[Senate Hearing 107-1129]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 107-1129

                             NANOTECHNOLOGY

=======================================================================

                                HEARING

                               before the

             SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, AND SPACE

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 17, 2002

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation



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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

              ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska
    Virginia                         CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana            KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
RON WYDEN, Oregon                    SAM BROWNBACK, Kansas
MAX CLELAND, Georgia                 GORDON SMITH, Oregon
BARBARA BOXER, California            PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina         JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri              GEORGE ALLEN, Virginia
BILL NELSON, Florida
               Kevin D. Kayes, Democratic Staff Director
                  Moses Boyd, Democratic Chief Counsel
      Jeanne Bumpus, Republican Staff Director and General Counsel
                                 ------                                

             Subcommittee on Science, Technology, and Space

                      RON WYDEN, Oregon, Chairman
JOHN D. ROCKEFELLER IV, West         GEORGE ALLEN, Virginia
    Virginia                         TED STEVENS, Alaska
JOHN F. KERRY, Massachusetts         CONRAD BURNS, Montana
BYRON L. DORGAN, North Dakota        TRENT LOTT, Mississippi
MAX CLELAND, Georgia                 KAY BAILEY HUTCHISON, Texas
JOHN EDWARDS, North Carolina         SAM BROWNBACK, Kansas
JEAN CARNAHAN, Missouri              PETER G. FITZGERALD, Illinois
BILL NELSON, Florida

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held September 17, 2002..................................     1
Statement of Senator Allen.......................................     5
Statement of Senator Wyden.......................................     1
    Prepared statement...........................................     3

                               Witnesses

Modzelewski, F. Mark, Executive Director, NanoBusiness Alliance..    11
    Prepared statement...........................................    13
Russell, Hon. Richard M., Associate Director for Technology, 
  Office of Science and Technology Policy........................     7
    Prepared statement...........................................     9
Stupp, Samuel I., Ph.D., Chairman of the Committee for the Review 
  of the National Nanotechnology Initiative, National Research 
  Council/The National Academies, and Board of Trustees Professor 
  of Materials Science, Chemistry and Medicine, Northwestern 
  University.....................................................    24
    Prepared statement and summary...............................    26
Swami, Nathan, Director, Initiative for Nanotechnology, 
  Commonweawlth of Virginia, and Microelectronics Program 
  Director, University of Virginia...............................    36
    Prepared statement...........................................    38
Williams, R. Stanley, HP Fellow and Director, Quantum Science 
  Research, Hewlett-Packard......................................    30
    Prepared statement...........................................    32

                                Appendix

Lieberman, Hon. Joseph I., U.S. Senator from Connecticut, 
  prepared statement.............................................    57
Roman, Dr. Cristina, Executive Director, European NanoBusiness 
  Association, prepared statement................................    74
Response to Written Questions Submitted by Hon. Ron Wyden to:
    F. Mark Modzelewski..........................................    61
    Hon. Richard Russell.........................................    58
    Dr. Samuel I. Stupp..........................................    68
    R. Stanley Williams..........................................    71

 
                             NANOTECHNOLOGY

                              ----------                              


                      TUESDAY, SEPTEMBER 17, 2002

                               U.S. Senate,
    Subcommittee on Science, Technology, and Space,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:35 p.m. in 
room SR-253, Russell Senate Office Building, Hon. Ron Wyden, 
Chairman of the Subcommittee, presiding.

             OPENING STATEMENT OF HON. RON WYDEN, 
                    U.S. SENATOR FROM OREGON

    Senator Wyden. Today, the Subcommittee on Science, 
Technology, and Space convenes the first ever Senate hearing on 
nanotechnology. Certainly in coffee shops and senior centers 
this afternoon Americans are not exactly buzzing about this 
science of building electronic circuits and devices from single 
atoms and molecules, but there is no question that this field 
will dramatically change the way the American people live.
    Today, I have introduced legislation on this issue with my 
distinguished colleague, the Senator from Virginia, and others. 
He and I have been pursuing all of these important technology 
issues on a bipartisan basis throughout the session, and I want 
to thank him for his support and also note that Senator 
Lieberman, Senator Landrieu and Senator Clinton are original 
sponsors of our bipartisan legislation as well.
    My own judgment is that the nanotechnology revolution has 
the potential to change America on a scale that is equal to if 
not greater than, the computer revolution. As chair of this 
Subcommittee, I am determined the United States will not miss 
the opportunities in this exciting field. At present, efforts 
in the nanotechnology area are strewn across a half-dozen 
Federal agencies. I believe it is critical that the Government 
marshall its various nanotechnology efforts in one driving 
force to become the Nation's leader in this burgeoning field, 
and I am of the view that Federal support is essential to 
achieving the goal.
    The legislation that we have introduced today will provide 
a smart, accelerated, and organized approach to nanotechnology 
research, development, and education. In my view, there are 
three major steps that need to be taken. First, a national 
nanotechnology research program should be established to 
superintend long-term, fundamental nanoscience and engineering 
research. The program's goals are to ensure America's 
leadership and economic competitiveness in nanotechnology, and 
to make sure that the ethical and social concerns are taken 
into account, alongside the development of the discipline.
    Second, the Federal Government should support nanoscience 
through a program of research grants and also through the 
establishment of nanotechnology research centers. These centers 
would serve as key components of a national research 
infrastructure, bringing together experts from the various 
disciplines that must intersect for nanoscale projects to 
succeed. As these research efforts take shape, educational 
opportunities will be key to their success.
    In this hearing room, I have already laid out a challenge 
to triple the number of people graduating with math, science, 
and technology degrees. Today, I commit to helping students who 
would enter the field of nanotechnology. This discipline 
requires multiple areas of expertise. Students with the drive 
and the talent to pursue physics, chemistry, and materials 
science, simultaneously, deserve all the support that we can 
offer.
    Third, the Government should create connections across 
agencies to mesh the various ongoing nanotechnology efforts. 
These should include a national steering office, a Presidential 
Nanotechnology Advisory Committee modeled on the President's 
Information Technology Advisory Committee. I also believe that 
as these organizational support structures are put in place, 
rigorous evaluation must take place to ensure the maximum 
efficiency of our efforts. Personally, I would call for an 
annual review of America's nanotechnology efforts from the 
presidential advisory committee and a periodic review from the 
National Academy of Sciences.
    In addition to monitoring our own progress, the Government 
should keep abreast of the world's nanotechnology efforts 
through benchmarking studies. If the Federal Government fails 
to get behind nanotechnology today with organized goal-centered 
support, the country runs the risk of falling behind other 
nations. Nanotechnology is already making pants more stain-
resistant, more windows self-washing, and making car parts 
stronger with tiny particles of clay.
    America risks missing the next generation of 
nanotechnology. In the next wave, nanoparticles and nanodevices 
will be the building blocks of health care, agriculture, 
manufacturing, environmental cleanup, and even national 
security. America does risk missing a revolution in electronics 
where a device the size of a sugar cube could hold all of the 
information in the Library of Congress. Today's silicon-based 
technologies can only shrink so small. Eventually, 
nanotechnology will grow devices from the molecular level up. 
Small though they may be, their capabilities and their impacts 
are going to be enormous. Spacecraft could be the size of mere 
molecules.
    America risks missing a revolution in health care. In my 
home State, Oregon State University researchers are working at 
the microscale to create lapel pin-sized biosensors that use 
the color-changing cells of the Siamese fighting fish to 
provide instant visual warnings when a biotoxin is present. An 
antimicrobial dressing for battlefield wounds is already 
available today, containing silver and nanocrystals that 
prevent infection and reduce inflammation.
    The health care possibilities are limitless. Eventually, 
nanoscale particles will travel through human bodies to detect 
internal disease. Chemotherapy could attack individual cancer 
cells and leave healthy cells intact. Tiny bulldozers could 
unclog blocked arteries. Human disease would be fought cell by 
cell, molecule by molecule, and nanotechnologies would provide 
victories over disease that cannot be imagined today.
    So America does risk missing a host of beneficial 
breakthroughs. America's scientists could be the first to 
create nanomaterials for manufacturing and design that are 
stronger, lighter, harder, self-repairing, and safer. Nanoscale 
devices could scrub automobile pollution out of the air as it 
is produced. Nanoparticles could cover armor to make America's 
soldiers almost invisible to enemies, and incredibly enough, 
tend to their wounds. Nanotechnology could grow steel stronger 
than what is made today with little or no waste to pollute the 
environment.
    And especially, there is an extraordinary opportunity to 
promote more jobs and an economic revolution. With much of 
nanotechnology now existing in a research surrounding, venture 
capitalists are already investing $1 billion in American 
nanotech interests this year alone. It is estimated that 
nanotechnology will become a trillion dollar industry over the 
next 10 years. As the field grows, the ranks of skilled workers 
needed to discover and apply its capabilities have to grow as 
well. In the nanotechnology revolution, areas of high 
unemployment could become magnets for domestic production, 
engineering, and research for nanotechnology applications, but 
only if the Government does not miss the boat.
    The National Nanotechnology Initiative is clearly a step in 
the right direction. Significant funds have already been 
committed to nanotechnology research and development, and what 
we need to make clear is that funding is not enough. There has 
to be careful planning to make sure that the money is used for 
sound science over the long term. That is the reason for the 
bipartisan legislation that Senator Allen and I have teamed up 
on today.
    I am going to put the rest of this statement that I have, 
and a lengthy one it is, into the record, and recognize my 
colleague. As I say, it has been a pleasure to team up with 
Senator Allen on a host of these technology questions. This is 
one that I think is going to be particularly exciting in States 
like Virginia and Oregon, where there are already pioneering 
efforts underway, and I want to again express my appreciation 
to my colleague.
    [The prepared statement of Senator Wyden follows:]

     Prepared Statement of Hon. Ron Wyden, U.S. Senator from Oregon

    Today the Subcommittee on Science, Technology and Space convenes 
the first-ever Senate hearing on nanotechnology. In coffee shops and 
senior centers this afternoon, Americans aren't exactly buzzing about 
this science of building electronic circuits and devices from single 
atoms and molecules. But there's no question that this field will 
dramatically change the way Americans live.
    My own judgment is the nanotechnology revolution has the potential 
to change America on a scale equal to, if not greater than, the 
computer revolution. As Chair of this Subcomittee, I am determined that 
the United States will not miss, but will mine the opportunities of 
nanotechnology. At present, efforts in the nanotechnology field are 
strewn across a half-dozen Federal agencies. I want America to marshal 
its various nanotechnology efforts into one driving force to remain the 
world's leader in this burgeoning field. And I believe Federal support 
is essential to achieving that goal.
    Legislation I am introducing today will provide a smart, 
accelerated, and organized approach to nanotechnology research, 
development, and education. In my view, there are three major steps 
America must take to ensure the highest success for its nanotechnology 
efforts.
    First, a National Nanotechnology Research Program should be 
established to superintend long-term fundamental nanoscience and 
engineering research. The program's goals will be to ensure America's 
leadership and economic competitiveness in nanotechnology, and to make 
sure ethical and social concerns are taken into account alongside the 
development of this discipline.
    Second, the Federal government should support nanoscience through a 
program of research grants, and also through the establishment of 
nanotechnology research centers. These centers would serve as key 
components of a national research infrastructure, bringing together 
experts from the various disciplines that must intersect for nanoscale 
projects to succeed. As these research efforts take shape, educational 
opportunities will be the key to their long-term success.
    In this hearing room, I have already laid out a challenge to triple 
the number of people graduating with math, science and technology 
degrees. Today, I commit to helping students who would enter the field 
of nanotechnology. This discipline requires multiple areas of 
expertise. Students with the drive and the talent to tackle physics, 
chemistry, and the material sciences simultaneously deserve all the 
support we can offer.
    Third, the government should create connections across its agencies 
to aid in the meshing of various nanotechnology efforts. These could 
include a national steering office, and a Presidential Nanotechnology 
Advisory Committee, modeled on the President's Information Technology 
Advisory Committee.
    I also believe that as these organizational support structures are 
put into place, rigorous evaluation must take place to ensure the 
maximum efficiency of our efforts. Personally, I would call for an 
annual review of America's nanotechnology efforts from the Presidential 
Advisory Committee, and a periodic review from the National Academy of 
Sciences. In addition to monitoring our own progress, the U.S. should 
keep abreast of the world's nanotechnology efforts through a series of 
benchmarking studies.
    If the Federal government fails to get behind nanotechnology now 
with organized, goal-oriented support, this nation runs the risk of 
falling behind others in the world who recognize the potential of this 
discipline. Nanotechnology is already making pants more stain-
resistant, making windows self-washing and making car parts stronger 
with tiny particles of clay. What America risks missing is the next 
generation of nanotechnology. In the next wave, nanoparticles and 
nanodevices will become the building blocks of our health care, 
agriculture, manufacturing, environmental cleanup, and even national 
security.
    America risks missing a revolution in electronics, where a device 
the size of a sugar cube could hold all of the information in the 
Library of Congress. Today's silicon-based technologies can only shrink 
so small. Eventually, nanotechnologies will grow devices from the 
molecular level up. Small though they may be, their capabilities and 
their impact will be enormous. Spacecraft could be the size of mere 
molecules.
    America risks missing a revolution in health care. In my home 
state, Oregon State University researchers are working on the 
microscale to create lapel-pin-sized biosensors that use the color-
changing cells of the Siamese fighting fish to provide instant visual 
warnings when a biotoxin is present. An antimicrobial dressing for 
battlefield wounds is already available today, containing silver 
nanocrystals that prevent infection and reduce inflammation. The health 
care possibilities for nanotechnology are limitless. Eventually, 
nanoscale particles will travel through human bodies to detect and cure 
disease. Chemotherapy could attack individual cancer cells and leave 
healthy cells intact. Tiny bulldozers could unclog blocked arteries. 
Human disease will be fought cell by cell, molecule by molecule--and 
nanotechnology will provide victories over disease that we can't even 
conceive today.
    America risks missing a host of beneficial breakthroughs. American 
scientists could be the first to create nanomaterials for manufacturing 
and design that are stronger, lighter, harder, self-repairing, and 
safer. Nanoscale devices could scrub automobile pollution out of the 
air as it is produced. Nanoparticles could cover armor to makes 
American soldiers almost invisible to enemies and even tend their 
wounds. Nanotechnology could grow steel stronger than what's made 
today, with little or no waste to pollute the environment.
    Moreover--and this is key--America risks missing an economic 
revolution based on nanotechnology. With much of nanotechnology 
existing in a research milieu, venture capitalists are already 
investing $1 billion in American nanotech interests this year alone. 
It's estimated that nanotechnology will become a trillion-dollar 
industry over the next ten years. As nanotechnology grows, the ranks of 
skilled workers needed to discover and apply its capabilities must grow 
too. In the nanotechnology revolution, areas of high unemployment could 
become magnets for domestic production, engineering and research for 
nanotechnology applications--but only if government doesn't miss the 
boat.
    Our country's National Nanotechnology Initiative is a step in the 
right direction. This nation has already committed substantial funds to 
nanotechnology research and development in the coming years. But 
funding is not enough. There must be careful planning to make sure that 
money is used for sound science over the long-term. That is the reason 
for the legislation I am issuing today. The strategic planning it 
prescribes will ensure that scientists get the support they need to 
realize nanotechnology's greatest potential.
    In 1944 the visionary President Franklin Delano Roosevelt requested 
a leading American scientist's opinion on advancing the United States' 
scientific efforts to benefit the world. Dr. Vannevar Bush offered his 
reply to President Harry S. Truman the next year, following FDR's 
death. In his report to the President, Dr. Bush wrote, ``The Government 
should accept new responsibilities for promoting the flow of new 
scientific knowledge and the development of scientific talent in our 
youth. These responsibilities are the proper concern of the Government, 
for they vitally affect our health, our jobs, and our national 
security. It is in keeping also with basic United States policy that 
the Government should foster the opening of new frontiers and this is 
the modern way to do it.''
    Those principles, so true nearly sixty years ago, are truer still 
today. I propose that the government now accept new responsibilities in 
promoting and developing nanotechnology. Our witnesses today will make 
it clear that nanotechnology will vitally affect our health, our jobs, 
and our national security--as well as our economy. I look forward to 
hearing from them on how this Congress might take up what I believe is 
a proper concern--and an essential one--indeed.

                STATEMENT OF HON. GEORGE ALLEN, 
                   U.S. SENATOR FROM VIRGINIA

    Senator Allen. Thank you, Mr. Chairman, and I want to thank 
you for calling today's hearing. I want to share your 
enthusiasm about today's prospect as well as many other 
matters. We worked as leaders in a bipartisan manner to try to 
get our colleagues in the Senate and, indeed, the whole Federal 
Government to address many important needs of our country, 
especially in the areas of science and space and technology. I 
look forward to listening to our panel of experts. I know that 
one, Dr. Swami, is from Virginia, and there is a great deal of 
promise here. I think it is exciting, because it is not just a 
matter of jobs, which is great, but it is truly improving our 
lives, our communications, our material sciences, and many 
other areas.
    We had a hearing in this Committee earlier about the 
importance of basic scientific research and whether or not 
Congress should consider doubling the budget for the National 
Science Foundation, and in the midst of that hearing, one of 
the more intriguing conversations was the discussion on 
nanotechnology, and those witnesses were saying, pay attention 
to that and, of course, you and I were, and in fact in 
preparing for this I looked back to a speech I gave in April of 
last year, and my view is, nanotechnology is quickly 
transforming every corner of our modern world and has already--
as you gave some of the examples, already transforming and 
improving the quality of our life.
    Whether it is electronic devices in computers to health 
care, pharmaceuticals, agriculture, energy, or national 
defense, nanoscience is really at the foundation and will be at 
the foundation of many of these revolutionary advances and 
discoveries in the decades to come. Some will be years to come, 
some decades to come, but it is certainly going to occupy a 
major portion of our technology economy. It is that promise, it 
is that potential that should impel us as Americans, in a land 
that has always historically valued and encouraged innovation 
and entrepreneurship, that we embrace and support this research 
and this work.
    Our Nation has been at the forefront of virtually every 
important and transformative technology since the Industrial 
Revolution, and we must continue to lead the world in the new 
frontier of nanoscience, and that is why, Mr. Chairman, I am so 
proud and enthusiastically joining with you in supporting and 
introducing the 21st Century Nanotechnology Research and 
Development Act. I think it is vitally important for the future 
of our country, for our competitive edge.
    Maybe some people will wonder what in the world is 
nanotechnology. We will get a definition of nanotechnology. It 
is typically defined by size, and the science of nanotechnology 
is really the ability to pick and place and manipulate atoms 
one one-hundred thousandth times smaller than the width of a 
human hair. So pull one of these out of your head.
    Senator Wyden. I do not have any left. I have given them to 
this cause.
    [Laughter.]
    Senator Allen. What a personal commitment.
    [Laughter.]
    Senator Allen. They are one one-hundredth times smaller 
than the width of a human hair. Of course, you would have to 
look at that under a microscope. You probably could not see it 
with the naked eye, but this is going to generate these 
materials and the fundamentally new and superior methods of 
science for us, and to improve our lives, so I agree with 
everything you said, Mr. Chairman, and I look forward to 
working with you and this Committee in making sure that the 
United States leads in this, as well as other areas. If we are 
going to lead, we have to be well-coordinated. We need a game 
plan.
    We do not just--obviously there is more funding in our act, 
and it is consistent with President Bush's initiatives as well, 
but we do want to have measurement, also recognizing in this 
that many of these developments and improvements in the 
marketing of these advancements may be decades down the road, 
but this is what I think the taxpayers of the United States 
Government would like us to do. And we look forward to 
listening to this esteemed panel as to how we can make sure 
that the Federal Government, working with the private sector, 
working with colleges and universities and the scientists 
therein, to make sure we have the right fertile ground 
conditions present for the collaboration that is needed for us 
to move forward in this area.
    Again, I thank you for this hearing, and thank these fine 
gentlemen for sharing their views with us.
    Senator Wyden. I thank my colleague for an excellent 
statement, we have got a big job ahead of us in terms of 
educating the Senate on these issues, and I look forward to 
tackling them with you.
    So we will introduce our panelists. We will begin with Hon. 
Richard Russell, Associate Director for Technology, Office of 
Science and Technology Policy; and then we will have Mr. Mark 
Modzelewski, executive director of the NanoBusiness Alliance; 
and then Dr. Samuel Stupp, Board of Trustees Professor in 
materials science, chemistry, and engineering at Northwestern; 
Dr. Stan Williams, HP fellow and director of quantum science 
research at Hewlett-Packard; and Dr. Nathan Swami, Director of 
the Initiative for Nanotechnology, Commonwealth of Virginia, 
and the microelectronics program director at the University of 
Virginia.
    Gentlemen, we welcome all of you. We are going to put your 
prepared statements into the record in their entirety, and I 
know that at these hearings there is almost a physical 
compulsion to just read, word for word, everything that is down 
in your statement, and I think in the interest of more having a 
free-flowing discussion, if I can talk you into summarizing 
some of your big concerns so that we can have a discussion 
about some of the issues, we will make your prepared statement 
a part of the hearing record in its entirety. Why don't you 
take, each of you, 5 minutes or so, and we will proceed with 
you.
    Mr. Russell, welcome.

        STATEMENT OF HON. RICHARD M. RUSSELL, ASSOCIATE 
        DIRECTOR FOR TECHNOLOGY, OFFICE OF SCIENCE AND 
                       TECHNOLOGY POLICY

    Mr. Russell. Thank you, Mr. Chairman and Senator Allen, for 
this opportunity to testify about the National Nanotechnology 
Initiative and the importance of nanotechnology research. I 
agree with you wholeheartedly that this is a tremendously 
important area and a tremendously exciting area for us to be 
looking at. Properties that govern physics of materials and 
artifacts at the nanoscale can differ significantly from those 
at more conventional scales. As a result, nanotechnology 
represents more than simply another step in the progression of 
technology miniaturization.
    Looking to the future, commercialization of nanotechnology 
is expected to lead to new products and in some cases the 
creation of new markets and applications as diverse as 
materials and manufacturing electronics, biotechnology, 
information technology, and national security. New discoveries 
in nanotechnology are being made on a regular basis.
    Just last week, and I am sure we will hear from the other 
panelists, Hewlett-Packard announced a breakthrough in 
molecular electronics through a joint Federal/industry-funded 
project at UCLA. The team pioneered a method to fabricate 
closely spaced nanoscale wires. This novel device represents a 
major breakthrough in memory storage density.
    Another example of great promise is federally funded BioCOM 
chip under development at UC Berkeley. This device allows for 
real-time blood screening for prostate cancer. Though still in 
the prototype stage, this device and others like it promise to 
improve significantly medical diagnostics.
    Nanotechnology is still at a very early stage of 
development. The role of Federal R&D funding in this area is to 
provide the fundamental research underpinnings on which future 
commercial nanoscale technologies could be based. Numerous 
challenges must be addressed before the envisioned promise of 
these technologies can be reached. These challenges include 
fundamental research to improve our understanding in several 
fields of science and engineering as well as synthesis, 
analysis and manufacturing of nanoscale-based products.
    Because of its significant potential impacts on the 
physical sciences, life sciences, and engineering and more 
broadly on the United States' economy and society, 
nanotechnology is viewed by the Bush administration as an 
important component of the Federal research and development 
portfolio. The President requested a 17-percent increase for 
nanotechnology research in fiscal year 2003.
    The administration's ongoing support for nanotechnology was 
also articulated through a joint guidance memorandum issued to 
heads of Federal science and technology agencies from OSTP and 
OMB, which specifically identified nanotechnology as 1 of 6 
interagency R&D priorities for 2004. Federal funding for 
nanotechnology is focused through NNI. NNI is an interagency 
program that encompasses relevant nanotechnology R&D-
participating Federal agencies.
    The research agenda for the 9 agencies currently 
participating in NNI is coordinated by the Nanoscale Science 
and Engineering Technology Subcommittee, or NSET, which is part 
of the National Science and Technology Council. The National 
Nanotechnology Coordinating Office assists NSET-participating 
agencies in coordinating their nanotechnology funding. It also 
serves as the secretariat for NNI. The coordinating office 
carries out the objectives established by NSET members, 
coordinates and publishes information for workshops sponsored 
by NNI, and prepares annual reports on the activities of NNI. 
The coordinating office also contracts for program reviews to 
provide feedback on NNI.
    NNI funding provides support for a range of activities 
which include basic research, grant challenges, research 
infrastructure and centers, and networks of excellence, which 
are centralized facilities intended to provide sites for 
cooperative research amongst groups of researchers from 
multiple institutions. NNI funding is also used to address 
nontechnical research problems in the broader context, 
including societal implications and workforce and training 
issues that will likely emerge in relation to nanotechnology.
    The National Research Council recently completed a report 
on NNI. The report highlighted the strong leadership of NNI, 
praising the degree of interagency collaboration and the early 
successes of the research programs. The report also provided a 
number of recommendations to further strengthen NNI.
    OSTP is working through the coordinating office and the 
NSTC to improve the structure of NNI, and to create a strong 
framework for implementing NNI's technical objectives. NNI's 
early program success and positive independent review by the 
NRC provides a sound justification for continued support in 
this important research field. With a history of only 2 years, 
the ultimate impact of NNI lies in the future, and will only be 
realized through continued Federal R&D funding.
    Mr. Chairman, Senator Allen, the administration supports 
nanotechnology research, the NNI program, and I look forward to 
working with the Committee on this important research.
    [The prepared statement of Mr. Russell follows:]

 Prepared Statement of Hon. Richard M. Russell, Associate Director for 
          Technology, Office of Science and Technology Policy

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to appear before you today to speak about the National 
Nanotechnology Initiative (NNI).
    Nanotechnology is research and development at the nanoscale--a 
scale on the order of 10-\9\ meters, or a thousandth of a 
millionth of a meter. To provide some perspective, this is 
approximately 1/100,000 the diameter of the average human hair. 
Research in nanotechnology is contributing to a fundamentally new 
understanding of the unique properties that occur on the nanoscale. The 
properties and governing physics of materials and artifacts at the 
nanoscale can differ significantly from those at more conventional 
scales. As a result, nanotechnology represents more than simply another 
step in the progression of technology miniaturization.
    Looking to the future, commercialization of nanotechnology is 
expected to lead to new products, and in some cases the creation of new 
markets, in applications as diverse as materials and manufacturing, 
electronics, medicine and healthcare, environment, energy, chemicals, 
biotechnology, agriculture, information technology, transportation, 
national security, and others. Nanotechnology will likely have a broad 
and fundamental impact on many sectors of the economy. Some have even 
suggested that this impact will surpass the combined impact of both 
biotech and information technology.
    New discoveries are being made on a regular basis. Just last week 
(9/10/02), researchers at Hewlett Packard announced a nanotechnology 
breakthrough in molecular electronics. Through a joint federal/industry 
funded project at the University of California at Los Angeles, the team 
pioneered a method to fabricate nanoscale wires separated by a thousand 
molecules. This novel device represents a major breakthrough in memory 
storage density that heralds a new era in microelectronic 
miniaturization. It serves as a prime example of the promise--and the 
challenge--posed by nanotechnology. This includes the promise of new 
materials, new devices, and new processes that will enable continued 
growth in our high tech industries. But it also highlights the 
challenge of understanding nanoscale phenomena, reliably producing 
nanoscale structures and systems, and converting this new knowledge 
into new technologies that contribute to our economic prosperity.
    Another example of great promise is the federally funded BioCOM 
chip under development at the University of California at Berkeley. 
This device combines elements of both the nano- and the micro-scale 
into a lab-on-a-chip package that provides a new tool for real-time 
sampling of blood for Prostate Specific Antigen (PSA) screening. Though 
still in the prototype stage, this device, and others like it, promise 
to revolutionize medicine. These developments are leading to new 
sensors that will be utilized in medicine as well as homeland security, 
broadly contributing to healthcare, economic strength, and national 
security.
    Nanotechnology is still at a very early stage of development. The 
role of federal R&D funding in this area is to provide the fundamental 
research underpinnings upon which future commercial nanoscale 
technologies will be based. Numerous challenges must be addressed 
before the envisioned promise of these technologies can be reached. 
These challenges include fundamental research to improve our basic 
understanding in several fields of science and engineering, as well as 
novel approaches toward synthesis, analysis and manufacturing of 
nanotechnology-based products. Because of the complexity, cost, and 
high risk associated with these issues, the private sector is often 
unable to assure itself of short-to-medium term returns on R&D 
investments. Consequently, industry is not likely to undertake the 
basic research investments necessary to overcome the technical barriers 
that currently face the nanotechnology field. The NNI program is 
structured to overcome these barriers so that America's industries will 
prosper from our investment in nanotechnology.
    The President's FY 2003 budget represents a record request for 
federally funded R&D ($112 billion), an increase of eight percent over 
the previous investment. Because of its significant potential impact on 
the physical sciences, life sciences, and engineering--and more broadly 
on the U.S. economy and society--nanotechnology is viewed by the Bush 
Administration as an important component of the federal research and 
development (R&D) portfolio. Funding for nanotechnology was increased 
seventeen percent in the FY 2003 request ($679 million). In the 
previous fiscal year, President Bush signed into law a thirty seven 
percent increase in the NNI budget (from $464 million to $579 million).
    The Administration's ongoing support for nanotechnology was 
articulated through a joint guidance memorandum issued to heads of 
Federal science and technology agencies from John H. Marburger III, 
Director of OSTP, and Mitchell Daniels, Director of the Office of 
Management and Budget, which specifically identified nanotechnology as 
one of six interagency R&D priorities for FY 2004.
    Federal funding for nanotechnology is focused through the National 
Nanotechnology Initiative (NNI). The NNI is an interagency program that 
encompasses relevant nanotechnology R&D among the participating Federal 
agencies. The research agenda for the nine agencies currently 
participating in the NNI is coordinated by the Nanoscale Science and 
Engineering Technology (NSET) Subcommittee of the National Science and 
Technology Council (NSTC). The NSET is staffed by representatives of 
the participating agencies, OSTP, OMB, as well as other Federal 
agencies that lack relevant R&D programs but which have an interest in 
these technologies. NSET members meet on a monthly basis to measure 
progress, set priorities, organize workshops, and plan for the coming 
year. The National Nanotechnology Coordination Office (NNCO) assists 
NSET-participating agencies in coordinating their nanotechnology 
funding. It also serves as the secretariat for the NNI. The NNCO 
carries out the objectives established by the NSET members, coordinates 
and publishes information from workshops sponsored by the NNI, and 
prepares annual reports on the activities of the NNI. The NNCO also 
contracts for program reviews to provide feedback on the NNI.
    The federal agencies currently performing nanotechnology research 
coordinated through the NNI are:

   Department of Defense;
   Department of Energy;
   Department of Justice;
   Department of Transportation;
   Environmental Protection Agency;
   National Aeronautics and Space Administration;
   National Institutes of Health;
   National Institute of Standards and Technology; and
   National Science Foundation.

    This funding provides support for a range of activities, which 
include: basic research, focused efforts directed at answering specific 
sets of questions of high significance--so-called ``grand challenges,'' 
research infrastructure (instrumentation, equipment, facilities), and 
centers and networks of excellence, which are larger centralized 
facilities intended to provide sites for cooperative and collaborative 
efforts among distributed networks and groups of researchers at 
multiple affiliated institutions. Depending on the agency, funding is 
being used to support mission-oriented research within agencies, 
research at national laboratories, or to support research at academic 
institutions. A small portion of the funding is also dedicated to 
addressing non-technical research problems in a broader context, 
including societal implications, and workforce and training issues that 
will likely emerge in relation to nanotechnology.
    The National Research Council (NRC) conducted an evaluation study 
of the NNI from mid-2001 to mid-2002. Earlier this summer, the NRC 
released the results of this study in a report entitled Small Wonders, 
Endless Frontiers: A Review of the National Nanotechnology Initiative. 
The report highlighted the strong leadership of the NNI, praised the 
degree of interagency collaboration, and lauded the early successes of 
the research programs. The report also provided a number of 
recommendations to further strengthen the NNI. OSTP is working closely 
with the NNCO, as well as through its representation on the NSTC's 
Nanoscale Science and Engineering Technology Subcommittee, to improve 
the structure of the NNI, and to create a stronger framework for 
implementing the NNI's technical objectives. One recommendation of the 
NRC was to create an independent Nanoscience and Nanotechnology 
Advisory Board (NNAB) to provide input to the NSET members. OSTP 
believes that this function can be met through the President's Council 
of Advisors and Science and Technology (PCAST). As you know, PCAST 
members represent a distinguished cross section of industry and 
academia and have always functioned as an external advisory board on 
science and technology issues of relevance to the nation. They are 
clearly qualified to carry out such functions for nanotechnology.
    The NNI was initiated in FY 2001. The early program successes and 
positive independent review by the NRC provide a sound justification 
for continued support in this important research field. With a history 
of only two years, the ultimate impact of the NNI lies in the future 
and will only be realized through continued federal R&D funding.
    Mr. Chairman and Members of the Committee, I hope that this 
overview has conveyed this Administration's commitment to 
nanotechnology and the NNI program. OSTP is actively working with the 
NNCO to implement many of the NRC recommendations. We believe that our 
efforts will improve the program substantially and will enhance our 
investment in nanotechnology.

