[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
                       NANOTECHNOLOGY: WHERE DOES
                            THE U.S. STAND?

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

                                HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON RESEARCH

                          COMMITTEE ON SCIENCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 29, 2005

                               __________

                           Serial No. 109-21

                               __________

            Printed for the use of the Committee on Science


     Available via the World Wide Web: http://www.house.gov/science

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
21-950                      WASHINGTON : 2005
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

                          COMMITTEE ON SCIENCE

             HON. SHERWOOD L. BOEHLERT, New York, Chairman
RALPH M. HALL, Texas                 BART GORDON, Tennessee
LAMAR S. SMITH, Texas                JERRY F. COSTELLO, Illinois
CURT WELDON, Pennsylvania            EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California         LYNN C. WOOLSEY, California
KEN CALVERT, California              DARLENE HOOLEY, Oregon
ROSCOE G. BARTLETT, Maryland         MARK UDALL, Colorado
VERNON J. EHLERS, Michigan           DAVID WU, Oregon
GIL GUTKNECHT, Minnesota             MICHAEL M. HONDA, California
FRANK D. LUCAS, Oklahoma             BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois               LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland         RUSS CARNAHAN, Missouri
W. TODD AKIN, Missouri               DANIEL LIPINSKI, Illinois
TIMOTHY V. JOHNSON, Illinois         SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia            BRAD SHERMAN, California
JO BONNER, Alabama                   BRIAN BAIRD, Washington
TOM FEENEY, Florida                  JIM MATHESON, Utah
BOB INGLIS, South Carolina           JIM COSTA, California
DAVE G. REICHERT, Washington         AL GREEN, Texas
MICHAEL E. SODREL, Indiana           CHARLIE MELANCON, Louisiana
JOHN J.H. ``JOE'' SCHWARZ, Michigan  DENNIS MOORE, Kansas
MICHAEL T. MCCAUL, Texas
VACANCY
VACANCY
                                 ------                                

                        Subcommittee on Research

                  BOB INGLIS, South Carolina, Chairman
LAMAR S. SMITH, Texas                DARLENE HOOLEY, Oregon
CURT WELDON, Pennsylvania            RUSS CARNAHAN, Missouri
DANA ROHRABACHER, California         DANIEL LIPINSKI, Illinois
GIL GUTKNECHT, Minnesota             BRIAN BAIRD, Washington
FRANK D. LUCAS, Oklahoma             CHARLIE MELANCON, Louisiana
W. TODD AKIN, Missouri               EDDIE BERNICE JOHNSON, Texas
TIMOTHY V. JOHNSON, Illinois         BRAD MILLER, North Carolina
DAVE G. REICHERT, Washington         VACANCY
MICHAEL E. SODREL, Indiana           VACANCY
MICHAEL T. MCCAUL, Texas             VACANCY
VACANCY                                  
SHERWOOD L. BOEHLERT, New York       BART GORDON, Tennessee
                 DAN BYERS Subcommittee Staff Director
            JIM WILSON Democratic Professional Staff Member
      MELE WILLIAMS Professional Staff Member/Chairman's Designee
        ELIZABETH GROSSMAN, KARA HAAS Professional Staff Members
                      JAMES HAGUE Staff Assistant


                            C O N T E N T S

                             June 29, 2005

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

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

                           Opening Statements

Statement by Representative Bob Inglis, Chairman, Subcommittee on 
  Research, Committee on Science, U.S. House of Representatives..    14
    Written Statement............................................    15

Statement by Representative Darlene Hooley, Ranking Minority 
  Member, Subcommittee on Research, Committee on Science, U.S. 
  House of Representatives.......................................    15
    Written Statement............................................    16

Prepared Statement by Representative Russ Carnahan, Member, 
  Subcommittee on Research, Committee on Science, U.S. House of 
  Representatives................................................    17

Prepared Statement by Representative Eddie Bernice Johnson, 
  Member, Subcommittee on Research, Committee on Science, U.S. 
  House of Representatives.......................................    17

                               Witnesses:

E. Floyd Kvamme, Co-Chair, President's Council of Advisors on 
  Science and Technology
    Oral Statement...............................................    18
    Written Statement............................................    20
    Biography....................................................    27

Matthew M. Nordan, Vice President of Research, Lux Research, Inc.
    Oral Statement...............................................    27
    Written Statement............................................    29
    Biography....................................................    37
    Financial Disclosure.........................................    38

Sean Murdock, Executive Director, Nanobusiness Alliance
    Oral Statement...............................................    38
    Written Statement............................................    41
    Biography....................................................    50
    Financial Disclosure.........................................    51

Jim O'Connor, Vice President, Technology Incubation and 
  Commercialization, Motorola, Inc.
    Oral Statement...............................................    51
    Written Statement............................................    53
    Biography....................................................    56
    Financial Disclosure.........................................    58

Discussion.......................................................    59

             Appendix 1: Answers to Post-Hearing Questions

E. Floyd Kvamme, Co-Chair, President's Council of Advisors on 
  Science and Technology.........................................    84

             Appendix 2: Additional Material for the Record

Letter to Robert Inglias from E. Floyd Kvamme, Co-Chair, 
  President's Council of Advisors on Science and Technology, 
  dated July 14, 2005............................................    90


               NANOTECHNOLOGY: WHERE DOES THE U.S. STAND?

                              ----------                              


                        WEDNESDAY, JUNE 29, 2005

                  House of Representatives,
                          Subcommittee on Research,
                                      Committee on Science,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Bob Inglis 
[Chairman of the Subcommittee] presiding.


                            hearing charter

                        SUBCOMMITTEE ON RESEARCH

                          COMMITTEE ON SCIENCE

                     U.S. HOUSE OF REPRESENTATIVES

                       Nanotechnology: Where Does

                            the U.S. Stand?

                        wednesday, june 29, 2005
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

1. Purpose

    On Wednesday, June 29, 2005, the Research Subcommittee of the 
Committee on Science of the House of Representatives will hold a 
hearing to examine the findings and recommendations of the recent 
assessment of the National Nanotechnology Initiative (NNI) by the 
President's Council of Advisors on Science and Technology (PCAST) and 
will hear from the nanotechnology community on how U.S. research and 
business activities in nanotechnology measure up to those of 
international competitors.

2. Witnesses

Mr. Floyd Kvamme is the Co-Chair of the President's Council of Advisors 
on Science and Technology and a partner at Kleiner Perkins Caufield & 
Byers, a high-technology venture capital firm.

Mr. Jim O'Connor is Vice President of Technology Incubation and 
Commercialization at Motorola, Inc.

Mr. Sean Murdock is the Executive Director of the NanoBusiness 
Alliance.

Mr. Matthew M. Nordan is the Vice President of Research at Lux Research 
Inc., a nanotechnology research and advisory firm.

3. Overarching Questions

          What is the position of U.S. research and development 
        and U.S. businesses in nanotechnology relative to that of other 
        countries? What key factors influence U.S. performance in the 
        field, and what trends exist among those factors?

          Which fields of science and engineering present the 
        greatest opportunities for breakthroughs in nanotechnology, and 
        which industries are most likely to be altered by those 
        breakthroughs in both the near-term and the longer-term?

          What are the primary barriers to commercialization of 
        nanotechnology, and how can these barriers be overcome or 
        removed? What is the Federal Government's role in facilitating 
        the commercialization of nanotechnology innovations, and how 
        can the current federal nanotechnology program be strengthened 
        in this area?

4. Brief Overview

          In December 2003, the President signed the 21st 
        Century National Nanotechnology Research and Development Act 
        (P.L. 108-153), which originated in the Science Committee. This 
        Act provided a statutory framework for the interagency National 
        Nanotechnology Initiative (NNI), authorized appropriations for 
        nanotechnology research and development (R&D) activities 
        through fiscal year 2008 (FY08), and enhanced the coordination 
        and oversight of the program. Funding for the NNI has grown 
        from $464 million in fiscal year 2001 (FY01) to $1.1 billion in 
        FY05, and 11 agencies currently have nanotechnology R&D 
        programs.

          In addition to federal investments, State governments 
        and the private sector have become increasingly involved in 
        supporting nanotechnology. In 2004, the private sector in the 
        U.S. invested roughly $2 billion in nanotechnology research, 
        while State and local governments invested roughly $400 
        million. The State and local investment is primarily spent on 
        infrastructure and research at public universities, while the 
        private funding focuses on applied research and development 
        activities at small and large companies, and funding for start-
        up nanotechnology ventures.

          Other countries are also investing significant funds 
        in nanotechnology research and development. In 2004, 
        governments in Europe, Japan, and elsewhere spent approximately 
        $2.8 billion in this area, and corporations outside North 
        America spent roughly $2 billion.

          The 21st Century National Nanotechnology Research and 
        Development Act required that a National Nanotechnology 
        Advisory Panel (NNAP) biennially report to Congress on trends 
        and developments in nanotechnology science and engineering and 
        on recommendations for improving the NNI. The first such report 
        was released in May 2005 (the executive summary is attached). 
        Its recommendations include strengthening federal-industry and 
        federal-State cooperation on nanotechnology research, 
        infrastructure, and technology transfer, and broadening federal 
        efforts in nanotechnology education and workforce preparation.

5. Background

Overview of Nanotechnology
    The National Academy of Sciences describes nanotechnology as the 
``ability to manipulate and characterize matter at the level of single 
atoms and small groups of atoms.'' An Academy report describes how 
``small numbers of atoms or molecules. . .often have properties (such 
as strength, electrical resistivity, electrical conductivity, and 
optical absorption) that are significantly different from the 
properties of the same matter at either the single-molecule scale or 
the bulk scale.'' Scientists and engineers anticipate that 
nanotechnology will lead to ``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.'' \1\
---------------------------------------------------------------------------
    \1\ Small Wonders, Endless Frontiers: A Review of the National 
Nanotechnology Initiative, National Research Council/National Academy 
of Sciences, 2002.
---------------------------------------------------------------------------
    Nanotechnology is an enabling technology and, as such, its 
commercialization does not depend specifically on the creation of new 
products and new markets. Gains can come from incorporating 
nanotechnology into existing products, resulting in new and improved 
versions of these products. Examples could include faster computers, 
lighter materials for aircraft, less invasive ways to treat cancer, and 
more efficient ways to store and transport electricity. Some less-
revolutionary nanotechnology-enabled products are already on the 
market, including stain-resistant, wrinkle-free pants, ultraviolet-
light blocking sunscreens, and scratch-free coatings for eyeglasses and 
windows.
    In October 2004, Lux Research, a private research firm, released 
its most recent evaluation of the potential impact of nanotechnology. 
The analysis found that, in 2004, $13 billion worth of products in the 
global marketplace incorporated nanotechnology. The report projected 
that, by 2014, this figure will rise to $2.6 trillion--15 percent of 
manufacturing output in that year. The report also predicts that in 
2014, ten million manufacturing jobs worldwide--11 percent of total 
manufacturing jobs--will involve manufacturing these nanotechnology-
enabled products.\2\
---------------------------------------------------------------------------
    \2\ Lux Research, ``Sizing Nanotechnology's Value Chain,'' October 
2004.
---------------------------------------------------------------------------
National Nanotechnology Initiative
    The National Nanotechnology Initiative (NNI) is a multi-agency 
research and development (R&D) program. The goals of the NNI, which was 
initiated in 2000, are to maintain a world-class research and 
development program; to facilitate technology transfer; to develop 
educational resources, a skilled workforce, and the infrastructure and 
tools to support the advancement of nanotechnology; and to support 
responsible development of nanotechnology. Currently, 11 federal 
agencies have ongoing programs in nanotechnology R&D funding for those 
activities is shown in Table 1. Additionally, 11 other agencies, such 
as the Food and Drug Administration, the U.S. Patent and Trademark 
Office, and the Department of Transportation, participate in the 
coordination and planning work associated with the NNI.




    In 2003, the Science Committee wrote and held hearings on the 21st 
Century National Nanotechnology Research and Development Act, which was 
signed into law on December 3, 2003. The Act authorizes $3.7 billion 
over four years (FY05 to FY08) for five agencies (the National Science 
Foundation, the Department of Energy, the National Institute of 
Standards and Technology, the National Aeronautics and Space 
Administration, and the Environmental Protection Agency). The Act also: 
adds oversight mechanisms--an interagency committee, annual reports to 
congress, an advisory committee, and external reviews--to provide for 
planning, management, and coordination of the program; encourages 
partnerships between academia and industry; encourages expanded 
nanotechnology research and education and training programs; and 
emphasizes the importance of research into societal concerns related to 
nanotechnology to understand the impact of new products on health and 
the environment.
National Nanotechnology Advisory Panel Report
    The 21st Century National Nanotechnology Research and Development 
Act required the establishment or designation of a National 
Nanotechnology Advisory Panel (NNAP) to assess and provide advice on 
the NNI. In July 2004, the President designated the existing 
President's Council of Advisors on Science and Technology to serve as 
the NNAP. The NNAP's responsibilities include providing input to the 
administration on trends and developments in nanotechnology and on the 
conduct and management of the NNI.
    The NNAP is required to report to Congress on its activities every 
two years, and its first report was formally released in May 2005. (The 
executive summary of this report is included in Appendix A, its content 
is described below, and the full report is available online.\3\ ) The 
report assesses the U.S. position in nanotechnology relative to the 
rest of the world, evaluates the quality of current NNI programs and 
program management, and recommends ways the NNI could be improved.
---------------------------------------------------------------------------
    \3\ The PCAST's report, National Nanotechnology Initiative at Five 
Years: Assessment and Recommendations of the National Nanotechnology 
Advisory Panel, is available online at http://www.nano.gov/
FINAL-PCAST-NANO-REPORT.pdf.
---------------------------------------------------------------------------
            Benchmarking
    The NNAP report finds that U.S. leads the rest of the world in 
nanotechnology as measured by metrics such as level of spending (both 
public and private), publications in high-impact journals, and patents. 
The report also finds, however, that other countries are increasing 
their efforts and investments in nanotechnology and are closing the gap 
with the U.S.
    Nanotechnology is a relatively new field, and relevant activities 
in the U.S. and abroad are focused more on research and development 
than on production and sales. The NNAP observes that, because the 
relevant markets are still emergent, useful economic indicators, such 
as market share, are not yet available for the evaluation of the U.S. 
competitive position. Therefore, the NNAP report considers where the 
U.S. stands by examining benchmarks such as funding for nanotechnology 
research and development and numbers of publications and patents.
    Reliable data on spending is difficult to gather, as definitions of 
nanotechnology vary, and investments in the private sector are often 
not reported. Information gathered by the National Science Foundation 
demonstrates that funding for nanotechnology around the world has grown 
significantly over the past decade or so; specifically, while total 
government investment in nanotechnology research and development was 
roughly $430 million in 1997, by 2005 it had climbed to roughly $4.1 
billion--a factor of 10 increase in just eight years. The U.S. 
traditionally has accounted for just over a quarter of that spending. 
Japan and the European Union countries collectively each spend roughly 
the same amount as the U.S.
    There is less historical data available for private sector spending 
on nanotechnology research and development, but current data are 
gathered. The most recent analysis from Lux Research estimates that 
corporations worldwide spent $3.8 billion in this area in 2004, with 46 
percent ($1.7 billion) of that spent by North American companies, 36 
percent ($1.4 billion) by Asian companies, 17 percent ($650 million) by 
European companies, and less than one percent by companies from other 
regions. In addition, venture capital firms invested approximately $400 
million in nanotechnology start-up companies.
    Data on spending describe current levels of effort and hence 
information about future generation of knowledge. Data on publications 
and patents provide a sense of the level of recent innovations and 
advances. Analysis of the U.S. share of publications show that, while 
the U.S. produces the most papers in nanotechnology, both overall and 
in the most highly-regarded journals, the percent of such papers 
originating in the U.S. is declining as other countries' contributions 
grow more rapidly than those from the U.S. Similar trends can be seen 
in studies of patents awarded.
    One of the reasons that the U.S. is the acknowledged leader in 
nanotechnology is its breadth of investment; research and development 
activities are ongoing in areas relevant to a wide range of industries 
(such as materials, energy, electronics, health care, etc.). Most other 
countries cannot afford to invest as broadly as the U.S. Some of these 
other countries--particularly in Asia--have chosen to concentrate their 
investments in particular areas to make strides in a specific sector. 
For example, Korea and Taiwan are investing heavily in nanoelectronics 
while Singapore and China are focusing on nanobiotechnology and 
nanomaterials, respectively.

            NNI Management
    The NNAP report finds that the NNI is a well managed program. The 
report notes that the balance of funding among different areas of 
nanotechnology is appropriate and emphasizes the importance of 
investment in a diverse array of fields rather than a narrow focus on a 
just a few ``Grand Challenges.'' In particular, the NNAP lauds the NNI 
for advancing the foundational knowledge about control of matter at the 
nanoscale; creating an interdisciplinary nanotechnology research 
community and an infrastructure of over 35 nanotechnology research 
centers, networks, and user facilities; investing in research related 
to the environment, health, safety, and other societal concerns; 
establishing nanotechnology education programs; and supporting public 
outreach.

            Recommendations
    The NNAP recommends continued strong investment in basic research 
and notes the importance of recent federal investment in research 
centers, equipment, and facilities at universities and national 
laboratories throughout the country (see Appendix B). Such facilities 
allow both university researchers and small companies to have access to 
equipment too expensive or unwieldy to be contained in an individual 
laboratory.
    The NNAP also emphasizes the importance of state and industry 
contributions to the U.S. nanotechnology efforts and recommends that 
the NNI expand federal-State and federal-industry interactions through 
workshops and other methods.
    The NNAP also recommends that the Federal Government actively use 
existing government programs such as the Small Business Innovation 
Research (SBIR) and the Small Business Technology Transfer (STTR) 
programs to enhance technology transfer in nanotechnology. All grant-
giving agencies are required by law to have SBIR and STTR programs, and 
some of them specifically target solicitations toward nanotechnology. 
However, it is hard to get a clear, up-to-date picture of how much 
funding is actually provided for nanotechnology-related projects in 
these programs and on what the demand for SBIR/STTR funding in this 
area is. The NNAP also recommends that federal agencies be early 
adopters and purchasers of new nanotechnology-related products in cases 
where these technologies can help fulfill an agency's mission.
    The NNAP also finds that the NNI is making good investments in 
environmental, health, and safety research, and recommends that the 
Federal Government continue efforts to coordinate this work with 
related efforts in industry and at non-profits and with activities 
conducted in other countries. The NNAP emphasizes the importance of 
communication with stakeholders and the public regarding research and 
findings in this area.
    Finally, the NNAP emphasizes the importance of education and 
workforce preparation and recommends that the NNI coordinate with 
Departments of Education and Labor to improve access to materials and 
methods being developed for purposes of nanotechnology education and 
training.

Challenges Ahead
    The NNAP notes that successful adoption of nanotechnology-enabled 
products will require coordination between federal, State, academic, 
and industrials efforts (including for efficient commercialization of 
products), training of a suitable high-technology workforce, and 
development of techniques for the responsible manufacture and use of 
these products.
    Developing a federal strategy to facilitate technology transfer of 
nanotechnology innovations is a particularly complex challenge because 
of the wide range of industry sectors that stand to benefit from 
nanotechnology and the range of time scales at which each sector will 
realize these benefits. The NNAP report provides examples of various 
possible nanotechnology applications and when they are expected to 
reach the product stage (Table 2). The applications cover sectors from 
information technology and health care to security and energy, and some 
applications are on the market now, while others are more than 20 years 
in the future.




    As the NNAP report notes, the states are playing an increasing role 
in nanotechnology. In 2004, State funding for nanotechnology-related 
projects was $400 million, or approximately 40 percent of the total 
federal investment. To date, State funding for nanotechnology has been 
focused on infrastructure--particularly the construction of new 
facilities--with some research support being provided in the form of 
matching funds to public universities that receive federal research 
dollars. In addition to receiving State support, universities and 
national laboratories also leverage federal investments through 
industry contributions of funds or in-kind donations of equipment and 
expertise. The NNAP report lists 15 examples of nanotechnology 
infrastructure investments at the State and local levels, and further 
details on non-federal initiatives can be found in the recent report on 
a 2003 NNI workshop on regional, State, and local nanotechnology 
activities.\4\
---------------------------------------------------------------------------
    \4\ Regional, State, and Local Initiatives in Nanotechnology is the 
report on a workshop convened on September 30-October 1, 2003 by the 
Nanoscale Science, Engineering and Technology (NSET) Subcommittee, the 
interagency group that coordinates NNI activities. The report is 
available online at http://www.nano.gov/041805Initiatives.pdf.
---------------------------------------------------------------------------
    In recent years, the focus has been on the construction of 
nanotechnology facilities, but as these building projects financed by 
federal, State, and private funding are completed, the nanotechnology 
community must consider how best to capitalize on these new resources. 
Specifically, funding will have to be found for operating expenses, and 
policies that will attract public and private sector users to these 
facilities will be needed on topics such as collaboration, intellectual 
property, and usage fees.
    The diversity of industry sectors will be a challenge for 
developing appropriate education and workforce training programs in 
nanotechnology. The predicted scale and breadth of research and 
manufacturing jobs related to nanotechnology will require not only 
specialized programs but also integration of nanotechnology-related 
information into general science, technology, engineering, and 
mathematics education.
    Finally, successful integration of nanotechnology into products 
will require an understanding of the standards and regulations needed 
to govern responsible manufacturing and use of nanotechnology-enabled 
products. Under the FY06 budget request, $82 million (eight percent) of 
the proposed NNI R&D funding would be spent on research related to the 
societal implications of nanotechnology. Of this amount, $38.5 million 
(four percent of the overall program) would be specifically directed at 
environmental, health, and safety research, while the remainder is for 
the study of economic, workforce, educational, ethical, and legal 
implications. In addition to this funding, relevant work is also 
ongoing in other NNI focus areas. One example is the development of 
measurement techniques at the nanoscale which are necessary to set 
standards that can be used for quality control of nanotechnology 
products and to manage compliance with safety regulations. Another 
example is the study of the basic mechanisms of interaction between 
nanoscale materials and biological systems, which can provide critical 
information for health care applications as well as safe use practices.

6. Witness Questions

    The witnesses were asked to address the following questions in 
their testimony:
Questions for Mr. Floyd Kvamme:

          What is the position of U.S. research and development 
        in nanotechnology relative to that of other countries? What key 
        factors influence U.S. performance in the field, and what 
        trends exist among those factors?

          What fields of science and engineering present the 
        greatest opportunities for breakthroughs in nanotechnology, and 
        what industries are most likely to be affected by those 
        breakthroughs in both the near-term and the longer-term?

          What is the Federal Government's role in facilitating 
        the commercialization of nanotechnology innovations, and how 
        can the current federal nanotechnology program be strengthened 
        in this area?

          What is the workforce outlook for nanotechnology, and 
        how can the Federal Government help ensure there will be enough 
        people with the relevant skills to meet the Nation's needs for 
        nanotechnology research and development and for the manufacture 
        of nanotechnology-enabled products?

Questions for Mr. Jim O'Connor:

          What is the position of U.S. research and development 
        in nanotechnology relative to that of other countries? What key 
        factors influence U.S. performance in this field?

          What fields of science and engineering present the 
        greatest opportunities for breakthroughs in nanotechnology 
        relevant to Motorola, and what products are most likely to be 
        affected by those breakthroughs in both the near-term and the 
        longer-term?

          What countries and corporations do you perceive to be 
        your closest competitors in nanotechnology science and 
        business? What factors influence Motorola's ability to compete 
        with these groups?

          What is the workforce outlook for nanotechnology, and 
        how does the U.S. position compare to that of other countries? 
        How can the Federal Government help ensure there will be enough 
        people with the relevant skills to meet the Nation's needs for 
        nanotechnology research and development and for the manufacture 
        of nanotechnology-enabled products?

Questions for Mr. Sean Murdock:

          What is the position of U.S. businesses in 
        nanotechnology relative to that of other countries? What key 
        factors influence U.S. performance in the field, and what 
        trends exist among those factors?

          What investments are other countries making in 
        nanotechnology research, development, and commercialization 
        activities? How do other countries' approaches differ from that 
        of the U.S.?

          What industries are most likely to be affected by 
        breakthroughs in nanotechnology in both the near-term and the 
        longer-term?

          What are typical pathways by which ideas or 
        prototypes of new nanotechnology-related products or processes 
        are successfully developed into commercial applications? What 
        are the primary barriers to these pathways, and how can these 
        barriers be overcome or removed?

          What is the Federal Government's role in facilitating 
        the competitiveness of U.S. industry in nanotechnology, and how 
        can the current federal nanotechnology program be strengthened 
        in this area?

Questions for Mr. Matthew Nordan:

          What is the position of U.S. businesses in 
        nanotechnology relative to that of other countries? What key 
        factors influence U.S. performance in the field, and what 
        trends exist among those factors?

          What investments are other countries making in 
        nanotechnology research, development, and commercialization 
        activities? How do other countries' approaches differ from that 
        of the U.S.?

          What industries are most likely to be affected by 
        breakthroughs in nanotechnology in both the near-term and the 
        longer-term?

          What are typical pathways by which ideas or 
        prototypes of new nanotechnology-related products or processes 
        are successfully developed into commercial applications? What 
        are the primary barriers to these pathways, and how can these 
        barriers be overcome or removed?

          What is the Federal Government's role in facilitating 
        the competitiveness of U.S. industry in nanotechnology, and how 
        can the current federal nanotechnology program be strengthened 
        in this area?

Appendix A

 The National Nanotechnology Initiative at Five Years: Assessment and 
     Recommendations of the National Nanotechnology Advisory Panel

  Report to the President from the President's Council of Advisors on 
                       Science and Technology\1\
---------------------------------------------------------------------------
    \1\ Released May 2005, full report available online at http://
www.nano.gov/
FINAL-PCAST-NANO-REPORT.pdf
---------------------------------------------------------------------------

EXECUTIVE SUMMARY

    The President's Fiscal Year (FY) 2004 Budget, released in February 
2003, tasked the President's Council of Advisors on Science and 
Technology (PCAST) with reviewing the National Nanotechnology 
Initiative (NNI) and making recommendations for strengthening the 
program. Congress ratified the need for an outside advisory body with 
its passage of the 21st Century Nanotechnology Research and Development 
Act of 2003 (the Act), which called for the President to establish or 
designate a National Nanotechnology Advisory Panel (NNAP). By Executive 
Order, the President designated PCAST as the NNAP in July 2004. To 
augment its own expertise in managing large research and development 
(R&D) programs, PCAST identified a Technical Advisory Group (TAG) 
comprising about 45 nanotechnology experts representing diverse 
disciplines and sectors across academia and industry. The TAG is a 
knowledgeable resource, providing input and feedback with a more 
technical perspective.
    The Act calls upon the NNAP to assess the NNI and to report on its 
assessments and make recommendations for ways to improve the program at 
least every two years. This is the first such periodic report provided 
by PCAST in its role as the NNAP.
    The Administration has identified nanotechnology as one of its top 
R&D priorities. When FY 2005 concludes later this year, over four 
billion taxpayer dollars will have been spent since FY 2001 on 
nanotechnology R&D. In addition, the President's FY 2006 Budget 
includes over $1 billion for nanotechnology research across 11 federal 
agencies. Such a substantial and sustained investment has been largely 
based on the expectation that advances in understanding and harnessing 
novel nanoscale properties will generate broad-ranging economic 
benefits for our nation. As such, the NNAP members believe the 
President, the Congress, and the American people are seeking answers to 
four basic questions relative to the federal investment in 
nanotechnology R&D:

        1.  Where Do We Stand?

        2.  Is This Money Well Spent and the Program Well Managed?

        3.  Are We Addressing Societal Concerns and Potential Risks?

        4.  How Can We Do Better?

    Answers to these questions provide the assessments and 
recommendations called for by the Act. Our conclusions can be 
summarized as follows:

1. Where Do We Stand?

    Today, the United States is the acknowledged leader in 
nanotechnology R&D. The approximately $1 billion annual Federal 
Government funding for nanotechnology R&D is roughly one-quarter of the 
current global investment by all nations. Total annual U.S. R&D 
spending (federal, State, and private) now stands at approximately $3 
billion, one-third of the approximately $9 billion in total worldwide 
spending by the public and private sectors. In addition, the United 
States leads in the number of start-up companies based on 
nanotechnology, and in research output as measured by patents and 
publications. Our leadership position, however, is under increasing 
competitive pressure from other nations as they ramp up their own 
programs.

