[Senate Hearing 109-1114]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 109-1114
 
      ECONOMIC DEVELOPMENT OPPORTUNITIES IN NANO COMMERCIALIZATION

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

                                HEARING

                               before the

        SUBCOMMITTEE ON TRADE, TOURISM, AND ECONOMIC DEVELOPMENT

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 4, 2006

                               __________

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


                  U.S. GOVERNMENT PRINTING OFFICE
64-375                    WASHINGTON : 2011
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  


       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                     TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona                 DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana                    Chairman
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
JIM DeMINT, South Carolina           FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana              E. BENJAMIN NELSON, Nebraska
                                     MARK PRYOR, Arkansas
             Lisa J. Sutherland, Republican Staff Director
        Christine Drager Kurth, Republican Deputy Staff Director
             Kenneth R. Nahigian, Republican Chief Counsel
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
   Samuel E. Whitehorn, Democratic Deputy Staff Director and General 
                                Counsel
             Lila Harper Helms, Democratic Policy Director
                                 ------                                

        SUBCOMMITTEE ON TRADE, TOURISM, AND ECONOMIC DEVELOPMENT

                   GORDON H. SMITH, Oregon, Chairman
TED STEVENS, Alaska                  BYRON L. DORGAN, North Dakota, 
JOHN McCAIN, Arizona                     Ranking
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
JOHN ENSIGN, Nevada                  JOHN D. ROCKEFELLER IV, West 
GEORGE ALLEN, Virginia                   Virginia
JOHN E. SUNUNU, New Hampshire        JOHN F. KERRY, Massachusetts
JIM DeMINT, South Carolina           MARIA CANTWELL, Washington
DAVID VITTER, Louisiana              FRANK R. LAUTENBERG, New Jersey
                                     BILL NELSON, Florida
                                     E. BENJAMIN NELSON, Nebraska
                                     MARK PRYOR, Arkansas


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 4, 2006......................................     1
Statement of Senator Allen.......................................     9
Statement of Senator Dorgan......................................     2
Statement of Senator Smith.......................................     1
Statement of Senator Stevens.....................................     4

                               Witnesses

Boudjouk, Philip, Ph.D., Vice President of Research, North Dakota 
  State University...............................................    11
    Prepared statement...........................................    13
Gwaltney, Jerry L., City Manager, City of Danville, Virginia.....    21
    Prepared statement...........................................    24
Murdock, Sean, Executive Director, NanoBusiness Alliance.........     4
    Prepared statement...........................................     6
Rejeski, David, Director, Project on Emerging Nanotechnologies, 
  Woodrow Wilson International Center for Scholars...............    30
    Prepared statement...........................................    32
Rung, Robert D. ``Skip'', President/Executive Director, Oregon 
  Nanoscience and Microtechnologies Institute (ONAMI)............    15
    Prepared statement...........................................    17


      ECONOMIC DEVELOPMENT OPPORTUNITIES IN NANO COMMERCIALIZATION

                              ----------                              


                         THURSDAY, MAY 4, 2006

                               U.S. Senate,
      Subcommittee on Trade, Tourism, and Economic 
                                       Development,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 3:17 p.m. in 
room SD-562, Dirksen Senate Office Building, Hon. Gordon H. 
Smith, Chairman of the Subcommittee, presiding.

          OPENING STATEMENT OF HON. GORDON H. SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Ladies and gentlemen, we call to order this 
hearing of the Senate Commerce Committee. Thank you for your 
attendance, and I appreciate so much your preparation. We 
apologize for the voting schedule around this place. They don't 
check with Byron or myself when they schedule these votes. But 
we can go forward now.
    Today's hearing will focus on economic development 
opportunities that exist within the field of nanotechnology; 
obviously, an enormously exciting field that has tremendous 
potential to improve the quality of life for our citizens, 
create high-paying jobs, and increase U.S. global 
competitiveness. Unfortunately, the Federal Government has not 
made the economic development aspect of nanotechnology much of 
a priority. We're going to try to do that.
    This hearing is going to highlight communities and 
companies that are harnessing this potential and bringing jobs 
to their towns. Hewlett-Packard, that has a large presence in 
Oregon, developed the thermal inkjet technology, as one example 
of how advances in nanoscience and microtechnology have 
generated tremendous economic benefit and created high-paying 
jobs. It enabled the creation of this breakthrough technology, 
and led to tremendous growth at HP, and created numerous 
opportunities in our state, not only in the Corvallis area, but 
also for thousands of others across the country.
    With the growth of nanotechnology, I envision similar types 
of job creation and advances in product development in the 
future. Today, more than 40 initiatives at the community, 
state, and regional levels are dedicated to nanotechnology 
commercialization and economic development. Advancement of 
nanotechnology is also evident, and quite competitive, on the 
global stage. Asian and European countries are making 
significant efforts to reap economic benefits from 
commercializing this industry. Recent studies indicate that by 
the year 2014 nanotechnology will affect most manufactured 
goods and represent manufacturing output of more than $2 
trillion.
    At the same time, some have expressed concern regarding 
potential health and safety issues related to nanotechnology. 
These issues need to be examined as we move forward. However, 
we should not unfairly hinder this emerging field of science. 
With the potential benefits that this technology offers, the 
Government should do more to ensure the United States is a 
leader in commercializing its technology and promoting its 
economic benefits.
    We have five witnesses here today that will discuss 
important issues as they relate to this topic. We thank you and 
look forward to hearing from you.
    And I would like to especially welcome Skip Rung, President 
and Executive Director of the Oregon Nanoscience and 
Microtechnologies Institute, in Corvallis, Oregon, who's here 
today. We welcome you, Skip.
    And, with that, let me turn to my colleague, Byron Dorgan 
from North Dakota.

              STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. Senator Smith, thank you very much.
    First of all, let me say, I appreciate your holding this 
follow-up hearing. We've held one other hearing in our 
Subcommittee, on nanotechnology. This hearing is about 
partnerships and commercialization, and I think it is right on 
the mark, and I very much appreciate it.
    I'm not able to stay for the entire hearing, because of the 
time problem that has occurred as a result of these votes, and 
I deeply apologize for that. But let me take the front end of 
this, just for a moment, to welcome Dr. Phil Boudjouk. At a 
hearing, I guess 5 or 6 years ago, in a room in this building, 
in a hearing room just like this, with Senator Stevens and 
myself, Dr. Boudjouk testified on issues, I think, dealing with 
EPSCoR at that moment. And, from that meeting, out in the 
hallway we talked about what we could, and should, do to make 
North Dakota State University a university that is a 
participant in microtechnology and nanotechnology. From that 
time, in the last 5 to 6 years, we have made remarkable 
strides, through research contracts with the Department of 
Defense and earmarks that I have included in legislation. The 
result of it all is that we now have, at North Dakota State 
University, a Center for Nanoscale Science and Engineering that 
is really quite a remarkable place. This summer, a company 
called Alien Technology will open the world's largest plant for 
making radio frequency identification tags, RFID tags, right 
across the street from the Center for Nanoscale Science and 
Engineering. A number of other high-technology companies have 
now located in Fargo and are participating. We think what is 
happening there is almost breathtaking.
    We're very interested in, I'm very interested, especially, 
in marrying the opportunity to have Federal research join 
partnerships and the private sector to commercialize the kinds 
of things that result from all of this technology.
    I think we're just in the first baby step of the 
development of what we will ultimately see in our lives from 
nanotechnology. But in order to have a destination, you've got 
to know where you are and where you want to be. And that's the 
purpose of this hearing. It's the purpose of the research that 
we're funding here in the Federal Government. And I just wanted 
to especially say that you don't have to be a New York 
University, Texas University, Massachusetts or California 
University, I mention those four, because, as you know, the 
huge pile of Federal dollars go to about four or five states 
for research, you don't have to be in one of those states to be 
world-class. We are creating, developing, and seeing world-
class opportunities in micro- and nanotechnology applications, 
that exist in other areas of the country, including a world-
class opportunity that is now being built and existing in 
Fargo, North Dakota, at North Dakota State University.
    Much of the credit of that is due to Dr. Boudjouk. I'm 
really pleased that I was able to invite him, and that you were 
willing to allow him to testify today.
    Senator Smith. Of course.
    Senator Dorgan. This is a great panel. I appreciate the 
input all of you will provide this Senate on these important 
issues.
    And, again, Mr. Chairman, thank you very much.
    Senator Smith. Thank you, Senator Dorgan. And I agree 
completely with your observation. You don't have to be from one 
of the big ones. You can be from Oregon or North Dakota and 
participate in this, and maybe make the breakthroughs.
    Our panel today will consist of Sean Murdock. He'll go 
first. He's the Executive Director of the NanoBusiness 
Alliance, in Skokie, Illinois; and then Robert ``Skip'' Rung, 
President and Executive Director of Oregon Nanoscience and 
Microtechnologies Institute, from Corvallis; and Dr. Philip 
Boudjouk--did I say it right?
    Dr. Boudjouk. You did.
    Senator Smith. We welcome you, Doctor. He's the Vice 
President for Research, North Dakota State University, Fargo, 
North Dakota; and David Rejeski----
    Mr. Rejeski. Rejeski.
    Senator Smith.--Rejeski--I'll get it better next time--
thank you for being here, as well. He's director of Project on 
Emerging Nanotechnologies, Woodrow Wilson International Center 
for Scholars, in Washington, D.C.; and Jerry Gwaltney----
    Mr. Gwaltney. Gwaltney.
    Senator Smith. Gwaltney, OK.
    Mr. Gwaltney. Yes, sir.
    Senator Smith. City Manager, City of Danville, Virginia.
    Senator Dorgan. Mr. Chairman, you could have picked some 
Smiths and some Olsons.
    Senator Smith. Yes.
    [Laughter.]
    Senator Dorgan. That's a lot easier, but these are the 
experts.
    Senator Smith. We're honored to be joined by the Chairman 
of the full Committee. Senator Stevens, we're glad you're with 
us, sir.

                STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    The Chairman. Thank you very much. I'm late but I'm happy 
to join you for this important hearing.
    Senator Smith. Sean, take it away.

  STATEMENT OF SEAN MURDOCK, EXECUTIVE DIRECTOR, NanoBusiness 
                            ALLIANCE

    Mr. Murdock. Thank you very much.
    I would like to thank you, Chairman Smith, Ranking Member 
Dorgan, Chairman Stevens, and the Members of this Senate 
Subcommittee on Trade, Tourism, and Economic Development, for 
the opportunity to testify on a topic of great importance to 
the American economy and to American competitiveness.
    I would also like to thank you for introducing the 
Nanoscience to Commercialization Institutes Act of 2005, which 
we believe will help expand our Nation's nanotechnology 
commercialization capabilities.
    My name is Sean Murdock, and I am the Executive Director of 
the NanoBusiness Alliance. The Alliance is the industry 
association policy advocate for nanotechnology innovators.
    Developments in nanotechnology will boost a broad range of 
industry. Lux Research has predicted that nanotechnology will 
account for 15 percent of our global manufacturing output, 
totaling almost $2.6 trillion in 2014. Those figures imply an 
expected impact of almost 3.7 million U.S. manufacturing jobs 
within 10 years. And the jobs that are created are likely to be 
very good ones, high-paying ones. Small Times has estimated 
that the average annual salary for an employee in the 
nanotechnology sector is almost $100,000 a year.
    States are making investments in nanotechnology economic 
development with the hope and the expectation of attracting 
companies and capturing these new jobs. According to Lux 
Research, state and local governments poured more than $400 
million last year into nanotechnology research facilities, 
business incubation programs, and other resources, aiming to 
attract the further funds, the billion dollars that are being 
disbursed at the Federal level.
    Most of the $400 million was invested in a few large-scale 
projects to build new buildings, and new facilities within 
those buildings. Only a small portion of that money is actually 
going to public/private partnerships that focus on connecting 
our research in the infrastructure to the existing businesses 
that may be able to use it, enhance their competitiveness, 
maintain existing jobs, and create new ones.
    There are several key challenges for realizing economic 
development through nanotechnology. The first is the Valley of 
Death. Companies need capital and time to bring innovations to 
market. But VCs have been shying away from investment in early 
stage platform technologies without the near-term products. 
According to statistics from Small Times, investment in startup 
and seed-stage companies has dropped significantly as a 
percentage of total investment by over 50 percent, with 
startups receiving only 3 percent--early stage only 3 percent 
in 2005. Federal investment in basic research without adequate 
commercialization capital for startup companies that are busy 
translating it into realworld applications will not result in 
the economic development that we expect.
    Second, to truly create revolutionary groundbreaking 
products, often several innovations have to be realized and 
combined. It is often not feasible for a single company to 
shoulder the burden of infrastructure investment and 
development. Public partnerships allow all parties to align 
their strategies for commercialization, to leverage one 
another's resources, and to create the kind of roadmaps that 
facilitate the coordinated activity. Currently, there is no 
programmatic approach to foster these kind of public/private 
partnerships.
    The third, startup nanotech companies are pioneers. They 
are rich in potential, courage, and ambition, but are poor in 
resources. As such, their ability to have a voice in policy 
discussions, to travel and network, and even access and apply 
for the Federal programs that we've put forward to help them, 
is extremely limited. Support for organizations that work on a 
grassroots level to support those startups and entrepreneurs, 
and act as a means for the companies to meet, share strategies, 
and cooperate, is essential to regional success for the 
industry.
    We have a few recommendations. First, we strongly support 
the Nanoscience to Commercialization Institutes Act of 2005, 
sponsored by Senators Smith and Cantwell. This bill has the 
potential to significantly impact job growth and revenues 
through modest Federal investment. It achieves this by 
leveraging industry investments and knowhow through sets of 
public/private partnerships. We believe the proposed 
commercialization centers will encourage application-focused 
research, develop metrics and measurements for economic growth 
to ensure that we're pursuing this efficiently and effectively, 
inform policymakers with real data on the impact of Federal 
research funding so that we can make changes, going forward, 
and provide strategic research guidance and meaningful, 
achievable goals for various application areas.
    We also believe that there must be more support for 
regional economic development initiatives. These organizations 
are engaged broadly in enabling efficient resource sharing, 
raising awareness of Federal and State programs that are 
already out there, so that they're better utilized and have the 
impact that we hope, convening stakeholders to promote 
cooperation not just within cities and states, but across state 
boundaries, and giving the industry and the entrepreneurs a 
voice when discussing policy at the regional, state, and 
national levels.
    The regional economic development initiatives are 
grassroots industry organizations through which small 
businesses can have a voice and be heard and gain access to 
critical knowledge and resources. Given the importance of small 
business to innovation, providing these regional initiatives 
with sufficient support will be an important part of any 
nanotech economic development strategy.
    Finally, we believe that we should enact nanotech R&D tax 
credits to address the Valley of Death. This would enhance the 
availability of early stage risk capital while leveraging 
market forces to decide which small businesses get the benefit. 
Investors will invest based on commercial potential, so these 
tax incentives for seed-stage investments will, through market 
means, encourage funding for companies most likely to produce 
the jobs and revenues that we all hope and expect out of this 
investment.
    Thank you, Mr. Chairman. I'd be happy to answer any 
questions.
    [The prepared statement of Mr. Murdock follows:]

        Prepared Statement of Sean Murdock, Executive Director, 
                         NanoBusiness Alliance