    Senator Wyden. Thank you. Mr. Modzelewski.

     STATEMENT OF F. MARK MODZELEWSKI, EXECUTIVE DIRECTOR, 
                     NanoBusiness ALLIANCE

    Mr. Modzelewski. Mr. Chairman, Senator Allen, I thank you 
for allowing me, on behalf of the NanoBusiness Alliance, the 
member organizations, the opportunity to testify before you on 
the topic of nanotechnology as a transition from a science into 
a business.
    Nanotechnology is rapidly becoming an industrial revolution 
for the 21st Century. However, today's nanotech industry might 
best be compared to the computer industry of the 1960s before 
the integrated circuit, or the biotech industry of the 1970s. 
While many nanotechnology sectors are in the nascent stages, 
others are already delivering products to market. A variety of 
nanomaterials, for instance, including enhanced polymers, 
coatings, and fillers, are already available, producing 
revenues and profits, and advanced nanotechnology medical and 
electronics applications will be imminently impacting our 
lives.
    As production of nanoproducts becomes easier, faster, and 
cheaper, every market sector will begin to feel the impact. We 
at the NanoBusiness Alliance estimate that the global market 
for nanotechnology-related products and services could reach 
more than $225 billion by 2005. The NSF conservatively predicts 
a $1 trillion global market for nanotechnology in a little over 
a decade.
    Since its inception, the National Nanotechnology Initiative 
has proven to be an incredible instance of Government outpacing 
the imagination of the private sector. Mike Roco, Jim Murday, 
and the other individuals who created and continue to advance 
the NNI should be highly commended. That is why the 
NanoBusiness Alliance and its members would like to 
enthusiastically endorse the 21st Century Nanotechnology 
Research & Development Act that is being introduced today by 
the Chairman and Senator Allen. This will be a timely and vital 
bill that builds on the fine work of the NNI and will assist 
America's long-term scientific and economic competitiveness in 
this field.
    Currently, nanotechnology is becoming nanobusiness faster 
than anyone could have ever imagined. Just 5 years ago, only a 
few corporate visionaries, IBM, HP, Texas Instruments among 
them, were undertaking any research and development in the 
nanosciences. Today, you would be hard pressed to find a member 
of the Fortune 500 that does manufacturing without some 
nanotechnology effort underway. GM, GE, Siemens, Intel, 
Hitachi, Dow have all launched significant nanotechnology 
initiatives.
    Unlike the dot com era, nanotech startups are built on 
science, and they are out there. They have real technology and 
real assets, and more often than not they are founded by 
researchers from universities, Government and corporate 
laboratories. More than half of the world's nanotech startups 
are in the U.S., and while it is difficult to pin an exact 
number on how many there are, it is safe to say at least 1,000 
are currently in operation, up from approximately 100 just 3 
years ago.
    Venture capitalists, institutional investors, and wealthy 
angels have also begun to see the potential of nanotechnology. 
Chastened by the lessons of the dot com disaster, they are 
nevertheless aggressively seeking investment opportunities. As 
you mentioned, Mr. Chairman, over $1 billion will be invested 
this year in nanotechnology, when you look at corporate 
venturing efforts, venture capital firms, and other wealthy 
angels.
    Ultimately, regional development efforts, the creation of 
technology clusters, Nanotech Valleys, if you will, will fuel 
the explosive growth of the nanotechnology industry. Localized 
development efforts are already underway from Virginia, to 
Texas, to California. The alliance ourselves launched a 
nanotechnology hubs initiative a few months ago to jump start 
regional technology cluster development, and frankly, we have 
been overwhelmed.
    We launched efforts in 6 regions as well as affiliates in 
the EU and Canada, and have been inundated with calls from over 
35 States and 11 countries to help develop this capacity. These 
States and regions are already looking to nanotechnology to 
ignite economic development.
    As far as foreign competition goes, nanotechnology is truly 
emerging as a global technology, and unlike many past waves of 
technology development the United States is not dominating; in 
several areas of nanotech the U.S. is being outpaced by foreign 
competition. Japan, EU, Russia, Korea, and China are all 
significant players in the field of nanotechnology. A recent 
report from the Journal of Japanese Trade and Industry notes 
the Japanese Government views the successful development of 
nanotechnology as the, quote, ``key to restoration of the 
Japanese economy,'' and they are not alone. Funding is growing 
at unprecedented rates across the globe over the past 3 years.
    Not everything is rosy for the future of nanobusiness. 
While the NNI and overall Government nanotech efforts have been 
a great source of coordination and basic research funding, 
these nanotech grants remain among the most competitive in the 
Government. In addition, many nanotechnology companies have 
emerged from the basic research cycle and are addressing issues 
such as scaling and integration. Few Government programs 
address this time frame. Add to that a venture capital sector 
that is unwilling, too, and you have companies falling into 
what investors term, the Valley of Death.
    Another great fear is uneasiness over lack of research in 
the nanotech health and safety issues, and more than one CEO 
has raised this as a concern. Others range from the U.S. Patent 
Office and its inability to understand the multidisciplinary 
nature of nanotechnology. In addition, the current state of 
technology transfer is lacking, by any measure. The technology 
transfer process from Government, academic labs, and the 
marketplace is impossible at times and arduous at best. And 
lastly the education as well as workforce training and 
development are beginning to become real issues among the 
nanotechnology community.
    In summation, we certainly, as the alliance, greatly 
support this effort to continue to drill down on nanotechnology 
and to develop Government programs for it. While maintaining 
the development of basic research as a priority, we must expand 
our search to cultivate nanotechnology as an industry, and 
truly usher in a new Industrial Revolution.
    I thank you.
    [The prepared statement of Mr. Modzelewski follows:]

    Prepared Statement of F. Mark Modzelewski, Executive Director, 
                         NanoBusiness Alliance

Introduction
    Mr. Chairman, Senator Allen, Members of the Subcommittee, I thank 
you for allowing me--on behalf of the NanoBusiness Alliance and our 
member organizations--the opportunity to testify before you on the 
topic on nanotechnology and its transition from a science into a 
business.
    Nanotechnology has really been here since the dawn of creation. The 
difference now is that man is beginning to tap into it. Nanotechnology 
is the ability to do things--measure, see, predict and manufacture--on 
the scale of atoms and molecules. Traditionally, the nanotechnology 
realm is defined as being between 0.1 and 100 nanometers, a nanometer 
being one thousandth of a micron (micrometer), which is, in turn, one 
thousandth of a millimeter. Working at the scale of atoms and molecules 
is not merely about miniaturizing items. Working at this scale allows 
for the actual opening of nature's toolbox. Working at this scale 
allows man to act as nature does in creating things.
    Currently, nanotechnology is transitioning from a science into a 
business. It is rapidly becoming the Industrial Revolution of the 21st 
century. The importance of nanotechnology cannot be overstated. It will 
affect almost every aspect of our lives, from the way we do computing, 
to the medicines we use, the energy supplies we require, the foods we 
eat, the cars we drive, and the clothes we wear. More importantly, for 
every area where we can fathom an impact from nanotechnology, there 
will be others no one has thought of--new capabilities, new products, 
and new markets.
    We are at the earliest stage of this ``nano-revolution.'' The 
nanotech industry might be compared to the computer industry of the 
1960s, before the development of the integrated circuit, or the biotech 
industry of the 1970s. But while many nanotechnology sectors are in 
their nascent stages, others are already delivering products to the 
market. Forward-thinking corporations and entrepreneurs are reaping 
revenues and profits from a variety of nanomaterials, including 
enhanced polymers, coatings, and fillers. And advanced nanotech medical 
applications, such as disease detection and drug delivery, are in human 
trials and will be greatly impacting lives within a few years.
    As production of nano-products becomes easier, faster and cheaper, 
every market sector will begin to feel their impact. We at the 
NanoBusiness Alliance estimate that the global market for 
nanotechnology-related products and services could reach more than $225 
billion in 2005. The U.S. National Science Foundation conservatively 
predicts a $1 trillion global market for nanotechnology in little over 
a decade.
    (It should be noted that the Microtechnology Innovation Team at 
Deutsche Bank AG. announced last week the results of a comprehensive 
market analysis on nanotechnology (full study available Q3/Q4 2002). 
They estimate that the current market size of nanotechnology products 
is greater than $116 billion, excluding electronics, and $300 billion 
total. According to the report, the nanomaterials market size is 
expected to reach $29.4B per year by 2006. While these significant 
numbers are appreciated, they do not align with other research in the 
field and will need to be explored upon the full release of the 
report.)

Nanotechnology Development
    Nanotechnology is an enabling technology. It allows us to do new 
things. Like other enabling technologies, such as the internal 
combustion engine, the transistor or the Internet, its impact on 
society will be broad and often unanticipated. And nanotech is indeed 
changing many fields of business in truly revolutionary ways.
Life Sciences and Medicine
    In life sciences and medicine, nanotechnology means we are 
beginning to be able to measure and make things on the level at which 
organisms in the living world, from bacteria to plants to ourselves, do 
most of their work. Being able to work at this scale doesn't just 
empower us in our control of the biological world, but also allows us 
to start borrowing from that world, leveraging the extraordinary 
inventions that nature has produced through billions of years of 
evolution. Nanotechnology will ultimately help to extend the life span, 
improve its quality, and enhance human physical capabilities. In the 
near future, about half of all production of pharmaceuticals will be 
dependent on nanotechnology--affecting over $180 billion in revenues 
per year in 10 to15 years.

Disciplines in LifeSciences and Medicine that are seeing 
        nanotechnology's impact are:
   Nanoparticle Tagging: Nanoparticles small enough to behave 
        as quantum dots can be made to emit light at varying 
        frequencies. If you can get particles that emit at different 
        frequencies to attach to different molecules you can literally 
        put a sign of identification on them. This development will 
        allow for the tagging of disease, infection and bacteria, 
        allowing for detection at the earliest moment of a disorder's 
        onset.

   Nanostructured Materials: Nanostructured materials, coupled 
        with liquid crystals and chemical receptors, offer the 
        possibility of cheap, portable biodetectors that might, for 
        instance, be worn as a badge. Such a badge could change color 
        in the presence of a variety of chemicals and would have 
        applications in hazardous environments. The U.S. armed forces 
        are already in advanced research stage for this discovery to be 
        part of the military uniform of the future.

   Drug Delivery: Drug delivery is one of the areas that is 
        anticipated to have applications hitting the market very soon; 
        clinical trials have already begun. Almost all current 
        medications are delivered to the body as a whole, which is fine 
        as long as they only become active in the areas you want them 
        to. But this is not usually the case. When the treatment is 
        designed to kill cells, as in the case of cancer, the side 
        effects are enormous. Nanotech also promises to allow for 
        substance ``extraction'' potentially removing poisons or toxins 
        from the body or allowing for organic coatings of these 
        substances so they pass harmlessly through the body.

   Cellular Manipulation: Cells are extraordinarily complex 
        systems about which we are still quite ignorant. For this 
        reason, it will be a long time before we see nanorobots doing 
        complex work in our bodies. However, as we learn more we are 
        likely to find ways to manipulate and coerce cellular systems 
        and will achieve a lot that way--persuading lost nerve tissue 
        to regrow.

Agriculture
    Nanotechnology will ultimately provide the ultimate solutions for 
many hurdles presented by biotechnology and agri-sciences. The most 
likely area in which nanotechnology will initially enter the 
agricultural industry is the world of analysis and detection, such as 
bio-sensors to detect the quality of and the health of agricultural 
products and livestock. Also, innovative waste treatment options and 
composite materials, as part of the manufacturing and processing of 
agricultural products, are already entering the market.

   Food Safety: Advanced nano-sensors that can detect surface 
        and airborne pathogens are already leaving the lab, yet work to 
        develop these products for the agriculture sector remain 
        limited. Should pricing continue to fall and enhanced 
        development be undertaken, the extent of nano-sensor usage can 
        go right to the consumer level with the packaging of 
        agriculture products such as meat actually examining and 
        denoting quality and safety.

   Animal Health: Work on unique drug delivery, protease 
        inhibitors, cell tagging and treatment are already hitting the 
        trail phases. Targeted drug delivery for instance is one of the 
        areas that are anticipated to have applications hitting the 
        market very soon. With protease inhibitors, viruses, prions and 
        diseases such as BSE (Mad Cow Disease) and Brucellosis.

   GMO Enhancements: Nanoparticles small enough to behave as 
        quantum dots can be made to emit light at varying frequencies. 
        If you can get particles that emit at different frequencies to 
        attach to different molecules you can literally put a sign of 
        identification on them. This development will allow for the 
        tagging of molecules in the GMO development process. This 
        development can also be used to tag disease, infection and 
        bacteria, allowing for detection at the earliest moment of a 
        disorder's onset. Also the tagging can be a part of the 
        treatment as cells that are tagged can be engineered or 
        attacked separately from non-tagged cells--allowing for 
        pinpoint eradication.

   Nano-filtration: NF uses partially permeable membranes to 
        preferentially separate different fluids or ions, and will 
        remove particles from approximately 0.0005 to 0.005 microns in 
        size. NF membranes are usually used to reject high percentages 
        of multivalent ions and divalent cations. while allowing 
        monovalent ions to pass. Removal includes sugars, dyes, 
        surfactants, minerals, divalent salts, bacteria, proteins, 
        particles, dyes, and other constituents that have a molecular 
        weight greater than 1000 daltons. Waste treatment efforts are 
        already in development.

   BioComposities: Nano-bio composites are in development that 
        can serve as composite material for manufacturing that is 
        lighter, stronger, yet completely bio-degradable. Uses include 
        body panels, parts, organic fibers and many other areas.

Materials Science
    In materials, things start to behave differently at the nanoscale. 
The bulk materials that we have traditionally dealt with are 
uncontrolled and disordered at small scales. The strongest alloys are 
still made of crystals the size and shape of which we control only 
crudely. By comparison, a tiny, hollow tube of carbon atoms, called a 
carbon nanotube, can be perfectly formed, is remarkably strong, and has 
some interesting and useful electrical and thermal properties.
    When particles get small enough (and qualify as nanoparticles), 
their mechanical properties change, and the way light and other 
electromagnetic radiation is affected by them changes (visible light 
wavelengths are on the order of a few hundred nanometers). Using 
nanoparticles in composite materials can enhance their strength and/or 
reduce weight, increase chemical and heat resistance and change the 
interaction with light and other radiation. While some such composites 
have been made for decades, the ability to make nanoparticles out of a 
wider variety of materials is opening up a world of new composites. For 
example, in 10-15 years, projections indicate that such nanotechnology-
based lighting advances (utilizing nano-phosphorus among other 
materials) have the potential to reduce worldwide consumption of energy 
by more than 10 percent, reflecting a savings of $100 billion dollars 
per year and a corresponding reduction of 200 million tons of carbon 
emissions.
    It has been estimated that nanostructured materials and processes 
can be expected to have a market impact of over $340 billion within a 
decade (Hitachi Research Institute, 2001). Like so many aspects of 
nanotechnology, this is a difficult thing to estimate because of 
potential new applications--if you can make a material ten times as 
strong and durable as steel for a lesser mass, what new products will 
people dream up?
    The nanometer scale is expected to become a highly efficient length 
scale for manufacturing. Materials with high performance, unique 
properties and functions will be produced that traditional chemistry 
could not create.

Disciplines in Material Sciences that are seeing nanotechnology's 
        impact are:
   Nanoparticulate Fillers: Alternatively, composite materials 
        can use nanoparticulate fillers. Composite materials already 
        enjoy an enormous market, but making the filling material 
        nanophase (i.e. consisting of nanoscale particles) changes its 
        properties. As particles get smaller, the material's properties 
        change--metals get harder, ceramics get softer, and some 
        mixtures, such as alloys, may get harder up to a point, then 
        softer again.

   Nanoparticles for Many Applications: Recently, clay 
        nanoparticles have made their way into composites in cars and 
        packaging materials. (Widespread use of nanocomposites in cars 
        could lead to an enormous decrease in fuel consumption: savings 
        of over 1.5 billion liters of gasoline over the lifespan of one 
        year's vehicle production, thereby reducing carbon dioxide 
        emissions by more than 5 billion kilograms). You've probably 
        heard of sunscreens using nanoparticulate zinc oxide. 
        Nanoparticles are also being used as abrasives, and in paints, 
        in new coatings for eyeglasses (making them scratchproof and 
        unbreakable), for tiles, and in electrochromic coatings for 
        windscreens, or windows. Anti-graffiti coatings for walls have 
        been made, as have improved ski waxes and ceramic coatings for 
        solar cells to add strength. Glues containing nanoparticles 
        have optical properties that give rise to uses in 
        optoelectronics. Casings for electronic devices, such as 
        computers, containing nanoparticles, offer improved shielding 
        against electromagnetic interference. That famous spin-off of 
        the space age, Teflon, looks soon to be trumped for 
        slipperiness thanks to nanoparticle composites.

   Textiles: Another huge industry that will be impacted by 
        nanotechnology is the textiles industry. Companies are working 
        on ``smart'' fabrics that can change their physical properties 
        according to surrounding conditions, or even monitor vital 
        signs. The incorporation of nanoparticles and capsules in 
        clothing offers some promise and nanotubes would make extremely 
        light and durable materials. Fabrics infused with nanoparticles 
        are already being marketed that are highly resistant to water 
        and stains and wrinkling.

Nanoparticle Catalysts
    Many industrial processes will be affected by nanotechnology. One 
major early impact will come from our improved capabilities in making 
nanoparticles, the reason being that nanoparticles make better 
catalysts. A catalyst (a substance that initiates or enhances a 
reaction without being consumed itself) does its work at the point 
where it contacts the reactants, i.e. its surface. Since volume changes 
as the cube of the linear dimension, but surface area changes only as 
the square, when you make a particle smaller in diameter (the linear 
dimension), the volume, and thus mass, decreases faster than the 
surface area. Thus a given mass of catalyst presents more surface area 
if it consists of smaller particles.
    Equally, a given catalytic surface area can be fitted into a 
smaller space. The use of catalysts in industry is widespread so there 
should be a large market here for nanoparticle manufacturers. It should 
be noted, though, that nanostructured catalysts have already been used 
in industry for decades--zeolites, catalytic minerals that occur 
naturally or are synthesized, have a porous structure that is often 
characterized on the nanoscale.
    Catalysts are also of major importance in cleaning up the 
environment, allowing us to break down harmful substances into less 
harmful ones. Improved catalysts will make such processes more 
economical. Petroleum and chemical processing companies are using 
nanostructured catalysts to remove pollutants, creating a $30 billion 
industry in 1999 with the potential of $100 billion per year by 2015.
    Improved catalysts offer a nice example of how taking an existing 
technology and making it better can open up whole new markets. 
Nanostructured catalysts look likely to be a critical component in 
finally making fuel cells a reality, which could transform our power 
generation and distribution industry (for example, our laptops and cell 
phones would run for days on a single charge).

Disciplines in Catalysts sector that are seeing nanotechnology's impact 
        are:
   Fuel Cells: The development of fuel cells will probably be 
        impacted by nanotechnology in other ways too, certainly by 
        structuring components in them on a nanoscale but also in terms 
        of storing the fuel, where the nanotube, yet again, shows 
        promise for storing hydrogen for use in fuel cells. A relative 
        of the nanotube, the nanohorn, has been touted as ready to hit 
        the market in two to four years in a methane-based fuel cell.

   Solar Cells: Nanotechnology has been cited as a way to 
        improve the efficiency of solar cells. However, typical 
        commercial cells have efficiencies of about 15 percent, with 
        over 30 percent having been achieved, which is already much 
        better than photosynthesis, at about 1 percent. The cost of 
        solar cells is currently the biggest barrier to 
        commercialization.

   Light Sources: In the world of light transmission, organic 
        LEDs are looking like a promising way of making cheaper and 
        longer-lasting light sources, reducing power consumption in the 
        process. By contrast, at least one group of researchers has 
        created a bulb driven by nanotubes. Tiny electron emitters, 
        called field emission devices, including ones based on 
        nanotubes, hold promise for use in flat panel displays.

   Pharmaceutical Processes: The pharmaceuticals industry will 
        probably experience a benefit not only from advances in 
        catalysis, but also from the new, cheaper and smaller 
        bioanalysis tools. One estimate claims that nearly half of all 
        pharmaceutical production will be dependent on nanotechnology 
        within 15 years--a market of some $180 billion per year (E. 
        Cooper, Elan/Nanosystems, 2001).

   Waste Treatment: Photocatalysis will play in this field in 
        the future. There are efforts underway to sensitize TiO2 
        to visible light; this could open the door for this technology 
        in large-scale waste treatment, because visible light is free 
        and plentiful, especially as compared to UV-light.

Electronics and Information Technology
    The impact of the Information Technology (IT) Revolution on our 
world has far from run its course and will surely outstrip the impact 
of the Industrial Revolution. Some might claim it has done so already. 
Key to this is decades of increasing computer power in a smaller space 
at a lower cost.
    In electronics, the benefit of working on the nanoscale stems 
largely from being able to make things smaller. The value comes from 
the fact that the semiconductor industry, which we have come to expect 
to provide ever smaller circuits and ever more powerful computers, 
relies on a technology that is fundamentally limited by the wavelength 
of light (or other forms of electromagnetic radiation, such as X-rays). 
The semiconductor industry sees itself plunging towards a fundamental 
size barrier using existing technologies. The ability to work at levels 
below these wavelengths, with nanotubes or other molecular 
configurations, offers us a sledgehammer to break through this barrier. 
Ultimately, circuit elements could consist of single molecules. MEMS 
are generally constructed using the same photolithographic techniques 
as silicon chips and have been made with elements that perform the 
functions of most fundamental macroscale device elements--levers, 
sensors, pumps, rotors, etc. Nanoscale structures such as quantum dots 
also offer a path to making a revolutionary new type of computer, the 
quantum computer, with its promise of mind-boggling computing power, if 
it can be converted from theory to practice. Lasers constitute an area 
that is likely to be commercially affected by nanotechnology in the 
near future. Quantum dots and nanoporous silicon both offer the 
potential of producing tunable lasers--ones where we can choose the 
wavelength of the emitted light.
    You may have heard of Moore's law, which dictates that the number 
of transistors in an integrated circuit doubles every 12 to 24 months. 
This has held true for about 40 years now, but the current lithographic 
technology has physical limits when it comes to making things smaller, 
and the semiconductor industry, which often refers to the collection of 
these as the ``red brick wall'', thinks that the wall will be hit in 
around fifteen years. At that point a new technology will have to take 
over, and nanotechnology offers a variety of potentially viable 
options.

Disciplines in Electronics and Information Technology that are seeing 
        nanotechnology's impact are:
   Carbon Nanotubes in Nanoelectronics: Carbon nanotubes hold 
        promise as basic components for nanoelectronics--they can be 
        conductors, semiconductors and insulators. IBM recently made 
        the most basic logic element, a NOT gate, out of a single 
        nanotube, and researchers in Holland are boasting a variety of 
        more complex structures out of collections of tubes, including 
        memory elements. There are two big hurdles to overcome for 
        nanotube-based electronics. One is connectibility--it's one 
        thing making a nanotube transistor, it's another to connect 
        millions of them together. The other is the ability to ramp up 
        to mass production. Traditional lithographic techniques are 
        based on very expensive masks that can then be used to print 
        vast numbers of circuits, bringing the cost per transistor down 
        to one five-hundredth of a U.S. cent. Current approaches to 
        nanotube electronics are typically one-component-at-a-time, 
        which cannot prove economical. Molecular electronics (which, 
        strictly speaking, includes nanotubes) faces similar scaling 
        hurdles. There are some possible solutions, however.

   Organic Nanoelectronics: Organic molecules have also been 
        shown to have the necessary properties to be used in 
        electronics. However, unlike nanotubes, the speed of reaction, 
        for instance in switching a memory element, and hardiness in 
        face of environmental conditions, will likely limit uses. 
        Devices made of molecular components would be much smaller than 
        those made by existing silicon technologies. But the issue of 
        mass production remains.

   Soft Lithography: There is an approach to making nanoscale 
        structures that potentially offers great promise for 
        nanoelectronics in the near term, owing to its simplicity. This 
        is soft lithography, which is a collection of techniques based 
        around soft rubber nanostructured forms or molds. You can use 
        these to stamp a pattern on a surface, in the form of 
        indentations, or using some form of ``ink''. No special 
        technology is required, and nor are the fantastically clean 
        environments required for existing silicon chip production. 
        Additionally, a wide variety of materials can be used.

        The approach is reminiscent of one of the most famous examples 
        of mass-production--the printing press. Soft lithography is 
        already used to make microfluidic systems, such as those in 
        lab-on-a-chip systems, and it scales readily down to the 
        nanoscale (depending on the variant of the technology used, 
        resolution can get below 10 nanometers). The techniques also 
        promise potential in the creation of optical devices, which may 
        in turn ultimately be used in optical computing. As a 
        replacement for traditional lithography for creating electronic 
        devices, however, there is currently a major obstacle--the 
        technique is not well suited to making the precisely-aligned, 
        multi-layered structures currently used in microelectronics, 
        although researchers are working to overcome this limitation.

   Memory and Storage: When it comes to the technology behind 
        the vast IT market, there is much more than just shrinking 
        microprocessors to consider. Storing information is vitally 
        important and can be done in many ways. Magnetic disks in 
        computers have been increasing their capacity in line with 
        Moore's law, and have a market at the moment of around $40 
        billion. The other type of information storage common to all 
        computers is DRAM (dynamic random access memory). DRAM provides 
        very quick access but is comparatively expensive per bit. 
        Magnetic disks can hold much more information but it takes much 
        longer to access the data. Also, DRAM is volatile--the 
        information disappears when the power is switched off. The 
        trade-offs between access speed, cost, and storage density 
        dictate the architecture of computers with respect to 
        information storage. New technologies may change this dynamic.

   MRAM: Some memory technologies that are currently being 
        researched are single-electron tunneling devices, rapid single 
        flux quantum devices, resonant tunneling diodes, and various 
        types of magnetic RAM (MRAM). MRAM offers the promise of non-
        volatile RAM, enabling devices such as a PC or mobile phone to 
        boot up in little or no time. This puts the technology 
        somewhere between existing DRAM and magnetic disk technologies. 
        Nanotubes also hold promise for non-volatile memory and recent 
        news suggests nanotube-based RAM may hit the market very soon 
        (commercial prototype in 1 to 2 years).

   Quantum Computing: In the much longer term, there's quantum 
        computing, which offers staggering potential by virtue of the 
        ability to perform simultaneous calculations on all the numbers 
        that can be represented by an array of quantum bits (qubits). 
        The atomic scale, the scale at which quantum effects come into 
        play, argues for a requirement for nanoscale structures and 
        quantum dots to come up regularly in discussions of quantum 
        computing. Primary applications would be in cryptography, 
        simulation and modeling. The realization of a quantum computer 
        is generally believed to be a long way off, despite some very 
        active research. Funding in the area is thus still largely that 
        provided for pure research, though some defense department 
        money has been made available.

        The total potential for nanotechnology in semiconductors has 
        been estimated to be about $300 billion per year within 10 
        years, and another $300 billion per year for global integrated 
        circuit sales (R. Doering, ``Societal Implications of Scaling 
        to Nanoelectronics,'' 2001). But it's actually much harder to 
        predict the commercially successful technologies in the world 
        of electronics than in the world of materials. The assumption 
        that continually increasing processing power will automatically 
        slot into a computer hardware market that continues to grow at 
        the rate it has done historically, is not necessarily sound. 
        Most of the growth over the last decade has been driven by 
        personal computers and some argue that this market is nearing 
        saturation.

The National Nanotechnology Initiative
    Since its inception, the National Nanotechnology Initiative (NNI) 
has proven to be an incredible instance of government outpacing the 
vision of the private sector. And already we are the better for it.
    The NanoBusiness Alliance indeed fully endorses the work of the NNI 
and offers our deep appreciation to the fine work of Dr. Mike Roco, Dr. 
James Murday and the other individuals who created the NNI and continue 
to advance its efforts everyday.
    The NNI has been an exceedingly successful program. From our 
industry vantage point the NNI has made an incredible impact in the 
following areas:

   1. Funding: The NNI has provided much needed funding for 
        basic research at America's universities and government labs. 
        By fueling innovation, this investment is--and will continue 
        to--find its way to the public marketplace promoting industry 
        development.

   2. Awareness: Before the NNI. the overwhelming majority of 
        Americans thought that nanotechnology was science fiction--or 
        they never even heard of it. A survey just a couple years back 
        showed that less than 5 percent of CEOs knew what 
        nanotechnology was, never mind what it meant to their 
        businesses. This is changing rapidly. In fact, we now hear 
        claims that people talk about nanotechnology too much.

   3. Collaboration: The NNI has been extraordinarily 
        successful at fueling collaborations between corporations, 
        universities, start-ups and government labs--in the U.S. and 
        abroad. Also, the NNI has helped to break down internal 
        research silos. Nanotechnology is an incredibly cross-
        disciplinary field. To succeed in developing applications you 
        need chemists to work with engineers; and engineers to work 
        with physics and so on. Due to the educational efforts of the 
        NNI, and the structure of their grants programs, this 
        collaborative movement is beginning to ferment. Universities, 
        such as University of Washington, are already giving out PhDs 
        in NanoScience which trains students across many needed 
        disciplines, and other schools are following at the undergrad 
        and graduate level.

   4. Competition: For better and for worst, the announcement 
        of NNI set forth a global contest for dominance in the 
        nanoscience and nanotech industry. Ultimately this will make 
        the consumer the winner. This global competition will push even 
        more rapid developments.

    That is why the NanoBusiness Alliance and its members would like to 
enthusiastically endorse the 21st Century Nanotechnology Research and 
Development Act that is being introduced by this Senator Wyden.
    By all accounts it will be a vital and timely bill that will assist 
America's scientific and economic competitiveness as well as play a key 
role in developing nanotechnology efforts for Homeland Defense.

State of NanoBusiness
    Few realize that the age of nanotechnology as a business--
NanoBusiness--is already here. Though we are admittedly at the earliest 
stages, substantial change is already taking place. Some of the most 
recent predictions for the development of nanotechnology and time to 
market are being rapidly eradicated. For instance, in January 2000 at 
the NNI kick-off announcement at Cal Tech, President Clinton noted:

        ``Just imagine, materials with 10 times the strength of steel 
        and only a fraction of the weight; shrinking all the 
        information at the Library of Congress into a device the size 
        of a sugar cube; detecting cancerous tumors that are only a few 
        cells in size. Some of these research goals will take 20 or 
        more years to achieve.''

    When President Clinton said those words it seemed like a highly 
reasonable timeframe. Yet here we are a couple of years later and just 
last week Hewlett-Packard said they had created a 64 bit computer 
memory chip using new molecular technology that takes miniaturization 
further than ever before. Some thousands of these memory units could 
fit on the end of a single strand of hair.
    In addition, incredibly strong nanocomposites are already available 
and being used by aircraft manufacturers and automakers among others. 
Researchers at Rice University are in early trials using quantum dots 
to detect cancer in the lab. Have we completely erased the 20 year 
prediction? No, but we are getting close. Very close.