2. Is This Money Well Spent and the Program Well Managed?

    The NNAP members believe strongly that the money the United States 
is investing in nanotechnology is money very well spent, and that 
continued robust funding is important for the Nation's long-term 
economic well-being and national security. Nanotechnology holds 
tremendous potential for stimulating innovation and thereby enabling or 
maintaining U.S. leadership in industries that span all sectors. The 
focus of the NNI on expanding knowledge of nanoscale phenomena and on 
discovery of nanoscale and nanostructured materials, devices, and 
systems, along with building an infrastructure to support such studies, 
has been both appropriate and wise. The NNI has accomplished much 
already-advancing foundational knowledge, promoting technology transfer 
for commercial and public benefit, developing an infrastructure of user 
facilities and instrumentation, and taking steps to address societal 
concerns--and the economic payoffs over the long-term are likely to be 
substantial.
    The NNI appears well positioned to maintain United States 
leadership going forward, through both its coordinated interagency 
approach to planning and implementing the Federal R&D program and its 
efforts to interact with industry and the public. This approach is 
outlined clearly in the recently released NNI Strategic Plan, which 
spells out the goals and priorities for the initiative for the next 
five to 10 years. The NNAP members believe that this Plan provides an 
appropriate way to organize and manage the program.

3. Are We Addressing Societal Concerns and Potential Risks?

    The societal implications of nanotechnology--including 
environmental and health effects--must be taken into account 
simultaneously with the scientific advances being underwritten by the 
Federal Government. The NNI generally recognizes this, and is moving 
deliberately to identify, prioritize, and address such concerns.

Environmental, Health, and Safety. The NNAP convened a panel of experts 
from Government regulatory agencies, academia, and the private sector 
to discuss the environmental and health effects of nanotechnology. 
Based on these panel discussions, as well as on information received 
from the NSET Subcommittee and the TAG, the NNAP members believe that 
potential risks do exist and that the Government is directing 
appropriate attention and adequate resources to the research that will 
ensure the protection of the public and the environment. The NNAP 
members are particularly pleased that strong communication exists among 
the agencies that fund nanotechnology research and those responsible 
for regulatory decision-making.

Education. The future economic prosperity of the United States will 
depend on a workforce that both is large enough and has the necessary 
skills to meet the challenges posed by global competition. This will be 
especially important in enabling the United States to maintain its 
leadership role in nanotechnology and in the industries that will use 
it. The NNI has launched a range of education-related programs 
appropriate for classrooms at all levels and across the country, along 
with other programs that are aimed at the broader public. While the NNI 
cannot be expected to solve the Nation's science education problems 
singlehandedly, the NNAP members believe that these NNI activities can 
help improve science education and attract more bright young minds into 
careers in science and engineering.

Other Societal Dimensions. Understanding the impact of a new technology 
on society is vital to ensuring that development takes place in a 
responsible manner. In addition to research into societal issues such 
as the environmental, health, and safety effects of nanotechnology, the 
NNI's diverse and growing R&D program is exploring other issues such as 
economic, workforce, and ethical impacts. In addition, communication 
among the various stakeholders and with the public on these topics is 
an important element of the program, as indicated by the establishment 
of an interagency subgroup to address this topic.

4. How Can We Do Better?

    The NNAP will monitor progress on the program elements discussed 
above; in the meantime, the NNAP offers the following recommendations 
aimed at further strengthening the NNI.

Technology Transfer. The level of interest and investment across many 
industrial sectors is growing and will likely outpace Government 
investment in the United States soon, if it hasn't already. The NNI 
needs to take further steps to communicate and establish links to U.S. 
industry to further facilitate technology transfer from the lab to the 
marketplace. The NNAP calls attention to two areas that would augment 
the existing suite of activities and enhance commercialization of 
research results.

          The NNI's outreach to, and coordination with, the 
        States should be increased. Such efforts would complement those 
        NNI activities already underway with various industrial 
        sectors. The States perform a vital role in fostering economic 
        development through business assistance programs, tax 
        incentives, and other means. In addition, collectively the 
        States are spending substantial amounts in support of 
        nanotechnology R&D and commercialization. The NNAP members 
        believe that practical application of NNI-funded research 
        results, workforce development, and other national benefits 
        will increase with improved federal-State coordination.

          The NNI should examine how to improve knowledge 
        management of NNI assets. This would include assets such as 
        user facilities and instrumentation available to outside 
        researchers, research results, and derivative intellectual 
        property. Through mechanisms such as publicly available and 
        searchable databases, the NNI can--and should--improve 
        infrastructure utilization and the transfer of technology to 
        the private sector.

    The NNAP notes that, although ultimate commercialization of 
nanotechnology is desirable and to be supported, the NNI must remain 
mindful that its primary focus is on developing an understanding of the 
novel properties that occur at the nanoscale and the ability to control 
matter at the atomic and molecular level. While we all want the United 
States to benefit economically from nanotechnology as quickly as 
possible, it is critically important that the basic intellectual 
property surrounding nanotechnology be generated and reside within this 
country. Those who hold this knowledge will ``own'' commercialization 
in the future.

Environmental and Health Implications. The NNI should continue its 
efforts to understand the possible toxicological effects of 
nanotechnology and, where harmful human or environmental effects are 
proven, appropriate regulatory mechanisms should be utilized by the 
pertinent federal agencies. Nanotechnology products should not be 
immune from regulation, but such regulation must be rational and based 
on science, not perceived fears. Although it appears that the public 
and the environment are adequately protected through existing 
regulatory authorities, the NNAP encourages the Government regulatory 
agencies to work together to ensure that any regulatory policies that 
are developed are based on the best available science and are 
consistent among the agencies.
    The NNAP notes that research on the environmental and health 
implications of nanomaterials and associated products should be 
coordinated not only within the Federal Government, but with other 
nations and groups around the world to ensure that efforts are not 
duplicated unnecessarily and information is shared widely.

Education/Workforce Preparation. A key to realizing the economic 
benefits of nanotechnology will be the establishment of an 
infrastructure capable of educating and training an adequate number of 
researchers, teachers, and technical workers. To maximize the value of 
its investment in developing materials and programs for education and 
worker training, the NNI should establish relationships with the 
Departments of Education and Labor. While the science agencies such as 
the National Science Foundation can conduct education research and 
design excellent programs and materials, ultimately the mission 
agencies, Education and Labor, must be engaged to disseminate these 
programs and materials as widely as possible throughout the Nation's 
education and training systems.
    The NNI's education focus should be on promoting science 
fundamentals at K-16 levels, while encouraging the development and 
incorporation of nanotechnology-related material into science and 
engineering education. To promote mid-career training for 
professionals, the NNI should partner with and support professional 
societies and trade associations that have continuing education as a 
mission.

Societal Implications. The NNI must support research aimed at 
understanding the societal (including ethical, economic, and legal) 
implications and must actively work to inform the public about 
nanotechnology. Now more than ever, those who are developing new 
scientific knowledge and technologies must be aware of the impact their 
efforts may have on society.
    In summary, the NNAP supports the NNI's high-level vision and 
goals, and the investment strategy by which those are to be achieved. 
Panel members feel that the program can be strengthened by extending 
its interaction with industry, State and regional economic developers, 
the Departments of Education and Labor, and internationally, where 
appropriate. The NNI should also continue to confront the various 
societal issues in an open, straightforward, and science-based manner.



    Chairman Inglis. The Subcommittee will come to order, and 
thank you for joining us this morning for a second hearing on 
nanotechnology. Last month, the Research Subcommittee heard 
from experts about examples of successful partnerships between 
government and the private and public sectors, and discussed 
barriers to future advancement. The witnesses also cited the 
National Nanotechnology Initiative as a successful program that 
is helping advance the nanotechnology industry.
    Also last month, the President's Council of Advisors on 
Science and Technology, PCAST, released a report on the state 
of and the outlook for technology in the U.S. On the whole, the 
report is very encouraging, and I am glad to see that Mr. Floyd 
Kvamme, the Co-Chair of PCAST, is one of our witnesses here 
today. The good news is that the United States still leads the 
world by most metrics, including funding, patents, and 
scientific publications. But I find it troubling that other 
countries are catching up, and not just in funding. I hope we 
can talk today about ways the U.S. can maintain its status as a 
world leader in these emerging technologies.
    I have said it before. I am not a scientist by background. 
My minuscule knowledge of nanotechnology, that I guess pun is 
intended there--is a result of preparing for hearings such as 
this, and is driven by the realization that this technology 
will quickly become as commonplace as the Internet. 
Nanotechnology is already changing the products we use and has 
the potential to revitalize our manufacturing base. It promises 
to impact virtually every field, with applications in fields 
from energy to defense to healthcare to transportation.
    Just yesterday, we rolled out the House Hydrogen and Fuel 
Cell Caucus, with the ultimate goal of leading us to a national 
hydrogen economy. I am excited to hear that efforts are already 
underway to use nanotechnology to improve hydrogen production, 
storage, and fuel cells. The development of this technology is 
truly amazing, and holds great promise. As many of you know, a 
hydrogen economy is an issue near and dear to my heart, as is 
the education of our nation's children in math and science. It 
is imperative that we encourage and nurture a future generation 
of scientists to help us maintain our prominence in 
nanotechnology and in other critically important scientific 
fields.
    That is why today's hearing is so important. As the PCAST 
report shows, the U.S. is currently ahead of the nanotechnology 
curve, but other nations continue to invest more and more time, 
energy, and money in their nanotechnology efforts. If we pause 
even to glance over our shoulders, we will see them on the 
horizon, several of whom are already on our heels and pushing 
to take the lead. This possibility is no small matter. Our last 
stronghold of competition is innovation, and the United States 
can not afford to lose the lead on this technology.
    Today, I hope our witnesses will address our current 
nanotechnology position, relative to other countries, from an 
R&D perspective and from a business perspective, and discuss 
where our greatest opportunities for breakthroughs are, and 
what the potential impacts may be in the near-term and in the 
long-term. Furthermore, we hope to hear what barriers exist to 
commercializing nanotechnology, how we could overcome them, and 
the Federal Government's role in the process.
    I look forward to hearing each of your testimonies. At this 
point, I would recognize Ms. Hooley for an opening statement.
    [The prepared statement of Chairman Inglis follows:]

               Prepared Statement of Chairman Bob Inglis

    Good morning, and welcome to our second hearing on nanotechnology. 
Last month, the Research Subcommittee heard from experts about examples 
of successful partnerships between government and the public and 
private sectors and discussed barriers to future advancement. They also 
cited the National Nanotechnology Initiative (NNI) as a successful 
program that is helping advance the nanotechnology industry.
    Also last month, the President's Council of Advisors on Science and 
Technology (PCAST) released a report on the state of, and outlook for, 
nanotechnology in the U.S. On the whole, the report is very 
encouraging, and am I glad to see Mr. Floyd Kvamme, the Co-Chair of 
PCAST, as one of our witnesses here today. The good news is that the 
United States still leads the world by most metrics, including funding, 
patents, and scientific publications. But I find it troubling that 
other countries are catching up, and not just in funding. I hope we can 
talk today about ways the U.S. can maintain its status as a world 
leader in these emerging technologies.
    I've said it before: I'm not a scientist by background. My 
minuscule knowledge of nanotechnology (pun intended) is a result of 
preparing for hearings such as this, and it is driven by the 
realization that this technology will quickly become as commonplace as 
the Internet. Nanotechnology is already changing the products we use 
and has the potential to revitalize our manufacturing base. It promises 
to impact virtually every field-with applications in fields from energy 
to defense to health care to transportation.
    Just yesterday, we rolled-out the House Hydrogen and Fuel Cell 
Caucus, with the ultimate goal of leading us to a national hydrogen 
economy. I'm excited to hear that efforts are already underway to use 
nanotechnology to improve hydrogen production, storage and fuel cells. 
The development of this technology is truly amazing and holds great 
promise. As many of you know, a hydrogen economy is an issue near to my 
heart, as is the education of our nation's children in math and 
science. It is imperative that we encourage and nurture a future 
generation of scientists to help us maintain our prominence in 
nanotechnology and in other critically important scientific fields.
    This is why today's hearing is so important. As the PCAST report 
shows, the U.S. is currently ahead of the nanotechnology curve, but 
other nations continue to invest more and more time, energy and money 
in their nanotechnology efforts. If we pause even to glance over our 
shoulders, we will see them on the horizon, several of whom are already 
on our heels and pushing to take the lead. This possibility is no small 
matter. Our last stronghold of competition is innovation, and the 
United States can not afford to lose the lead on this technology.
    Today, I hope our witnesses will address our current nanotechnology 
position relative to other countries, from an R&D perspective and from 
a business perspective; discuss where our greatest opportunities for 
breakthroughs are and what the potential impacts may be in the near-
term and the long-term. Furthermore, we hope to hear what barriers 
exist to commercializing nanotechnology, how we can overcome them, and 
the Federal Government's role in the process.
    I look forward to hearing your testimony.

    Ms. Hooley. Today, the Research Subcommittee concludes its 
review of the National Nanotechnology Initiative, or NNI, which 
we began with a hearing on May 18. Just prior to the May 18 
hearing, I was astonished to learn the Administration had 
prevented the appearance of the Co-Chair of the President's 
Council of Advisors on Science and Technology, to present the 
Council's Congressionally mandated report on NNI.
    Subsequently, the Science Committee ably laid out for the 
White House our objections to that decision. The decision was 
reconsidered, and I am happy to say, reversed, and as a result 
our witnesses this morning include Mr. Floyd Kvamme, who I am 
extremely pleased to welcome to the hearing.
    We will now be able to hear from a key author of the report 
that provides the initial biennial assessment of NNI. This 
assessment covers both the content and the management of this 
important $1 billion per year R&D initiative.
    One aspect of the NNI of great interest to me is how the 
initiative helps to facilitate the commercialization of 
nanotechnology. In today's testimony, we will see that Lux 
Research projects that nanotechnology will impact nearly every 
category of manufactured goods over the next 10 years, becoming 
incorporated into 15 percent of global manufacturing output, 
totaling $2.6 trillion in 2014. We clearly need to ensure that 
the United States is a major player in this market, and fares 
well against strong international competition.
    During the Subcommittee's May hearing, we heard about 
investments underway in the states to advance nanotechnology, 
and to foster the transition of research results into new 
products and applications. For example, one of our witnesses, 
Dr. Cassady, from Oregon State University, described the Oregon 
Nanoscience and Microtechnologies Institute, better known as 
ONAMI, which is a collaboration between Oregon's three major 
research universities, federal research agencies, and the 
state's thriving high tech sector.
    There was a general consensus among the witnesses at the 
May hearing that the Federal Nanotechnology Funding should 
include support for applied, pre-competitive research. I will 
be interested in your views, Mr. Kvamme, and our other 
panelists, on how we can ensure that the Nation gains the full 
benefit of the large federal basic research investment being 
made in nanotechnology. In particular, I would like your 
suggestions on the kinds of activities that will ensure 
effective technology transfer to the private sector.
    Mr. Chair, I want to thank you for calling this hearing, 
and I thank all of our witnesses for appearing before the 
Subcommittee today, and I look forward to our discussion.
    [The prepared statement of Ms. Hooley follows:]
          Prepared Statement of Representative Darlene Hooley
    Mr. Chairman, today the Research Subcommittee concludes its review 
of the National Nanotechnology Initiative, or the NNI, which we began 
with a hearing on May 18th. Just prior to the May hearing, I was 
astonished to learn that the Administration had prevented the 
appearance of the Co-Chair of the President's Council of Advisors on 
Science and Technology to present the Council's congressionally 
mandated report on the NNI.
    Subsequently, the Science Committee ably laid out for the White 
House our objections to that decision. The decision was reconsidered, 
and I am happy to say, reversed. And as a result, our witnesses this 
morning include Mr. Floyd Kvamme, who I am extremely pleased to welcome 
to the hearing. We will now be able to hear from a key author of the 
report that provides the initial biennial assessment of the NNI. This 
assessment covers both the content and the management of this important 
$1 billion per year R&D initiative.
    One aspect of the NNI of great interest to me is how the initiative 
helps to facilitate the commercialization of nanotechnology. In today's 
testimony we see that Lux Research projects that nanotechnology will 
impact nearly every category of manufactured good over the next 10 
years, becoming incorporated into 15 percent of global manufacturing 
output totaling $2.6 trillion in 2014. We clearly need to ensure that 
the United States is a major player in this market and fares well 
against strong international competition.
    During the Subcommittee's May hearing, we heard about investments 
underway in the States to advance nanotechnology and to foster the 
transition of research results into new products and applications. For 
example, one of our witnesses, Dr. John M. Cassady from Oregon State 
University, described the Oregon Nanoscience and Microtechnologies 
Institute. ONAMI is a collaboration between Oregon's three major 
research universities, federal research agencies, and the state's 
thriving high-tech sector.
    There was a general consensus among the witness at the May hearing 
that federal nanotechnology funding should include support for applied, 
pre-competitive research. I will be interested in the views of Mr. 
Kvamme and our other panelists today on how we can ensure that the 
Nation gains the full benefit of the large federal basic research 
investment being made in nanotechnology. In particular, I would like 
your suggestions on the kinds of activities that will ensure effective 
technology transfer to the private sector.
    Mr. Chairman, I want to thank you for calling this hearing and 
thank our witnesses for appearing before the Subcommittee today. I look 
forward to our discussion.

    Chairman Inglis. Thank you, Ms. Hooley. Other Members, we 
would be pleased to receive opening statements for the record, 
if you would like to submit them, so that we can get right to 
our panel, and let me introduce them.
    [The prepared statement of Mr. Carnahan follows:]

           Prepared Statement of Representative Russ Carnahan

    Mr. Chairman and Ms. Ranking Member, thank you for holding this 
important and very interesting hearing.
    I am especially pleased to revisit the role our country has in the 
nanotechnology field in light of The National Nanotechnology Initiative 
five-year assessment and recommendations release.
    Nanotechnology has the promise of allowing scientists to control 
matter on every length scale, including materials in the range of one 
to 100 nanometers. Science is allowing us to control material behavior 
by altering structures at the level of one billionth of a meter.
    The field includes three main categories of promise, materials and 
manufacturing, information technology and medicine. I am most eager to 
see what this technology can do for our nation's health and am hopeful 
that the utilization of nanotechnology will someday positively affect 
our economy and job market.
    Thank you for your willingness to join us, Mr. Kvamme, Mr. 
O'Connor, Mr. Murdock and Mr. Nordan. I am eager to hear your 
testimony. Thank you.

    [The prepared statement of Ms. Johnson follows:]

       Prepared Statement of Representative Eddie Bernice Johnson

    I want to thank Chairman Inglis and Ranking Member Hooley for 
bringing the issue of nanotechnology before the Subcommittee today. I 
appreciate their continued leadership on this issue.
    Experts believe that nanotechnology could have an impact on our 
economy and society as significant as the impact of the steam engine, 
electricity, the Internet, and the computer chip. Researchers and high-
tech start-ups have already identified many potential benefits and 
applications of nanotechnology in health, energy and the environment, 
information and communications technology, advanced materials, 
manufacturing, and national security. It is possible that 
nanotechnology could lead to solar energy that is competitive with 
fossil fuels.
    Medical researchers are already working on using nanotechnology to 
develop tools for the diagnosis and therapy of cancer. I am proud to 
say that Texas is playing a leading role in the development of 
nanotechnology.
    Texas is at the center of the impending nanotechnology revolution. 
Four of the twenty-one Texas universities (Rice University and the 
Universities of Texas in Austin, Arlington and Dallas) involved with 
nanotechnology research programs have already developed nanotechnology-
specific research centers.
    University of Texas Southwestern Medical School in Dallas is the 
only medical school in the world where four Nobel Laureates are 
actively involved in research. The center of the world's 
telecommunications industry is in Richardson, a Dallas suburb, known as 
Telecom Corridor. The Dallas and Austin regions are focal points for 
the semiconductor industry in Texas. More silicon wafers are produced 
in Texas than in any other U.S. state except California.
    I urge my colleagues to continue to pay attention to nanotechnology 
after this hearing and I hope that the Administration and the Congress 
can look for ways to build on and strengthen the nanotechnology 
research. With this committee leadership, we can work is in the 
direction of creating a brighter and more prosperous future for all 
Americans. I look forward to continue working with my colleagues on 
both sides of the aisle to ensure the full development of this 
important initiative.

    Chairman Inglis. Each of you will have five minutes to 
speak and then we will follow that with a period of questions 
from the Members here.
    Mr. Floyd Kvamme is the Co-Chair of the President's Council 
of Advisors on Science and Technology, the PCAST organization 
that I just mentioned. Mr. Matthew Nordan is the Vice President 
of Research for Lux Research, Inc. Very happy to have you with 
us. Mr. Sean Murdock is the Executive Director of the 
NanoBusiness Alliance. Mr. Jim O'Connor is the Vice President 
of Technology Incubation and Commercialization at Motorola, 
Inc.
    Mr. Kvamme, if you would start us, and we will recognize 
you for five minutes, and then, we will go down the panel. 
Thank you.
    If you would push that button. Thank you.
    Mr. Kvamme. Missed that.
    Ms. Hooley. We don't have nanotechnology here.
    Chairman Inglis. It is not voice activated.

STATEMENT OF E. FLOYD KVAMME, CO-CHAIR, PRESIDENT'S COUNCIL OF 
               ADVISORS ON SCIENCE AND TECHNOLOGY

    Mr. Kvamme. My name is Floyd Kvamme, and I am here in my 
capacity as Co-Chair of the President's Council of Advisors on 
Science and Technology, or PCAST, which the President 
designated as the National Nanotechnology Advisory Panel, or 
NNAP, called for by the legislation that the Science Committee 
passed and the President signed in late 2003.
    In the first periodic--in that report, the approach that 
the panel took, based on the requirements of the Act, was to 
ask four basic questions that we felt the President, the 
Congress, and the American public wanted to hear.
    First, where do we stand, or how does our competitive 
position in nanotechnology R&D stack up relative to other 
countries? Second, is the NNI money well spent, and the program 
well managed? Third, are we addressing societal concerns and 
potential risks? And four, how can we do better, or how can we 
strengthen the U.S. nanotechnology effort?
    During the review process, PCAST convened panels, met with 
members of the Nanoscale Science Engineering and Technology 
Subcommittee of the National Science and Technology Council, 
attended NNI workshops, and consulted individually with 
researchers across the United States and around the world.
    In addition, a particularly valuable resource was our 
technical advisory group, or TAG--some 45 nanotechnology 
experts who provided input and feedback from a technical 
perspective on the various aspects of nanotechnology and the 
NNI. Because the focus of this hearing is on the U.S. 
competitiveness in nanotechnology, I will concentrate my 
remarks on the first of these questions, ``where do we stand?'' 
and on our recommendations for improving the program.
    Regarding the other two questions, the NNAP members 
generally feel that the federal funding for nanotechnology 
research and development is money very well spent, and that the 
program is well managed. Likewise, the NNAP concludes that the 
NNI is taking appropriate steps to understand and address 
societal concerns and potential risks. For more details about 
the NNAP's assessment in these areas, please see my written 
testimony, or the report itself, or I would be happy to answer 
questions.
    So, where do we stand? The metrics that we used to compare 
the U.S. position in nanotechnology with that of other 
countries were R&D spending, a measure of input, and percentage 
of patents and publications, a measure of output. We found, 
from the data we surveyed, that today, the U.S. is the leader 
in nanotechnology R&D. The approximately $1 billion in annual 
federal funding is roughly one-quarter of the current global 
investment by all nations. Moreover, many comparisons of 
international investments do not report total R&D spending; 
that is, not only federal but also state and private funding. 
When all public and private funding is considered, the U.S. is 
funding approximately $3 billion, or one-third of the nearly $9 
billion in total worldwide spending for what is classified as 
nanotechnology R&D.
    In the United States, states have been particularly active 
in promoting nanotechnology R&D, investing an estimated $400 
million in 2004 alone. The U.S. also leads in the number of 
nanotechnology-based startup companies, and in research output, 
as measured by U.S. patents and publications. However, other 
countries are aggressively chasing the U.S. leadership position 
by increasing support for coordinated national programs, and in 
some cases, by focusing investments in areas of existing 
national economic strength. For example, many Asian countries 
are investing heavily in nanoelectronics.
    So, how can we do better? The NNAP report makes a number of 
recommendations. I will mention four here. First, the NNI 
should increase its outreach to facilitate tech transfer and 
commercialization. State and regional entities are directing 
considerable funding toward nanotechnologies. Examples of state 
nanotechnology initiatives include New York's Albany 
Nanocenter, the Oregon Nanoscience and Microtechnologies 
Institute that has just been mentioned, South Carolina's 
Nanocenter, and others from California, Texas, Pennsylvania, 
Illinois and many other states, all of which are very active in 
supporting nanotechnology-based economic development.
    While the NNI has begun to reach out to the states, and has 
begun an organized program of outreach to other, to various 
industries, more outreach will leverage the federal investment, 
and complement those NNI activities already underway with 
various industrial sectors, many of which appear anxious to 
pull technology developments from the federal research 
activity.
    Second, as mentioned above, we recommend that the NNI 
continue its efforts to understand the possible toxicological 
effects of nanotechnology. While it appears that the public and 
environment are adequately protected through existing 
regulatory authorities, the NNAP encourages continued research 
into possible toxicological effects in the workplace, and urges 
regulatory agency cooperation to ensure that any policies based 
on best science, are based on best science, not perceived 
fears, and are consistent among the agencies. The NNAP also 
recommends coordinating and sharing environmental health and 
safety research results internationally, and working with 
international entities to ensure that efforts are not 
duplicated and information is shared widely.
    Third, in accordance with the Act, the agency group that 
coordinate the NNI has identified seven program component 
areas, PCAs, that generally follow the broad categories of 
foundational research being conducted today. The PCAs represent 
areas in which ongoing and coordinated investment, across 
multiple agencies, will be required to support the development 
of the many anticipated applications of nanotechnology. The 
NNAP recommends that these PCAs be regularly reexamined and 
adjusted as necessary to track the developments in 
nanotechnology R&D. We cannot know where the state of 
nanotechnology will be 10 years from now, but we can be fairly 
certain it will be considerably different than what exists 
today. Flexibilities in these definitions are essential.
    Lastly, any look at nanotechnology or technology 
development in general highlights the need for a more 
technically trained workforce. A separate, recent PCAST study 
focused on this subject. Encouraging our young people to pursue 
technical degrees so that we have a rich mix of technically 
trained people throughout our society will be a requirement for 
success in a world increasingly driven by technical advances.
    In conclusion, I am personally excited about the continual 
flow of new discoveries and revolutionary opportunities made 
possible by nanotechnology R&D, but while all of us would like 
to see rapid commercialization of nanotechnology research, our 
panel feels strongly that the NNI must have, as its primary 
focus, the development of and understanding through research 
and development of the novel properties that occur at the 
nanoscale, and the ability to control matter at the atomic and 
molecular level.
    While we all want the U.S. to benefit economically from 
nanotechnology as quickly as possible, it is critically 
important that the basic intellectual property surrounding 
nanotechnology be generated and protected within this country. 
Those who hold this knowledge and have the workforce to exploit 
it will own commercialization in the future.
    Mr. Chairman, I appreciate the work and support of this 
committee for nanotechnology R&D, and look forward to continued 
dialogue with you on this important subject.
    [The prepared statement of Mr. Kvamme follows:]

                 Prepared Statement of E. Floyd Kvamme

Introduction

    Mr. Chairman and Members of the Committee, it is a pleasure and an 
honor for me to testify to you today regarding the National 
Nanotechnology Initiative (NNI) and general competitive position of 
United States in nanotechnology. My name is Floyd Kvamme and I am a 
Partner at Kleiner Perkins Caufield & Byers, a high technology venture 
capital firm located in Silicon Valley. That is my full time 
occupation. I was also honored to be asked, and accepted an invitation, 
by President George W. Bush in 2001 to co-chair his science and 
technology advisory group, the President's Council of Advisors on 
Science and Technology (PCAST). The PCAST is a group of non-government 
advisors comprising some two dozen senior representatives, appointed by 
the President, and drawn from industry, education, and research 
institutions, and other non-governmental organizations. The President's 
Science Advisor, the Director of the Office of Science and Technology 
Policy (OSTP) Jack Marburger, co-chairs the PCAST along with me.