    I would like to thank you, Chairman Smith, Ranking Member Dorgan, 
and members of the Senate Subcommittee on Trade, Tourism, and Economic 
Development for the opportunity to testify on a topic of importance to 
the American economy--nanotechnology and its role in increasing our 
GDP, creating jobs and providing America with high-value goods to power 
our exports in the increasingly global economy. I also want to thank 
you for introducing the Nanoscience to Commercialization Institutes Act 
of 2005, which will help expand our Nation's nanotechnology 
commercialization capabilities.
    My name is Sean Murdock, and I am the Executive Director of the 
NanoBusiness Alliance. The NanoBusiness Alliance is the nanotechnology 
industry association and 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 government grants, Fortune 500 companies with multimillion 
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 quality-of-life 
improvements, economic growth and business success 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 impact of nanotechnology on economic development in 
America.
Nanotechnology's Potential for Economic Development
    Developments in nanotechnology boost a broad range of industries. 
Today nanotechnology is found in approximately 80 consumer products, 
and over 600 raw materials, intermediate components and industrial 
equipment items that are used by manufacturers. While the number is 
small at this juncture, the diversity of the products and 
applications--stain resistant clothing, tennis racquets, cosmetics, 
catalytic converters, fuel cells, solar cells, flat screen displays, 
molecular diagnostics and cancer therapies--provide testament to its 
broad impact which will deepen in the coming decade as more products 
come to market. Lux Research has predicted that nanotech will account 
for 15 percent of our global manufacturing output totaling $2.6 
trillion by 2014.
    The potential for economic development that nanotech represents is 
profound. Nanotechnology will create more jobs and better jobs over the 
next decade. According to Lux estimates, the number of jobs in making 
nano-enabled products is set to balloon from 47,000 globally today to 
more than 10 million in 2014--11 percent of total manufacturing jobs in 
that year. Of these, the U.S. should capture at least 37 percent or 3.7 
million. And, studies show that on a national level, nanotechnology 
employees today have higher than average salaries and are highly 
educated. In the United States, the average annual salary for an 
employee in the nanotechnology sector is $97,978.
The State of Nanotechnology Commercialization in the U.S.
    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. 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.
    Regardless of the international situation, the growth of new, 
venture backed nanotech start-ups has been relatively stagnant over the 
past few years. 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.
    States are making investments with the hope and expectation of 
attracting nanotechnology companies and capturing these new nanotech 
jobs. According to Lux Research, state and local governments poured 
more than $400 million last year into nanotechnology research, 
facilities, and business incubation programs, aiming to attract further 
funds from the nearly $1 billion being disbursed at the Federal level.
    Most of the $400 million was invested in a very few, large projects 
to build new research facilities and buildings to house those 
facilities. Albany Nanotech in NY, The International Institute for 
Nanotechnology in Illinois, and The California Nanosystems Institute 
are good examples.
    Little money is actually going to public-private partnerships that 
focus on connecting those performing our federally funded research to 
the existing businesses that may be able to use that technology and 
make use of the new facilities and infrastructure that have been 
created.
Barriers to Nanotech Commercialization in America
    The following outlines some of the most prominent barriers to 
commercialization.
The Valley of Death
    The trying period between a company's formation and its achieving 
significant cashflow, referred to as the ``valley of death,'' is 
particularly acute for nanotechnology. Lab research holds the potential 
to develop game-changing products but requires a significant investment 
in process knowledge and internal capabilities before any revenues can 
be generated. This investment is required to identify a particular 
product need, integrate the lab process with current manufacturing 
techniques, develop the lab process so that efficient large-scale 
production is possible, handle compliance with any regulatory statutes, 
and also fund the operational infrastructure of the company.
    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 early stage 
technologies without near term commercialization processes and end 
market economics. According to statistics from Small Times, investment 
in startup and seed-stage companies has dropped as a percentage of 
total investment, by 50 percent (with startups receiving only 3 percent 
in 2005). Federal investment in basic research without adequate capital 
support for the startup companies that translate it into real world 
applications will not result in economic development.
Lack of a Level International Playing Field for American Companies
    On a per capita basis and relative to GDP, the U.S. funding of 
nanotech innovation and commercialization is matched or exceeded by its 
Asian competitors (particularly Japan and Korea). Also, Asian 
investments tend to be more focused on specific applications. While 
these competitors are not outperforming the U.S. in knowledge 
development (i.e., overall patents), they are developing leadership in 
specific areas, particularly electronics related applications. Foreign 
governments (particularly in Asia) also provide direct subsidies for 
application development which creates an un-level playing field for 
American nanotech startups.
    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.
Insufficient Opportunities for Public-Private Partnerships
    Turning the ideas and innovations being funded into manufactured 
products is the key to the government seeing a return on its investment 
in research. However, to create a truly revolutionary or ground-
breaking product, often several innovations have to be realized and 
combined. For example, developing a successful nanomaterial requires 
advances in measurement and metrology, materials engineering, product 
integration and manufacturing process. This requires an extensive 
research infrastructure with multiple areas of specialization. It is 
not feasible for a single company to shoulder the burden of 
infrastructure investment and development.
    Public-private partnerships allow both parties to align their 
strategies for commercialization, leverage each others resources and 
help create fundamental roadmaps for economic growth and development. 
Currently, there are no institutions that foster or house these 
partnerships.
Lack of Support for Regional Economic Initiatives
    Startup nanotech companies are pioneers--rich in potential, courage 
and ambition but poor in resources. As such, their ability to have a 
voice in policy discussions, to travel and network and even to access 
and apply for Federal programs and support is extremely limited. 
Support for organizations that work on a grassroots level and act as a 
means for these companies to meet, share strategies and cooperate is 
essential to regional successes in this industry.
Recommendations and Proposals
Create Commercialization Centers to Promote Public-Private Partnerships
    We recommend creating centers for nanotech commercialization that 
allow public and private stakeholders to share the costs of developing 
infrastructure for conducting fundamental, application-focused 
nanotechnology research. We strongly support the Nanoscience to 
Commercialization Act of 2005 (S. 1908), sponsored by Senators Smith 
and Cantwell. This bill has the potential to significantly impact job 
growth and revenues through a modest Federal investment. It achieves 
this by leveraging industry investments and know-how through a set of 
public-private partnerships.
    The proposed commercialization centers would:

   Encourage application-focused research.

   Developing metrics and measurements for economic growth in 
        the industry and publishing analyses of American 
        competitiveness in this space.

   Informing policymakers with real data on the impact of 
        Federal research funding in nanotech on job growth and 
        revenues.

   Provide strategic research guidance and meaningful, 
        achievable goals and challenges for various application areas.

    The centers could act as the focal point for industry to develop 
roadmaps for multi-component applications. This would help small 
businesses that have innovations for one or more components to focus 
their development and collaborate to create the larger application.
    In addition, the data being generated at these centers can 
streamline Federal research investments so that dollars are being spent 
to achieve a maximum return. It can also draw on regional initiatives 
to develop effective and relevant strategies for dealing with 
commercialization challenges. Finally, by focusing on areas that do not 
already have nanotechnology centers, the bill promotes an expansion of 
the Nation's nanotechnology infrastructure.
Providing Funding for Regional Economic Initiatives
    Regional economic initiatives are engaged, broadly, in the 
following missions:

   Developing nanotech clusters to allow resource sharing.

   Raising awareness of Federal and state programs and 
        infrastructure available to startups.

   Convening conferences to promote cooperation across 
        geographies.

   Giving the nanotech industry a voice when discussing policy 
        at the regional, state and national levels.

    There are over 40 nanotech initiatives throughout the U.S. 
dedicated to developing tactical plans to realize the strategy above. 
To date, two workshops have been held by the NNCO to facilitation 
coordination across these initiatives. The main focus of these 
workshops has been to compare strategies for acquiring funding and 
models for building working nanotech clusters in the various regions. 
The product has been the development of some ``best practices'' and a 
series of recommendations on how to structure an initiative and best 
utilize the scarce resources.
    The regional economic initiatives are the grassroots industry 
organizations through which small businesses can have a voice and be 
heard. Given the importance of small business to innovation, providing 
these regional initiatives with sufficient support must be an important 
part of any nanotech economic development strategy.
Provide a Tax Incentive for Investment in Small Business
    A recommendation for addressing the ``valley of death'' and the un-
level playing field is to develop tax incentives for investors in small 
businesses engaged in translating research from labs into applications 
and products.
    The R&D Tax Credit in section 41 of the Tax Code is, of course, an 
important incentive. However, it does not benefit many small 
nanotechnology companies, because they do not have profits and thus do 
not have taxes against which the credit can apply. Furthermore, our 
experience is that investors do not factor the future availability of 
credit ``carry-forwards'' into account, especially for small companies. 
Thus, many small nanotechnology companies will fail from a lack of 
capital before the credits are available.
    States have successfully used tax credits to dissuade nanotech 
companies from migrating to other states (e.g., in Wisconsin). The same 
can be accomplished on a national level, thereby preventing off-shoring 
of nanotech development. In addition, this approach would rely on 
market forces to decide which small businesses get the benefit; in 
other words, investors still will invest based on which nanotech 
companies have the highest potential for commercialization (and other 
business-driven factors). As a result, tax incentives for seed-stage 
investments will, through market means, encourage funding for companies 
most likely to produce jobs and revenues.
    Thank you Mr. Chairman. I would be happy to answer any questions.

    Senator Smith. Sean, I'm curious, and I would like to ask a 
question. What I'd like to do, if it's all right with my 
colleagues, is, as each one gives his testimony, if you have 
questions, we'll just take them up right then and have a fuller 
free exchange.
    The Chairman. How long are you going to take on each one of 
us on that first round?
    Senator Smith. Not long at all.
    The Chairman. OK.
    Senator Smith. Sean, how is America relative to our 
competitors in nanotechnology commercialization? Where do we 
stand?
    Mr. Murdock. We have about half of the nanotechnology 
startup companies, if you will, located in the United States.
    Senator Smith. And where are the others located?
    Mr. Murdock. They are distributed across the entire globe--
in Europe, and concentrated heavily in Asia, in Japan, in 
China. If you are to believe some of the statements that have 
been made by the Chinese, we don't have the majority of the 
companies. There was a statement made at one of their trade 
shows that they have 800 companies working on nanotechnology 
commercialization. We have no way of verifying that. But that 
would put them in the lead, if it was, in fact, true.
    Senator Smith. Do you have a question for him?

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

    Senator Allen. Let me just add something to Mr. Murdock's 
statement. Your colleague, from Oregon, and I have been leaders 
in the Senate working with our colleagues here, on 
nanotechnology, and making sure the United States is a leader 
in it. And there's been over a billion dollars in funding. A 
lot of it's now getting focused in energy and other areas. In 
China--you mentioned China--we do need to stay in the lead; 
otherwise, European or Asian countries will be in the lead.
    In the applications in a round-the-world trip that brought 
us to India and also to China, I looked at China 
nanotechnology, because I was interested in this very question 
you asked. Nanotechnology can be everything from life sciences 
to energy to materials engineering to electronics. China seems 
to be focused mostly in the materials engineering, and they 
seem to--and if you want an analogy, they're like--and I know 
you like baseball--they're like George Steinbrenner. They will 
pay what it takes to get the best engineer in materials 
engineering and engineers who understand the carbon nanotubes, 
which are part of materials engineering. And they are a 
directed economy, and they are focused, and they want to take 
the lead in that aspect of it, in the materials, which are 
lighter and stronger nanomaterials, as opposed to some of the 
life sciences or health sciences aspects of nanotechnology. So, 
we need to be in the lead.
    Senator Smith. Yes.
    Senator Allen. And whether it's research through Federal 
agencies, colleges, universities, the private sector, and the 
states, which is part of what your bill aims to do, I think 
that's a very important component of it, and recognize our 
competition, if we didn't move, would actually be gaining 
ground, and, in fact, surpassing us over a period of time.
    Senator Smith. And in those various areas that Senator 
Allen named, Sean, are we in the lead or behind in any of 
those, or are we leading in some, and not in others?
    Mr. Murdock. We have a very strong foundation in the basic 
research across the board. We have good leadership there. We 
haven't been--you asked the question about the translation of 
that into products, and there, we're not as strong. We do well 
in the biomedical arena, healthcare arena, because we have such 
a strong biotech industry here. In the electronics arena, we're 
already finding that many of the nanotech startups have 
applications relevant to electronics are having to go over to 
Asia to find their partners and to partner to commercialize the 
technologies there.
    Senator Smith. Senator Stevens?
    The Chairman. I have two short, but sort of stupid 
questions. Is your headquarters in Illinois?
    Mr. Murdock. Yes, it is.
    The Chairman. How did that happen? I mean, that's not a 
normal place for a national center, is what I'm saying.
    Mr. Murdock. Well, it happened from a few things. One, I'm 
based in Illinois, and I have been for a while. I grew up in 
the Chicagoland area, but also----
    The Chairman. Did you name yourself the ``Center,'' or do 
you really have a lot of members?
    Mr. Murdock. No, there's a lot that--well, the Alliance is 
a national organization, so we have members around the country. 
But there is quite a bit of capability in the Chicagoland 
area--Argonne, Northwestern----
    The Chairman. My not-so-stupid question is--we're working 
in this Committee to try and deal with the problem outlined by 
the report ``Rising Above the Gathering Storm'' that shows us 
that there is a decline in the production of graduate students 
in science, technology, and engineering. Having this separate 
nano division now, is that producing a competition within the 
numbers we are projecting? I mean, after all, it looks like 
China and India are producing about 1.1 million engineers while 
we're producing 70,000. That doesn't sound like there are a lot 
of engineers who work on nanotechnology. Are we splitting our 
forces too much?
    Mr. Murdock. Well, I think that having the focus on 
nanotechnology is actually quite powerful. As we talk about 
some of these grand challenges of clean renewable energy or 
high-powered computing, et cetera, it serves to motivate the 
children and the younger students to think about how this will 
tangibly affect their world. And at least from the people I've 
interacted with at the grade school and the high school levels, 
it's getting excitement where they're going to consider going 
into the engineering disciplines. But I think we need to have 
not just a--what I would characterize as a ``push'' strategy, 
which is throw more money about it in the educational 
infrastructure, but a ``pull'' strategy, where they start to 
see that there are going to be good, high-paying, dynamic, fun, 
exciting jobs that will change the world through the 
commercialization of nanotechnology, and then we will get more 
people going into the engineering disciplines. I think we have 
to do both.
    The Chairman. Did you participate in the Augustine study 
and report?
    Mr. Murdock. No, I did not.
    Senator Smith. Senator Dorgan's schedule is going to have 
him leaving earlier than the conclusion of this hearing, so, in 
the interest of his time, we'll go to Dr. Boudjouk, and then 
we'll go back to Skip Rung.

    STATEMENT OF PHILIP BOUDJOUK, Ph.D., VICE PRESIDENT OF 
            RESEARCH, NORTH DAKOTA STATE UNIVERSITY

    Dr. Boudjouk. Thank you.
    Chairman Smith, Ranking Member Dorgan, and members of the 
Committee, thank you for the opportunity to discuss the 
importance of helping to commercialize discoveries 
nanotechnology and some of the critical roles that universities 
could play.
    There's a big future in small things, and the consequences 
for our economy can be enormously positive if we harness the 
potential of nanotechnology. By ``harness,'' I don't mean 
probing the depths of understanding of what nature is telling 
us when we ``go nano.'' I mean ``harness'' in the sense of 
developing and commercializing technologies that will find 
places in the market because they meet the needs of our 
citizens.
    Enhancing our understanding comes from our efforts in 
science. Implementation, and, therefore, economic development, 
however, derives from advancing technology. There will always 
be important questions for science to answer about 
nanomaterials, and, just as important, about energy on the 
nanoscale; for example, devices using only nanowatts of energy. 
But I wish to emphasize that we know enough now that we can 
move forward today to the marketplace by pushing the 
nanotechnology envelope.
    This is the time to forge the links to our economy. This 
can be done by providing incentives for efficient pipelines, 
from science to technology to economic development. For the 
topic today, the focus would be nanoscience to nanotechnology, 
but--and here comes the good part--to macroeconomic 
development. The economic development payoff could be enormous.
    In North Dakota, we have made important progress in 
converting nanotechnology into economic development. Thanks to 
the vision and support of Senator Dorgan, we have been able to 
forge partnerships with the private and Federal sectors to 
develop microdevices that operate at the nanowatt level. These 
devices have the critical advantage of emitting virtually 
undetectable signals, a property very important in matters of 
national defense and security.
    While our original work was focused on meeting the needs of 
the Department of Defense, our partnerships with the private 
sector have led to sophisticated, yet practical, joint efforts 
to address commercial needs and markets. The value of the 
partnerships in incalculable, because now the considerable 
intellectual capital and remarkable technical infrastructure 
put in place at North Dakota State University to address 
Federal needs has been, and will continue to be, targeted to 
the commercial sector. And targeting is what we universities 
need.
    Universities are generally not savvy to the marketplace. 
Never have been, likely never will be. It has the partnership 
with the private sector that enables the efficient leveraging 
of our tremendous resources. We universities--not all of us, 
perhaps, and probably not all aspects of a university, but 
surely parts of many universities, should be tuned to the 
markets. And that tuning would best be done in collaboration 
with our partners in the private sector. This is a win-win on a 
grand scale.
    For us, in Fargo, North Dakota, an area not previously 
known for high-technology-based industries, we now have 
Microsoft Great Plains, John Deere, Ingersoll Rand, and, this 
month, Alien Technology, the world leader in radio frequency 
identification technology will open its doors in the North 
Dakota State University Research and Technology Park. They are 
in Fargo because Senator Dorgan challenged us to form a three-
part partnership--Federal, State, and private--and North Dakota 
has. Our Governor, our legislators, and our State Board of 
Higher Education have provided the necessary local leadership 
and support to make great things happen. The rewards have been 
enormous. The Senator's vision has led to the Red River Valley 
Research Corridor, anchored by our two research universities, 
North Dakota State University and our sister institution, the 
University of North Dakota, forming one of the most powerful 
marketing tools in the Upper Midwest, and the birthplace of the 
high-technology sector in that region.
    The NDSU Research and Technology Park is a remarkable 
achievement for the community, the state, and the region. What 
was once 55 acres of sunflower test plots is--now supports 
250,000 square feet of research and development space where 400 
people come to work every day in high-technology industries. 
Next year, that will be 300,000 square feet and 600 people. 
Seventy-five percent of those people were not in North Dakota 5 
years ago. The average salary is more than double that 
average--the average in Fargo.
    We now have, as a result of these partnerships with the 
private sector, nanotechnologies that I am confident will be 
commercial products within 3 years. Some examples are 
nanostructured coatings to inhibit corrosion on aircraft; 
nanostructured coatings to reduce fouling on ships and enhance 
their fuel efficiency and improve maneuverability; nanowatt-
level devices for sensors, detecting toxic materials, specific 
radio frequencies and emissions, changes in temperatures in 
magnetic fields; nanowatt technologies for tracking livestock 
and other elements of our food supply.
    We have had great success in this area, and I'm delighted 
to answer questions. But first, let me thank you for this 
opportunity. I'm gratified that your Committee is addressing 
these issues. And I am honored to have had the opportunity to 
offer my comments.
    Thank you.
    [The prepared statement of Dr. Boudjouk follows:]