Corporations
    Just five years ago only a few corporate visionaries--IBM, HP, 
Texas Instruments among them--were undertaking any research and 
development in the nanosciences. Today you'd be hard pressed to find a 
single member of the Fortune 500 that is involved in manufacturing that 
does not have some nanotechnology effort underway--GM, GE, Ford, 
Siemens, Intel, Motorola, Lucent, Toyota, Hitachi, Corning, Dow 
Chemical, NEC, Dupont, 3M, etc. have launched significant nanotech 
initiatives. Some of the biggest spenders on R&D are allocating up to a 
third of their research budgets to nanotech.
    As an example of current market applications in corporate America 
for one small area of nanotech--carbon nanotubes--already some 60 
percent of the cars on our highways utilize nanotubes or other 
nanoparticulate fillers in their fuel lines, airbags, and body panels. 
And 50 percent of lithium batteries on the market utilize nanotubes to 
enhance their energy storage capabilities. These are compelling cases 
of American corporations already tapping into the potential of 
nanobusiness.
    Some examples:

   General Electric: At a time when many corporations are 
        scaling back research and development operations, General 
        Electric, the world's largest company, reaffirmed its 
        commitment to R&D this year with a $100 million+ pledge to 
        modernize its global research center. The Center will focus its 
        greatest emphasis on nanotechnology. GE views nanotechnology as 
        a key component to its future.

   IBM: Few would question that IBM is the world's leading 
        nanotechnology company with bleeding edge efforts in nano-
        electronics, life sciences and nano-materials. IBM has major 
        nanotechnology operations underway in New York, Zurich and in 
        Silicon Valley. They are patenting literally hundreds of new 
        nanotechnology discoveries a year.

   Mitsubishi Corp: Mitsubishi Corp. created a joint venture 
        with two Arizona-based start-ups, MER and Research Corporation 
        Technologies, to form Fullerene International Corp. (FIC). FIC 
        has established a fullerene manufacturing facility in Osaka, 
        Japan, with MER providing the reactor.

Start-Ups
    Unlike the Dot-com era, nanotech start-ups are built on science. 
They have real technology. Real assets. And more often than not, they 
are founded by researchers from universities, government and corporate 
laboratories. These young companies are already pushing the growth of 
the field through their innovation. And these start-ups will most 
assuredly be part of the next NASDAQ boom.
    More than half the world nanotech start-ups are in the U.S.. And 
while it is difficult to pin an exact number on how many there are, it 
is safe to say that around a 1,000 are currently in operation up from 
maybe 100 three years ago.
    Some examples:

   C Sixty Inc., A pioneering biotech company that is modifying 
        fullerenes for medical applications,--drug delivery, protease 
        inhibitors, and disease prevention. C-Sixty has begun clinical 
        trials on an AIDS drug already. The Houston-based company also 
        reported progress on another fullerene-based approach--this one 
        for Lou Gehrig's disease, a degenerative disorder that affects 
        nerve cells.

   Luna Innovations: A diverse research company based in 
        Blacksburg, Va., recently received a $2 million federal grant 
        to develop buckyballs that can be used in magnetic resonance 
        imaging (MRI) systems and for possible diagnosis and treatment 
        of cancer. They also have a cutting edge sensor in final 
        development for the oil and gas industry.

   NanoBio: A start-up company spun off from the University of 
        Michigan has created an emulsion that protects civilians and 
        troops from biological terror attacks. It actually kills 
        anthrax and was approved several years ago, far in advance of 
        the horrible events of last fall. This antimicrobial substance 
        called NanoProtect, can be applied either before or after an 
        attack to all kinds of surfaces, including skin, clothing and 
        vehicles. NanoProtect is the result of a five-year, $11.8 
        million grant by the U.S. Defense Advanced Projects Research 
        Agency (DARPA) to researcher Dr. James Baker Jr.

   Evident Technologies: Evident is a nanotechnology 
        manufacturing and application company that draws upon 
        semiconductor nanocrystal expertise to develop sophisticated, 
        cost effective, innovative devices and products. Their products 
        have applicability in biotechnology, optical switching, and 
        computing, telecommunications, energy and other fields. 
        Evident's quantum dot technology can be used to ``tag'' 
        cancerous cells, create new lighting source, or serve as part 
        of developing electronics. This self funded company has been 
        creating profits by supplying testing materials to the 
        semiconductor and biotech industries.

Funding
    Venture capitalists, institutional investors and wealthy angels 
have also begun to see the potential in nanotech, and, though chastened 
by the lessons of the ``dot-com disaster,'' are nevertheless 
aggressively seeking investment opportunities. Over 60 U.S. venture 
capital firms invested in nanotech-related companies in 2000. 
Investment in nanotechnology start-ups will rise from $100 million in 
1999 to nearly a $1billion by 2003. Recent investments include 
NanoPhontonic, a semiconductor company that received over $25mm this 
spring in venture investment. Surface Logic, a nanoelectronics firm 
obtained almost $22 mm in new funding as well.
    All signs demonstrate that this growth curve will continue to 
increase rapidly over the next 3-5 years for nanotechnology regardless 
of the current economic slow down. So-called angel investors and 
corporate venturing operations are expected to outpace traditional 
venture capital firm's investments for the foreseeable future due to 
the business models and return times.

Regional Development
    Ultimately, regional development efforts --the creation of 
technology clusters (Nanotech Valleys if you will)--will fuel the 
explosive growth of the nanotechnology industry. The bringing together 
of universities, government officials, corporations, investors, non- 
profits, start-ups and service firms to coordinate, plan, and develop 
an environment condusive for collaboration and attracting talent is the 
key to developing the industry. Region specific approaches. Region 
specific planning. National--even international--collaboration and 
impact.
    Localized development efforts are already underway from Virginia to 
Texas to California. The NanoBusiness Alliance launched a ``Nanotech 
Hubs Initiative'' a few months back with the hope of jump starting 
regional technology cluster development. We have been overwhelmed. 
Though we have launched efforts in Colorado, New York, San Francisco, 
San Diego, Michigan and Washington DC metro--as well as affiliate 
organizations in the EU and Canada--we have been inundated with calls 
from 35 states and 11 countries to help develop this capacity. They are 
looking for best practices, partners and funding. They are looking for 
roadmaps and shared databases.
    These states and regions are already looking to nanotechnology to 
develop local economies and fuel overall state economic development.
    Some examples:

   New York State: Albany NanoTech is a fully-integrated 
        research, development, prototyping, pilot manufacturing and 
        education resource managing a strategic portfolio of state-of-
        the-art laboratories, supercomputer and shared-user facilities 
        and an array of research centers located at the University at 
        Albany--SUNY. Its first research center, the NYS Center for 
        Advanced Thin Film Technology, was established to provide its 
        company partners with a unique environment to pioneer, develop, 
        and test new ideas within a technically aggressive, yet 
        economically competitive, research environment. Governor Pataki 
        has been instrumental in expanding this center, as has IBM. It 
        has served to be a magnet for corporate development and start 
        ups. It was recently announced that the SEMATECH--the largest 
        semiconductor industry developers--would locate its next 
        generation R&D facility at the Center. When the last SEMATECH 
        located in Austin it turned the city from a quiet college town 
        into one of Americas 5 great technology centers.

   Chicago: Chicago is looking to seize leadership in the 
        emerging field of nanotechnology by providing tax subsidies to 
        foster a high-tech corridor. The area has also created a 
        Chicagoland nanotech initiative of sorts, with large corporate 
        players like Boeing and Motorola; nanotech companies like 
        NanoPhase and NanoInk; investors; consultants like McKinsey: 
        Northwestern's Nanotechnology Center; U Chicago; and Argonne 
        National Laboratory all collaborating.

Foreign Competition
    Nanotechnology is emerging as a truly global technology. Unlike the 
many waves of technological development over the past seventy-five 
years, nanotechnology is not dominated by the United States. The U.S. 
is being outpaced by foreign competition in several areas of 
nanotechnology. Japan, Italy, Israel, Ireland, Switzerland, the 
Netherlands, UK, Germany, Russia, South Korea, China, France, Canada, 
and Australia are all significant players in the field of 
nanotechnology.
    A recent report from the Journal of Japanese Trade & Industry notes 
that the Japanese government views the successful development of 
nanotechnology as the key to ``restoration of the Japanese economy.'' 
They are not alone. Funding has grown at unprecedented rates in the 
last three years fueled by the awareness of the U.S. National 
Nanotechnology efforts.

Problems in the NanoBusiness World
    Not everything is rosy for the future of nanobusiness. Though much 
development has occurred, many obstacles remain. While the NNI and 
overall government nanotech efforts have been a great source of 
.coordination and basic research funding for many, these nanotech 
grants remain among the most competitive in the government.
    In addition, many nanotech companies have emerged from the basic 
research cycle and are addressing issues such as scaling and 
integration. Few government programs address this timeframe. Add to 
that a venture capital sector that is battered, not knowledgeable on 
nanotech and now working in a shortened cycle of investment return and 
you have many nanotech companies falling into what investors term 
``Death Valley.''
    Another area of concern for nanotech start ups is the current state 
of U.S. intellectual property and the USPTO. The Patent Office is in 
desperate need of training programs to ensure its examiners understand 
nanotechnology. At USPTO, nanotech patent applications--understandably 
due to the wide breadth of application areas the technology covers--go 
down many different review silos at USPTO. Also, several early nanotech 
patents are given such broad coverage, the industry is potentially in 
real danger of experiencing unnecessary legal slowdowns.
    Another grave fear that is often expressed by CEOs, particularly at 
large corporations that are undertaking nanotech R&D, is uneasiness 
over the lack of research on nanotech health and safety issues. More 
than one CEO has raised the specter of ``are we sitting on the next 
asbestos working with all these tiny things.''
    In addition, the current state of technology transfer is lacking by 
any measure. The technology transfer process from government and 
academic labs to the marketplace is impossible at worst--arduous at 
best.
    And lastly, education, as well workforce training and development 
are beginning to become issues among the nanotech community.

Close
    In closing, nanotechnology the science is indeed now rapidly 
becoming nanotechnology the business. As a nation we have been very 
fortunate to have the visionary support--from both sides of the aisle--
in developing and maintaining the National Nanotechnology Initiative. 
However, we are now at a cross roads where we must expand the reach of 
this national initiative from the laboratory to the board room. While 
maintaining the development of basic research as a priority, we must 
expand our sights to cultivate the nanotechnology industry and usher in 
a new Industrial Revolution. Again, that is why the 21st Century 
Nanotechnology Research and Development Act is so important.

        1.  We see the Act's ability to strengthen the structure of the 
        National Nanotechnology Initiative as being of vital 
        importance--increasing the long term stability and growth of 
        our Nation's nanotechnology efforts.

        2.  The Act makes the development of the nanotechnology sector 
        a major government focus. Increasing understanding and 
        awareness of nanotechnology throughout the government's 
        political and civil service ranks by providing mechanisms for 
        program management and coordination across government agencies 
        and White House. We especially support Act's call for the 
        development of a government advisory board made up of 
        nanotechnology leaders to regularly discuss the state of the 
        industry and recommend solutions to the President and Congress.

        3.  Due to real challenges to our Nation's efforts to obtain a 
        secure leadership position in nanotechnology and nanobusiness, 
        we also strongly support the Act's call for further examination 
        and tracking of international funding, development and 
        competition in nanoscience and nanobusiness.

        4.  And, we strongly support the Act's efforts to encourage 
        nanoscience through additional grants, and the establishment of 
        interdisciplinary nanotechnology research centers, as this will 
        lead to more innovation and further development of the nanotech 
        economy.

    Long term, the Alliance would like to see Congress continue its 
focus on nanotechnology as it becomes nanobusiness and develop 
programs--and expand existing programs--for commercializing 
nanotechnology development.

        a.  Create programs that offer opportunities to entrepreneurial 
        start-ups and innovative corporations alike. Programs that 
        offer incentives, loans, and funding to take nanotechnology 
        innovations into the marketplace.

        b.  Ensure that the USPTO is properly educated and equipped to 
        evaluate and approve nanotechnology patents

        c.  Organize an extensive global effort with industry, academia 
        and government to study the health and environmental effects--
        good and bad--on nanotechnology now before potential problems 
        or even negative intimations arise. The effort should include 
        social and scientific studies building on much of the fine work 
        of the National Nanotechnology Initiative staff. Ensure that 
        publicly accessible materials, events and websites are 
        developed to disseminate such information to a broad audience.

        d.  Develop programs, possibly though the Office of Technology 
        Policy in the Department of Commerce, economic development 
        organizations, universities and industry groups to promote and 
        nurture regional nanotechnology cluster development. Create 
        best practices reports, guides, and extensive national 
        nanobusiness database.

        e.  Develop programs to improve the state of tech transfer at 
        government labs and academic institutions which will improve 
        the commoditization of emerging technologies

    Again, I would like to thank the Chairman, Senator Allen and the 
Committee for this opportunity to address them.

    Senator Wyden. Mr. Modzelewski, we also understand you 
could provide a couple of demonstrations today, and since you 
are under your 5 minutes, please have at it.
    Mr. Modzelewski. One that we can start off with, if we 
could dim the lights, I am going to demonstrate a technology by 
a company called Evident Technology, which is based in New 
York, and this is a testing kit which basically uses quantum 
dot technology. This technology could be used for everything 
from potentially detecting individual cancer cells in the human 
body to being used actually for lighting sources, everything 
from light bulbs that use less energy to flat screens. It is 
even being used in the electronics industry in semiconductor 
work.
    The thing that you will find most interesting about them is 
your ability to give off a large and intense color spectrum. I 
am going to use a black light to demonstrate that for you. As 
you can see, they are very hard to see initially, but when 
given the color spectrum they can give off an incredible glow, 
and these glows can literally be assigned to pick up individual 
pathogens, even can be used as biosensors for the military and 
be used for individual forms of cancer.
    The thought is, is that this could be advanced in, say, 
cancer research to where you are not only identifying them, but 
are able to link up the light spectrum to things like lasers or 
other ultraviolet sources that could eradicate just the 
individual cells, as opposed to treating the whole area of the 
body.
    Another thing we have is here from a company called 
Infomat, which is a Connecticut-based company, and what they 
are able to do is actually use a flexible ceramic coating, and 
you have instead an incredibly heat-resistant product here, and 
we have the flexible ceramic. We can start looking at things 
like ceramic engines and other things that have long been 
difficult for us to even imagine being able to successfully do 
this. This actual little piece of metal is actually a band that 
the U.S. Navy is beginning to use on some of the development of 
their ships and things along those lines.
    I am not sure if we also want to demonstrate the 
nanochinos. Is anyone interested in that?
    Senator Wyden. We have a huge demand for nanochinos.
    Mr. Modzelewski. You have to understand, this is already in 
the marketplace. There is the availability of nanofibers, and 
these coated fibers create such a level of surface area that 
anything that is spilled on them does not just bead up like 
Scotchgard, but literally is repelled away, and we can actually 
be looking, potentially, within the next decade, for clothing 
that does not need to be cleaned, and you are seeing how grape 
juice, I believe, beads up and works off of the nanochinos.
    Voice: I wipe it and it is all completely dry.
    Senator Wyden. That is unbelievable.
    Voice: If it is submersed, it will release and allow 
washing.
    Mr. Modzelewski. That product is already available. He is 
not wearing something experimental. Big name brands n the 
American fabric industry, Levi's, Lee, Eddie Bauer sell 
nanochinos, nanojeans, and also shirts with such a capacity, 
and in fact Dockers is running a commercial right now where a 
gentleman is in a bar and his buddy keeps pouring a drink on 
him, and he is begging him to stop pouring the drink on him to 
watch how cool the nanotechnology works. And so I think we are 
starting to enter an age right now where, true, we do need the 
basic research, and we should continue to advance that, but we 
are already really seeing this technology start to enter our 
lives in very simple ways, and soon to be more advanced ways.
    I thank you.
    Senator Wyden. Dr. Stupp.

STATEMENT OF SAMUEL I. STUPP, Ph.D., CHAIRMAN OF THE COMMITTEE 
   FOR THE REVIEW OF THE NATIONAL NANOTECHNOLOGY INITIATIVE, 
NATIONAL RESEARCH COUNCIL/THE NATIONAL ACADEMIES, AND BOARD OF 
           TRUSTEES PROFESSOR OF MATERIALS SCIENCE, 
        CHEMISTRY AND MEDICINE, NORTHWESTERN UNIVERSITY

    Dr. Stupp. Mr. Wyden, Mr. Allen, thank you for the 
opportunity to present this statement. I chaired the review 
committee for the NNI of the National Research Council. I am 
here representing a committee which was composed of a mix of 
individuals from academe and industry, and drawn from a variety 
of scientific and engineering disciplines relevant to the topic 
of nanoscience and nanotechnology. The committee spent 9 months 
reviewing the NNI and writing the report that is the basis of 
my testimony to you today. During those 9 months, we heard from 
all of the agencies currently being funded under the NNI, and 
most of the agencies that are planning on joining the NNI in 
the near future.
    In addition to the information gathered from these 
agencies, we also relied on the knowledge committee members 
have about activities ongoing in our universities, in the 
private sector, in State and local regions, and 
internationally. The committee was asked to review the NNI with 
particular attention to (1) whether the balance of the overall 
research portfolio is appropriate, (2) whether the correct seed 
investments were being made now to assure U.S. leadership in 
nanoscale work in the future, (3) whether partnerships were 
being used effectively to leverage the Federal investment in 
this area, and (4) whether the coordination and management of 
the program is effective, such that the whole is greater than 
the sum of its parts.
    Our committee detailed many of the important outcomes that 
could come from nanotechnology, including applications in 
medical diagnostics, new therapies for disease and injury, the 
very exciting frontier of regenerative medicine, which is not 
discussed all that frequently, and homeland security as well.
    The committee found that the agencies participating in the 
NNI have made a good start in organizing and managing such a 
large interagency program. The committee was impressed with the 
leadership and level of multiagency involvement in the NNI, 
particularly the leadership role played by the National Science 
Foundation. Programs funded to date that were presented to the 
committee were all of an appropriately high technical merit, 
and the participating agencies have sponsored a number of 
influential symposia in nanotechnology.
    The committee formulated 10 major recommendations to help 
the NNI agencies build on their efforts to date to further 
strengthen the implementation of the initiative. So concerning 
the research portfolio, the committee recommended that (1) more 
emphasis be given to long-term funding of new concepts in 
nanoscale science and technology. Truly revolutionary ideas 
will need sustained funding to achieve results and produce 
important breakthroughs. There are not currently enough funding 
mechanisms to give longer term support to higher risk but 
potentially groundbreaking ideas. There are more of those in 
Europe than here in the U.S.
    (2) The committee recommends increasing the multiagency 
investments in research at the intersection of nanoscale 
technology and biology. We can already see applications of 
nanoscale science and technology that will have significant 
impacts in biotechnology and medicine. Bionano is not currently 
as well-represented in the NNI portfolio as it should be. Since 
many of the advances foreseen in this area involve the marriage 
of physical sciences and engineering with biology, these 
investments should focus on collaborations between the NIH and 
the other NNI agencies.
    (3) The committee recommends investment also in the 
development of new instruments for measurement and 
characterization of nanoscale systems. Historically, many 
important advances in science happened only after the 
appropriate instruments became available.
    (4) The committee recommends that NSET develop a new 
funding strategy to ensure that the societal implications 
become an integral and vital component of the NNI.
    On whether the ``correct'' seed investments are being made 
now for the future of U.S. leadership in nanotechnology, the 
committee recommends, (1) that NNI agencies provide strong 
support for the development of an interdisciplinary culture for 
nanotechnology. Nanoscale research is leading us into areas 
involving the convergence of many disciplines, biology, 
chemistry, physics, material science, all areas of engineering. 
However, the overall value system used by the scientific 
community to judge its members continues to discourage 
interdisciplinary research.
    Looking at the question of whether partnerships are being 
used effectively in the NNI, the committee found that 
industrial partnerships need further stimulation and nurturing 
to accelerate the commercialization of NNI development. The 
U.S. is most likely to realize economic benefits from 
nanotechnology when its underlying intellectual property comes 
from U.S.-based laboratories, institutions, and corporations.
    (2) Interagency partnerships also require further 
attention. While the NNI implementation plan lists major 
interagency collaborations, the committee has no sense that 
there is any common strategic planning occurring in those 
areas, any significant interagency communication between 
researchers in those areas, or any significant sharing of 
results before publication in the open literature.
    To stimulate meaningful interagency collaborations, we 
proposed a special fund within NNI, perhaps under the oversight 
of OSTP, for grants to exclusively support interagency research 
programs.
    On the topic of program management and evaluation, the 
committee recommends that NSET develop a crisp, compelling, 
overarching strategic plan for the NNI which includes both 
short, medium, and long-term goals.
    The committee recommends that NSET develop performance 
metrics to assess the effectiveness of the NNI in meeting its 
objectives and goals. Currently, the programs have only been 
evaluated as a part of the procedures of individual agencies.
    (3) The committee recommends that OSTP establish an 
independent standing nanoscience and nanotechnology advisory 
board now. The existence of such a board would help the NSET 
agencies vision beyond their own individual missions. It could 
identify and champion research opportunities that do not fit 
conveniently into any one agency's mission. To ensure that 
nanoscale research continues its progress towards its ultimate 
potential, such a board should be composed of leaders from 
industry and academia with scientific, technical, social 
science or research management credentials.
    I think this is the end of my statement.
    [The prepared statement of Dr. Stupp follows:]

Prepared Statement of Samuel I. Stupp, Ph.D., Chairman of the Committee 
  for the Review of the National Nanotechnology Initiative, National 
    Research Council/The National Academies, and Board of Trustees 
        Professor of Materials Science, Chemistry and Medicine, 
                        Northwestern University

    Good morning, Mr. Chairman and Members of the Committee. My name is 
Samuel Stupp. I am Board of Trustees Professor of Materials Science, 
Chemistry and Medicine at Northwestern University, and chaired the 
Committee for the Review of the National Nanotechnology Initiative of 
the National Research Council. The Research Council is the operating 
arm of the National Academy of Sciences, National Academy of 
Engineering, and the Institute of Medicine, chartered by Congress in 
1863 to advise the government on matters of science and technology.
    I am here representing a committee that was composed of a mix of 
individuals from academe and industry, and drawn from a variety of 
scientific and engineering disciplines relevant to the topic of 
nanoscience and nanotechnology. The committee spent nine months 
reviewing the National Nanotechnology Initiative or NNI, and writing 
the report that is the basis of my testimony to you today. During those 
nine months, we heard from all of the agencies currently being funded 
under the NNI, and most of the agencies that are planning on joining in 
the NNI in the near future. In addition to the information gathered 
from these agencies, we also relied on the knowledge committee members 
have about activities on-going in our universities, in the private 
sector, in state and local regions, and internationally.
    The committee was asked to review the NNI with particular attention 
to:

   Whether the balance of the overall research portfolio is 
        appropriate,

   Whether the correct ``seed'' investments were being made now 
        to assure U.S. leadership in nanoscale work in the future,

    Whether partnerships were being used effectively to leverage the 
federal investment in this area, and

   Whether the coordination and management of the program is 
        effective, such that ``the whole is greater than the sum of its 
        parts.''

    In writing its report, the committee was very concerned with 
communicating to the reader the importance of nanotechnology and its 
future potential. There have been a lot of promises made for the 
wonders which nanotechnology will provide for society, and while there 
has been hype, the committee can say definitively that nanoscience and 
nanotechnology are not dreams but are here today in products and 
technologies we currently use. You already use nanotechnology everyday 
in applications as mundane as the sunscreen and lipstick you may be 
wearing, to those as sophisticated as the high-density hard disk that 
runs your pc or laptop. Current research results point to even more 
applications in the near future, such as improved medical diagnostics 
and new therapies for disease and injury.
    The committee found that the agencies participating in the NNI have 
made a good start in organizing and managing such a large interagency 
program. The committee was impressed with the leadership and level of 
multi-agency involvement in the NNI, particularly the leadership role 
played by the National Science Foundation. Programs funded to date that 
were presented to the committee were all of an appropriately high 
technical merit, and the participating agencies have sponsored a number 
of influential symposia in nanoscale science and technology, including 
one on the potential ethical, legal, and social issues involved in 
these technical advances.
    The committee formulated ten major recommendations to help the NNI-
participating agencies build on the foundation of their efforts to date 
to further strengthen the implementation of the initiative.
    Concerning the balance of the research portfolio, the committee 
recommended that:

   More emphasis be given to long-term funding of new concepts 
        in nanoscale science and technology. Truly revolutionary ideas 
        will need sustained funding to achieve results and produce 
        important breakthroughs. There are not currently enough funding 
        mechanism to give longer-term support to higher risk but 
        potentially groundbreaking ideas.

   The committee recommends increasing the multiagency 
        investments in research at the intersection of nanoscale 
        technology and biology. We can already see applications of 
        nanoscale science and technology that will have significant 
        impacts in biotechnology and medicine. ``Bio-nano'' is not 
        currently as well represented in the NNI portfolio as it should 
        be. Since many of the advances foreseen in this area involve 
        the marriage of physical sciences and engineering with biology, 
        these investments should focus on collaborations between NIH 
        and the other NNI agencies.

   The committee recommends investment in the development of 
        new instruments for measurement and characterization of 
        nanoscale systems. Historically, many important advances in 
        science happened only after the appropriate investigative 
        instruments became available. Since one must be able to measure 
        and quantify a phenomenon in order to understand and use it, it 
        is critical that we develop tools that allow for more 
        quantitative investigations of nanoscale phenomena.

   The committee recommends that NSET develop a new funding 
        strategy to ensure that the societal implications become an 
        integral and vital component of the NNI. The current level and 
        diversity of efforts concerning societal implications of 
        nanotechnology is disappointing. Federal agencies have not 
        given sufficient consideration to societal implications of 
        nanoscale science and technology. To ensure that work in this 
        area is funded, the participating agencies should develop a 
        funding strategy that treats societal implications as a 
        supplement or set-aside to agency core budget requests, which 
        is then awarded to agencies willing and capable to engage in 
        this type of work.

    On whether the correct ``seed'' investments are being made now for 
the future of U.S. leadership in nanoscale science and technology, the 
committee recommends:

   That NNI agencies provide strong support for the development 
        of an interdisciplinary culture for nanoscale science and 
        technology. Nanoscale research is leading us into areas 
        involving the convergence of many disciplines--biology, 
        chemistry, physics, materials science, mechanical engineering, 
        and others. However, the overall value system used by the 
        scientific community to judge its members continues to 
        discourage interdisciplinary research. Although the number of 
        interdisciplinary research groups will grow as it becomes 
        evident that this approach is necessary to make the most 
        exciting advances in nanoscale research, federal agencies 
        should accelerate this process by developing creative programs 
        that encourage interdisciplinary research groups in academia.

    Looking at the question of whether partnerships are being used 
effectively in the NNI, the committee found that:

   Industrial partnerships need further stimulation and 
        nurturing to accelerate the commercialization of NNI 
        developments. The U.S. is most likely to realize economic 
        benefits from nanoscale science and technology when this 
        technology and its underlying intellectual property come from 
        U.S.-based laboratories, institutions, and corporations.

   Interagency partnerships also require further attention. 
        While the NNI Implementation Plan lists major interagency 
        collaborations, the committee had no sense that there is any 
        common strategic planning occurring in those areas, any 
        significant interagency communication between researchers 
        working in those areas, or any significant sharing of results 
        before publication in the open literature. All NNI funds are 
        currently directed by each agency to the projects and programs 
        of that agency's choice. To stimulate meaningful interagency 
        collaborations, the committee recommends the creation of a 
        special fund within NNI, perhaps under the oversight of the 
        Office of Science and Technology Policy (OSTP), for grants to 
        exclusively support interagency research programs.

    On the topic of program management and evaluation, the committee 
recommends:

   That NSET, the Nanoscale Science, Engineering and Technology 
        subcommittee of the National Science and Technology Council, 
        develop a crisp, compelling, overarching strategic plan for the 
        NNI. This plan should articulate short, medium, and long-term 
        goals, and emphasize those long-range goals that move results 
        out of the laboratory and into society. In particular, the 
        strategic plan should include a consistent set of anticipated 
        outcomes for each funding theme and each Grand Challenge in the 
        NNI implementation plan.

   The committee recommends that NSET develop performance 
        metrics to assess the effectiveness of the NNI in meeting its 
        objectives and goals. Currently the programs have only been 
        evaluated as part of the GPRA procedures of individual 
        agencies.

   Finally, the committee recommends that OSTP establish an 
        independent standing Nanoscience and Nanotechnology Advisory 
        Board (NNAB). The existence of such a board would help give the 
        NSET agencies vision beyond their own individual missions. It 
        could identify and champion research opportunities that don't 
        fit conveniently into any one agency's mission to ensure that 
        nanoscale science and engineering continue to progress toward 
        their ultimate potential. Such a board should be composed of 
        leaders from industry and academia with scientific, technical, 
        social science, or research management credentials.

    With this, I will be happy to take your questions on the report and 
its findings.
                                 ______
                                 
 THE NATIONAL ACADEMIES, DIVISION OF ENGINEERING AND PHYSICAL SCIENCES
Small Wonders, Endless Frontiers: A Review of the National 
        Nanotechnology Initiative--Summary

    Background. Nanoscale science and technology, often referred to as 
``nanoscience'' or ``nanotechnology,'' is science and engineering at 
the scale of 10-\9\ meters, or 1/100,000 the width of a 
human hair. In the last two decades, researchers have begun developing 
the capability to manipulate matter at the level of single atoms and 
small groups of atoms, and to characterize the properties of materials 
and systems at that scale. This capability has led to the astonishing 
discovery that clusters of small numbers of atoms or molecules--
nanoscale clusters--often have properties (such as strength, electrical 
resistivity and conductivity, and optical absorption) that are 
significantly different from the properties of the same matter in 
either the single molecule or bulk scales.
    Using these discoveries, scientists and engineers have begun 
controlling the structure and properties of materials and systems. 
Current applications of nanoscale materials includes titanium dioxide 
and zinc oxide powders which are used by cosmetics manufacturers for 
facial base creams and sunscreen lotions. Nano-structured materials 
have been integrated into complex products such as the hard disk drives 
that store information and the silicon integrated circuit chips that 
process information in every Internet server and personal computer. In 
the future, these researchers anticipate that nanoscale work will 
enable the development of materials and systems with dramatic new 
properties relevant to virtually every sector of the economy, such as 
medicine, telecommunications, and computers, and to areas of national 
interest such as homeland security. With potential applications in 
virtually every existing industry, and new applications yet to be 
discovered, there is no doubt that nanoscale science and technology 
will emerge as one of the major drivers of economic growth in the 
decades to come.



    Recognizing the tremendous scientific and economic potential of 
nanoscale science and technology, in 1996 a federal inter-agency 
working group formed to consider the creation of a National 
Nanotechnology Initiative (NNI). As a result of this effort, around one 
billion dollars have been directed towards NNI research since 2001. At 
the request of officials in the White House Economic Council and NNI-
participating agencies, the National Research Council (NRC) agreed to 
review the NNI. A review committee was formed by the NRC and asked to 
consider topics such as the current research portfolio of the NNI, the 
suitability of federal investments and inter-agency coordination 
efforts in this area.
    Findings and Recommendations. The committee was impressed with the 
leadership and level of multi-agency involvement in the NNI. 
Specifically, the committee commends the leadership of the National 
Science Foundation in the establishment of the multi-agency Nanoscale 
Science, Engineering and Technology (NSET) committee as the primary 
coordinating mechanism for the NNI. NSET has played a key role in 
establishing research priorities, identifying Grand Challenges, and 
involving the U.S. scientific community in the NNI.
    Nevertheless, the committee has formulated a limited number of 
recommendations to further strengthen the implementation of NNI. Using 
information provided by all federal agencies involved in the NNI, the 
review panel considered the structure of this initiative over the past 
several months and makes the following ten recommendations:

   The committee recommends that the Office of Science and 
        Technology Policy (OSTP) establish an independent standing 
        Nanoscience and Nanotechnology Advisory Board (NNAB) to provide 
        advice to NSET member agencies on research investment policy, 
        strategy, program goals, and management processes. This board 
        could identify and champion research opportunities that do not 
        conveniently fit within any single agency's mission. It should 
        be composed of leaders from industry, and academia with 
        scientific, technical, social science, or research management 
        credentials.

   NSET should develop a crisp, compelling, overarching 
        strategic plan that emphasizes long-range goals that move 
        results out of the laboratory and into the service of society. 
        The Strategic Plan should include a consistent set of 
        anticipated outcomes for each theme and grand challenge and 
        estimated time frames and metrics for achieving those outcomes.

   The committee recommends that the NNI support more long-term 
        funding and investment in nanoscale science and technology. 
        Establishing a proper balance between the short-term and long-
        term funding of nanoscale science and technology will be 
        critical to realizing its potential.

    The committee recommends increased multi-agency investments in 
research at the intersection between nanoscale technology and biology. 
The relevance of the NNI to biology, biotechnology, and the life 
sciences cannot be overstated. Cellular processes are inherently 
nanoscale phenomena. Barriers to inter-agency and inter-disciplinary 
work must be over come to enable such developments.