Potential of Nanotechnology

    ``Nanotechnology'' touches upon a broad array of disciplines, 
including chemistry, biology, physics, computational science, and 
engineering. And like information technology, nanotechnology has the 
potential to impact virtually every industry, from aerospace and energy 
to health care and agriculture. Based on the ability to see, measure, 
and manipulate matter at the scale of atoms and molecules, 
nanotechnology was born, in many ways, with the advent of atomic force 
microscopy in the mid-1980s. Today many industries such as those based 
on semi-conductors and chemicals already are creating products with 
enhanced performance based on components and materials with nanosized 
features.
    Nanotechnology today reminds me very much of the early days of the 
semiconductor industry. The new interdisciplinary relationships being 
forged and the sense of excitement over future possibilities are very 
reminiscent of that earlier period.
    As with semiconductors, future application of nanotechnology based 
on evolving research could have significant impact throughout the 
world. Examples where nanotechnology has the potential to vastly 
improve standards of living in industrialized and developing nations 
include: medical applications, clean water, and energy. In our report, 
we highlight some key research in these areas. In medical applications, 
for example, nanotechnology has made possible the creation of a 
synthetic bone replacement material that is highly biocompatible and 
allows bones to heal faster and more completely than the materials that 
are used today. In the area of energy efficiency, researchers at Sandia 
Laboratories have demonstrated a light source that mixes different 
sized ``quantum dots'' to create high-efficiency white ``light emitting 
diodes'' that use about one-tenth as much energy as an incandescent 
bulb and that could reduce by more than half the amount of electricity 
used for lighting nationwide. Finally, researchers at Lawrence 
Livermore National Laboratory are nanoengineering membrane systems that 
can target and remove contaminants in water, while reducing treatment 
costs by at least half compared to conventional technologies. Low-cost 
clean water technologies have obvious application in remediation of 
contaminated groundwater and treating industrial waste, as well as 
significant potential to help improve public health in developing 
nations.
    The early recognition of the broad range of useful and powerful 
nanotechnology applications led to the formal establishment of a 
National Nanotechnology Initiative (NNI) in Fiscal Year (FY) 2001. Due 
to its potential to promote innovation and economic benefits, to 
address the needs of the Federal agencies, as well as to strengthen the 
position of the United States as a leader in science and technology, 
the Administration has identified nanotechnology as a top research and 
development (R&D) priority for the past several years.

History of PCAST's Involvement with Nanotechnology

    The history of PCAST's involvement with the NNI extends back to 
1999 when the analogous body under the previous Administration 
supported a proposal for establishing an interagency nanotechnology 
initiative. In their letter to the President, they included a 
recommendation that ``the progress toward NNI goals be monitored 
annually by an appropriate external body of experts, such as the 
National Research Council.'' In part based on this recommendation, the 
National Research Council (NRC) was commissioned to do a study of the 
NNI, which was released in 2002. The first of that study's ten 
recommendations was that OSTP establish an independent standing 
nanoscience and nanotechnology advisory board to provide advice to the 
Nanoscale Science, Engineering, and Technology (NSET) Subcommittee (the 
interagency body that coordinates the NNI) on policy, strategy, goals, 
and management.
    The President's FY 2004 Budget, released in February 2003, 
acknowledged the NRC's recommendation for external review, and directed 
PCAST to conduct an assessment and provide advice regarding the 
strategic direction of the NNI program. PCAST began this task shortly 
thereafter.

The 21st Century Nanotechnology Research and Development (R&D) Act

    As PCAST was undertaking its review of the NNI, this subcommittee 
and its Senate counterpart were also in the midst of creating new 
legislation that would make statutory the activities and organization 
of the NNI, along with periodic reviews and other aspects of this vital 
R&D effort. The requirement for an ongoing outside advisory panel was 
ratified by Congress in the 21st Century Nanotechnology Research and 
Development Act of 2003 (Public Law 108-153; hereafter referred to as 
``the Act''), which called for the President to establish or designate 
a National Nanotechnology Advisory Panel (NNAP). PCAST's role was 
reaffirmed when, in July 2004 by Executive Order, the President 
formally designated PCAST to fulfill the duties of the NNAP. The order 
amended the original Executive Order commissioning PCAST, thus 
establishing that nanotechnology should be included in the formal PCAST 
charter.
    As detailed by Congress in Section 4, the Act calls upon the NNAP 
to assess the national nanotechnology program in the following areas:

          Trends and developments in nanotechnology

          Progress in implementing the program

          The need to revise the program

          Balance among the component areas of the program, 
        including funding levels

          Whether program component areas, priorities, and 
        technical goals developed by the NSET Subcommittee are helping 
        to maintain U.S. leadership

          Management, coordination, implementation, and 
        activities of the program

          Whether social, ethical, legal, environmental, and 
        workforce concerns are adequately addressed by the program.

    The Act requires the NNAP to report on its assessments and to make 
recommendations for ways to improve the program at least every two 
years. The first such report provided by PCAST in its role as the NNAP 
is now complete and was delivered to this subcommittee at the hearing 
that was held on May 18th. The remainder of my testimony will focus on 
this report and the observations and recommendations contained therein. 
Also, because PCAST was designated as the statutorily mandated NNAP, 
from this point forward in my testimony I will refer to PCAST as the 
NNAP.

Technical Advisory Group

    Before getting into the specifics of the report, I'd like to 
highlight a resource that our panel relied on during the course of the 
review in order to augment the NNAP's expertise in managing large R&D 
programs with more specific nanotechnology technical expertise. Early 
in our review, the NNAP identified a Technical Advisory Group (TAG) 
comprising approximately 45 nanotechnology experts who represent 
diverse disciplines and sectors across academia and industry. The TAG 
is a knowledgeable resource, providing input and feedback with a more 
technical perspective. The NNAP called upon its TAG on several 
occasions for broader expert opinions on various topics. Two particular 
areas where the TAG was very helpful were in reviewing and providing 
feedback on the NNI Strategic Plan and in helping to illuminate and 
rationalize for the NNAP some of the key opportunities in 
nanotechnology research over the short-, medium- and long-term. Input 
from the TAG has been considered and is represented in the report you 
have before you today.

NNAP Report

    The approach we took during our first assessment of the NNI was to 
ask some basic questions that encompass the requirements of the Act and 
that we perceived to be the most pressing questions the President, the 
Congress and the American public wanted answers to. These were:

          Where do we stand? In other words, how does our 
        competitive position in nanotechnology R&D stack up relative to 
        other countries?

          Is this money well spent and the program well 
        managed? This encompasses the general request for an external 
        assessment of the NNI.

          Are we addressing societal concerns and potential 
        risks? Responding to specific Congressional and public 
        concerns, are we paying close enough attention to 
        environmental, health and safety risks and other societal 
        issues?

          How can we do better? What does the NNAP recommend 
        that will help the U.S. strengthen its nanotechnology effort?

    I will summarize our assessment and recommendations, and recommend 
to the committee our full report for a more thorough review of these 
issues.

Where do we stand?

    In attempting to compare the strength of the U.S. nanotechnology 
effort internationally, the NNAP reviewed a number of metrics that our 
members felt were appropriate for assessing the competitive position of 
the U.S. in this new technology area where research and technology 
discoveries in many cases have yet to reach the marketplace. We looked 
at available data for levels of international R&D investment by 
governments (including Federal, regional, State, and local), as well as 
private corporations and venture capital firms. We also surveyed data 
on patent and publication trends to assess commercial interest and 
strength of research findings among various countries that are active 
in nanotechnology.
    The data surveyed indicate that, today, the United States is the 
leader in nanotechnology R&D. The approximately $1 billion annual 
Federal Government funding for nanotechnology R&D is roughly one-
quarter of the current global investment by all nations. Total annual 
U.S. R&D spending--including federal, State, and private funding--now 
stands at approximately $3 billion, one-third of the approximately $9 
billion in total worldwide spending by the public and private sectors. 
It is noteworthy that State, local and regional governments have been 
particularly active in promoting nanotechnology development, investing 
$400 million in 2004 according to one estimate.\1\ In addition, the 
United States leads in the number of start-up companies based on 
nanotechnology, and in research output as measured by patents and 
publications.
---------------------------------------------------------------------------
    \1\ Lux Research, Inc. 2005. Statement of Findings: Benchmarking 
U.S. States in Nanotech. New York: Lux Research, Inc.
---------------------------------------------------------------------------
    However, the data also show that other countries are aggressively 
chasing this leadership position, both in terms of ramping up 
coordinated national programs--many of which are modeled directly on 
the NNI--as well as in focusing investments to areas of existing 
national economic strength. For example, many of the Asian countries 
are investing heavily in nanoelectronics. Further, the U.S. lead in 
publications and patents appears to be slipping. Increased 
international activity is resulting in increased competitive pressure 
from other nations and, in the opinion of the NNAP, an increased 
urgency that the U.S. continues its focus on nanotechnology R&D 
excellence.

Is this money well spent and the program well managed?

    Chapter 2 of the report provides an assessment of the NNI program 
and its accomplishments. The NNAP also evaluated the Administration's 
recently released Strategic Plan and the mechanisms in place to manage 
the program. The NNAP concludes that the money the United States is 
investing in nanotechnology is money very well spent, and that 
continued robust funding is important for the Nation's long-term 
economic well-being and national security.
    Nanotechnology holds tremendous potential for stimulating 
innovation and thereby enabling or maintaining U.S. leadership in 
industries that span all sectors. The NNAP concludes that the strategic 
focus of the NNI on expanding knowledge of nanoscale phenomena and on 
discovery of nanoscale and nanostructured materials, devices, and 
systems, along with building an infrastructure to support such studies, 
has been both appropriate and wise. The NNI has accomplished much 
already--advancing foundational knowledge, promoting technology 
transfer for commercial and public benefit, developing an 
infrastructure of user facilities and instrumentation, and taking steps 
to address societal concerns--and we believe the economic pay-offs over 
the long-term should be substantial.
    The NNAP commends the NNI in particular for making the long-term 
commitment to nanotechnology R&D through the establishment of a 
geographically distributed suite of centers of excellence and broadly 
available user facilities. Largely university-based, the centers 
provide education of skilled scientists and engineers as well as 
serving as focal points of multi-disciplinary R&D and, hopefully, new 
economic opportunities that are geographically dispersed. User 
facilities, such as the five Department of Energy Nanoscale Science 
Research Centers, provide access for all researchers to state-of-the-
art equipment and expertise for advanced nanotechnology R&D. Staff at 
the Center for Nanophase Materials Sciences at Oak Ridge National 
Laboratory in Tennessee--the first of the DOE centers to become fully 
operational--are currently installing equipment and hiring additional 
researchers.
    At this time, the NNI appears well positioned to maintain United 
States leadership going forward, through both its coordinated 
interagency approach to planning and implementing the Federal R&D 
program and its efforts to interact with industry and the public. This 
approach is clearly outlined in the recently released NNI Strategic 
Plan, which spells out the goals and priorities for the initiative for 
the next five to 10 years. The NNAP surveyed the TAG to augment our 
review of this Plan, and we believe it provides an appropriate way to 
organize and manage the program, and that the goals and priorities 
outlined in the Plan are likewise appropriate.
    There are a number of cautionary notes and minor recommendations 
contained in our report, which I will detail in a few minutes when I 
discuss how we can do better, and I would be happy to answer any other 
questions on items I may not have covered in my testimony. However, 
overall I think I can safely say that the NNAP endorses current funding 
and management of the NNI and believes the strategic direction of the 
program is sound at this point.

Are we addressing societal concerns and potential risks?

    The NNAP believes that the societal implications of 
nanotechnology--including environmental and health effects--must be 
taken into account simultaneously with the scientific advances being 
underwritten by the Federal Government. In its review, the Panel found 
that the NNI does recognize this, and is moving deliberately to 
identify, prioritize, and address these concerns. The NNI and NNCO are 
more organized on this front than when the PCAST first began its review 
of the NNI two years ago. Because, as many members of the Congress and 
this committee have rightly pointed out, addressing risks and societal 
concerns is so important, the NNAP placed special emphasis on this 
topic, and will continue to do so.
    In order to gain insight into environmental, health, and safety 
issues around nanotechnology, the NNAP convened a panel of experts from 
Government regulatory agencies, academia, and the private sector. Based 
on this panel discussion, as well as on information received from the 
NSET Subcommittee and its TAG, the NNAP believes that potential risks 
do exist and that the Government is directing appropriate attention and 
adequate resources to the research that will ensure the protection of 
the public and the environment. The NNAP is particularly pleased that 
strong communication exists among the agencies that fund nanotechnology 
research and those responsible for regulatory decision-making. The 
pertinent government agencies are devoting more attention and resources 
toward these issues than most people may realize.
    In addition to research into issues related to environmental, 
health, and safety effects of nanotechnology, the NNI's diverse and 
growing R&D program is exploring other societal issues such as 
economic, workforce, and ethical impacts. The NNAP believes that 
understanding the impact of a new technology on society is vital to 
ensuring that development takes place in a responsible manner. The NNAP 
is pleased with the level of discourse on societal issues and believes 
these efforts should continue.
    In addition, communication with the various stakeholders, including 
the public, on these topics is an important element of the program. 
Therefore, we were pleased that the interagency group managing the NNI 
established a new subgroup to address the topic of public engagement.
    One societal issue that I would say has engendered the most 
lingering concern for the NNAP during this review is one which also 
affects the broader science and technology enterprise and about which 
PCAST has previously studied and reported. That is, the health of 
science education in the U.S. and the projected shortage of a qualified 
science and technology workforce. The future economic prosperity of the 
United States will depend on a workforce that both is large enough and 
has the necessary skills to meet the challenges being posed by global 
competition. This will be especially important in allowing the United 
States to maintain its leadership role in nanotechnology and the 
industries that will use nanotechnology. The NNI has launched a range 
of education-related programs appropriate for classrooms at all levels 
and across the country, along with other programs that are aimed at the 
broader public. While the NNI cannot be expected to solve the Nation's 
science education problems single-handedly, the NNAP believes that NNI 
activities can help improve science education and attract more bright 
young minds into careers in science and engineering. The issue of 
science education in the U.S. is one about which the PCAST feels 
strongly, and I would direct you to our previous report, ``Sustaining 
the Nation's Innovation Ecosystem: Maintaining the Strength of Our 
Science and Engineering Capabilities'' for more information and for our 
views on this issue generally.

How can we do better?

    This chapter of our report presents NNAP recommendations for how we 
feel the NNI program can be strengthened and improved. I will describe 
briefly the areas in which our recommendations are principally focused, 
and would be happy to answer questions about these and any of the other 
recommendations in our report.
    Technology Transfer: The issue of facilitating the transfer of 
technology from government labs or universities into the marketplace is 
a subject that I know this committee has been interested in and which 
generates a significant amount of discussion. In the case of 
nanotechnology, the level of interest and investment across many 
industrial sectors is growing and will likely outpace Government 
investment in the United States soon, if it hasn't already. In our 
report, the NNAP recognizes and applauds current efforts to promote 
technology transfer, such as ongoing dialogues between the NNI and 
various industries and recent efforts by research agencies to direct 
Small Business Innovative Research (SBIR) and Small Business Technology 
Transfer (STTR) contracts toward nanotechnology projects. However, the 
NNAP also believes there are additional steps the NNI should take to 
further communicate with and establish links to U.S. industry in order 
to facilitate technology transfer from the lab to the marketplace.
    The NNAP calls out two particular areas that could augment the 
existing suite of activities and enhance commercialization of research 
results. The first of these is increasing NNI's outreach to the States, 
which, as previously noted, are directing considerable funding toward 
nanotechnology projects. The NNAP believes that greater federal-State 
interaction can leverage the investments and competencies of both. 
States, in particular, have a strong interest in and capacity for 
stimulating economic development and commercial activity.
    A notable example of State activity is Albany NanoTech, home to 
five R&D centers and the College of Nanoscale Sciences and Engineering 
at the State University of New York (SUNY) Albany. As you heard in 
testimony by Mr. Michael Fancher at the May 18th hearing that you 
convened, Albany NanoTech has attracted over $1 billion in private 
investment and has over 100 partnerships with other universities, 
federal labs, and industry. Programs in nanoelectronics have led to 
close relationships with major electronics firms such as IBM, ASML, 
Tokyo Electron and International Sematech.
    Oregon is another state that has developed a nanotechnology 
initiative and committed state funds to support infrastructure 
development for Oregon's Nanoscience and Microtechnologies Institute. 
The University of South Carolina has invested in the creation of the 
USC NanoCenter to serve as a focal point for the University's 
nanotechnology research, to foster multi-disciplinary research and 
education efforts, and to promote economic development. South 
Carolina's NanoCenter has developed a special emphasis on creating 
dialogue concerning the societal and ethical implications of 
nanotechnology. These are a few examples of specific state and regional 
activities. Obviously, there are others, including states like 
California, Texas and Illinois, all of which are very active in 
supporting technology clusters to spur economic development.
    The NNI has begun to reach out and understand what the states are 
doing, as evidenced in workshop on Regional, State, and Local 
Nanotechnology Initiatives held in late 2003. The NNAP encourages more 
outreach to the States to help leverage the federal investment. Such 
efforts would complement those NNI activities already underway with 
various industrial sectors. The NNAP believes the States perform a 
vital role in fostering economic development through business 
assistance programs, tax incentives, and other means. The NNAP believes 
that practical application of NNI-funded research results, workforce 
development, and other national benefits will increase with improved 
federal-State coordination.
    A second, related effort is the development of improved knowledge 
management of NNI assets. Funding for the NNI to date has resulted in a 
vast network of assets that should, through proper management, be 
available to outside researchers and other private interests. The NNAP 
recommends the NNI focus on improving access to its knowledge assets--
including user facilities and instrumentation available to outside 
researchers, research results, and derivative intellectual property. 
Through mechanisms such as publicly available and searchable databases, 
the NNI can--and should--improve infrastructure utilization and the 
transfer of technology to the private sector.
    While the NNAP agrees that ultimate commercialization of 
nanotechnology is desirable and to be supported, I do want to emphasize 
that the Panel feels strongly that the NNI must remain mindful of its 
primary focus toward developing an understanding, through research and 
development, of the novel properties that occur at the nanoscale and 
the ability to control matter at the atomic and molecular level. While 
we all want the United States to benefit economically from 
nanotechnology as quickly as possible, it is critically important that 
the basic intellectual property surrounding nanotechnology be generated 
and reside within this country. Those who hold this knowledge and who 
have a workforce prepared to exploit it will ``own'' commercialization 
in the future.
    Environmental and Health Implications: Picking up on the issues 
raised in Chapter 3, the NNAP recommends the NNI continue its efforts 
to understand the possible toxicological effects of nanotechnology and, 
where harmful human or environmental effects are proven, that the 
pertinent federal agencies should promptly regulate accordingly. 
Nanotechnology products should not be immune from regulation, but such 
regulation must be based on science and rationality, not perceived 
fears and irrationality. Judging on where we are today with existing 
research and regulation, it appears that the public and the environment 
are adequately protected through existing regulatory authorities. 
However, the NNAP encourages continued research into possible 
toxicological effects--particularly in the workplace--and urges 
Government regulatory agencies to work together to ensure that any 
regulatory policies that are developed are based on the best available 
science and are consistent among the agencies. The NNAP recommends 
coordinating and sharing environmental, health and safety research 
results internationally to ensure that that efforts are not duplicated 
unnecessarily and information is shared widely. The NNAP will continue 
to monitor the development of these issues very closely.
    Program Component Area Flexibility: In accordance with the Act, the 
interagency group that coordinates the NNI has identified seven Program 
Component Areas (PCAs) that generally follow the broad categories of 
foundational research being conducted today. The PCAs represent areas 
in which ongoing and coordinated investment across multiple agencies 
will be required to support development of the many anticipated 
applications of nanotechnology. The NNAP recommends that these PCAs be 
regularly re-examined and adjusted as necessary to track the 
developments in the nanotechnology R&D field. Today's PCAs should not 
be viewed as set in stone, and today's organizational choices cannot be 
allowed to continue indefinitely and thereby to drive the future 
progression of the program. We cannot know where the state of 
nanotechnology will be 10 years from now, but we can be fairly certain 
it will be considerably different than exists today.
    Education/Workforce Preparation: A key to realizing the economic 
benefits of nanotechnology will be the establishment of an 
infrastructure capable of educating and training an adequate number of 
researchers, teachers, and technical workers. To maximize the value of 
its investment in developing materials and programs for education and 
worker training, the NNAP felt that better relationships should be 
established between the NNI and the Departments of Education and Labor. 
While the science agencies such as the National Science Foundation 
(NSF) can conduct education research and design excellent programs and 
materials, ultimately the mission agencies, Education and Labor, must 
be engaged to disseminate these programs and materials as widely as 
possible throughout the Nation's education and training systems. The 
NNAP also felt that the NNI's education focus should be on promoting 
science fundamentals at K-16 levels, while encouraging the development 
and incorporation of nanotechnology-related material into science and 
engineering education. To promote mid-career training for 
professionals, the NNAP recommends that the NNI partner with and 
support professional societies and trade associations that have 
continuing education as a mission.
    Other Societal Implications: The NNAP strongly supports continued 
NNI funding for research aimed at understanding the societal 
implications of nanotechnology, including ethical, economic, and legal 
aspects. The NNAP members believe the NNI also must work to inform the 
public about nanotechnology and seek to understand and address public 
concerns about this emerging area of technology development. Now more 
than ever, those who are developing new scientific knowledge and 
technologies must be aware of the impact their efforts may have on 
society. Nanotechnology, like biotechnology, has the potential to 
require individuals, corporations, and governments to make decisions 
that have ethical, legal, and other societal implications. The NNI must 
actively engage scholars who represent disciplines that might not have 
been previously engaged in nanotechnology-related research to address 
these issues. Moreover, these efforts should be integrated with 
conventional scientific and engineering research programs so that the 
people who develop nanotechnology are more fully aware of the societal 
implications of their work. While the NNAP generally felt that the NNI 
through its National Nanotechnology Coordination Office (NNCO) has done 
a good job initiating public outreach and is working to facilitate 
stakeholder discourse on these subjects, we would encourage continued 
attention to societal issues into the future.
    Other Recommendations/NNAP Report Schedule: Beyond the issues I 
have highlighted, the NNAP report generally endorses the NNI and 
recommends continued robust funding to help maintain U.S. leadership. 
We also suggest increased coordination with other interagency groups 
and more involvement by agencies not participating in NNI at a level 
appropriate to their mission, most notably DHS. Finally, there are a 
few administrative items, such as a recommendation that the NNAP report 
schedule be adjusted to more adequately complement NNI strategic plan 
reporting activities. These recommendations and others are more fully 
described in the report, and I would be happy to respond to any follow-
up questions you have.

Conclusion

    In conclusion, speaking as a member of the NNAP who has been very 
closely involved in studying and monitoring developments in 
nanotechnology over the past several years, and as a an early 
participant in the semiconductor research industry, I am personally 
excited about the continual flow of new discoveries and truly 
revolutionary opportunities made possible by nanotechnology R&D. I 
believe the NNAP report echoes this enthusiasm and conveys our general 
support for continuing down the path of robust funding and support for 
the NNI in order to maintain the U.S. competitive edge in this emerging 
area. I particularly appreciate the work of this committee and the 
support in Congress generally for nanotechnology R&D, and I look 
forward to continued dialogue with you on this important research 
endeavor.

                     Biography for E. Floyd Kvamme

    Since March 1984, Floyd Kvamme has been a Partner at Kleiner 
Perkins Caufield & Byers, a high technology venture capital firm. He is 
responsible for the development of high technology companies from early 
start-up to publicly traded phase.
    Floyd Kvamme currently serves on the boards of Brio Technology, 
Gemfire, Harmonic, National Semiconductor, Photon Dynamics, Power 
Integrations, and Silicon Genesis.
    Mr. Kvamme is Chairman of Empower America, a Washington based issue 
advocacy organization. He serves on the boards of the Markkula Center 
for Applied Ethics Advisory Board at Santa Clara University and the 
National Venture Capital Association (NVCA) and on the Executive 
Committee of The Technology Network. In 1998, Kvamme served as Chairman 
of the Electronic Commerce Advisory Council for the State of 
California.
    On the political front, Mr. Kvamme served on the High Tech Advisory 
Committee and on the National Finance Committee of the Bush for 
President Campaign. Previously, he served on the Finance Committee of 
the Fong for Senate Campaign.
    Floyd Kvamme was one of five members of the team that began at 
National Semiconductor in 1967, serving as its General Manager of 
Semiconductor Operations and building it into a billion-dollar company. 
He served as President of the National Advanced Systems subsidiary, 
which designed, manufactured and marketed large computer systems.
    In 1982 he became Executive Vice President of Sales and Marketing 
for Apple Computer. While at Apple, his responsibilities included 
worldwide sales, marketing, distribution and support.
    He holds two degrees in Engineering; a BS in Electrical Engineering 
from the University of California at Berkeley (1959) and an MSE 
specializing in Semiconductor Electronics from Syracuse University 
(1962).

    Chairman Inglis. Thank you, Mr. Kvamme. Mr. Nordan.

STATEMENT OF MATTHEW M. NORDAN, VICE PRESIDENT OF RESEARCH, LUX 
                         RESEARCH, INC.