    Prepared Statement of Philip Boudjouk, Ph.D., Vice President of 
                Research, North Dakota State University

    Chairman Smith, Ranking Member Dorgan and Members of the Committee:
    Thank you for the opportunity to discuss with you today the 
importance of helping to commercialize discoveries in nanotechnology 
and some of the critical roles that universities could play.
    There is a big future in small things and the consequences for our 
economy can be enormously positive if we can harness the potential of 
nanotechnology. By harness, I do not mean probing the depths of 
understanding of what Nature is telling us when we ``go nano.'' I mean 
harness in the sense of developing and commercializing technologies 
that will find places in the market because they meet peoples' needs.
    Enhancing our understanding comes from our prodigious efforts in 
science. Implementation, and therefore economic development, however, 
derives from advancing technology. There will always be important 
questions for science to answer about nanomaterials, and, just as 
important, about energy on the nanoscale, e.g., devices using only 
nanowatts of energy. But, I wish to emphasize that we know enough now 
that we can move forward, today, to the marketplace by pushing the 
nanotechnology envelope.
    This is the time to forge the links to our economy. This can be 
done by providing incentives for efficient pipelines from science to 
technology to economic development. For the topic today, the focus 
would be: NANOscience to NANOtechnology but, and here is the good part, 
to MACROeconomic development. The economic development payoff could be 
enormous.
    In North Dakota, we have made important progress in converting 
nanotechnology into economic development. Thanks to the vision and 
support of Senator Dorgan we have been able to forge partnerships with 
the private and Federal sectors to develop microdevices that operate at 
the nanowatt level. Those devices have the critical advantage of 
emitting virtually undetectable signals, a property very important in 
matters of defense and national security.
    While our original work was focused on meeting the needs of the 
Department of Defense, our partnerships with the private sector have 
led to sophisticated, yet practical, joint efforts to address 
commercial needs and markets. The value of the partnerships is 
incalculable because now, the considerable intellectual capital and 
remarkable technical infrastructure put in place at North Dakota State 
University to address Federal needs has been and will continue to be 
targeted to the commercial sector. And targeting is what we 
universities need.
    Universities are generally not savvy to the marketplace; never have 
been, and likely never will be. It is the partnership with the private 
sector that enables the efficient leveraging of our considerable 
resources. We universities, not all of us perhaps, and probably not all 
aspects of a university, but surely parts of many universities, should 
be tuned to the markets. And that tuning would best be done in 
collaboration with our partners in the private sector.
    This is a win-win on a grand scale. For us, in Fargo, North Dakota, 
an area not previously known for high technology-based industries, we 
now have Microsoft Great Plains, John Deere, Ingersoll Rand and, this 
month, Alien Technology, the world leader in Radio Frequency 
IDentification technology will open its doors in the North Dakota State 
University Research and Technology Park. They are in Fargo because 
Senator Dorgan challenged us to form a three part relationship: 
Federal, State, and private. And North Dakota has. Our Governor, our 
legislators and our State Board of Higher Education have provided the 
necessary local leadership and support to make great things happen. The 
rewards have been enormous. The Senator's vision has led to the Red 
River Valley Research Corridor, anchored by our two research 
universities, NDSU, and our sister institution, the University of North 
Dakota, forming one of the most powerful marketing tools in the Upper 
Midwest, and the birthplace of the high technology sector in that 
region.
    The NDSU Research and Technology Park is a remarkable achievement 
for the community, the state and the region: what was once 55 acres of 
sunflower test plots in the northwest corner of our campus 6 years ago 
now supports over 250,000 square feet of research and development space 
where 400 people come to work every day in high technology industries. 
By this time next year the numbers will be more than 300,000 square 
feet and 600 employees. Seventy-five percent of those people were not 
in North Dakota 5 years ago. The average salary is more than double the 
average wage in Fargo.
    We now have, as a result of these partnerships with the private 
sector, nanotechnologies that, I am confident, will be commercial 
products within 3 years. Some examples are:

        1. Nanostructured coatings to inhibit corrosion on aircraft;

        2. Nanostructured coatings to reduce fouling on ships that will 
        greatly enhance their fuel efficiency and improve 
        maneuverability;

        3. Nanowatt level devices for sensing toxic materials, specific 
        radio emissions and changes in temperature and magnetic fields 
        as well as for item tracking and for displays; and

        4. Nanowatt level technologies for tracking livestock and other 
        elements of our food supply.

    We are presently working with companies to develop nano-based 
products to improve lifetimes of body replacement parts, increase 
complexity of the smallest electronic components available today and 
increase the production of nanomaterials as feedstocks for industry. 
The key here is that our focus is the market and we are getting the 
right kind of guidance. Any efforts to better connect the universities 
to the market will be greatly rewarded in terms of enhanced economic 
development.
    The pipeline from science and technology on our campuses to product 
development and commercialization has to be put in place wherever we 
can. The critical step is the forging of links between campus developed 
nanotechnologies to the private sector. This is no time for gaps. We 
all know that we are in a global competitive environment and markets 
move quickly. Missing a product cycle is damaging to every company but 
it can be fatal for a small enterprise.
    I am gratified that your Committee is addressing these issues and I 
am honored to have had this opportunity to offer my comments.
    Thank you.

    Senator Smith. Well, thank you, Doctor. Obviously, you're 
setting a very good example for the rest of the country in how 
you commercialize this.
    Senator Dorgan, do you have a question?
    Senator Dorgan. First of all, thanks to Dr. Boudjouk for 
the leadership.
    On the issue of RFID technology, the radio frequency 
identification tags, it's going to be a big part of our future, 
and we are poised to play a significant role in that. I 
understand that the chips, for example, that will be produced 
by Alien Technology are microtechnology. They are defined as 
microtechnology. But the energy used to power them is 
nanotechnology. Can you explain that, number one? And, number 
two, how far away are we from commercializing the research that 
is done on nanotechnology as it relates to energy on a larger 
scale?
    Dr. Boudjouk. The chips are, indeed, very small, require 
very little bits of energy. And if the demand on them--you can 
have a variety of demands on those chips--if the demand is in 
the form of just item tracking, let us say, as an elegant 
barcode, then you're going to need less information--less 
energy than if you're involved in the sensing mode, where you 
really want to process lots of information. But most 
importantly is that you would only query these chips 
periodically and rarely. And most of the time they would go 
into a mode still alive where they are emitting a barely or 
undetectable amount of energy. And so, whereas we've seen, even 
with computers in a sleep mode, they are warm and they stay 
warm, and they eventually generate quite a bit of heat, that 
type of technology reduces that to a very small level.
    In terms of the second question, Senator, the products are 
in the market now. Alien Technology will be making, in the year 
beginning, I'd say, this September, 10 to 20 billion radio 
frequency identification tags for the market.
    Senator Dorgan. Thank you.
    Senator Allen. Say that again. Could you repeat that?
    Dr. Boudjouk. That would be ``b,'' as in----
    Senator Allen. The whole sentence again.
    Dr. Boudjouk. Within a year, beginning in September 2006, 
Alien Technology will be producing, in Fargo, North Dakota, 10 
to 20 billion--``b,'' as in ``burger''--billion chips for 
devices to be used in the market. So, we're there.
    Senator Smith. You're not burgling anything, though. You're 
selling it.
    [Laughter.]
    Senator Smith. Senator Stevens, do you have any questions 
for this witness?
    Senator Allen, do you have any?
    Senator Allen. I would just commend you all, there at North 
Dakota State. This is an example that I would like to see. I'm 
glad we have the economic developer, city manager of Danville, 
but this is what I think that all of us would like to see, 
particularly the convergence of university research, the 
private sector, and the application. And I can tell by your 
accent it's not the usual, ``You ot-ta go to North Da-ko-ta'' 
accent.
    And so--and the other thing--Mr. Chairman, I know we care 
about enticing more young people into the areas of technology, 
and technology jobs pay, on average, for the whole country, 
about 85 percent, or nearly double, average wages. And here we 
are--just 2 days ago, Senator Cornyn and I and a few others 
introduced a bill to get H1B visas increased, to get more 
people in from other countries. There's a tremendous demand for 
technology workers in this country. And I'm for these H1B 
visas. In fact, we ought to attach a visa to any graduate--I 
don't care if they're from India or France or wherever they're 
from--if they get a degree in one of these fields. But it--
there's tremendous demand, and we need to get more young 
people, women, African Americans, and Latinos, in particular, 
that are disproportionally low in the number of scientists, 
engineers, and technologists in this country. And if you can do 
it at North Dakota State, you've set a model for this country. 
And congratulations. And I commend you and the vision of 
Senator Dorgan, your legislators, and your Governor, as well.
    Senator Dorgan. Senator Allen, I might just point out, he 
is an import, but he's been there many, many years, and he 
wasn't much until he got there.
    [Laughter.]
    Senator Dorgan. And now he's world class.
    [Laughter.]
    Senator Dorgan. And what he's building is world class. And 
we're enormously proud of Dr. Boudjouk.
    Dr. Boudjouk. Senator, thank you.
    Senator Smith. Thank you very much, Dr. Boudjouk.
    We'll now turn to an Oregonian. Skip Rung, tell us about 
your great center.

        STATEMENT OF ROBERT D. ``SKIP'' RUNG, PRESIDENT/

           EXECUTIVE DIRECTOR, OREGON NANOSCIENCE AND

              MICROTECHNOLOGIES INSTITUTE (ONAMI)

    Mr. Rung. Chairman Smith, Ranking Member Dorgan, Chairman 
Stevens, and members of the Committee, thank you for the 
opportunity to speak with you today, and thank you, Senator 
Smith, for taking leadership to introduce Senate bill 1908.
    My name is Skip Rung, and I am the President and Executive 
Director of Oregon Nanoscience and Microtechnologies Institute, 
which is the State of Oregon's first signature research center, 
and, as such, a deep collaboration among industry, investors, 
government agencies, and research institutions, including the 
Pacific Northwest National Laboratory in the State of 
Washington.
    Our theme, nanoscience combined with microtechnologies, was 
selected because it was the optimum overlap of research 
excellence, high-wage job-creation potential, and our existing 
industry strength. Indeed, although Oregon is a small state, we 
have the third largest semiconductor workforce, and, even more 
important than that, we have the world's top industrial 
research and development assets in the fields of nanotechnology 
and microtechnology. Intel Corporation and Hewlett-Packard both 
have their most advanced operations in the State of Oregon, and 
FEI company is one of our homegrown successes; FEI, of course, 
being the world leader in tools for nanotechnology. So, Oregon 
is both a high-tech and a manufacturing leader, and our future 
prosperity and supply of high-wage jobs requires that we remain 
so.
    Prior to ONAMI, I worked, for 25 years, at Hewlett-Packard, 
most recently as the RD director for HP's world-leading thermal 
inkjet technology, which ranks among the most successful 
nanoscience and microtechnology innovations of all time. 
Overcoming many daunting challenges, this breakthrough 
technology took back the PC printer business from the Far East 
and created thousands of high-wage jobs across the United 
States. HP's Corvallis, Oregon site grew from 3 buildings to 11 
large buildings in the space of 8 years, and we were always 
hard pressed to keep up with customer demand and to stay ahead 
of the competition. But the only downside to this story is that 
no one innovation keeps giving forever. We knew that the inkjet 
business would mature approximately in 2005, and we worried 
that our site and community were both at risk without a robust 
diversification plan. So, it was in 1997 that we began to take 
a much greater interest in new business creation, using both 
internal efforts and working with the universities in our 
region.
    I wish, frankly, that we had started sooner, because it may 
be that no single opportunity will be as large as inkjet. And, 
indeed, there is lower employment in Corvallis right now in 
manufacturing than there was at the peak of inkjet development.
    In the news recently, we have read that the personal 
computer market is also maturing and that this is driving 
reinvention discussions in other technology powerhouse 
companies such as Intel Corporation. The common theme, again 
here, is that innovation, by its very nature, means 
reinvention, and success or failure at this reinvention is 
going to have dramatic impact on employment levels, wage 
levels, and community health across the country.
    Now, my reason for going through all of this is to 
introduce five conclusions I have reached after many years of 
thought regarding innovation, nanotechnology, and economic 
development.
    The first is that traded-sector competitiveness is the key 
to high relative productivity, which, in turn, is the only 
dependable basis for the high-wage jobs and prosperity 
Americans have come to expect.
    The second is that innovation, in the form of trained 
people and protected intellectual property, is the key to 
competitiveness. Head-to-head global competition in traded-
goods manufacture simply cannot deliver the wage differentials 
we want. Being 20 percent more efficient will not enable us to 
pay 20 times higher wages.
    The third point is that continued leadership in prosperity 
based on innovation carries a price tag of constant change, 
sacrificial investment, hard work, and, frankly, a fair amount 
of stress. If emerging global competitors embrace future 
opportunities with greater focus, defer more gratification to 
prepare their citizens, and simply work harder, I fear it will 
go very hard with us and with our children.
    The fourth conclusion is that ``nanotechnology,'' which in 
somewhat oversimplified terms means the current state of 
progress in the physical sciences, is the frontier, the 
battlefront in the global innovation competition. We will keep, 
or lose, our prosperity, and all that comes with it, based on 
the outcome of this one global competition.
    The fifth conclusion is that we must find a way to get the 
most out of our fabulous national assets: the world's best 
universities, the world's best system of entrepreneurship and 
new-venture financing, superior industrial research and 
manufacturing sites, and outstanding Federal laboratory and 
science agency capabilities. So, specifically, I mean that we 
need not only to invest in research and education as if they 
were our future, which they are, but also to accelerate the 
commercialization of innovation by funding and measuring this 
specific outcome, and removing the barriers to more powerful 
and effective collaboration between businesses and research 
institutions.
    So, with these concerns always in mind, I have been 
encouraged, this year, by both the President's American 
Competitiveness Initiative and Senate bill 1908 under 
consideration by this Committee. By taking a hard look at where 
growth in high-wage jobs is most likely to be found and 
ensuring intimate involvement by industry and investment 
professionals in all aspects, the probability of success will 
be maximized.
    ONAMI is, itself, a bold experiment for the State of Oregon 
in this direction, and we look forward to working with you on 
this vitally important mission.
    In my written testimony, I have included some comments from 
our board chair, Dave Chen; Jay Linquist, our commercialization 
manager; and myself, regarding detailed implementation of 
Senate bill 1908. We'd be happy to discuss that and answer any 
other questions.
    Thank you.
    [The prepared statement of Mr. Rung follows:]

  Prepared Statement of Robert D. ``Skip'' Rung, President/Executive 
  Director, Oregon Nanoscience and Microtechnologies Institute (ONAMI)