   Historically, many important advances in science have come 
        only after appropriate investigative instruments have become 
        available. The committee recommends the NSET create programs to 
        facilitate the invention and development of instruments for 
        nanoscale science and technology. This should include 
        analytical instruments capable of modeling, manipulating, 
        tailoring, characterizing, and probing at the nanoscale.

   To help foster interagency collaboration the committee 
        recommends the creation of a special fund for Presidential 
        Grants, under OSTP management, to support interagency research 
        programs relevant to nanoscale science and technology. These 
        grants should be used exclusively to fund meaningful 
        interagency collaborations that cross mission boundaries, 
        particularly among the National Institutes of Health, the 
        Department of Energy, and the National Science Foundation.

   Noting the need for greater interdisciplinary research, the 
        Committee recommends that NNI provide strong support for the 
        development of an interdisciplinary culture within science. To 
        date, NSET agencies have encouraged multidisciplinary 
        collaborations, but creative programs are needed that encourage 
        the development of self-contained interdisciplinary groups as 
        well.

   To enhance the transition from basic to applied research, 
        the committee recommends that industrial partnerships be 
        stimulated and nurtured, both domestically and internationally, 
        to help accelerate the commercialization of NNI developments. 
        NSET should create support mechanisms for coordinating and 
        leveraging state initiatives, which focus on fostering local 
        industry, to organize regional competitive clusters for 
        nanoscale science and technology development.

   The committee recommends that the NSET develop a new funding 
        strategy to ensure that consideration and assessment of 
        societal implications becomes an integral and vital part of the 
        NNI. This effort will help ensure that the ``next industrial 
        revolution'' produces social and economic as well as technical 
        benefits.

   NSET should develop metrics to assess the effectiveness of 
        the NNI in meeting its objectives and goals. The committee sees 
        a need to measure the progress of the NNI as a whole, with 
        measurable factors including quality, relevance, productivity, 
        resources, and movement of research concepts toward 
        applications.

    Senator Wyden. Thank you. Dr. Williams.

        STATEMENT OF R. STANLEY WILLIAMS, HP FELLOW AND 
              DIRECTOR, QUANTUM SCIENCE RESEARCH, 
                        HEWLETT-PACKARD

    Dr. Williams. Chairman Wyden, Senator Allen, and Members of 
the Subcommittee, I thank you for the opportunity to testify 
before you on the topic of nanotechnology. My name is Stanley 
Williams, and I work for Hewlett-Packard Company in Palo Alto, 
California.
    To appreciate the smallness of a nanometer, first consider 
shrinking yourself down in three-dimensional factors of 1,000. 
You are now the size of an ant. Now shrink the ant down by 
another factor of 1,000. You would be the size of a red blood 
cell, the smallest cell in your body. Now take that cell and 
shrink it down by another factor of 1,000. That is the size of 
a nanometer, the size of a few atoms.
    Nanoscience is the study of structures that are just a few 
atoms in size, and it is the scientific field where hundreds of 
years of advances in physics, chemistry, and biology have just 
recently converged. The unifying theme is that the intrinsic 
properties of matter such as color, chemical reactivity, and 
electrical resistivity depend upon the size and shape of matter 
only at the nanoscale.
    Nanoengineered systems have the broadest possible 
arrangement of properties that human beings can design, which 
in turn means that building anything with control at the 
nanometer scale will enable us to produce them in the most 
efficient possible manner. Thus, nanotechnology is a collection 
of tools available to a broad range of scientists and 
engineers. However, it is not a complete solution to any 
problem. We will increasingly find that the crucial or enabling 
component of a system is engineered at the nanometer scale.
    Indeed, Deutsche Bank in Berlin has estimated that the 
total value of nanotechnology-enabled products and services 
will be $116 billion this year. Thus, as we consider creating a 
national nanotechnology program, we must not neglect other 
scientific and engineering areas that provide the other 
components to complete solutions. I am going to give three 
examples that illustrate the breadth and scope of what is 
possible in the present, in the near future, and the longer 
term of nanotechnology.
    By mixing hard and tough materials at the nanoscale, new 
composites have been made with levels of both properties never 
seen before in a single material. In the past year, General 
Motors has introduced a polymer clay nanocomposite already 
mentioned by Chairman Wyden that is used for running boards on 
their pickup trucks, and they plan to utilize this new 
composite in an increasing number of components in their 
vehicles in the future. In this one example, we see that a 
nanotechnology can help the fuel economy, the safety, the 
repair costs, and the ecological impact of our transportation 
system.
    I believe one of the most significant nanoscience 
discoveries of the past couple of years is that carbon 
nanotubes and semiconductor nanowires are extremely sensitive 
sensors of chemical compounds. They should actually be ideal in 
home defense applications for the detection of explosives, 
poisons, and biological agents. Given an appropriate level of 
support, it should be possible to begin deploying such sensors 
in susceptible areas within 2 to 3 years.
    On the 5 to 10 year time frame, it should be possible to 
cheaply manufacture such sensors in the hundreds of millions to 
billions of units per year to provide continuous monitoring of 
our public buildings, post offices, transportation networks, 
and other institutions vulnerable to terrorist attack.
    On a longer time frame, recent discoveries and 
announcements in the areas of nanoelectronic memory and logic 
circuits promise to extend the dramatic improvements in 
performance of computers that we have seen well into the 
future. These advances also promise to extend the economic 
benefits of the electronics industry that the U.S. has enjoyed 
for many more decades.
    From these examples, we see that nanotechnology has the 
potential to greatly improve the properties of nearly 
everything that humans currently make, and will lead to the 
creation of new medicines, materials, and devices that will 
substantially improve the health, wealth, and security of 
American and global citizens.
    However, current experience in the United States shows that 
the number of excellent research proposals submitted for 
nanotechnology-related research far outstrips the available 
funds. The ramp-up in funding must be steep. I estimate 
approximately 30 percent a year, and sustained for at least the 
next 5 years. A national nanotechnology program will allow for 
continuous monitoring and feedback to make sure the best ideas 
are funded.
    Also, increases in nanotechnology support must be 
consistent with an overall increase in the total physical 
science and engineering base in agencies such as the National 
Science Foundation, the Department of Energy, and the 
Department of Defense.
    My primary concern for U.S. nanotechnology is that we will 
not train or retain enough of the best researchers to be the 
leaders in this crucial area. Currently, the United States is 
supplying only 25 percent of the global funding for 
nanotechnology research by national Governments. Other 
countries are determined to keep pace and even surpass our 
efforts by investing heavily and by recruiting the best and the 
brightest researchers away from the United States.
    We will need to leverage our academic, Government, and 
corporate research capabilities to compete globally. However, 
relations between large corporations and American universities 
have never been worse. Severe disagreements have arisen over 
conflicting interpretations of the Bayh-Dole act. Many large 
U.S.-based corporations now work with the leading institutions 
in France, Russia, and China, which are willing to offer 
extremely favorable intellectual property terms for their 
support.
    The U.S. Government has several roles to play to ensure 
that America leads the world in nanotechnology. The first is to 
invest sufficiently in the basic research enterprise which 
produces the scientists and engineers who will invent the 
future. The second is to act as an early adopter of new 
technologies, especially in the areas where technological 
advances enhance our security.
    Finally, the Government should consider a new role, that of 
mediator to bring together academic, corporate, and national 
labs so that they can work together, and the Nation can share 
in the benefits of their discoveries.
    Thank you very much.
    [The prepared statement of Dr. Williams follows:]

  Prepared Statement of R. Stanley Williams, HP Fellow and Director, 
               Quantum Science Research, Hewlett-Packard

    Chairman Wyden, Senator Allen, Members of the Subcommittee, I thank 
you for allowing me--on behalf of Hewlett-Packard Company--the 
opportunity to testify before you on the topic of nanotechnology.
    Few words have generated as much hype and controversy over the past 
few years as `nanotechnology'. On the one hand, some enthusiasts have 
established a quasi-religion based on the belief that nanotechnology 
will generate infinite wealth and life-spans for all humans. On the 
other, alarmists fear that nanotechnology will somehow end life as we 
know it, either by poisoning the environment or releasing some type of 
self-replicating nanobot that conquers the earth. Neither scenario is 
realistic, and both have been propagated by people who are good 
communicators but actually have no relevant scientific experience in 
the nanosciences.
    This knowledge gap exists primarily because most scientists 
actually working in the field are either unable to communicate what 
they are doing to lay audiences or think they are too busy to try. I am 
afraid that many scientists are guilty of believing that the public in 
general and policy makers in particular are incapable of understanding 
science, and that their work should be supported simply because it is 
important and beautiful. This patronizing attitude has not served the 
citizens of the U.S. or American scientists. It is certainly true that 
policy makers do not have the time to understand the full details of 
the research in any field of scientific endeavor, just as most 
scientist have no clue about the intricacies of the legislative 
process. However, we owe it to each other and to the American public to 
engage in meaningful dialog. Our two communities may not understand the 
details of what the other does, but we should each appreciate what the 
other has to contribute to the overall benefit of society.
    I will attempt to provide you with some of that appreciation today 
by providing a high-level description and a series of analogies, each 
of which is certainly flawed but taken together I hope they provide you 
with a picture that you can utilize in your deliberations. 
Nanotechnology is particularly frustrating to describe. It is not one 
thing, and it is certainly not all things. I have been told by public 
relations experts that I need to simplify the field and provide a 
single rallying point upon which policy makers can focus. However, this 
would do a grave injustice to the field and I think in the long run it 
is an insult to your intelligence. Therefore, let me attempt to 
describe what nanotechnology has to offer by delving into some of the 
complexity.
    First, one needs to appreciate the smallness of a nanometer. 
Consider shrinking yourself down in all three dimensions by a factor of 
1000--you would become the size of a fairly small ant. Now take that 
ant and shrink it down by a factor of 1000--it would be about the size 
of a single red blood cell, which are the smallest cells in your body. 
Finally, shrink that red blood cell by a factor of 1000--that is the 
size of a nanometer, essentially the width of a few atoms. When 
thinking explicitly about this as a fundamental building block, Richard 
Feynman was truly prescient when he said there is `plenty of room at 
the bottom'.
    Nanoscience, the study of structures that are a few nanometers in 
size, is the field where hundreds of years of advances in the fields of 
physics, chemistry and biology have come together in just the past 
decade. Each discipline naturally and separately evolved toward this 
common goal through a series of intellectual advances, instrument 
developments and experimental discoveries. A significant fraction of 
the Nobel prizes in physics, chemistry and medicine in the past 10 
years have been awarded for research discoveries at the nanoscale. Now 
that all three disciplines have arrived at this same goal, each has 
realized that it can learn much from the others, so that the field of 
nanoscience has transcended traditional academic boundaries. Engineers 
have been very quick to adapt the insights gained at the nanoscale, and 
in many cases have actually been the leaders in recognizing the trans-
disciplinary synergies available. Material science, bio-engineering and 
electrical engineering are all rapidly becoming components of a nano-
engineering super-discipline. The unifying issue for engineering is 
that the intrinsic properties of matter, such as color, chemical 
reactivity, and electrical resistivity, depend on size and shape only 
at the nanoscale. Thus, nano-engineered systems have the broadest 
possible range of properties that can be designed, which in turn means 
that building anything with control down to the nanometer scale will 
enable them to be produced in the most efficient possible manner. Thus, 
nanotechnology can and will be applied to everything made by human 
beings--it will allow us to dramatically improve nearly everything that 
we currently make, and it will enable us to create an entire range of 
new materials, medicines and devices that we cannot even conceive of 
today. Human cleverness is at a premium--which means high value added 
products and high wages for companies and countries that dominate 
nanotechnology.
    With that said, we must realize that nanotechnology is a collection 
of new tools available to a broad range of scientists and engineers--it 
is not a complete solution to any problem. For the next several 
decades, there will be very few cases in which an entire product is the 
result of nanotechnology, but more and more we will find that the 
crucial or enabling component of a system is engineered at the 
nanometer scale. A current example of this is the giant magneto-
resistance, or GMR, read head currently found in hard disk drives for 
computers--the recent dramatic increase in storage capacity of disk 
drives is directly attributable to the fact that GMR heads have 
components that are nano-engineered. The value of the read heads alone 
is fairly small, but they enable a multi-billion dollar per year 
industry. Indeed, Matthias Werner of Deutsche Bank has estimated that 
the total value of nanotechnology-enabled products will be $116 billion 
in 2002, and will increase dramatically in the near future. Thus, as we 
think about increasing support for the U.S. Nanotechnology Initiative, 
we must not neglect other disciplines that will also be contributing 
necessary components to complete solutions. As in all things, a 
balanced approach is essential.
What are the recent advances in nano science and engineering?
    There have been so many recent advances in the nano sciences and 
engineering in recent past I could take up all my time just listing 
them. Let me give just three examples that illustrate the breadth and 
scope of what is possible in the present, the near future, and the 
longer term.
    During the past couple of years, a significant number of new 
nanocomposite materials have come into the market place. These 
materials are engineered to combine properties that natural materials 
have never displayed, such as hardness and toughness. Naturally hard 
materials such as diamond shatter easily, whereas naturally tough 
materials like wood are easy to scratch or dent. However, by mixing 
hard and tough materials at the nanoscale, new composite materials can 
be made with levels of the two properties never seen before. In the 
past year, General Motors has introduced a polymer-clay nanocomposite 
material that is used for a dealer installed optional running board on 
their SUVs and pickup trucks. This material is not only harder and 
tougher, but it is also lighter and more easily recycled than other 
reinforced plastics, and GM plans to utilize it in more and more 
components of their vehicles as economies of scale make it cheaper. In 
this one example, we see that a nanotechnology can help the fuel 
economy, the safety, the maintenance cost, and the ecological impact of 
our transportation system. In the future, nanocomposites will become 
increasingly sophisticated and truly smart, with the ability to adapt 
to new environments and even to self-repair.
    One of the most significant nanoscience discovories of the past 
couple of years that came out of Stanford, Harvard and UCLA is that 
nanowires, especially carbon nanotubes and semiconductor wires, can be 
used as extraordinarily sensitive detectors of light and of chemical 
and biological agents. In this case, the nanowires have such a small 
diameter that any change on the surface of the nanowire has a dramatic 
effect on its electrical conductivity. There is already a significant 
activity in the U.S. and abroad to build sensors based on this 
discovery. These sensors can be used for medical diagnostics to detect 
and report extremely small amounts of pathogens for the early detection 
of disease such as a known cancer or even a new bacterial or viral 
infection not previously known. Prof. James Heath of UCLA has proposed 
a vision in which a laboratory on a chip with nanosensors could help 
investigators go from a new `bug to drug' in 24 hours. However, 
probably their most pressing near term application will be for security 
applications for the detection of explosives, chemical warfare agents 
and biological threats. Given an appropriate level of support, it 
should be possible to begin deploying such sensors in sensitive areas 
within two to three years. Given economies of scale, it should be 
possible on the five to ten year time frame to cheaply manufacture such 
sensors in the hundreds of millions to billions of units to provide 
continuous monitoring our public buildings, post offices, 
transportation networks and other institutions vulnerable to terrorist 
attack.
    I will also mention that on a longer time frame, recent discoveries 
and announcements in the area of nanoelectronic memory and logic 
circuits promise to extend the dramatic improvements in performance for 
cost that we have seen over the past 40 years. These advances promise 
to extend the economic benefits of the electronics industry that the 
U.S. has enjoyed for several decades, and also continue the efficiency 
with which we conduct our business and government affairs. We will see 
a wide variety of new products emerging, but most important of all we 
will see our electronic tools become much easier and intuitive to use.

What is the significance of and potential for the development and 
        deployment of nanotechnology?
    From these examples, we can see that nanotechnology has the 
potential to greatly improve the properties of nearly everything that 
humans currently make, and will lead to the creation of new medicines, 
materials and devices that will substantially improve the health, 
wealth and security of American and global citizens.

Is the Federal Government adequately investing in nanotechnology (i.e. 
        perspective on the National Nanotechnology Initiative)?
    Given the starting point of the NNI in the year 2000 and budgetary 
realities, I think the current funding for nanotechnology is 
appropriate. It would be a mistake to put too much money earmarked for 
nanotechnology too quickly into the research community, since it could 
not adjust and efficiently absorb that funding . However, current 
experiences show that the number of excellent proposals for research 
funding in nanoscience and engineering far outstrips the available 
funds, and thus the ramp-up must be steep, approximately 30 percent per 
year, and sustained for at least the next five years. A National 
Nanotechnology Program will allow for continuous monitoring and 
feedback to make sure that the best ideas are funded. Also, increases 
in nanotechnology support must be consistent with an overall increase 
in the total physical science and engineering base in agencies such as 
the National Science Foundation, the Department of Energy, and the 
Department of Defense.
    As a nation, we have neglected our investments in physical sciences 
and engineering over the past decade. We have forgotten that these have 
been the drivers for our current level of material well being. The 
analogy is that physical science and engineering have been orchards, 
and we have been busily harvesting the fruits of those orchards for the 
past 20 years. However, we as a nation have forgotten that if we want 
to continue to harvest from such orchards, we must continually be 
planting new trees. As a fraction of GNP, our investments in basic 
research in the physical sciences and engineering have declined nearly 
30 percent over the past decdade. This state of affairs has convinced 
American young people that there is no future for them in these 
disciplines, even though the potential in these areas is great.

As an expert and a leader in this field what are your concerns in the 
        nanotechnology area?
    My primary concern is that we in the United States will not have 
enough of the best researchers to be the leaders in this crucial area. 
Currently, the U.S. is supplying approximately 25 percent of the global 
federal funding for nanotechnology. Other countries are determined to 
keep pace and even surpass our efforts. Even though Japan has 
experienced significant economic problems, they make certain that their 
NNI meets or exceeds the funding levels approved in the U.S.. The 
European community is doing the same. Korea, Singapore, Taiwan and 
China are pouring a much higher percentage of their economy into 
research in this area, and when considering the local purchasing power 
of currencies, the PRC has the largest NNI in the world in terms of the 
number of researchers they intend to support. Another significant part 
of the NNIs of all other nations is that they have set aside 
significant funds to recruit senior and talented researchers from other 
countries, and for the most part they are targeting the U.S. The 
primary requirement for federal support of basic research, from a large 
corporation point of view, is the training of the people needed in our 
corporate research and development labs to invent the new products that 
secure our futures. We are going to have to be smarter and more 
efficient going forward--we need cooperation among government at all 
levels, national labs, and corporate R&D facilities.
    I also have some secondary concerns for the future health of the 
U.S. R&D enterprise.
    Largely as a result of the lack of federal funding for research, 
American Universities have become extremely aggressive in their 
attempts to raise funding from large corporations.
    Severe disagreements have arisen because of conflicting 
interpretations of the Bayh-Dole act. Large U.S. based corporations 
have become so disheartened and disgusted with the situation they are 
now working with foreign universities, especially the elite 
institutions in France, Russia and China, which are more than willing 
to offer extremely favorable intellectual property terms.
    The situation with respect to corporate partnering with U.S. 
National Labs is not much better. In this case, inconsistent policies, 
the long time lines to negotiate relationships, and constantly shifting 
government priorities often make it too difficult for companies to 
partner with National Labs. Again, there is an international market 
place. National Labs in other countries are aggressively courting 
American companies. Perhaps the major example of this is Center for 
Innovation in Micro and Nano Technologies, or Minatec, in Grenoble, 
France, which provides access to facilities and a source of students 
for companies that locate research labs on their campus.
    The most important problem of all is that we have lost sight of the 
fact that government and corporate funds spent on research are not 
expenditures or luxuries that can be cut at a whim, they are essential 
investments to the long term viability of an enterprise. We have 
neglected those investments for a long time now. The prosperity of the 
1990's was prepared by the investements of the 1960's, when the U.S. 
Federal Goverment was investing 2 percent of GNP on R&D. That 
investment has paid off many fold over the decades, but because we 
became wealthy, we forgot that we needed to keep investing to stay 
wealthy. The impatience of corporate boards and institutional investors 
have placed too strong a focus on short term results with too little 
long-term investment. A significant factor in the current economic 
situation, especially in the high tech sector, is that we do not have 
enough new and compelling products and services to generate customer 
demand. The internet bubble was a failed experiment to substitute 
clever business plans for new goods.

How should and could government-industry collaboration enhance research 
        and development in the nanotechnology area?
    The U.S. government has several roles to play to insure that 
America leads the world in nanotechnology. The first is to invest 
sufficiently in the basic research enterprise, which produces the 
scientists and engineers who will invent the future. The second is to 
act as an early adopter of new technologies, especially in the areas 
where technological advantage enhances our security. Finally, 
government should consider a new role, that of mediator to bring 
together academic, corporate and national research labs so they can 
work together and the nation can share in the benefits of their 
discoveries.

    Senator Wyden. Thank you, very helpful. Dr. Swami, welcome.

      STATEMENT OF NATHAN SWAMI, DIRECTOR, INITIATIVE FOR 
NANOTECHNOLOGY, COMMONWEALTH OF VIRGINIA, AND MICROELECTRONICS 
                       PROGRAM DIRECTOR, 
                     UNIVERSITY OF VIRGINIA

    Dr. Swami. Thank you, Mr. Chairman and Senator Allen. My 
name is Nathan Swami, and I am here representing the Initiative 
for Nanotechnology in Virginia, INanoVO for short. We are a 
coalition of State Government, leading research universities, 
and a growing family of nanobusinesses all across the 
Commonwealth. A list of our members and stakeholders is 
attached in the written version of this testimony.
    Our organization has the goal to position Virginia among 
the national leaders in nanotechnology research and business 
development, as we are keenly aware that leadership in this key 
technology is a key to our economic future. In our short 
history in this field, we have seen great enthusiasm amongst 
different institutions in Virginia, different labs and 
different universities, including businesses, and we urge the 
passage of the 21st Century Nanotechnology Research and 
Development Act, as in the draft bill.
    In my remarks this afternoon, I wish to sketch some general 
arguments in favor of this bill, and touch briefly on 
Virginia's perspective, which we believe will be shared by 
numerous regions across the Nation, and conclude with two 
recommendations that we believe will strengthen the impact of 
this legislation.
    First, some comments. The rest of the panel have talked 
about scientific and business aspects of nanotechnology. I will 
extend it to its social implications and also its regional 
implications. First, we must recognize that our entire economy 
has become heavily dependent on technological innovation. Some 
economists estimate that nearly half of the American economy is 
now driven by new scientific discoveries in the technology-
heavy sectors, ranging from agriculture and medicine, to man-
made materials, electronics, information technology, and 
telecommunications.
    We now know that further development in these and other 
industries will be driven in large part by a broad general 
movement that we have come to know as nanotechnology. So it is 
inevitable that we view nanotechnology, which in its simplest 
definition is a natural outgrowth of our ability to work with 
ever-greater precision in ever-smaller dimensions, as the 
foundation upon which we will enter this new age of innovation.
    Some may ask, why do we need this bill? If nanotechnology 
is so promising, why cannot private enterprise foot the bill? 
The answer, quite simply, is this. We owe our leadership in 
high technology to the Government's timely investments in 
critical early stages, time and again, when emerging 
technologies were most in need of a boost in order to move 
toward eventual commercial success. From the dawn of modern 
agriculture, to aerospace, to the launching of the information 
age, Government support has been a powerful catalyst to drive 
basic research and accelerate technology transfer from the 
laboratory to the marketplace.
    To those who ask, why pass this bill, we can respond to 
another question. What will happen if we do not? The answer is 
disconcerting. As we see other Governments of the European 
Union and East Asian nations investing heavily in long-term 
major nanotechnology research and development centers, the hard 
reality is the worldwide race for preeminence in nanotechnology 
is on, and America must push to stay ahead.
    From Virginia's perspective, we see great promise for 
nanotechnology to boost business and industries that are 
crucial to our own overall economy, which include information 
technology, biotechnology, advanced materials, health care, et 
cetera. We have an impressive infrastructure in the State, with 
leading research universities, a lively venture capital 
community, and a business-friendly State government. For all 
our strengths, however, we are not yet at the point of critical 
mass. We have not yet created the synergies necessary to form 
leading nanotechnology research and development centers such as 
those currently under development in several other States.
    I believe this will be the case with numerous regional 
areas where nanotechnology is carried out, and so we believe 
that this bill will be a catalyzing force to encourage 
nanotechnology research and education in Virginia, as in 
industrial regions of the Nation, to foster development of 
major public-private partnerships and to actively engage larger 
segments of our business communities and academic communities 
in nanotechnology movement.
    Regarding the bill itself, we have two major 
recommendations that we believe will enhance its effectiveness. 
First, we judge that the pace of nanotechnology research will 
be accelerated considerably if the bill were to encourage the 
development of regional centers for excellence in research 
instrumentation which encompass both multidisciplinary 
facilities and state of the art infrastructure.
    All scientific disciplines are engaged in nanoscale 
research, and much of this work requires sophisticated and 
expensive equipment. If this bill were to encourage the 
formation of regional networks of such research equipment, then 
access would be enhanced. We would anticipate more efficient 
utilization of equipment, a much broader participation of 
researchers from colleges and universities of all sizes, and a 
faster spread of the scientific, technological, and educational 
benefits of nanotechnology.
    Second, we believe the bill should specifically require 
coordination between the National Nanotechnology Coordination 
Office and existing State nanotechnology initiatives, as well 
as university research offices. This decentralized approach is 
particularly necessary for nanoscale sciences, where much of 
the fundamental innovations will occur, or have been occurring 
in a bottom-up fashion.
    One method to accomplish this is for the national office to 
directly fund State initiatives and charge them with the task 
of identifying and encouraging specific lines of research and 
business development based on identified strengths in their 
particular regions.
    In conclusion, the Initiative for Nanotechnology in 
Virginia strongly supports the proposed bill and envisions it 
as a much-needed catalyst to help the Nation and regional 
centers realize their ultimate potential for scientific, 
technological, educational innovations through the enabling 
science of nanotechnology.
    Finally, I would like to thank the committee Chairman and 
Senator Allen for inviting us to speak at this forum, and I 
gladly offer the services of our organization to help the swift 
passage of this bill.
    Thank you.
    [The prepared statement of Dr. Swami follows:]

     Prepared Statement of Nathan Swami, Director, Initiative for 
    Nanotechnology, Commonwealth of Virginia, and Microelectronics 
                Program Director, University of Virginia

    Good afternoon. My name is Nathan Swami, and I am Executive 
Director of the Initiative for Nanotechnology in Virginia, or INanoVA 
for short. We are a coalition of state government, leading research 
universities, and a growing family of nanobusinesses that are emerging 
throughout the Commonwealth of VA. A list of our members and 
stakeholders is appended to the written version of my testimony. 
INanoVA's overall goal is to position Virginia among the national 
leaders in nanotechnology research and business development, as we are 
keenly aware that leadership in this exciting field is the key to 
Virginia's economic future. In our short history, we have found a 
rising tide of interest in nanotechnology, and it is with great 
enthusiasm that we urge passage of the ``21st Century Nanotechnology 
Research and Development Act.''
    In my remarks this morning (afternoon), I wish to sketch out some 
general arguments in favor of this bill, touch briefly on Virginia's 
perspective, and conclude with two recommendations that we believe will 
strengthen the impact of this important legislation.
    First, we must recognize that our entire economy has become heavily 
dependent on technological innovation. Some economists estimate that 
nearly half of the American economy is now driven by new discoveries in 
technology-heavy sectors ranging from agriculture and medicine to man-
made materials, electronics, information technology, and 
telecommunications. We now know that further developments in these and 
other industries will be driven in large part by the broad general 
movement known as nanotechnology. So it is inevitable that we view 
nanotechnology, which in its simplest definition is the natural 
outgrowth of our ability to work with greater and greater precision in 
ever smaller dimensions, as the foundation upon which we will enter a 
new age of innovation. This new age, the Age of Nanotechnology, is one 
where we will imitate nature itself, thus endowing us with the 
capability to make materials, devices, machines and medicines with an 
efficiency and effectiveness that is undreamt of today. We are on the 
cusp of that new age now, and government support can assure that we 
will get there first.
    Some may ask, ``But why do we need this bill? If nanotechnology is 
so promising, why can't private enterprise foot the bill?'' The answer 
quite simply is this: We owe our world leadership in high technology to 
the government's timely investments at critical early stages, time and 
again, when emerging technologies were most in need of a boost in order 
to move toward eventual commercial success. From the dawn of modern 
agriculture to aerospace to the launching of the Information Age, 
government support has been a powerful catalyst to drive basic research 
and accelerate technology transfer from the laboratory to the 
marketplace. In industry after industry, one sees the same pattern: 
federal dollars encourage early discoveries in a new technology, which 
then attracts private investment, which then grows into a successful 
industry, with large employers and many jobs for working Americans. 
Trace the history of agribusiness and the green revolution and you find 
federal dollars funneled through Agricultural Extension services in our 
land grant universities, an ongoing investment that has revolutionized 
American farming. Silicon Valley and Boston's Route 128 high tech 
corridor would not exist if the Federal Government had not invested in 
early stage research in computer science. The Internet itself is an 
outgrowth of federally supported research. We are now at another 
critical juncture in our technological evolution, and timely passage of 
this bill will go far to assure continuing American leadership in the 
global economy.
    To those who ask, ``Why pass this bill?,'' we can respond with 
another question: ``What will happen if we don't?'' The answer is 
discomforting, as we see other governments of the European Union and 
East Asian nations investing heavily in major nanotechnology research 
and development centers. The hard reality is that the worldwide race 
for preeminence in nanotechnology is on, and America must push to stay 
in the lead.
    From Virginia's perspective, we see great promise for 
nanotechnology to boost business development in industries that are 
crucial to our overall economy: information technology, biotechnology, 
advanced materials, health-care, aerospace, shipbuilding, and 
telecommunications, to name just a few. We have an impressive 
infrastructure in this state, with leading research universities, a 
lively venture capital community, and a business-friendly state 
government. Indeed, INanoVA owes its very existence to timely funding 
from Virginia's Center for Innovative Technology, an economic 
development agency focused on innovative technologies with an 
impressive track record in facilitating the start up and growth of 
leading edge businesses. For all our strengths, however, we are not yet 
at the point of critical mass, and we have not created the synergies 
necessary to form leading nanotechnology R&D centers, such as those 
currently under development in several other states. This bill, we 
believe, will be a catalyzing force to encourage nanotechnology 
research and education in Virginia, to foster the development of major 
public/private partnerships, and to actively engage larger segments of 
our academic and business communities in the nanotechnology movement.
    Regarding the bill itself, we have two recommendations that we 
believe will enhance its effectiveness.
    First, we judge that the pace of nanotechnology research will be 
accelerated considerably if the bill were to encourage the development 
of regional centers for excellence in research instrumentation, 
encompassing both multi-disciplinary facilities and state-of-the-art 
infrastructure. All scientific disciplines are engaged in nanoscale 
research, and much of this work requires sophisticated and expensive 
equipment. If this bill were to encourage the formation of regional 
networks of such research equipment, then access would be enhanced. We 
would anticipate more efficient utilization of the equipment, a much 
broader participation of researchers from colleges and universities of 
all sizes, and a faster spread of scientific, technological, and 
educational benefits.
    Second, we believe the bill should specifically require 
coordination between the National Nanotechnology Coordination Office 
and existing state nanotechnology initiatives, as well as university 
research offices. This decentralized approach is particularly necessary 
for nanoscale sciences where much of the fundamental innovations occur 
in a ``bottom-up'' fashion. One method to accomplish this is for the 
national office to directly fund state nanotechnology initiatives and 
charge them with identifying and encouraging specific lines of research 
and business development based on identified strengths in their 
particular regions.
    In conclusion, the Initiative for Nanotechnology in Virginia 
strongly supports the proposed bill and envisions it as a much-needed 
catalyst to help the nation and regional centers realize their ultimate 
potential for scientific, technological, business and educational 
innovations, through the enabling science of nanotechnology.
    Finally I would like to thank the Committee for inviting me to 
speak, and I gladly offer the services of our organization (INanoVA) to 
help in the swift passage of this bill. Thank you.

