP or the Advanced Technology 

Program grants. We got a $2 million grant, which was a competitive grant that was adjudicated by a panel of experts based on the 

information we provided. That actually we were able to translate 

into enormous progress that then enabled us to raise a $20 million 

private venture capital round. 

So there really is a place where, especially in the R&D phase, 

when it is so difficult to kick start things that ultimately may become real contributors to the economy, real contributors to our 

health and so on. There is a place where the right sort of incentives 

can be the difference between life and death for these companies. 

Chairman QUAYLE. Great. Thank you very much. I now recognize 

Ms. Edwards for five minutes. 

Ms. EDWARDS. Thank you, gentlemen, for your testimony. I want 

to stay focused on that because although I have, you know, an interest in a lot of our tax policy, too, I have my own R&D tax credit 

bill, this Committee has really limited jurisdiction. So I want to 

focus on the things that we on our Committee could potentially do 

something about because otherwise, it is just kind of an abstract 

conversation. 

So, Mr. Bendis, in your testimony, you talked about the Technology Innovation Program, and what I would like you to focus on 

are some of the gaps that you mentioned where, you know, TIP fills 

important and critical gaps, but now, because of congressional action, we really don’t have the benefit of that. And also if you could 

give me an idea about your perceptions of the predecessor program, 

the ATP, program as well. 

Mr. BENDIS. Yes, Congresswoman Edwards, I believe the U.S. 

Government and Congress could take a look at a gap analysis, and 

to be honest with you, the gaps are wider and deeper than they 

have ever been in the private sector because venture capitalists are 

moving upstream and funding less early-stage capital. 

So I don’t believe the Federal Government should fund by itself 

every different segment and stage of the life cycle within a company, but there are appropriate roles that the Federal Government 

can play. I will start at the beginning of the portfolio. 

The SBIR program is the best program in the world for doing 

early-stage funding. Many countries have copied what we do in the 

United States, and I couldn’t believe that we had to go through so 

many reauthorization challenges here to get it reauthorized. It is 
73 

something that also should become permanent in this government 

because it is the best early-stage investment program that America 

has, and we should not have to go through the reauthorization 

process, even after six years. 

As I mentioned in my testimony, where we have a tremendous 

gap in the innovation capital area right now is in commercialization, and basically bridging the gap from proof of concept to what 

I classify as proof of commercial relevance is where Phase III would 

empower people to get their technologies, to get it market and commercial ready. 

On the TIP program, it was designed to deal with mission-critical, federal agency, mission-critical, and Federal Government and 

America mission-critical technologies in areas that needed to be focused on to enhance the quality of life, our infrastructure and defense of the United States. Since that program has been discontinued, there basically isn’t a program to replace it with federal 

funding, and companies generally don’t have the capital to take on 

this high-risk research themselves. 

The difference in the ATP program and TIP program was ATP 

tended to be more focused on large companies, but the TIP program organized itself to focus on partnerships with small business, 

academic institutions and large business but was predominantly 

small-business oriented, where basically that research should 

begin. 

Ms. EDWARDS. Thank you, Mr. Bendis. And let me just interrupt 

you because I think it is important for us, and I want to hear from 

each of you just very briefly. Is there universal agreement across 

this panel about the benefit of the SBIR program? Mr. Truitt? 

Mr. TRUITT. You know, there was for us, you know. We have 

gone to a point now where it is beyond what Ludlum works with, 

but I could see where in the future that start-up companies need 

something like that. 

Ms. EDWARDS. But when you started up, you, your company, as 

I understand it, has had the benefit of SBIR. Am I correct? So it 

was important for beginning, even though for companies that are 

well down the line, it may not be as valuable as those start-ups, 

is that right? 

Mr. TRUITT. Yes, that is true. And when we started up, we did 

have the benefit of, you know, the SBIR, and the local bankers and 

things that were—again, back then, you know, handshakes meant 

something. And that is really how a lot of the business was done. 

Ms. EDWARDS. Mr. Brandt. 

Mr. BRANDT. And I can report that our company benefited from 

the 8(a) program early in its life, and at the time we did our IPO, 

the pure venture money was supplemented and enhanced by an 

SBIC. So those were key milestones in the development of our 

1,500 person company. 

Ms. EDWARDS. Thanks, and I appreciate that because I think 

sometimes we get confused. I mean, there is an important role, especially in a start-up for several different programs, whether it is 

through SBA, SBIR, you know, these things that really can sort of 

jump start without choosing winners and losers. That is not what 

this is about, but it is saying, you know, there are some ideas out 

there that have to be seeded. The Federal Government can provide 
74 

some of that seed, and then you all go off and let your thousand 

flowers bloom without us choosing which one of them are the ones 

that should be picked. And with that, I think I will yield. 

Mrs. BIGGERT [presiding]. Thank you, and I would now yield myself for five minutes. Mr. Brandt, thank you so much for what you 

do for TechAmerica. I think that is so, so important to our country. 

You know, we have heard a lot from companies about the time and 

resources required to comply with the regulations. In fact, some of 

them say that the only job they have been able to hire for has been 

compliance officers. So I think that that shows that there is a problem here. 

Can you give us a sense of cost and time required by your company to achieve regulatory compliance? 

Mr. BRANDT. Well, what is closest to my desk is Securities and 

Exchange Commission requirements for being a public company, 

and the cost and time certainly went up a notch as the SarbanesOxley 404 rules kicked in, and we have been obliged to invest for 

internal control, monitoring and reporting, at a much higher cost 

than prevailed before that rule came into effect. 

Mrs. BIGGERT. Does it really affect your business and investment 

decisions? 

Mr. BRANDT. Well, it diminishes the capital that is available to 

invest elsewhere. So to the extent I have an internal audit department now and I have staff that are virtually full time committed 

to ensuring that we have records of having checked ourselves multiple times during the year for compliance with our own policies. 

Those are dollars that are not available for us to hire engineers to 

enhance our products and be more competitive. 

Mrs. BIGGERT. The SEC I think has at least 450 regulations that 

they are working on or have already brought forward. Are a lot of 

these the ones that you are working on? 

Mr. BRANDT. Well, between the outside auditors and the attorneys who are, on the average, $300 to $500 an hour, they monitor 

all those rules on behalf of my office and the company, and I am 

sure they all factor into those bills. 

Mrs. BIGGERT. Thank you. Then, Mr. Truitt, you testified that 

trade policies affect the cost of doing business for companies in the 

global markets, and you cite policies and partnerships critical to 

the U.S. competitiveness and economic growth. How can the United 

States best promote exports through trade agreements, and can 

you give us a sense of how access to new markets enable smalland medium-sized enterprises to create jobs and grow their businesses? 

Mr. TRUITT. Yes, trade agreements do play a big part in what we 

can do. The recent trade agreements with South Korea, which has 

a big nuclear industry, and in fact, they are building nuclear power 

plants for other countries now, has made it so that we are more 

competitive with local companies because there are local companies 

within South Korea that compete with us. So it makes it so we are 

on a more level playing platform. More trade agreements like this, 

because most countries around the world have more than what the 

United States do, would certainly make us more competitive in 

more countries. 
75 

Mrs. BIGGERT. It seems like those trade agreements that we have 

just had with South Korea and Panama and Colombia really took 

a long time to get out. 

Does anyone else have anything they would like to add to that 

question? Anybody else deal with trade? Okay. 