    Chairman Smith, Ranking Member Dorgan, and Members of the 
Subcommittee,
    Thank you for the opportunity to speak with you today. My name is 
Skip Rung and I am the President and Executive Director of Oregon 
Nanoscience and Microtechnologies Institute, the State of Oregon's 
first signature research center and a deep collaboration among 
industry, investors, government agencies and research institutions. Our 
theme--nanoscience combined with microtechnologies--was selected 
because it was the optimum overlap of research excellence, high-wage 
job creation potential, and existing industry strength. Indeed, though 
Oregon is a small state, we have the 3rd largest semiconductor 
workforce and--even more important--the world's top industrial research 
and development assets in these fields. Intel Corporation and Hewlett-
Packard have their most advanced operations in Oregon, and FEI Company 
is one of our home-grown successes. Oregon is both a high-tech and 
manufacturing leader, and our future prosperity and supply of high-wage 
jobs requires that we remain so.
    Prior to ONAMI, I worked for 25 years at Hewlett-Packard, most 
recently as R&D director for HP's world-leading Thermal Inkjet 
technology, which ranks among the most successful nanoscience and 
microtechnology innovations of all time. Overcoming many daunting 
challenges, this breakthrough technology took back the PC printer 
business from the Far East and created thousands of high-wage jobs in 
the United States. HP's Corvallis, Oregon site grew from 3 buildings to 
11 in the space of 8 years, and we were always hard-pressed to keep up 
with customer demand and to stay ahead of the competition. The only 
downside to this story is that no innovation keeps giving forever. We 
knew that the inkjet business would mature approximately in 2005, and 
worried that our site and community were both at risk without a robust 
diversification plan. So it was in 1997 that we began to take a much 
greater interest in new business creation using both internal efforts 
and university relationships. I now wish we had started sooner, because 
it it may be that no single local opportunity will be as large as 
inkjet, and indeed there is lower employment in Corvallis now than at 
the peak of inkjet development.
    In the news recently, we have read that the personal computer 
market is also maturing and that this is driving reinvention 
discussions in other technology powerhouse companies such as Intel. The 
common theme, again, is that innovation--by its very definition--means 
reinvention, and that success or failure at this reinvention is going 
to have dramatic impact on employment levels, wage levels, and 
community health.
    My reason for going through all of this is to introduce five 
conclusions I have reached after many years of thought regarding 
innovation, nanotechnology and economic development:
    The first is that traded sector competitiveness is the key to high 
relative productivity, which in turn is the only dependable basis for 
the high-wage jobs and prosperity Americans have come to expect.
    The second is that innovation--in the form of trained people and 
protected intellectual property--is the key to competitiveness. Head-
to-head global competition in traded goods manufacture simply cannot 
deliver the wage differentials we want. Being 20 percent more efficient 
will not enable us to pay 20x higher wages.
    The third is that continued leadership in prosperity based on 
innovation carries a price tag of constant change, sacrificial 
investment, hard work, and--frankly--a fair amount of stress. If 
emerging global competitors embrace future opportunities with greater 
focus, defer more gratification to prepare their citizens, and simply 
work harder, I fear it could go very hard with us and our children.
    The fourth is that nanotechnology--which in somewhat over-simple 
terms means the current state of progress in the physical sciences--is 
the frontier, the battlefront, in the global innovation competition. We 
will keep or lose our prosperity--and all that comes with it--based on 
the outcome of this one global competition.
    The fifth is that we must find a way to get the most out of our 
fabulous national assets--the world's best universities, the world's 
best system of entrepreneurship and new venture financing, superior 
industrial research and manufacturing sites, and outstanding Federal 
laboratory and science agency capabilities. Specifically, I mean that 
we need not only to invest in research and education as if they were 
our future--which they are, but also to accelerate the 
commercialization of innovation by funding and measuring this specific 
outcome, and removing the barriers to more powerful and effective 
collaboration between businesses and research institutions.
    With these concerns always in mind, I have been encouraged of late 
by both the President's American Competitiveness Initiative and Senate 
bill 1908 under consideration by this Committee. By taking a hard look 
at where growth in high-wage jobs is most likely to be found, and 
ensuring intimate involvement by industry and investment professionals 
in all aspects, the probability of success will be maximized. ONAMI is 
itself a bold experiment for the State of Oregon in this direction, and 
we look forward to working with you on this vitally important mission.
 Attachment--The Need for Nanoscience to Commercialization Centers and 
                 Comments on Implementation of S. 1908

        John M. Lindquist, ONAMI Commercialization Manager; David Y. 
        Chen, ONAMI Board Chair; and Robert D. ``Skip'' Rung, ONAMI 
        President and Executive Director.

    The promise and potential benefits of nanotechnology are real. The 
Federal Government is wise to consider taking explicit steps to lead, 
enable and accelerate the commercialization of technologies stemming 
from its investment in nanotechnology research. S. 1908, Nanoscience to 
Commercialization Institutes, if implemented wisely, will yield 
dramatic economic benefits at the national, regional and community 
levels and help to ensure U.S. competitiveness for years to come.
    Nanotechnology is the ultimate frontier (atomic scale) for 
materials science and device fabrication, and will initiate the next 
generation of technology-driven economic development for the U.S. It is 
appropriate that the Federal Government has invested or authorized 
billions of dollars for basic nanotechnology research. Findings from 
this research will enable life-saving medicines, secure and sustainable 
energy supplies, ultra-fast computers, communication devices for both 
consumer and national security efforts, wear-resistant clothing and 
battle gear, and dramatic improvements in environmental quality.
    It is important to understand, though, that scientific research and 
technology development do not directly lead to commercialization and 
its associated economic and social benefits. The tremendous potential 
advancements brought about by Federal research dollars are at risk of 
lying fallow due to lack of commercialization efforts to bring them 
from the laboratory to technology proof-of-concept, and from proven 
technology to user-tested products which can profitably be taken to 
market. The Federal Government can take the lead in driving 
commercialization of nanotechnology research with the establishment of 
Nanoscience to Commercialization Centers at key locations throughout 
the country, each focused on a key area of commercialization and 
leveraging the vast array of regional capabilities, both industrial and 
academic, present in each area.
    For example, Oregon's decision to focus on three aspects of 
nanotechnology--nanolaminates and transparent/printed electronics, 
green nanomanufacturing, and nanoscale metrology--was made in large 
part because of the world-class industrial R&D and manufacturing assets 
(e.g., at HP, FEI, Intel, LSI Logic/Nantero, Electro Scientific 
Industries, TriQuint, Xerox. etc. . . .) we could hope to leverage.
    S. 1908, Nanoscience to Commercialization Institutes can provide 
the key elements associated with successful commercialization of 
nanotechnology research: leadership, early stage funding to bring 
technologies out of the lab and into the market, and development of an 
infrastructure, culture and network to enable, support and effectively 
catalyze technology commercialization.

   Leadership will bring focus, drive, and strategic planning 
        to this process and we believe each Center must be held 
        accountable to strict metrics and push commercialization 
        through critical business planning processes.

   Funds will be necessary to establish the Centers, staff them 
        with talented and experienced business professionals, and 
        protect the intellectual property generated by Federal research 
        dollars.

   Incentives are needed to encourage entrepreneurs to develop 
        product prototypes. We believe the use of Federal and state tax 
        credits (as Oregon has begun to do) will be an important tool 
        to bring investors into this high-risk phase of the 
        commercialization process.

   Development of an infrastructure which supports 
        commercialization at the regional level will leverage existing 
        facilities, tools, and human capital which can provide the 
        critical mass of capabilities to support this process.

    We have two final observations which we think may be helpful as 
detailed planning for Nanoscience to Commercialization centers begins:

        1. Even at a time of global networks and instant 
        communications, nanotechnology commercialization actually calls 
        for localization. The centerpieces of this localization will be 
        shared physical facilities within easy commuting distance of 
        both researchers (university faculty and graduate students, 
        national laboratory technical staff) and industrial product 
        development personnel. These facilities are expensive both to 
        build and maintain. A critical-mass local community which 
        includes research institutions, industry, entrepreneurs and 
        sophisticated investors is needed for such facilities to be 
        truly successful.

        2. Judicious selection of a practical application theme (and 
        perhaps also a ``grand challenge'') that is not too broad and 
        not too narrow can be a vital catalyst for a commercialization 
        community. Combining the ``DARPA approach'' to problem solving 
        (define an important challenge, invite experts to a 
        brainstorming workshop, issue a funding solicitation, fund the 
        best ideas, down-select the best performers for development) 
        with dedicated facilities and co-located expertise as described 
        above may be the optimum model to consider.

    In conclusion, we believe S. 1908 centers implemented along the 
above lines will be hubs for networking regional assets and magnets for 
technology commercialization. They will yield a cluster of critical 
technologies, investment funds, human and capital assets, and the 
essential leadership required to accelerate the process. Regional 
economies will grow around these commercialization centers as a 
workforce, set of suppliers and service providers are attracted to the 
companies which emerge from each Center.

    Senator Smith. Skip, when I first came to the Senate, the 
dot-com business was booming, the Silicon Forest was the answer 
to the old forest. We didn't need to cut trees or any of those 
old kinds of jobs. But I always remember hearing, as I learned 
more about this new sector of the Oregon economy, that when 
high-tech companies hit the wall, there were no skidmarks.
    Now, when we saw the dot-com bubble burst, it seemed like 
there were a lot of wrecks around, and not many skidmarks. But 
I think what you're telling me is, ONAMI and Hewlett-Packard 
and Intel and others actually are planning and targeting out 
the life of their products. I'm sure you'll tell me that they 
fully comprehend where nanotechnology fits into future 
products. There's a market incentive out there to bring from 
the laboratory to the shelves of our businesses these new 
products.
    Mr. Rung. That is quite true. Intel and Hewlett-Packard, 
which have, as I said, their most important operations in the 
whole world in Oregon, have followed a very similar model for 
manufacturing jobs, and that is that you perform advanced 
research in the next generation of technology--the Pentium 5 
processor or the fourth-generation thermal inkjet--you make a 
massive investment in tooling and equipment and facilities and 
people to do the final stages of development, the early 
manufacturing, perhaps, for 1 or 2 years, and then, as that 
business takes off, you expand at hub sites--Intel calls this 
``copy exactly''; at HP, we called these ``regional hub 
sites''--and then, in the space left behind, you invent the 
next generation.
    So, what the American very-high-cost locations are involved 
in doing is mostly product development, and that's how you have 
the high-wage jobs, is that the old generation becomes old, it 
becomes a commodity, but you're there with the next one. And 
so, indeed, that's where nanotechnology fits in for companies 
like Intel and HP and FEI.
    Senator Smith. Yes. Now, for my colleagues, I know how 
ONAMI came together. We see, on a regular basis, the great 
universities compete quite vigorously for grants out of this 
place, but it seems that what you did was, instead of competing 
with all the regional universities, you got together one 
organization to pool these things. And could you describe that 
for my colleagues and for the Senate record?
    Mr. Rung. So, Oregon is a small State, and our research 
universities--and there are three research universities in the 
Oregon university system, those being Portland State, Oregon 
State, and University of Oregon--all have approximately 20,000 
students. That makes them rather small by national standards, 
compared to, say, a University of Wisconsin, with, what, 
90,000. And so, as research and the economic development 
contribution of universities became more important, a shift in 
thinking took place, starting 7 or 8 years ago, that, instead 
of competing for relatively small investments that the State of 
Oregon is able to make, it was a much smarter thing to do to 
join forces and have the universities collaborate with each 
other on joint proposals, sharing facilities, which we do, in 
order to be more competitive internationally. It has worked 
better, I think, than anyone ever expected. The leadership, 
from the presidents on down to the campuses, get along 
extremely well. I have a leadership team consisting of faculty 
leaders from all three universities and Pacific Northwest 
National Laboratory. There are joint inventions, there are 
successful proposals and exciting projects that simply could 
not have happened had we not decided to collaborate.
    Senator Smith. Are you seeing this being copied by other 
States?
    Mr. Rung. Yes. I think--although I'm not as familiar, of 
course, with other States' work as I am--I hear of things like 
this happening in Virginia and Maryland, for example. And so, I 
think it's--it's not an unheard-of topic at all. People 
recognize the importance of collaboration. Collaboration being 
so necessary if you want to assemble resources quickly, to 
attack an opportunity rather than spend a great deal of time 
building or hiring what you don't have.
    Senator Smith. Do any of you have any questions for him?
    In the interest of Senator Allen's time, he'd like to have 
his witness from Virginia go next. And so, if you don't mind, 
we'll go to Mr. Gwaltney, and you go next.
    Senator Allen. Thank you, Mr. Chairman.

         STATEMENT OF JERRY L. GWALTNEY, CITY MANAGER, 
                   CITY OF DANVILLE, VIRGINIA

    Mr. Gwaltney. Thank you, Mr. Chairman, distinguished 
Chairman Stevens, and, of course, Senator Allen--my name is 
Jerry Gwaltney. I'm the City Manager of the City of Danville. 
And Danville is an independent city located on the Dan River on 
the border of North Carolina.
    Strategically located on the mid-Atlantic Coast, Danville 
is within 1 day's driving distance to over two-thirds of the 
United States population. The city has a population of 48,000-
plus, and has lost a tremendous number of basic employer jobs 
over the past 24 to 36 months. In fact, the job losses have 
caused the unemployment rate to hover at more than double the 
state average. Today, it was announced in the paper that it's 
11.9 percent, and it stays there most often. Furthermore, the 
Danville MSA has held the position of the state's highest MSA 
unemployment level for 2 years or more. A total of 58 
metropolitan areas suffered total job losses over the year 
ending September 2005. Danville lost 2,400 jobs. This places 
Danville in the top four metropolitan areas in areas with job 
loss. Only three areas ranked higher than Danville. All three 
are located in areas devastated and ravaged by hurricanes.
    In order to reinvent the economy, the city is in the 
forefront of the establishment of infrastructure and the 
creation of an atmosphere conducive to establishing a 
nanocluster. I would like to share with you today the clear 
vision and subsequent path the city of Danville is engaging in, 
and further detail for you our efforts and success in utilizing 
nano as a crucial element in the transformation of our economy.
    Our goal in the city is rooted in, and grown from, the need 
to diversify our economy. Knowing we would face a decline in 
our traditional industries, tobacco and textiles, the city 
placed a proactive focus on evaluating the global economy and 
refining a vision that would serve as a catalyst for us and our 
local economy. In this case, and relative to today, the focus 
is on nano.
    Our efforts have been built on three equally important 
elements: education, a hands-on governmental approach, and 
private investment in technology. Through collaboration, 
partnership, and implementation, we've had success and 
recruited a nanotechnology facility now in place, and are 
confident additional interests will continue to unfold.
    I would like to take a moment to briefly focus on our 
collaborative efforts, as they have been, without a doubt, 
innovative and truly a template others can use as a model.
    The efforts began with creating an atmosphere of learning 
and interest, through schools, which--such as the Galileo High 
School, a school that was enabled through a Federal magnet 
grant which focuses on biotech, information technology, and 
aerospace. The efforts continue through the creation of 
infrastructure such as the Cyber Park, fiber network, business 
incubator, and the foundation for a nanocluster in our historic 
tobacco warehouse district redevelopment area.
    We have shaped our environment into one that is user-ready 
for various technology-focused companies, including 
nanotechnology. There's no doubt that Luna nanoWorks has been a 
catalyst for other companies selecting our area.
    Our efforts have been long thought out and aggressively 
sought after, yet would not be possible without numerous 
collaborative efforts. Our partners range from our neighboring 
county to Federal entities, such as EDA, along with hard work 
from a good Senator named Senator Allen--George Allen, and, of 
course, his colleagues, Senator Warner and Congressman Goode.
    We have invested in several key technology-based economic 
development assets, such as the Institute of Advanced Learning 
and Research and the Regional Center for Advanced Technology 
and Training, with the assistance from the Commonwealth of 
Virginia, the Tobacco Indemnification and Revitalization 
Commission, and various educational partners, to include 
Virginia Tech.
    We have a technology business incubator, which has been 
sponsored by EDA. This environment, along with our current 
nanomaterials manufacturing facility, Luna nanoWorks, a 
division of Luna Innovations, Incorporated, helps to secure 
Danville's position as a leader in technology, especially in 
the nanoscale.
    Luna is an ideal example of our intentions coming to 
fruition. It supports the idea that through government support 
a realistic effort exists in creating a nanoecosystem, of which 
nanotechnology research transference to the marketplace can 
take place regardless of the size or location of the ruralness 
of a community. Specifically, the Luna project's scope was $6.5 
million in investment, with the creation of 54 high-technology 
jobs over a 30-month period. Of course, I'm interested in what 
it can do for the support people who need to transfer to those 
jobs, also.
    Today, Luna is 25 employees strong, and growing--15 
Ph.D.'s, including two world renowned fullerene scientists, a 
member of the American Academies of Science, and a successful 
pharmaceutical entrepreneur make up this high-caliber company. 
Their presence has led to a very creative partnership for 
education excellence, K-12 and higher education, including 
significant work toward a graduate program at the Institute for 
Advanced Learning and Research in Nanotechnology. This success 
story owes its happy ending to a collaboration of a lot of 
people.
    And in your words, Mr. Chairman, and I quote, 
``Nanotechnology is creating opportunities that range from 
improving sports equipment to inventing lifesaving medical 
applications. Competition in nanotechnology is global in 
nature. Other countries, such as Japan and China, are making 
tremendous investments, and it's critical that we maintain 
global leadership.''
    Looking at it from a city manager's perspective, think what 
research can do for a city's operation by developing 
nanotextile materials that protect the policeman that's being 
shot at, or create better automobiles for use in city 
operations, or enhances our regional medical facilities. So, 
not only does nanomaterials and research assist in forming an 
economic basis for the community, it can also provide worldwide 
commercialization to help a city like Danville compete in the 
global economy.
    Senate bill 1908 positions the United States to retain its 
competitive position with respect to nanotechnology on a global 
scale. The bill's approach to building a collaborative 
partnership between private sector, the Federal Government, and 
major research institutions is exactly what is needed. The 
creation of eight Nanoscience to Commercialization Institutes, 
in my opinion, is right on target. In fact, Danville stands as 
an example of what this bill could accomplish on a much larger 
scale.
    In closing, Mr. Chairman, when you get the bill passed, I 
want one in Danville, Virginia. And that's----
    [Laughter.]
    Mr. Gwaltney. So--but let me say how important this is to 
our economy.
    Senator Smith. I know somebody who can help you----
    [Laughter.]
    Mr. Gwaltney. He's been very much of a help.
    Let me add one other thing here. I made a note--somebody 
mentioned $100,000 per year. And--but I also wrote ``support 
people,'' the people that won't make the $100,000 a year, but 
they can come out of the textile industry and the tobacco 
industry, which is no longer there, and be the support people 
and make decent salaries with regards to this.
    By the same token, when you bring something like this into 
a community such as I serve, which is a very rural area, and 
one that's been hard hit by NAFTA, you bring people in that 
change your school system, change your education system, and 
change what the demands are on the community to make that 
community lift itself up and bring the right kind of jobs to 
the people who are trying to better themselves.
    So, while I'm not the expert on the technology that the 
other gentlemen have mentioned here today--I'm here because of 
jobs and what nanotechnology can do for jobs and make a 
community competitive. It is an example and hopefully has given 
you some brief that we've been there and done that, and we've 
used this as a vision and a basis to make us a better place to 
be.
    Thank you for your time, sir.
    [The prepared statement of Mr. Gwaltney follows:]