    Mr. Nordan. And there we go. Good morning, Chairman Inglis, 
Ranking Member Hooley, and Members of the Committee. Thank you 
for inviting me to testify today. My company, Lux Research, 
advises corporations, investors, startups, and public sector 
institutions on exploiting nanotechnology for competitive 
advantage. I lead the research team.
    Now, let us start with the good news. The U.S. leads the 
world in nanotechnology today. Last year, $4.6 billion of 
government spending went into nanotech R&D worldwide. $1.6 
billion was in the U.S., far exceeding second place Japan at $1 
billion flat. Sixty-nine percent of nanotech patents issued by 
the USPTO are assigned to U.S. based entities, versus only 56 
percent for patents overall, so we have a lead there. Last 
year, $3.8 billion in corporate R&D went into nanotechnology. 
Of that, $1.7 billion came from U.S. based companies like GE 
and GM, again far exceeding second place Japan at $1.1 billion. 
Finally, 24 percent of scientific articles on nanoscience and 
nanotechnology have emerged from the U.S., with China and Japan 
next, at 13 percent and 11 percent respectively.
    However, our lead is tenuous. The rest of the world is 
catching up. We are falling behind in government investment. At 
purchasing power parity, Taiwan, Japan, and South Korea all 
exceed us on a per capita basis. Taiwan's $9.40 per head at PPP 
last year was nearly twice our $5.42. We are threatened by 
industrial policies abroad that do what the U.S. will not, 
namely put universities and corporations together to dominate 
specific, near-term applications. To return to Taiwan, 60 
percent of the funds in its $640 million nanotechnology 
initiative are devoted to working directly with corporations to 
achieve leadership in specific product categories.
    Even when measured by patents at our own USPTO, we lag 
other countries in some of the most promising and near-term 
fields. Of 70 patents for carbon nanotube field emission 
displays, 22 are assigned to South Korean entities, and 20 to 
Japanese ones, versus only 12 for the U.S. We have 
overestimated our lead. Scientists in countries with a less 
rich history of science and technology are not lagging when it 
comes to nanotech. On the contrary, they are studying our 
publications, being educated in our universities, and 
outfitting their labs with equipment from U.S. firms. China 
spent $130 million U.S. on nanotech last year. At purchasing 
power parity, that was $611 million, 38 percent of what we 
spend. The Iranian nanotechnology initiative was ordered by 
none other than President Mohammad Khatami.
    U.S. patents are at risk in countries that do not strongly 
enforce intellectual property laws. There is a class of 
nanomaterials called metal oxide nanoparticles. They are used 
in everything from high SPF sunscreens to rocket fuels. Now, I 
recently met with several manufacturers in this field at a 
conference. First, I spoke with U.S. based firms, like 
Nanotechnologies, Inc., NanoGram, and NanoPhase, all of whom 
have invested great amounts of money to develop exclusive 
patented processes for making these nanoparticles. Then, I 
spoke with a marketing manager from a Chinese competitor, and 
he was full of detailed, quantitative information about his 
company's products, until I asked what his production process 
was, aiming to see if his company might be infringing on the 
patents of one of the U.S. based firms. He professed that the 
question had never come up.
    What can the U.S. do to maintain and, moreover, extend 
leadership in nanotechnology? I see five key actions. First, 
the U.S. must grow federal funding for nanotechnology research. 
Nanotech is a horizontal enabler most similar to assembly line 
manufacturing or to electricity that will impact virtually 
every manufactured good. It is as critical for us to lead in 
this field now as it was to lead in packet switched networks 
decades ago, far before the Internet stimulated economic 
development.
    Second, we must eliminate regulatory uncertainty 
surrounding environmental, health, and safety issues in 
nanotechnology. There are no firm guidelines from the EPA or 
OSHA today about how those agencies plan to regulate 
nanomaterials, and as a result, large corporations are 
beginning to hold back investment, for fear that the ground 
will shift underneath them.
    Third, we must attract U.S. students to the physical 
sciences, but as well, we must retain the foreign students that 
we import. Nobel laureate Richard Smalley has observed that on 
current trends, by 2010, 90 percent of physical scientists 
worldwide will be Asian nationals, 60 percent will be 
practicing in Asia. The U.S. should strengthen science 
education in K-12, reconsider the effect of visa tightening on 
the inflow of foreign science and technology students, and 
develop economic incentives to retain those researchers when 
they study here. Quite frankly, we risk becoming a drive-
through educational institution for other countries' students.
    Fourth, we must create financial incentives aligned with 
desirable applications. Such programs can be coordinated 
through existing agencies. They require no incremental 
bureaucracy. Consider NASA's $11 million project with Rice 
University to develop extremely low loss power cables based on 
carbon nanotubes.
    And finally, we must be sensible about export controls in 
nanotechnology, which could choke commercialization. Export 
controls in this field, per se, are a dead end. The field is 
too broad to implement them. Such action would be like trying 
to impose controls on assembly line manufacturing techniques 
and equipment. Instead, we believe the U.S. should identify 
specific nanotech applications with military significance, like 
nanoparticulate explosives, and impose sensible controls on 
them within existing frameworks.
    I appreciate your inviting me here to speak. I think 
nanotechnology is critical to our nation's future, and I am 
pleased to answer any questions.
    [Statement of Mr. Nordan follows:]

                Prepared Statement of Matthew M. Nordan

    The U.S. leads the world in nanotechnology today, but its position 
is tenuous. To maintain global leadership, U.S. policy-makers must grow 
federal funding for nanotech research; eliminate regulatory uncertainty 
surrounding environmental, health, and safety issues; and do a better 
job of retaining foreign Ph.D. students. In addition, the U.S. must 
create financial incentives aligned with desirable applications and 
approach export controls sensibly.

The U.S. Leads the World in Nanotechnology Today

    Nanotechnology is the purposeful engineering of matter at scales of 
less than 100 nanometers (nm) to achieve size-dependent properties and 
functions. Nanotech innovations occupy a value chain starting with 
nanomaterials like carbon nanotubes and dendrimers, followed by 
intermediate products like memory chips and drug delivery carriers 
built with nanomaterials, and ending with enhanced final goods like 
mobile phones and cancer therapies (see Figure 1). Lux Research 
projects that new, emerging nanotechnology applications will affect 
nearly every type of manufactured good over the next ten years, 
becoming incorporated into 15 percent of global manufacturing output 
totaling $2.6 trillion in 2014 (see Figures 2 and 3).\1\
---------------------------------------------------------------------------
    \1\ Source: October 2004 Lux Research report, ``Sizing 
Nanotechnology's Value Chain.''
---------------------------------------------------------------------------

Multiple Metrics Testify to the Position of the U.S.

    Massive investment is going into nanotech--$8.6 billion combined in 
government spending, corporate R&D, and venture capital worldwide in 
2004, up 10 percent from 2003 (see Figure 4-1).\2\ By most measures, 
the U.S. leads in nanotechnology today, including:
---------------------------------------------------------------------------
    \2\ Source: 2004 Lux Research reference study, ``The Nanotech 
Report 2004.''

          Absolute public sector spending. Of the $4.6 billion 
        spent by governments on nanotechnology R&D last year, the U.S. 
        led in absolute terms with nearly $1.6 billion; runner-up Japan 
        spent less than two-thirds as much at $1.0 billion (see Figure 
        4-2).\3\
---------------------------------------------------------------------------
    \3\ Source: 2004 Lux Research reference study, ``The Nanotech 
Report 2004.''

          Patents issued. U.S. leadership in patent activity in 
        general is amplified when it comes to nanotechnology. While 56 
        percent of total issued patents at the U.S. Patent and 
        Trademark Office are assigned to U.S.-based entities, 69 
        percent of nanotech patents are.\4\
---------------------------------------------------------------------------
    \4\ Source: USPTO searches as of June 22, 2005. For more 
information on nanotechnology and patents, see the March 2005 Lux 
Research report, ``The Nanotech Intellectual Property Landscape.''




          Corporate R&D spending. We conservatively estimate 
        that corporations worldwide spent $3.8 billion on 
        nanotechnology R&D in 2004; of this, $1.7 billion was spent by 
        corporations based in the U.S., far more than in any other 
        country (see Figure 4-3).\5\
---------------------------------------------------------------------------
    \5\ Source: 2004 Lux Research reference study, ``The Nanotech 
Report 2004.''

          Scientific publications. Of a representative sample 
        of 109,728 articles published in peer-reviewed journals about 
        nanoscience and nanotechnology through June 2005, 24 percent 
        were authored by U.S.-based scientists--exceeding second-place 
        China (at 13 percent) and third-place Japan (at 11 percent) by 
        a wide margin (see Figure 4-4).\6\
---------------------------------------------------------------------------
    \6\ To identify these articles, we used the Science Citation Index 
with a search string of ``(quantum dot OR nanopartic* OR nanotub* OR 
fullerene* OR nanomaterials* OR nanofib* OR nanotech* OR nanocryst* OR 
nanocomposit* OR nanohorn*).''

Deeply Embedded Sociocultural Values Drive U.S. Leadership

    The U.S. owes its leadership position in nanotechnology to wise 
decisions, made by both governments and private sector entities like 
venture capital investors, about how science and technology innovations 
should be commercialized. These decisions, in turn, stem from deeply 
embedded sociocultural values--for example, that successful risk-taking 
innovators should capture large rewards, and that short-term failure is 
a step toward long-term success. The U.S. benefits from:

          World-class universities that create grist for the 
        commercialization mill. Universities provide an effective 
        vehicle for transferring cutting-edge technology from the lab 
        to the manufacturing floor.\7\ The U.S. serves as a model for 
        the world in this regard, for both high technology in general 
        and nanotech in particular. U.S. investment in knowledge as a 
        percentage of GDP totaled 6.8 percent in 2000, topping the 
        league tables of the first-world OECD countries.\8\ The Bayh-
        Dole Act of 1980 gave universities powerful financial 
        incentives to transfer innovation into commercial entities, and 
        corporations working in nanotech eagerly tap these resources: 
        85 percent of corporations active in nanotech R&D interviewed 
        by Lux Research in Q4 2004 have university collaborations.\9\
---------------------------------------------------------------------------
    \7\ It should be noted that national labs such as Oak Ridge and 
Sandia also serve as wellsprings for innovation that can be 
commercialized down the road.
    \8\ Source: OECD Factbook 2005.
    \9\ Source: December 2004 Lux Research report, ``The CEO's 
Nanotechnology Playbook.''




          A culture of entrepreneurship that thrives on 
        constructive failure. In the U.S., leaving a comfortable 
        corporate job to launch a start-up company is widely considered 
        a positive career move. In other first-world countries, it may 
        either be viewed as foolish or be nearly impossible to 
        accomplish. Hotbeds like Massachusetts's Route 128, 
        California's Silicon Valley, and Texas's greater Austin area 
        teem with the combination of innovative thinkers, technical 
        talent, and experienced management needed to forge a successful 
        start-up. It's no surprise that, of approximately 1,200 
        nanotech start-ups active in 2004, half were located in the 
        U.S.\10\
---------------------------------------------------------------------------
    \10\ Source: 2004 Lux Research reference study, ``The Nanotech 
Report 2004.''

          World-leading availability of risk capital. Although 
        corporations do an effective job of incubating incremental 
        nanotechnology applications that complement their existing 
        products, disruptive nanotechnology applications overwhelmingly 
        arise from start-up companies such as Aspen Aerogels, 
        Nanospectra Biosciences, and Nantero. Venture capital is the 
        lifeblood of these small firms, and the U.S. claims 56% of 
        venture capital deployed in start-ups globally.\11\
---------------------------------------------------------------------------
    \11\ Source: Lux Research analysis based on Thomson Venture 
Economics and IMD World Competitiveness Yearbook 2004.

    The Dominant U.S. Position in Nanotechnology Lies at Risk
    Despite the U.S.'s strong position in nanotechnology, other 
countries--from the usual suspects like Japan and South Korea to 
surprises like Australia and Israel--challenge its dominance. Witness:

          U.S. loss of spending leadership on a relative basis. 
        Although the U.S. puts more government funding to work on 
        nanotech research than any other country on an absolute basis, 
        it has already fallen behind Asian competitors on a relative 
        basis. This trend becomes even more apparent when spending 
        levels are corrected for purchasing-power parity, reflecting 
        the difference in what a dollar buys from one country to the 
        next. On this basis, the U.S. invested $5.42 per capita in 
        government spending on nanotechnology last year, exceeded by 
        South Korea at $5.62, Japan at $6.30, and Taiwan at $9.40--
        nearly twice the level of the U.S. (see Figure 5-1).\12\
---------------------------------------------------------------------------
    \12\ Source: Published spending allocations and Lux Research 
analysis.




          Industrial policy abroad aimed at dominating specific 
        product segments. U.S. industrial policy eschews direct 
        government/industry collaboration for leadership in specific 
        applications. In Europe and Asia, many governments pursue the 
        strategies that the U.S. avoids, giving foreign competitors a 
        leg up on their U.S. rivals. For example, of the $640 million 
        allocated to Taiwan's Nanoscience and Nanotechnology Initiative 
        over five years, 60 percent is earmarked for ``strategic 
        industry applications'' developed collaboratively between 
        government institutions and industrial champions.\13\ Two of 
        Taiwan's top nanotechnology applications are magnetoresistive 
        RAM, which U.S. companies Freescale Semiconductor, IBM, and NVE 
        have been developing for more than a decade, and carbon 
        nanotube field emission displays, which U.S.-based electronics 
        giant Motorola, small-cap company Nano-Proprietary, and start-
        up cDream are working on.\14\
---------------------------------------------------------------------------
    \13\ Source: ``The Strategy and Experiences to Industrializing 
Nanotechnology in Taiwan,'' presentation delivered at SEMI NanoForum 
2004, November 15, 2004, by Tsung-Tsan Su, Ph.D., General Director, 
Nanotechnology Research Center, Industrial Technology Research 
Institute, Taiwan.
    \14\ Such initiatives do not exist only in Asia. In Europe, the 
NanoCMOS project aims to reach the 45-nm semiconductor process node in 
2005, well ahead of the International Technology Roadmap for 
Semiconductors targets. It received =24 million in initial funding from 
the European Commission and is being executed by a consortium anchored 
by semiconductor heavyweights Infineon (Germany), Philips (the 
Netherlands), and STMicroelectronics (France).




          Leadership of high-volume, near-term applications on 
        foreign shores. In many specific, promising application 
        domains, researchers in other countries have begun to outpace 
        the U.S. in developing intellectual property--even when 
        measured by patents issued within the U.S. patent system. 
        Consider carbon nanotubes in displays, where the wonder 
        materials have been proposed for a new type of large, flat-
        panel monitor that could outperform LCD and plasma at lower 
        cost and energy consumption. Of 70 patents for carbon nanotube 
        display applications issued by the U.S. Patent and Trademark 
        Office through February 2005, only 17 percent were issued to 
        entities based in the U.S. compared with 29 percent in Japan 
---------------------------------------------------------------------------
        and 31 percent in South Korea (see Figure 5-2).

          Innovative efforts in unexpected places. Scientists 
        in countries with a less rich history of science and technology 
        innovation are not lagging when it comes to nanotech. On the 
        contrary, they are studying U.S. scientific publications, being 
        educated in U.S. universities, and orienting their initial 
        capital investments toward the instrumentation needed for 
        nanotechnology research, without having to maintain technology 
        infrastructures and skill sets that were cutting-edge 20 years 
        ago. The result: impressive efforts in countries not known for 
        scientific leadership. The $130 million in estimated government 
        spending on nanotech last year in China equaled $611 million at 
        purchasing-power parity, or 38 percent of U.S. expenditure; in 
        addition, China recently launched a world-leading effort to set 
        standards for nanomaterials.\15\ Further, some countries that 
        the U.S. considers to represent strategic threats have thriving 
        nanotech programs; the Iranian NanoTechnology Initiative was 
        ordered by none other than President Mohammed Khatami.\16\
---------------------------------------------------------------------------
    \15\ Source: Lux Research analysis.
    \16\ Source: ``Revolutionary Nanotechnology,'' Hamshahri (Iranian 
daily newspaper), No. 3651, page 10, March 3, 2005. Accessed via http:/
/www.netiran.com/?fn=artd(3434).




          Lack of concern with violating intellectual property 
        (IP) protection. Companies exploiting nanotechnology depend on 
        international property protection to defend their freedom to 
        operate. Yet in many foreign countries, lax enforcement of 
        intellectual property means that rivals appear to ignore 
        patents in practice. In the crowded field of metal oxide 
        nanoparticles, with applications in everything from sunscreens 
        to rocket fuels, 74 companies compete globally, eight of which 
        are in China. The U.S.- and European-based companies--like 
        NanoGram, Nanophase, and Nanotechnologies Inc.,--depend on 
        proprietary, patented production processes. for their 
        differentiation and financial valuations. But the Chinese 
        manufacturers stress their ability to deliver identical 
        products at prices 15 percent to 20 percent cheaper--and 
        generally refuse to name their production processes, raising 
        suspicion that they are using Westerners' patent filings like 
        recipe books. With lax Chinese IP enforcement and no way to 
        infer a manufacturing process from the nanoparticles that 
---------------------------------------------------------------------------
        result, U.S. nanoparticle firms have limited means to compete.

Entrepreneurs Face Steep Hurdles on the Path from University Lab to 
                    Successful Start-Up

    For the U.S. to remain highly competitive, it must help start-ups 
overcome:

          Funding gaps. The widespread perception that 
        nanotechnology start-ups have more venture capital than they 
        can reasonably deploy is dead wrong. In fact, venture funding 
        for nanotechnology start-ups declined from $385 million in 2002 
        to $200 million in 2004, and accounted for only two percent of 
        nanotechnology R&D funding that year; cautious VCs burned by 
        the Internet bubble hesitate to commit more cash until they see 
        substantial exits (see Figure 6).\17\ To encourage 
        entrepreneurs to bring nanotech innovations out of university 
        laboratories and into the commercial arena, government funding 
        through vehicles like Small Business Innovation Research (SBIR) 
        grants and the National Institute of Science and Technology's 
        Advanced Technology Program (ATP) is an absolute necessity.
---------------------------------------------------------------------------
    \17\ Source: 2004 Lux Research reference study, ``The Nanotech 
Report 2004.''

          Human resource gaps. The U.S. is not generating 
        enough Science and Engineering Master's degree and Ph.D. 
        holders to maintain leadership in nanotechnology. Tighter 
        controls on student visas since the September 11 attacks have 
        reduced the inflow of Ph.D. students to the United States in 
        favor of Western Europe, and as economies in China, India, and 
        South Korea develop, foreign scientists are less likely to 
        remain in the U.S. for their careers than they were a decade 
        ago. Nobel Laureate Richard Smalley from Rice University has 
        noted that at current rates, by 2010, 90 percent of all 
        physical scientists will be Asian and 50 percent of them will 
---------------------------------------------------------------------------
        be practicing in Asia.

          Manufacturability gaps. Nanotechnology start-ups must 
        cross a much ballyhooed ``valley of death'' to obtain the risk 
        capital funding required to move the business forward. Yet they 
        also must cross another, related, valley between small-scale 
        benchtop production volumes and the pilot-scale production 
        required to win commercial contracts. Our contacts with 
        nanotechnology researchers indicate that the Nanoscale Science 
        Research Centers scattered throughout the U.S. assist with 
        basic research only (not scale-up), are ill-used, and do not 
        help bridge this gap. As a result, many start-ups spend 
        redundant millions to build the same manufacturing pilot plants 
        that they end up using perhaps 10 percent of the time; 
        dedicated, shared manufacturing facilities devoted to 
        technology incubation would help bridge this gap more cost-
        effectively.

The U.S. Government Must Take Concerted Action to Maintain Leadership

    We recommend that the U.S. Government:

          Grow federal funding for nanotechnology research. To 
        maintain leadership, the U.S. National Nanotechnology 
        Initiative (NNI) must be funded at or beyond current budget 
        request levels. It should not be assumed that U.S. states will 
        pick up any slack should federal spending ebb: Although U.S. 
        states spent $432 million last year, complementing 
        approximately $1.15 billion at the federal level, most of this 
        money went to initial purchases of equipment and construction 
        of facilities, not to funding ongoing research activity by 
        Ph.D. and postdoctoral students. This state spending 
        essentially represents one-time capital expenditure unlikely to 
        be sustained.

          Eliminate uncertainty surrounding environmental, 
        health, and safety (EHS) issues. Nanoparticles present new EHS 
        issues; not enough fundamental toxicity research has been done 
        on nanoparticles to decisively determine what hazards they may 
        pose to workers, the public, and the environment--or how such 
        hazards may be mitigated. We believe fundamental research on 
        nanoparticle toxicity can realistically be performed only under 
        a government aegis; to perform it, the U.S. Government must at 
        least double the small sums currently allocated at the federal 
        level for nanotech EHS research, which totaled only 3.7 percent 
        of the 2006 NNI request (see Figure 7).\18\
---------------------------------------------------------------------------
    \18\ Source: May 2005 Lux Research report, ``A Prudent Approach to 
Nanotech Environmental, Health, and Safety Risks.''

           Beyond fundamental research, agencies like the Environmental 
        Protection Agency have not yet established firm guidelines for 
        how new nanoparticles will be treated under existing, or 
        potentially new, regulatory schemes. While this unwillingness 
        to rush to judgment before all the facts are in is well 
        intentioned, it has perverse effects: Based on our contact with 
        individuals driving nanotech initiatives at America's largest 
        corporations, it's clear to us that ambiguity surrounding EHS 
        regulation of nanoparticles is hampering commercialization--
        firms do not want to play a game whose rules may change at any 
        time. To move forward, the EPA, the FDA, and NIOSH must issue 
        clear guidance to industry on how they plan to approach 
---------------------------------------------------------------------------
        nanoparticles.

          Attract U.S. students to science and engineering and 
        retain foreign ones. As with many science and technology 
        fields, funding and development incentives for nanotechnology 
        research will amount to nothing without a steady stream of 
        advanced science and engineering degree holders entering the 
        workforce. The U.S. should strengthen programs designed to 
        inspire students with wonder for the physical sciences in K-12 
        education, reconsider the effect of visa tightening on the 
        inflow of foreign science and technology graduate students, and 
        develop economic incentives for foreign science and technology 
        graduates to remain in the United States rather than 
        repatriate, taking with them the skills they acquired in the 
        U.S.
        
        

          Create financial incentives aligned with desirable 
        applications. We believe U.S. economic development policy is 
        right not to fund specific solutions to broad technology 
        problems. However, the U.S. would be well served by government 
        programs that provide funds to nanotechnology researchers, 
        giving them incentives to develop applications with well-
        defined ends, without specifying particular technology means. 
        Such programs can be coordinated through existing agencies and 
        require no incremental bureaucracy.

           Consider NASA's $11 million project with Rice University to 
        develop extremely low-loss power cables based on carbon 
        nanotubes: Such cables could enable a national power grid, 
        shuttling electricity from locations of sustainable resources 
        to areas of high demand without losing it on the way. The 
        National Renewable Energy Laboratory estimates that solar cells 
        covering a 100-by 100-mile area in Nevada could meet the U.S.'s 
        entire energy needs, but without low-loss power cables the 
        electricity could never reach demand hubs like Chicago and New 
        York.\19\
---------------------------------------------------------------------------
    \19\ Source: John A. Turner, ``A Realizable Renewable Energy 
Future,'' Science, Vol. 285, Issue 5428, pp. 687-689, July 30, 1999.

          Employ export controls sensibly, without choking 
        nanotech commercialization. Export controls for products 
        incorporating nanotechnology have become a hot topic inside the 
        Beltway; individuals representing multiple organizations across 
        branches of government have independently sought Lux Research's 
        advice on this issue. We believe that export controls for 
        ``nanotechnology'' per se are a dead end. The field is too 
        broad; such action would be like trying to impose export 
        controls on assembly-line manufacturing techniques and the 
        equipment used to implement them--impossible to carry out 
        rationally. Instead, we believe the U.S. should identify 
        relevant nanotechnology applications (e.g., radiation-hardened 
        solar cells, high-frequency beam-steerable antennas, 
        nanoparticulate propellants and explosives) and impose sensible 
        export controls on them within existing frameworks rather than 
---------------------------------------------------------------------------
        introducing new ones.

                    Biography for Matthew M. Nordan

    Matthew Nordan heads Lux's research organization. Under Matthew's 
leadership, the Lux Research analyst team has become a globally 
recognized authority on the business and economic impact of 
nanotechnology. Lux Research serves as an indispensable advisor to 
corporations, start-ups, financial institutions, and governments 
seeking to exploit nanotechnology for competitive advantage.
    Matthew has counseled decision-makers on emerging technologies for 
a decade. Prior to Lux Research, Matthew held a variety of senior 
management positions at emerging technology advisor Forrester Research, 
where he most recently headed the firm's North American consulting line 
of business. Earlier, Matthew lived for four years in the Netherlands 
growing Forrester's operations in Europe, where he launched and led 
research practices in retail, mobile commerce, and telecommunications.
    Matthew has been invited by news outlets including CNN and CNBC to 
comment on emerging technology markets and has been widely cited in 
publications such as The Wall Street Journal and The Economist. He has 
delivered advice to clients and been an invited speaker at conferences 
in North America, Europe, Southeast Asia, Japan, Australia, and South 
Africa. Beyond the corporate sphere, Matthew has participated in 
developing public-sector technology strategy for organizations 
including the World Economic Forum, the European IT Observatory, and 
the Dutch transportation ministry.
    Matthew is a summa cum laude graduate of Yale University, where he 
conducted cognitive neuroscience research on the neural pathways 
mediating emotion and memory.




    Chairman Inglis. Thank you, Mr. Nordan. Mr. Murdock.