    Senator Wyden. Dr. Swami, thank you. that is very helpful. 
All of you have been very good. Just a few questions from me on 
this round, and Senator Allen and I always go back and forth, 
and as I said, what I would really like to do is just see if we 
could engage in a discussion.
    I think it is fair to say, gentlemen, that the premise of 
this bill is that the National Nanotechnology Initiative is a 
sensible step for Government. I think it is a good step, a 
constructive step, and we are for it.
    We think we can do better. We think we can build on it. I 
think what would be helpful is if you would highlight for us 
what you think the strengths and limitations of the NNI are. 
We'll start with you Dr. Stupp because of your work with the 
Academy. That way we can get your sense of where we are without 
getting you into endorsing every part of our bill as it is 
written.
    Feel free, if you would choose to, to endorse every part of 
this legislation. But seriously, what I think we are more 
interested in is getting your sense of what the Government is 
doing well in this area, what areas the Government could do 
better in, and starting off our discussion in that kind of way.
    Dr. Stupp. Certainly, what the Government did well was 
create NNI. That was a great concept. I think the only way to 
ensure that nanotechnology proceeds to its ultimate potential 
here in the U.S. is to have some kind of national program in 
nanotechnology. I think what is being done very well is 
certainly the great interest that all Federal agencies have 
shown in this initiative. I think across the board all agencies 
recognize the importance of nanotechnology, and that it has 
been very reassuring for members of the scientific community.
    The limitations, of course, are along the lines of 
interagency partnerships, which we view as being key to the 
future of nanotechnology. A very important partnership, for 
example, is that of the NIH and the other agencies, because the 
only example of nanotechnology at work in its best expression 
is biology itself.
    Senator Wyden. What should be done in the biology area? I 
noted that in your testimony earlier. What would you like to 
see done in the biology area that isn't being done now?
    Dr. Stupp. I think I would like to see programs that are 
specifically targeted to this interface of biology, medicine, 
and the physical sciences in the nanocontext, programs that are 
started by or initiated by agencies such as NSF, working 
alongside the NIH.
    I think the NIH, for example, needs to invest a lot more 
money in nanotechnology than they are investing today, and the 
NSF on the other hand needs the funds to leverage those 
interactions with agencies such as the NIH.
    I think my community, you know, the scientific community is 
really screaming for initiatives that are at this interface. 
The NIH has been an organization that has had a very strong 
mission, and you cannot criticize that. Their mission is to 
look over the health of our Nation, but at this point we all 
recognize in the scientific community that many of the most 
exciting opportunities lie at this interface with biology, and 
the NIH does not have the background, perhaps, to deal with it, 
and the NSF does not have the funds, so we have I think a 
problem of resources. We have, on the other hand----
    Senator Wyden. But that is a serious problem, we have a mix 
of insufficient talent and insufficient funds in an area that 
has extraordinary potential.
    Dr. Stupp. We have great talent, and insufficient funds.
    Senator Wyden. Maybe I missed it. Did you not say at NIH 
there are people with the requisite expertise in the biology 
field, and at NSF there are the funds?
    Dr. Stupp. But, of course, I am referring to the NIH as an 
agency that funds research. I am not speaking about the 
community of scientists, but there is, if you talk to any young 
person, our brightest young people in American universities 
today that are interested in science, you will find a large 
majority of them are interested in biology, but not necessarily 
traditional biology. They would like to innovate in medicine, 
and they see the technology as an enabling tool to get there.
    Senator Wyden. Let us see if we can get from Mr. 
Modzelewski and Dr. Williams and Dr. Swami the pluses and 
minuses of the NNI.
    Mr. Modzelewski. The biggest plus was the actual awareness. 
It told so many people in the corporate world and other Nations 
that nanotechnology was real and was serious. Unfortunately, 
the negative side of that awareness was sort of the 
nanotechnology race that might be best compared to a space race 
that was set off among Governments, who are increasingly 
funding and are increasingly aware of what this means to their 
economies in the future.
    Other positive areas were the much-needed funds, the level 
of coordination, and a lot of groundbreaking research that I 
think was actually very visionary for a new program that looked 
into social aspects and implications, and economic aspects and 
implications of what was greatly a basic research program, so 
it was quite innovative.
    We see some negative, not so much negative comments, but 
where there is a jumping off point to go a little further is 
probably look at research and development for 
commercialization. Again, things like scaling issues, it is one 
thing to make a very small amount of something on basically a 
small piece of glass in a laboratory, it is another thing to 
scale it up to production levels that industry could use. That 
is something in particular that many of the Asian competitive 
Nations such as Japan and Korea are very good at.
    Another area to look at is the integration of private 
sector, all the more so into the NNI, and ensure that on things 
such an advisory panel, that industry is strongly represented, 
so that much of the research direction does go to the future of 
the economy, not that we would like to take out a lot of wild-
haired ideas that are some of the foundations of great 
scientific discovery. But to know that there is a level of 
looking towards the commercialization of these technologies I 
think would be very important to any further direction.
    And then I think there are a couple of issues that you 
could look at that are problematic across emerging 
technologies, and I think that would be things like the 
technology transfer system in the United States. It has 
certainly been improving at the Government level, but it still 
by most standards would be considered lacking at the 
universities, and still at a corporate level, when compared to 
other commercial operations, so to speak, and also the fear of 
a lot of patent issues, with the Patent Office being properly 
trained to understand this multidisciplinary structure, in 
granting patents that are too wide or too small, and also very 
timely and accurately approving patents.
    Senator Wyden. Dr. Williams.
    Dr. Williams. I will have to second most of that. I think 
the primary issue that NNI did was give the field legitimacy. 
At that point in time it was viewed primarily as fiction, and 
it was often very difficult for people who were working in the 
area to be taken seriously, or to get grants funded when they 
submitted proposals.
    Also, I think one thing that NNI did wonderfully was accept 
responsibility for ethical issues. Very early on, we were 
looking at the societal impacts and issues, trying to make sure 
that we did not have any nasty surprises that would come along 
and blindside the people working in this area. There was good 
communication about both the good, the benefits, and the 
potential downsides of nanotechnology and how they could be 
dealt with.
    It is also true that the creation of the United States NNI 
has seeded tremendous competition worldwide. As soon as we had 
an NNI, the world had an NNI. In fact, Japan makes absolutely 
sure that whatever we do in this country, they do at least as 
much, because their fiscal year follows ours by about 5 months. 
Whatever the United States enacts, they do the same or more, 
and that can also be said of the European Union.
    So as I mentioned in my remarks, I think the only way we 
can deal with global competition is to leverage all of the 
assets we have available in this country: the academic research 
community, our national labs and our corporate labs. I think 
the problem we have right now is that what few interactions 
existed are dramatically falling apart.
    I see these communities essentially turning their backs on 
each other and just walking away. I myself have just given up 
hope of negotiating with universities anymore to get engaged in 
joint research ventures. It is just too painful. I think we 
really need to have, as a part of a national nanotechnology 
program, means for bringing these communities back together and 
conflict resolution among these communities. Perhaps even an 
explanation of what the heck Bayh-Dole actually means, and what 
it was intended to do, rather than the very, shall we say, 
aggressive types of actions that we see taking place whenever 
we try to negotiate with the university now.
    Senator Wyden. We'll talk a little bit more about Bayh-Dole 
in a minute or two. Dr. Swami.
    Dr. Swami. Yes, briefly, I think a major strength, as has 
been stated in the past, has been increasing the visibility and 
the legitimacy of nanotechnology, no doubt about that.
    Another strength, although it has been also pointed out as 
a drawback, by Dr. Stupp, is getting organizations to work 
together. Yes, there is no doubt that there is a limitation in 
that, but to me it is also a major strength that agencies as 
diverse as the EPA were brought into, with the NSF, all to work 
together on nanotechnology. Five years, seven years ago I would 
never have thought this would have happened.
    Major limitations from the point of view of at least a 
regional center is, there are just too few large center 
opportunities, and since these are too few they end up being 
extremely competitive, fighting for a certain small amount of 
funds for a small amount of time, with a large number of 
competitors, and so I think the programs of the NSET and the 
interdisciplinary research programs that NSF has should be 
expanded to basically allow longer term research.
    Second is research infrastructure has not been directly 
addressed. There is a lot of good infrastructure available to 
some centers which are near national labs, or which work with 
those national labs, but otherwise universities have to build 
this infrastructure, and then have the industry come and work 
with the universities at these, the infrastructure, and I think 
the infrastructure should be addressed in some form, for 
nanotechnology especially.
    And finally, coordination of agencies, which many people 
have pointed out as a limitation, I would take that a step 
further. It is not just coordination of agencies for actual 
research done, but coordination of what happens with that 
research, who is doing what, coordination at the State and at 
the regional levels. That would be a limitation I think that 
could be acted upon.
    Thank you.
    Senator Wyden. Okay. Senator Allen.
    Senator Allen. Thank you, Mr. Chairman. Thank you all for 
your insightful testimony here, and answering questions. Let me 
ask Hon. Richard Russell a question. Listening to all of these 
concerns, I am going to follow up on some of them with him, but 
does the Administration have any target plans to aid in 
technology transfer and the commercialization of 
nanotechnologies?
    It has been said through a variety of ways, and I do want 
to follow up on why it is so hard to work with universities for 
the private sector and so forth, but do you have any target 
areas to get through some of these problems? Much of which is 
saying, get it into commercialization like some of the examples 
we have, and that will obviously pay for some of the research 
in the future.
    Mr. Russell. Let me break that into two pieces. I think 
part of what NNI has been trying to do is push the envelope, 
and push technologies out, and if you look at the grand 
challenges under the NNI programs that currently exist, and 
look at things like nanoscale manufacturing, this is clearly an 
effort to push nanotechnology into, not just manufacturing, but 
into the economy. The second issue revolves around generically 
the concept of how we push tech transfer, and I think that with 
nanotechnology, as with all research we do with the Federal 
Government that we try to get commercialized, I think the very 
same issues that are revolving around nanotechnology are also 
relevant across the board, and so we wanted to promote things 
like CRADAs, we want to promote--
    Senator Allen. Like what?
    Mr. Russell. CRADAs, corporate research and development 
agreements. We want to promote the use of the existing legal 
framework. Bayh-Dole was mentioned, and obviously there are 
issues between universities and industry, because really it is 
a win-win when you look at the universities and you look at 
industry. It is in both their interests to get this technology 
out. Industry obviously gains, the economy obviously gains, as 
does the university, and so where there are breakdowns in terms 
of nanotechnology I think there are probably the exact same 
issues we see across the board for all technology issues.
    Senator Allen. Let me follow up, then, with the rest of the 
panel here. Thanks for your comments.
    Some have alluded to the space race, and so forth, of the 
1960s, and we have heard about how the Japanese and obviously 
Taiwan, Korea, and the European countries are all wanting to 
emulate or do more than we are. We hear the same things in 
aeronautics research. There are a lot of similarities in here.
    The one thing that has been a thread through here, though, 
and especially from Dr. Williams and Hewlett-Packard's 
comments, as well as Mr. Modzelewski's comments, is the 
scientific research here, as far as the collaboration which is 
necessary with the private sector and universities and the 
Government, everyone collaborating, rather than having the 
Federal Government kind of as a mediator, and maybe it has to 
be.
    Why are intellectual property laws--in some cases, I have 
heard you say that is harming us, and how is that different 
from the intellectual property laws in other countries, whether 
it is Japan or whether it is Europe? And if anyone of you all--
and maybe, Dr. Williams, I would ask you to do this, since you 
say you do not want to bother working with universities and 
colleges, that Hewlett-Packard, it is just too much of a 
nightmare, it is too difficult.
    These sorts of things, such as our patent laws, our 
intellectual property laws, and whatever other laws there may 
be at the Federal level that are harming cooperation with the 
private sector and universities, all are just fundamental 
problems that need to be addressed. And to the extent we can we 
ought to fix it so that people will have that collaboration, 
and make those investments, and obviously help the universities 
as far as their education, but ultimately, of course, benefit 
the competitive leadership role of our country.
    So Dr. Williams, if you could start off, and any of you all 
who want to lend some commentary to that, I would appreciate 
hearing it.
    Dr. Williams. I think the problem is not that the 
legislation is not good. I have now read the Bayh-Dole Act so 
many times I think I have actually memorized significant 
portions of it, and as I read it, it is a very fine act. 
However that is as I interpret it, and what we find is that 
people at universities interpret the same act, the same words 
in an entirely different fashion.
    Senator Allen. For purposes of the record, would you share 
with us what your view is of the purpose of the Bayh-Dole Act? 
And how is it being misinterpreted?
    Dr. Williams. My view of the Bayh-Dole Act is that it is a 
vehicle by which universities should be able to license 
intellectual property that they create in order to generate an 
economic benefit to the universities, and reward them for 
having created intellectual property. And in a sense to repay 
the investment that the public has made into performing 
research in generating an income stream for the universities. 
From that standpoint I believe that that is a very excellent 
idea. What it does is, it made universities more aware that 
intellectual property was important, and that it was an asset 
that they should take seriously.
    I would say that from a large corporation point of view the 
problem comes down to the interpretation of just a few very 
simple sentences in the Bayh-Dole Act, which state that in the 
case of commercialization opportunities, small companies should 
be preferred over large companies. And there's also another 
sweet little sentence in there that says, if a company provides 
some funding to a research program, the university ``may'' give 
a license for that work to the company that provides the 
funding.
    A large company reads that and says, okay, I give money to 
Professor X, whatever Professor X does, I own that. The 
university says, no, we actually have to prefer small 
companies, so you give money to Professor X, we, the university 
owns it. And by the way, when it comes time to license it, we 
are going to license it to a small company, and it is going to 
be very likely that that small company actually was created by 
Professor X.
    So large companies have been burned many times by giving 
money for research to universities, only to find that they had 
absolutely no rights to the intellectual property that was 
created at all, and the intellectual property winds up being 
put in the hands of a small startup company which actually has 
the principals of the startup company being the professors who 
got the research funding. There's a fairness issue there, and 
enough large companies have been burned enough times by this 
type of thing happening that most of the people I have talked 
with at large companies say, forget it, we are just not going 
to go there anymore. This is the end.
    But in fact there is a reasonable decent and fair middle 
ground. The thing that the University interpretation of the 
Bayh-Dole Act does not really recognize is that there is a 
difference between an exclusive and a nonexclusive license, 
that if a company gives money to a professor to do research, of 
course it is totally unfair for the company to claim ownership 
to all of that research because they are not paying for the 
infrastructure that has been paid for by State and Federal 
funds and everything else that goes on. But on the other hand, 
it is possible to grant a nonexclusive license, in other words 
a license that recognizes a sharing of that intellectual 
property, the fact that the company provided money, and also 
often provides intellectual input to help to create those ideas 
as well.
    So I think there is a meaningful middle ground. What has 
happened is that the discussion between most large companies 
and universities has become so strident that they become 
polarized and refuse to even acknowledge that there is a middle 
ground available to them, and what is happening is that they 
are growing further and further apart. And for my own part, I 
find it is far easier to me to start up a research 
collaboration with a university in Russia, or China, or France, 
than it is with a university, shall we say, just a few miles 
from where I am located.
    Senator Allen. Thank you, Dr. Williams. Dr. Stupp.
    Dr. Stupp. As Professor X, I guess I have to say something. 
right?
    [Laughter.]
    Senator Allen. This is a great concern, that it is easier 
for a company to deal with it especially in another country.
    Dr. Stupp. I just wanted to say for the record that even 
though I agree with many of the things that my colleague Mr. 
Williams said, I think for the most part universities are 
careful, usually, to grant exclusive or nonexclusive licenses 
to those companies that funded the research. I think, I am sure 
there are exceptions. There may be different trends on the West 
Coast versus the East Coast or the Midwest, but I think if you 
look at the problem specifically, usually the universities are 
careful to do that.
    The issue of a nonexclusive license, I agree with what Stan 
said, and yet the problem is that sometimes we receive, you 
know, $50,000 for 1 year of research from a company, often 
times a large company, and we are always very eager to please 
the company and show good results, so that you end up spending 
a lot more than $50,000 to achieve the goals. And so in that 
case, of course, a nonexclusive license is perfectly 
reasonable, and that is the way it should be done.
    But just for the record, I think that if one wants to 
assess if this is a real problem, you really have to look at 
the statistics. There are too many universities in this 
country, and many of them are extremely careful, I would say, 
about matching one-to-one, and funds versus licensing.
    Senator Allen. Well, Mr. Modzelewski, from your 
association, which obviously has a multitude of folks, you are 
looking for capital in your alliance, as far as your 
nanobusinesses, what do they say about this? We have two 
slightly different points here.
    Mr. Modzelewski. I think actually, picking off of something 
you just said, it is that careful nature. They are so careful 
that nothing gets transferred out. There tends to be, there are 
very few operations. I have heard less than a dozen among all 
the thousands of universities in America that are actually 
profitable on a tech transfer standpoint. Something like 6, I 
think, were last year, and one of the reasons for this is that 
nothing gets transferred out. The negotiations tend to be quite 
aggressive and quite onerous. The amount, the percentage that 
the university asks for tends to be very high.
    This is--looking at the psychology, I mean, not being a 
psychologist myself, but looking into some of it, you tend to 
see from conversations with tech transfer people that they are 
all trying to hit a home run. They are all looking for the next 
Gatorade, or the next giant biotech revolutionary discovery 
that will bring in millions if not billions to the university, 
so in light of that they tend to negotiate so tough that 
nothing gets out.
    They tend to look for such a big percentage just in case 
something hits, and that they are not held responsible for only 
getting 10 percent of a multibillion dollar drug discovery, 
that instead they just put the brakes on everything. And it 
does include, certainly, the corporations, but also the 
startups. There are many entrepreneurial professors at 
universities that try to take their discoveries off, and just 
cannot, or the fight is so long they say, I am really 
considering leaving my university.
    I have had professors say, I would rather go to one of the 
ones that is working, or get out of here and give up my past 
portfolio, just cede it to the university, rather than sit here 
and just not be able to get anything done. They want to be 
entrepreneurs, they want to get things out, but the negotiation 
process generally just ties them up so badly.
    Continuing along the same lines, there is also just issues 
with taking intellectual property and making it something that 
is global. The cost of registering patents in the U.S. is 
actually very cost-effective, and our processes really should 
be the envy of the world, but when you try to take a simple 
discovery that is here in the United States and get global 
protection, you are talking about more than a $100,000 process 
with legal fees and registration fees, and that is an 
incredible burden that most universities, unless award after 
award is being given to the research that was discovered, are 
willing to extend to the professor. And so that is another 
point that once you get to that global level, you start having 
some real difficulties and hit the wall.
    Senator Allen. Well, some of those are similar to business 
decisions, regardless of whether it is a university and having 
to register it.
    Mr. Modzelewski. They cannot be blamed for that. If every 
professor who discovered something wanted a global patent, I 
think the university certainly does need to make that business 
decision. Nevertheless, you are entering an area of where might 
there be some easement of that sort of pain on a researcher, 
and where might there be programs, whether they be loan 
programs, or something along those lines, that might be able to 
help this bottleneck, the ability to get global protections.
    Senator Allen. If I may, Mr. Chairman, can I follow up on 
this line of concern?
    Senator Wyden. Of course.
    Senator Allen. In listening to the three of you all on 
this, there is maybe three different perspectives. Let us 
assume that some universities are more easy to deal with than 
others, some are very picky and very restrictive. Apparently, 
Hewlett-Packard has not found those that are better.
    In listening to you, obviously the Nanobusiness Alliance, 
their view is that some are better than others. Could it be the 
case, or could it occur that those universities that are, let 
us say, more willing to strike a reasonable deal and a 
partnership with the private sector working with their 
professors, students and so forth, would those not then be one 
of the more attractive universities, or are they commonly 
known?
    And I do not ask you to start listing names here, but if 
they were more commonly known, say the top 10 percent that have 
good business sense and are willing to take some of these risks 
and partner, would not more research go to those universities 
in the event that they have that reputation, so that it does 
not matter? Any company, Intel or Micron, would want to do 
that?
    Mr. Modzelewski. Yes. It almost becomes self-fulfilling. 
The ones who are very good at it are able to cut much easier 
terms, because they have so much flow that they know there will 
be something to receive on the other end. We have a lot of 
other universities, a few that they only have one shot. They 
swing for the fence on the ones they do get out. So you do see 
the schools that are well known in technology development, some 
of which are actually represented right here, being able to be 
much more fair in their negotiations than others, who are again 
just looking for that big hit that will change the university's 
dynamic.
    Senator Allen. Dr. Swami, have you found this in Virginia, 
since you have worked with a dozen universities?
    Dr. Swami. Yes. In Virginia we have the same paradigm with 
the big company and the small company, but clearly even small 
companies have had trouble getting these technologies on board 
because of negotiations with universities. Nevertheless, we 
still have had some success with at least about a handful of 
such technologies. Usually that has occurred when the 
professor, the entrepreneur, is entrepreneurial enough to take 
it to the next stage. If the professor has not been of that 
nature, then usually there is an even bigger stumbling block 
than anything else.
    Senator Allen. Dr. Stupp, do you have any closing comments 
on behalf of the universities?
    Dr. Stupp. I think one other thing one should add is that 
our experience with this process is still pretty young, and I 
would argue that maybe 5 years from now you will be able to 
make a better assessment, and this is a self-selecting process, 
I think. The universities who are really smart about dealing 
with technology transfer, eventually they will become 
attractive places, as you said, and people will gravitate to 
those, and those will be successful, I think.
    We do not have many decades of experience in tech transfer 
at universities, and so I think you just need to let things 
sort out.
    Senator Allen. Thank you, and thank you, Mr. Chairman, for 
letting me go a little longer.
    Senator Wyden. I thank my colleague, and I thank Dr. 
Williams. I have been trying to get everybody in this town to 
get interested in Bayh-Dole, because I think if people really 
understood what was at stake, we would do more than talk about 
this from time to time for a few minutes.
    The fact of the matter is, and we have considerable 
statistics on this, Dr. Stupp, we spend billions and billions 
of taxpayer dollars every year on the National Institutes of 
Health, energy laboratories, and environmental laboratories. 
Under the Bayh-Dole law, which is more than 20 years old, we 
are supposed to have a process for commercially transferring 
these fruits of the taxpayers' research treasure trove to the 
private sector, yet virtually nothing gets out.
    I have done a number of analyses of Bayh-Dole, and in my 
view, not only does the system not work for companies, it does 
not work for universities, and it does not work for taxpayers. 
We are at the point now where major agencies cannot even 
document where the tax dollars go with respect to key areas of 
investments with the universities and companies. Specifically 
at my instigation, the National Institutes of Health has sought 
to document Government investments in medicines, and they have 
not been able to do it. They literally do not know where all 
the investments are in promising medicines that the taxpayers 
have put up money for.
    We do have a sense that perhaps half of the breakthrough 
drugs can get to market with taxpayer money, but we do not know 
where all of those investments go, and NIH is just now trying 
to assemble such a database.
    And so I am going to leave this question of Bayh-Dole, 
other than asking Mr. Russell one question. We discussed this 
when you came to my office, when you were going to be 
confirmed. In light of the testimony today, our discussion, and 
other discussions I know you have had on Bayh-Dole, are you now 
convinced that it is time for an administration task force 
composed of university officials, of companies, and taxpayer 
advocates, to work together in a cooperative way to get more 
value out of taxpayer investments?
    What Dr. Williams has done is blow the whistle here. Thank 
goodness somebody did from the real world, because when people 
talk to me about it, they say it does not work for 
universities, it does not work for companies, and it sure does 
not work for taxpayers. The statistics are pitiful, beyond the 
paltry return and the fact that we do not know where the money 
goes.
    I have talked about this several times, and every time I 
do--Dr. Williams, I am going to be able to invoke your name--
everybody heads for the ramparts. The universities worry that 
Ron Wyden is about to upset the apple cart. Western 
civilization is going to end, universities will not be able to 
do any more of the research, and all I have talked about is 
creating a winner for universities, companies and taxpayers.
    I want to leave Bayh-Dole after we get Mr. Russell's 
comments, but what I would like to hear from Mr. Russell is 
that you get the message. You understand how serious this is. I 
would like to know within 30 days, whether the administration 
is willing to work with universities, companies and taxpayer 
groups to take a look at this 22 year old law. I believe it was 
enacted in 1980, and it does not seem to work for anyone now. I 
think we ought to examine this on a cooperative basis, because 
after all this is not a question of somebody being corrupt or 
evil.
    [For example] a big part of Bayh-Dole did not even envisage 
the kind of health care applications that Senator Allen and I 
are so excited about. It did not even envisage what would 
happen with the tax law, where Bristol Myers Squibb made $1.6 
billion last year and virtually nothing was given back to the 
taxpayers. So I would like to see you all within the 
administration review this on a cooperative basis.
    Mr. Russell. As you indicated, you have raised this with me 
previously. We took it seriously at that time, as we continue 
to take it seriously. We did ask PCAST, the President's Council 
of Advisors on Science and Technology, which is made up of both 
university presidents and industry CEO's, to look at this 
issue.
    The initial reports that we have gotten back is that Bayh-
Dole as a framework makes sense. I think some of the specific 
issues that have been raised here today, though, are 
interesting, and I think that we should look at those, I am 
more than happy to work with you and your staff on fleshing out 
some of these very specific issues, because clearly, we are 
talking about nanotechnology, the Federal Government is 
investing a lot of money in nanotechnology. It will be 
investing a lot of money in the future in nanotechnology.
    The universities are going to get a lot of that research 
money, and we do want to see that research passed through to 
the U.S. economy, so I am more than happy to work with you and 
your staff on the issue. I hate to commit to a task force. I 
will tell you that right up front.
    Senator Wyden. If you all want to try and reinvent the 
Bayh-Dole law through the prism of nanotechnology, that is fine 
with me, but what Dr. Williams just told us is that he is 
having so much trouble with this that he and his colleagues 
will traipse to Russia and around the world, rather than work 
with universities here. That is not a trifling kind of concern. 
That goes right to the heart of what I have been interested in 
trying to change.
    Mr. Russell. And I would say, as I think I started my 
comments off to Senator Allen, that I use nanotechnology as an 
example. I do not think this is a nanotechnology-exclusive 
issue. I think we have to be careful that when we talk about 
tech transfer we look at it broadly, and not based on any 
single emerging technology, because I think whatever lessons we 
learn from nanotechnology are going to be the same for other 
technologies as well.
    Senator Wyden. I am willing to look at it broadly. I have 
looked at it broadly, and I have looked at it in depth; I have 
even looked at the exclusivity matter, Dr. Williams. A few 
years ago, there was an exclusive deal between Scripps and 
Sandoz, and I basically busted that up, because it was totally 
contrary to the interests of the public, to the business 
community, and to this country.
    The Scripps-Sandoz deal would essentially have put an 
exclusive agreement together with respect to general scientific 
knowledge, and it would all have been lubricated with taxpayer 
money. We broke that up, and since then I have followed the 
issue. At a minimum, Mr. Russell, I would hope that the 
administration would use nanotechnology in a cooperative way 
with universities, companies, and with taxpayer groups to get 
some changes. I think we can do so much better, and I have 
tried to promote such a discussion for some time.
    Dr. Williams, I did not know you were going to discuss 
Bayh-Dole today, but I think you performed a great service by 
blowing the whistle on this.
    Dr. Stupp. Mr. Chairman, I wonder if you would allow me 
just one extra thing.
    Senator Wyden. Sure.
    Dr. Stupp. That when you speak about the enormous 
investment of taxpayers' money, and the billions of dollars, 
you should also recognize that this always needs to be a part 
of the equation if we are going to revisit the law and so 
forth, that we have, of course, we provide--I mean, the main 
function that we have is education, and we have invested--a lot 
of that taxpayer money actually goes into training a very 
technically competent workforce, perhaps the best in the world, 
possibly, and we use the investment from taxpayers' money to 
educate our people, and this is a very costly procedure.
    At the same time, large companies in the last 20 years have 
downsized their basic research efforts, and so there is now 
suddenly a much greater--you know, there is a spotlight on 
universities to take the burden of basic research and 
development, which is very difficult to do inside universities, 
because it is not compatible with education.
    Senator Wyden. I think that is a very fair comment, and 
there is no question that there are many beneficial 
ramifications of the work between companies and universities. 
Bayh-Dole's central premise is that when taxpayers support 
research, we are supposed to get breakthroughs out of the 
laboratory and turn it into innovations in the marketplace. 
Clearly this is an area where we must do better. If companies 
like Hewlett-Packard tell us that not only are we not doing it, 
but they are so frustrated at this point that they are going to 
go to the former Soviet Union, we have got a challenge on our 
hands.
    Dr. Stupp. Maybe you should come to the Midwest.
    Senator Wyden. Let us have those discussions. I thank my 
colleagues. I have additional questions. Would you like to ask 
any?
    Senator Allen. No, but I do want to thank you all for your 
very insightful testimony.
    Mr. Chairman, I am sorry, I have other meetings I have to 
get to.
    Senator Wyden. Thank you. Let us go specifically back to 
nanotechnology. Now that we have had this discussion on Bayh-
Dole, I would like to hear about the health care applications 
of nanotechnology, and particularly what kind of nano-inspired 
health care applications look promising in the short term. What 
does the landscape look like further down the road? Would any 
of you like to start with that? Dr. Stupp.
    Dr. Stupp. Well, there are two technologies, I think, that 
are likely to be nano-inspired, that will have broad impact. 
One of them is targeted drug delivery. If you think about 
cancer, for example, we basically kill our patients with toxic 
drugs, and in the end the battle is lost, and a lot of these 
problems have to do with our ability to target medicines to the 
right locations of the body.
    I think the nanodesigns of drug couriers will definitely 
address this problem. Whether you see this as a short or a long 
term is not really clear, but nonetheless I think, I would 
prefer to think that it is not really long range, it is 
actually middle range.
    The other one is regenerative medicine, because that is an 
alternative to medicines. Why not use nanotechnology to 
regenerate parts of the heart, or to regenerate cartilage, or 
bone, or regenerate spinal cords so you can reverse paralysis, 
reverse blindness?
    What is needed there is, you have to design materials, 
which are typically referred to as scaffolds, that will give 
cells the right signals to regenerate normal tissue, and the 
only way we are going to be able to get that is to design 
materials at the nanoscale that can in some rational way 
interact with cells, so I would say regenerative medicine is 
one of those areas where nanotechnology has enormous potential, 
and it happens to be a wonderful example of something that 
biologists alone will not do, engineers alone will not do. This 
is going to have to be a team effort, and highly 
interdisciplinary effort, and a very important fruit of 
nanotechnology, basically repairing human beings, and this will 
eliminate the need for a lot of the medicines that we now take 
which are not very successful, probably shorten our life span.
    Senator Wyden. Others on the health care applications of 
nanoscience? Dr. Williams?
    Dr. Williams. I think an area that actually has potential 
for happening relatively soon is an entirely new means for 
diagnosis. Right now, of course, when you go to the doctor you 
give a little blood sample and it goes off to a lab, and it 
takes several days to come back, and then, of course, it is 
fairly nonspecific set of information that the doctor gets.
    With new technologies for being able to build entire 
laboratories on a chip, and within those laboratories, being 
able to build extremely sensitive nanoscale detectors which can 
be targeted at a wide range of vectors, if you will, for either 
external attack or some type of internal disease like cancer, a 
medical exam can essentially be performed immediately. You get 
results back in real time.
    I think that with the marriage of advanced information 
technology we also have the possibilities of creating in real 
time with the diagnosis a directly specific treatment for the 
particular patient who is coming to see the doctor, so I think 
that this whole area of diagnosis is going to change the way 
people interact with their doctors, and the way you have your 
physical exams, and that I think is the type of thing that 
literally can happen within a relatively short number of years, 
2, 3 years, some of these things can be up and ready to go if 
there is the will to actually do it.
    Senator Wyden. Dr. Swami, did you want to comment on 
health?
    Dr. Swami. My comments would probably follow on what Dr. 
Williams said. Basically, I would just extend it. Diagnostics 
is probably one specific application in the general field of 
sensors, because nanotechnology has the ability to sense 
extremely sensitive signals. Due to that, and due to the fact 
that it can be embedded very easily into products, sensors 
would be a field where you can see an immediate application, a 
platform where they could immediately or very soon work 
directly on the product development in that field.
    Mr. Modzelewski. One other area that is already happening 
right now and is already in trials from a company called C-60 
is actually using a Bucky ball as a protease inhibitor for the 
AIDS virus. As the AIDS virus tries to attach itself to a cell, 
you might almost consider it like an octopus trying to latch 
on, and what they basically are working on right now is 
actually using a Bucky ball to actually block it from attaching 
itself to the cell.
    It is not treating the HIV, so the HIV is not developing 
any mutations towards it, or going about it different ways. It 
is just thwarting it from doing its job, which is to attach 
itself and to replicate.
    Senator Wyden. Gentlemen, some are raising concerns about 
the ethics of nanotechnology and saying in effect the 
scientific developments are outpacing the focus on ethical 
concerns. I am curious whether you share that view and, if so, 
whether you have any recommendations for how it ought to be 
dealt with.
    Dr. Williams. Frankly, I think, and largely because of Mike 
Roco's leadership, the NNI has been almost unique in its focus 
on societal issues, and trying to elevate the awareness very 
early in the entire cycle, so yes, it is very, very true that 
right now our tools that we have are evolving much faster than 
we ourselves are.
    For millennia we have all very slowly worked with our 
tools, but now the tools are changing by orders of magnitude, 
well within the life span of any individual, so that is very 
difficult for us to deal with and adjust to, but in my own 
opinion the NNI provides the model that exists so far for being 
able to take into account these ethical and social issues in 
watching a science evolve into a technology and beyond.
    I think this is a first. I think it is the first time this 
has been done, so I am sure that the process can be improved. 
But I applaud Mike Roco and the others who have been involved 
in Examining ethical issues doing this, because it is 
imperative for people to be well educated in the tools that are 
going to be used in the society around them.
    Senator Wyden. Doctor.
    Dr. Stupp. I just would add, briefly, that our committee, 
our report very specifically talks about this in recommendation 
9, because we felt that even though there was the intention of 
the NNI to look into issues of societal implications, the 
reality is, it really has not happened to a great extent, and 
so we are recommending that the NNI implements a new strategy 
to make sure that those programs do take place.
    Senator Wyden. Gentlemen, in your view, what needs to be 
done to make sure that this country has a properly educated 
nanotechnology workforce? It is very clear that the educational 
aspects of this are going to be key, and we are going to have 
to look at this systematically, particularly at the 
universities. Why don't we take a minute or two to get your 
thoughts on what it is going to take for this country to have a 
properly educated workforce to really tap the potential in 
nanotechnology.
    Dr. Stupp, do you want to start with that, with the 
academy's views?
    Dr. Stupp. Definitely, the development of an 
interdisciplinary culture is key for nanotechnology 
development. I think that it would be fair to say that most 
universities have recognized that multidisciplinary research is 
important. However, it is not yet clear to a lot of 
investigators what interdisciplinary research really is.
    I mean, there is a difference between multidisciplinary and 
interdisciplinary. What we need most is interdisciplinary 
culture, meaning that individuals themselves are 
interdisciplinary, and this is a very challenging educational 
task, but in fact the NNI, and hopefully with the advice of 
some external board that includes members of the scientific 
community, as well as individuals with expertise in research 
management, will be able to impact directly on this goal by 
creating the right programs that will encourage this kind of 
interdisciplinary development among individuals. So 
interdisciplinary culture is key.
    I think we need to catalyze it through the NNI programs, 
and so somebody has to think hard about how to do that. The 
solutions are not there yet.
    Senator Wyden. Others? Mr. Modzelewski, particularly the 
private sector. I can think of an awful lot of public schools 
in Oregon where we are very excited about the prospects of 
nanotechnology, where we would like to see your companies make 
investments.
    Mr. Modzelewski. I think it starts there. I think it starts 
very early. I mean, I think we have to make a real effort not 
to just consider this as a college program, but to get kids 
interested in the physical sciences at a much younger age, and 
not just getting them interested. I think too much emphasis is 
put on, perhaps, an idealistic view that this excitement in 
science will just naturally be drawn within them.
    I think there needs to be other buttons pushed, and I think 
certainly financial incentives, and that the entrepreneurs of 
tomorrow might be--are the researchers of today is certainly 
something that should be underlined far more, that the 
companies of tomorrow in nanotechnology are the startups that 
are being started by researchers at university and corporate 
labs, and that they are going out to start these, and I think 
that level of incentive also being worked in is something that 
we need to accept as probably being part of the incentive 
package for young people to think of this as a career move.
    Right now, you are talking about a field that is greatly 
dominated at American universities by foreign students. You 
will find Chinese nationals in some cases being the entire 
program at a university, and at some of the startups the entire 
research team being Chinese nationals, who they know at one 
time or another are going to be recalled to their home country 
to do their work. So we really do need to think of this as an 
imperative how we incentivize, and I think mainly just getting 
the information out there as science is cool and exciting is 
one thing, and that is sort of a path we have taken, but I 
think also to point out that it is a great career move, and a 
very lucrative career, is something that will certainly attract 
young people.
    Senator Wyden. Any idea, of today's nanotechnology 
workforce in this country, how many are from other countries?
    Mr. Modzelewski. I would be giving a blind guess, but it is 
definitely more than half.
    Dr. Williams. I can give an observation. 17 out of the last 
18 people I have hired were born outside the United States, and 
half of those were educated outside the United States.
    Senator Wyden. Well, that sort of sums it up.
    Dr. Williams. Actually, if I may just make a comment along 
this line, to be real crude about it, money talks. If you look 
at what has happened over the course of the past decade, and 
track as I have the enrollments of American undergraduate 
students in various disciplines as a function of time, what has 
happened is that the enrollment of American undergraduates 
tracks almost exactly the investments in basic research.
    So over the past decade, NIH has actually been doing very 
well. Their budgets have been going up. The enrollments of 
American under graduate students in biology departments in the 
United States is skyrocketing. It is up over 55 percent in just 
the past few years.
    On the other hand, in mathematics, in physical sciences, in 
engineering, overall funding is down, and down significantly. 
Enrollment of American undergraduates in those programs is down 
20 to 30 percent over the past decade.
    I have asked young people what they want to do, and they 
always tell me, oh, I am going to go into biology. I ask then 
why. Well, that is where the action is. You know, from the 
standpoint of a young person looking at a career, you go to a 
college and you see where all the money is being spent on a 
college campus, it is being spent primarily in the biology 
departments because of the strength of the NIH, so of course, 
that is what draws them into it.
    I believe that by taking the steps that we have taken, by 
legitimizing nanotechnology and as long as we have the 
commitment to increase the funding and keep it going, we will 
see significant increases in students going into this area, 
because it is very exciting intellectually. There are 
tremendous careers associated with nanotechnology, but the 
interface, the only place where young people learn that is when 
they first show up on a college campus; especially 
disadvantaged young people, who are the ones who are most 
likely going into sciences, you might say they do not know any 
better, but it turns out to be a great opportunity for them. 
And so I think that the NNI, just in being what it is, and in 
focusing attention and putting money into it, is going to have 
a tremendous impact on them.
    Senator Wyden. Well, gentlemen, there are a couple of 
questions I am going to ask of you all in writing. One of them 
deals with some technical issues with respect to the employment 
picture. It is clear that this is a significant opportunity for 
new jobs. It is very important in my State. We have the highest 
unemployment rate in the country, and what I would like to do 
is get into some of the specific areas where you think the 
biggest sources of jobs are likely to be. We will submit that 
and a couple of other questions in writing.
    Let me leave you with this. The irony is that we did get 
into a significant area that I did not expect to talk about at 
all today, which is the Bayh-Dole law, because it is clear that 
cutting edge science and nanotechnology is something we are all 
particularly excited about. It means we have got to get it 
right with respect to the role for Government, the role for 
private sector, and the role for universities. As I think Mr. 
Modzelewski said, with respect to education, we need to start 
even earlier than the universities, and I think we have got 
that opportunity with nanotechnology. I think we have got an 
opportunity to get it right.
    The administration clearly is moving in the right 
direction. Mr. Russell is a good man, and we have worked with 
him in the past. The NNI is a very positive step, and that was 
clearly the consensus of all today. The purpose of the 
legislation Senator Allen and I have with Senator Lieberman, 
Senator Landrieu, and Senator Clinton introduced is to build on 
it.
    We can do a bit better, and you can be very sure we are 
going to work closely with the administration and all in this 
country who care so much about it. We hope as we adjourn 
today's hearing and leave with a great deal of excitement about 
the possibility of regenerative medicine, never having to buy a 
pair of khakis again, and all kinds of other excitement that we 
have heard about today, that we leave with the idea that if we 
work together and get it right, nanotechnology can serve as a 
model that we will be able to duplicate again and again when 
there are other exciting fields. There is certainly enough 
goodwill and commitment over on that side of the dais to do it, 
and we will match it with bipartisan support over here, and we 
thank all of you for your patience. You have been here a long 
time, and with that, the Subcommittee is adjourned.
    [Whereupon, at 4:25 p.m., the Subcommittee adjourned.]