        Prepared Statement of Jerry L. Gwaltney, City Manager, 
                       City of Danville, Virginia

    Mr. Chairman, Senator Allen and distinguished members of the 
Committee, thank you for the opportunity to appear before you and 
testify today on the establishment of the Nanoscience to 
Commercialization Institutes Act (S. 1908.)
    I am the City Manager of the city of Danville, Virginia. The 
independent city of Danville is located on the Dan River in the 
southern central portion of Pittsylvania County along the North 
Carolina Border. Strategically located on the mid-Atlantic coast, 
Danville is within 1 day's driving distance to over two thirds of the 
United States' population. Excellent highway and rail systems provide 
ready access to major northern and southern metropolitan and 
manufacturing markets.
    The city of Danville has a population of 48,411 and has lost a 
tremendous number of basic employer jobs over the last 24-36 months. 
These job losses have caused the unemployment rate to hover at more 
than double the state average (11.9 percent February 2006 versus VA at 
3.3 percent for that same month). Furthermore, the Danville MSA has 
held the position of the state's highest MSA unemployment level for 2 
years or more.
    A total of 58 metropolitan areas suffered total job losses over the 
year ending September 2005. Danville lost 2,400 jobs. This places 
Danville in the top four metropolitan areas with job loss. Only three 
areas ranked higher than Danville. All three are located in areas 
devastated and ravaged by hurricanes. The entire South Atlantic region 
has lost a total of 20,300 manufacturing jobs. The city of Danville 
alone claims over 8 percent of that regional total.
    In order to reinvent the economy, the city of Danville is in the 
forefront of the establishment of infrastructure and the creation of an 
atmosphere conducive to facilitating a nano cluster. I would like to 
share with you today the clear vision and subsequent path the city of 
Danville is engaging in and further detail for you our efforts and 
success in utilizing nano as a crucial element in the transformation of 
our economy.
    Our goal in the city of Danville is rooted in and grown from the 
need to diversify our economy. Knowing we would face a decline in our 
traditional industries, tobacco and textiles, the city placed a 
proactive focus on evaluating the global economy and refining a vision 
that would serve as a catalyst for us and our local economy. In this 
case, and relative to today, the focus is on nano.
    Our efforts have been built on three equally important elements: 
education, a hands-on governmental approach (local, regional and in 
partnership with the Commonwealth) and private investment in 
technology. Through collaboration, partnership and implementation we 
have had success and recruited a nanotechnology facility, now in place, 
and are confident additional interest will continue to unfold.
    I would like to take a moment to briefly focus on our collaborative 
efforts as they have been without a doubt innovative and truly a 
template others can use as a model. The efforts began with creating an 
atmosphere of learning and interest through schools such as the Galileo 
High School, a school enabled through a Federal magnet grant, which 
focuses on biotech, information technology and aerospace. The efforts 
continue through the creation of infrastructure such as a Cyber Park, 
fiber network, business incubator and the foundation for a nano cluster 
in our historic tobacco warehouse district redevelopment area. We have 
shaped our environment into one that is user ready for various 
technology-focused companies, including nanotechnology. It is no doubt 
that Luna nanoWorks has been a catalyst for other companies selecting 
our area.
    Our efforts have been long thought out and aggressively sought 
after, yet would not be possible without numerous collaborative 
efforts. Our partners range from our neighboring county, Pittsylvania, 
to Federal entities such as EDA along with hard work from our strong 
supporters; Senator Warner, Senator Allen and Congressman Goode. We 
have invested in several key technology based economic development 
assets such as the Institute of Advanced Learning and Research (IALR) 
and the Regional Center for Advanced Technology and Training (RCATT), 
with the assistance from the Virginia Tobacco Indemnification and 
Revitalization Commission, the Commonwealth of Virginia and various 
educational partners including Virginia Tech. We have a Technology 
Business Incubator through the contributions of EDA, the city and 
county. This environment, along with our current nano materials 
manufacturing facility, Luna nanoWorks, a division of Luna Innovations 
Incorporated helps to secure Danville's position as a leader in 
technology--especially in the nanoscale. Luna is an ideal example of 
our intentions coming to fruition.
    Luna is an example of how the city of Danville has bridged the gap 
in between vision and implementation. It supports the idea that through 
government support a realistic effort exists in creating a nano 
ecosystem from which nanotechnology research transference to the 
marketplace can take place regardless of the size or location of the 
community.
    Specifically, the Luna project scope was $6.5 million in investment 
with the creation of 54 high technology jobs over a 30-month period. 
Today, Luna is 25 employees strong and growing. Fifteen Ph.D.'s, 
including two world renowned Fullerene Scientists, a member of the 
American Academies of Science, and a successful pharmaceutical 
entrepreneur make up the scientific leadership team for this high 
caliber company. Their presence has led to a very creative partnership 
for educational excellence K-12 and higher education, including 
significant work toward a graduate program at the Institute for 
Advanced Learning & Research in nanotechnology. This success story owes 
its happy ending to a coalition of forces including the city of 
Danville, who purchased a building that is leased to Luna, the 
Governor's Opportunity Fund, the Tobacco Region Opportunity Fund, DBA 
workforce services, higher educational institutions, the SBA Hubzone, 
etc.
    In your words Mr. Chairman, ``Nano technology is creating 
opportunities that range from improving sports equipment to inventing 
life-saving medical applications. Competition in nanotechnology is 
global in nature. Other countries, such as Japan and China are making 
tremendous investments and it's critical that we maintain global 
leadership.''
    Looking at it from a City Manager's perspective, think what 
research can do for a city's operation by developing nano textile 
materials that protect the policeman that's being shot at or create 
better automobiles for use in city operations, or enhances our medical 
facilities. So not only does nano materials and research assist in 
forming an economic basis for the community, it can also provide 
worldwide commercialization to help a city like Danville compete in the 
global economy.
    Senate bill 1908 positions the United States to retain its 
competitive position with respect to nanotechnology on a global scale. 
The bill's approach to building a collaborative partnership between the 
private sector, the Federal Government and major research institutions 
is exactly what is needed. The creation of 8 Nanoscience to 
Commercialization Institutes, in my opinion, is right on target. In 
fact, Danville stands as an example of what this bill could accomplish 
on a larger scale. In closing, Mr. Chairman, when you get the bill 
passed I want a Nanoscience to Commercialization Institute for 
Danville.
    Again, thank you Mr. Chairman and Members of the Committee for your 
time and this opportunity to address you today.
              Luna nanoWorks--Nanomanufacturing Factsheet
Project Summary
    Cost-effective nanomaterials are needed for research and 
development of new defense and industrial applications. High volume 
production addresses the global need for large quantities of 
nanomaterials at a reduced cost. In a former tobacco warehouse in 
Danville, Virginia, Luna nanoWorks' focus is to be a leading 
manufacturer of carbonaceous nanomaterials.
What are Luna's Nanomaterial Technologies?
    Luna is a leader in nanotechnology with a focus on the 
manufacturing and application of carbon-based nanomaterials. Luna's 
nanomaterial technologies include carbon nanomaterials, empty cage 
fullerenes, and high purity carbon nanotubes. Luna's intellectual 
property position includes exclusive licenses, patents and inventions 
relating to manufacturing, modification, and application of these new 
nanomaterials. For example, TrimetasphereTM carbon 
nanomaterials are a newly discovered class of molecules owned 
exclusively by Luna. TimetasphereTM carbon nanomaterials 
consists of three rare earth metals (i.e., Scandium, Lutetium, Holmium, 
Gadolinium) inside a molecular cage formed of carbon atoms. Luna has 
successfully translated the research that conceived of these materials 
into a commercial reality.
What are the Commercial Applications?
    Luna is developing high value, carbonaceous materials for defense 
and commercial applications.
    Luna is focused on several defense applications including 
conductive coatings and sealants to improve stealth, low friction 
coatings to keep engines running with loss of lubricant, and high 
performance wearable solar cells. Luna's carbonaceous nanomaterials 
have also been demonstrated as single molecule devices for molecular 
computing and data storage.
    A critical commercial application of TrimetasphereTM 
carbon nanomaterials will be a new generation of medical diagnostic 
agents. Trimetasphere-based contrast agents for medical imaging offer 
the potential for improved performance and safety over competitive 
technologies. As an example, initial testing has shown that 
Trimetaspheres' nanomaterials can be used to provide medical 
images with 25x the resolution of leading technologies. The nature of 
the molecular cage protects patients from the metal atoms used for 
imaging, improving patient safety. Better diagnostic performance and 
safety results in improved patient outcomes and reduced health care 
costs. Trimetaspheres' nanomaterials also can be used as 
targeted diagnostics, enabling physicians to precisely locate cancer 
cells, blood clots, etc. for more effective diagnosis and treatment.
Why is this Project Important?
   For Danville--This project transforms the Southside economy 
        and promotes a high-technology image for the region with ``new 
        economy'' jobs. This division is projected to employ more than 
        50 people by 2006.

   For Virginia--Virginia has achieved national recognition in 
        nanotechnology, as the Commonwealth's leading research 
        universities, laboratories, and small businesses continue to 
        produce groundbreaking work in the field. This project further 
        establishes Virginia as an international leader in 
        nanotechnology. Luna's headquarters, research, and 
        manufacturing facilities are located in Virginia.

   For the U.S.--There are limited supplies of highly pure 
        carbonaceous nanomaterials to meet the ever increasing need in 
        research and development. This results in keeping nanomaterial 
        costs high while preventing widespread development. Luna is a 
        U.S.-owned manufacturer and developer of nanomaterials and will 
        be able to supply needed amounts of product necessary for 
        defense applications. Luna intends to work with the Department 
        of Defense on the research and development of products for the 
        future, and to create high quality jobs in the U.S.
Who were Luna's Collaborators in establishing nanoWorks in Danville?
    Partners include:

   U.S. Senator John Warner

   Governor Mark Warner, Secretary of Commerce & Trade Michael 
        Schewel and the Virginia Economic Development Partnership

   U.S. Congressman Virgil Goode and the Virginia Tobacco 
        Commission (Carthan Currin, Executive Director)

   City of Danville Office of Economic Development (Ron Bunch, 
        Executive Director)

   Virginia Department of Business Assistance's Workforce 
        Services Program

How Did the SBIR and ATP Funding Assist?
    Luna nanoWorks was aided by NSF programs that focused on production 
and separation technology and a NIST Advanced Technology Program for 
high-risk research and development of carbon nanomaterials for medical 
applications. The company continues to work on Department of Defense 
applications and is scaling up its manufacturing of nanomaterials for 
bulk supply.
Who is Luna Innovations?
    Luna nanoWorks is a division of Luna Innovations Incorporated--an 
employee-owned business, headquartered in Virginia 
(www.lunainnovations.com). Luna's business model is--Invent, Build and 
Commercialize. Luna is accelerating the innovation process, utilizing 
the vast resources of our Nation's universities and Federal 
laboratories to address critical defense and commercial market needs.
    Utilizing Small Business Innovation Research and NIST Advanced 
Technology Program awards, corporate partnerships and venture capital, 
Luna has developed cutting-edge products that improve the diagnosis and 
treatment of disease, enhance the way the world communicates, and 
provide a brighter future for our energy needs. Most recently, Luna's 
products are centered on breakthroughs in nanomaterials technology. 
Luna has created hundreds of high quality jobs in the State of Virginia 
and has research and manufacturing facilities in Blacksburg, 
Charlottesville, Hampton, Danville and McLean.

  Nanomaterials--An industry leader in nanotechnology, Luna is making 
                  products empowered by nanomaterials.
    Nanomaterials are components that enable engineering at the atomic 
scale. The assembly of composites using nanomaterials can achieve a 
degree of miniaturization and control of processes unprecedented in 
typical manufacturing. Luna nanoWorks, a division of Luna Innovations 
Incorporated, understands that the value of nanomaterials depends on 
the benefits provided to end-use products in which they are 
incorporated. The division is focusing on materials manufacturing and 
proprietary products based on carbon nanomaterials.
    TrimetasphereTM carbon nanomaterials are a newly 
discovered class of compounds that are exclusive to Luna. This patented 
class of novel molecules comprises 80 carbon atoms forming a sphere 
which encloses a complex of three metal atoms in a nitride 
configuration. TrimetasphereTM carbon nanomaterials can 
include metallic atoms of the Group IIIB and lanthanides, including 
Scandium. Different metals, each providing unique attributes, can be 
incorporated. For example, Gadolinium and Holmium 
TrimetasphereTM carbon nanomaterials 
(Gd3N@C80, and Ho3N@C80) 
have paramagnetic nuclei that could dramatically enhance the contrast 
for medical Magnetic Resonance Imaging (MRI) procedures and 
revolutionize medical diagnostics. These agents are nano-engineered to 
maximize the impact of the magnetic field on the water protons to 
achieve higher contrast. Gd3N@C80 is the only 
molecule that enables radiologists to administer a targeted Gd-based 
contrast agent to a specific target without the risk of metal toxicity.
    Luna offers Ho3N@C80 
Trimetasphere' as a building module for researchers that 
wish to track the distribution of their molecule after administration 
in animals. Holmium provides high relaxivity, which means sharper 
contrast and image resolution. The reagent kit provides Trimetaspheres 
to researchers and they can attach and customize their targeting 
species.
    Luna's Scandium TrimetasphereTM carbon nanomaterials 
(Sc3N@C80) have unique electron transport 
properties that could improve organic solar panel performance. Organic 
solar cells are lightweight, flexible and less expensive than inorganic 
solar cells but have not been widely used as they do not presently 
convert enough of the sun's light into electrical energy. Luna is 
developing a novel derivative of Sc3N@C80 that is 
designed to enhance organic solar cell performance which will make a 
more popular choice.
    Luna's expertise in TrimetasphereTM carbon nanomaterials 
includes synthesis, purification, functionalization and specific 
application development for defense and commercial requirements. Due to 
encapsulated metal variations, each species may be used for 
applications exhibiting different mechanical, electrical, optical and 
magnetic behavior based on end user needs.
    Single Wall Carbon Nanotubes (SWCNTs) consist of a single, rolled-
up sheet of atomic carbon hexagons that are 50,000 times thinner than a 
human hair. These hollow, cylindrical molecules of pure carbon are 
reported to be extraordinarily strong (100 times stronger than steel of 
the same weight) and flexible. Nanotubes can vary in diameter and in 
the pitch of the spiral formed by tracing each row of contiguous six-
membered rings. The term for the different spirals is ``chirality''. 
With different chirality nanotubes have different electrical 
properties. Some behave like insulators, preventing electricity from 
flowing, some are highly conductive and some are semi-conductors.
    The potential for creating nano-scale electrical circuits is but 
one exciting possibility using Luna's SWCNTs. In addition to their 
mechanical properties, SWCNTs have excellent thermal conductivity. Luna 
is working to integrate this property into textiles to create next-
generation garments that could eliminate heat quickly by harnessing the 
power of the nano-scale.
    Higher Fullerenes--The original Buckminster Fullerene is a C60 
sphere in which the carbon atoms are all covalently bound to each other 
in a structure that resembles a soccer ball. Carbon atoms can pack 
together in other arrangements, as demonstrated in the figure above. 
Each of these higher fullerenes has a different pattern of electrons 
which convey unique physical and chemical properties while allowing for 
unique electron affinities. This allows Luna to tune the electronic 
properties of nano-structured composites using different mixtures.
    Luna nanoWorks is taking advantage of its ability to manipulate the 
properties of their materials to engineer nanomaterials into a number 
of systems in specific products for the Department of Defense and 
others. Nano-empowered products under development include:

   Composites
   Coatings
   Paints
   Plastics
   Medical Diagnostics
   Therapeutics

