Federal Labs

High Tech's Hatcheries

CANDACE STUART / Small Times 20aug03

Resource-rich federal labs foster ingenuity, struggle with fledgling inventions

It’s been about a decade since M. Allen Northrup and Joseph Lichtenhan first set out to serve their country. But neither joined the armed forces. Their contributions were going to be in the form of technologies for the military.

For Northrup, that meant working at Lawrence Livermore National Laboratory on a miniaturized system for analyzing DNA to spot pathogens. Lichtenhan’s mission was to develop an additive that makes plastics erosion-proof and heat-resistant at an Air Force Research Laboratory.

Both left the federal labs in the last half of the 1990s to start their own companies. Their efforts to nudge their inventions into the marketplace already are leading to products. Northrup’s system appears in portable detectors used by soldiers and anthrax monitors installed at mail sorting facilities. Lichtenhan’s nanostructured particles have been tested for applications that vary from adhesives for dental repair to radiation-hardy materials for spacecraft.

Funded through the departments of Energy and Defense, the United States’ national and military labs are among the best-equipped and -staffed research institutions in the world. The two agencies earmarked more than $65 billion this year for research and development, with the labs among their beneficiaries. In return, researchers are expected to use their expertise to build better defense and security technologies and otherwise improve the nation’s technical capabilities.

“The lab is the world’s biggest playground for technology,” said Northrup, who joined Lawrence Livermore in 1993 and left about three years later to start the biotech company Cepheid. He is now president and chief executive of the startup MicroFluidic Systems Inc. in Pleasanton, Calif. “I had access to incredible technology, multimillion-dollar equipment … all the things I would need to figure out the problem.”

“They are at the trough, literally,” said Lichtenhan of the defense labs. He left the lab at Edwards Air Force Base in 1998 to launch Fountain Valley, Calif.-based Hybrid Plastics, where he is president and chief executive. “There is a tremendous amount of financial and equipment resources and an intimate knowledge of the road maps and industrial problems particular to aerospace.”

But it’s up to industry to turn lab-based innovation into inventory. Strictly non-commercial, the labs rely on licensing, cooperative agreements and other protocols to fulfill their missions. Technologies that readily fit a corporate game plan may make the transition, tech transfer experts say, but less accepted and seemingly riskier approaches like nanotechnology and microsystems are more likely to find acceptance in the startup world.

The labs’ ultimate success may hinge on the entrepreneurship of the inventors themselves. More researchers are following the examples of Northrup and Lichtenhan by founding companies to commercialize their work. Changing federal priorities and an emphasis on homeland security may help – or hamper – their efforts.

An innovation presence

The Department of Energy (DOE) leads the nation’s top nine federal agencies for innovation, primarily based on the number of new inventions, patents and licensing at its 15 major labs, according to a General Accounting Office analysis. The DOE chalked up 1,479 of the agencies’ 3,676 invention disclosures in 2001; 1,126 of the 2,807 patent applications; 586 of the 1,585 patents issued; and 583 of the 920 licenses executed.

The DOE contracts with operators to manage its national labs, whose responsibilities reflect the agency’s varied missions. Lawrence Livermore in Livermore, Calif., Sandia in Albuquerque, N.M, and its neighbor, Los Alamos, are responsible for maintaining the nation’s nuclear stockpile. Other laboratories such as the Oak Ridge facility in Tennessee, Pacific Northwest in Richland, Wash., and the E.O. Lawrence Berkeley National Laboratory in Berkeley, Calif., focus more on energy and environmental issues.

It’s people like Northrup and Phil Belgrader, a Lawrence Livermore and Cepheid colleague and now the vice president and chief scientific officer at MicroFluidic Systems, and Berkeley Lab scientists Paul Alivisatos and Alex Zettl who make the DOE an innovation presence. Alivisatos helped found the nanotechnology companies Quantum Dot Corp. and Nanosys Inc., and Zettl launched Nanomix Inc. The DOE owns some of the dozens of patents issued to the four researchers, whose startups now license their technologies.