Let me go back to research and development. It seems like research and development is so important that we have the Office of 

Science for the Department of Energy and Department of Defense 

does a lot of this. But you talked about the valley of death that so 

many companies reach. And I have had a couple of companies that 

have come to me and, you know, they have a product, it works but 

they can’t get to that part where they can really, you know, open 

up a big shop. What do we do with them? There is one right now 

that really is an important issue that could really solve some of the 

problems that we are having with gasoline and diesel. Anybody 

have any ideas? Mr. Bendis. 

Mr. BENDIS. Yes, ma’am. Basically, every company shouldn’t create a big shop. What we need to determine whether or not is 

whether they have something that is commercially relevant, that 

somebody wants to buy and that there is a scalable market to be 

able to create a real business around it. So what we can do to them 

is to mentor them, provide advice to them initially, not give them 

money, but I think they need knowledge more than they do money 

sometimes to determine whether or not the market really needs 

their technology. 

And the other thing is there are a lot of State resources that 

exist in each of the individual States, and that means that if, for 

example, in Maryland you have TEDCO, which is a tech-based economic development organization, that can provide some support to 

them. Some of the tech transfer offices can also provide some support to them. 

So at the end of the day, I think providing good mentoring 

knowledge and access to resources might be one of the best things 

that could be done for these companies and entrepreneurs. 

Mrs. BIGGERT. Thank you very much. Dr. Cohen. 

Dr. COHEN. Yes, speaking for the biotechnology industry, one of 

the key issues in allowing that sort of growth and transition for us 

is now the regulatory pathway, and we are one of the most regulated industries in the world, and rightly so. People need to be assured that we have safe and effective medicines, and that is what 

the FDA tries to do. 

But the reality is over the last decade or so, the pathway has become so burdensome that the timelines have been increasing, and 

companies are finding it harder and harder to get their products 

to market, even with drugs that work and can confer benefits. So, 

for example, in 2001, drugs that got approved on average had 

taken about 12.4 years or so to get through the development process. Now it is about 14.8 years. So in just 10 years, we have increased the burden by over two years, and that seems to be continuing. 

So things that can be done, for example, what I suggested in my 

testimony are approval of bills like the FAST bill where we can get 

pathways adopted by the FDA and expand them to many diseases 

that are serious, that require answers. Right now those pathways 
76 

are being applied reasonably well in HIV and cancers. But for 

other diseases that are equally serious or sometimes more so, they 

are not being applied. And that is a critical thing that could help 

the biotech industry because investors have recognized this, and 61 

percent of venture capitalists in a poll last year cited the regulatory 

uncertainties as the reason that they are reducing their investment 

in the biotechnology industry. 

Mrs. BIGGERT. Thank you very much, and I have gone over my 

time, but now I recognize the gentlelady from Oregon, Ms. 

Bonamici. 

Ms. BONAMICI. Thank you very much, Madam Chair. Dr. Cohen, 

you just anticipated and answered my question. But I wanted to 

follow up a little bit about it because you talked about this FDA 

approval process in your testimony, and it is something that I have 

heard about from constituents, both relating to drugs and devices, 

and you did mention that one of the reasons why there is reduced 

investment in medical science sectors is because of this regulatory 

challenge. I think we can all agree that we need to have a process 

to assure that the drugs and the products are safe. 

So can you expand a little bit about the FAST bill, and I know 

there is already the accelerated approval. What else can be done 

so that we can assure safety but speed up the approval process? 

Dr. COHEN. So thank you for the opportunity to respond to that. 

There are a number of things that can be done to respond to that 

particular issue, and in my view it is the leading issue for the 

biotech industry in terms of what could be done to foster the industry and make sure that it is healthy and growing and helping all 

of us. 

BIO has put forth a series of suggestions, so for example, in the 

FDA’s mission statement, right now it does not include a commitment to foster biomedical innovation. We think it should, because 

out of that will flow a decision-making process that will take into 

account that, for example, there is a cost not only to putting a potentially unsafe drug on the market, but there are many costs to 

not putting a potentially effective drug on the market in a timely 

way. And too often in that equation, that part of it is not given due 

weight. 

So what is the cost to patients who need a drug now of not getting it to them now, versus the cost, of course, you don’t want to 

get an unsafe drug out there. 

But the balance is in my view skewed on one side, and it needs 

to have that other balance, on behalf of the patients who need the 

drugs. The patients’ voices themselves are too often not included in 

the process. There ought to be more ways for patient groups to 

make their voices heard in terms of what do they consider a benefit 

to them, and what do they consider a risk that they are willing to 

assume. That voice is too often missing from the equation. 

So there are many different things. There are others—in my 

written testimony I think we have a longer series of proposals—but 

a very good start is embodied in the FAST Act. It includes some 

of what I have just talked about, but in particular this issue of accelerated approval, which is an existing pathway. 

Ms. BONAMICI. Right. 
77 

Dr. COHEN. The FDA already recognizes it, but it is not sufficiently broad in its application. There is not sufficient transparency 

to companies like mine where we can have a dialogue with FDA 

and say, well, do we potentially qualify for this pathway? And over 

all, there needs to be more transparency and communication between drug sponsors, like my company, and the FDA. And one of 

the encouraging signs in the PDUFA legislation that is up for reauthorization is FDA did agree to an ombudsman that would now 

help facilitate basic communications back and forth, where now if 

my group has a simple question that could be answered theoretically in a day or two, it could take a few months before we get our 

answer. And during those few months, we are paralyzed. We can 

no longer continue with our development program. 

So these are the sorts of things that I would be very happy if 

Congress would continue to focus on to help the FDA accomplish 

the mission that they want to accomplish which will help all of us. 

Ms. BONAMICI. Terrific. Thank you very much. Mr. Truitt and 

Mr. Brandt, thank you for your testimony as well. I know you both 

mentioned the difficulty of finding highly skilled, qualified workers. 

And I suspect as we move toward more advanced manufacturing, 

that difficulty is going to grow. And Mr. Truitt, I understand you 

are here on behalf of the Chamber, and I want to applaud you for 

talking about the need for high-skilled immigration reform and 

how it needs to be coupled with education reform. I think I couldn’t 

agree with you more on that. 

But putting aside the immigration issue, what else can we do as 

government policymakers to improve the training of our domestic 

workforce to meet these growing advanced manufacturing needs? 

Mr. BENDIS. I believe that continued support for STEM is extremely important and also looking for advanced workers. All of 

them don’t need to have graduate degrees. I think the community 

colleges in America play a tremendous role in providing skilled 

workers, and I think they can actually help support the need for 

skilled workers as our advanced manufacturing needs occur because everybody doesn’t need to be a Ph.D. or scientist. But I think 

also some of the major professional societies in America and associations need to work on this problem because it is not just a congressional or a federal problem. I think it is an industry problem 

which a lot of them are trying to address as well as to how do we 

increase the quality of our workforce in America to be able to compete on a global basis. 

Ms. BONAMICI. Thank you very much, and I believe my time is 

expired. Thank you. 

Mrs. BIGGERT. Thank you. The gentleman from Illinois, Mr. Lipinski, is recognized for five minutes. 

Mr. LIPINSKI. Thank you, Madam Chairwoman. I have a couple 

questions here. First I want to thank everyone for their testimony 

here. Clearly we are all interested in what we can do to foster the 

competitive edge that our country has as our economy continues to 

struggle and people are asking the question. I keep saying this, although I don’t think people want to voice it. Americans are saying 

where are our jobs going to come from, and I think certainly innovation is what we need to look to. On this Committee, one thing 

I want to especially focus on, and we have been focusing on, is 
78 

ways of leveraging the Federal Government’s investment in basic 

research to spur the creation of new jobs. 