    Senator Smith. Mr. Gwaltney, I don't really have a question 
for you, but I sure have about a dozen rural towns in Oregon 
I'd like to have listen to your testimony, because so many 
places of rural America were built by oldtime industries, and 
the products from those industries have passed or become 
uncompetitive, and I think you're setting the standard for how 
rural places can participate in the flat world economy at the 
highest levels of technology.
    Mr. Gwaltney. No doubt. We've had a lot of companies come 
just because they are there. But I think another important 
thing, Mr. Chairman, is that people say that these highly 
educated Ph.D.s don't want to come, they want to go to these 
universities. Well, there has to be that tie-in with their 
institutions and in research as we--such as we have done with 
Tech and the Institute. But I find that many of them would like 
to get in that kind of area, and they will come if the research 
and the capabilities are there for them to carry on their work.
    Senator Smith. Senator Allen?
    Senator Allen. Thank you, Mr. Chairman. And thank you for 
inviting, at my request--I wanted Luna Technologies to come, 
but we said, ``Well, let's get Mr. Gwaltney.''
    I've talked to the folks at Luna, and all these things we 
talk about are important, but so are people. One of the reasons 
Luna is there is Jerry Gwaltney. He's one--they said, ``We're 
interested in certain things,'' and they could take his word to 
the bank. And persons still matter in this world of technology, 
and he's one that--I'll tell you, they are facing the toughest 
thing, Danville and just a little bit to the west there, in 
Martinsville. They have lost literally thousands of textile 
jobs, some of them being lost right before Christmas. It's 
worse than a natural disaster when these--whether it's Dan 
River or Toltechs or others shut down. At least when there's a 
natural disaster, you can build back. But there are generations 
that have worked, and they lose these jobs due to international 
competition.
    And the transformation and the inspiration from what 
they're doing in Danville is very important. Where Luna is, 
they're now fabricating or manufacturing these Trimetaspheres, 
which----
    Mr. Gwaltney. Yes.
    Senator Allen.--can have all sorts of applications in life 
sciences, as well as some of the materials sciences. But what's 
most interesting is, where they're located is in the old 
tobacco warehouse district. So, they're in where the old 
economy was, building the most advanced intellectual property 
that they actually----
    Mr. Gwaltney. Yes, sir.
    Senator Allen.--own the trademark and the patents on this. 
And so, things are tough right now in Southside Virginia, with 
the decline of tobacco and textiles and, in some cases, wood 
bedroom furniture, as well. But these folks are fighting back. 
They are adapting as best they can.
    The universities do matter. There's an institute that was 
created down there in Danville with the community college, 
Averett. But the key was Virginia Tech. And Virginia Tech--I 
think that really does help a great deal. And I commend you, 
Mr. Gwaltney and all the folks in Danville and Pittsylvania and 
Southside Virginia for hanging tough. And I look at 
nanotechnology as the next economic revolution. And we need to 
be in the lead. And for the hardworking people and creative 
folks, whether it's in Danville or whether it's anywhere else 
in this country, we need to make sure that we're on the lead of 
it. And a place like Danville, if you all can do it, you're a 
model for others, as well. We're really proud of you. Count me 
as a continued teammate.
    Mr. Gwaltney. You certainly have been, and we certainly 
will continue to count on you.
    Now, let me just close by one more thing--one more thing 
that--I'm going to go back to what Chairman Smith said. I've 
had a chance, from an economic development standpoint, to 
travel to India and China and some of those places with regards 
to--and what they're doing to us. And I've seen that, 
firsthand. And to do something like this, that Chairman Smith 
is trying to do, I think, is the--really the most important 
thing that can be done for communities such as us. And, as you 
said early on, so many are at the--or Chairman Stevens or 
someone said--they're in different places, and they're where 
the institutions are, and what have you. If you can broaden 
this and make it something that can go out into the communities 
and bring those institutions together with the private research 
and the incentive programs and put--together by the local 
governments and the Commonwealth of Virginia, which Governor 
Allen was very familiar with, as Governor--it is very important 
to the livelihoods of communities such as mine that has been 
devastated with unemployment due to NAFTA and those type 
things.
    Thank you.
    Senator Smith. Well, thank you. I think most of the public, 
when they hear nanotechnology, they're afraid we're talking 
about a nanny state or something----
    [Laughter.]
    Mr. Gwaltney. That's right.
    Senator Smith.--and what this hearing's all about is what 
you're doing, and that is to make this real, in terms of 
products, in terms of jobs, in terms of American leadership on 
planet Earth. And so, you're a great witness and a great story.
    Mr. Gwaltney. Thank you, sir. Just one more thing. When 
they brought me that little black soot, I'll call it, that was 
supposed to be so--product of the nanomaterial, which I knew 
nothing about, I looked at our economic development, Ron Bunch, 
who is behind me, and said, ``What in the heck is this?'' But 
it has proven to be something really worthwhile. And the 
byproduct to our local educational system as--will do exactly 
what you all were talking about earlier, train these 
youngsters, get these youngsters into it. They're into--these 
people are into our school systems, and it's bringing tech into 
our school systems. And that's the way we're going to build the 
future scientists that Senator Allen and you want so much.
    Thank you.
    Senator Smith. Well, thank you.
    And thank you, Dave Rejeski, for your patience. You're 
going to bat cleanup here today. And so, the mike is yours.

        STATEMENT OF DAVID REJESKI, DIRECTOR, PROJECT ON

           EMERGING NANOTECHNOLOGIES, WOODROW WILSON

               INTERNATIONAL CENTER FOR SCHOLARS

    Mr. Rejeski. Great. I'd like to thank you, Chairman Smith, 
and also Ranking Member Dorgan and other Members of the 
Committee, for holding this hearing.
    My name is Dave Rejeski, and I direct the Project on 
Emerging Nanotechnologies at the Woodrow Wilson Center.
    Let me begin by talking a little bit about the state of 
commercialization. In February, our project released the first 
public inventory of nanotech-based consumer products. This 
suite of already commercialized products tells us something 
about the challenges we're going to face as we begin to 
introduce nanotechnology into the marketplace. In the end, it's 
going to be a test of our policies, our resolve, and our 
ingenuity.
    We found 230 products, and we believe this is a significant 
underestimate. And I've brought a few of these products with 
me. We can talk about them, if you'd like.
    These products have been commercialized predominantly by 
small- and medium-sized firms, most of them in the U.S. The 
products are entering the marketplace in areas where oversight 
and regulations are relatively weak, in the areas of cosmetics 
and dietary supplements. And commercialization is global. We 
found products essentially from 15 countries already.
    Senator Smith. Fifteen?
    Mr. Rejeski. Fifteen countries.
    In late March, the world experienced what may be the first 
nanotechnology accident resulting in adverse health effects, 
involving a German product, a bath and tile cleaner called 
Magic Nano. The product had significant health impacts. Over a 
hundred people were affected with respiratory problems, six 
people were hospitalized. In addition, a lack of disclosure 
concerning the ingredients on the product has prevented a 
timely resolution in the case. And a third-party testing label 
highly trusted by the German public, much like our UL label, 
was misused on this product, which is a serious offense.
    So, something is going right. We can begin to see these 
products are being commercialized, but clearly things can go 
wrong if we fail to provide the right oversight.
    One of the greatest enemies of commercialization is 
uncertainty--uncertainty about the risks, about regulation, and 
about public acceptance. Pervasive uncertainty is going to 
limit, ultimately, the flow of critical investment capital into 
what Sean described as the ``Valley of Death.''
    Let me provide just three recommendations to improve the 
overall climate for commercialization in this country. It will 
help firms. It's going to help investors. And it's going to 
help consumers.
    First, there's been an incredibly surprising degree of 
consensus between industry, trade associations, think tanks, 
and NGO's concerning the need for more environmental health and 
safety research funds and the need to make sure these funds are 
strategically allocated to deal with existing and emerging 
risks. We need to put the research in front of the product 
flows to both inform our oversight strategies with good science 
and to provide important information on risks and benefits to 
the public.
    Second, for commercialization to succeed, we need an 
oversight system that's transparent for business, that's 
efficient, and predictable. We don't have that now. Companies 
are unsure about the regulatory intentions of the Government 
right now, investors are insecure, and the public is largely 
uninformed. Short of new legislation, there is much more 
Government and industry can do to provide adequate oversight of 
emerging products. One approach is applying a portfolio-of-
initiative strategy to key product areas. Using just cosmetics 
as an example, we could put together the FDA's voluntary 
registration program with what industry does on ingredients 
review, couple that with some labeling guidelines and more 
consumer education. In other words, we put together a portfolio 
of approaches.
    Finally, I think we've waited too long to really engage the 
public about nanotechnology. Successful commercialization 
without strong consumer confidence, is just not possible. So, 
we need resources for public engagement. They need to be 
increased by orders of magnitude, and efforts rapidly 
accelerated.
    If we don't address these broad issues affecting the 
climate for commercialization, I think the work of any of the 
commercialization institutes, such as those being considered by 
the Subcommittee, is going to be severely handicapped, and a 
lot of innovations could essentially die on the laboratory 
bench.
    There are also a few more focused activities that could be 
undertaken to complement the proposal in the bill, which I 
support.
    First, I think that commercialization policies and the 
programs need to be informed by rigorous data about the firms, 
their products, their issues, and their needs. We need to get 
some people on the ground collecting data. I think the Commerce 
Department should work to collect and continually update survey 
data on nanobusinesses, working as needed with other data-
collection arms of the U.S. Government, whether it's the Bureau 
of Labor Statistics, the Census Department, whatever.
    Second, I also think we need a one-stop-shop at a Federal 
level focused on integrating our efforts that are critical to 
commercialization. I'd call it the Interagency Nano Business 
Office. The existing National Nanotech Coordinating Office does 
a good job, but it was set up to coordinate science, not to 
drive innovations to market. So, I think a one-stop shop would 
complement the nanoscience commercialization institutes being 
proposed in S. 1908, and also help bring a lot of the policy 
discussions together at a Federal level, and that would help us 
in our interactions internationally.
    I think we should use the purchasing power of the 
government, at Federal, state, and local levels, or quasi-
governmental organization such as the Postal Service, to create 
early markets for critical nanotech-based products, especially 
in the energy application area, such as lighting, 
photovoltaics, fuel cells, and batteries.
    Finally, I think we begin now to develop an export-
promotion strategy to help U.S. nanotech firms in what's going 
to be an incredibly tough and highly competitive global market. 
That means engaging agencies that have been largely on the 
sidelines of the national nanotech initiative, but are going to 
play increasingly important roles in commercialization, such as 
the Export-Import Bank and the Trade and Development Agency.
    There's one caveat that applies to everything that I have 
said here. Any government program, policy, or strategy, has got 
to work for our small businesses. They are essentially the 
heart of the nanotech revolution.
    I'd like to close by saying that I applaud the Committee 
for focusing our attention on the issues of commercialization. 
Nanotechnology is no longer just a large government science 
project. In the long run, key social and economic benefits will 
only occur if we succeed in bringing innovations to market.
    Thank you.
    [The prepared statement of Mr. Rejeski follows:]

  Prepared Statement of David Rejeski, Director, Project on Emerging 
   Nanotechnologies, Woodrow Wilson International Center for Scholars

    I would like to thank Subcommittee Chairman Gordon Smith, Ranking 
Member Byron Dorgan, and the members of the Senate Subcommittee on 
Trade, Tourism, and Economic Development for holding this hearing on 
promoting economic development opportunities through nanotechnology 
commercialization.
    My name is David Rejeski, and I am the Director of the Project on 
Emerging Nanotechnologies at the Woodrow Wilson International Center 
for Scholars. The Project on Emerging Nanotechnologies is an initiative 
launched by the Wilson Center and The Pew Charitable Trusts in 2005. It 
is dedicated to helping business, government and the public anticipate 
and manage the possible health and environmental implications of 
nanotechnology. The Project collaborates with researchers, government, 
industry, nongovernmental organizations (NGO's), and others concerned 
with the safe applications and utilization of nanotechnology.
    Our goal is to take a long-term look at nanotechnologies, to 
identify gaps in the nanotechnology information, data, and oversight 
processes, and to develop practical strategies and approaches for 
closing those gaps and ensuring that the benefits of nanotechnologies 
will be realized. We aim to provide independent, objective information 
and analysis which can help inform critical decisions affecting the 
development, use, and commercialization of nanotechnologies throughout 
the globe.
    In short, both the Wilson Center and The Pew Charitable Trusts 
believe there is a tremendous opportunity with nanotechnology to ``get 
it right.'' Societies have missed this chance with other new 
technologies and, by doing so, forfeited significant social, economic, 
and environmental benefits.
    As the Subcommittee knows, nanotechnology is expected to become the 
transformational technology of the 21st century. It is the world of 
controlling matter at the scale of one billionth of a meter, or around 
1-100,000th the width of a human hair. Researchers are exploring new 
ways to see and build at this scale, reengineering familiar substances 
like carbon and gold in order to create new materials with novel 
properties and functions.
    As the National Science Foundation (NSF) highlights, the ability to 
create novel properties in materials and systems at this scale implies 
that nanotechnology eventually could impact the production of virtually 
every human-made object--everything from automobiles, tires, and 
computer circuits to advanced medicine and tissue replacements--and 
lead to the invention of products yet to be imagined.\1\ Nanotechnology 
will fundamentally restructure the technologies currently used for 
manufacturing, medicine, defense, energy production, environmental 
management, transportation, communication, computation, and education.
The Landscape of Nanotechnology Commercialization
    It would have been difficult to address the state of 
commercialization just one year ago. In March 2006, our project 
released the first public inventory of nanotech-based consumer 
products.\2\ This suite of already-commercialized products tells us 
something about the emerging face of the nanotechnology industries and 
the challenges we face as we begin to introduce nanotechnology into the 
marketplace. It is a test. Our ability to reap the long-term benefits 
of nanotechnology--in areas from medicine to energy and food 
production--will depend heavily on how we manage the introduction of 
this first generation of consumer products. More complex products, with 
large societal implications, will soon be upon us. For example, there 
are currently 130 nano-based drugs and delivery systems and 125 devices 
or diagnostic tests in preclinical, clinical, or commercial 
development--an increase of 68 percent percent since last year.\3\ We 
are about to be inundated with hundreds, if not thousands, of new 
products.
    In analyzing our nanotechnology consumer products inventory, we 
found that:

   There are 230 products on the market. We believe this number 
        is a significant underestimate because the inventory only 
        contains nanotechnology products self-identified by the 
        manufacturer. This does not include the ``over 600 raw 
        materials, intermediate components and industrial equipment 
        items'' that EmTech Research projects are currently in use by 
        manufacturers.\4\

   These consumer products have been commercialized 
        predominantly by small and medium sized enterprises (our 
        estimate is that roughly two-thirds of products are from small 
        or medium sized businesses).\5\

   Products are entering the marketplace in areas where 
        regulations and oversight are weak, for instance, in the areas 
        of cosmetics (31 products), dietary supplements (13 products), 
        and consumer products (at least 135 products). Many of the 
        products we found have high exposure potential, being used 
        directly on the body or actually ingested. In short, we are 
        facing a situation in which nano-based products are entering 
        the market at precisely the points where government regulation 
        and oversight are imperfect and imprecise and potential 
        exposure is high.

   Commercialization is already global. We found products from 
        15 countries.\6\ Nanotechnology will continue to mature in a 
        global digital economy where products can be bought and sold on 
        the Internet and flow quickly across international boundaries 
        through both business-to-consumer and business-to-business 
        Internet transactions. This trend in global e-commerce will 
        present new challenges for our oversight system, as products 
        can be shipped, transported, and traded between nations with 
        varying environmental, health, and safety laws. The lack of 
        international agreements on labeling products that contain 
        nanomaterials further complicates this issue.

    In late March in Germany, the world experienced what may be the 
first nanotechnology incident resulting in adverse health effects--from 
a bath and tile treatment called ``Magic Nano.'' The product allegedly 
had significant health impacts, with 100 people affected with 
respiratory problems and six hospitalized with pulmonary edemas.\7\ 
Other issues have since emerged around ``Magic Nano'' that are critical 
to our ability to commercialize new nanotechnology products in the 
future, including:




   A lack of disclosure concerning the ingredients in the 
        product has prevented a timely resolution of the case and 
        determination of whether and how nanotechnology might have been 
        implicated. A panel of German government experts was unable to 
        determine whether nanomaterials were the cause of health 
        problems because ``the distributors of the two sealing sprays 
        were unable to supply the full formulations because information 
        was missing from their upstream suppliers.'' \8\

   It appears that a third party testing seal, highly trusted 
        by the German public (TUV), was misused on this product. The 
        head of the Federation of German Consumer Organizations noted 
        that ``It is irresponsible to give the consumers a mistaken 
        sense of security by falsifying stamps.'' \9\ This case has 
        been referred to the district attorney, and there are calls for 
        a criminal investigation against the manufacturer for suspected 
        violation of Germany's product safety laws. This is analogous 
        to the misuse of the Underwriters Laboratories (UL) symbol in 
        the United States, which has occurred recently with respect to 
        fireplaces,\10\ extension cords,\11\ and table saws.\12\ 
        Further complicating this issue is that these third-party 
        certification bodies test products more for performance than 
        for potential health or environmental risks. Even if such 
        bodies were called upon to test products containing 
        nanomaterials, no clear, agreed-upon test protocols exist.