                            A P P E N D I X

            Prepared Statement of Hon. Joseph I. Lieberman, 
                     U.S. Senator from Connecticut

    Our nation has long prided itself on being the world's premier 
innovator of new ideas. Over the last two and a half centuries, the 
uniquely American willingness to experiment with novel concepts and to 
chart bold directions has placed us at the forefront of scientific and 
technological progress. Our ability to engage in scientific exploration 
and to marry research findings with the development of practical 
applications has, in turn, enabled us to set the benchmark on virtually 
every indicator of human progress, from longer lifespans, to higher 
standards of living, to unparalleled economic productivity.
    However, while past accomplishments may confer a present 
competitive advantage, it does not guarantee future success. We cannot 
afford to rest on our laurels in a world that is becoming increasingly 
characterized by the speed with which scientific paradigms shift and 
technological revolutions occur. In a global economy in which ideas and 
technology are the new currency, every new breakthrough represents an 
opportunity to claim--or, in our case, lose--global leadership.
    The emerging field of nanotechnology constitutes such an 
opportunity. It is not just any opportunity, however, but one whose 
magnitude and significance locates it on the scale of harnessing 
electricity, creating antibiotics, building computers, or wiring up the 
Internet. It is, in short, a new frontier in science and technology 
that has the potential to transform every aspect of our lives. 
Nanotechnology, in fact, may have even greater potential to affect the 
way we live since it has such broad prospective applications in so many 
different areas, from medicine, to electronics, to energy. 
Nanotechnology is what scientists and technologists often call an 
``enabling'' technology--a tool that opens the door to new 
possibilities constrained only by physics and the limits of our 
imaginations.
    Yet, despite the enormous potential that nanotechnology offers, it 
is not an area in which we have assumed uncontested leadership. From an 
international perspective, the United States faces the danger of 
falling behind its Asian and European counterparts in supporting the 
pace of nanotechnological advancement. Other nations have grasped the 
fact that the first players to fully capitalize on the promise of 
nanotechnology have the potential to leapfrog in productivity and 
precipitate a reshuffling in the economic, and perhaps aspects of the 
military, pecking order. Accordingly, they have undertaken substantial 
efforts to invest in nanotechnology research, and to accelerate 
technology transfer and commercialization. While our nation certainly 
possesses the raw resources and talent to lead the world in developing 
this technology, it is also clear that a long-term focus and sustained 
commitment, as well as new collaborations between government, academia, 
and industry, will be needed to ensure our place at the head of the 
next wave of innovation.
    In recognition of the need to support ongoing nanotechnology 
efforts and to spur new ones, I am pleased to join Senator Ron Wyden in 
cosponsoring today the ``21st Century Nanotechnology Research and 
Development Act.'' This Act will build on the efforts of the National 
Nanotechnology Initiative (NNI), which was started under President 
Clinton and has received continued support under President Bush, to 
establish a comprehensive, intelligently coordinated program for 
addressing the full spectrum of challenges confronting a successful 
national science and technology effort, including those related to 
funding, coordination, infrastructure development, technology 
transition, and social issues.
    I feel it is appropriate at this point to give credit to President 
Clinton for having the prescience and initiative of creating the NNI, 
and to applaud President Bush for expanding support for nanotechnology 
R&D from $270 million in FY 2000 to the $710 million targeted in his 
budget request for FY 2003. The NNI has been a key driver of 
nanotechnology in this country by bringing coherence and organization 
to what had previously been a scattered set of research programs within 
the Federal Government. It has, in no small part through the efforts of 
its spokespersons, Dr. Mike Roco and Dr. Jim Murday, achieved a higher 
profile for nanotechnology both within and outside the government, and 
brought the importance of this field into the national consciousness.
    The time is now ripe to elevate the U.S. nanotechnology effort 
beyond the level of an Executive initiative. Funding for nanotechnology 
will soon reach $1 billion a year, and the NNI currently attempts to 
coordinate programs across a wide range of federal agencies and 
departments. This level of funding and the coordination challenges that 
arise with so many diverse participants strongly recommend having a 
program based in statute, provided with greater support and 
coordination mechanisms, afforded a higher profile, and subjected to 
constructive Congressional oversight and support.
    Our bill closely tracks the recommendations of the National 
Research Council (NRC), which completed a thorough review of the NNI 
this past June. The NRC report stated how impressed the reviewers were 
with the leadership and multi-agency involvement of the NNI. 
Specifically, it commended the Nanoscale Science, Engineering, and 
Technology (NSET) subcommittee, which is the primary coordinating 
mechanism of the NNI, as playing a key role in establishing research 
priorities, identifying Grand Challenges, and involving the U.S. 
scientific community in the NNI. To catalyze the NNI into becoming even 
more effective, the NRC made a number of recommendations. These 
recommendations have largely been incorporated into our bill, including 
establishing an independent advisory panel; emphasizing long-term 
goals; striking a balance between long-term and short-term research; 
supporting the development of research facilities, equipment, and 
instrumentation; creating special funding to support research that 
falls in the breach between agency missions and programs; promoting 
interdisciplinary research and research groups; facilitating technology 
transition and outreach to industry; conducting studies on the societal 
implications of nanotechnology, including those related to ethical, 
educational, legal, and workforce issues; and the development of 
metrics for measuring progress toward program goals. This legislation 
will also complement the provision that I authored in this year's 
Senate defense authorization bill, S. 2514, establishing a 
nanotechnology research and development program in the Department of 
Defense. If this provision is supported in conference, we will have 
matching pieces of legislation that will encompass and coordinate both 
civilian and defense nanotechnology programs, establishing a truly 
nationwide effort that leverages the expertise residing in every corner 
of our government.
    If history teaches us anything, it is that once the wheels of 
innovation have stopped and stagnation has set in, mediocrity will soon 
follow. Nowhere in the world are those wheels of innovation spinning 
more rapidly than in the realm of nanotechnology. This legislation 
provides a strong foundation and comprehensive framework that elicits 
contributions from all three sectors of our society in pushing 
nanotechnology research and development to the next level. I look 
forward to supporting Senator Wyden in getting this important bill 
through the Congress, and hope that we may all work together in a 
bipartisan fashion to set the stage for U.S. economic growth over the 
next century.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. Ron Wyden to 
                          Hon. Richard Russell

Bayh-Dole Act
    We heard from Dr. Stan Williams of HP and others at the September 
17 hearing that the Bayh-Dole Act and the way that universities deal 
with intellectual property is a major barrier to university-industry 
collaboration. In fact, Dr. Williams noted that it is easier to work 
out a partnership with foreign universities than with U.S. academic 
institutions. While the promise of Bayh-Dole is to get research off the 
shelf and commercialized, the reality of Bayh-Dole is that industry and 
academia often view the process differently and we get few useful 
results.
    Question 1. As you know, I am of the opinion that the Bayh-Dole law 
isn't working for any of its constituents--universities, industry, 
government, or taxpayers. How can we fix Bayh-Dole? Would OSTP or 
another appropriate agency be willing to lead an Administration task 
force made up of university people, companies, taxpayer advocates, and 
other interested parties that would work in a cooperative way to reform 
Bayh-Dole?
    Answer. The President's Council of Advisors on Science and 
Technology (PCAST) has created a Panel on Federal Investment in 
Research and Development and its National Benefit. The panel has been 
charged with two goals:

        1.  To review the R&D portfolio to determine areas where 
        programs should be expanded, curtailed and maintained; and

        2.  To give advice on technology transfer mechanisms that will 
        encourage commercial development to ensure maximum benefit for 
        research funding.

    With respect to the second goal, one of the Panel's primary 
interests is the Bayh-Dole Act. The PCAST Panel is seeking perspectives 
on the Act from all parts of the science and technology community, 
including representatives from industry, academia, government labs, the 
venture capital community, and other interested parties.
    The Panel is working with these representatives to understand their 
viewpoints regarding whether the Bayh-Dole Act has been effective in 
promoting or catalyzing the transfer of technology from federally 
funded research to the private sector through licensing of patented 
intellectual property. Likewise, these representatives may also suggest 
to the PCAST Panel whether improvements to Bayh-Dole would involve the 
Act itself, or the manner in which the Act is interpreted or 
implemented. The Panel is hoping to include these perspectives on the 
Bayh-Dole Act in their larger analysis of technology transfer 
mechanisms that should be developed at the end of 2002.
    In addition, PCAST tentatively plans to hold an open forum on tech 
transfer in December to assist in soliciting a wide range of viewpoints 
on tech transfer programs including best practices under Bayh-Dole.
Sufficient Government Support of Nanotechnology Research
    Question 2. Given that other countries are also investing 
significant amounts in this field, do you feel that we are doing enough 
to ensure our leadership in this field?
    Answer. The administration proposed a $679 million investment in 
nanotechnology for FY 2003, a 17 percent increase over FY 2002 funding 
levels. Taken together with past increases (FY 2002 levels were 25 
percent higher than FY 2001 levels, for example), nanotechnology 
represents one of the fastest-growing areas of federal research 
funding. The investment in nanotechnology also leverages the overall 
federal R&D investment, which reached unprecedented levels in the 
President's FY 2003 budget request. This overall investment helps 
support the research facilities and the higher education system that 
make the U.S. science and technology enterprise the world's best. 
However, while federal funding is important to maintaining U.S. 
leadership in nanotechnology, it is but one component underlying the 
strength of this field. For example, private sector innovation, and 
policies that support this innovation, are of critical importance as 
well.

    Question 3. The Administration has requested $1.1 billion for FY 
2003 for nanotechnology. We want to ensure that the efforts are well 
coordinated. How is that effort coordinated? How does its coordination 
compare with the coordination mechanisms for the Information Technology 
Research program? Does it make sense to bring in an advisory committee 
of outside experts to aid in the coordination?
    Answer. The Federal investment in nanotechnology is coordinated 
through the Nanoscale Science and Engineering Technology (NSET) 
subcommittee of the National Science and Technology Council (NSTC). 
NSET is currently chaired by a representative from NSF. Representatives 
from each agency participating in the NNI, as well as OSTP and OMB, 
attend regular meetings of the NSET and have a voice in coordinating 
the programs of the NNI. A National Nanotechnology Coordinating Office 
(NNCO) serves as a secretariat for the NNI, in a manner directly 
analogous to the function of the National Coordinating Office (NCO) for 
the Networking and Information Technology Research and Development 
(NITRD) program.
    Outside input on federal R&D issues is important, and Presidential 
advisory committees are one mechanism for gaining this input. However, 
formation and maintenance of a Presidential advisory committee comes at 
significant cost. Creating an advisory committee dedicated solely to 
advising on issues related to nanotechnology would necessarily draw 
funds away from the research and development activities of the NNI. The 
President's Council of Advisors on Science and Technology (PCAST) is an 
independent, external advisory body comprised of leaders from industry 
and academe who provide important extra-governmental input on R&D 
issues to the President and are clearly qualified to provide advice on 
issues related to nanotechnology. For this reason, drawing on an 
existing body such as PCAST represents a preferable means for gaining 
non-governmental, expert advice on nanotechnology without diverting 
funds away from research and development activities.

    Question 4. How are you tracking and measuring the success of 
nanotechnology research programs?
    Answer. Each agency that participates in the NNCO is responsible 
for reporting its accomplishments to the NNCO, which then assembles and 
includes these data in an annual report. Under the NNI, each agency 
invests in those R&D projects that support its own mission as well as 
the overarching NNI goals. While each agency consults with the NSET 
Subcommittee, the agency retains control over how resources are 
allocated against its proposed NNI plan. Each agency then uses its own 
methods for evaluating potential projects, and each assesses its NNI 
research activities according to its own Government Performance Review 
Act (GPRA) policies and procedures.

    Question 5. Your hearing testimony highlighted the economic 
potential of nanotechnology. Let me play devil's advocate for a 
moment--if nanotechnology is such a huge, revolutionary area, why 
should the Federal government invest here? Why can't companies bear 
this burden, if they are going to be positioned to reap the profits?
    Answer. The Federal government supports basic research and 
development across a broad range of disciplines that advance the 
frontiers of knowledge. Because the field of nanotechnology is still, 
in many ways, in its infancy, there is a clear need for fundamental 
research that answers the most basic questions regarding why materials 
behave differently when studied at the nanoscale instead of at more 
conventional scales. Understanding these questions will enable further 
research, including the type of research and development most important 
to industry. Given industry's focus on shorter term return on the 
research investment, the private sector simply will not fund the bulk 
of this type of long term, basic research. Thus there is a clear role 
for the Federal government in funding fundamental nanotechnology 
research, and this has been the priority of the NNI as a result.

    Question 6. What do you see as the biggest challenges nanoscience 
currently faces? In other words, what barriers could potentially keep 
nanotechnology from reaching its potential?
    Answer. The biggest challenges facing nanoscience include the 
development of new scientific instruments to enable precise 
measurements and manipulation at the nanoscale; the development of 
robust, reliable methods for fabricating reproducible structures; and 
the generation of sufficient numbers of scientists and engineers to 
make these advances. In addition, the societal impacts of 
nanotechnology must be addressed. Each of these issues represents an 
area of focus within the existing framework of the NNI.
Multidisciplinary Education
    It appears that nanotechnology is an interdisciplinary science, 
combining facets of chemistry, materials science, computer science, 
biology, mechanical and electrical engineering, and physics.
    Question 7. How well prepared are our universities to produce the 
next generation scientists who have the requisite expertise in multiple 
disciplines in order to ensure that the United States continues to lead 
in nanotechnology research?
    Answer. Academic institutions are routinely engaged in reviews of 
existing curricula. How best to address the increasing need for 
scientists and engineers who can function at the intersection of 
multiple disciplines is a question many academic institutions are 
grappling with. One role of the Federal Government in this area is to 
fund the development of innovative educational programs aimed at 
helping to educate the next generation of scientists and engineers. 
Examples of federally-funded higher education programs related to 
nanotechnology include the following: Penn State used NNI funding to 
implement a new degree program in Nanofabrication Manufacturing 
Technology; NSF Integrative Graduate Education, Research and Training 
(IGERT) programs have funded a host of graduate projects on 
nanotechnology at a range of institutions; and NNI funding has 
supported education and training centers and networks at Columbia, 
Rice, Cornell, Harvard, Northwestern, and Rensselaer.

    Question 8. What needs to be done to promote a multidisciplinary 
curriculum at all levels, not just universities, so that we have a 
properly educated nanotechnology workforce?
    Answer. Decisions regarding the adoption of particular curricula at 
the K-12 level are best made by local entities. Federally-funded 
nanoscience-specific activities, including some funded through the NNI, 
are aimed at increasing the scientific and mathematics proficiency of 
the nation's K-12 students. For example, the NNI-sponsored activities 
mentioned above also have outreach functions that support K-12 
educational programs, and additional K-12 activities at Wisconsin, 
North Carolina, Arizona State, Rensselaer, the University of Tennessee, 
Rice and the University of Illinois at Chicago are funded through the 
NNI. In addition, the National Science Foundation and the Department of 
Education support the Mathematics and Science Partnerships program. 
This program, a key element of President Bush's No Child Left Behind 
education blueprint, supports partnerships between institutions of 
higher education and school districts in order to improve preK-12 math 
and science achievement for all students, to improve teacher training 
and professional development in these crucial subjects, and to improve 
the quality of math and science curricula. In addition, Federal 
sponsorship of research at universities, including activities mentioned 
in the previous answer, includes significant support of work that will 
result in a better educated and larger nanotechnology workforce.
                                 ______
                                 
      Response to Written Questions Submitted by Hon. Ron Wyden to
                          F. Mark Modzelewski
Nanotechnology, Job Creation, Regional Centers
    Question 1. How many jobs do you anticipate the nanotechnology 
industry creating over the next ten years?
    Answer. This is a challenging question to answer as no formal 
studies currently exist. In fact, we urge the Congress to ensure that 
the U.S. Department of Labor undertakes a study of this question in FY 
2003.
    The difficulty in developing such a projection stems from the fact 
that nanotechnology is a platform technology--not unlike harnessed 
electricity, the internal combustion engine and the transistor. As a 
platform technology that will have a transformative impact on 
everything from the material sciences to life sciences to information 
technology and electronics means that in most cases nanotech will 
expand growth in these industries or reverse downward trends. It is 
expected that nanotechnology will become completely intertwined in 
current industries--before creating new ones.
    Nanotechnology employment growth trends will scale in much the same 
way biotechnology, the semiconductor industry, and the Internet sector 
developed; however, growth is reasonably expected to be sustained over 
a longer period of time as nanotech's reach is far greater. Current 
projections predict nanotechnology to represent a value of $1 trillion 
to the U.S. economy in value in little over a decade, it is safe to say 
that 10 percent-25 percent of all U.S. jobs in a decade will be 
directly related to nanotechnology.
    On a regional jobs development scale, we can look to history for 
job growth projections. For instance, Albany, NY recently became home 
to the next generation of SEMATECH--the semiconductor industry's 
development program. This project involves nanoscale semiconductor 
development and is part of the SUNY Albany NanoTech Center. Analysis by 
the State of New York strongly suggests that this $400 million project 
(together with the $400 million previously raised from corporate and 
state interests for the Albany NanoTech Center) will trigger economic 
development on par with Austin, TX's extraordinary growth initiated by 
the original SEMATECH project in 1988.
    Since arriving in Texas, SEMATECH has been responsible for 
attracting 11 percent of all jobs in the State--35 percent of 
manufacturing, 10 percent of service, 13 percent of trade, and 12 
percent of construction job growth. Austin-metro region unemployment 
rate is one-half that of the nation at large. Employment in the broad 
technology sector totals 125,000 and includes approximately 2,000 
firms, including:

   More than 200 semiconductor and semiconductor related 
        companies located in the Austin area employing nearly 24,000 
        people.

   Approximately 120 computer manufacturing and peripherals 
        companies employ more than 43,000 people.

   More than 450 software development companies employing 
        30,000+ employees.

   Annual R&D expenditures in Austin has risen from less than 
        $200 million prior to 1980 to in excess of $1.4 billion by the 
        private and public sectors with the number of technology 
        patents awarded to the areas inventors nearly doubling since 
        1991.

    Groundbreaking nanotech projects today will mean incredible 
regional--and national--job growth in the future. Again, serious 
analysis on this point is needed going further to make proper 
determination and to aid planning.

    Question 2. How can this industry effect areas of high unemployment 
such as my home state of Oregon?
    Answer. Nanotechnology will create jobs in two profound ways:

        1.  New development of jobs and industries
        2.  Invigoration of old industries as the opportunities 
        provided by nanotechnology render their continuation and 
        location economically feasible.

    Nanotechnology is already fueling development in new methods of 
drug delivery and medical treatments (in Texas and California); fuel 
and solar cell development (in New York and Texas); and organic 
electronics and quantum computing (in California, Colorado and New 
York).
    An example of a industry that is about to demonstrate explosive 
growth through nanotechnology is the sensors sector. Sensors have 
gradually found their way into vehicles and personal appliances, but 
their size and cost have placed major limitations on their availability 
and use. The industry was hitherto unable to maximize its extraordinary 
potential: small and inexpensive sensors to detect pathogens on meat, 
poisons in the air, diseases and disorders in the body, even tire 
pressure and stress on an aircrafts wings. Nanotechnology is rapidly 
providing the opportunity--through capability, size and price--to fuel 
this development. Barriers to entry in this field from an R&D and 
manufacturing perspective are very low and areas of Oregon and other 
regions experiencing economic stress could certainly build and attract 
efforts in the field.
    As to invigorating old industries, nanotech is providing radical 
innovations to current products: composite materials, coatings, 
textiles, lighting, batteries and semiconductors, to name a few. at an 
ever increasing rate, many of these sectors have been transitioning to 
lesser-developed nations, leaving job loss in their wake. If the U.S. 
invests sufficiently in nanotechnology, its developments will make 
these industries economically feasible for the U.S. again.
    For example, the textile industry has all but left the United 
States, leaving major unemployment in its wake. Companies such as Nano-
Tex and eSpin are now providing radical improvements to this field with 
wear resistant and water and stain repellent technologies. The cost of 
implementing these technologies into the manufacturing processes of 
textiles is nominal, yet it provides the industry with enormous 
financial incentives to keep factories in the United States, where such 
technology is easily available.
    New York State explicitly noted that the ``Capital District'' where 
the Albany NanoTech is located has both the solid university resources 
to build around, and a manufacturing base of great potential but now in 
despair since the relocation of IBM, Philips and other companies 
operations. The decision to align this nanotechnology development 
project with this region is purposeful and will allow for R&D to 
interplay with corporate and employment development.
    Focusing on Oregon's major employers we see the following interplay 
of nanotechnology:

   Healthcare (Children's Hospital, HMOs, etc): New drug 
        delivery and treatment techniques using Bucky Balls and Q Dots; 
        new MRI and X Ray technologies using caged atom techniques; new 
        bio-sensor detection methods to spot diseases at their earliest 
        stages.

   University System (OU, OSU, etc): Research programs across 
        the spectrum of nanotech--materials science, catalysts, life 
        science and medical, and IT and electronics. Potential to spin 
        off start-ups and collaborate with in-state corporations.

   Nike: Health Sensors and monitors; stain and wear resistant 
        nano-fabrics; and composites materials for the soles of shoes 
        and athletic gear.

   Intel: Continuation of Moore's law through nanoscale chip 
        development and production technologies.

   NORPAC Foods: Sensors to detect pathogens on foods; new, 
        more energy efficient refrigeration; new fuel, and lighting 
        systems technologies.

    The NanoBusiness Alliance strongly urges that the Federal 
Government undertake an effort to determine those regions most likely 
to experience a major industrial impact from nanotech at the 
management, research and wage earner levels. Additional studies are 
needed for PhD, MBA level development, as well as at America's 4-year 
undergraduate level and at two-year colleges.

    Question 3. What does it take to get a successful nanotechnology 
hub going? What elements do these communities share? How can the 
Federal government help in that process?
    Answer. This question is extremely important, as prevailing 
economic theory demonstrates the importance of developing such hubs. In 
his book ``The Competitive Advantage of Nations,'' Harvard Business 
School professor Michael Porter makes the case for a new approach for 
both understanding and creating economic success in a global economy. 
Porter relates the competitiveness of nations and regions directly to 
the competitiveness of their home industries. Moreover, he argues that 
in advanced economies today, regional clusters of related industries 
(rather than individual companies or single industries) are the source 
of jobs, income, and export growth. These industry clusters are 
geographical concentrations of competitive firms in related industries 
that do business with each other and that share needs for common 
talent, technology, and infrastructure (Mary Watts, ASU). Call it the 
power of collaboration.--a new competitiveness framework for state 
economic development.
    For any cluster development to work, government, corporations, 
start-ups, service firms, non-profits, venture capital and start-ups 
must come together to develop three tiers of interaction and 
collaboration:

   First Tier: Leading companies and/or research universities

   Second Tier: A myriad businesses that provide supplies, 
        specialized services, investment capital, and research to these 
        companies and others involved in the nanotech field.

   Third Tier: is composed of essential economic foundations 
        (e.g., advanced infrastructure, specialized workforce training, 
        R&D capability, the pool of risk capital available in the 
        region) that are the building blocks of healthy clusters and a 
        competitive economy.

    At this point no region has reach true critical mass in developing 
a nanotechnology cluster. The industry is so nascent and has been 
developing at an unexpectedly rapid rate that has prevented anyone from 
developing an insurmountable lead. What my organization, the 
NanoBusiness Alliance, has attempted to do is jumpstart the creation of 
nanotech clusters through our NanoBusiness Hubs Initiative. The 
Alliance Hubs bring together business leaders, researchers, government 
officials, investors, corporations, service industry principles, start-
ups and other interested parties to drive forward the growth of 
nanobusiness in their regions. The new program kicked-off in New York, 
San Francisco/Silicon Valley, Colorado, Michigan, San Diego and Metro--
Washington DC.
    The NanoBusiness Alliance Hub Initiative serves as a localized 
catalyst to fuel understanding, discussion, planning, and 
implementation for area specific nanobusiness development. Each 
Alliance hub undertakes the process of bringing together key 
stakeholders to develop regional nanotechnology business clusters. In 
turn we provide them with a top line assessment of their nanotech 
assets (universities, start-ups, corporate efforts, etc), generalized 
best practices of other regional development (using past industries 
efforts and current regional nanotech efforts as a model), organizing 
meetings with area stakeholders and networking their efforts into our 
other regional hubs so they can interact. Our goal is not to run these 
efforts, but to set them in motion and tie them together through our 
organization.
    To be perfectly blunt, our resources at the Alliance have been 
completely over tasked. We are proud of our work to date and have 
already gotten major progress under way in the New York and Colorado, 
substantial movement underway in 4 other regions, as well as other 
efforts in Chicago and Texas into our network, we are an organization 
of under 10 employees, on a tight budget raised through corporate 
membership, events attendance, and report sales and can no way meet the 
demands of organizations in 35 states and 11 countries that have 
contacted us to help develop this capacity.
    What the Federal Government could do to be a force in jumpstarting 
the effort to create regional hubs is the following:

   Education: Too few political and corporate leaders, as well 
        as the general public know anything about nanotechnology or its 
        economic promise.