  STATEMENT OF SEAN MURDOCK, EXECUTIVE DIRECTOR, NANOBUSINESS 
                            ALLIANCE

    Mr. Murdock. We are all going to make that mistake. Good 
morning. I would like to thank you, Mr. Chairman, Ranking 
Member Hooley, and the Members of the Research Subcommittee of 
the Committee on Science for the opportunity to testify on this 
critically strategic question.
    My name is Sean Murdock, and I am the Executive Director of 
the NanoBusiness Alliance. The NanoBusiness Alliance is the 
premier nanotechnology policy and commercialization advocacy 
group in the United States. Our members span multiple 
stakeholder groups, from startups surviving on angel funding 
and SBIR funding, to Fortune 500 companies with multimillion 
dollar commitments to nanotechnology R&D, to academic research 
institutions and public-private partnerships working to derive 
economic development, benefit, and growth through 
nanotechnology. This wide group of stakeholders has come 
together because we believe that nanotechnology will be one of 
the key drivers of business success, economic growth, and 
quality-of-life improvements in the 21st Century. The Alliance 
provides a collective voice and vehicle for efforts to advance 
the benefits of nanotechnology across our economy and our 
society.
    With that perspective in mind, I would like to share with 
you my thoughts on the United States' competitive position in 
the commercialization of nanotechnology. To briefly synthesize, 
the U.S. is leading the world today, but our lead is far from 
secure. We face stiff and accelerating competition and we need 
to take action to ensure leadership.
    Nanotechnology will have tremendous impact on virtually 
every sector of our economy. Near-term applications include 
scratch resistant coatings, stain resistant textiles, high 
performance tennis rackets and golf clubs, computer memory and 
storage, flat panel displays, drug delivery systems, chemical 
and biological sensors, and dramatically more sensitive and 
selective diagnostics to name a few applications. Given this 
breadth, it is clear that nanotechnology will be the engine of 
innovation for the next 50 years, and we must be at the 
forefront of this revolution.
    Furthermore, nanotechnology's implication for homeland 
security, defense, cleaning the environment and developing 
renewable, sustainable sources of energy make its development 
strategic as well as economic for the United States. For these 
reasons, we as a nation and as the last superpower cannot 
afford to hold anything less than a commanding position of 
leadership in the commercialization of nanotechnology.
    While the knowledge development that we refer to in 
nanoscience R&D create value for the U.S. and society as a 
whole, it is through the commercialization of nanotechnology 
into new processes and products that businesses will create 
jobs, and that this nation will see a return on its investment. 
On this dimension, the United States is performing quite well. 
According to our database, of all companies involved with 
nanotechnology, a little over 50 percent are in the United 
States.
    That is the good. The bad news is while we lead in the 
number of nanotech startups, the so-called valley of death, the 
period between a company's formation and its achieving 
significant cash flow, is particularly acute for 
nanotechnology, and is constraining the growth of the sector. 
Most nanotechnology innovations require significant investment 
and platform development before any revenues can be generated 
because they are based upon fundamental scientific 
breakthroughs and basic research at universities and federal 
labs.
    Burned by the dot-com bubble, and needing to raise internal 
rates of return in order to raise the next fund, venture 
capitalists have been shying away from investments in these 
kind of platform technologies that have longer-term 
commercialization processes and unclear market economics. 
According to data from Small Times Media, we continue to 
generate about 30 to 40 venture backed startups a year, and I 
am sure that there are many, many others that are being formed 
that fall beneath the radar screen because they lack the 
capital to get noticed. However, the growth of this group has 
been stagnant over the past several years, as venture capital 
funding for nanotech has remained relatively flat at about an 
average of a little more than $200 million. To put that in 
perspective, the investment over the past seven years by VCs 
has been about the equivalent of the investment of the Federal 
Government in 2004.
    Leading Fortune 500 companies also have nanotechnology 
initiatives and funding for R&D, but many have scaled back 
their early stage research and development in response to stock 
market pressures for near-term profitability and the reduction 
of cost. The commitment to early stage R&D at GE, IBM and the 
likes of Motorola is the exception and not the rule. Many 
companies plan to innovate through acquisition. Relying upon 
startups to develop and commercialize innovations further 
expands the valley of death since companies are looking for 
startups to have developed their technologies far enough to 
ease integration. It also means that more than ever, startups 
represent the product pipeline for large corporations and their 
successful formation is key not only to creating new 
prosperity, but continuing our existing prosperity.
    Until the VC cycle changes again, and stock markets allow 
companies to adopt longer horizons, we have a substantial and 
growing valley of death. Since the market is not prepared to 
take on this risk, the government needs to help bridge this 
gulf. Specifically, the government must fully and effectively 
use the SBIR and other programs at its disposal to enhance 
commercialization activity.
    Many member companies speak of the myth of SBIR Phase III 
grants. The Phase I innovations proved out in Phase II are 
supposed to be brought into use in the sponsoring agency. While 
SBIR grants in and of themselves are quite valuable for those 
attempting to commercialize nanotech innovations, purchases to 
meet agency needs would generate a sustainable source of 
revenues, provide customer validation, and accelerate the 
learning curve through production. Furthermore, this would 
ensure that our agencies, particularly defense and homeland 
security, would remain ahead of the world in terms of nanotech 
integration capability.
    We need to create new nanotech innovation ecosystems to 
form particularly between U.S. startups and incumbents. If we 
are to retain our jobs in existing companies and industries, 
then we will need to integrate the innovations of nanotech 
startups into these sectors rapidly. Without incentives to form 
domestic partnerships, the value from our nation's investment 
may be disproportionately captured by foreign companies with 
patient capital who partner with cash-strapped U.S. startups.
    However much the government can do directly, in the end the 
greatest leverage will be achieved by creating greater 
incentives for the private sector to invest and aggressively 
participate in the commercialization process. To that end, we 
should investigate establishing a permanent R&D tax credit, and 
potentially creating new vehicles, like the R&D limited 
partnerships, that were instrumental in the formation of 
commercialization capital for biotech. These will unlock not 
only more of the potential of nanotech, but all technology-
driven industries.
    Thank you, Mr. Chairman. I would be happy to answer any 
questions you may have.
    [The prepared statement of Mr. Murdock follows:]

                   Prepared Statement of Sean Murdock

    I would like to thank you, Mr. Chairman, Ranking Member Hooley, and 
Members of the House Research Subcommittee of the Committee on Science 
for the opportunity to testify on this critically strategic question.
    My name is Sean Murdock, and I am the Executive Director of the 
NanoBusiness Alliance. The NanoBusiness Alliance is the premier 
nanotechnology policy and commercialization advocacy group in the 
United States. NanoBusiness Alliance members span multiple stakeholder 
groups and traditional industrial sectors, including newly formed 
start-ups surviving on angel funding or SBIR grants, Fortune 500 
companies with multi-million dollar commitments to nanotechnology R&D, 
academic research institutions, and public-private partnerships working 
to derive economic development and growth through nanotechnology. This 
wide group of stakeholders has come together because we believe that 
nanotechnology will be one of the key drivers of business success, 
economic growth and quality-of-life improvements in the 21st century. 
The Alliance provides a collective voice and a vehicle for efforts to 
advance the benefits of nanotechnology across our economy and society.
    With that perspective in mind, I would like to share with you my 
thoughts on the United States' competitive position in both the 
research and commercialization of nanotechnology. The U.S. is leading 
the world in nanoscience today, but our lead is narrow and we face 
stiff and accelerating competition. Action, both in terms of spending 
and policy, is required at the federal, State, and local levels to 
assure that we maintain this lead.
    Since this subcommittee has relatively strong familiarity with 
nanotechnology and the 21st Century Nanotechnology Research & 
Development Act, I only need to give some highlights of the potential 
of nanotechnology and why it is so important. It is my belief and the 
belief of every member of the Alliance that nanotechnology will have a 
tremendous impact on virtually every sector of the global economy, a 
belief that is reflected in the diversity of our membership. In some 
industries, such as data storage, companies without a nanotechnology 
strategy already cannot compete. This will become pervasive in all 
industry sectors that produce goods rather than services. Furthermore, 
I believe that nanotechnology is not just a tremendous economic driver, 
but that its implications for homeland security, defense, cleaning the 
environment, and developing renewable, sustainable energy sources 
should make its development a key strategic as well as economic goal 
for the U.S. For these reasons, we as a nation and as the last 
superpower cannot afford to hold anything less than a commanding 
leadership position in the commercialization of nanotechnology.
    Investing in nanotechnology could also bring other benefits, beyond 
the creation of jobs, bolstering of the economy, and strategic 
leadership. Investing in commercialization allows us to reinvest in 
nanoscience education, research, and development, forging a virtuous 
circle that will ensure our children enjoy the same improvement in 
quality of life that we have. Nanotechnology's potential to provide 
solutions to the grand challenges of today could provide a rallying 
point and inspire interest comparable to the race to overtake Sputnik 
in the 50's and 60's, still one of the greatest periods of innovation 
in American history.
    The stakes are incredibly high. The NSF has estimated that the 
global impact of nanotechnology enabled products and services will be 
$1 trillion by 2015. Many considered this estimate to be quite lofty 
when it was made in 2000 with the launch of the National Nanotechnology 
Initiative. However, more recent estimates for the global impact of 
nanotechnology enabled goods are even larger than the NSF's. In Realis, 
a consulting group, has predicted that nanotech will impact up to $2 
trillion of global economic output, while Evolution Capital, an 
investment bank, estimates that the market will reach $1 trillion five 
years earlier in 2010. Finally, in perhaps the most rigorous study to 
date, Lux Research, a nanotechnology analyst group, has estimated that 
nanotech will impact $2.6 trillion in global economic output by 2015 
(see Figure 1).




    While these estimates are mind-numbingly large, a brief mention of 
some prospective applications and estimated time to market helps to 
make them more tangible and more credible. Simple and passive 
applications of nanotechnology including nanoparticles, coatings, 
catalysts, and nanocomposites are already on the market, while more 
revolutionary applications, including the first generation of 
nanotechnology-enabled pharmaceuticals, bulk nanomaterials, sensors, 
and many more are beyond the research stage and well into the product 
pipeline. In additional to developing revolutionary products, 
nanotechnology will radically change the cost-structures of many 
industries, making non-nano alternatives simply non-competitive (see 
Figure 2).




    On the strategic side, nanotechnology will enable dramatic 
enhancements in military and homeland security capabilities. Start-ups 
are working on new protective armor, chem/bio suits, and chem/bio 
sensors, as well as a variety of technologies such as quantum computing 
and encryption which have enormous dual-use applications.
    Given the potential of nanotechnology and the evidence of traction 
toward realizing that potential, it is increasingly clear that 
nanotechnology will be a game changing technology. Economists estimate 
that technology innovation in the U.S. (transistors, integrated 
circuits, recombinant DNA, etc.) generated half of the economic growth 
over the past fifty years. Nanotechnology is likely to be the engine of 
innovation for the next fifty years, and we must be at the forefront of 
this innovation.
    That is the importance of nanotechnology as a national goal, but it 
does not answer the question of where the country currently stands with 
respect to other nanotechnology leaders such as China, Japan, and the 
E.U., the other global leaders in nanotech. Fortunately, at the current 
time, the U.S. is clearly in a leadership position, evidenced by its 
strength in investment, scientific publications, and patents. This 
should not be taken for granted--key innovations have been developed in 
the E.U. (such as the electron microscope, the instrument that helped 
enable all nanotech research) and Japan (such as the discovery of the 
nanotube, the most versatile and powerful nanomaterial yet developed).




    Ironically, the challenges to U.S. domination of nanotechnology are 
in part a result of our early support of nanotechnology. The formal 
launch of the NNI in 2000 brought the potential of nanotechnology into 
the world consciousness and initiated a race for global leadership. As 
a result, the U.S. share of global government expenditures has dropped 
since 2001, despite the absolute commitment more than doubling in the 
same time period from $465MM to $960MM (see Figure 6).




    Not surprisingly, the growth in foreign investment in 
nanotechnology R&D has helped other nations to gain ground in the 
development of new knowledge, innovations and the production of human 
capital (see Figure 7).




    Of particular competitive concern is China. The Scientist, an 
American academic journal, said that from January to August 2004 China 
had presented 3,621 research papers on nanotechnology, more than any 
other country, as tabulated by the Scientific Citation Index. According 
to the article, China published 14 percent more papers than the United 
States in that time period. Furthermore, China currently has more than 
3,000 researchers who are engaged in related programs and has had 
series of innovative achievements according to the Director of China's 
National Center for Nanoscience and Technology and the Vice President 
of the Chinese Academy of Sciences.
    While knowledge development and nanoscience R&D create value, it is 
through the commercialization of nanotechnology into new processes and 
products that businesses will create jobs and nations will see a return 
on their investments.
    According to the NanoBusiness Alliance's proprietary database on 
all companies involved with nanotechnology worldwide, a little over 50 
percent of the companies are in the United States (613 of 1,175). 
However, if one is to believe the announcements made at the 
ChinaNano2005 trade expo that China has almost 800 companies involved 
with nanotechnology and a recent EU report claiming that Europe has 
500, the share would appear to be significantly lower. Unfortunately, 
it is notoriously difficult to track commercial developments in 
nanotechnology, so we cannot be precisely sure.
    However, the rate of formation of new nanotech start-ups over the 
past several years has been relatively stagnant (see Figure 8).




    This is, perhaps, one of the most disconcerting indicators for 
nanotechnology in the U.S. The entrepreneurial culture and deployment 
of risk capital, especially venture capital, toward early stage 
technology companies has been a key source of competitive advantage for 
the United States. This historic advantage appears to be at risk.
    Although we lead in the number of nanotechnology startups, these 
startups need risk capital to bring these nanotechnology innovations to 
market. The so called ``valley of death,'' the period between a 
company's formation and its achieving significant cash flow, is 
particularly acute for nanotechnology. Most nanotech innovations 
require significant investment and ``platform'' development before any 
revenues can be generated because they are based upon fundamental 
breakthroughs in basic research at universities and federal labs. 
Burned by the dot com bubble and needing to raise IRR's in order to 
raise the next fund, VC's have been shying away from ``platform'' 
technologies without near-term commercialization processes and end 
market economics. In fact, the total VC financing over the past seven 
years is approximately the same as the U.S. Government investment in 
2004 (see Figure 9).




    Furthermore, the investment to date has been highly concentrated in 
a few, mature nanotech companies.




    Highlighting this trend, almost all of the venture capital that 
went to nanotech companies in the first quarter of 2005 was placed into 
four companies, NanoTex ($33MM), Nanomix ($17MM), Nantero ($17MM), and 
NanoOpto ($12MM).
    While leading Fortune 500 companies have nanotechnology initiatives 
and some funding for R&D, most have scaled back their early stage 
research and development in response to stock market pressure for near-
term profitability and reducing costs. Many companies plan to 
``innovate through acquisition,'' relying upon start-ups to develop and 
commercialize innovations. This further expands the ``valley of death'' 
since companies are looking for startups to have developed their 
technologies far enough for ease of integration. It also means that 
more than ever start-ups represent the product pipeline for large 
corporations, and that their successful formation is key not only to 
creating new prosperity, but continuing our existing prosperity.
    Until the VC cycle changes again and the stock markets allow 
companies to adopt longer time horizons, we have a substantial and 
growing ``valley of death.'' Since the market is not prepared to take 
on this risk, the government needs to develop programs to bridge this 
gulf.
    Given the current landscape, there are a few key initiatives that 
the Federal Government can take to revitalize nanotechnology 
commercialization here and bolster our global lead.
    The federal investment in infrastructure and user facilities is 
part of the solution. These facilities, in theory, provide access to 
critical and expensive equipment, and reduce the capital intensity of 
nanotech commercialization activity. However, many nanotech start-ups 
lack the process knowledge and internal capabilities to make effective 
use of these investments. The government must also ensure sufficient 
operating funds to provide services and train the start-ups, or the 
assets will be underutilized and the investment will not generate the 
return we expect.
    The U.S. Government must be the ``gold standard'' as the most 
hospitable climate for commercializing nanotech innovations. We must 
lead in the development of new nanotech knowledge and research 
infrastructure. As such, our share of worldwide government investment 
should be at least on par with our share of global GDP.
    We should establish goal-oriented research programs to address our 
grand challenges. While much fundamental research remains to be done, 
we should endeavor to do it to the extent possible within the context 
of its potential uses. The National Cancer Institute's Centers for 
Cancer Nanotechnology Excellence (CCNEs) provide a model for this. To 
quote the recent solicitation, ``The CCNEs will be a national resource 
that will integrate nanotechnology development into basic and applied 
cancer research to facilitate the rapid application of this science in 
the clinic. This initiative will catalyze targeted discovery and 
development efforts that offer the greatest opportunity for advances in 
the near- and medium-terms and will lower the barriers for those 
advances to be translated to the private sector for commercial 
development.'' The NCI has established clear objectives without 
constraining how to get achieve them, and thus the creativity of the 
scientists pursuing the research. This model should be emulated and 
extended in other agencies and strategic investment areas.
    Next, the government must fully and effectively utilize the SBIR 
and ATP programs to enhance commercialization activity. Many member 
companies speak of the ``myth'' of the SBIR Phase III--the phase where 
innovations proved out in Phase II are supposed to be brought into use 
in the sponsoring agency. While the SBIR grants in and of themselves 
are quite valuable to those attempting to commercialize nanotech 
innovations, purchases to meet agency needs would generate a 
sustainable source of revenues and provide customer validation. 
Furthermore, this would ensure that our agencies, particularly Defense 
and Homeland Security, remain ahead of the world in terms of nanotech 
integration capabilities.
    The ATP program, although controversial, provides one of the only 
sources of capital (and thus incentives) for new nanotech innovation 
ecosystems to form, particularly between U.S. startups and incumbents. 
If we are to retain jobs in our existing companies and industries, then 
we will need to integrate the innovations of nanotech start-ups into 
these sectors rapidly. Without incentives to form domestic 
partnerships, the value from our nation's investment may be 
disproportionately captured by foreign companies and governments with 
patient capital who partner with cash strapped U.S. startups.
    However much the government can do directly, in the end, the 
greatest leverage will be achieved by creating stronger incentives for 
the private sector to invest and aggressively participate in the 
commercialization process. To that end, we should investigate 
establishing a permanent R&D tax credit and possibly create new 
vehicles like the R&D Limited Partnerships that were instrumental in 
biotech capital formation. These will unlock not only more of the 
potential of nanotech, but of all technology-driven industries.
    In closing, all technological progress depends first and foremost 
upon human capital. We must adopt an integrated human capital strategy 
spanning multiple time horizons. In the near-term, we must encourage 
the best and brightest to come to the U.S., help build out our 
knowledge base, and transform nanotech inventions to innovations that 
touch our daily lives. This will mean streamlining immigration 
requirements for ``knowledge'' and highly skilled workers so that we 
not only attract but retain these workers as citizens. In the medium-
term, we must greatly strengthen our job training programs. In the 
longer-term, we must dramatically strengthen the science and technology 
education system, the ultimate investment in our commercial future.

                       Biography for Sean Murdock

    Prior to becoming the Executive Director of the NanoBusiness 
Alliance, he was the Executive Director and a founding board member of 
AtomWorks, an initiative formed to foster nanotechnology in Illinois 
and more broadly throughout the Midwest.
    Sean has established himself as a leading thinker in the areas of 
nanotechnology commercialization and economic development. He has 
delivered keynote speeches on the commercialization of nanotechnology 
at several nanotechnology conferences, and served as Co-Chair for the 
Commercialization Focused NanoCommerce 2003 Conference and Trade Show. 
Sean has been quoted extensively on the subject in many leading 
publications including Fortune, The Economist, the Chicago Tribune, the 
Chicago Sun-Times, and Small Times.
    Sean has been very active in nanotechnology trade and economic 
development issues. He helped to organize and execute the first 
Nanotechnology Trade Mission to Europe in conjunction with the 
NanoBusiness Alliance and the U.S. Department of Commerce. He has also 
been engaged with senior officials of the U.S. Department of Commerce's 
Technology Administration on the potential impact of export control 
issues on nanotechnology development and commercialization.
    Prior to founding AtomWorks and serving as the Executive Director 
of the NanoBusiness Alliance, Sean had more than seven years experience 
in management consulting, most recently as Engagement Manager at 
McKinsey & Company. Sean served a variety of Fortune 500 companies, 
focusing primarily upon the industrial and chemicals sectors. While 
there, he developed some of the firm's early perspective on the 
business opportunities created by the nanotech revolution, publishing 
the first two internal documents on the subject.
    Sean received his Master's in Business Administration and Master's 
in Engineering Management from Northwestern University. He holds a BA 
in Economics from the University of Notre Dame.




    Chairman Inglis. Thank you, Mr. Murdock. Mr. O'Connor.

     STATEMENT OF JIM O'CONNOR, VICE PRESIDENT, TECHNOLOGY 
        INCUBATION AND COMMERCIALIZATION, MOTOROLA, INC.

    Mr. O'Connor. Chairman Inglis, Ranking Member Hooley, and 
Members of the Subcommittee, fellow panelists, good morning. I 
want to thank you for inviting me to share Motorola's thoughts 
on where the United States stands competitively and 
innovatively when it comes to the subject of nanoscience and 
nanotechnologies.
    As the Vice President for Technology Commercialization at 
one of America's largest preeminent technology companies, I am 
honored to represent Motorola's 24,000 research scientists and 
engineers before this distinguished panel that time and again 
stands up and fights for the complex, fast moving technology 
world and the ever-growing high tech industry.
    Today, as we consider the recent report by the President's 
Council of Advisors on Science and Technology on the National 
Nanotechnology Initiative at Five Years, I will use it to give 
you a snapshot of where we stand in relation to our global 
competitors. I also want to provide you some insights on how 
Motorola is trailblazing the nanotechnology frontier with 
breakthrough sciences and commercial applications.
    While the National Nanotechnology Initiative is a 
relatively young concept, those of us in the research and 
development community know the basic science for its 
foundation, and have been around for many years. As the PCAST 
Report states, scientists and engineers anticipate that 
nanotechnology will lead to materials and systems with dramatic 
new properties relevant to virtually every sector of the 
economy, such as medicine, telecommunications, and computers, 
and lastly, to areas of national interest such as homeland 
security.
    And because of the strong commitment from the Congress and 
those in the Administration who understand these societal 
benefits, the U.S. has surged to the forefront of 
nanotechnology research and development, ahead of Europe, ahead 
of Asia, ahead of all other competing nations around the globe.
    Generally speaking, this rise to prominence has been 
through good old American collaboration. Thanks to public-
private partnerships between Federal and State governments, 
business and academia, our nanotechnology position has become 
quite strong. For instance, Motorola today can leverage 
researched performed in a number of our nation's esteemed 
universities, such as U.C. Berkeley on better nanotubes and 
nanowires, Harvard on fabricating nonvolatile electronic memory 
using nanotubes, and lastly, Stanford on two particular 
projects, one to use synthesis technology for biological and 
chemical sensors and field emission devices, and the other, to 
build up a portfolio of nanodots, nanotubes, and nanowires for 
more enhanced electronics.
    And while Motorola is still a few weeks away from 
officially announcing it, I am proud to inform this 
distinguished panel that this summer, Motorola is launching the 
Center for Interdisciplinary Research on Nanotechnology with 
Arizona State University. This strong partnership between 
university and industry will promote nanotechnology, education, 
research, and commercialization. ASU will advance the state of 
the art in nanotechnology for communications, while Motorola 
will use basic and applied technologies to develop useful and 
innovative products and services for American consumers, better 
mobile devices, equipment, and high frequency applications.
    But the private sector partnering with academia could not 
do it alone. We are grateful for federal support through grants 
as well as research and development tax credits. To further 
illustrate the high tech industry's importance to our economy 
in terms of research, sales, and exports, America is at the 
vanguard in the number of startup companies based on 
nanotechnology, as some of the panelists have spoken. We also 
lead the world in research output.
    To fully understand the zeal to get a competitive edge in 
the global market, let us look at Asia. While some of these Far 
East nations may not be spending as much money as the U.S. is 
today, they are being very strategic by choosing to concentrate 
their investments in particular areas in order to make 
significant strides sooner in a specific sector. For example, 
Korea and Taiwan are investing heavily in nanoelectronics, 
while Singapore and China are focusing nanobiotechnology and 
nanomaterials respectively.
    Mr. Chairman, you may be wondering why is a continued 
federal commitment to nanotech so important? Let me answer it 
this way. Nanotechnology research holds tremendous potential 
for stimulating innovation, and its revolutionary applications 
will enable the U.S. to maintain our global leadership in 
industries that span many sectors. That is as long as our 
public policies don't ease off the pedal of momentum or slam on 
the brakes of critical funding or R&D tax initiatives 
altogether. And don't worry. The private sector will not 
abandon this effort either. We are in it for the long haul in a 
partnership atmosphere.
    For instance, in addition to Motorola's efforts, IBM, 
Intel, DuPont, and NEC have kicked off major nanotechnology 
efforts. These breakthroughs make life simpler, safer, and more 
enjoyable. And remember, we are simply on the cusp of much, 
much more to come, new advances, and more challenges.
    However, there are bumps in the road ahead. You have 
probably seen reports on the shortage of Americans skilled in 
science and technology. The U.S. is slipping behind our 
competitors, Asia in particular, in undergraduate and graduate 
training. At Motorola, we have found that every day we go into 
the marketplace searching for highly skilled workers, demand 
far outpaces supply, and this challenge seems to get worse as 
each month passes. It further illustrates another important 
component to the global competition in the high tech industry. 
We are no longer competing against Europe and Asia in 
developing better products, but also in trying to lure and 
secure basic workforce needs.
    Simply put, we must have a well educated talent pool to 
survive. Therefore, Motorola strongly supports the PCAST Report 
recommendation that the NNI establish relationships with the 
Department of Education and Labor to develop education and 
training systems, to improve the Nation's technical proficiency 
in the STEM fields of science, technology, engineering, and 
math.
    Life-changing dreams are becoming a reality in our nation's 
nanotechnology labs. We must press forward in a coordinated, 
collaborative fashion between Federal and State governments, 
businesses in the private sector and our academic institutions. 
We must go full speed ahead on the nanotechnology express lane, 
to boost our economy and our citizens' quality of life.
    Thank you for listening. I will be happy to take any 
questions.
    [The prepared statement of Mr. O'Connor follows:]

                   Prepared Statement of Jim O'Connor

    Chairman Inglis, Ranking Member Hooley, our homestate Illinois 
Congressmen Johnson and Lipinski, and Members of the Subcommittee, good 
morning. I want to thank you for inviting me to share Motorola's 
thoughts on where the United States stands competitively and 
innovatively when it comes to the subject of nanoscience and 
nanotechnologies.
    As the Vice President for IP Incubation & Commercialization at 
America's largest cell phone manufacturer, I am honored to represent 
Motorola's 24,000 research scientists and engineers before this 
distinguished panel that time and again stands up and fights for the 
complex, fast-moving technology world and the ever-growing high-tech 
industry.
    Today, as we consider the recent report by the President's Council 
of Advisors on Science and Technology (PCAST) on The National 
Nanotechnology Initiative at Five Years, I will use it to give you a 
snapshot of where we stand in relation to our global competitors. I 
also want to provide you some insights on how Motorola is trailblazing 
the nanotechnology frontier with breakthrough sciences and commercial 
applications.
    While the National Nanotechnology Initiative (NNI) is a relatively 
young concept, those of us in the research and development community 
know the basic science for its foundation has been around for years. As 
the PCAST Report states: Scientists and engineers anticipate that 
nanotechnology will lead to ``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.''
    And because of a strong commitment from the Congress and those in 
the Administration who understand these societal benefits, the U.S. has 
surged to the forefront of nanotechnology research and development--
ahead of Europe, ahead of Asia, ahead of all other competing nations 
around the globe.
    Generally speaking, this rise to prominence has been through good 
old American collaboration. Thanks to public-private partnerships 
between Federal and State governments, business and academia, our 
nanotechnology position has become strong. For instance, Motorola can 
leverage research performed in a number of our nation's esteemed 
universities, such as:

          U.C. Berkeley on better Nano-Tubes and Nano-Wires;

          Harvard on fabricating nonvolatile electronic memory 
        using Nano-Tubes; and,

          Stanford on two projects: one to use synthesis 
        technology for biological and chemical sensors and field 
        emission devices; the other to build up a portfolio of Nano-
        Dots, Nano-Tubes and Nano-Wires for more enhanced electronics.

    And while Motorola is still a few weeks away from officially 
announcing it, I am proud to inform this distinguished panel that this 
summer Motorola is launching the Center for Interdisciplinary Research 
on Nanotechnology with Arizona State University. This strong 
partnership between university and industry will promote nanotechnology 
education, research and commercialization. ASU will advance the ``state 
of the art'' in nanotechnology for communications, while Motorola will 
use basic and applied technologies to develop useful and innovative 
products and services for American consumers--better mobile devices, 
equipment and high frequency applications.
    But, the private-sector partnering with academia could not do it 
alone. We are grateful for federal support through grants as well as 
research and development tax credits.
    The PCAST Report states: the U.S. Government this year will spend 
just over $1 billion on Nano R&D. To put this in perspective, $1 
billion is roughly one-quarter of the current global investment by all 
nations. And when you combine federal, State and private U.S. dollars, 
our overall investment jumps to $3 billion, or one-third of the 
estimated $9 billion in total worldwide spending by the public and 
private sectors combined on Nano R&D.
    To further illustrate the high-tech industry's importance to our 
economy in terms of jobs, research, sales, and exports, America is at 
the vanguard in the number of start-up companies based on 
nanotechnology. We also lead the world in research output as measured 
by patents and publications--as you can imagine, this number-one 
position is very important to Motorola today and will continue to be 
important for our competitive growth in the future.
    For example, Motorola is near commercialization on the first of its 
kind 5-inch color video flatscreen using Carbon Nanotube technology. 
This Nano Emissive Display technology, which provides much brighter and 
thinner flat panel displays, is now available for licensing. Motorola 
expects this breakthrough technique could create larger flat panel 
displays with superior quality, longer lifetimes and lower costs to 
consumers than current products in the competitive video display 
market.
    While that's the good news, the PCAST Report highlights there are 
some pressing challenges that threaten our leadership position in the 
global economy. Specifically, the relative lead the U.S. currently 
holds is in jeopardy because the rest of the world is catching up in a 
variety of measurements. In government funding, for example, the rate 
of increase in the European Union and Asia is higher than that of the 
U.S. This should be a wake-up call for American researchers and policy-
makers alike.
    For instance, the EU announced this month the adoption of a 
Nanosciences/Nanotechnology Action Plan for Europe for 2005-2009. Their 
plan proposes measures to be taken at the national and European level 
to strengthen research and develop useful products and services so that 
Europe can maintain its competitive edge in the global economy.
    In the EU, much work is being leveraged through consortia efforts 
which promote partnering between companies and universities. And, Japan 
has had over 20 years of commitment to nanotechnology through funding 
of broad and focused national programs. Furthermore, China now has over 
twice as many engineers working in nanotechnology than the U.S. does 
because it's been identified there, as a ``government initiative.''
    To fully understand the zeal to get a competitive edge in the 
global market, let's look at Asia in general. While some of these Far 
East nations may not be spending as much money as the U.S. is today, 
they are being very strategic by choosing to concentrate their 
investments in particular areas in order to make significant strides 
sooner in a specific sector. For example, Korea and Taiwan are 
investing heavily in Nano-Electronics while Singapore and China are 
focusing on Nano-Biotechnology and Nano-Materials respectively.
    Mr. Chairman, you may be wondering:

          Why is a continued federal commitment to nanotech so 
        important?

          Why should the American taxpayer invest so much in 
        the global race over nano R&D?

          And maybe most importantly, what are the actual 
        benefits of nanotechnology to American consumers?