The thermal cycler, a microfabricated device developed by Northrup at Livermore, forms the heart of Cepheid’s portable detection systems. The cycler combines a system for quickly replicating and optically tagging several bits of DNA with optical readout mechanisms. Through its partner Northrop Grumman, Cepheid supplies anthrax detectors for the U.S. Postal Systems’ mail sorting facilities. Independently, it is making inroads in the clinical market with a fast and accurate genetically based diagnostic tool.

“You can imagine going into the doctor’s office and getting a test,” said Kurt Petersen, a co-founder of Cepheid and its president and chief operating officer. “The DNA analysis could be done on the spot.”

At MicroFluidic Systems, Northrup is linking his expertise with bioanalytical microdevices and Belgrader’s experience with microfluidics and sample preparation. Belgrader, who led a biotech research program at Lawrence Livermore from 1997 to 1999, perfected a method to open cells and spores and expose their genetic material.

They founded the company in 2001. Their goal is to provide detection components for military and civilian biodefense systems, but they could expand to forensics and other fields, Northrup said. In March, MicroFluidics Systems and Lawrence Livermore received $1.5 million from the Defense Advanced Research Projects Agency (DARPA) to build an autonomous airborne pathogen detector that runs continuously. DARPA awarded them $1 million in 2002 for the project.

From microscope to market

Alivisatos and Zettl credit Berkeley Lab and state-of-the-art facilities such as its National Center for Electron Microscopy for their ability to make and understand nanomaterials. Their three California-based companies are among the 18 spinouts recorded by the lab since 1990.

A pioneer in nanomaterials, Alivisatos excels at controlling nanocrystal architectures to make shapes and sizes with useful optical and electrical properties. Zettl specializes in novel nanostructures such as wires, switches and transistors made from carbon nanotubes.

Both use the lab’s high-resolution microscopes to study features such as surfaces, where the slightest imperfection can affect properties. “When it’s that small, you really need to be able to image it,” Alivisatos said.

Alivisatos designed semiconductor nanocrystals that, depending on their size, emit different colors of light when exposed to a laser. Called quantum dots, the crystals serve as fluorescent tags for tracking molecules in cells. Quantum Dot launched its first product in 2002.

More recently, he created electrically conductive plastics for solar cells that combine nanorods with polymers. He’s also experimenting with another shape, nanoscale pyramids with a 150 nanometer-long rod attached to each face, that could improve solar cell efficiency.

Nanosys announced in June that it signed an exclusive licensing agreement with Berkeley Lab for the rights to commercialize its solar cell composites.

Stop talking, start selling

Lichtenhan struggled for several years to find an industrial suitor for his novel additive, and the Air Force supported his efforts. After all, the additive – a hybrid nanoscale structure combining organic and inorganic molecules – could snuggle among polymers and create plastics that were erosion-proof and heat resistant. They even worked as fire retardants.

But in the mid ’90s, the concept of nanostructured chemicals was too revolutionary for corporations to bite. “We were too far out there,” Lichtenhan said.

By 2002, Ray Yin concluded that he, too, had outpaced his contacts in industry. A researcher with the Army Research Laboratory in Aberdeen Proving Ground, Md., he and his team developed biothreat detectors based on proteins instead of DNA.

The advantage of proteins is they need

little or no sample preparation. But once immobilized, a protein such as an antibody loses some of its ability to bind onto a complementary antigen. In a protein-based detector, that binding signals the presence of the pathogen.

Yin’s group solved that problem by developing a nanomanipulation technique that orients only the binding portion of the protein on a film. Their field tests showed the system was 100 times more sensitive than other approaches.

“You can talk technology forever,” Yin said. A former corporate manager with experience guiding startups, he instead chose to launch ANP Technologies Inc. in Aberdeen, Md., in July. He is the president of the 10-person company, and is targeting clinical and drug discovery markets as well as the military.

“I felt obliged to myself as well as the public,” he said of his decision. “I want to see something finally used. I want to see everything become a product.”

Inventors not always entrepreneurs

Yin received the Army’s blessing but no leave to try his luck as an entrepreneur. Lichtenhan likened the experience to jumping off a cliff.

Many researchers in federal labs would share his reservations, according David Goldheim, the director of corporate business development and partnerships at Sandia. “Basically, people in labs like this don’t join because they want to be entrepreneurial and start a company,” he said. Instead, they’re drawn to the stability, technically challenging work and the notion that they are serving the country.