    Regardless of how this case plays out, the lack of transparency and 
issues with independent testing have serious implications for public 
perceptions. When asked what would help increase public trust in 
government to manage the risks posed by nanotechnology, a number of 
studies conducted around the world have reached two conclusions: 
greater transparency/disclosure and the use of third party, independent 
safety testing. The ``Magic Nano'' case indicates that both of these 
principles can be violated and that a similar situation could occur 
just as easily in the United States or other developed countries. The 
incident may be local, but the press is global.
Challenges Facing Nanotechnology Commercialization
Lack of Effective Oversight Mechanisms
    Something is going right--products are being commercialized--but, 
clearly, things can go wrong if we fail to provide the adequate 
oversight, as the ``Magic Nano'' case in Germany illustrates.
    Though agencies have been meeting to discuss oversight and the EPA 
has begun developing a voluntary data collection program, our approach 
on the regulatory side so far has been ad hoc and incremental, with no 
vision. It is particularly worrisome that many nanotechnology-based 
consumer products are entering the market in areas with little 
government oversight, such as cosmetics and dietary supplements. The 
U.S. Government approach has been limited by the following:

   A focus on single statutes such as the Toxic Substances 
        Control Act (TSCA) rather than taking an integrated, multi-
        statute approach;

   A focus on products more than the facilities and processes 
        where production occurs;

   A general lack of concern with the full life-cycle impacts 
        of emerging nanotechnologies (an approach recommended in the 
        2004 U.K. Royal Society Report); \13\

   Too little resources devoted to pollution prevention and the 
        ``greening'' of nanotechnology products and production 
        processes, which could help industry and society ultimately 
        avoid potential risks from the beginning; and

   Inadequate discussion of the resource constraints to 
        effective oversight (for instance, do we have the personnel, 
        expertise and dollars in the agencies needed for enforcement or 
        testing?).

    Most important, we have not looked forward to consider where 
nanotechnology is heading, assuming instead decades-old risk management 
policies and analogies to the past will help us respond to the risks of 
the future. Today, nanotechnology is largely chemistry and materials 
science. But it is quickly becoming chemistry and biology. After that, 
we will be dealing with multifunctional machines operating at the 
interface of classical and quantum physics, and, eventually, the 
convergence of nanotechnology, biotechnology, information technology, 
and cognitive science.
    Many of the assumptions that governed our approach to chemicals 
regulation may no longer hold. Because the risks of nanomaterials are 
poorly related to mass (and depend on other characteristics like 
surface area, chemistry, charge, etc.), governments and industry will 
have to rethink the mass-based approaches that have historically shaped 
our toxicology, regulations, and regulatory-related monitoring systems. 
In addition, as nanomaterials become more complex and multi-functional, 
new properties will emerge that are not predictable from the simple 
chemical approach of current regulations.
    We need a systemic analysis across agency statutes and programs, 
across agencies, and across the international landscape. This should 
include existing regulations, voluntary programs, information-based 
strategies, state and local ordinances, and tort law. All these 
measures need to be evaluated not just in terms of their applicability 
to nanotechnology today, but also in terms of their efficacy in 5 or 10 
years. We need an oversight blueprint that is proactive, transparent, 
and, for industry, predictable both now and into the foreseeable 
future.
Lack of Public Engagement
    We know from public surveys and polls that the government and 
industry will have to win the public's trust on nanotechnology. The 
emergence of viable markets depends on strong and growing consumer 
confidence.
    However, in the midst of nanotechnology's commercialization, 
publics throughout the world remain largely in the dark. A major study, 
funded by NSF and conducted in 2004 by researchers at North Carolina 
State University (NCSU), found that 80-85 percent of the American 
public has heard ``little'' or ``nothing'' about nanotechnology.\14\
    This is consistent with similar polling results in Europe and 
Canada. Anecdotally, some researchers believe that an even higher 
percentage of the public remains uninformed about nanotechnology. These 
same citizens are now meeting nanotechnology products in their local 
store or on the Internet. The public will increasingly have to make 
sense of competing claims, complex science, and emerging risk research, 
all with little or no preparation or support. Into this mix enter an 
increasing number of NGO groups interested in shaping public opinion in 
various directions, some of which may have large strategic implications 
for business and government.\15\
    In 2005, the Project on Emerging Nanotechnologies commissioned a 
new report by Senior Associate Jane Macoubrie, who co-authored the 
North Carolina State University study in 2004. This new report, 
``Informed Public Perceptions of Nanotechnology and Trust in 
Government,'' provides an in-depth look at American attitudes toward 
nanotechnology.\16\
    It indicates that U.S. consumers, when informed about 
nanotechnology, are eager to know and learn more. They generally are 
optimistic about nanotechnology's potential contribution to improve 
quality of life. The key benefits the public hopes for are major 
medical advances, particularly greatly improved treatment for cancer, 
Alzheimer's, and diabetes.
    The Project's report findings track closely with work done in 2004 
by University of East Anglia researcher Nick Pidgeon for Great 
Britain's Royal Society. Pidgeon also found there were few among the 
British public who knew much about nanotechnology. Those that did were 
optimistic that it would make life better.\17\ This general public 
optimism about nanotechnology is what I consider the ``good news.'' 
This optimism is tempered by a significant amount of suspicion about 
industry's intentions, and skepticism about the government's commitment 
to effective oversight.
    For policymakers, the ``take home'' messages that emerge from these 
studies are quite clear:

   Consumers want more information to make informed choices 
        about nanotechnology's use and greater citizen engagement in 
        shaping how the technology is developed.

   There are low levels of trust in government and industry to 
        manage any risks associated with nanotechnology. There is 
        little support for industry self-regulation or voluntary 
        agreements. A majority of the public believes that mandatory 
        government controls are necessary.

   People have clear ideas about how to improve trust. They 
        want government and industry to practice due diligence to 
        ensure manufacturing and product safety. In both U.S. and U.K. 
        studies, this translated into strong support for research and 
        safety testing before products go to market and a focus on 
        better understanding long-term effects on both people and the 
        environment.

    In my view, there is still time to inform public perceptions about 
nanotechnology and to ensure that nanotechnology is developed in a way 
that citizens--as well as the insurance industry, corporate investors, 
NGO's, and regulatory officials--can trust. However, with the 
production of nanosubstances ramping up and with more and more 
nanotech-based products pouring into the marketplace, this window is 
closing fast.
    Worries are already being voiced that public input will now be used 
simply as a ``tokenistic add-on'' rather than as a valuable policy-
making tool.\18\ Coordinated education and engagement programs will be 
needed, supported by both government and industry. Public engagement 
programs will have to be structured to reach a wide range of consumers, 
cutting across age, gender, and socioeconomic status, utilizing a 
variety of media going beyond traditional print, radio, television and 
film, and toward non-traditional media such as blogs and multiplayer 
online games.
Lack of Coordinated Research Strategies
    There are currently no coordinated research strategies designed to 
address the potential environmental, health, and safety risks posed by 
nanotechnology. In the absence of such a risk-related research 
strategy, it will be difficult for the public or for small and medium 
sized companies to learn about the downsides of the technology and 
reach conclusions about where the greatest risks lie. Additional 
research about potential workplace hazards, environmental implications, 
and human health toxicity needs to be done and made readily available 
to small and medium sized nanotechnology corporations.
    Over the past 15 years, scientific data on the health and 
environmental impacts of nanostructured materials has been growing 
slowly. However, research on the implications of manufactured 
nanomaterials has only been available for the past 5 years. Though much 
of the research undertaken so far has raised more questions than 
answers, a number of key points have emerged, including:

   Since engineered nanomaterials show behavior that depends on 
        their physical and chemical structure, risk assessment 
        paradigms that have been developed based on traditional, bulk 
        chemistry alone may no longer be valid.

   Inhaled, nanometer-structured, insoluble particles can 
        elicit a greater response in the lungs than their mass would 
        suggest, indicating mechanisms of action that are dependent on 
        particle size, surface area, and surface chemistry, among other 
        properties. However, information is lacking on nanomaterials' 
        structure-related behavior in the body.

   Inhaled, nanometer-diameter particles may leave the lungs 
        through non-conventional routes and affect other parts of the 
        body, including targeting the cardiovascular system, the liver, 
        kidneys, and the brain. Next to nothing is known about the 
        impact of engineered nanomaterials on these organs.

   Nanometer-diameter particles may be able to penetrate 
        through the skin in some cases, although this is still an area 
        of basic research and the chances of penetration appear to be 
        significantly greater for damaged skin. The potential for 
        nanostructured particles present in cosmetics and other skin-
        based products to do harm may be low, but remains unknown.

   Little information on how manufactured nanomaterials may 
        affect ecosystems and how they might bioaccumulate.

   Virtually nothing is known about the hazard of engineered 
        nanomaterials ingested as a food additive or by accident.

    To date, the majority of research on the environmental, health, and 
safety (EH&S) implications of nanotechnology has focused on relatively 
basic engineered nanomaterials. As nanomaterials move from simple to 
complex materials and on to active and multifunctional materials, major 
knowledge gaps need to be filled before useful quantitative risk 
assessments can be carried out and before comprehensive, lifecycle risk 
management strategies can be developed.
    A number of groups have developed, or are in the process of 
developing, lists of research priority areas and questions of interest. 
These organizations include EPA, NIOSH,\19\ Environmental Defense,\20\ 
the Semiconductor Research Corporation, the Chemical Industry Vision 
2020 Technology Partnership,\21\ and the Project on Emerging 
Nanotechnologies. Despite the diversity of these organizations, these 
gap analyses are generally in broad agreement on the areas requiring 
further research and development. Common themes include: toxicity 
(human and environmental), exposure and material release/dispersion, 
epidemiology, measurement and characterization, control of exposure and 
emissions, safety hazards, risk management models, and product life 
cycle analysis.
    However, more needs to be done to engage small and medium sized 
businesses in setting research agendas and outlining where knowledge 
gaps exist. Without such involvement, EH&S research may not be able to 
adequately address and provide substantial answers to many risk 
management questions that will emerge in both the near and long-term 
future for these companies. Therefore, an effective, forward-looking, 
internationally accepted, small and medium sized business focused, EH&S 
research strategy needs to be developed to fill this gap.
Recommendations for Nanotechnology Commercialization
    Let me provide three general recommendations to improve the overall 
climate for commercialization that will help companies, investors, and 
consumers. The goal is to ensure the benefits overweigh the risks, 
firms have a clear path to market, and public confidence grows.

   We need to put our research in front of product flows to 
        both inform oversight and regulatory strategies with good 
        science and to provide important information on risks and 
        benefits to the public. There has been a surprising consensus 
        between industry, trade associations, think tanks, and 
        environmental NGO's concerning the urgent need for more EH&S 
        research funds and the need to make sure these funds are 
        strategically allocated to deal with existing and emerging 
        risks. For instance, though we know there are already 
        ingestible nanotechnology products on the market--along with a 
        number of promised applications in the agriculture and food 
        sectors--there is a total lack of research on the impacts of 
        nanomaterials in the gastro-intestinal tract. Given the lag 
        time between the initiation of research and the results, 
        greater efforts need to be made to place research on 
        environmental, health, and safety concerns further ``upstream'' 
        in the product development process. \22\ Such research needs to 
        be coordinated at a global level, since the commerce in 
        nanotechnology materials and products is, and will continue to 
        be, worldwide.

   For commercialization to succeed, we need an oversight 
        system that is transparent, efficient, and predictable. We do 
        not have that now. Companies are often confused about the 
        regulatory intentions of the government, investors and insurers 
        are insecure, and the public is suspicious. In his report on 
        the subject, Dr. J. Clarence Davies noted that ``nanotechnology 
        is difficult to address using existing regulations,'' since 
        they ``either suffer from major shortcomings of legal 
        authority, or from a gross lack of resources or both.'' \23\ 
        Short of new legislation, which must be seriously considered, 
        there is much more government and industry can do to provide 
        adequate oversight on emerging products. One approach is 
        applying a portfolio-of-initiatives strategy to key product 
        areas. \24\ Using cosmetics as an example, one could assemble a 
        portfolio which combines the FDA's Voluntary Cosmetic 
        Registration Program (VCRP), \25\ the Cosmetic, Toiletry & 
        Fragrance Association's (CFTA) Cosmetic Ingredient Review 
        (CIR), \26\ labeling guidelines, and consumer education efforts 
        by industry and government. Such a multi-faceted system could 
        be used to ``fast-track'' the review of key nanomaterials, such 
        as carbon fullerenes, that are already being used in high-
        exposure cosmetic products. Integrating industry, government, 
        and association efforts would help bolster the insufficient 
        level of human resources that exist in the regulatory agencies. 
        \27\ Such a portfolio-based approach requires not only 
        integrating initiatives, but a constant evaluation of progress 
        and a willingness on the part of government and industry to 
        make midcourse corrections if necessary.

   Finally, resources for public engagement need to be 
        increased by orders of magnitude and engagement activities need 
        to be rapidly accelerated. We have waited far too long to begin 
        engaging the public about nanotechnology. Successful 
        commercialization without strong consumer confidence is 
        impossible. How consumers find out about nanotech, from whom, 
        and with what messages will be critical to nanotechnology's 
        long-term success. Key impressions will be formed over the next 
        2 years that will affect consumer confidence far into the 
        future. The ``21st Century Nanotechnology Research and 
        Development Act'' requires the government ensure that ``public 
        input and outreach . . . be integrated into the Program by the 
        convening of regular and ongoing public discussions, through 
        mechanisms such as citizens' panels, consensus conferences, and 
        educational events.'' \28\ However, nothing along these lines 
        has occurred in over a year and a half, and the first meeting 
        on this topic will take place at the end of this May to discuss 
        how to do public engagement, not to actually engage the public. 
        The longer we wait, the greater the danger that the public will 
        see such efforts as disingenuous, ``after the fact,'' and 
        tokenistic.\29\