    Let me answer this way: nanotechnology research holds tremendous 
potential for stimulating innovation. Its revolutionary applications 
will enable the U.S. to maintain our global leadership in industries 
that span all sectors. That's as long as our public policies don't ease 
off the pedal of momentum or slam on the brakes on critical funding or 
R&D tax initiatives altogether. And don't worry, the private sector 
will not abandon this effort either--we're in it for the long haul.
    For instance, a few large multinational companies such as IBM, 
Intel, DuPont and NEC have kicked off major nanotechnology efforts. My 
company, Motorola, continues to rebuild, retool, and consolidate our 
nanotechnology programs. In addition, as I mentioned earlier, the 
number of nano start-ups in the U.S. has increased significantly due to 
heavy private sector venture capital investing.
    However, I want to be candid. One of the biggest challenges before 
research scientists and engineers--those not necessarily known for 
their communication skills--is being able to relate to the American 
people what's actually going on in nanotech labs.
    This morning, I'd like to give it a shot by using a very popular 
Motorola product--the mobile phone.
    When Motorola launched the 1st cell phone, do you remember how 
bulky and cumbersome it used to be?
    Well, thanks to cutting-edge research utilizing nanotechnology 
principles at Motorola labs, tomorrow your mobile phone can have better 
optics, better acoustics, and better displays, more efficient 
batteries, and overall enriched electronics in a very small form 
factor.
    Specifically, Nano-Composites can make today's cell phones 
structurally stronger, but physically smaller and lighter. Nano-
Displays are larger, brighter and cost less due to embedded carbon 
nanotubes, and Nano-Power can give this light-weight phone higher 
capacity power sources for storage and conversion.
    Let me be as clear as possible: if the Internet improved our 
quality of life via the Information Superhighway, then nanotechnology 
should be considered the Express Lane for future technological 
breakthroughs to make our lives simpler, safer, smarter and more 
enjoyable. And please remember, we are simply on the cusp of much, much 
more to come--new advances and more challenges.
    For instance, understanding the societal implications of 
nanotechnology--including ethical, economic, and legal issues--will 
still need to be confronted and addressed in the future, and the NNI 
must work harder and more consistently to better educate our fellow 
citizens about the wonders of nanotechnology.
    And talking about education, there have been many recent reports on 
the shortage of American workers skilled in science and technology. The 
U.S. is slipping behind our competitors--Asia in particular--in 
undergraduate and graduate training.
    At Motorola, we have found that everyday we go into the marketplace 
searching for highly skilled workers, demand far outpaces supply, and 
this challenge seems to get worse as each month passes. It further 
illustrates another important component to the global competition we're 
witnessing in the high-tech industry. No longer is this just about a 
company's business demand to develop better products against Europe and 
Asia, but about American companies increasingly under pressure to 
compete against our rivals when trying to secure our basic workforce 
needs. Simply put, we must have a well-educated talent pool to survive.
    Therefore, Motorola supports the PCAST Report's recommendation that 
the NNI establish relationships with the Departments of Education and 
Labor to develop education and training systems to improve the Nation's 
technical proficiency in areas related to science, technology, 
engineering and math--better known as the STEM fields.
    In addition, immigration policies have to be set to allow, at least 
in the near-term, U.S. trained graduates from foreign countries to stay 
and work here and in the longer-term, a steady influx of new foreign 
students to come to the U.S. for their education.
    On top of much-needed talent to work inside our labs, Motorola also 
believes there's a need for external funds to boost the physical 
infrastructure to foster and maintain long-term research. I'd suggest 
this be a combination of direct funding and R&D tax credits to the 
nanotechnology labs.
    As far as innovation and patenting are concerned, Motorola believes 
corporate investment in nanotech is very product focused. The scope of 
research must be longer-term. In fact, long-term funding could actually 
enhance the speed and number of patents that are awarded and help 
ensure that America retains its global leadership position.
    And our competitive edge isn't just about what the Federal or State 
government should be doing. We, as an industry, must look inside our 
own operations and see how we can do better. For instance, Motorola 
needs to take further steps to communicate with and establish links to 
further facilitate technology transfer from the lab to the marketplace.
    As I close, the commercialization of nanotechnology does not 
necessarily depend upon the creation of new products--such as stain-
resistant, wrinkle-free pants, or even new, emerging markets--like 
those more superior flat-panel displays using Carbon Nanotubes being 
developed by Motorola researchers as we speak.
    Gains can come from incorporating nanotechnology into existing 
products, resulting in new and improved versions of these products. 
Just imagine: faster computers, lighter materials for aircraft, less 
invasive ways to treat cancer, and more efficient ways to store and 
transport electricity.
    Life-changing dreams are becoming reality in our nation's 
nanotechnology labs. We must press forward in a coordinated, 
collaborative fashion between Federal and State governments, businesses 
in the private sector, and our academic institutions. Simply put, we 
must go full speed ahead on the Nanotechnology Express Lane to boost 
our economy and our citizens' quality of life.
    Thank you for listening. I will be happy to take any questions.

                       Biography for Jim O'Connor

    Jim O'Connor is Vice President of Technology Incubation and 
Commercialization at Motorola. In this role, Jim's operational 
responsibilities include working closely with a global team of 4,600 
technologists, prioritizing technology programs, creating value from 
intellectual property, guiding creative research from innovation 
through early-stage commercialization, and influencing standards and 
roadmaps. Previous to this role, Jim was Managing Director and co-
founder of Motorola Ventures, the corporate venture capital investment 
arm of Motorola, Inc. This role included active review of investments 
and management of the global minority equity opportunities strategic to 
Motorola's core and emerging businesses. During this time, Jim oversaw 
the creation of investment operations in Silicon Valley, Europe, Israel 
and China. He led Motorola's investment into 4th Pass, Mesh Networks, 
Foundstone, Xtreme Spectrum and Bitfone.
    He co-founded Motorola Ventures in September 1999 following a year 
of service in the U.S. Government as a White House Fellow appointed by 
President William Jefferson Clinton. He was chosen by and served his 
assignment through Treasury Secretaries Robert Rubin and Larry Summers. 
During his time at the Treasury Department, he was responsible for 
coordinating strategies on domestic financial policy, electronic 
commerce and community development policy. Prior to his public service, 
Jim worked as a Management Consultant with the global management 
consultancy A.T. Kearney out of Chicago where he focused on strategic 
and operational issues with Fortune 100 companies. Jim received his BA 
and JD from Georgetown University where he lettered in crew and 
football and was named an East Coast Athletic Conference (ECAC) All-
Star and GTE Academic All-American. He received his MBA from the J.L. 
Kellogg Graduate School of Management where he received the Dean's 
Award for Outstanding Achievement.
    Jim was named a Henry Crown Leadership Fellow by the Aspen 
Institute in 2004, a United States-Japan Leadership fellow in 2000 and 
a Leadership Greater Chicago Fellow in 2000. Jim remains active in the 
local Chicago community as Co-Chair of the Chicagoland Entrepreneurial 
Center, which is a national model for public-private partnerships that 
are established to assist entrepreneurs. He is a Board Member of the 
Chicagoland Chamber of Commerce. Jim is also the founder of Kellogg 
Corps, a non-profit entrepreneurial program at the Northwestern J.L. 
Kellogg Graduate School of Management whose mission is to bring 
management expertise to non-profit organizations in developing 
countries. In addition, Jim is an Advisory Board Member of the J.L. 
Kellogg Graduate School of Management. He serves as an Advisory Board 
Member of the NanoBusiness Alliance, the preeminent nanotechnology 
public policy organization in the United States. He founded the Field 
Associates, the Field Museum's young professional Board, as well as the 
Lyric Opera Auxiliary Board, the Lyric Opera's young professional 
Board. Jim also serves on the Board for the Children's Home & Aid 
Society, the Chicago Cities in Schools Program (CCIS) as well as the 
Big Shoulders Board for the Archdiocese of Chicago's inner-city school 
fund. He was awarded the Motorola CEO Award for Volunteerism in 2002. 
He was awarded the Motorola CEO Award for Outstanding Achievement in 
2004. He is a member of the American Bar Association, the Economic Club 
of Chicago and Executive Club of Chicago.
    Jim lives in Wilmette, Illinois with his wife, Julie, and their 
twin sons.