If you are looking at this from an SBIR perspective, you could 

consider it to be Phase 0. We are talking about we have all these 

researchers in our universities, our national labs, who are doing all 

this great research, but they don’t know how to start the process 

even trying to develop a product from that research that can create 

a new company, new jobs. 

Now, a couple of things we have done, the National Science 

Foundation has started a program called the Innovation Corps, or 

I–Corps, where research grant recipients can take what amounts to 

an entrepreneur course for scientists. In part, the corps teaches 

academic researchers how to develop a business model, solicit customer feedback and revise their products over and over to meet 

customer demands. This is based on decades of experience by entrepreneurs and venture capitalists in Silicon Valley. NSF has gone 

through one round of this so far and is about to do a couple more 

rounds of this. So it is open to anyone who has received an NSF 

grant. 

On the SBIR side, I was able to get language into the reauthor- ization bill that redirects $10 million of NIH’s STTR funds for 

grants to universities and other research institutions to support 

proof of concept capabilities for researchers, that is, programs that 

help researchers that are attempting to found companies assess the 

marketability of the innovation and give them the tools they need 

to succeed in business. This is based on programs such as the one 

at University of Virginia, which has generated a five-to-one overall 

return on investment and new follow-on funding and a 42-to-1 ROI 

for the top 10 percent of portfolio projects at UVA. 

So we have these two programs. I wanted to ask, first start with 

Mr. Bendis and then if anyone else has any comments, on I–Corps, 

on essentially Phase 0, SBIR over at NIH. Are these good programs? Is there anything else you would recommend for this space, 

for what we can do to better get the great research being done into 

new products, new jobs? 

Mr. BENDIS. The answer, both of them are good products, Congressman Lipinski. The I–Corps I think is an innovative way that 

we can look at identifying some potential scientists that have ideas 

that may be commercializable but we can get in the marketplace 

and find a way to give them some training. 

Phase 0 is an extremely important part of the overall SBIR portfolio of programs, and it is a good jumpstart program to look at 

true proof of concept. But if we look at ways that we want to improve these programs, or look at other programs to strengthen it, 

and I think prior to your coming in, we talked about the Phase III 

commercialization program for SBIR, of which we are strong proponents and believe there is a tremendous gap that needs to be addressed there. 

Second, the tech transfer offices in the federal labs generally are 

reactive, not proactive. That means that they basically do laboratory push with trying to push technology into the marketplace and 

rather than a market pull. What we have created is a very innovative program called an Entrepreneur in Residence program where 

we are placing a serial entrepreneur within the Office of Tech-
79 

nology Transfer at NIH to be able to determine what industry’s 

needs are and the market needs are today, rather than just identifying what good science is. We need to work hand in hand with 

these tech transfer offices from a market perspective, rather than 

just purely from a science and a laboratory perspective. And I 

think that is a tremendous program. 

Another program that is innovative in Maryland is called Innovate, and it is a program between the University of Maryland-Baltimore and Johns Hopkins where they take post-docs that have 

ideas, that have potential commercialization, and they work with 

them on a 12-month basis and educate them, basically, to determine whether or not they should be entrepreneurs, whether or not 

they have the capability to be an entrepreneur, or whether or not 

the idea is marketable. If they are not qualified at the end of that 

period, and say we don’t want any part of entrepreneurship but the 

technology is good, it helps match up the technologies with potential entrepreneurs who can take it further. 

But everybody that is a scientist should not be a potential entrepreneur or develop a product. And we need to have balance in our 

research to where we have the advancement of knowledge, which 

is extremely important, to our congressional and the federal mission, but at the same time identify the low-hanging fruit where 

there is significant commercial potential and match them up with 

the resources, knowledge, and the potential capital that is necessary. And there are some good programs within the Federal Government to support that. 

Mr. LIPINSKI. Thank you, Mr. Bendis, for bringing those forward. 

Mr. Brandt. 

Mr. BRANDT. If I may, I would submit that in recent years it is 

not only at the gestation stage but at the adolescent and maturation stage where we have seen a big change in the reduction and 

venture-backed initiatives that make their way through to the 

stage of going public. And in order for the venture community to 

be as effective as it once was in filtering through the ideas and 

commercial opportunities that began in the incubators or in academia, they need to know where there is an exit. And today they 

can sell to a bigger company which ordinarily means the departure 

of the entrepreneur. They don’t have an exit, and that has sharply 

reduced, it appears, their number of investments that are nurturing and bringing companies up to a larger stage where they are 

employing and growing more people. But the high cost of being a 

public company and other obstacles to going public have very, very 

sharply reduced the number of IPOs and consequently the middlestage companies that prevailed a few years ago. 

Mr. LIPINSKI. Thank you. I yield back. 

Mrs. BIGGERT. The gentleman yields back. The gentleman from 

California, Mr. Rohrabacher, is recognized for five minutes. 

Mr. ROHRABACHER. Thank you very much, and thank you very 

much to our very knowledgeable panel. Before I ask you some questions, let me predicate this on the fact that all of us on this side 

of the room are faced with a huge challenge, and that challenge is 

for the last three years our country has spent $5 trillion more than 

we have taken in and that if we do not stop that, if we do not have 

some way to pull that back so we are no longer going into debt at 
80 

such a high rate, our economy will collapse, the currency will collapse, the system will collapse. So I am predicating my comments 

on that before we get into the questions. 

Now, with that understanding, how we are going to get out of 

that depends on about what you are talking about. We have got to 

make sure that we develop the technology that we are capable of 

in this country, not only just develop it but put it in place and see 

that it is working, commercialize it so that it is developing, it is 

permitting us to do the things we need to in a cheaper and better 

and faster way that only new technology will permit us. In other 

words, $5 trillion in debt, we have got to produce the equivalent 

of $5 trillion worth of labor or focus and activity or wealth in our 

society. 

With that said, there are several different approaches. Some of 

the approaches we have heard today, like we just heard a litany 

of, are focused on very specific—say we have got to pick the lowhanging fruit, got to find those technologies that have the best 

chance of making it and making a contribution. Unfortunately, we 

have a focused approach, and you are relying on the bureaucracy 

or on government to do this, to select who is the low-hanging fruit. 

What happens is you end up with cronyism, and in the midst of 

that $5 trillion debt, a close examination of that will show that a 

substantial amount of money, hundreds of billions of dollars, are 

ending up in the pockets of cronies. Decisions that were made, ‘‘Oh, 

yes, you have got a good project because you are my buddy.’’ And 

we end up building factories in Finland, for example, with the 

stimulus package, or we end up just in time giving a solar energy 

company $250 million just before they go out of business. 

So what I would like to look at are the general policies which I 

believe is if you have a general field of policies in place, you look 

at those policies and find out what can make sure that an overall 

environment for the development of new technology is put into 

place, rather than relying on focused programs. 

So I am going to ask you about those general policies. We have 

a general policy that is represented by the FDA. We have a general 

policy that we are going to protect the public from people who are 

offering things that have not been thoroughly examined that might 

be harmful to them. Are we now protecting our people to death? 

Is the FDA—I know three or four examples myself of drugs and 

changes and innovations that the FDA has to approve that they 

have been sitting on because they are a bureaucracy. Do we need 

major FDA reform or some kind of restructuring or at least some 

sort of systematic attempt to make the FDA more efficient? Go 

right ahead, Dr. Cohen. 