Yet to steer an immature technology toward marketability, the inventor usually needs to be involved, according to researchers and tech transfer experts. “There are times where the inventor is the critical ingredient,” Goldheim said. In other cases, having inventors or a member of their research team as consultants will suffice, he said.

Berkeley Lab provides a flexible work plan that allows researchers like Alivisatos and Zettl to spend a limited time at companies. In that way, they can provide technical assistance and remain full time at the lab. Both also hold joint appointments at the University of California, Berkeley.

Sandia offers an entrepreneurial leave program that lets inventors take several years off to launch a business. Lockheed Martin, the corporation that manages Sandia, created the Technology Ventures Corp. to help new companies develop business plans and find funding. Recognizing that scientists and engineers may not make the best business leaders, various organizations also help pair innovators with experienced management teams.

Whether the inventor takes a sideline or prominent role at a company, the transition from a concept proven in a state-of-the-art lab to a product that is cost-efficient and reliable will be challenging, those who have succeeded say.

“Scientists by their very nature want to invent things,” Cepheid’s Petersen said. “Launching a product is a different kind of problem.”

Budget winners and losers

In 2000, Congress passed the Technology Transfer Commercialization Act to help get inventions into the marketplace. But funding decisions for 2004 may be sending some mixed messages to innovators.

The Department of Defense is likely to receive $63 billion for R&D in fiscal year 2004, its largest allocation in history. But the lion’s share of that funding will go toward fairly mature projects like missile defense, according to an analysis by the American Association for the Advancement of Science (AAAS).

Some programs that support innovation face the budget ax. Kei Koizumi, director of the R&D Budget and Policy Program at the AAAS, found funding for less developed work declines in 2004. Funding for basic research dropped 7.7 percent, to $1.3 billion. Money for applied research plummeted 14.4 percent to $3.7 billion.

“The Department of Defense is preoccupied with now, the near future, and is buying weapons for the next war,” he said, and not focusing on breakthroughs that could affect “the next, next war.”

The DOE R&D programs are in line for a more modest increase, from about $8.2 billion to $8.5 billion. But the benefits won’t be across the board. Most budgeting for the three nuclear labs comes from the National Nuclear Security Administration (NNSA), a semi-autonomous agency within the DOE. The other labs answer to the Office of Science.

The NNSA will get a 9.4 percent increase in 2004, according to the AAAS. The Office of Science’s pool is flat, with a 0.9 percent increase that shrinks to -0.3 when costs like security are factored, according to the AAAS analysis.

Among the losers: The Cooperative Research and Development Agreements (CRADA) program, a system that allows federal labs and nonfederal partners to share resources on projects that meet the lab’s mission. Funding for CRADAs in the Office of Sciences’ labs will expire in 2004; the program was phased out in 2000 in the nuclear labs, Goldheim said.

“I do lament the fact that it went away,” he said. Among the winners: The five labs selected for the DOE’s new nanoscale science research centers. The DOE sought $197 million in 2004 for the centers, a $64 million increase from 2003.

Homeland defense presents a wild card for the labs and companies working on military and security technologies. The Department of Homeland Security is expected to pour $1 billion into R&D in 2004, Koizumi estimates. It is likely to establish an office to coordinate efforts with the national labs and even set up headquarters at some sites.

But it remains unclear how the labs and their partners might tap into research funds. “Everyone is trying to figure that out,” said Cheryl Fragiadakis, Berkeley Lab’s director of technology transfer.

And what might prove fortuitous for small tech startups, the department is considering directing about half of its $1 billion pot to a program that models DARPA, Koizumi said. DARPA supports technologies that big business typically sees as too risky but the military considers valuable. It’s been credited with the Internet and other blockbusters.

Lab spinouts like MicroFluidic Systems, Hybrid Plastics and ANP Technologies are especially well positioned for opportunities, their founders say. They have the technology, the contacts and they know how to navigate the system.

“The U.S. government is the best customer in the world,” Lichtenhan said. “But the government works differently.”

source: http://www.smalltimes.com/document_display.cfm?document_id=6476 18aug03