                               Discussion

    Chairman Inglis. Thank you, Mr. O'Connor. I will recognize 
myself for a first round of questions here.
    Over the last several weeks, I have noticed several 
articles about environmental issues associated with 
nanotechnology. Maybe they were there before, and maybe it is 
just because of the last hearing that I started noticing them. 
But Mr. Nordan, you mentioned the regulatory uncertainty about 
environmental regulation in the area of nanotechnology. What do 
you think is driving those stories? I mean, are there real 
concerns out there about the environmental impacts of these, or 
is that mostly a health and safety issue, as in workers exposed 
to materials. Comment on that, if you would.
    Mr. Nordan. Well, it is a complex topic. It doesn't easily 
reduce to a sentence or two, I am afraid. My firm just 
published a report on this particular topic, that we will be 
glad to make available to the Committee.
    The first cut that you have to make is between real risks 
and perceptual risks, which are equally important. So, on one 
hand, there are real risks of manufactured nanoparticles, 
nanotubes, metal oxide nanoparticles, fullerenes, dendrimers. 
All of the building blocks of nanotechnology may have adverse 
effects, adverse effects in high volumes to manufacturers in an 
assembly line, who might have the opportunity to encounter 
large quantities of them in an aerosol in the air, for example, 
adverse effects to consumers at use, or adverse effects on the 
environment that may take a long time to rear their heads. 
There is a strong belief, and you can demonstrate that the 
multiwall nanotube composites that are already used in cars, 
for example, today, are in a situation such that the nanotubes 
can't get out of their composite matrix, but does that sustain 
in a landfill for 20, 30, 50 years? The answer is we don't know 
right now.
    So, on one hand, there are real risks that companies 
working in this field are treating assiduously--DuPont is a 
good example--where David Warheit, among others, has been a 
leader in conducting EHS research on the real risks of 
nanoparticles. On the other hand, there are perceptual threats, 
which are often written off by participants in the field of 
nanotechnology as not terribly important, but if you look at 
the genetically modified food experience in Western Europe, you 
can see that the belief that there might be a threat, even when 
none actually exists, can choke commercialization just as real 
risks do. In fact, in many cases, those threats can appear 
earlier, and have a broader magnitude of impact, than real 
risks, as we have encountered with materials like asbestos, 
have.
    To this end, there are a couple of actions that I feel are 
relevant at a government level. One of them is to conduct more 
and broader research into the real risks of nanoparticles. It 
is probably a fallacy to assume that the private sector will 
pick up all of the slack here. When it comes to specific 
applications, like carbon nanotubes in displays, or in 
composite matrices, it is absolutely reasonable to expect that 
the DuPonts and GEs and Dows of the world have a vested 
interest in their commitment to shareholders to minimize risk, 
such that that application level research will be done. When it 
comes to fundamental research on the particles themselves, 
irrespective of any specific application, it is probably off 
the mark to believe that that research will be conducted by the 
private sector. Funding here is insufficient today. If you look 
at the budget request for the NNI for Fiscal Year 2006, only 
3.7 percent of funding is earmarked for EHS concerns. We 
believe that number needs to be two to four times higher than 
it is today.
    Secondly, there is an issue about reducing regulatory 
uncertainty, and you have to think about this from a risk 
reduction standpoint. Let us say that you or I are a business 
manager at, I don't know, what would a good example be, DuPont? 
You are looking at introducing a new insulating material that 
involves nanoparticles, right? And you sit down with your 
government relations head, and start talking about what the 
risks are here, and you ask well, what are the applicable 
regimes under the EPA? Is this a new substance that has to be 
registered under the Toxic Substances Control Act? Is it going 
to be considered an existent substance that is not going to 
have a lengthy approval process? And the regulator looks at you 
and says I don't know. They haven't really decided yet. Now, 
the lack of action here is not ill-intentioned by any means. 
The folks at these agencies are looking at nanotechnology, and 
they don't want to introduce firm regulations before all the 
facts are in from research.
    That said, we believe that action is required at this 
point, because corporations are now looking at these 
opportunities, and are putting them off for a year or two or 
three or five, until at least an indication of how a regulatory 
framework will be developed is in. Action is required here in 
order not to stall commercialization.
    Chairman Inglis. Mr. Kvamme, any thoughts on that subject 
from you, as well as this other thing, the environmental issue, 
I have seen rising up. The other thing I have seen in some 
media accounts since our last hearing--I don't think it is 
associated with last hearing, but it sort of, I have noticed it 
since, is a little bit of push back about now, we get a lot of 
hype on this subject, and that is not going to change the 
world.
    Mr. Kvamme. Well, as has already been mentioned, we 
actually spent quite a bit of time on the environmental aspects 
of this, and I had the pleasure of being in some of the NSET 
meetings on this as well, and I am very pleased with the role, 
for example, EPA among others, NIOSH, et cetera, are taking in 
those roundtables that are essentially monthly meetings.
    The concern that we came up with was really workplace 
related, as I mentioned in my testimony. That is because of the 
raw particles are really available there, and frankly, it is 
not a lot different in my view, than what we had in the early 
days of the semiconductor business, when we were working with 
the same, you know, arsene gases, and et cetera, that are not 
good for folks. And so, we had to do controls in our workplace. 
Once that material was installed in the silicon, once those 
nanotubes are installed in a tennis ball or something like 
that, we are far less concerned, because of the technology 
involved there.
    So, I would totally agree that continued study of this is 
necessary, because materials, the way I like to think about it 
is, think about a Tinkertoy set, where you are putting 
molecules together, and think about the fact that it is a 
different material if the peg goes into one different slot in 
that round circle. Tinkertoys probably age me, or show my age, 
anyway. Those of you that remember Tinkertoys, okay. It is a 
different material, and you could say that that means that 
carbon can be thousands of materials, really, and we have to be 
sensitive of that, particularly in that construction phase. So, 
on the environmental thing, like I say, I think it is mostly 
workforce-related, at least as far as we have a concern. We 
will continue to look at that.
    Chairman Inglis. All right. Speaking of being sensitive, I 
need to be sensitive to the clock up here, and recognize Ms. 
Hooley, but perhaps, others might want to take a crack at that, 
as later questions, as you see the opportunity, about whether 
this, whether nanotechnology can change the world, as I think 
everybody up here is assuming it can, and you are assuming it 
can, and how we would answer people who say the other, that it 
is much ado about nothing. I am not sure they say that, but 
they have been sort of pooh poohing some of the advances that 
could happen. So, perhaps, as we go along, you might want to 
address that.
    Ms. Hooley.
    Ms. Hooley. Thank you. Thank all of you for testifying.
    Do any of you have any experience with the Advanced 
Technology Program, and do you believe it is valuable and 
deserving of our continued support? Anyone to comment on that? 
Advanced Technology Program? Anyone?
    Okay. I am going to go the next--oh, good. Mr. Murdock.
    Mr. Murdock. I will say that while I don't personally have 
experience with the Advanced Technology Program, there are many 
nanotech companies who ultimately have utilized the Advanced 
Technology Program, from Luna Innovations in Texas, and Spectra 
Biosciences, also in Texas, to name a few, and I think all 
would say that it has been incredibly helpful for them in 
maturing the technology, and in specific cases, in forming 
partnerships with large companies, who will ultimately be the 
channel, if you will, to market, to commercialize these 
innovations.
    Ms. Hooley. Okay. Mr. Kvamme, and excuse me for butchering 
your name many times today, your report discusses the federal 
role in commercialization of nanotechnology, and specifically 
mentions the Small Business Innovation Research and Small 
Business Technology Transfer Programs as sources of funding for 
critical early stages of technology development. Why is the 
report silent on the Advanced Technology Program? Any reason 
for that?
    Mr. Kvamme. Our emphasis on the commercialization aspect, 
as you saw in the report, was utilizing the state economic 
development agencies that exist in every single state. We had 
the pleasure of meeting with a number of state representatives, 
and feel that that is an area where there is a considerable 
amount of interest in economic development. Your state of 
Oregon, for example----
    Ms. Hooley. Right.
    Mr. Kvamme.--is very, very active in this area, and we felt 
that that close to home area for tech transfer was a more 
valuable resource to getting to commercial application of 
products than anything else we were able to see. In fact, it is 
larger than the SBIR, STTR programs. In fact, on its impact in 
the nano area that, at least as far as we could see from our 
study.
    Ms. Hooley. A question for all of you, and I know a couple 
of you mentioned it, talking about how do we make sure that we 
have the scientists in this country to work in this kind of 
technology? What is your question of what we do to interest our 
young people from majoring or taking advantage of science and 
math courses that are offered to them in high school, college, 
and so forth?
    Mr. Kvamme. If I could begin on that, I----
    Ms. Hooley. You may.
    Mr. Kvamme.--would be very happy, because you have just hit 
my hot button. It is the area that concerns me most at all.
    Ms. Hooley. It should concern all of us, yeah.
    Mr. Kvamme. And we issued a report on that subject, a 
workforce report, some several months ago, and made a number of 
recommendations. I think some of the most important things is 
to stop looking at engineering, for example, as a trade school. 
People who graduate with an engineering degree have learned how 
to do problem solving, analysis. They shouldn't be considered 
only aimed at engineering careers any more than French majors 
should be aimed at becoming Frenchmen. There is no connect 
there at all. An engineering degree----
    Ms. Hooley. I have never heard that before.
    Mr. Kvamme. But an engineering degree is a valuable degree, 
and we must make sure that people who want to be in problem 
solving areas, whether they want to go into public policy, or 
any other field, can gain a lot of insight into that by 
utilizing a technical degree. So, we have to change that 
perception that there aren't jobs for these people. I will 
remind you of the G.I. Bill. Nobody questions today whether the 
G.I. Bill was a good idea. At the time, however, remember how 
controversial it was. I wasn't exactly around then, but I was 
alive.
    Ms. Hooley. Right.
    Mr. Kvamme. But, you know, I will quote the President of 
the University of Chicago at that time. ``What are we going to 
get? Educated hobos?'' to use a very negative term of the day. 
Because he didn't believe that an advancement in technology 
would benefit all of society. We have to remove that notion 
that we don't need more engineers, we don't need more 
scientists, and it is prevalent. Believe me, it is prevalent. 
It has to be removed.
    Secondarily, I think it is unfortunate, but the facts are, 
a science education is tough.
    Ms. Hooley. It is.
    Mr. Kvamme. And it is harder than a lot of other things. 
When kids go away to school, we don't have a problem with 
matriculating freshmen at the Bachelor's level. We have a 
problem that they drop out and go into other fields, because it 
is hard. I think we have to incentivize them. I was, frankly, 
very disappointed when Approps, in the last few days, dismissed 
a program that we had recommended, that I was with Secretary 
Spellings yesterday morning on this subject, had asked for an 
initial program to help fund scientific study by Bachelor's 
degree students.
    I think it is important that we understand that it is 
tough, and if you want to call it bribery, call it bribery, but 
keep youngsters in there, because they are interested in it, 
but it is hard. What incentives can we offer for them? We have 
a number of recommendations in our report. I would be happy to 
supply copies of that report also, but it is an area of great 
concern to us. I think it is our largest area of concern, 
because we are entrepreneurial in this country. We just need 
more bodies to handle the entrepreneurial nature across our 
economy.
    Ms. Hooley. Anyone else want to talk about that?
    Mr. Nordan. To add to that point from the other end of the 
educational spectrum, I know this is probably not something 
that is welcome by the Committee to hear, but this essentially 
comes down to money, all right.
    If you are a Ph.D. student, and you have just completed a 
doctoral degree, and you are now looking at doing a postdoc, 
and doing an assistant professorship at a university, and 
moving upward, the amount of money that you will make doing 
that is an order of magnitude less than you will achieve by 
taking that same degree, and working for a Wall Street firm, or 
a management consultancy, or something else, applying your 
scientific knowledge not to scientific development, but in a 
professional services context.
    If the mechanisms through which we fund postdoctoral 
degrees and assistant professorships within state universities 
gave a better cost/benefit ratio on the value of time for these 
individuals, you would see more of them working to apply the 
degrees in scientific context, rather than in other ones.
    Ms. Hooley. Okay.
    Mr. Murdock. There is also another lever. I am sure this 
committee often hears of, you know, the Sputnik generation, and 
the race. And we need a clear, compelling, cohesive vision for 
how science and technology can change the world around us in 
meaningful ways. And that will motivate people, the individuals 
going through the educational system, to do that.
    That is one of the reasons that we believe, you know, 
translational, goal-oriented research should also be in the 
mix. If you make the National Cancer Institute's Center for 
Cancer Nanotechnology Excellence, they are looking at trying to 
take nanotechnology and bring it to bear as rapidly as 
possible, not to eliminate cancer, because that is not quite 
feasible, but to minimize the pain and suffering associated 
with cancer, and they have set a specific target of 15 years 
from now. It is that kind of program and activity that people 
can relate to that will motivate them to be part of the 
solution. And part of this is, as Matthew said, motivation. 
There are financial levers to motivation, and there are values-
oriented levers to motivation. We need to pull on both.
    Mr. O'Connor. One last comment on that. At Motorola, we 
take that very seriously. We have 24,000 scientists, and we 
feel we have to make a committed amount of dedicated time to 
this with children. I will give you a couple statistics. In 
China, for example, 45 percent of the degrees are engineering, 
whereas in the U.S., it is five percent.
    Ms. Hooley. Forty-five percent?
    Mr. O'Connor. That is correct. And that is not uncommon to 
see that in some of our international partners. Another 
statistic that is of interest is there is a group called the 
International Science Engineering Fair, in which there are 
600,000 U.S. students that participate. There are six million 
students in China that participate.
    So, I think there has to be a concerted effort across the 
public and private sector to address this issue, and different 
nonprofit organizations and large companies need to make a 
dedicated commitment, if we really want to get to that supply 
of our top talent, to do what we need to do, to get to the next 
generation of technology.
    Ms. Hooley. Thank you.
    Chairman Inglis. Thank you, Ms. Hooley. Mr. McCaul, 
recognized for five minutes for questions.
    Mr. McCaul. Thank you, Mr. Chairman. I thank you for 
putting this hearing together. I thank the witnesses. I wanted 
to follow up on the university-industry partnership issue. I 
represent the Research and Development Center, the UT system, 
it is called the J.J. Pickle Center. He was a former Chair of 
the Science Committee. Unfortunately, he recently passed away. 
I was at his funeral.
    But I wanted to follow up on that. I know, Mr. Murdock, you 
had had some experience with the University of Texas. Mr. 
O'Connor's comment was interesting. This partnership won't do 
it alone, and I am interested in your comments on that. In 
getting the tour of the Center, it was very impressive, in 
terms of the research and development going on at the 
university, and the exchange of information and partnering with 
the high tech, which is very prevalent in the Austin area, in 
my district. A lot of the funding actually was at the Pickle 
Center, to make the semiconductor wafers, and the industry got 
a lot of the benefit out of that, and I would like you to 
comment on the pros and cons of how can we strengthen the 
partnership, what are the problems associated with the 
partnership? And lastly, I would say the majority of students 
that I saw working at the Center were over here on student 
visas, predominantly from Asian countries, and more disturbing 
is what I was essentially told that most of them would not 
stay, we would not have their talent after they graduated. They 
would essentially return back to their countries, and you know, 
we have this investment, in terms of training, that we give to 
them, and yet, we lose that talent when they return back to 
their country. So, if you could, if you wouldn't mind 
addressing maybe those two issues.
    Mr. Murdock. To respond, I am not overly familiar with the 
specific university-industry partnership that you are referring 
to, but having said that, we do rely extensively, in the United 
States on foreign students right now for postdoctoral positions 
and they do a lot of great research, help us build our 
knowledgebase, develop the innovations, in fact, of our patent 
applications. And we are training them.
    The issue of students' visas on foreign immigration is very 
important. In the near-term, we need to have an influx of human 
capital from around the globe. The United States should be the 
place where the best and brightest from around the world come 
to do research and commercialize their activity. I think that 
is a very positive thing.
    The risk of doing that is that we don't cultivate enough of 
our own talent, and so we need to be cognizant of that, and you 
know, as we have talked about, increase the supply of trained 
scientists and engineers from the lower grades, all the way up 
while doing that. So, these need to be pulled simultaneously. 
And then, we need to take steps to ensure, and to create 
incentives, as Matthew said, to ensure that we retain the 
talent here. When we lose the talent, it is a net loss. But it 
is important to manage across all phases simultaneously.
    Mr. O'Connor. Yes, I would like to comment on the UT 
partnership, because I am familiar with it. It is a great 
program. In fact, a couple of years ago, I got involved in that 
program via a small company called Molecular Imprints, which is 
a nanoimprint lithography company. A man by the name of Norm 
Schumaker. And a good example of some of the context of 
partnership and why it makes a difference in this 
commercialization chasm of death that they talk about and how 
we can get through it, is this small company came out of UT, 
needed some venture funding, and through our venture arm, we 
actually formed a partnership, through venture capital and a 
commercial agreement, to help get them to the next stage. So, 
you had a good example of innovation within a university, a 
small startup in venture funding, and a large company working a 
collaborative agreement to bring this company's technology to 
bear. So, we think that is a great example of the kind of 
partnerships that are achievable, and the types of things that 
we are looking more often to do.
    Mr. McCaul. Thank you. Any other comments on that? Mr. 
Nordan.
    Mr. Nordan. I would just underscore the fact that the issue 
is retention. If the takeaway that you get from today's 
discussion is we need to plow resources into inspiring students 
with wonder for science and technology in K-12, that is 
absolutely right. It will be absolutely ineffectual for years. 
In the near-term, the lever that is open to us to pull is being 
able to retain foreign students that are already studying on 
our shores, but are no longer staying here. If you look at the 
course of American Ph.D.s, right. In the first half of this 
century, we educated a lot of American Ph.D. and postdoctoral 
students who, in rare cases, would go and practice abroad. In 
the second half of the 20th century, we then imported a large 
number of students, but were highly effective at being able to 
keep them here, which is a reason that our university staffs 
and the R&D staff of companies like Motorola are so diverse, 
and we gain from that diversity.
    The problem is that as economic fortunes have improved in 
India, China, South Korea, et cetera, the cost/benefit tradeoff 
of remaining in the U.S., cut off from cultural links and 
cultural support, versus returning home, is no longer as stark 
as it once was, and we are losing these students. What can 
those incentives be? Well, they are fairly broad-based. There 
is a lever that we have to pull in visas. There is a lever that 
we have to pull in improving the lot of what a postdoctoral 
situation, or an early university professorship would be, in 
terms of financial remuneration in the United States. There are 
probably other levers that I am not aware of, but in the short-
term, the lever we have to pull is retention, and the long-term 
lever we have to pull is education of our students 
domestically.
    Mr. McCaul. I agree with that, and my time has expired. 
Thank you, Mr. Chairman.
    Chairman Inglis. Thank you, Mr. McCaul. Ms. Johnson.
    Ms. Johnson. Thank you very much. I am pleased to follow 
Mr. McCaul, because I think that some of the things that we 
have done on this committee might lend a little bit of insight.
    About six or seven years ago, with Congresswoman Connie 
Morella, we sponsored a bill to try to get the attention of 
young people, and interest them in science and technology, and 
it was focused, at the time, on women and minorities, only to 
find that it was not just women and minorities we need to 
attract, because the figure for Anglo males going into 
engineering was just dropping like a lead balloon. And so, we 
now know that 80 percent of the scientists, researchers in this 
country are not American-born, and we do need to give great 
attention to that.
    The University of Texas Southwestern Medical School is in 
my district, and I work closely with them on this kind of 
research, as well as University of Texas at Dallas and the 
system where we hope to become a leader, just as we led the way 
in the Dallas area for the chip. And I think that this 
technology, the nanotechnology, is going to be in that 
category. I think for healthcare delivery, a number of things, 
this is the research we need to focus on. It is like the steam 
engine when it came about, or the Internet when it came about. 
It is going to make that kind of impact on our economy, so it 
is important that we do invest money in this research.
    And we are falling behind other countries in research 
dollars. We used to be leaders. Now we are behind. But it was 
out of this type of research that brought us to where we are 
now. This is the research that caused us to have the economy we 
had in the '90s. It came from this area. So, I cannot be more 
passionate about how much we need the leadership in this area, 
and hope that all of us can influence young people to go, and 
it does start in K-12, because we know that at the sixth grade, 
they start dilly dallying to something else.
    We have tried to determine what causes that. We rank number 
18 in the world in the science and math, and we should not be, 
in a leading country. But we cannot get it without the support 
that we need. And so, could you take that back to the White 
House?
    Mr. Kvamme. I would be very happy to, and in fact, you 
might be pleased to know that what you just said would almost 
sound like you were a fly on the wall at a meeting I had with 
Secretary Spellings yesterday morning, because we talked about 
this exact idea, and the fact that you folks here in the 
Congress have approved that billion dollar math and science 
program, how do we push that? You know, we were reviewing, and 
our committee is reviewing a very interesting study out of UCLA 
on 1,546 colleges and universities in this country, and what is 
motivating kids to take the major that they are. It is very, 
very telling. It is also very interesting as to who studies 
engineering.
    Many, many of the students that go into engineering happen 
to be from families that are first time college people. They 
are coming from--I am an example of that. My folks are 
immigrants. My dad was a carpenter. My mother was a domestic 
worker. And--but I am finding that, even in the current 
generation, that is still true. How do we make sure that those 
families understand that an engineering degree is a good idea? 
So, we are working on that. We are looking at where is the 
market for this, and hopefully, we will be able to come up with 
some concrete proposals. We already have them in our existing 
workforce report, but it is a very, very high priority at the 
PCAST.
    Ms. Johnson. One of the ways we can do it is through 
partnerships. I carried legislation on that area. Texas 
Instruments is our star company for involving themselves in our 
education system in Dallas. What we find is that when students 
can relate this to everyday life, and understand how it relates 
to the research, and what brings on the technology and the 
advancement and what have you, the more they appreciate doing 
it. Now, Texas Instruments funds a lot of this for the Dallas 
Independent School District, and I have no objection to it. But 
we, as a nation, cannot afford not to invest more in this area. 
We are losing our edge, our competitive edge.
    Mr. Kvamme. At the risk of taking the time, let me just 
agree with you, but let me also help you think this through. 
Think about it, a hundred years ago, a kid walking down Main 
Street saw every potential job they could have in their life.
    I defy you to walk down the streets of Silicon Valley--
area--and know what is going on behind those buildings. It is 
not possible. We have hidden from our kids. I will tell you a 
personal story. When I was running National Semiconductor, we 
had 9,000 people in my operations. We decided, for reasons that 
are obscure, to have our company picnic at the plant, instead 
of going to a distant site. Usually, about 1,000, 1,500 people 
showed up. 24,000 people came. The police were irate. Why did 
they come? Kids wanted to know what their folks did for a 
living. They wanted to see their workplace. They wanted to. It 
taught me a real lesson about opening up. We have to understand 
that we have to bring our children into the workplace. We have 
to make sure the insurance companies don't bar that, because 
they try to. They don't like kids running around this 
instrumentation, but it is critical that we do that.
    I knew what my dad did. He built buildings. He built 
houses. Our kids don't know what their parents do. It has an 
impact on family values. It has an impact on everything. Open 
up. In East Palo Alto, I suggested that those young kids, they 
wanted to go visit companies that I was involved in. I said no, 
no. Get them to go to Johnny's mom's company. Get them to go to 
Billy's dad's company. And go visit that, and open it up so 
that they can see, they can relate to work in the environment. 
Again, I feel so strongly about this, I am sorry.
    Ms. Johnson. Well, my time is up. But I feel equally as 
strongly, and I am very happy to meet you. I might become a 
worrywart.
    Mr. O'Connor. Yes, if I may, I share your passion on this 
as well, and I think--to answer one of your questions earlier 
about how to make this real. I think that is one of the 
problems with nanotechnology is that it is somewhat of an 
esoteric concept to people. So, when you talk about it, they 
may not get it. And that is why we firmly believe we have to do 
more in the communities to do different things, and we are 
working with public schools in different areas. And one good 
example of it that we like to show, is if you look at the cell 
phone, from you know, 10, 15 years ago, and you actually feel 
that it is really quite remarkable, and then you compare it to 
what you have today. This is just the start of the kind of 
technology evolution that nanotechnology is going to allow. The 
miniaturization, the better displays, the printed electronics 
and transistors inside, to allow shrinkage.
    And people get it when they start to see these things, and 
when you talk about displays and having carbon nanotubes and 
nanoemissive displays that actually allow you to see a 
basketball or a baseball more clearly going across the screen, 
at a much lower cost than what is currently available, it comes 
to life for people, and it is quite real. So, I think those 
types of examples make a difference in getting this type of 
technology understood by people.
    Chairman Inglis. I should not have thrown away that big 
phone recently. I should have kept it----
    Mr. O'Connor. That is right.
    Chairman Inglis.--and used it as a prop. Mr. Kvamme, that 
was a very interesting point about openness. That is very 
interesting. Mr. Sodrel.
    Mr. Sodrel. Thank you, Mr. Chairman. A lot of good comments 
and challenges, and I guess, I want to take the final step. Let 
us assume that we get all of our students motivated and 
inspired to pursue science. We, in fact, produce more 
scientists and engineers. We invest more in research and 
development. We develop public and private partnerships, and we 
provide salaries that attract and keep good folks. So, now, we 
are in the ideal world.
    As you pointed out early on, I think most of you made the 
point that other countries are working hard to catch up. In 
some cases, catch up means stealing technology and research 
from our country. China, for example, has shown little respect 
for intellectual property or patent rights, and a real 
enthusiasm for industrial espionage, or whatever term you want 
to use. So, my question is, how do we maintain any real lead in 
nanotech when any breakthrough in research can be transmitted 
to our world competitors at the speed of the Internet?
    Mr. Nordan. If I can take a first shot at that one. It is 
just like the Red Queen in Alice in Wonderland. It is not an 
issue of being in one place before someone else. It is always 
being one step ahead, being able to run faster. There is an 
evolutionary arms race to think about.
    The fact is, if you look at what was mentioned earlier, 
revitalizing the U.S. manufacturing base through 
nanotechnology, there is certainly pilot scale manufacturing 
and certainly manufacturing where specific skills are required, 
generally low volume, that will be incentivized by 
nanotechnology. But if you look at fields of nanomaterials 
today, the manufacturing train has already left the station.
    Where the U.S.' economic opportunity is here is in coming 
up with the ideas that may be implemented in manufacturing 
plants on other shores. To give you an example, in the category 
of fullerenes, it is a kind of nanomaterial, think of a soccer 
ball, where the intersections between the stitching are carbon 
atoms, and the stitching is bonds, right? There is a company 
that is a joint venture of Mitsubishi Corp. and Mitsubishi 
Electric in Japan, called Frontier Carbon. They built a plant 
capable of manufacturing 40 tons of fullerenes a year. Do you 
know what world demand for fullerenes was last year? About one 
and a half tons. It is unlikely that you are going to find U.S. 
based companies investing that far ahead of demand in order to 
attain manufacturing dominance, but what is not known is that 
at that plant, the manufacturing process they use to make the 
fullerenes is not homegrown. It is licensed from a company spun 
out of MIT called Nano-C, that has an innovative process using 
two dimensional flames to create fullerenes at very high 
quality and high purity, right.
    The way that the U.S. can maintain its edge in this regard 
is not by trying to go toe-to-toe against competencies, be they 
be in low labor tasks, or tax advantages for capital investment 
in manufacturing facilities, et cetera, that we are unlikely to 
catch up in, compared with other countries that have more 
runway to go down, in terms of economic development based on 
nanotechnology. It is to have an unremitting, relentless flow 
of novel ideas that take time and keep us continually two, 
three, five years ahead of what other countries can attain.
    We cannot prevent research being done that goes into a 
startup company being transmitted in some way, be it through a 
patent process, et cetera, to a country that perhaps does not 
have the respect for intellectual property rights that Western 
European and U.S. nations hold. That is going to happen. The 
achievement that we can drive toward is to always be ahead, and 
always be first to market with those novel ideas. And through 
that, I think we will attain economic rewards. After that, 
there are a million tiny things that can be done that will have 
an impact. Working through organizations like the World Trade 
Organization, to encourage stronger IP enforcement in countries 
like these. Being able to have win-win partnerships involving 
joint development, which countries like--companies like 
Motorola are good at doing, that give strategic incentives, as 
well as economic ones or legal ones, to these countries to 
expect--to respect intellectual property laws.
    But ultimately, the number one lever that we have to pull 
here is by always being first and always being ahead.
    Mr. Kvamme. I actually disagree with Matt on that, so 
maybe, I ought to make a comment.
    Mr. Sodrel. Okay.
    Mr. Kvamme. And have fun. The reason that you put a 
semiconductor plant today in China has nothing to do with labor 
rates. It has to do with return on capital employed. When you 
look at a semiconductor plant, 93 percent of the cost is 
related to capital. About six percent is labor. When they give 
you a situation in a plant that is going to last 10 years, zero 
tax for the first five years, and half tax for the next five 
years, in our manufacturing report, we reported that for a $3 
billion investment, it costs, just because of cost of capital, 
$1.3 billion more for that plant in the United States as it is 
in Europe--as it is in China. It has nothing to do with labor 
rates, and the public doesn't understand that at all. It is a 
capital issue.
    So, as we talk about nanotechnology, unfortunately, the 
manufacturing plants are going to be expensive. So, who is 
going to give you the best opportunity for return on your 
capital? If you get hit with 35 percent off the top here, and 
four percent someplace else, it makes a dramatic difference. 
You do not put those high value plants overseas for four 
percent of your cost structure. You just don't do it. When I 
sit in board meetings, the reason we go overseas is tax 
benefit, okay? I realize that is not the purview of this 
committee, but that is the reason.
    Now, by the way, the Indian situation is different. India 
is looking more at more labor-intensive things, and what I call 
the slope-and-intercept problem, you know. It is the same thing 
in so many industries. It takes $800 million to make a drug. 
The drug manufacturing costs are zero, almost, per pill, but 
who is going to pay the $800 million? Who is going to pay the 
$3 billion back? Who is going to pay for the software back, the 
development cost, that intercept? If you think about it in a 
chart, you have this enormous startup cost, so I think that is 
a big issue.
    On the patent point, I think that is also a point that you 
make, and we do have a tool there that has been effectively 
used in the past, and sometimes, folks are reluctant to use it. 
It is called closing them off at the borders. We can't forget 
the fact that we are a huge market. Now, obviously, 
international markets are growing, and there, I would agree 
with Matt, but as far as serving the U.S. market with products 
that are ripped off from us, we have a tool, if we enforce it. 
We are not very good, sometimes, at enforcing it. I have good 
experiences, and I have had ugly experiences on that front. But 
that is a tool we have to protect our markets that I think we 
ought to utilize.
    Mr. Nordan. Just to keep the discussion going, do you think 
it is realistic that tax rates like the ones you have described 
in China could ever be approached in the U.S. at any scale?
    Mr. Kvamme. These are the folks that make those decisions.
    Mr. Sodrel. Okay.
    That is music to my ears. I was sworn in in January, and I 
often tell people I spent my career in real life, with balance 
sheets and profit/loss statements, and so you are speaking my 
language now. We certainly need to have you come back and 
testify before one of the other committees, when we get into 
tax simplification.
    Thank you, Mr. Chairman. I am sure my time has expired.
    Chairman Inglis. Mr. Murdock, did you want to add something 
to that?
    Mr. Murdock. Yes, if I could. I also would like to 
reinforce the need to, obviously, enforce the intellectual 
property laws, that it will be, in fact, critical to 
maintaining U.S. leadership. Furthermore, I am not prepared to 
cede, if you will, manufacturing of nanotechnology-enabled 
products here in the United States. I believe that we need to 
endeavor to be more than just IP companies. If you look at the 
total value associated with any product, most of the value 
tends to accrue to those that are closest to the customer; that 
in fact, make it. And while IP may have higher margins, you 
know, ultimately, there is a big value pool out there, and we 
need to ensure that we are taking steps to capture the value.
    Furthermore, IP is not the only source of intellectual 
capital, if you will. There is know-how, and that is the reason 
for the importance of manufacturing. Ultimately, when we move 
from the knowledge or the proof-of-principle into making the 
stuff, we develop process knowledge. That process knowledge 
helps us to refine and improve both the quality of the product 
and the throughput, if you will. And it increases the value of 
the labor. It increases the marginal productivity of the labor. 
That is what enables us to pay high wages and keep jobs here.
    So, while we need to be realistic and understand that this 
is a global economy, we also need to take steps to do what we 
can to ensure that we do commercialize and manufacture the set 
of technologies that we can here.
    Chairman Inglis. Thank you. Mr. Honda.
    Mr. Honda. Thank you, Mr. Chairman, and this discussion has 
been interesting, and being someone who wants to keep jumping 
in at each juncture, I sat on my tongue, and I just, you know, 
listened. And we have gone all over the board, Mr. Chairman, on 
technology and let me see if I can pose a couple of questions.
    From education to investment, I think the gentlemen are 
correct that we are not doing quite enough, in terms of 
education and the research that was done at UCLA, I suspect 
that the population was a pretty narrow population at UCLA. And 
I suspect a lot of them had black hair, too, in the engineering 
department. But I think that there is something to be learned 
from that, in that there are a lot of things that we need to be 
doing in our society, in terms of education, and taking what we 
learned from that research, apply it to our country.
    I don't think that this country has been disciplined 
enough, and--to apply what we have learned in all spectrums of 
our society, like Kansas or Appalachia, where families need 
this kind of education, and need this kind of rigor and 
expectation. It is not about Asia being better or Asia having 
more. It is just that Asia had decided to something, and India 
had decided to do something, and this country just needs to 
decide what they are going to do with their education and 
invest it in this country.
    Whether it is Appalachia, Southern states, the valleys of 
California, we just need to stop, and invest in our own 
education, take the best practices, and expect it of our own 
children. That is the problem. The reason why people are coming 
over to this country from other places is because the graduate 
programs and the companies that work together, they have a 
freedom, and there is a lot less control, if you will, in what 
they do and how they think.
    And I suspect that a lot of the people who work in our 
companies in Silicon Valley not only come from India and China. 
If you look at a lot of startups, they come from Europe, they 
come from the UK, everyplace. So, it is a magnet for the 
intellectual curiosity people that want to participate in this 
country.
    In terms of the PCAST report on government roles in 
research and development and commercialization, bridging the 
gap, if you will, I think the report went all over the place, 
but did not say specifically what the role is. They pushed it 
off onto states and private companies, which is being done, 
because the Feds refuse to do it. And in the report, it talked 
about SBIR and STTR, and there is a role there. Certainly, 
there is a role there, because they get a percentage of income 
from other projects, and put it in there, and then they use 
that money. But when you reduce the amount of money in each of 
these programs, they get less money, and then we zeroed out 
ATP, I believe.
    And I guess, to the gentlemen, I would like to know, just 
how strongly do you feel about the role of government in 
helping companies bridge this valley of death, in terms of our 
competitiveness--you said it once, but I would like to hear it 
again, in strong terms. And then have this sent to the 
President, the Administration, because the Committee here, the 
full Committee, was asked not to move forward on programs like 
ATP. We didn't, and so, you know, our job is to propose and 
authorize and then it is the Administration's job to figure out 
whether they are going to back it up or not, but in this 
democratic society, we are the ones that are supposed to listen 
to you, and translate that into programs, and I have a bill, 
called the Nanomanufacturing Investment, H.R. 1491, which 
addresses specifically bridging the valley of death, and I 
would like to hear what your reactions are to that bill, and 
how that can be improved, and whether it should be supported by 
this Administration, as the previous bill that we signed, the 
Nanotech bill, that Mr. Kvamme and PCAST had supported also. I 
think that is the next piece that needs to be signed, so that 
we can make sure that we move forward in areas that you are all 
concerned about. That and education, I think, are intertwined, 
and then, moving forward with educating our members of our 
communities, and bringing them along, so that there is no 
perceived fear, that there is knowledge. That is important, and 
I think that that is part and parcel of education, and part and 
parcel of the bill that we are looking at, so that more and 
more people will be exposed to this thing we call nanoscale 
activities, because it is a brand new enabling activity, that 
will just change the complexion of this world. I wonder whether 
you have any reactions to what I said. I have rambled a bit, 
but I think you get the gist of my comments.
    Mr. O'Connor. If I may. I appreciate your comments, 
Congressman. I couldn't agree more. To be emphatic, from the 
private sector perspective, we truly feel the government needs 
to take a strong hand in developing this technology. It is part 
of an overall partnership. Large companies like Motorola, small 
startups, nonprofit organizations, venture capitalists, and the 
government. It has to be an emphatic focus across the board.
    And when you travel abroad, you see this. You go to places 
like China and Korea, where there is a strong partnership 
between the government and the private sector in developing 
these technologies. We can't sit by the wayside. We have to 
move this forward. So, from a private sector perspective, we 
feel we are not doing enough. We have to do more, and it has to 
be really on a consortium partnership level.
    Mr. Honda. And is it the nature of nanoscale activities, 
one of the reasons why we have to shift federal paradigms in 
order to be able to justify going into this activity?
    Mr. Murdock. I think the meta-theme, if you will, of the 
role of government, is to create a conducive commercialization 
climate, to help create an ecosystem where this can be done. 
And there is no one silver bullet. It is going to take many 
things moving in parallel to accomplish that. Actually, you 
referred earlier to the regulatory climate, and export 
controls, so obviously maintaining our investment in the 
generation of knowledge through nanoscience R&D in the 21st 
Century--doing more through the SBIR programs, and potentially, 
making them longer and bigger, like NIH has done, if you look 
at that as best practice to help get over the transaction costs 
of going through the grant program. Leveraging fast track, you 
know, there has been talk in the SBIR as to whether venture 
capital funded companies should be able to receive grants. You 
know, ultimately, we need to do as much as we can to encourage 
capital formation associated with the--rather than discourage. 
So, we believe that, you know, venture capital companies ought 
to be included. As I said, Phase III, I think the government 
can play an incredibly important role in acquiring and 
integrating nanotech innovations into its agency needs and 
missions rapidly, and to design with intent to do that on a go 
forward basis, and then, ultimately, creating incentives for 
the private sector to form long-term commercialization-oriented 
capital. The stock market, we all know, drives companies to 
short-term performance. We ought to think about how to create 
new vehicles to enable the set of folks who are longer-term in 
their thinking and have more patient capital to deploy that to 
help grow the sector.
    Mr. Nordan. To add to that, I absolutely agree with my 
fellow panelists that there is an important and key role for 
the Federal Government in bridging the chasm of death that we 
have talked about.
    The only point of caution I would add is that if you look 
at the history of industrial policy, it is littered with 
examples where state agencies encouraged the development of a 
specific technology solution to a problem to their peril, 
right.
    The government of France, for example, put a great deal of 
money into specifically minicomputers right at the time that 
personal computers were beginning to usurp them, and that was a 
bad choice. What I would encourage is not activity focused on 
specific technology solutions, but on solving broad problems. 
The National Cancer Initiative's nanotechnology effort is a 
great example, where there are broad goals to come up with 
noninvasive therapies, for example, or targeted agents, but no 
specification to use specifically gold nanoshells or 
dendrimers, or another technology platform. This is a place 
where we can make some wiser decisions than perhaps some of our 
international competitors have. If you look at Taiwan, which I 
mentioned beforehand and works very closely with specific 
corporations on specific solutions, one of the solutions they 
are backing is magnetoresistive memory, right, which is one of 
several forms of nanoenabled memory that could be much more 
dense, much lower power, and nonvolatile. But it is probably a 
bad choice. That technology solution could lose in the 
marketplace to nanotube-based memory, or memory based on 
organic porphyrin molecules. A wiser choice might be to create 
incentives, and ATP may be one incentive structure, to solve 
the problem without subsidizing or incentivizing a specific 
solution.
    Mr. Murdock. I was going to follow up briefly and say that 
meta-theme, if you will, goal-oriented research centers, 
translational research centers focused on very clear, well 
established societal problems like cancer are one way that we 
can simultaneously, again, captivate the imagination of our 
youth, and get people drawn in, and make very specific progress 
toward these goals, and it provides a forum, if you will, for 
industry to effectively engage, rather than trying to sift 
through everything, and figure out where the relevant research 
that is taking place in cancer therapy.
    Mr. Honda. Mr. Chair, if I may just ask you to look at the 
bill, and wordsmith in ways that it would encapsulate what it 
is that you just mentioned.
    Mr. Kvamme. Well, I was just going to add, you know, I am 
sure one of the difficult jobs you have where you sit, is 
dividing the pie. You know, where do you spend the money? I 
mean, it has got to be a very difficult job. We have that in 
management every day. I would put education at the top of the 
list. I would put programs, you know, again, we made some 
recommendations along those lines, programs to encourage STEM 
graduation at the top of the list.
    The second thing I would do is I would return, if I could, 
to the spirit of the '60s in federal procurement. The Federal 
Government was a more risk-taking buyer in the days of Apollo. 
I sold parts into the Apollo computer, and it was fun. MIT was 
doing the design. I got to sit in the capsule in 1963. It was 
exciting stuff. The Federal Government has become a very, very 
cautious buyer. They should be--they are 20 percent of the 
economy. Is 20 percent of the business that the other gentlemen 
have talked about in the nano area being bought by the Federal 
Government today? I seriously doubt it. They are a much, much 
more conservative buyer, and at the end of the day, what you 
need is customers, in any business. It is kind of fundamental.
    As far as the government as an investor, it is not hard to 
invest in good ideas. It is very hard to say no when the good 
idea isn't panning out real well. I think the big problem with 
a lot of government programs is they keep funding things that 
ought to have been shot. In the venture business, we all have 
closed-end funds, and you get, unfortunately, to say no when 
things haven't worked out, because we are in the risk business. 
It is a shame it is called venture capital. It ought to be 
called risk capital. Because it is a risky business. And what I 
have found, therefore, is that government investment is best 
done in things like facilities. There is a finite number of 
dollars involved in building a facility. In backing a corporate 
enterprise, you need oversight that I think is beyond the scope 
that is conceivable by government, because they--you just can't 
say no appropriately, and those would be my comments, Mr. 
Representative, and my representative, for a good while, by the 
way.
    Mr. Murdock. If I could pick up quickly on Floyd's comment 
on facilities. The investment in facilities and infrastructure 
is incredibly important, and I think the 21st Century Nanotech 
R&D Act has done a phenomenal job that way, specifically--I am 
from Chicago and the DOE, Argonne Center for Nanoscale 
Materials there is going to be incredibly important to the--I 
think that drives down, if you will, the capital intensity of 
commercializing nanotechnology, which is an incredibly 
important part of the solution, so that startups don't have to 
acquire all that capital.
    In order to effectively use it, though, it is incredibly 
important that we have, if you will, the operating funds as 
well, because the startups do not have, necessarily have the 
process know-how, or the skills, to make effective use of to 
get the return on that investment in facilities and 
infrastructure, we need to match it with operating funds to 
provide services and get the utilization from the startup 
community.
    Chairman Inglis. Thanks. Mr. Akin.
    Mr. Akin. Thank you, Mr. Chairman. This could be a question 
for any of the witnesses. What is the role, I think you just 
made reference, of venture capital in bringing the products of 
nanotechnology research to the market? Do you think there is 
enough venture capital investment available to nanotechnology 
companies, and why? And then, what factors most influence 
venture capital investment choices in nanotechnology?
    Mr. Kvamme. Okay. I guess I am a venture capitalist, so I 
have to take a first shot at that. Actually, venture capital 
availability right now, in total is pretty good. I think we may 
have, you know, we got into a mode that was kind of, during the 
bubble, it was kind of nutso, but if you take a look at the 
professional venture capital business, it has grown through 
the, you know, and if you eliminate the bubble, we are back on 
the curve that you would have projected from the early '90s, so 
the total amount of venture capital that is being deployed, and 
looks like it is being somewhat effectively deployed in the $20 
billion a year range right now.
    Now, obviously, that covers an extraordinarily wide range 
of kinds of opportunities, nanotech being only one of many. And 
I would say that, you know, and this is corresponding with what 
some of the others have already said. Some firms are more 
interested in this area, and others are not. There is one 
problem that we faced on the Committee that you should all be 
aware of. Some things are hard to call nanotech, because they 
seem to meet the requirements, but this requirement that the 
processes be different or not conceivable from the larger scale 
is touchy. So, I am, for example, involved with a company in 
layer transfer of silicon, very, very fine layers of silicon. 
We don't call that a nanotech investment. I think some might, 
but you know, right now, the level is relatively low.
    I think there is an adequate amount of venture capital. 
Venture capital is measured by one metric and one metric alone 
by the investors. It is called internal rate of return, which 
means you not only have to make hits, you have to make hits 
that hit quickly, and sometimes, nanotech is not viewed that 
way, as biotech wasn't in the early '80s.
    Mr. Nordan. To give a bit more global perspective on the 
same question. Right now, venture capital is notable in 
nanotechnology by its absence, not its presence. Last year, by 
our math, about $8.6 billion globally went into nanotech R&D. 
Of that, $4.6 billion was government, $3.8 corporate R&D, and 
this tiny slice, about two percent, $200 million of venture 
capital. That number has declined in the course of the last 
three years, from $385 million in 2002 to $200 million in the 
last year. And is also highly, highly concentrated in a very 
small number of companies.
    We count about 1,200 nanotech startups globally. Of those, 
as of the middle of last year, only 109 had ever received a 
dime of institutional venture capital. Of those, only 10 had 
done two rounds, and that money was, then, even further 
concentrated in very specific sectors, about 40 percent in 
health care and life sciences, mostly drug delivery, about 40 
percent in electronics and IT, mostly novel forms of computer 
memory, about one-sixth in materials, and then a tiny slice of 
five percent in tools.
    That number, over all of those years, is equivalent to 
maybe around 1.4 to 1.7 percent of total VC dollars deployed. 
Now, the reasons for this are good reasons. As Floyd mentioned 
beforehand, there was a dramatic efflux of venture capital 
money during the bubble. As a result, venture capitalists are 
much more cautious. There are some other, more human factors 
reasons as well. Venture capital firms tend to be dominated by 
former successful entrepreneurs who invest in companies that 
they know well. Because of that, they tend to be staffed with 
folks who know electronics and who know life sciences very 
well, but often don't have experience in materials, and find it 
more difficult to be able to do due diligence on a materials 
investment. That means that it is less likely that a nanotech 
startup with a materials play is going to find a willing 
audience within a venture capital company.
    Now, what can be done at the federal level in order to 
influence this? The levers are not terribly strong. I think 
that the meta-theme that Sean has mentioned beforehand about 
having goal-directed research would create a form of 
validation, right, for venture capitalists, that there is 
something here. There is a story here that is bigger than this 
one company. The issue of permitting SBIR grants to be 
allocated to venture backed companies is another lever that can 
be pulled.
    Mr. O'Connor. Yeah, I think, picking up on one of Floyd's 
comments, I think what it is important to understand is----
    Mr. Akin. Could I interrupt just a second.
    Mr. O'Connor. Yes. Sure.
    Mr. Akin. I want to make sure I am understanding what you 
are saying. In answer to the question, what factors most 
influence venture capital choices, I think I heard your 
response is particularly the specific area of application. 
There are certain favored areas, such as you said medicine 
particularly, and that is part of what is driving it.
    Mr. Nordan. Well, I would turn this back to Floyd, but in 
observation of these companies, the human resources, the 
knowledge that they have tends to be in those domains, in life 
sciences and electronics, typically not in materials. That 
drives selection. But the overarching factor, as Floyd 
mentioned, IRR is the metric that matters. IRR comes down to 
risk, and nanotechnology investments are viewed as more risky, 
because to date, there is not a strong track record of exit. In 
an early period, right, you do not have the pot of gold at the 
end of the rainbow to go on. You have the rainbow itself, and 
you are going to assume there is something at the end. There 
are companies that have gone public, and done IPOs based on 
nanotechnology. They have not strongly identified themselves 
with nanotech. Inacon, which went out last year, was pitched as 
a life sciences company, for example.
    Mr. Akin. Thank you. I am sorry. I didn't mean to interrupt 
you.
    Mr. O'Connor. Not a problem. Just to pick up on those 
thoughts. I think what is important to understand in this field 
is it is a longer cycle of commercialization than most. If you 
compare nanotechnology to enterprise software, for example, it 
is not even comparable. It is a generally six to seven year 
cycle. In our case, on some of our commercialization of carbon 
nanotubes, it has been 15 years since early '90s, when we 
worked on this, and have roughly 150 patents. So, it is not 
something that happens overnight, and because of that, to 
answer your question, you get into the risk/reward scenario. 
Many VCs will be reluctant to get into it. I think, similar to 
what Mr. Nordan was saying, they may not know this area, and 
then, lastly, the whole concept of how do you exit? I think big 
companies will start looking at opportunities to potentially 
buy, but I don't think you have seen the IPO opportunities peak 
up as much, which is what is going to motivate a venture 
capitalist to get liquidity.
    Mr. Akin. Thank you very much. I guess I was looking at it 
partly from the numbers of how much. You had almost been cut in 
half in three years, how much venture capital would come in. I 
was trying to figure out what is driving some of that.
    Mr. Murdock. Well, one point to raise on that, that number 
is rising this year. Obviously, the jury is still out, but in 
one week of this year, I believe the second week of March, $66 
million, equivalent to a third of the entire investment last 
year, went into three companies, Nantero, Nano-Tex, and 
Nanomix. The reason for this is that the bets that were placed 
in nanotechnology, the initial bets on startups, were made in 
2001 and 2002, and a large number of bets that were relatively 
small bets at a time, right, were made. Many of those companies 
are gone now, but those that are surviving are now doing series 
C and D rounds, further on, which tend to be bigger rounds of 
investment than the As and Bs that start companies, and as a 
result, seeing companies like the ones that I have mentioned 
reach a later part of their lifecycle, they are attracting more 
funding. That is causing money that has been deployed to raise.
    Our estimate, based on year to date, is probably we are 
looking at around $350 million, similar to the levels of 2002 
in the course of this year.
    Mr. Akin. Thank you, Chairman.
    Chairman Inglis. Mr. Sherman.
    Mr. Sherman. Thank you, Mr. Chairman. Thanks for allowing 
me to participate in these hearings, even though, as a Member 
of the Full Committee, I am not a Member of this subcommittee.
    It was interesting to hear the conversation about the 
industrial policy nature of what we are doing. I certainly 
agree with Mr. Kvamme that education is important. That 
wouldn't even be thought of as industrial policy. I know the 
comment is made well, China is using government money to 
subsidize this area. But keep in mind, let us say you are a 
Chinese entrepreneur. You get government money. You develop 
technology and then you decide to move to Switzerland for tax 
reasons, or you decide to move the jobs to India for cheaper 
labor. You would be sent to a reeducation camp. Now, that is 
one way to work industrial policy. I have yet to see how the 
U.S.. . . I mean education, obviously, the benefit is to the 
student, and the student is staying here. But I have yet to see 
how, short of reeducation camps, we could work out something 
with business entrepreneurs so that these benefits--these are 
highly risky. It is not enough to say well, you invest a 
billion dollars, and look, you got 10,000 jobs. Because you are 
probably going to lose the billion dollars. You take that kind 
of risk and it hits, we should have a million jobs. Well, maybe 
not. Maybe it is a heads, we lose, tails, India wins or 
Switzerland wins, depending upon whether it is tax policy or 
cheap labor that drives things.
    But I want to shift to something completely different, an 
issue that I have bored my colleagues on this committee with 
for a while. And that is the issue of enhancing human 
intelligence or developing artificial intelligence. Now, the 
National Nanotechnology Initiative has provided funds, and I am 
pleased to see that roughly four percent of that money is going 
towards looking at some of the concerns that people have about 
nanotechnology, health and environment, the toxicity of some 
nanoparticles. And that is all well and good, but the statute 
that we passed--and this is really a question as to whether any 
of us serving on an authorizing committee are just wasting our 
time--we know the appropriators are there every year to make 
sure that what they put in the statute is adhered to, and if 
not, then, you don't get the money for the next year. But there 
are those who think that those of us on authorizing committees 
are wasting our time. And the statute makes it clear that 
program activities are to include the potential, studying the 
potential use of nanotechnology, or the societal impacts of the 
potential use of nanotechnology in enhancing human 
intelligence, and developing artificial intelligence which 
exceeds human capacity. Later, in Section 5, those two matters 
are to be reported on back to Congress, and I wonder if Mr. 
Kvamme could tell us what the Administration is doing to carry 
out that part of the mandate of the bill.
    Mr. Kvamme. Well, we tried to look at that, and because 
clearly, I think the general sense of our counsel, at least, 
was that we are not interested in, what was that famous book, 
Prey. You know, we are not interested in creating Prey animals. 
As a matter of fact, we were somewhat concerned that that----
    Mr. Sherman. Yes, but the language I was able to get in the 
statute had nothing to do with Prey.
    Mr. Kvamme. I understand that. Yeah.
    Mr. Sherman. And----
    Mr. Kvamme. The enhancing aspect is what I am getting at. 
As you will see in our report, we actually have an example, 
though, of things that hopefully will work better to enhance 
medical improvements, the screw that we talk about, for use in 
medical applications, that is more capable of becoming, or 
being like bone material, we think is an important 
contribution.
    Mr. Sherman. If I can interrupt, because I have got one 
more question.
    Mr. Kvamme. And maybe I am on the wrong track.
    Mr. Sherman. Okay. The law says look at the societal 
impact----
    Mr. Kvamme. Yeah.
    Mr. Sherman.--of creating a half-human, half-enhanced 
technologically, chip-enhanced human brain, and a new species 
that may or may not consider itself human. Your response is we 
are developing a new screw that might be used in brain surgery.
    Mr. Kvamme. Yeah.
    Mr. Sherman. You are supposed to be looking at the societal 
problems, and you are looking at the technological capacity.
    Mr. Kvamme. I guess it somewhat depends upon your 
definition of the word enhanced, okay?
    Mr. Sherman. Well, but the statute is you are supposed to 
look at the societal problems----
    Mr. Kvamme. Yeah.
    Mr. Sherman.--caused by----
    Mr. Kvamme. Yeah.
    Mr. Sherman.--levels of intelligence beyond those of anyone 
in this room, with the possible exception of the chairman. And 
your response is we don't want to study the societal problems 
of doing it. We want to study how to do it.
    Mr. Kvamme. I don't intend that to be my response.
    Mr. Sherman. Okay. Then what has been funded to look at the 
potential societal and ethical implications of developing new, 
intelligent species?
    Mr. Kvamme. Well, there are a number of studies that you 
are probably aware of that--and workshops in that particular 
area--one of them hasn't taken place yet. This summer, NSF has 
a workshop relative to that, a Center for Society, and in our 
study, we spent a full day on these types of matters. We did 
not see, and maybe we should have looked more deeply, we did 
not see that at this point in time, the societal applications, 
such as creating half-humans, to use your example, were going 
on. We are trying----
    Mr. Sherman. Well, it is obvious it is not going on now.
    Mr. Kvamme. Yeah.
    Mr. Sherman. These sections were not designed to become 
operative only a year before it was technologically possible. 
For a species to decide whether it wants to go out of business 
should take more than a year, and you would think that a 
statute that says look at a societal problem should not mean 
well, don't do anything as long as the technology is more than 
a year away. Again, I think you are illustrating the point that 
those of us on our authorizing committees are not really in a 
position, in writing statutes, to actually affect 
Administration policy.
    Mr. Kvamme. That is very possibly true.
    Mr. Sherman. Then, you want our support, you want our 
authorization, you will ignore those provisions of the statute 
we put in----
    Mr. Kvamme. No, no, no, no, no. I did not say that, sir.
    Mr. Sherman. Well, you just said it is quite possibly true 
that those of us on authorizing committees, even when 
successful in getting our language into authorizing bills, will 
find that our provisions will be ignored, cannot be enforced 
through the appropriations process. That was the theory I 
started off with.
    Mr. Kvamme. You are, unfortunately, putting words in my 
mouth that are not accurate, sir. The answer I am trying to 
give you is the following. I am saying that we have looked at 
that. We interpreted that statute in a way that apparently you 
do not interpret it. We ought to get clarification on your 
interpretation.
    Mr. Sherman. Well, I wrote it, so maybe you should. Thank 
you.
    Mr. Kvamme. Thank you.
    Chairman Inglis. Perhaps, if you want to add any comments 
on that in writing, we are happy to receive them.
    Mr. Sherman. Fine.
    Chairman Inglis. We are going to go with another brief 
round of questions, three minutes. We are going to reset the 
clock for three minutes. We are actually going to stick to the 
clock this time. We were rather generous in the last time, but 
Ms. Hooley had some questions, and I had one quick question for 
Mr. Kvamme.
    Very interesting discussion you were having about siting of 
sophisticated plants, and the incentives, relative to being in 
China, let us say, as opposed to being in the United States. If 
you were sitting up here, and trying to figure out, devise 
strategies on how to keep a manufacturing base here in the 
U.S., besides the education component, which we have discussed 
this morning, what else would you advise us to do, to make it 
so that that decision that you were talking about earlier would 
come the other way, and you would site one of those very 
sophisticated nanotechnology plants in the U.S., rather than in 
China?
    Mr. Kvamme. Tax policy. It is, plain and simply, tax 
policy. And countries have to be competitive.
    Chairman Inglis. Income tax policy, or property tax policy?
    Mr. Kvamme. No, corporate tax policy. It has to be 
competitive. Now, obviously, you can't compete with every 
little knick and knack that somebody is going to incentivize 
you with. Look at how our states compete with one other for 
siting. That plant that I mentioned was a fight between Texas 
and New York, frankly, as I understand the details. And I don't 
understand all the details on that.
    So, just take that example, and move it to the corporate, 
to the country level, and I think I am hoping that in the new 
look at this, this revision of the tax policy, we will look at 
our global competitiveness at the corporate tax level. Because, 
frankly, we are not very competitive right now.
    Now, by the way, on the positive side, why did those folks 
stay here, with $3 billion? Why did they stay, at a $1.3 
billion cost? They were afraid of IP, that many of us 
mentioned. They were afraid it would leak, and so, they decided 
it was worth $1.3 billion to stay here, for that reason. Well, 
that is not a bad reason, so, having a very strong IP 
protection thing, obviously, is a contributor.
    Do you have to get equal to the other guys? I don't think 
so. I just think in most cases, $1.3 billion out of $3 billion 
makes a huge difference.
    Chairman Inglis. May I ask you a quick followup in 30 
seconds?
    Mr. O'Connor. Sure, if I may. From a Motorola perspective, 
most of our nanotechnology research and development, almost all 
of it, is here in the U.S., for a number of reasons. Close to 
facilities. And I think, really, the early applications for 
what we are seeing. I agree with Floyd on the concept of tax 
and just the incentives on trying to make sure we are 
incentivizing the proper type of development in this area, is 
for us a big issue.
    Chairman Inglis. Ms. Hooley.
    Ms. Hooley. Thank you. I will also try to do a quick 
question. Thank you all for this wonderful discussion that you 
have given us today. Really appreciate your comments.
    Dr. Cassady from Oregon State was here in May, and 
suggested the need for a DARPA-like organization to support 
nanotechnology development efforts that are closer to 
commercialization of products and processes. Opinion on that. 
Needed, not needed, okay?
    Mr. O'Connor. I will start quickly with an answer.
    Ms. Hooley. Okay.
    Mr. O'Connor. Absolutely. It would be great. Some of our 
best innovations are via DARPA programs in our different areas. 
We have had great success with it. It is a good example of 
collaboration between government and the private industry, and 
a lot of good successes. And I think that would be a very 
worthwhile initiative.
    Mr. Kvamme. I think the first step is to, as we have been 
referring, rapidly look to use nanotechnology within the 
existing agencies, the mission-driven programs like DARPA, the 
6.2, 6.3 funding, et cetera, NIH--down the line, energy, et 
cetera. There may very well be a good role for looking across 
those, creating that pot of funds that looks for synergies that 
will not be realized in any one agency.
    Ms. Hooley. Okay.
    Mr. Kvamme. I would say that in the '70s and '80s, when I 
had a lot of involvement with DARPA, by the way, they were good 
at saying no.
    Ms. Hooley. It is always nice to have someone who can do 
that.
    Mr. Kvamme. Yeah. They would cut off projects. They are an 
example that is contrary to what I said before.
    Ms. Hooley. Thank you.
    Chairman Inglis. That is all. I want to thank the 
witnesses. I appreciate you taking the time to testify. I thank 
the Members for participating, and the hearing is adjourned.
    [Whereupon, at 11:55 a.m., the Subcommittee was adjourned.]

