The Senate voted 68 to 32 to pass one of the most expansive bills on U.S. economic competitiveness in decades.  The United States Innovation and Competition Act (“USICA”) is the culmination of three months of bipartisan negotiations after Majority Leader Chuck Schumer (D-NY) invited six Senate committees to propose bills to bolster U.S. leadership in research and development (“R&D”), technological advancement, and economic growth.  Before the vote, Leader Schumer remarked that “the ambitions of this legislation are large, but the premise is simple.  If we want American workers and American companies to keep leading the world, the federal government must invest in science, basic research, and innovation just as we did decades after the Second World War.”  He applauded the bill for “paving the way for the largest investment in science and technology in generations.”

The convincing bipartisan vote to authorize over $200 billion in federal funding reflects broad  support for investing in U.S. innovation and competition.  The heart of the bill is the Endless Frontier Act authorizing $81 billion to the National Science Foundation (“NSF”) and $17 billion to the Department of Energy (“DOE”) to support R&D across ten key technologies, including artificial intelligence, advanced communications technology, biotechnology, and semiconductors.  The bill also includes institutional support, including establishing a new technology and innovation arm at the NSF and hundreds of provisions recognizing the Federal Government’s role in innovation and competition, including support for science, technology, engineering, and mathematics (“STEM”) education; protecting research security and intellectual property rights; and competing globally, including against China.  Against the backdrop of a global chips shortage, the bill appropriates $52 billion in emergency funding to support semiconductor manufacturing and R&D and $1.5 billion to support open and interoperable interface radio access networks (“open-RAN”) enabling more secure deployment of 5G.

The bill’s provisions are organized across six divisions:

Division A funds two programs that were enacted as part of the National Defense Authorization Act last year.  First, the division appropriates $52 billion to fund programs authorized by the Creating Helpful Incentives to Produce Semiconductors for America Act (“CHIPS Act”), including financial assistance for companies to invest in facilities and equipment for semiconductor manufacturing and R&D, a Department of Defense public-private partnership to ensure a robust semiconductor supply chain, and a Department of Commerce (“DOC”) study on the capabilities of the U.S. industrial base to support semiconductor needs.   Second, the division appropriates $1.5 billion to a Public Wireless Supply Chain Innovation Fund, authorized by the Utilizing Strategic Allied Telecommunications Act (“USA Telecommunications Act”), to award grants for companies to research, develop, and deploy 5G and next-generation technology that uses open-RAN.

Division B incorporates the Endless Frontier Act, introduced by Senator Schumer and Senator Todd Young (R-IN), and passed by the Commerce, Science, and Transportation Committee earlier this May.  The division authorizes over $110 billion in investments to support key technologies, including through establishing a new Directorate of Technology and Innovation in the NSF, creating regional technology hub and supply chain resiliency programs at the DOC, and promoting the participation of underrepresented populations in STEM.  Toward these goals, Division B authorizes $52 billion to the NSF for its existing activities, $29 billion to the new Directorate, $17 billion to the DOE, $10 billion for space-related activities, $8 billion to the technology hubs, and $2.4 billion for the DOC’s Manufacturing Extension Partnership.  During an earlier mark-up of the Endless Frontier Act, the Commerce Committee approved an amendment extending Davis-Bacon provisions, which require companies to pay their workers prevailing wages, to entities receiving funding under the CHIPS Act.  Right before passage of the bill, the Senate voted to retain these provisions by rejecting, 42 to 58, an amendment proposed by Senator John Cornyn (R-TX) to strike them, with eight Republicans joining all Democrats to oppose the change.

Division C incorporates the Strategic Competition Act passed by the Foreign Relations Committee in April.  The division addresses the challenges posed by China to U.S. economic and national security and the need for a robust, coordinated response by the United States and its allies.  The provisions focus on U.S. support for secure technological infrastructure, including expanding Internet access in the Indo-Pacific region and around the world.  They also promote reasserting U.S. leadership in international organizations and standards-setting bodies, addressing intellectual property theft and other foreign corrupt practices, and committing to sanctions against China in response to human rights abuses.

Division D incorporates the Safeguarding American Innovation Act passed by the Homeland Security and Governmental Affairs Committee.  The division includes provisions to protect against theft of U.S. research, technology, and intellectual property by establishing a Federal Research Security Council to develop policies on federal research and grant-making processes, thwart further abuses by individuals who have stolen sensitive information, and adopt guidelines for sponsors of foreign researchers to prevent unauthorized release of controlled technology.

Division E incorporates the Meeting the China Challenge Act passed by the Banking, Housing, and Urban Affairs Committee.  The division addresses threats in the financial services area, including money laundering, fraud, cyberattacks, and human rights abuses related to Chinese entities by creating a joint interagency task force to investigate allegations of market manipulation and urging firms to adopt a corporate code of conduct for operating in China.  In response to these illicit activities, the provisions commit to the use of existing sanction authorities, review export controls on products that may be associated with human rights abuses, and require a report from the Department of Treasury on potential threats of entities incorporated in China doing business in the United States.

Finally, Division F includes sections supporting STEM in K-12 schools and institutions of higher education; updating merger filing fees for the first time since 2001; and requiring the DOC to work with other government agencies to study underlying factors for a slowdown in entrepreneurship.

The action now heads to the House of Representatives, where members are drafting analogous and alternative provisions to the USICA.  These provisions include the National Science Foundation for the Future Act led by House Science, Space, and Technology Committee Chair Eddie Bernice Johnson (D-TX) and Ranking Member Frank Lucas (R-OK), which is expected to be marked up by the full House Science Committee in mid-June, and the Ensuring American Global Leadership and Engagement Act (“EAGLE Act”) led by House Foreign Affairs Committee Chair Gregory Meeks (D-NY).  Additional provisions are likely to be introduced in the coming days and weeks.  With Senate passage, this landmark legislation is a critical step closer to enactment, but the finish line of reaching the President’s desk is still some distance away.