Dr. COHEN. Thank you, Congressman. As I indicated earlier, I do 

believe that the system that we have in place now has many virtues, but it has become overly, if I may use the word, bureaucratic 

and too slow and too complex. And it needs to be streamlined. It 

needs to be put in a position where it can expedite development—— 

Mr. ROHRABACHER. Well, aren’t we spending billions of dollars 

now that in the end, once something is approved, we figure out 

those billions of dollars were actually not necessary and perhaps 

time that we could be serving people who are suffering with a new 
81 

technology, that now they won’t be able to utilize this new technology or a new medicine? As I say, that is a cost. We are talking 

about wasting huge amounts of money. 

Dr. COHEN. You are speaking about the billions of dollars that 

are spent on FDA? 

Mr. ROHRABACHER. FDA approval, for example. 

Dr. COHEN. Yeah. It is a question that is beyond my ability to 

answer because I think you are asking a societal question, and at 

the end of the day, society, and in particular the patients who are 

affected and their loved ones, need to come to consensus over time 

over what risk-benefit ratio they are willing to accept. Because, 

clearly, I think we all agree that there needs to be regulation to 

protect the public and ensure that what my industry is putting out 

there is, in fact, at some minimal level of safety and effectiveness 

that we all want and accept. 

Having said that, so I believe we need a strong FDA. I do believe 

we need to invest in the FDA because it helps all of us. It helps 

me to develop the right kind of medicines. 

Mr. ROHRABACHER. We need an FDA that functions. We need a 

patent system so that—— 

Dr. COHEN. Correct. 

Mr. ROHRABACHER [continuing]. People who are inventing new 

technologies will be protected and a copyright system and people 

who are coming up with new medicines and new technologies—let 

me ask one question, just informationally here. The President’s 

health care plan, I am not sure about this detail. I heard that there 

was a new tax on health technology in the new bill. Is that right? 

There is not? I am asking you. I am not sure. 

Mr. BENDIS. I am not positive of that, but I think there has been 

some confusion related to that issue. 

Mr. ROHRABACHER. Yeah, because I saw a list of things that people are saying that would need to be fixed in the bill, and one was 

that we are actually discouraging health care technology because 

we are taxing new health care technology by two percent or something. If we are doing that, that is insane because if you have new 

health care technology, you might be saving more than that. 

Thank you, Madam Chairman. 

Mrs. BIGGERT. Gentleman’s time has expired. I would like to 

thank all the witnesses for their valuable testimony. You have been 

a great panel. And I would like to thank the Members for their 

questions, and the Members of the Subcommittee may have additional questions for the witnesses, and we would ask you to respond in writing. And the record will remain open for two weeks 

for additional comments and statements from Members. 

With that, the witnesses are excused, and thank you all for coming, and this hearing is now adjourned. 

[Whereupon, at 11:30 a.m., the Subcommittee was adjourned.] 
82 

ANSWERS TO POST-HEARING QUESTIONS
83 

ANSWERS TO POST-HEARING QUESTIONS

Responses by Mr. Ron Cohen 

QUESTIONS FOR THE RECORD 

THE HONORABLE BEN QUALYE (R-AZ) 

U.S. House Committee on Science, Space, and Technology 

Subcommittee on Technology and Innovation 

I. What do you believe is more important for policy makers to focus on-targeted policies 

designed to provide an immediate boost to the economy or economic policies designed to 

create the conditions for long-term growth? 

Both short- and long-term policies are critically important to the success of the biotech industry 

and the health of the United States' 21 st century innovation economy. For example, the 

Therapeutic Discovery Project (TOP) injected $1 billion of immediate capital into the industry in 

2010, creating American jobs and driving the innovative search for cures and treatments. The 

awards provided critical, timely funding to biotech researchers on the cusp of scientific 

breakthroughs. However, Congress must follow-up on this successful program with long-term 

policies that will provide a more hospitable environment in the U.S. for innovative companies 

that will drive America's economic growth. 

2. In your testimony. you state that the FDA needs to be more clear and consistent in its 

application of standards and its communications with drug developers. Can you give us a 

sense of how this lack of clarity and consistency alfects your company and others in your 

industry? What do you believe are the long-term effect on innovation in this countryfrom 

lack of clarity and consistency in regulations? 

FDA's approval processes for new drugs and biologics profoundly impact the discovery and 

development of new treatments for diseases, to a degree that is difficult to overstate. There is no 

question that protecting patients from harm is a critical component of FDA's mission. But so too 

is enabling the timely development and availability of effective new therapies for patients 

suffering from serious and life-threatening diseases. In a time when the U.S. medical innovation 

ecosystem is facing severe strains and increased global competition, it is imperative that FDA's 

policies and practices find the right balance between these objectives to ensure we are able to 

deliver the next generation of breakthrough treatments and therapies. 

Too often, development is hampered by inefficient, opaque FDA processes and poor or untimely 

communications, which culmulatively can add years and tens of millions of dollars to 

development costs. My own company experienced these issues first-hand during the 

approximately 15 years it took us to develop our MS drug through FDA approval in 2010. To be 

clear, we found FDA's staff overall to be dedicated professionals who want to do the best job 

possible. But they were often challenged by chronic understaffing and what appeared to be 

overly bureaucratic process. 

From 1999-2005, the average duration of clinical trials in the U.S. grew by 70%/ and, since 

2001, the average time to achieve approval of new drugs has increasedjrom 12.4 to 14.8 years2 

I Tufts Center for the Study of Drug Development. 2008. "Growing Protocol Design Complexity Stresses 

Investigators, Volunteers." Impact Report. 10.1 

2 Source: CMR 20 II Pharmaceutical R&D Fact Book. Thomson Reuters. 
84 

For patients and their families, such delays are unfair and should not be acceptable. For small 

biotech companies that have become the leading engine for medical breakthroughs, such delays 

are not merely costly but can be--and have been--fatal, as investors are hard pressed to continue 

to fund development programs. 

At the same time, patient groups have comparatively little say in the drug approval process. Yet 

in the end, it is they who must make the ultimate risk-benefit decisions that affect their lives. It 

would be useful if, as part of the approval process, the FDA were required not only to quantify 

the risk of putting a potentially unsafe drug on the market, as it does now, but also to quantify the 

risk of delaying availability of a potentially effective therapy to patients who need it. 

While America has developed more cures and breakthrough medicines than any other country 

and is home to over 2,500 biotech companies, our global competition is increasing at an 

unprecedented rate, as rapidly rising economic powers such as China and India are committing 

billions of dollars to develop their own life sciences indnstries. Our leadership position will not 

be sustained without a concerted policy focus on supporting and incentivizing the next frontier of 

biomedical discoveries, treatments, and cures. A critical component of these policies needs to be 

a modern FDA and a regulatory environment that is consistent and clear to patients, doctors, and 

industry. 

Although there have recently been a few headlines touting increased investment in the 

biomedical field, these headlines oversimplify the actual state of affairs. The National Venture 

Capital Association (NVCA) recently released their fourth quarter 2011 numbers for venture 

financing in biotechnology in the U.S. While the numbers showed an overall 18% increase in 

investment from 2010 to 2011, this is not reflective of the situation that most small, innovative 

biotechnology companies are facing. Investment in biotechnology in 2011 was 12% lower than 

the peak we saw in 2007. Additionally, first round venture deals in 2011 fell below 100 for the 

third time in a decade and the total number of venture financing deals is down 8% since 20 I O. 

Most importantly. especially to small innovative companies, the number of venturej'unded earlystage companies(ell 19%. The number and quantity of investments moving away from earlystage innovative projects is a very disturbing trend that has been growing over the past few years, 

and this in large part directly reflects investor avoidance of the increasing risks of the regulatory 

process. Infact the number offirst-timefinancingfor life sciences companies is at its lowest level 

since 1996. 