                              Appendix 1:

                              ----------                              


                   Answers to Post-Hearing Questions

Responses by E. Floyd Kvamme, Co-Chair, President's Council of Advisors 
        on Science and Technology

Questions submitted by Representative Bart Gordon

Q1.  The National Research Council of the National Academies of Science 
reviewed the National Nanotechnology Initiative (the NNI) and issued a 
report in 2002 (Small Wonders, Endless Frontiers) that included a 
number of recommendations. On the basis of the PCAST's more recent 
review of the NNI, could you comment on how the initiative has 
responded to the following NRC findings and recommendations:

Q1a.  The NRC stressed that the NNI should provide ``strong support for 
the development of an interdisciplinary culture'' since nanoscale 
science and technology involves research at the convergence of many 
different disciplines. Did you find evidence that this is happening, 
and do you judge the mix of federal funding among awards for 
individuals, small groups, and large multi-disciplinary groups about 
right?

A1a. During its review of the NNI, PCAST met with representatives from 
the federal agencies that fund research under the NNI as well as with 
investigators at research institutions around the country. Based on 
these interactions, I and other PCAST members found that in fact the 
initiative recognizes the need for and strongly supports an 
interdisciplinary culture in order to promote advancement in 
nanoscience and nanotechnology. In addition, I tended to rely on my 
personal experience from the beginnings of the semiconductor industry 
when interdisciplinary activity was crucial to gaining a full 
understanding of all the different aspects of semiconductor research. 
Nanotechnology discovery will have similar traits. Your question, 
however, prompted me to look in greater depth into the means by which 
the NNI supports interdisciplinary research. They include:

          National Science Foundation (NSF) Nanoscale Science 
        and Engineering Centers (NSECs) are required to involve 
        multiple departments and multiple research institutions, as 
        well as industry partners. Each NSEC is focused on a research 
        problem that cannot be addressed practically by single 
        investigators or small groups. Each NSEC typically receives 
        $2.5 million/year for five years, with an option for an 
        additional five years. Currently active are 14 NSECs with 
        participation by over 30 universities across the country. NSF 
        will announce two new NSECs, one focused on societal issues and 
        one on nanomanufacturing, before the end of this fiscal year.

          NSF Nanoscale Interdisciplinary Research Teams 
        (NIRTs) involve researchers from 3-5 different disciplines 
        within one or more research institutions. Each NIRT receives 
        approximately $1-$2 million over four years. During the period 
        from FY 2001 through FY 2005, over 250 NIRTs will be created. 
        Additional information about both NSECs and NIRTs can be found 
        on the NSF website at http://www.nsf.gov/erssprgm/nano/.

          The Department of Defense (DOD) Multidisciplinary 
        University Research Initiatives (MURIs) are required to involve 
        researchers from more than one discipline and often include 
        multiple universities. Since FY 2001, the DOD has awarded 
        nearly 40 MURI grants that are focused on nanotechnology 
        research. Each MURI receives on average $1 million/year for 
        three years, with an optional two year extension.

          The Institute for Soldier Nanotechnologies (ISN) is 
        an interdepartmental research center at MIT. Established in 
        2002 by a five-year, $50 million contract from the U.S. Army, 
        the ISN's research mission is to use nanotechnology to 
        dramatically improve the survival of soldiers. The ISN brings 
        together researchers from 10 different departments and supports 
        more than 100 students and post-doctoral fellows.

          The DOD also supports interdisciplinary research at 
        its in-house laboratories. One example is the Naval Research 
        Laboratory Institute for Nanoscience, which supports multi-
        disciplinary research critical to the Navy's mission. The 
        Institute is housed in a new state-of-the-art facility that 
        provides the highly controlled environmental conditions and 
        advanced equipment that is often required to perform nanoscale 
        research.

          The Department of Energy (DOE) is constructing five 
        Nanoscale Science Research Centers (NSRCs), co-located with 
        major x-ray and neutron facilities at Oak Ridge National 
        Laboratory, Argonne National Laboratory, Lawrence Berkeley 
        National Laboratory, Sandia National Laboratories (jointly with 
        Los Alamos National Laboratory), and Brookhaven National 
        Laboratory. The NSRCs are under construction (the Center for 
        Nanophase Materials Science at Oak Ridge National Laboratory is 
        nearing completion and will begin accepting users in early FY 
        2006), and will be operated as user facilities for the broad 
        research community with multi-disciplinary staff support. The 
        facilities are designed specifically to bring together 
        laboratory staff from a variety of fields and disciplines in 
        order to better serve the user community and to foster 
        interdisciplinary in-house research.

          In 2002, NASA established four University Research, 
        Engineering and Technology Institutes (URETI) using a model 
        that is similar to the NSF NSECs. Each NASA institute receives 
        approximately $3 million/year for five years, with a possible 
        five year extension. All four institutes are implemented as 
        consortia and all place a special emphasis on the union of 
        biology and nanoscale technology in order to address NASA's 
        particular requirements.

          More recently, the National Cancer Institute (NCI) of 
        the National Institutes of Health (NIH) released its Cancer 
        Nanotechnology Plan. The Plan includes programs and activities 
        that are aimed specifically at bringing physical and computer 
        scientists together with biologists and cancer researchers to 
        develop nanotechnology for diagnosis, detection, and treatment 
        of cancer. In addition to funding (beginning this fiscal year) 
        interdisciplinary research teams at several Centers of 
        Nanotechnology Cancer Excellence, NCI is creating, along with 
        the National Institutes of Standard and Technology (NIST) and 
        the Food and Drug Administration (FDA), the Nanotechnology 
        Characterization Laboratory to develop critical capabilities 
        for accelerating the transition of nanomaterials into clinical 
        applications. More information about the Cancer Nanotechnology 
        Plan can be found at http://nano.cancer.gov.

    The above are just a few examples that illustrate the strength and 
breadth of the NNI's support for multi-disciplinary research. Moreover, 
the fact that agencies such as NSF are only able to fund a small 
percentage of the proposals for multi-disciplinary research that pass 
peer review indicates that an interdisciplinary ``culture'' has taken 
hold across the university research community. The role of the NNI in 
establishing such an interdisciplinary culture was specifically noted 
by the most recent outside review of NSF programs.
    While a substantial portion of funding now goes to support large 
centers, the majority (80 percent at NSF) of funding for nanoscale 
research is for individual investigators and small research teams. The 
NNI is cognizant of the need to maintain a balance among these funding 
mechanisms and the members of PCAST believe that the current mix is 
appropriate.

Q1b.  The NRC criticized the initiative for having too little 
information sharing among the agencies during program planning and 
execution and for a lack of willingness by the participating agencies 
to co-fund large research programs. Did your review find any evidence 
of stronger collaboration among the federal agencies, and are there 
examples of joint agency funding of large research projects?

A1b. PCAST found that the agencies are working in a coordinated fashion 
to advance the goals of the initiative. The Council noted in particular 
the following mechanisms and activities that are the result of joint 
planning or execution by the agencies.

          Strategic Plan. The National Science and Technology 
        Council's Nanoscale Science, Engineering, and Technology (NSET) 
        Subcommittee is the interagency body that coordinates and 
        manages the NNI. As called for by the 21'' Century 
        Nanotechnology Research and Development Act (the Act), in 
        December 2004 the NSET Subcommittee released an updated 
        strategic plan identifying the goals and priorities of the 
        initiative as a whole, and activities across the Federal 
        Government by which to achieve those. The plan also describes 
        the relationship between the participating agencies and the 
        areas of research (program component areas) and the areas of 
        application. Subgroups of the NSET Subcommittee have been 
        formed to further coordinate work within the PCAs identified in 
        the plan.

          Annual Budget Supplement. Also in accordance with the 
        Act, the NSET Subcommittee prepared a supplement to the 
        President's FY 2006 Budget, in which is outlined the activities 
        taking place across the Federal Government. The report 
        emphasizes in particular numerous interagency planning, 
        coordination, and collaboration efforts that will support the 
        FY 2006 budget priorities.

          Regular Interagency Meetings. The NSET Subcommittee 
        meets monthly and many of the subgroups that have been formed 
        to address specific areas that benefit from interagency 
        attention also meet regularly. Current subgroups include:

                  Nanotechnology Environmental and Health Implications 
                (NEHI) Working Group provides for exchange of 
                information among agencies that support nanotechnology 
                research and those with responsibilities for protecting 
                health and the environment, worker safety, etc. The 
                NEHI Working Group is working to identify and 
                prioritize research needs to support science-based 
                regulatory decision-making. Its members include 
                representatives from the Environmental Protection 
                Agency, Food and Drug Administration, National 
                Institute for Occupational Safety and Health, National 
                Institute of Environmental Health Sciences, Department 
                of Agriculture, Department of Energy, Department of 
                Defense, National Science Foundation, Occupational 
                Safety and Health Administration, Consumer Product 
                Safety Commission, and National Institute of Standards 
                and Technology.

                  Nanotechnology Innovation and Liaison with Industry 
                (NILI) Working Group promotes the development of 
                nanotechnology for practical benefit and the transfer 
                of NNI research results to commercial products and 
                services for public use. Under the NILI Working Group 
                are a number of liaison groups, also known as 
                Consultative Boards for Advancing Nanotechnology 
                (CBANs), made up of NSET Subcommittee members and 
                representatives from particular industry sectors, 
                including the semiconductor and chemical industries. 
                The CBANs provide channels for exchange of information 
                relating to the industries' nanotechnology needs and 
                nanotechnology research results.

                  Global Issues in Nanotechnology (GIN) Working Group 
                was formed relatively recently to track nanotechnology 
                activities globally, to identify opportunities for 
                international collaboration on nanotechnology R&D, and 
                to provide joint agency input to balance U.S. 
                Government commercial, diplomatic, and security 
                interests within nanotechnology activities on the 
                international level.

                  Nanotechnology Public Engagement Group (NPEG) is 
                developing strategies for informing the public about 
                nanotechnology and for getting input from the public 
                regarding benefits of particular interest and risks of 
                particular concern.

          Numerous examples of multi-agency support for 
        nanotechnology R&D can be found in the FY 2006 NNI Supplement 
        to the President's Budget. Those include:

                  A solicitation jointly funded by EPA, NSF, and NIOSH 
                for research on environmental, health, and safety 
                implications.

                  A cooperative effort to develop appropriate test 
                methods among the National Cancer Institute (NCI), the 
                National Institute for Standards (NIST) and Technology, 
                and the Food and Drug Administration (FDA). These tests 
                will be used by researchers at the NCI Nanotechnology 
                Characterization Laboratory to test nanomaterials and 
                nanostructures that have potential application for the 
                detection, diagnosis, and treatment of cancer.

           Even where programs are not funded jointly, where 
        appropriate, agencies have combined program reviews in order to 
        better share the results of individually funded projects in a 
        particular area.

Q2.  The NRC recommended the creation of programs for the invention and 
development of new instruments for nanoscience. Has this recommendation 
been addressed by the initiative, and in general, what level of 
priority did you find that the NNI assigns for this purpose?

A2. PCAST found that the NNI has recognized the need for increasingly 
powerful instrumentation for the visualization, measurement, and 
characterization of new nanomaterials and nanostructures. Specific 
activities include:

          Leading-edge nanotechnology measurement research, 
        including development of instrumentation, is a core mission of 
        NIST. With its Advanced Measurement Laboratory now operational, 
        the agency appears well-equipped to remain at the forefront in 
        this area.

          NSF's program within Mathematical and Physical 
        Sciences Division aimed specifically at instrumentation 
        research and development.

          The National Nanotechnology Infrastructure Network 
        (NNIN) is a 13-university network that supports both research 
        on state-of-the-art tools and methods for synthesis and 
        characterization and user facilities for the use of advanced 
        instrumentation by the broader research community. In the first 
        three quarters of FY 2005, over 7,500 users have benefited from 
        NNIN facilities and expertise.

          DOE is funding the development of a next generation 
        Transmission Electron Aberration-corrected Microscope (TEAM) to 
        allow for even greater capabilities for visualization and 
        characterization at the nanoscale. The TEAM project supports 
        efforts at Argonne National Laboratory, Brookhaven National 
        Laboratory, Lawrence Berkeley National Laboratory, Oak Ridge 
        National Laboratory, and Frederick Seitz Materials Research 
        Laboratory at the University of Illinois at Urbana-Champaign.

Q3.  The PCAST report notes that an important role of the Federal 
Government in the development and commercialization of new technologies 
is an ``early adopter'' customer. How is the National Nanotechnology 
Initiative helping mission agencies to identify opportunities to 
develop and use products that arise from federal nanotechnology 
research under the NNI?

A3. As the PCAST report has just issued, there has not been time for 
the initiative to take steps to address this recommendation, however, 
PCAST will be interested in and will be monitoring how the initiative 
does so.

Q4.  An important potential obstacle to commercialization of 
nanotechnology will be environmental, health, and safety concerns. Does 
PCAST find the current level of funding in the National Nanotechnology 
Initiative sufficient to address this set of issues adequately?

A4. As part of its review, PCAST convened a panel of experts in 
environmental, health, and safety (EHS) of nanomaterials from 
government, industry, and academia to assess this very question. The 
panel's input, along with information from the agencies led PCAST 
members to conclude that the initiative is giving appropriate priority 
and funding to this important area. Activities aimed at addressing EHS 
concerns, including research to understand the effects of 
nanomaterials, have increased within agencies such as the National 
Institute for Occupational Safety and Health (NIOSH), EPA (which 
shifted its emphasis for new grants from environmental applications to 
EHS implications), and the National Institute of Environmental Health 
Sciences (NIEHS). NSF has listed environmental implications as a 
specific focus area for its nanoscience research program since the 
initiative's inception in FY 2001.
    PCAST noted that in addition to the funding that is being spent on 
R&D with a primary purpose of understanding EHS implications of 
nanomaterials (nearly $40 million requested in the FY 2006 Budget), 
there is also underway considerable research on applications and in 
fields such as metrology that is related to and advances our 
understanding of EHS implications. Furthermore, agencies such as EPA 
and FDA are devoting substantial other resources other than research 
funds to assess risks and take appropriate steps to protect the public 
and the environment.
    Agencies are also engaged in international activities related to 
EHS concerns, including standards development for accurate and reliable 
measurement and characterization of nanomaterials. These and other 
efforts to understand the EHS effects of nanotechnologies are the 
concern, and the responsibility, of all nations that are investing in 
the development of new nanomaterials. As our report notes, the United 
States invests approximately 25 percent of the total amount spent on 
nanotechnology R&D by all governments. PCAST hopes that other countries 
also are investing in EHS R&D and that all countries will cooperate to 
share the results of these efforts and, to this end, PCAST members have 
visited with their European counterparts to promote such open 
cooperation.
    Finally, our report also indicated that the primary area for 
immediate concern is in the workplace, where nanomaterials are being 
used or manufactured and where the greatest likelihood for exposure 
exists. While the Federal Government will play a role in addressing 
occupational safety, industry must also provide leadership in the 
research and development of safe products and in maintaining a healthy 
workplace and a clean environment. Clearly, the sharing of research 
results among government and industry stakeholders will contribute to 
our collective knowledge and will benefit everyone.

                              Appendix 2:

                              ----------                              


                   Additional Material for the Record