     National NanoBusiness Summit: Hold a high profile national 
        summit in Washington DC to educate the public on the future of 
        nanotechnology as a science, a technology and a business. Make 
        special efforts to educating the youth of America to pursue the 
        study of the physical sciences as a path for their future.

     Trade Missions/Exchanges: Hold trade missions between the 
        U.S. and other leaders in the nanotechnology field to find 
        opportunities for collaboration and markets for their nanotech 
        developments.

     Regional Events: It is not enough to hold a large scale 
        event in Washington to spread the word of nanotechnology and 
        its economic impact, efforts must be made to hold events in 
        states and regions to spark excitement.

     Database: Though databases are being developed for the 
        nanosciences, no effort has been made to create or fund a 
        database of corporations, start-ups, supporting service firms, 
        and investment resources. There is also no platform for 
        existing government resources under one p banner for nanotech--
        contracts, grants, loan programs. Not only to inform but also 
        to be a platform for collaboration. Regions could also explain 
        their efforts and share best practices.

     Studies: Many basic studies to understand the dynamics of 
        the nanotechnology economy have yet to be performed. The 
        Departments of Labor, Education, Commerce, HUD, and Defense are 
        all necessary components in developing an understanding of the 
        nanotech workforce of tomorrow, its economic impacts and the 
        state of global competition, etc. In addition, as we learned 
        from how foreign markets have addressed GMOs, there is a real 
        aversion to surprises in technology development. Nanotech is 
        about to offer up many such surprises. There is a real need for 
        global studies on the health and environmental effects of 
        nanoscience right now or there may be major consequences 
        later--either real or imagined--that will slow and perhaps 
        cripple important developments.

   Coordination: Make the National Nanotechnology Initiative 
        more than just an oversight and funding agency for basic 
        research. The NNI should also be equipped to address the needs 
        of the emerging business of nanotechnology and study the 
        competitive business climate in the U.S. and abroad. There 
        needs to be strong linkages with agencies such as Department of 
        Commerce Office of Technology Policy, the Department of Labor 
        and the Department of Education.

   Capital: The timing for the sudden rise of nanotechnology as 
        a business could not be worst in terms of market conditions on 
        Wall Street and in the venture capital sector. Recent corporate 
        announcements by GE and Microsoft noting they saw real 
        opportunities in new future markets (like nanotechnology), and 
        hence were increasing R&D efforts, were met with extremely 
        negative responses on the Street.

        There is no need for the Federal government to become a blank 
        checkbook for the nanotech industry with huge levels of new 
        funding for business. However, the Federal Government would be 
        missing a real opportunity to advance the nanotechnology 
        industry if it did not develop some level of new incentives 
        and, grant and loan programs. In addition, the Federal 
        Government should have a mandate to take existing programs and 
        ensure that they reach out to emerging technologies, such as 
        nanotechnology--particularly at Defense, Agriculture and SBA.

        In addition, though NIST ATP has certainly had its problems and 
        has many opponents, it nonetheless is a program that could be 
        critical to the long term development of nanotechnology. ATP is 
        almost unique in the Federal Government in that it acts as a 
        conduit for funding during the critical middle stage of 
        development--post-basic research/pre-commoditization--when 
        companies are dealing with issues such as packaging, scaling 
        and integration. This is a timeframe that no venture capital 
        firm will fund--and a timeframe they affectionately refer to as 
        the ``valley of death.''

   Government Practices: There are many existing programs and 
        methods employed by the Federal Government if changed could 
        provide much needed assistance and resources to the emerging 
        nanotechnology industry without requiring huge funding outlays. 
        Some examples include:

     Tech Transfer: The technology transfer environment in the 
        U.S. is abysmal at the university and government level--though 
        admittedly the government is certainly making greater strides. 
        Efforts should be made to reform the execution of the Bayh-Dole 
        Act or to rewrite it. In addition, government labs, the land 
        grant college system, and any university working on government 
        research grants, should be pushed to post their nanotechnology 
        IP portfolio in a central NNI database along with appropriate 
        contact information to spur use and commoditization of these 
        technologies.

     Patents: The U.S. Patent and Trademark Office is among the 
        most highly overburdened organizations in the government. The 
        PTO is expected to receive 350,000 patents applications this 
        year and on top of backlog roughly equal to that number. PTO is 
        the gateway to technology commercialization on America. It must 
        be given the necessary funds (or allowed to retain their fees 
        collected) in order to properly attend to nanotechnology and 
        other emerging technologies.

          Case in point, PTO must have the funding to provide training 
        to its examiners in the field of nanotechnology. Nanotech is an 
        extraordinarily cross-disciplinary technology reaching into 
        nearly all sectors of examination at PTO. Efforts must be made 
        to ensure PTO can properly understand and manage the 
        nanotechnology patent application process. In turn, PTO must 
        also work with the nanotechnology industry to help train its 
        researchers and companies so that legal protections are 
        appropriate and timely. At the NanoBusiness Alliance we have 
        begun to work with PTO on these issues, arranging for meetings 
        between industry and officials and bringing in researchers to 
        talk with PTO examiners about their work. Indeed we have found 
        PTO officials to be extraordinarily welcoming and professional. 
        However, this effort needs to be more formalized and extensive.

          In addition, it is imperative that Congress address the 
        October 3, 2002 Madey v. Duke decision by the Federal Circuit 
        which ended the so-called research exemption from United States 
        patent law. The effect will no doubt be chilling, essentially 
        ensuring that all corporate collaborative research with 
        universities and other non-profit research institutions will 
        move offshore as every other industrialized country in the 
        world recognizes a research exemption in patent law but the 
        U.S.

          Before Madey the research exemption had been unquestioned 
        under the convincing case law line that came from no less an 
        authority than perhaps the leading scholar on the early Supreme 
        Court, Joseph Story, in his landmark opinion in 1813 in 
        Whittemore v. Cutter which used the now anachronistic term 
        ``philosophical'' instead of ``scientific'' to describe the 
        experimental use exemption from patent infringement. This 
        ``scientific-philosophical'' exemption from patent infringement 
        resides at the very core of the Constitutional mandate for 
        Congress to create a patent system ``to Promote the Progress of 
        ``the Useful Arts''--an essential component being that those 
        skilled in such Useful Arts are free to use the knowledge 
        imparted by a patent disclosure to create better and newer 
        technologies.

          If the United States is to maintain its high level of 
        nanotechnology research--as well as any other emerging field of 
        scientific study whether it be biotech, photonoics, or fuel 
        cells--it is essential that the Congress not wait to see if the 
        Supreme Court intervenes on Madey, and immediately reinstate 
        the research exemption into law. If this is not done 
        immediately, expect corporate research collaborations with 
        America's universities and non-profit institutions in America 
        to come to a near end as this work is exported globally to the 
        major research centers of the world--Kyoto, Zurich or Shanghai.

     FDA Advisory Committee: Much like the PTO, FDA is an 
        enormously burdened agency. FDA historically has responded to 
        new directions and techniques rather than being proactive. With 
        such revolutionary developments as bucky ball drug delivery and 
        protease inhibitors, quantum dot disease detection, and pin 
        point cancer detect and removal through gold nano-shells all in 
        advanced laboratory development, it is imperative that FDA be 
        ready to rapidly and properly address and evaluate these 
        developments and not let them languish--at the peril of the 
        American public--for a decade or more of evaluation. That is 
        why we strongly recommend that FDA be compelled and funded to 
        immediately create an internal advisory committee on 
        nanotechnology. This committee would establish education 
        initiatives and relationships in the nanotech research 
        community to ensure that future evaluations of developments are 
        handled with great speed and great caution.

     EPA: Because of the rapid development of nanotechnology 
        from science to a business there has been little research done 
        into the health and environmental effects of the technological 
        developments. While all current evidence suggests that c60 is 
        safe for long term use in the body, we don't know definitively. 
        Activist groups, many of which have been involved in limiting 
        the growth of the GMO industry, are already lining up against 
        nanotechnology development, some even calling for moratoriums 
        on commercialization. This can't be allowed to happen.

          For the industry to develop and meet its potential, we need 
        study and we need public education to begin now. The 
        NanoBusiness Alliance is working with our European and Canadian 
        counterparts to create a foundation to ensure that a dialog on 
        nanotechnology's health and environmental effects is begun 
        immediately. We are seeking to ensure that studies are 
        undertaken and that public awareness campaigns are begun today. 
        Our organizations are reaching out to the environmental 
        community to work with them to address any concerns they have 
        on nanotech's development. We believe that it is imperative for 
        the Federal Government to be aligned with these efforts--
        particularly the EPA and FDA.

     Government Grants and Programs: Because of the newness of 
        nanotechnology, many researchers, business leaders and 
        officials in the field have little understanding of programs 
        and grants already provided by the government that may help 
        develop nanotechnology. In turn government officials, at say 
        SBA, have little idea of how their programs can be adjusted or 
        administered to serve this emerging industry. Efforts should be 
        made to develop regional outreach events at all major 
        government agencies to ensure a dialog and full participation 
        in existing programs for the nanotechnology community. In 
        addition, the NNI website should become a one stop shop for all 
        government programs and grant information that may be open to 
        the NanoBusiness community.

          Another area to address is evaluation criteria. Many self-
        funded companies in the nanotech arena have complained at 
        length at how SIR criteria--for instance--is unbalanced and 
        better serves venture backed start-ups.

          In addition, criteria for evaluating new nanotech centers--
        whether it be new round of NSF, DoD or DOE centers--should be 
        made to include commercialization planning and regional 
        development planning as a grading criteria so that it does not 
        become merely for research sake.

     Advisory Board: The NanoBusiness Alliance and our member 
        organizations welcome the call for the 21st Century 
        Nanotechnology Research and Development Act for the creation of 
        a national advisory board on nanotechnology. We believe that it 
        is imperative that the President and Congress have top advisors 
        from outside the government--people who are on the front lines 
        of nanotechnology' s development--to provide vital feedback and 
        advice on the NNI and overall government nanotech efforts. 
        However, we feel it is essential that such a board reflect the 
        full spectrum of the nanotechnology community and not be a 
        board made up of just the research community. Nanotechnology 
        business leaders--start ups, corporations, even service 
        industry executives must be part of this effort to ensure that 
        it is effective. Also, it is vital that the various regions of 
        the U.S. where nanotech is developing be included fairly, so 
        that traditional tech clusters like Silicon Valley, Boston and 
        greater Washington been't included at the exclusion of other 
        developing regions such as the Pacific Northwest, Chicago, 
        Texas, upstate New York, and others. Lastly, it is of grave 
        importance that the Advisory Board also cover the breadth of 
        the nanotechnology field--life sciences; material sciences; 
        electronics; etc.--and not merely concentrate on one or two 
        areas.

     NNI Mission: Lastly, and perhaps most importantly, it is 
        vital that the NOT's mission be expanded beyond the initiation 
        and funding of basic research, and extend to the developing 
        business of nanotechnology and ensure America's leadership in 
        global marketplace.

Government Investment
    Question 4. Some critics of the National Nanotechnology Initiative 
argue that the research portfolio is not in balance, currently favoring 
readily achievable research goals and not sufficiently supporting high-
risk research, such as truly exploratory work in molecular 
nanotechnology. Do you agree or disagree? Please explain.
    Answer. We generally disagree. The NNI portfolio and other 
government programs such as NIST ATP have been in solid balance funding 
near, mid and long-term efforts. This should continue. The 
nanotechnology field includes many long-term visionaries and to be 
honest, some that harbor extreme ideas on technology development. It is 
not the government's role in our opinion to fund their fantastic ideas 
at the expense of real development for the American people and our 
country's economy.
    Currently the most under-funded area of nanotechnology is not the 
longer-term ideas such as universal assemblers, it is actually the mid-
term development stage--the so-called ``valley of death.'' This is the 
period after basic research but before commercialization. This period 
of research and application development includes scaling, packaging, 
and integration. Except for NIST ATP and some DARPA programs, no 
government effort addresses this period in the life cycle of 
development. Corporations and VCS also do not normally provide funds 
for this period. This is an area that particularly the Asia countries 
excel at--which is why so many Japanese and Korean companies are 
attempting to license U.S. nanotech research right now. We need a 
comprehensive effort on the part of the Federal Government to make 
funds available for this stage of nanotech's development as it will 
have the greatest impact on our people and our industries.
    In this competitive budget environment it is important that funding 
priorities remain in balance and frankly touch more near term and 
achievable developments. With that said, as an industry that is 
projected to have an unrivaled impact of the global economy, we feel 
that more funding is necessary so that efforts can be enhanced and 
perhaps some longer term theories can be funded. We would like to see 
another doubling of the U.S. nanotechnology budget within two years to 
ensure our nation can compete globally in what is becoming the next 
industrial revolution.

    Question 5. Given that other countries are also investing 
significant amounts in this field, do you feel that we are doing enough 
to ensure our leadership in this field?
    Answer. No. Nanotechnology is emerging as a truly global 
technology. Unlike the many waves of technological development, 
nanotechnology is not dominated by the United States. In several areas 
of nanotechnology the U.S. is being outpaced by foreign competition. 
The Japan, EU, Russia, Korea, and China are all significant players in 
the field of nanotechnology.
    A recent report from the Journal of Japanese Trade & Industry notes 
that the Japanese government views the successful development of 
nanotechnology as the key to ``restoration of the Japanese economy.'' 
They are not alone. Funding has grown at unprecedented rates across the 
globe over the last three years.
    The upside of 2000's NNI announcement was that it provide the U.S. 
with a rallying point as well as additional funding for nanotechnology 
development. The downside was it set off a global competition not seen 
since the space race of the 1960's. In addition, most of these foreign 
efforts include strong corporate interaction, unlike the U.S. NNI 
effort that for the most part is a basic research program.
    The EU just announced a new $685.4 million budget for research in 
nanotechnology and the formation of the EU Nanotechnology Industrial 
Platform. When individual country spending is added to the EU mix, 
overall spending is nearly double that of the U.S. EU corporate 
spending has remained generally on par with ours.
    The Japanese are outspending us from a government perspective and 
their corporations are far more aggressive than ours in R&D and 
investment. There are few U.S. based start-ups in the nanotech field 
that have not been contacted by Japanese investors. Also in Asia, China 
in adjusted dollars is clearly outspending the U.S.--and Korea, 
Singapore, Taiwan and others all have very significant programs 
underway. Add to this that the majority of U.S. nanotechnology grad 
students and post-docs are non-U.S. citizens from Asia.
    If one is to add to this construct the current U.S. business 
environment of R&D cuts, Wall Street in a severe downturn, and a 
stagnant VC market, the U.S. nanotechnology market is in need of 
serious attention and assistance from the Federal Government.
    To turn this around the U.S. government must consider the 
following:

   Increased funding for research and centers; additional 
        incentives and contract opportunities for nanotech business; 
        and extending current and adding new loan and assistance 
        programs for nanotech businesses.

   Additional coordination between agencies and among 
        government programs to reach out to the nanotech research and 
        business community.

   Information development in terms of monitoring and 
        developing reports on global competitiveness; regional 
        development; best practices; etc.

   Promote regional development through information databases.

   Promote business development through omnibus government 
        database of resources.

   Refashion the NNI to include a strong commercialization and 
        industry development platform.

   Improve the current state of technology transfer in the U.S.

   Provide educational and organizational resources for PTO, 
        FDA, and other agencies at the front line of developing the 
        U.S. nanotechnology industry.

   Develop model curriculums for U.S. schools for nanotech. 
        Create programs to promote careers in the nanotechnology field 
        to get more U.S. kids into this field now before it is too 
        late.

    Question 6. What role could a Nanotechnology advisory committee of 
academic, finance, and industry experts serve in improving and 
grounding the Federal government's nanotechnology research? Would you 
support the creation of such an advisory committee?
    Answer. The NanoBusiness Alliance and our member organizations 
welcome the call for of the 21st Century Nanotechnology Research and 
Development Act for the creation of national advisory board on 
nanotechnology.
    We believe that it is imperative that the President and Congress 
have top advisors from outside the government--people who are on the 
front lines of nanotechnology's development--to provide vital feedback 
and advice on the NNI and overall government nanotech efforts. We feel 
it is essential that such a board reflect the full spectrum of the 
nanotechnology community and not be a board made up of just the 
research community. Nanotechnology business leaders--start-ups, 
corporations, even services industry executives must be part of this 
effort to ensure that it is effective. Also, it is vital that the 
various regions of the U.S. where nanotech is developing be included 
fairly, so that traditional tech clusters like Silicon Valley, Boston 
and greater Washington been't included at the expense of other 
developing regions such as the Pacific Northwest, Chicago, Texas, 
Upstate New York, and others. Lastly, it is of grave importance that 
the Advisory Board also cover the breadth of the nanotechnology field--
life sciences; material sciences; electronics; etc.--and not merely 
concentrate on one or two areas.
    As to the role of the board:

   Advice and real world feedback as to the industry's needs 
        and the effects of current government efforts.

   Assist with the overall NNI coordination between government, 
        academia and industry.

   Bench marking, review and evaluation of government 
        nanotechnology efforts.

   Development and review of reports, studies, and surveys on 
        the field.

   Promotion of the science and business of nanotechnology.

Intellectual Property.
    Question 7. Mr. Modzelewski, in your testimony, you expressed 
concerns over the current state of intellectual property and the U.S. 
Patent and Trademark Office.
    Answer. Can you provide specific recommendations on how to improve 
the Patent Office system so that it does not hamper nanotechnology 
growth and innovation?
    The U.S. Patent and Trademark Office is among the most highly 
overburdened organizations in the government. The PTO is expected to 
receive 350,000 patents applications this year and on top of backlog 
roughly equal to that number. PTO is the gateway to technology 
commercialization on America. It must be given the necessary funds (or 
allowed to retain their fees collected) in order to properly attend 
nanotechnology and other emerging technologies.
    Case in point, PTO must have the funding to provide training to its 
examiners in the field of nanotechnology. Nanotech is an 
extraordinarily cross-disciplinary technology reaching into nearly all 
sectors of examination at PTO. Efforts must be made to ensure PTO can 
properly understand and manage the nanotechnology patent application 
process. In turn, PTO must also work with the nanotechnology industry 
to help train its researchers and companies so as that legal 
protections are appropriate and timely. At the NanoBusiness Alliance we 
have begun to work with PTO on these issues, arranging for meetings 
between industry and officials and bringing in researchers to talk with 
PTO examiners about their work. Indeed we have found PTO officials to 
be extraordinarily welcoming and professional. However, this effort 
needs to be more formalized and extensive.
    It should be noted that the signing of H.R. 2215 will make it 
easier for nanotechnology companies to eliminate mistakenly granted 
patent claims that would otherwise hinder their business development 
efforts. Other possible efforts can include accelerated patent 
examinations for a reasonable fee should be permitted to enable 
nanotechnology companies and other high-tech companies to bypass the 
backlog of cases at the U.S. Patent Office.
    In addition, it is imperative that Congress address the October 3, 
2002 Madey v. Duke decision by the Federal Circuit which ended the so-
called research exemption from United States patent law. The effect 
will no doubt be chilling, essentially ensuring that all corporate 
collaborative research with universities and other non profit research 
institutions will move offshore as every other industrialized country 
in the world recognizes a research exemption in patent law but the U.S.
    Before Madey the research exemption had been unquestioned under the 
convincing case law line that came from no less an authority than 
perhaps the leading scholar on the early Supreme Court, Joseph Story, 
in his landmark opinion in 1813 in Whittemore v. Cutter which used the 
now anachronistic term ``philosophical'' instead of ``scientific'' to 
describe the experimental use exemption from patent infringement. This 
``scientific-philosophical'' exemption from patent infringement resides 
at the very core of the Constitutional mandate for Congress to create a 
patent system ``to promote the progress of the useful arts''--an 
essential component being that those skilled in such ``Useful Arts'' 
are free to use the knowledge imparted by a patent disclosure to create 
better and newer technologies.
                                 ______
                                 
      Response to Written Questions Submitted by Hon. Ron Wyden to
                          Dr. Samuel I. Stupp
Bayh-Dole
    Question 1. In testimony before the Subcommittee, Dr. Stan Williams 
of HP stated that due to U.S. universities' interpretation of 
intellectual property sharing regime created under Bayh-Dole, it is 
easier to work with foreign universities rather than U.S. academic 
institutions. How would you respond to this criticism from the academic 
side? Does Bayh-Dole need an overhaul? If so, what would you 
specifically suggest?
    Answer. My personal view is that U.S. universities have been 
extremely proactive on technology transfer over the past decade, and I 
do not see any obvious problem with the system. If you look for example 
at the large number of successful start up companies in biotechnology 
and other fields that have emerged from technology transfer activities 
at universities, you see definite evidence of a healthy system. Many of 
these companies are now public and as far as I know no other country in 
the world is as successful as we are in this respect. I have no doubt 
that this proactive trend will continue into the nanotechnology era 
over the next few decades and I certainly do not see a justification 
for U.S. industry to flock to foreign universities to acquire 
technology. Of course there will always be exceptions, when very 
specific technologies are available for licensing overseas or when 
going a broad will be the only way to strike a ``good deal'' for large 
U.S. corporations. I do not know what experience Mr. Williams has had 
that would lead him to hold his opinion.
    Before opening a public forum on the subject, one would need to 
back up with good stastistics the alleged inappropriate practices by 
U.S. universities on technology transfer. My feeling is that 
stastistics will not support the case, and that the Bayh-Dole act does 
not need an overhaul. Furthermore, I would add that even ignoring 
technology transfer, the billions of dollars invested in research at 
U.S. universities have yielded over the course of decades the best 
technical/scientific work force in the world. This has been a 
critically important return for the economic success of our country. 
Furthermore, now that large U.S. corporations have downsized their 
research and development infrastructure, mostly for financial reasons 
in my view, universities are the ones leading the way to technical 
innovation as well as playing the role they always played of educating 
our scientists and engineers. Is it appropriate to tamper now with 
Bayh-Dole, I don't think so.
Promises of Nanotechnology
    New revolutionary technology often promises to ``change the way we 
live.'' Often times visionaries tell of how these technologies will 
enable better, more improved lives. There have been a number of 
promises about the bright potential of nanotechnology. For example, I 
have heard that with the ability to manipulate atoms, we can completely 
forgo smelting and instead essentially ``grow'' steel. While this is 
undoubtedly promising, it sounds rather fantastic.

    Question 2. Can you distinguish for me between what is reasonably 
achievable and what are exaggerations?
    Answer. I think growing steel because we have now demonstrated the 
ability of manipulating individual atoms is an exaggeration. Smelting 
will be around for a very long time. That said, nanotechnology has 
undoubtedly the potential to change the way we live. My favorite 
examples are its potential impact on health care and personal as well 
as homeland security. Making nano-sized objects that can deliver 
medicines or genes to the specific cells that need them is definetely 
something that can happen and it would have remarkable impact on our 
ability to cure certain diseases and also controld the side effects of 
medication, including the life-threatening consequences of cancer 
chemotherapy. Regeneration of tissues, including the spinal cord, the 
heart, the retina which impact on dreams such reversing paralysis and 
blindness, or returning to a completely normal life after heart 
attacks. Along with advances in biology and medicine, nanotechnology 
will impact this field because regenerative medicine will require 
directing cells with nanostructured devices and materials. It is also 
reality that we can build with nanotechnology powerful machines to map 
out genomes very fast compared to current capabilities. This of course 
will have innumerable consequences in disease prevention and cure, but 
it will also advance biology faster. It is also real that we can 
achieve with nanotechnology the fabrication of single molecule 
detectors. This would have a profound impact on our security alerting 
us of dangerous events a lot earlier than we can today. There is no 
doubt that nanotechnology can also get us into a completely different 
regime of the information age giving us faster, smaller, and softer 
computers. On the lighter side it is also real that nanotechnology will 
help us look better and healthier--we are only starting to see what 
wonders nanotechnology can bring to the world of cosmetics. The real 
vision of nanotechnology will no doubt include other things that we 
cannot anticipate now that may deeply touch transportation and energy 
technologies.
Government Investment
    Question 3. Some critics of the National Nanotechnology Initiative 
argue that the research portfolio is not in balance, currently favoring 
readily achievable research goals and not sufficiently support high 
risk research. Do you agree or disagree. Please explain.
    Answer. I would agree that the NNI portfolio needs to fund more 
high risk long term research. This was one finding of the National 
Research Council's review of the initiative. In my own opinion, our 
research funding system is in general not very conducive to long term 
research because, budgets for the agencies fluctuate a lot leading to 
year-to-year programmatic changes, there is insufficient NSF funding, 
and the NIH has too much money and only a tiny piece of it is invested 
in long term technology-based research.

    Question 4. Given that other countries are also investing 
significant amounts in this field, do you feel that we are doing enough 
to ensure our leadership in this field?
    Answer. In my opinion, we are not doing enough in nanotechnology 
research. In order to keep a balanced portfolio within the NNI that 
targets both short range development of nanotechnology products and at 
the same time maintain funding stability for long range nanoscience we 
need to be ramping up rapidly to a budget of at least one billion 
dollars a year. Our report shows for example that Japan's 
nanotechnology budget is similar to ours. Normalizing by our GDP it is 
clear that we do not have equal capabilities. This is particularly 
important given that large industries are not contributing as much as 
they would have two decades ago to the research and development 
infrastructure. One critical issue is to raise the budget of the NSF, 
and get the NIH to engage in research programs on nanotechnology that 
are out of their box.

    Question 5. What role could the Nanotechnology advisory committee 
of academic, finance, and industry experts that was suggested by the 
Academy panel serve in improving and grounding the Federal government's 
nanotechnology research?
    Answer. This panel would be able to perform several critical 
functions. One of them is to guide the NNI's development in the context 
of ongoing scientific interests and discoveries in the international 
community. They could be a very important science and technology 
``radar'' to ensure that programs being funded couple to the most 
promising directions rather than to the internal interests and concerns 
of the various federal funding agencies. They will police for a more 
effective development of nanoscience and nanotechnology. Another 
important function will come from the members of this board associated 
with industry. These individuals can guide the programs to areas of 
interest to our economy in the global competition, ensuring that 
adequate programs of this type are always part of the NNI. This board 
should also develop the appropriate metrics to judge the success of the 
NNI and the changing needs for investment in this initiative year to 
year.

    Question 6. All of us have called out the economic potential of 
nanotechnology. Let me play devil's advocate for a moment--if 
nanotechnology is such a huge, revolutionary area, why should the 
Federal government invest here? Why can't companies bear this burden, 
if they are going to be positioned to reap the profits?
    Answer. Companies, particularly the large ones that have 
traditionally had the greatest resources, cannot develop effectively 
the nano era of science and technology because they have by now nearly 
destroyed their R&D laboratories guided by Wall Street forces, merges 
and acquisitions. Most industrial labs are focused on short term 
product development and improvement. The most promising activities with 
regard to industry lie in start companies and these are often 
associated with universities. Once these grow and become successful 
they will hopefully use their wealth to remove at least part of the 
burden from the Federal Government. Thirty years ago maybe the argument 
would have been valid but at this time we need to move quickly in the 
global competition and there is no time to wait for industry to rebuild 
its long term research infrastructure. Funding to universities and 
small companies would be at this time the fastest route to success at 
this time.

    Question 7. What do you see as the biggest challenges nanoscience 
currently faces? In other words, what barriers could potentially keep 
nanotechnology from reaching its potential?
    Answer. One barrier in my view would be a weak economy because we 
will then loose any chance of engaging industry for development that 
uses technology transfer from our academic and government laboratories. 
Another barrier is of course political instability in the world which 
is of course a real threat at this time. Nanotechnology development 
will benefit from meaningful international partnerships and flow of 
scientific information and people among communities in different parts 
of the world. Another possible barrier has to do with our educational 
systems. In this regard the interdisciplinary culture in which young 
scientists are conditioned and challenged to work on complex problems 
is a very important element for nanotechnology development to its 
optimal potential.
Multidisciplinary Education
    It appears that nanotechnology is an interdisciplinary science, 
combining facets of chemistry, materials science, computer science, 
biology, mechanical and electrical engineering, and physics.
    Question 8. How well prepared are our universities to produce the 
next generation scientists who have the requisite expertise in multiple 
disciplines in order to ensure that the United States continues to lead 
in nanotechnology research?
    Answer. Programs at our universities are changing rapidly toward 
the interdisciplinary mode which is very critical to nanotechnology 
development. However, they are still sub-optimal and very deep cultural 
changes need to occur for the various scientific communities to learn 
to recognize and respect the value of interdisciplinary activity in 
science. Most scientists are hesitant to operate outside their comfort 
box, but starting early on with young students we can encourage those 
with interdisciplinary intelligence to stick to this mode throughout 
their careers and eventually natural selection will produce the right 
community for optimal nanotechnology development. The broad scientific 
scope of nanoscience and also its broad range of applications requires 
very definitely individuals who are themselves interdisciplinary and 
can work at interfaces among fields. Multidisciplinary teams, the 
current common mode in universities is not effective for 
interdisciplinary activity. It only serves to hide individuals that 
cling on to traditional modes of scientific thinking and results in 
ineffective investment in nanoscience which is a pervasive revolution 
across all of science. The nanotechnology board can play a key role in 
helping the agencies catalyze the process with innovative programs.

