Under current federal copyright law (17 U.S.C. 105), federal agencies cannot copyright and license their computer software. Officials at the Departments of Agriculture, Commerce, and Defense, the Environmental Protection Agency, the National Aeronautics and Space Administration, and the National Institutes of Health state that a significant portion of their laboratories' software has not been effectively transferred to and used by U.S. businesses because of the copyright prohibition. Businesses are unwilling to invest in documenting and developing commercial applications for federal software without having copyright protection. Effective transfer of software is an appropriate goal that could be achieved by amending the law to provide agencies the authority to copyright and license computer software with commercial applications. Such a change, however, should be balanced against the concern that licensing software to individual companies might exclude the public's access to this software and related federal databases. Two options for accommodating these concerns and achieving effective transfer are available. One would be to amend the copyright law to allow federal agencies to copyright and grant licenses to computer software on a case-by-case basis. Alternatively, the Stevenson-Wydler Technology Innovation Act of 1980 could be amended to allow federal agencies to copyright and grant licenses to federal software developed under a cooperative research and development agreement. Proposed legislation (S. 1581) takes the second approach and should enhance the ability of federal agencies to enter into collaborations with U.S. businesses. It would also allow federal researchers who develop software that is subsequently commercialized under such an agreement to share in royalties, which would be consistent with federal policy for rewarding federal inventors. (DB)