The October 2011 survey conducted by the NVCA and MedIC showed that 40% of venture 

capitalists expect to decrease investment in biopharma over the next three years, three times as 

many as the number who expect to increase. Indeed, during the past year several long-time 

investment funds announced that they will no longer be investing in the medical science sectors. 

This same survey showed that 61% cited regulatory challenges at the FDA as the main reason 

for reducing investments. 

While it is undeniably important to assure the safety of new drugs coming to market, it is equally 

important to recognize the benefits of new therapies. It is also essential to recognize that the way 
85 

in which these objectives are balanced has enormous implications for our country's ability to 

maintain leadership in turning science into breakthrough products. We must have an FDA that is 

empowered and enabled to consistently and expeditiously review innovative products; otherwise, 

the risk of investment in medieal irmovation will continue to inerease, driving investment capital 

away from U.S. life sciences and into other industries and other countries. To this end, I believe 

that the FAST Act currently being considered in the House, and the analogous TREAT bill in the 

Senate, go a long way toward improving our current regulatory system, and should be enacted. 

3. In your testimony, you recommend changing the dejinition of "qualified small 

businesses" under Section 1202 to include companies with gross assets up to $150 

million, to index the cap to inflation, and to exclude intellectual property andfollow-on 

rounds offinancingfrom the gross assets test. Can you elaborate on what makes capita/-

intensive industries different, and on how reforms to these rules would improve 

competitiveness? Also, you suggest that the definition of "ownership change" should be 

expanded to allow companies that have undergone an ownership changes as a result of 

certain investments, like venture financing, to still use net operating losses. IVhat types of 

investments should this expanded definitions of ownership change include? What possible 

risks are there to expanding this definition? 

It takes 10 to 15 years for a company to bring a new medicine from discovery, through clinical 

trials, and on to FDA approval of a product. The entire endeavor costs on average between $800 

million and $1.2 billion. I personally had to raise $600 million over a 15 year period in order to 

bring Acorda's first drug to market, a breakthrough therapy that improves the ability ofMS 

patients to walk. This capital-intensive process is most often undertaken by companies with 

virtually zero product revenue, so all research and development funds must come from investors. 

The significant capital requirements necessitate fundraising through a wide range of investors, 

and growing biotech companies need investors who are willing to support this long, high risk, 

expensive development process. 

Congress' original intent in enacting Section 1202 was to encourage and reward individuals for 

taking risks by investing in new ventures and small businesses. However, by limiting the 

exclusions for qualified small business stock to investors in companies with less than $50 million 

in gross assets, the current Section 1202 does not provide adequate incentives to invest in small 

companies. The capital-intensive nature of R&D companies like those in the biotech industry 

pushes them above $50 million in gross assets and disqualifies them and their investors from the 

benefits of Section 1202. 

By making changes to the requirements in Section 1202, including raising the gross assets 

ceiling to $150 million, Congress can stimulate investment in growing innovative companies. 

These companies should not be penalized for their valuable IP and successive rounds of followon financing these are important indicators of a biotechnology company's health and 

attractiveness for future investment; by exempting these from the gross assets test, Congress can 

incentivize investment in small companies rather than restricting it. At a time when other 

countries are aggressively funding their own biotech industries in an effort to bolster their own 

competitiveness and attract American companies, incentivizing domestic investment in biotech 

should be a kcy component of Congress's innovation agenda. 
86 

Similarly, Section 382 was enacted with commendable intent - to curtail NOL trafficking. 

However, small biotech companies are caught in its scope because their reliance on multiple 

rounds of financing triggers the ownership change restriction. I believe that investments in startup companies in a loss position with fewer than 500 employees and with at least 35% of 

expenditures going toward research and development should not qualify as an ownership change 

and, therefore, that those companies should be able to retain their NOLs. These investments in 

innovative companies are not what Congress was targeting when it restricted ownership changes 

- because of these small companies' lack of revenue, any new investment is technically a lossrestricting ownership change, despite the fact that they operate at a loss for more than a decade. 

If small biotech companies could retain their NOLs, they would be able to include them as tax 

attributes on the balance sheet, thus increasing their value when preparing for additional rounds 

of financing like mergers or initial public offerings. This change would incentivize investment 

in biotech and drive innovation. 
87 

QUESTIONS FOR THE RECORD 

THE HONORABLE RANDY NEUGEBAUER (R-TX) 

U.S. House Committee on Science, Space, and Technology 

Subcommittee on Technology and Innovation 

I. The US. federal debt is now approaching $16 trillion, with no end in sight. How do our 

fiscal problemsjigure into your long-term business decisions and outlook? 

Certainty and predictability are extremely important for growing companies making long-term 

business decisions. Stable funding for important agencies like NIH and predictability from 

Congress on coverage, funding, and broader fiscal issues will enable companies and their 

investors to look down the road and make long-term decisions that will promote economic 

growth, which in turn will contribute importantly to reduction of the overall U.S. debt. 

2. I regularly hear irom small businesses thatfederal regulation results in massive 

commitments of human capital, time, and resources to completing paperwork and 

ensuring compliance. Jfyou have experienced this issue, please provide examples. How 

does this affect your business operations? What can Congress do to alleviate this 

imposition? 

The FDA process alone required that my company hire significant additional staff, as well as 

several outside consulting groups costing several million dollars each. Our New Drug 

Application comprised over a million pages, which we had to convert to digital format and in 

which we had manually to insert thousands of hyper links. To prepare for the Advisory 

Committee meeting called by FDA required us to create over 1,200 slides and to devote over 5 

months of preparation, which consumed a large percentage of the time of our scientific and 

clinical staff, time that otherwise could have been devoted to our other drug development 

programs. 

In a similar vein, Sarbanes-Oxley compliance required that our very small company of fewer 

than 80 at the time of our IPO in 2006, spend over $2 million of our scarce dollars and hire 

additional staff specifically for this purpose. Congress recently took an important step toward 

alleviating regulatory burdens by passing the Jumpstart Our Business Startups (JOBS) Act. This 

legislation will provide emerging growth companies five years to find their feet on the public 

market before having to comply with burdensome regulations like Sarbanes-Oxley (SOX) 

Section 404(b) and certain other accounting and disclosure requirements. The exemption from 

SOX Section 404(b) will allow growing companies time to focus on their innovative research 

before having to divert funds to costly regulations. The JOBS Act will also ease private 

fundraising through an expansion of the eligibility requirements for SEC Regulation A offerings 

and broaden the investor base by reforming the SEC private shareholder limit and SEC 

Regulation D. 

The new law will ease capital formation for growing biotechnology companies, giving them 

access to both private and public investors at a time in their growth cycle when they have little to 

no product revenue to offset the costs of conducting groundbreaking research. Currently, 

venture financing is stagnant and the public market remains closed to many biotech companies. 
88 

By removing regulatory burdens, the JOBS Act will allow companies to focus on the search for 

cures and breakthrough medicines rather than bureaucratic red tape. 
89 

Responses by Mr. Mick Truitt 

LUDLUM MEASUREMENTS, INC. 