    Question 9. What needs to be done to promote a multidisciplinary 
curriculum at all levels, not just universities, so that we have a 
properly educated nanotechnology workforce?
    Answer. We need to create programs from the top (OSTP for example) 
that offer significant resources to inter-agency programs at all levels 
that will attract what one might describe as individuals with 
interdisciplinary intelligence. The hope is that these populations of 
strong interdisciplinary scientists will eventually dominate the 
community demonstrating their ability to make key discoveries on 
complex phenomena and invent new things. This is a natural selection 
problem that nonetheless needs guidance from the top.
Measurement Tools
    Dr. Stupp, the Academy panel pointed out the need to develop the 
tools and measurements to support nanotechnology in order to spur 
nanotechnology innovation.
    Question 10. Please explain this recommendation. What agency or 
agencies are best known for this field? Are we allocating enough 
resources in this area?
    Answer. The development of new tools is key for nanotechnology. In 
fact it was new instruments enabled by microtechnology and software 
that spearheaded many of the activities we now label as nanotechnology. 
Agencies such as the Department of Energy and the NSF have always 
played a pivotal role on tool development. These agencies cannot afford 
to fund sufficient research activity on tool development. This is 
clearly a budget problem, and no we are not allocating sufficient 
resources to this objective. The NIH and possibly DoD should take a 
stronger interest in funding outstanding teams and even international 
collaborations to develop new tools for measurement, manipulation, and 
characterization of nanoscale systems. Clearly DOE and NSF need greater 
budgets to be able to address this problem.
                                 ______
                                 
      Response to Written Questions Submitted by Hon. Ron Wyden to
                          R. Stanley Williams
Bayh-Dole.
    Question 1. In your testimony before the Subcommittee, you stated 
due to U.S. universities' interpretation of intellectual property 
sharing regime created under Bayh-Dole, it is easier to work with 
foreign universities rather than U.S. academic institutions. What would 
it take for you to work with U.S. universities? Does Bayh-Dole need an 
overhaul? If so, what would you specifically suggest?
    Answer. I believe that it is still possible for leaders of good 
will from U.S. academia and industry to agree on a workable compromise 
that is fair and equitable to both parties and that satisfies the 
intent and the letter of the Bayh-Dole act.
    Unfortunately, we have seen significant polarization between 
attorneys representing these groups, and the level of acrimony has 
risen to the point that I despair that we can work together in the 
future. Typically at present, negotiating a contract to perform 
collaborative research with an American university takes one to two 
years of exchanging emails by attorneys, punctuated by long telephone 
conference calls involving the scientists who wish to work together. 
All too often, the company spends more on attorneys' fees than the 
value of the contract being negotiated. This situation has driven many 
large companies away from working with American universities 
altogether, and they are looking for alternate research partners.
    On the other hand, many high quality foreign universities are very 
eager to work with American companies, and by keeping attorneys out of 
the discussion completely they have streamlined processes to allow a 
successful negotiation to take place in literally a few minutes over 
the telephone. It is possible to specify what one wants to a professor 
at a university in China or Russia and then issue a purchase order to 
obtain a particular deliverable. The deliverable is received and 
verified to be satisfactory before the American company pays for it, 
and in this case the American company owns all rights to the 
deliverable and the process by which it was created. Often, such 
transactions can be completed in a few months, a fraction of the time 
required to just negotiate a contract with an American University, 
which will insist on owning all rights to whatever is produced. Thus, 
just as American companies were long ago forced to deal with high 
quality and low priced foreign competition, American universities will 
either have to modify their behavior or lose their industrial 
customers.
    In my opinion, the root of the problem is in the desperate 
financial situation of most American universities. In the physical 
sciences and engineering, the support from the U.S. government for 
academic research has been decreasing in real terms for over a decade. 
This has forced the universities to try to raise funds from other 
sources. Since a few universities have made a large amount of money 
from a piece of valuable intellectual property, this has encouraged 
nearly all universities to attempt to duplicate this success. However, 
this strategy is rather like planning ones retirement on winning the 
lottery. The vast majority of those adopting this strategy will lose.
    In negotiations between American universities and large companies, 
the term ``Bayh-Dole Act'' comes up frequently to justify an extreme 
position taken by universities with respect to intellectual property. 
Most universities claim that the Bayh-Dole Act requires them to retain 
complete control of all intellectual property produced at the 
university. This then leads to the position by a university that a 
company needs to pay for research that is being done up front in a 
collaborative project, to pay the costs for any patents that are filed 
as a result of the research, and then to enter into a separate 
negotiation with the university to license the intellectual property 
that is created. In many cases, the root idea originated with the 
sponsoring company in the first place, not the university. Companies 
take the view that they are thus forced to pay three times for their 
own intellectual property, which puts them at a significant 
disadvantage with respect to a company that doesn't spend anything to 
sponsor university research. Some companies have agreed to this 
arrangement in the past, but there are several instances where 
intellectual property that was supported and generated in collaboration 
with one company was then licensed to a different company, often a 
start-up that is owned by the professors who participated in the 
research. Again, this behavior is defended as being necessary because 
of the Bayh-Dole Act. However, I contend that this is an extreme 
interpretation of the Act, and in fact there are fair and equitable 
compromises that can be made that in the long run will benefit 
universities much more than the disastrous short-term strategies they 
are now following. Universities will in general receive far more 
funding in the form of research contracts from high tech companies than 
they will by licensing technology, because of the short life of such 
technologies and the fact that it is always possible to substitute one 
technology for another.
    If we look at the actual language of the Bayh-Dole act itself, it 
is difficult to understand where university-industry cooperative work 
is impacted. However, the Council on Government Relations (COGR--``An 
association of research universities--COGR's primary function is to 
help develop policies and practices that fairly reflect the mutual 
interest and separate obligations of federal agencies and universities 
in federal research and training'') has created a set of guidelines for 
university behavior: The Bayh-Dole Act--A Guide to the Law and 
Implementing Regulations (http://www.cogr.edu/bayh-dole.htm) . In these 
guidelines, we find the statement ``In their marketing of an invention, 
universities must give preference to small business firms (fewer than 
500 employees), provided such firms have the resources and capability 
for bringing the invention to practical application,'' which is the 
justification for channeling IP rights to university-based start-ups. 
Unfortunately, these start-ups almost always fail to get their 
technology to the market, since they lack the resources to do so and 
the market itself moves too quickly for them to be ready. The next 
sentence of the COGR guide states ``However, if a large company has 
also provided research support that led to the invention, that company 
may be awarded the license.'' The natural compromise position is this: 
in recognition of the fact that other research support created the 
institution and the general environment where any large-company funded 
research leads to intellectual property, that large company should be 
awarded a nonexclusive license, and the university should have the 
right to sell nonexclusive licenses to any other companies interested 
in buying them. This will be by far the most efficient means of 
actually getting a technology into the market place--by creating a 
competitive environment with multiple entities vying to get the 
technology to market.
    If we fail to find a broad consensus agreement between research 
universities and companies on IP licensing, then I would recommend 
amending the Bayh-Dole act to restrict the ability of a private 
institution that receives federal funding to award exclusive licenses.
Government Investment
    Question 2. Some critics of the National Nanotechnology Initiative 
argue that the research portfolio is not in balance, currently favoring 
readily achievable research goals and not sufficiently supporting high-
risk research. Do you agree or disagree? Please explain.
    Answer. I agree with this criticism, but this issue of sandbagging 
research proposals is not restricted to nanotechnology research alone--
it is endemic within the entire academic and national lab research 
enterprise. Again, the problem is the scarcity of research funds. 
Individual professors believe that the risk of failure is too high, so 
they only propose projects that they know will succeed (or indeed 
projects that they have already completed). To have a `failed' project 
could mean that the professor never gets another grant funded, which is 
the equivalent of academic death. Thus, nearly all projects `succeed', 
but at a very small scale. This extreme risk aversion is now 
characteristic of nearly all research in the physical sciences and 
engineering. It means that in general we are not seeing many big 
breakthroughs, but mainly incremental progress along easily predicted 
directions. In order to escape from this risk-averse environment, it 
must be possible for university researchers to gamble big and not 
receive the equivalent of an academic death sentence if things do not 
work out exactly as they predict--we need to reward grand visions 
whether they turn out to be viable or not. It was possible to do that 
in an era where grant funding was plentiful--it can also be possible in 
an era of restricted funding if agencies decide to play long shots 
consistently, understanding that only a small fraction of them will pay 
off. This is the very nature of the way Venture Capital works, and I 
think that funding agencies should adopt some of the practices of VC's 
when constructing their research investment portfolio.

    Question 3. Given that other countries are also investing 
significant amounts in this field, do you feel that we are doing enough 
to ensure our leadership in this field?
    Answer. The European Union is currently boasting that they own a 
commanding lead in nanotechnology research, that they will invest at 
least twice as much for basic research in this crucial area as the 
United States in 2003, and that the entire field is ``Its Ours to 
Lose'' (title of an October 3, 2002 report issued by the European 
Nanobusiness Association). The Japanese government plans to invest 40 
percent more than the presently announced U.S. National Nanotechnology 
Initiative (NNI) budget for 2003, and has consistently demonstrated a 
strong resolve to raise the ante every time the U.S. provides budget 
figures for the NNI. Given the local purchasing power of a dollar, the 
$200 M budget announced by China is already supporting what is probably 
the world's largest nanotechnology effort in terms of the number of 
young scientists working in the field. Make no mistake about it: we are 
in a global struggle to dominate the technological high ground, and 
thus a large portion of the economy, of the 21st Century. The U.S. 
cannot outspend the rest of the world on research and development this 
time, so we must be by far the most productive at creating new 
technologies and the most efficient at bringing them to the 
marketplace. This will require coordination and cooperation across a 
wide variety of institutions and disciplines such as we have never seen 
before in the U.S.. To fail places the wealth and security of this 
nation at serious risk.
    We certainly can and must invest more in basic research, primarily 
to ensure that all the excellent proposals coming into the funding 
agencies are being supported. My suggestion is that the U.S. should 
increase funding for the NNI at the rate of 30 percent per year for the 
next three years, and monitor the field to make sure the investment is 
well utilized. However, the only hope that we have to dominate this 
field is if we can be much more effective than anyone else with the 
research dollars we spend. Nanotechnologies will all be subject to 
exponential improvements for decades, which means that a sustained lead 
of just one-year in any area by one country can be an insurmountable 
barrier to entry of commercial products for all others. We need to have 
a balanced portfolio, with a reasonable number of well-placed long shot 
investments. Our real strength in American science and technology lies 
in our diversity of institutions: our research universities, our 
National Laboratories and our great corporate research labs. As to the 
latter, much has been made of corporate America's de-emphasis of basic 
research, but in fact we have invested heavily and consistently in 
applied research and development over the past twenty years, and in 
general we have developed the world's best institutions for turning 
technology into products. To win globally in nanotechnology, these 
strategic assets must work together as partners. This will require a 
significant engagement among these institutions to build trust and 
working relationships, which in turn will require wise and consistent 
policies that remain stable and are emphasized over many years. We will 
have to come to a better understanding of intellectual property and its 
value to each of these stakeholders, and attempt to understand how to 
adequately reward each partner while creating the maximum total benefit 
for the country. This is a difficult task, and in my view we are 
presently moving in exactly the opposite direction. Our current 
policies are driving American companies to look overseas for their 
research partners, which eventually will lead to the relocation of 
corporate R&D labs to be close to those partners.
    Question 4. What role could a Nanotechnology advisory committee of 
academic, finance, and industry experts serve in improving and 
grounding the Federal government's nanotechnology research? Would you 
support the creation of such an advisory committee?
    Answer. I am always wary of creating a new bureaucracy, but in this 
case the stakes are so high that I think we should do so on an 
experimental basis. However, this advisory committee has to include 
real decision-makers, people who can come to agreements and obligate 
their institutions to abide by those agreements. Otherwise, it will 
just be a lot of hot air that winds up being more fodder for attorneys 
and multi-year debates. These decision-makers should create model 
agreements for their institutions that would then hopefully be adopted 
as standards for all university-government-corporate research 
interactions. It will take a few bold and brave visionaries to lead the 
way out of our current rather miserable situation. However, I believe 
that once some sensible new practices are established, they will become 
such a strong competitive advantage that the rest of the American 
institutions not leading way will have to follow the leaders.
                                 ______
                                 
Prepared Statement of Dr. Cristina Roman, Executive Director, European 
                        NanoBusiness Association

It's Ours to Lose--An Analysis of EU Nanotechnology Funding and the 
        Sixth Framework Programme

Executive Summary
    With funding for the Sixth Framework Programme (FP6) due to come 
into effect in a few months, comparisons have been made between U.S. 
and European nanotechnology funding that suggest that the U.S. is 
investing significantly more in this important area than the European 
Union.
    In fact, a closer look at the figures, performed here through the 
mechanism of three scenarios, suggests that European Union spending on 
nanotechnology research is not just comparable to that of the U.S. but 
will probably exceed it by a factor of two or more for 2003. Moreover, 
the reason that the `hidden' European funding is not obvious may 
arguably lead to more results per dollar or euro spent. Although the 
increased focus on multidisciplinary endeavours that nanotechnology 
requires does argue for dedicated nanotechnology spending, there is 
also, no doubt, value in framing spending decisions in terms of high-
level goals, in which nanotechnology will figure only if merit 
dictates, rather than being pre-ordained. The `hidden' FP6 spending is 
of this nature, being directed according to the Framework Programme's 
`thematic priorities'. This balanced approach may well yield dividends.
    According to our analysis, EU nanotechnology funding alone, which 
constitutes between 4 percent and 20 percent of total European research 
funding, will exceed the recently proposed 2003 U.S. nanotechnology 
budget. Given that EU spending often does not cover the infrastructure 
and manpower that U.S. spending does, this being met by individual 
nations, and given that European research funding represents a much 
smaller fraction of total European funding than U.S. federal funding 
does of total U.S. funding, European nanotechnology funding may exceed 
U.S. funding by a factor of 2 in 2003, or greater if funding from 
individual EU nations is taken into account.
    Though this analysis demonstrates that Europe recognises the long-
term economic potential of a strong nanotechnology research base and is 
acting accordingly, it should not lead to complacency as there are 
still areas that warrant further attention if we want to maximise 
Europe's ability to perform not just world-leading research but to 
translate that into economic benefits. These are outlined below.

Recommendations
    In order to enable European industry to continue to be competitive 
on a global basis, attention is required in areas beyond providing 
adequate funding under FP6. These need to be tackled at national levels 
and at the European level, both from within the existing European 
structures and through organisations such as the ENA.

   Basic R&D and Fundamental Science: The EU cannot, for 
        political and budgetary reasons, coordinate all European 
        research. It is essential for all European countries to 
        increase their efforts to fund both basic and applied 
        nanotechnology research. Individual countries have the ability 
        to react much faster to changing scientific and economic 
        conditions than the EU, and should use this to their advantage. 
        By implementing local measures based on local conditions, 
        abilities and market requirements, Europe as a whole can 
        maintain its current leading position. While some European 
        countries have recognised this challenge and are meeting it 
        head on, others could do more.

   Business Climate: The climate for nanotechnology business 
        start-ups across Europe varies from friendly to positively 
        hostile. This applies both to government regulations and 
        funding bodies, both private and public.

   Technology Transfer: The wide variations across Europe will 
        lead to a technological divide. While academic research is of a 
        generally excellent standard across the continent, technology 
        transfer is not. This will have an impact on both the corporate 
        funding of academic research and start-up activity, these being 
        concentrated in areas where technology transfer is most 
        efficient for business. The recipe for successful technology 
        transfer will vary from one member state to the other and some 
        creativity will be required to come up with the best solutions 
        for areas that currently lack effective mechanisms. Analysis of 
        the mechanisms that have already shown success should be the 
        starting point.

   Public Perception: The widespread perception among both the 
        business community and the general public that nanotechnology 
        is still science fiction does little to encourage industry to 
        take advantage of it. An appropriate appreciation of the 
        realities and potential of nanotechnology is taking root more 
        slowly in much of Europe than in the rest of the world. The 
        European Union, the ENA and individual governments need to 
        continue to work on improving the perception of nanotechnology 
        among the business community and the public.

   Government Inaction: While some European countries are 
        already taking proactive measures, many, especially in southern 
        Europe, seem to be taking a wait and see approach or ignoring 
        the area completely. Applying this philosophy to 
        microelectronics and the Internet has led to a wide economic 
        gap between technology-based and agrarian/tourism-based 
        economies. Nanotechnology will be much more fundamental to 
        economic performance than any previous technological revolution 
        and will have a part to play even in predominantly agrarian 
        economies. All governments within Europe should be encouraged 
        to understand what nanotechnology can do for them.

   Education: From Korea to the Irish Republic there have been 
        many examples in recent history of countries being rapidly 
        transformed into technological powerhouses by virtue of a well-
        educated and relatively cheap work force. The agrarian/tourism-
        based economies of Europe do offer low labour costs and many 
        offer attractive climates and lifestyles. Thanks to European 
        Union efforts they also offer good infrastructure. The final 
        piece in the jigsaw that might allow such economies to 
        transition to being more technology-based is education--it is 
        essential that a significant pool of technically highly 
        educated workers is maintained throughout Europe. An increased 
        emphasis on natural science training is urgently required for 
        European institutions to be able to absorb the planned funding. 
        Equally important are mechanisms for attracting more students 
        into science-related subjects. This is a problem that is being 
        tackled with some success in a few European countries but the 
        lessons learned need to be heeded elsewhere.

   Communication: It is intrinsically difficult to get messages 
        across in an economic block composed of many countries with 
        different languages and cultures. However, researchers, 
        entrepreneurs and the public at large must be made aware of the 
        significant opportunities that are available to them in Europe 
        so that they don't get the impression that the opportunities 
        are greater elsewhere when this is not in fact the case. 
        Combined efforts from the ENA, such as this report, and the 
        European Union should be able to address this issue.

Introduction
    A figure against which nanotechnology funding is often benchmarked 
is the budget of the U.S. National Nanotechnology Initiative. At first 
glance this appears to suggest that Europe's often quoted 1.3 billion 
over 4 years is tiny compared to the 2003 NNI budget of $710.2 million 
( 0.72 billion). Our analysis indicates that the top level figures do 
not reveal the whole story, that many of these headline figures are in 
fact misleading, and that European nanotechnology spending may in fact 
be significantly higher than that of the U.S.
    Two criticisms are commonly levelled at endeavours such as this. 
One is that variations in funding mechanisms in different economic 
areas are complex, and varying definitions of nanotechnology add to 
this such that any comparison of numbers will always require certain 
assumptions and may be open to alternative interpretations. However, 
the comparisons can certainly give an indication of the approximate 
state of play.
    The other criticism is that putting numbers on nanotechnology 
spending is a pointless exercise, a little akin to putting numbers on 
spending for research into chemistry. Meaningful comparisons, the 
argument goes, would be at higher, application-oriented levels, such as 
cancer research, alternative energy, etc.
    The need for some sort of figure for nanotechnology spending, even 
if expressed as a range of figures in which the true figure probably 
falls, comes from the fact that businesses and academics look to these 
headline numbers and make decisions based upon them. If academics feel 
that the funding environment for nanotechnology is better in another 
region, they may be inclined to relocate. Equally, businesses will 
favour locations where grants may be more accessible and a greater pool 
of qualified individuals is present. For this reason, some attempt must 
be made to produce meaningful numbers.

Global Nanotechnology Funding
Europe

  Table 1. Final budget breakdown (in millions of euros) for the Sixth
      Framework Programme for 2002 through 2006. (Source. CORDIS).
------------------------------------------------------------------------
             Commission's final budget                 June 2002 Final
------------------------------------------------------------------------
INTEGRATING AND STRENGTHENING THE ERA
1. Focusing and integrating Community research                    13345
1.1 Thematic priorities                                           11285
1.1.1 Life sciences, genomics and biotechnology                    2255
 for health
1.1.2 Information society technologies                             3625
1.1.3 Nanotechnologies and nanosciences, knowledge-                1300
 based multifunctional materials and new
 production processes and devices
1.1.4 Aeronautics and space                                        1075
1.1.5 Food quality and safety                                       685
1.1.6 Sustainable development, global change and                   2120
 ecosystems
1.1.7 Citizens and governance in a knowledge-based                  225
 society
1.2 Specific activities covering a wider field of                  1300
 research
Non-nuclear activities of the Joint Research                        760
 Centre
2. Structuring the European Research Area                          2605
3. Strengthening the foundations of the European                    320
 Research Area
SPECIFIC PROGRAMME NUCLEAR ENERGY                                  1230
------------------------------------------------------------------------
    TOTAL                                                         17500
------------------------------------------------------------------------

USA

 Table 2. Breakdown (in millions of dollars) of NNI spending for FY 2001
 (appropriated and actual), 2002 (appropriated) and 2003 (congressional
  request). Note: the `total' includes funding reported on 2/4/02 p/us
   funding in associated nanotechnology programmes. (Source: National
                       Nanotechnology Initiative)
------------------------------------------------------------------------
                                     FY2001          FY 2002    FY 2003
      Department/Agency      ----------------------  Appropr.   Request
                               Appropr.    Actual     Total      Total
------------------------------------------------------------------------
Department of Defense               110        123        180        201
Department of Energy                 93      87.95       91.1      139.3
Department of Justice                          1.4        1.4        1.4
Department of Transportation                     0          2          2
 (FAA)
Environmental Protection                         5          5          5
 Agency
National Aeronautics and             20         22         46         51
 Space Administration
National Institutes of               39       39.6       40.8       43.2
 Health
National Institute of                10       33.4       37.6       43.8
 Standards and Technology
National Science Foundation         150        150        199        221
U.S. Department of                             1.5        1.5        2.5
 Agriculture
------------------------------------------------------------------------
    Total                           422     463.85      604.4      710.2
------------------------------------------------------------------------

Asia

    Table 3. Estimated Japanese government nanotechnology R&D expenditures (in millions of dollars). (Source:
                  National Science Foundation, Nanoscale Science, Engineering and Technology).
----------------------------------------------------------------------------------------------------------------
                                              1997      1998      1999      2000      2001      2002      2003
----------------------------------------------------------------------------------------------------------------
Japan                                            120       135       157       245       465       750      1000
----------------------------------------------------------------------------------------------------------------

    Other Asian countries have also allocated large budgets to 
nanotechnology although many of these figures are not associated with 
clear timescales. However, given the increased purchasing power in many 
Asian countries, e.g. a researcher in China costs much less than one in 
Amsterdam, the funding is none the less significant.
    In the Japanese case, the annual 50 percent increases cast doubt 
upon the accuracy of these figures. While there is no question that 
funding will increase, increasing the number of researchers available 
to absorb this extra funding does not seem possible on an annual basis.
    Furthermore, given the difficulty of even agreeing on what 
constitutes nanotechnology, many of these numbers must be treated with 
caution. An example would be the recent assertion from the Taiwanese 
government that 800 companies in that country will soon be involved in 
nanoscience. This figure does not square with estimates from other 
sources of between 700 companies involved in nanotechnology (including 
multinationals) and 1000 nanotechnology start-ups worldwide (this 
latter figure quite likely uses an overly broad definition of 
nanotechnology).

Table 4. Asian nanotechnology budgets (in millions of dollars). (Source:
                      CMP-Cientifica; Asia Pulse).
------------------------------------------------------------------------
                    Country                               2002
------------------------------------------------------------------------
        Japan                                                       750
        China                                                       200
        Taiwan                                                      111
        Korea                                                       150
        Singapore                                                    40
------------------------------------------------------------------------
              Total                                                1251
------------------------------------------------------------------------

EU Funding
    EU funding for nanotechnology is contained within the 6th Framework 
Programme, which runs from 2002 to 2006 and has an overall budget of 
17.5 billion. (The discussion will be focused on `thematic priorities', 
which is the area where nanotechnology can have a significant impact. 
Notice that almost a quarter of the budget goes to: Euratom; 
strengthening the European Research Area (ERA); and other, non-
research-related, activities.)
    The official EU figure for nanotechnology, as quoted by Research 
Commissioner Philippe Busquin, is 700 million over 4 years, if 
nanotechnology is defined as only processes involving the manipulation 
of atoms and molecules. However, the EU does not have a standard 
definition of nanotechnology, preferring to use an upper limit of 50 
nm, or `exploitation of mesoscopic and quantum effects at the 
macroscale' or `the manipulation of atoms and molecules'.
    A more detailed analysis of EU spending is given below in table 5. 
Following detailed discussions with Commission officials, an upper and 
lower limit for the nanotech percentage was assigned to each thematic 
priority. It is immediately obvious that the headline figure of 1.3 
billion is in fact incorrect as thematic priority 1.1.3 is only partly 
dedicated to nanotechnology.

   Table 5. Budget percentage corresponding to Nanotechnology for each thematic priority of the 6th Framework
               Programme for 2002-2006 (in millions of euros). (Source: EU Commission officials.)
----------------------------------------------------------------------------------------------------------------
                                                       June 2002      Min                     Max
             Thematic priorities budget                  Final     (percent)     Total     (percent)     Total
----------------------------------------------------------------------------------------------------------------
1.1.1 Life sciences, genomics and biotechnology for         2255         1.0        22.6         2.5        56.4
 health
1.1.2 Information society technologies                      3625         7.0       253.8         9.0       326.3
1.1.3 Nanotechnologies and nanosciences, knowledge-         1300        25.0       325.0        30.0       390.0
 based multifunctional materials and new production
 processes and devices
1.1.4 Aeronautics and space                                 1075         0.2         2.2         0.2         2.2
1.1.5 Food quality and safety                                685         0.2         1.4         0.2         1.4
1.1.6 Sustainable development, global change and            2120         0.2         4.2         0.2         4.2
 ecosystems
1.1.7 Citizens and governance in a knowledge-based           225         0.2         0.5         0.2         0.5
 society
----------------------------------------------------------------------------------------------------------------
    TOTAL                                                  11285                   609.7                   781.0
----------------------------------------------------------------------------------------------------------------

    While the above table justifies Commissioner Busquin's statement on 
EU spending, the figures should be treated as conservative. While 
institutions such as the European Space Agency have failed to match the 
NASA lead (and the $51 million 2003 budget) in applications of 
nanotechnology, it is clear that any materials-dependent applications 
such as those prominent in aerospace will have a nanotechnology 
component far higher than 0.2 percent. Food quality and safety are 
seeing packaging applications based on nanotechnology already on the 
market and a variety of sensor technologies look set to hit the market 
soon, which also argues that the nanotechnology component in research 
would be significantly higher than 0.2 percent. Sustainable development 
is equally an area where recent nanotechnological developments show 
significant promise. Life sciences, genomics and health are already 
seeing major impacts from microtechnology, with nanotechnology looking 
to play a larger role very soon, in areas ranging from bioanalysis to 
drug delivery.
    In fact, some EU officials expect the percentage of nanotech across 
all items to be as high as 30 percent, as taken in the `nano inside' 
scenario outlined below.
    So there is good reason to believe that the 0.7 billion figure 
given in the table above is a serious underestimate, and that the 30 
percent figure is probably a better reflection, although this may, of 
course, be optimistic.
    The aim of the FP6 is to produce breakthrough technologies that 
directly benefit the EU, whether economically or socially. In order to 
achieve this, the research programme contains broad thematic areas, 
such as health, which are then broken down into sub-components for 
research funding. Instead of funding nanotechnology and nanoscience 
directly, an issue which is addressed in the nanotechnology thematic 
priority, the focus is on breakthroughs. By focusing on breakthroughs, 
nanotech funding is targeted at applications rather than pure science. 
Similar applications are being pursued in government programmes in the 
U.S. and in Europe; the fundamental difference between the European 
approach and that of the U.S. and some other countries is the way the 
applications are grouped--the EU structure makes considerations of 
benefits the priority by embodying them in the highest level of the 
funding structure. The NNI in the U.S. starts with a nanotechnology 
budget, then apportions this to various departments representing 
thematic areas.
    In order to decode the European Union's spending plans on 
nanotechnology three scenarios have been examined. While none of these 
approaches is entirely adequate to explain the complexities of European 
funding, they do at least allow an approximate level of European 
commitment to nanotechnology to be determined.

Scenario 1--`Nano Inside'
    Applying the view of some within the EC who believe that 
nanoscience and technology will play a large part in producing the 
breakthrough technologies of FP6, for example in drug delivery and 
biodetection, leads to the assumption by certain programme officials 
that 30 percent of all spending will be nanotechnology-related. This 
fits well with NNI estimates, which reach the fabled $1 trillion market 
size for products and services affected by nanotechnology by assuming 
that nanotechnology will have a part to play in almost everything.
    This 30 percent estimate for the nanotechnology component of the 
funded projects for FP6 is an average across all the thematic 
priorities and is described as `nano inside'.
    Of course, the true nanotechnology component may be higher or lower 
than 30 percent and it will not be possible to extract it until a final 
review of the FP6 is complete after the end of the programme.
    If this 30 percent figure is applied to the European funding figure 
of 11.28 billion, then 3.4 billion, or 850 million a year, may well be 
spent on nanotechnology.

Scenario 2--Mobilised Capital
    Many EU-funded programmes are not entirely supported by the EU. In 
the case of university research 100 percent of the marginal cost, e.g. 
for additional researchers or equipment, but not for those already in 
place, is funded, but for many other projects matching funds are 
provided by national governments or participating companies.
    The main instruments of FP6 are integrated projects (IP) and 
networks of excellence (NoE) proposed under FP6. For each NoE the EU 
funds up to 50 percent of the project. For each IP the EU only funds up 
to 25 percent of the project, requiring a minimum national contribution 
of 75 percent. Given the 400 million allocated for IPs and the 300 
million allocated for NoEs, the amount of capital released by EU 
funding may be in the region of 2.4 billion, or 600 million a year.
    Taking another EU definition, that of `the manipulation of atoms 
and molecules', which commission officials estimate to be around 1 
billion, would give a mobilised capital figure of 3.43 billion or 857 
million per year.

Scenario 3--Pro-rata Comparison
    There are several fundamental differences between the EU approach 
and that of the U.S. and Japan. While a detailed analysis of U.S. and 
Japanese funding mechanisms is beyond the scope of this report, an 
appreciation of these differences changes the relative balance of 
funding.
    As previously discussed, the EU structure makes considerations of 
benefits the priority by embodying them in the highest level of the 
funding structure. Another fundamental difference is that rather than 
assigning a fixed budget for nanotechnology in health care, as the NNI 
is doing via the National Institutes of Health (NIH), the EU assigns a 
budget for health.
    A further difference arises as the EU funding only covers marginal 
cost, i.e. the extra funding required for researchers, equipment etc. 
The cost of infrastructure and that of paying academics already in 
place is borne by the national governments (but will generally not be a 
part of the budget for their own nanotechnology initiatives). This is 
in marked contrast to the U.S. system where the NNI generally wholly 
supports the institutes dedicated to nanotechnology. In fact, the 
National Science Foundation funding includes almost 10 percent of its 
budget for research infrastructure.
    However, the most significant difference is that the FP budget 
represents about 4 percent of the total European public research 
budgets (see, for example, ftp://ftp.cordis.lu/pub/nanotechnology/docs/
nanoscience_presentation_022002_en.ppt).
    This is, however, an average figure. In high-technology areas such 
as aerospace, the figure is closer to 20 percent, while in others, such 
as cancer research, it is substantially less than 4 percent. Thus, 
assuming a similar nanotech proportion in other budgets, and an EU 
contribution of 10-20 percent, the conservative estimate of 700 million 
over 4 years could result in spending of between 3.5 billion and 7 
billion over 4 years, or 0.88-1.75 billion per year.
    This figure would, of course, need to be compared with a U.S. 
figure that included funding from individual states. However, current 
U.S. state spending suggests it may exceed the NNI budget by a factor 
of two, not, as in the EU, by a factor of 10-25. In fact, to date, 
total nanotechnology funding by individual U.S. states has so far not 
approached the levels allocated nationally by the NNI.

   Table 6. Total EU nanotechnology funding for the period 2002-2006.
   Comparison of the three described scenarios (in billion of euros).
------------------------------------------------------------------------
                                                 Mobilised     Pro-rata
             Scenario              Nano Inside    Capital     Comparison
------------------------------------------------------------------------
EU Funding (Total FP6)...........          3.4     2.4-3.43      3.5-7.0
EU Funding per year..............         0.85    0.60-0.86    0.88-1.75
------------------------------------------------------------------------

    It is also arguable that by targeting some funding to specific 
thematic priorities, in addition to providing funding specifically for 
nanotechnology, which is probably necessary to effectively tackle the 
new cross-disciplinary issues it presents, EU funding may prove more 
effective in terms of results per dollar or euro spent.
    Given the huge differences between the EU and U.S. funding 
programmes, a direct comparison between them is difficult to make. An 
analysis of European researchers and patents by Commission official Dr. 
Ramon Compano, published in the journal Nanotechnology (volume 13, 
number 3, June 2002) indicates that European researchers are performing 
as well as their U.S. counterparts, with apparently far less funding. 
This is a further indication that the headline figures are not telling 
the whole story.

Conclusions
    On balance, it looks as if Europe has a significant edge at the 
moment. However, it should be remembered that since discussions about 
FP6 started the U.S. NNI budget has almost doubled. Once the economic 
benefits of U.S. funding begin to be felt, whether in new company 
start-up activity, or progress towards military or social goals, U.S. 
funding is expected to increase rapidly. In addition, the FP6 budget is 
now fixed until 2006, at which point the balance may have changed 
dramatically. This is where the initiatives of individual European 
governments become important, as outlined in the recommendations at the 
start of this report.
    While European funding appears to be adequate to match the U.S. and 
Japanese initiatives, it is simplistic to divide the funding figures by 
4. Simply turning on the funding will cause problems unless the 
scientific infrastructure is there to absorb that funding. Europe 
cannot just suddenly double the number of physics students being 
produced because the funding is there for their PhD and post-doctoral 
work. We will see more of an exponential ramp-up.
    The EU, national governments and organisations such as the ENA need 
to continue to focus on: improving the business climate in member 
states; developing strategies for improving technology transfer and 
increasing the number of students embarking on scientific training, to 
ensure an adequately trained labour pool; ensuring that public and 
business perception of nanotechnology is realistic; encouraging local 
governments that have not yet recognised the importance of 
nanotechnology to do so; making sure the opportunities in Europe are 
adequately communicated; and ensuring that national governments have 
nanotechnology R&D policies that allow a more rapid reaction to 
changing opportunities than is possible from the Europe-wide 
programmes.
    While much of the headline news is made by the EU, we expect 
European funding will be picked up where it goes with the grain of 
member states' own programmes. Given that EU funding represents only 4 
percent of Europe's total, the efforts of member states are likely to 
be the deciding factor in the eventual competitiveness of European 
funding.

                                  
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