    These three steps should be taken together, properly resourced, and 
integrated. Frankly, with products flowing into the market at an 
increased rate, we do not have a lot of time. There is no ``pause 
button'' for technological innovation that government can conveniently 
push to create time for research, testing, policy deliberation, or a 
few more public meetings. By the time we have settled on nomenclature 
for the first generation of nanomaterials, the next generation will be 
upon us; by the time we have characterized risks of early nano-based 
substances, newer, more complex materials will be on the market. 
Without better foresight, our answers will be for yesterday's 
questions.
Focused Recommendations
    In addition to creating a more strategic and forward-looking 
approach to research, oversight, and public engagement, there are also 
a number of more focused activities that can be undertaken to 
accelerate the commercialization of nanotechnologies.
    First, our commercialization policies and programs need to be 
informed by rigorous data about nanotech firms, their products, their 
issues, and needs. We have virtually no government-derived data to 
guide commercialization strategies, a situation that is dangerous given 
our multi-billion dollar investments in nanotechnology. The Department 
of Commerce should work to collect and continually update survey data 
on nano businesses, especially startups, working, as needed, with the 
Bureau of Labor Statistics, the Census Bureau, or other data collection 
arms of the U.S. Government. As with other sectors and industries, data 
should be collected on demographic characteristics of the labor force, 
R&D expenditures, revenues, environment/health/safety issues, injuries/
illnesses, exports, and the geographic profile of the firms. We should 
also better understand who could best help these firms with which 
issues. Will they access websites, use technical assistance programs at 
nearby universities, or prefer peer-to-peer mentoring from other firms? 
The Project on Emerging Nanotechnologies is presently working with Yale 
University and the University of Massachusetts at Lowell to survey the 
environmental, health and safety concerns/needs of nano startups in the 
New England area, but data collection of this type should be undertaken 
broadly by the government and conducted over long periods of time as 
firms change and mature.\30\
    Second, we should create a one-stop-shop at a Federal level focused 
on helping firms with issues around commercialization--an Interagency 
Nano-Business Office--INBO, where companies in need of help can be 
quickly directed to the appropriate Federal programs. The existing 
National Nanotechnology Coordinating Office (NNCO) was set up to 
coordinate science, not to drive innovation to market and deal with 
commercialization challenges. Its function needs to be complemented and 
expanded. The creation of various Nanoscience to Commercialization 
Institutes around the country does not mitigate the need for a 
centralized locus in the Federal Government. INBO needs to be 
structured and staffed to work well with the business and investor 
communities, and will need the capability to deal with international 
business issues involving trade, export and intellectual property 
protection.
    Third, we should use the purchasing power of the government, or 
quasi-governmental organizations, to help create early markets for 
critical nanotech-based products, especially in the energy sector. The 
Federal Government purchases approximately 2 percent of all things sold 
in the United States, with state and local governments purchasing an 
additional 5 percent. Key players in terms of procurement are the 
Postal Service, General Services Administration, Department of Defense, 
and Department of Homeland Security as well as state and municipal 
agencies with significant buying power. Large procurements can increase 
economies of scale and prove critical in reducing costs for early stage 
technologies. The Postal Service cut the per unit cost of energy-saving 
LED exit signs almost in half by committing to purchase 15,000 units, a 
change which saved them more than $300,000 per year in energy and 
maintenance costs.\31\ In the energy sector, key nano-based 
technologies that could benefit from early adoption strategies by 
government are: batteries, photovoltaics, fuel cells, and lighting.
    Fourth, the United States should become the world leader in the 
development and commercialization of environmentally benign, ``green'' 
nanotechnology production processes and products as well as a new 
generation of nano-based environmental technologies. At the beginning 
of what may be another industrial revolution, we have a unique window 
of opportunity to engineer significant risks out of products and 
processes. Instead, we are creating a long-term employment program for 
risk assessors and toxicologists. In terms of research funding, we have 
set up a false dichotomy between applications and implications 
research, often creating a zero-sum game where we must chose between 
eliminating or preventing risks or studying them, after the fact. There 
are already examples that new nano production processes can be both 
environmentally beneficial and cost effective. For instance, ongoing 
research at the University of Oregon is being directed at the cleaner 
and greener production of gold nanoparticles, a process that also 
reduces the cost of synthesizing these materials from $300,000 per gram 
to $500 per gram.\32\ Though there are over 100 projects being funded 
by the National Science Foundation that are focused, at some level, on 
the ``green'' application of nanotechnology to the environment, more 
work needs to be done in this area and U.S. leadership established as a 
means of creating a global niche for our firms and expertise.
    Finally, we need to begin developing an export promotion strategy 
to help U.S. nanotech firms in what will be a tough and highly 
competitive global market. NSF predicts that the world market for goods 
and services using nanotechnologies will grow to $1 trillion by 2015. 
Lux Research calculates that in 2004 there was $13 billion worth of 
products in the global marketplace incorporating nanotechnology.\33\ 
Worldwide about $9 billion annually is being spent by governments and 
the private sector on nanotechnology research and development. The thin 
film and photovoltaic sector is projected to be ``worth over $2.3 
billion in the year 2011,'' \34\ and the use of silver nanoparticles in 
fields as diverse as food packaging and medical devices is ``emerging 
as one of the fastest growing product categories in the nanotechnology 
industry.'' \35\ This means engaging agencies that have been largely on 
the sidelines of the National Nanotechnology Initiative but that will 
play increasingly important roles in commercialization, including the 
Export-Import Bank, Federal Trade Administration, Trade and Development 
Agency, State Department, and Small Business Administration. These 
agencies will be key players in a coordinated export promotion 
strategy.
    There is one important caveat that applies to everything I have 
mentioned. Any government program, policy, or strategy must work for 
our small businesses; they are the heart of the nanotech revolution and 
will remain so into the foreseeable future. According to the 2003 
Census, nearly 72 percent of 300,000 manufacturing entities in the 
United States have less than 20 employees and 92 percent of 
manufacturing companies have less than 100 employees.\36\ Additionally, 
the Small Business Administration estimates that there were 
approximately 22.9 million small businesses in the U.S. in 2002 and 
that small businesses provide approximately 75 percent of the net new 
jobs added to the economy, represent 99.7 percent of all employers, and 
represent 97 percent of all U.S. exporters.\37\
    In closing, let me say that I applaud the Committee for focusing 
our attention on issues of commercialization. Nanotechnology is no 
longer just a large government science research project. In the long 
run, key social and economic benefits will only occur if we succeed in 
bringing innovations to market. To do that, we need to place new 
people, resources, and ideas behind an expanded national nanotechnology 
initiative.
ENDNOTES
    \1\ M.C. Roco, R.S. Williams and P. Alivisatos. Nanotechnology 
Research Directions: IWGN Workshop Report. Berlin, Germany: Springer, 
2000, p. iii-iv.
    \2\ See http://www.nanotechproject.or/consumerproducts and Rick 
Weiss, ``For Now, Nanotechnology Means Little More Than Better Golf 
Balls,'' The Washington Post, March 10, 2006.
    \3\ ``2006 Nanomedicine, Device & Diagnostics Report.'' NanoBiotech 
News. Atlanta, GA: National Health Information, LLC, 2006.
    \4\ ``Nanotechnology White Paper,'' Washington, D.C.: United States 
Environmental Protection Agency, December 2, 2005. Available at http://
www.epa.gov/osa/pdfs/
EPA_nanotechnology_white_paper_external_review_draft_12-02-2005.pdf.
    \5\ Applying a definition commonly used by the Small Business 
Administration that a small business has fewer than 500 employees.
    \6\ Countries include: United States, Mexico, United Kingdom, 
France, Germany, Switzerland, Finland, Sweden, China, Korea, Japan, 
Taiwan, Australia, New Zealand, and Israel.
    \7\ David Graber and Pat Phibbs. ``German Institute Working to 
Understand Why `Magic Nano' Cleaner Caused Ailments.'' Daily 
Environmental Report, April 12, 2006.
    \8\ ``Cause of intoxications with nano spray not yet fully 
elucidated,'' Berlin, Germany: Federal Institute for Risk Assessment, 
April 12, 2006. Available at http://www.bfr.bund.de/cms5w/sixcms/
detail.php/7750.
    \9\ ``Nano Poison Scandal: Misuse of a Major German Testing `Seal 
of Approval,' '' Berlin, Germany, Federation of German Consumer 
Organisations, April 14, 2006. Available at http://www.vzbv.de/go/
dokumente/502/4/17/index.html.
    \10\ See http://www.ul.com/media/newsrel/nr031406.html.
    \11\ See http://www.ul.com/media/newsrel/nr030106.html.
    \12\ See http://www.ul.com/media/newsrel/nr040606.html.
    \13\ Nanoscience and nanotechnologies: opportunities and 
uncertainties. London, U.K.: The Royal Society and Royal Academy of 
Engineering, July 2004. Available at http://www.nanotec.org.U.K./
finalReport.htm.
    \14\ Michael D. Cobb and Jane Macoubrie. ``Public Perceptions about 
Nanotechnology: Risk, Benefits and Trust.'' Raleigh, NC: North Carolina 
State University, 2004. Available at http://www2.chass.ncsu.edu/cobb/
me/past%20articles%20and%20wor
king%20papers/Public%20Perceptions%20about%20Nanotechnology%20-
%20Risks,%
20Benefits%20and%20Trust.pdf.
    \15\ Since 1990, more than 100,000 new citizens' groups have been 
established around the world. Trust in many of these groups has 
increased in direct proportion to decreasing confidence in government 
and industry. See: Bonini, S. M. et al (2006). ``When Social Issues 
Become Strategic,'' McKinsey Quarterly, Number 2.
    \16\ Jane Macoubrie. Informed Public Perceptions of Nanotechnology 
and Trust in Government. Washington, D.C.: Woodrow Wilson International 
Center for Scholars, 2005. Available at http://www.wilsoncenter.org/
news/docs/macoubriereport1.pdf.
    \17\ Nanotechnology: Views of the General Public. London, U.K.: 
BMRB Social Research, January 2004, BMRB/45/1001-666. Available at 
www.nanotec.org.U.K./Market%20Research.pdf.
    \18\ Anna Saleh. ``Critics say nanotech plan sidelines public,'' 
ABC Science Online, April 28, 2006. Available at http://www.abc.net.au/
science/news/health/Health
Republish_1625988.htm.
    \19\ National Institute for Occupational Safety and Health. 
Strategic Plan for NIOSH Nanotechnology Research: Filling the Knowledge 
Gaps. September 28, 2005. Available at http://www.cdc.gov/niosh/topics/
nanotech/strat_planINTRO.html.
    \20\ Richard A. Denison. ``A proposal to increase Federal funding 
of nanotechnology risk research to at least $100 million annually.'' 
Washington, D.C.: Environmental Defense, April 2005. Available at 
http://www.environmentaldefense.org/documents/4442_100milquestionl.pdf.
    \21\ Semiconductor Research Corporation and Chemical Industry 
Vision 2020 Technology Partnership. ``Joint NNI-ChI CBAN and SRC CWG5 
Nanotechnology Research Needs Recommendations.''
    \22\ Recently, our project finished the first phase of a study with 
the University of Minnesota, in which we analyzed over 150 research 
projects where nanotechnologies were being developed for food and 
agricultural applications. This study allowed information to be 
generated on what products might reach the market first, which 
oversight mechanisms would be triggered, who might be exposed to risks, 
etc. See: http://www.nanotechproject.org/50/live-webcast-agrifood-
nanotechnology-reserach-and-development.
    \23\ J. Clarence Davies. Managing the Effects of Nanotechnology. * 
Washington, D.C.: Project on Emerging Nanotechnologies, Woodrow Wilson 
International Center for Scholars, 2006.
---------------------------------------------------------------------------
    * A copy of the information referred to has been retained in 
Committee files.
---------------------------------------------------------------------------
    \24\ The use of a portfolio-of-initiatives approach is often 
recommended as a strategy for dealing with uncertainty. See: Bryan, 
Lowell (2002). ``Just-in-time Strategy for a Turbulent World,'' 
McKinsey Quarterly, Special Edition, or Courtney, Hugh (2001): 20/20 
Foresight: Crafting Strategy in an Uncertain World, Harvard Business 
School Press.
    \25\ See http://www.cfsan.fda.gov/dms/cos-regn.html.
    \26\ See http://www.cir-safety.org.
    \27\ Though the Federal Government has continually maintained that 
it has sufficient statutory authority to deal with nanotechnology, it 
has said nothing about the resources needed to back up existing 
statutes, which are as critical to success as the statues themselves.
    \28\ ``21st Century Nanotechnology Research and Development Act,'' 
S. 189, Washington, D.C.: U.S. Congress, 2003.
    \29\ This problem occurred in the U.K. after the government 
launched a project on public engagement around genetically-modified 
food (GM Nation), after such products were already on the market.
    \30\ Another model for this is the Sloan Foundation's Industry 
Studies Program, started in 1990, which is based on rigorous, 
observation-based research in firms. See: http://
www.industry.sloan.org/.
    \31\ David Rejeski. ``An Incomplete Picture,'' The Environmental 
Forum, September/October, 1997.
    \32\ Stephen K. Ritter. ``Planning Nanotech from the Ground Up.'' 
Chemical and Engineering News, April 17, 2006.
    \33\ ``Sizing Nanotechnology's Value Chain.'' New York, NY: Lux 
Research, October 2004.
    \34\ http://www.electronics.ca/PressCenter/articles/274/1/Thin-
Film-And-Organic-Photovoltaic-Market-To-Reach-%242.3-Billion-
%28%24US%29-In-2011.
    \35\ See http://www.electronics.ca/PressCenter/articles/292/1/Use-
Of-Silver-Nanoparticles-Rapidly-Expanding-In-The-Consumer-And-Medical-
Markets.
    \36\ See http://www.sba.gov/advo/research/data.html#us.
    \37\ ``Small Business Statistics.'' Washington, D.C.: Small 
Business Administration. Available at http://www.sba.gov/aboutsba/
sbastats.html. 

    Senator Smith. Thank you very much, David. Those are some 
very good suggestions, and I've got some good staff here that's 
jotted them all down, and we'll see if we can't get them into 
the bill, or another bill that we will produce. Obviously, we 
don't want any more government than is necessary, but having 
some data and some regulations to keep it safe and keep the 
confidence of consumers up, is very important.
    Do you know enough about the Magic Nano? Has that created 
sort of a biofoods sort of backlash?
    Mr. Rejeski. I don't think so. I mean, I think--the good 
news is that the German Government and the Europeans responded 
very quickly. They have very effective early warning systems. 
All of these cases were reported immediately by doctors who saw 
the patients. But I think it tells us some of the problems. I 
think, in the end, the public is not going to sort through the 
science here.
    Senator Smith. Yes.
    Mr. Rejeski. What they're going to remember is ``nano,'' 
and ``nano'' is associated with adverse health outcomes. And I 
think that's something that we want to avoid. I think, also, 
the case has dragged out right now. It's been actually elevated 
to an EU level, because there's issues about, What was it in 
this product that caused the problems? And some of the 
ingredients now come from Luxembourg. The longer it stays in 
the press, the worse off we are, I think. So, it was 
unfortunate, but--and the other thing which I think is quite 
serious is the misuse of a label like----
    Senator Smith. Yes.
    Mr. Rejeski.--like a UL label.
    Senator Smith. Right.
    Mr. Rejeski. One of the things the public has told us in a 
lot of the focus groups that we've done is, one way to really 
increase trust in government and industry around nano is more 
disclosure and transparency, and third-party independent 
testing.
    Senator Smith. Yes.
    Mr. Rejeski. And so, if the public loses trust in 
independent testing organizations, I think we're in real 
trouble.
    So, I think you have to stay tuned. I'm hoping that it'll 
resolve quickly, but it's going to be a test of the system.
    Senator Smith. Yes.
    Mr. Rejeski. And there was a bunch of things that happened 
simultaneously, essentially--the labeling, the inability to 
find out what's going on, the lack of disclosure. I think all 
of that really undercuts public confidence.
    Senator Smith. Yes.
    Mr. Rejeski. We want public confidence to go this way----
    Senator Smith. Yes.
    Mr. Rejeski.--as we introduce products into the 
marketplace.
    Senator Smith. I know, it's biogenetically modified foods 
have been sort of a disaster in Europe, but, I'm not sure it 
was based on science, but it certainly was based on perception 
and----
    Mr. Rejeski. Right.
    Senator Smith.--and advertising. I don't want nano to go 
the same way.
    Mr. Rejeski. Well, you know, it's interesting, because I 
was thinking about just local government. I mean, certainly you 
remember what happened in the early 1970s with recombinant DNA.
    Senator Smith. Yes.
    Mr. Rejeski. Incredible fears we were going to release 
these pathogens, they were going to cause major damage. The 
scientists were afraid. We knew virtually nothing about the 
risks. At that point in time, there was one community, 
Cambridge, Massachusetts, that stepped forth in 1976 and put in 
place the first biotech ordinance. They actually said, ``In a 
sea of ambiguity, we're going to create some clarity.'' They 
set up a Citizen Review Panel. They set up fairly strict 
oversight and the ability of people to get in and work with the 
firms to make sure they were operating on a safe level.
    What happened was, firms moved to Cambridge. In fact, in 
1980, Biogen, which is a huge Swiss biotech company, moved into 
Cambridge, and they asked Biogen, ``Are you crazy? '' 
essentially moving into the most regulated area in the world. 
And they said, ``That's exactly the point. We know the 
oversight. We trust it. And, most importantly, the community 
trusts the system.'' And, the rest is history. Cambridge has 
become an oasis for biotech innovation. There's over 50 biotech 
firms there. After 30 years, they still have the ordinance in 
place. It's still working.
    Senator Smith. Wow.
    Mr. Rejeski. We talk a lot about what can happen in the 
Federal level, but there's an awful lot that could be done, I 
think, to increase consumer confidence. It's that--a lot of 
companies and investors I talk to want--they want a system 
that's predictable. It's not that they're against regulation; 
they don't want ineffective regulation, but they want something 
that actually--they understand----
    Senator Smith. No, regulation can be helpful to 
commercialization.
    Mr. Rejeski. Yes.
    But it's a fascinating story. And it always reminds me, 
when I hear what's happening in a small community like this, 
that even communities can step forth and, I think, create 
this----
    Senator Smith. Are these products you have in front of you 
currently on the market?
    Mr. Rejeski. They're all on the market. This is a new one 
we just got. This is actually Tupperware that has nanosilver in 
it. It's antimicrobial. There's a number of sunscreens here. 
These are dietary supplements. I don't know if you're a golfer, 
but this--this hasn't helped my game, but----
    Senator Smith. Yes.
    [Laughter.]
    Mr. Rejeski.--people swear by it. I guess if you're Tiger 
Woods, you get something from this. Lip balms. We've shared 
these with FDA, and most scientists know if you don't know a 
lot about the risks, you really want to try to limit exposure. 
And a lot of these products are being ingested or put on your 
skin, so I think that there are areas where we need to look 
closely at the oversight system. There's a tendency to talk 
about nano in terms of cures for cancer and the space elevator. 
These are all amazing kinds of innovations. But this is the 
face right now. This is what the consumers are seeing. And I 
want to make sure that we get over the next 2 years without any 
kinds of speedbumps.
    Senator Smith. Well, thank you all, gentlemen, so very 
much.
    Sean, you look like you want to say something.
    Mr. Murdock. I just wanted to say, again, we appreciate 
your holding this hearing. Nanotechnology has profound 
opportunities to change the world around us, but not just in 
abstract ways, to reinvigorate the economy. You know, I, as 
Chairman Stevens pointed out, come from Illinois, and Illinois 
has certainly had its set of issues in the manufacturing 
economy. And I think it's--that it's important that we keep our 
eye on the ball and how this is going to affect the folks 
around us and lead to better, higher-paying jobs. And this kind 
of activity that we're talking about with the legislation that 
you've introduced, I think, is a meaningful step in the right 
direction.
    Senator Smith. Well, I would just simply conclude by saying 
that Congress's role is to hold hearings and flesh out good 
ideas, and turn them into laws, and then, where necessary, to 
bring light and heat to an issue to get it to advance. And 
that's been the purpose of today's hearing, to push along the 
practical application of this part of science to improve the 
life of the American people. And so, you've all contributed 
mightily, and each in his own segment, add to that public 
record. And so, we're very grateful for your time. I apologize 
again. The voting schedule of the Senate had us delayed a bit. 
But we've gotten through it, and it has been worthwhile, to me, 
and I hope to others, as well.
    Well, thank you.
    With that, we're adjourned.
    [Whereupon, at 4:28 p.m., the hearing was adjourned.]

                                  