501 OAK ST. / P.O. BOX 810 

SWEE1WATER. TEXAS 79556 

Phone: 325-235-5494 800-622-0828 (USA) 

Fax: 325-235-4672 E-Maill: ludlum@ludlums.com 

Website: http://www.ludJums.com FEIN 75-1085764 

April 12, 2012 

The Honorable Ben Quayle 

Chairman, Subcommittee on Technology and Innovation 

Committee on Science, Space, and Technology 

2321 Rayburn House Office Building 

Washington, DC 20515 

Dear Chairman Quayle: 

DESIGNER AND MANUFACTURER 

OF 

Scientific and Industrial 

Instruments 

I would like to thank you and the entire committee for allowing me to appear before you and for listening 

to the issues and concerns facing Ludlum Measurements Inc .. I especially wanted to stress how the 

issues of immigration and taxes affect all companies no matter what their size or where they are located 

in the United States. Hearings such as this are essential for our congressional leaders to hear directly 

from businesses and understand how regulations and policies they are making impact the people they 

govern. Attached please find the responses to the questions submitted to me. Please feel free to call 

upon me anytime when I may be of service. 

Thank you again for the opportunity to express my views and concerns, 

Mick Truitt 

Ludlum Measurements Incorporated 

Vice President of Sales, Marketing and Business Development 

Serving the Nuclear Industry Since 1962 
90 

QUESTIONS FOR THE RECORD 

THE HONORABLE BEN QUALYE (R-AZ) 

U.S. House Committee on Science, Space, and Technology 

Subcommittee on Technology and Innovation 

Fostering the US Competitive Edge: Examining the Effect of Federal Policies on Competition, 

Innovation, and Job Growth 

Tuesday, March 27, 2012 

Responses by Mick ~ Vice President of Ludlum Measurements, Inc. and mayor may not reflect the 

--- views of the U.S. Chamber of Commerce. 

I. What do you believe is more important for policy makers to focus on-targeted policies 

designed to provide an immediate boost to the economy or economic policies designed to 

create the conditions for long-term growth? 

Response When it comes to questions of policy in this issue area, Congress should operate 

like a business. It is always a balance. You need some short-term projects/policies for cash 

flow and immediate growth and long-term projects/policies to make sure you have a secure 

foundation for the future. What is important to always remember is that the United States 

economy is like a company in that it is either growing or dying. Congress should focus on 

putting in place policies that foster an environment that encourages businesses and 

entrepreneurs to invest, expand and create jobs which will in turn get our economy moving in 

the right direction. 

2. In your testimony, you stated that LMI is structured for tax purposes as a Subchapter S 

corporation and that company profits are passed through to shareholders and taxed at the 

individual's marginal income tax rate. Could you elaborate on what the implications would 

be for your business if marginal individual income tax rates were to increase at the end of this 

year? In your experience would this affect other emerging innovative companies? 

Response - The increase in the marginal tax rate for the individual would have huge and 

harmful implications for our business. Ludlum Measurements Incorporated (LM!), like other 

Sub Chapter S corporations, pays distributions to cover individual shareholder taxes. 

Therefore, if individual tax rates are allowed to increase, distributions would be higher 

leaving less cash in the corporation to reinvest. LMI has a policy of reinvesting all funds 

possible back into the company through capital equipment purchases and hiring employees. 

If there was less cash available because the individual rates are permitted to increase, LMI 

would not be able to hire as many employees or buy more equipment. New and emerging 

companies would be hit even harder. They have less cash to begin with and the more funds 

that go to the government due to higher taxes, then they have less to reinvest and keep the 

company afloat. 
91 

QUESTIONS FOR THE RECORD 

THE HONORABLE RANDY NEUGEBAUER (R-TX) 

U.S. House Committee on Science, Space, and Technology 

Subcommittee on Technology and Innovation 

Fostering the US. Competitive Edge: Examining the Effect of Federal Policies on Competition. 

Innovation. and Job Growth. 

Tuesday, March 27, 2012 

tesponses by Mick Truitt, Vice President of Ludlum Measurements, Inc. and mayor may not reflect the 

:::::: views of the U.S. Chamber of Commerce. 

1. The U.S. federal debt is now approaching $16 trillion, with no end in sight. How do our fiscal 

problems figure into your long-term business decisions and outlook? 

Response - We are an international company in that we sell and ship goods all over the 

world, but we also own a company in England. We deal in various currencies in our 

business. When the United States federal government cannot pay its own bills it drastically 

hurts our economy which in turn hurts our business. When the dollar is weaker, it costs us a 

lot more money through currency exchange. The Unites States of America certainly has the 

means to cover its own debt, and I'm extremely disappointed that our leaders have let us get 

in this bad of financial shape. A business is not allowed to operate in this manner, why 

should our government? 

2. I regularly hear from small businesses that federal regulation results in massive commitments 

of human capital, time, and resources to completing paperwork and ensuring compliance. If 

you have experienced this issue, please provide examples. How does this affect your business 

operations? What can Congress do to alleviate this imposition? 

Response There are really too many examples of this to explain in a short period of time. I 

will stick to the ones that were most directly related to the testimony. When it comes time for 

LM! to hire new highly technical people what sometimes becomes apparent is that we have 

to go not only outside of Texas but outside of the United States to get the expertise we 

require. In the one example of the person we hired from Mexico it has cost LM! over $17,000 

and probably 1,000 hours to go through the appropriate channels and paperwork to get this 

accomplished. It would be very beneficial to LMI and companies in a similar situation to 

alleviate this unnecessarily burdensome process to allow us to acquire the high level 

personnel with advanced degrees we need. We should be able to be expedite this process with 

user friendly forms and less onerous paperwork so that it does not take special legal help to 

maneuver through what is currently a very cumbersome process. 

Another issue is the R&D tax credit. The paperwork required to be documented is significant 

and can actually cut into the time an engineer has available to design new products. LMl is 

hesitant to spend this much engineering time on the paperwork that is required to take full 

advantage of this tax credit. This hesitation is exacerbated due to the reality that every year 

we are unsure whether the credit is going to again be extended or not. Making the R&D tax 

credit permanent would alleviate these concerns, give us a long-term solution and empower 

LM! to invest the time and resources required to take full advantage of the R&D tax credit. 
92 

QUESTIONS FOR THE RECORD 

THE HONORABLE DANA ROHRABACHER (R-CA) 

U.S. House Committee on Science, Space, and Technology 

Subcommittee on Technology and Innovation 

Fostering the u.s. Competitive Edge: Examining the Effect oj Federal Policies on Competition, 

Innovation, and Job Growth. 

Tuesday, March 27, 2012 

Responses by Mick Truitt, Vice President of Ludlum Measurements, Inc. and mayor may not reflect the 

-::;:::: views of the U.S. Chamber of Commerce. 

1. What impact will the 2.3 % tax on medical devices have on innovation, job creation, and U.S. 

global competitiveness? 

Response - LMI has to consider any new tax as an additional cost which has to be offset by the 

price of the instrument. When calculating this cost, it is not only the 2.3% for the tax but in this 

case an additional 0.5% for the overhead to track and file these taxes. This additional 

approximately 3% is nothing but overhead and adds no intrinsic value to the instrument that can 

be used to show how LMI products compare to other products made outside the United States that 

do not have this kind of tax. 

2. Will the medical device industry and small manufacturers pass this tax on to consumers in higher 

prices for patient care? 

Response - LMI would have to pass this additional tax and overhead onto our customers, who in 

turn set the prices for patient care. While we cannot speak directly for them, I do not see how they 

would be able to be in business without passing additional costs onto their customers who are 

their patients. 

3. Are we stifling innovation with unnecessary tax burdens on small businesses who are trying to 

promote economic growth? 

Any taxes and overhead tie up and redirect time and money that cannot then be used to add new 

equipment or employees. Also any new regulations tie up employee time just reviewing and 

determining if and how the new regulation affects LMI. 
93 

Responses by Mr. Thomas M. Brandt, Jr. 

QUESTIONS FOR THE RECORD 

THE HONORABLE BEN QUALYE (R-AZ) 

1. What do you believe is more important for policy makers to focus on-targeted 

policies designed to provide an immediate boost to the economy or economic 

policies designed to create the conditions for long-term growth? 

With respect to policies to boost the economy and economic growth, I believe there 

is a place for both short-term and long-term policies that can work together. As the 

economy is still turning around, targeted policies can provide companies, especially 

smaller ones, with the tools they need to keep employment steady, increase 

employment, invest in R&D, and continue to grow their businesses. That said, I 

believe economic policies focused on long-term growth are extremely important 

and should always be part ofthe discussion. Long-term policies will provide 

innovators with the certainty and predictability they need when making long-term 

planning decisions. 

In addition, foreign governments, are increasingly aggressive in promoting 

favorable tax policies, improving their legal, accounting and intellectual property 

structures, and boosting their R&D spending to foster innovation in their countries. 

The U.S. needs to meet the challenge of foreign competitors or risk losing our 

technological edge. To maintain our nation's competitive advantage, we must 

update public policy to support what has made us successful: Improving access to 

capital with smart tax policies, increasing support for basic R&D, improving math 

and science education, supporting immigration and opening new markets. 
94 

QUESTIONS FOR THE RECORD 

THE HONORABLE RANDY NEUGEBAUER (R-TX) 

'tee,~ C"-~ 

Q82\ 

1. The U.s. federal debt is now approaching $16 trillion, with no end in sight. How do our 

fiscal problems figure into your long-term business dedsions and outlook? 

As a small / mid cap technology company, TCS is affected by access to and cost of capital. 

To the extent that interest rates in general are affected by market uncertainty about the US 

treasury's ability to fund deficits, we are impacted. Our company is also a vendor of 

technology to US government agencies, and uncertainties about budgets and funding also 

adversely affect the willingness of investors to support our company. 

2. I regularly hear from small businesses that federal regulation results in massive 

commitments of human capitat time, and resources to completing paperwork and 

ensuring compliance. [fyou have experienced this issue, please provide examples. How 

does this affect your business operations? What can Congress do to alleviate this 

imposition? 

Accessing public equity markets to fund our business has become increasingly expensive 

since our IPO in 2000, mainly due to audit and staff fees to comply with SEC reqUirements 

including Sarbanes Oxley requirements. In 2010-11, our annual audit and related fees have 

been in the $800-$900,000 range, while the market value of the securities protected by 

these regulations has been in the $100-$250 million range. So it is clear that the 

proportion of financial market policing cost to economic risk has been extraordinarily high 

for us. 

Entrepreneurial, smaller businesses like ours have been the victims of the broad brush of 

"regulation" faIling disproportionately on small and large risks. By definition, investors in 

smaller companies are doing so on the fundamentals of the business plans, markets, and 

technology. High profile cases large-loss cases have tended to involve large scale complex 

derivative securities and deal structures. 

In terms of what Congress can do to address this, passage of the JOBS Act was a step in the 

right direction in terms of creating an "on-ramp" for companies going public. The Startup 

Act, introduced by Senators Warner and Moran, is another piece oflegislation that would 

address the disproportionate impact of regulations on smaller companies. The bill would 

require a cost-benefit analysis of proposed regulations with an impact of $100 million or 

more to determine its potential impact on the formation and growth of new businesses. By 

better studying and reviewing proposed laws and regulations before they go into effect, we 

may be able to avoid some of the extraordinary implementation problems that resulted 

after enactment of the Sarbanes-Oxley Act. 
95 

Responses by Mr. Richard Bendis 

QUESTIONS FOR THE RECORD 

THE HONORABLE BEN QUALYE (R-AZ) 

U.S. House Committee on Science, Space, and Technology 

Subcommittee on Technology and Innovation 

Fostering Ihe US. Competitive Edge: Examining the Effect of Federal Policies on Competition, 

Innovalion, and Job Growth. 

Tuesday, March 27, 2012 

1. What do you believe is more important for policy makers to focus on-targeted 

policies designed to provide an immediate boost to the economy or economic policies 

designed to create the conditions for long-term growth? 

I BELIEVE BOTH ARE IMPORTANT AND WE SHOULD NOT MAKE AN EITHER 

OR DECISION. WE SHOULD TAKE A BALANCED PORTFOLIO APPROACH 

LOOKING ALL THE WAY BACK TO PROOF OF CONCEPT OPPORTUNITIES AS 

WELL AS MATURE INDUSTRIES, SUCH AS MANUFACTURING AND 

DEVELOP POLICY THAT WILL HELP BOTH THE SHORT TERM IN CREATION 

OF MORE HIGH SKILLED OPERMANENT JOBS AND LONG TERM BY 

PROTECTING EXISTING JOBS THAT MIGHT HAVE GONE OVERSEAS BUT 

ARE STARTING TO COME BACK TO THE U.S.AS WELL AS PROTECT OTHER 

CRITICAL JOBS THAT WE MIGHT LOSE OVERSEAS. 
96 

QUESTIONS FOR THE RECORD 

THE HONORABLE DONNA EDWARDS (D-MD) 

U.S. House Committee on Science, Space, and Technology 

Subcommittee on Technology and Innovation 

Fostering the US. Competitive Edge: Examining the Effect of Federal Policies on Competition, 

Innovation, and Job Growth. 

Tuesday, March 27, 2012 

1. You note that the Office of Innovation and Entrepreneurship and the National 

Advisory Committee on Innovation and Entrepreneurship should have greater visibility 

within the Administration and Congress in order to effectively serve as the central 

location and focal point of Federal innovation activities, as well as foster interagency 

cooperation in this area. Can you tell us what you think needs to be done to strengthen the 

Office and have it realize its full potential, as envisioned in the America COMPETES 

Reauthorization Act of 20 1O? 

THE OFFICE NEEDS AT LEAST AN ASSISTANT SECRETARY IF NOT FULL 

SECRETARY CLASSIFICATION. THE CURRENT POSITION OF OlE IS LOST 

WITHIN DOC/EDA DOES NOT HAVE A BUDGET OR STAFF AND ALSO DOES 

NOT HAVE A CLEAR MISSION THAT CAN BE MEASURED. 

IT MAYBE MORE APPROPRIATE TO CREATE A NEW PRIVATE/PUBLIC 

PARTNERSHIP OUTSIDE OF GOVERNMNET LED BY THE PRIVATE SECTOR 

WHERE GOVERNMENT IS A PARTNER BUT SUPPORTS AND DOES NOT 

CONTROL AN OFFICE OF INNOVATION AND ENTREPRENERSHIP WHICH ARE 

BASICALL Y DRIVEN BY PRIVATE SECTOR AND ENTREPRENEURS. 

THE U.S. DOES NOT HAVE A LONG TERM, SUSTAINABLEAND INTEGRATED 

INNNOV ATION AND ENTREPRENEURSHIP STRATEGY OR IMPLEMENTATION 

PLAN AND THIS ENTITY SHOULD BE RESPONSIBLE FOR DEVELOPING AND 

MONITORING ITS EFFECTIVENESS 

2. In your testimony, you mention the need for the Economic Development 

Administration to have "additional flexibility in program design and implementation" in 

relation to its Regional Innovation Program because "every region in the U.S. has their 

unique assets, strengthens, and needs." Can you please elaborate on the current 

constraints that EDA is operating under with respect to their Regional Innovation 

Program and why this is a concern? 

THE EDA PRIMARILY FOCUSES ON ECONOMICALLY DISTRESSED COMMUNITIES 

AND REGIONS IN THE U.S. IT SHOULD HAVE THE FLEXIBILITY TO HAVE STRONG 

AND W AK REGIONS WORK TOGETHER TO FORM STRONGER REGIONAL 

INNOV A TION CLUSTERS AND THE EDA ALSO IS SEVERELY LIMITED BY THE SIZ E 

OF ITS ANNUAL BUDGET. THE EDA IS THE MOST ENTREPRENEURIAL FEDERAL 

AGENCY AS THE NEW i6 COMPETITIONS DEMONSTRATES BUT A WARDING 6 

$1 MILLION AWARDS WILL NOT HAVEA SIGNIFICANT IMPACT UNLESS LARGER 

AND MORE A WARDS ARE MADE. EDA IS LOOKED UPON AS A SECOND CLASS 
97 

AGENCY SINCE ITS BUDGET IS SO SMALL IN COMPARISON TO THE MAJORS, BUT 

ITS CURRENT AND POTENTIAL IMPACT ON AMERICA CAN BE GREAT 
98 

QUESTIONS FOR THE RECORD 

THE HONORABLE RANDY NEUGEBAUER (R-TX) 

U.S. House Committee on Science, Space, and Technology 

Subcommittee on Technology and Innovation 

Fostering the US. Competitive Edge: Examining the Effect of Federal Policies on Competition, 

Innovation, and Job Growth. 

Tuesday, March 27, 2012 

I. The U.S. federal debt is now approaching $16 trillion, with no end in sight. How do our 

fiscal problems figure into your long-term business decisions and outlook? 

THE U.S. FISCAL PROBLEMS HAVE A NEGATIVE IMPACT ON EVERYONE 

INCLUDING, THE STATES, CITIES, INDUSTRY, ACADEMIA AND 

ENTREPRENEURS. ENTREPRENEURS AND INNOVATORS HAVE TO FIND 

WAYS TO BOOTSTRAP THEIR OPERATIONS TO TRY TO GET NEW PRODUCTS 

AND SERVICES TO THE MARKET AND UNFORTUNATELY GOVERNMENT AT 

ALL LEVELS DOES NOT HAVE THE NECESSARY TOOLS AND PROGRAMS TO 

ASSIST THEM. 

I BELIEVE THERE NEEDS TO BE A CRITICAL ANALYSIS OF THE EXISTING 

FEDERAL PORTFOLIO OF PROGRAMS AND DETERMINE IF ALL ARE 

WORTHY OF FUNDING IN TODA Y'S ENVIRONMENT. UNTIL A STRATEGIC 

PLAN FOR INNOVATION AND ENTREPRENEURSHIP IS DEVELOPED IT IS 

HARD TO DETERMINE WHERE THE GAPS ARE THAT GOVERc"JMENT NEEDS 

TO ADDRESS AND WHERE THERE MAY BE ANTIQUATED POLICIES OR 

PROGRAMS THAT WE DON'T NEED. 

I BELIEVE THERE IS MORE THAN ENOUGH MONEY TO GROW OUR 

ECONOMY IN THE BUDGET, BUT WE ARE AFRAID TO MAKE THE DIFFICULT 

DECISIONS TO CUT PROGRAMS OR REPURPOSE BUDGETS TO WHERE 

THERE ARE GREATED NEEDS TODAY FOR THE FUTURE. WE NEED TO 

ELIMINATE SOME LEGACY AND PORK PROGRAMS TO RIGHT SIZE OR 

BUDGET. 

2. I regularly hear from small businesses that federal regulation results in massive 

commitments of human capital, time, and resources to completing paperwork and 

ensuring compliance. If you have experienced this issue, please provide examples. How 

does this affect your business operations? What can Congress do to alleviate this 

imposition? 

THERE ARE UNNECESSARY DELAYS IN THE DECISION PROCESS FOR 

GOVERNMENT PROGRAMS ESPECIALLY THOSE THAT EFFECT SMALL 

BUSINESS AND ENTREPRENEURS. A PRIME EXAMPLE IS THE SMALL 

BUSINESS INNOVATION RESEARCH PROGRAM (SBIR), WHERE IT TAKES 

SEVERAL MONTHS AFTER AN APPLICATION IS MADE TO MAKE DECISIONS 
99 

ON A WARDS. IN ORDER FOR AMERICA TO REMAIN GLOBALLY 

COMPETITIVE WE NEED TO BE DECISIVE IN MAKING DECISIONS IN 

CRITICAL NEW EMERGING INDUSTRIES AND TECHNOLOGY AREAS WHERE 

FOREIGN COMPETITION IS BECOMING MORE FORMIDABLE. THE U.S. 

GOVERNEMNT NEEDS TO BECOME MORE ENTREPRENEURIAL IN ITS, 

DECISION MAKING, PROGRAMS AND POLICIES SO AS TO BE ABLE TO 

COMPETE MORE EFFECTIVELY IN THE GLOBAL INNOVATION ECONOMY. 

(101) 

Appendix 2 

ADDITIONAL MATERIAL FOR THE RECORD
102 

TECHAMERICA: TECHNOLOGY ROADMAP FOR AMERICA

Æ 

6) TechAmenca Technology Roadmap for America WHERE THE FUTURE BEGINS 

To rCllw!n in todoy's world - ond to find solutions to our rr:ost 

!ronsfonn opd un innovation economy. in the 21 sl 

notional and homeland security and global competitiveness ore all on innovation 

3. 

Preparing Americans 10 create ond pedoll!) of the future requires investment in the 

of innovnfion. We urg(~ Congress to enact 0 Roodn10p: 

Research and Development. Strengthen and make permanent the R&D tax crediL The current 

credit's on-again, off-again nature impedes long term research planning by industry 

Trade. Implement an innovation-based national trode 

open up new fnorkets and expand existing ones for 

with new free trade ogrecmenls thaI 

firms to export products. 

JobSt Education and Ensure a competitive 21 st workforce through a greater 

on SCience, engineering and maih and initiatives 10 stl"engthell 

learning opportunities. 

4. Intellectual Property. Enact meaningful patent and content protection to drive innovation 

infrastructure and ensure citizens are shielded from 

trusted identities online. 

6. Privacy. Promote consumer trust and confidence in online commerce. Provide consumers with 

reasonable choice and control while allowing for technological innovation fhat spurs innovation. 

8. 

Broadband. Meet our broadband challenge 

deployrnent and adoption. Adopt spectrum and 

innovative solutions that accelerate broodband 

Service Fund reforms. 

Government Management. governrnent effectiveness with 

technologies, OMB IT plan im~,len,enrotic,a, and repeal of controcfor 

9. National Security and Homeland Security. Technology deployrrlf)nf is a critical elernent to success in 

lhese missions and also drives innovation in fhe private sector. 

10. Immigration. Strengthen our economy by fixing America's broken skilled immigration syslem 

11. Competitive Tax Code. Enact pro-innovation lox reform and a temporary repatriation incentive 

12. Cloud. Implement a framework that promotes public and commercia! sector cioud computing 

13. Smart and Clean Energy. Promote technology solutions as a means to solve the !lotion's energy 

challenges. 

For more information, contact TechAmerica SVP for Federal Government Affairs Kevin Richards at 

kevin.richards@techamerica.org or 202.595.3062.