[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                THE TRANSFER OF NATIONAL NANOTECHNOLOGY
                    INITIATIVE RESEARCH OUTCOMES FOR
                     COMMERCIAL AND PUBLIC BENEFIT

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

                                HEARING

                               BEFORE THE

                      SUBCOMMITTEE ON RESEARCH AND
                           SCIENCE EDUCATION

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 11, 2008

                               __________

                           Serial No. 110-82

                               __________

     Printed for the use of the Committee on Science and Technology


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


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                                 ______

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                 HON. BART GORDON, Tennessee, Chairman
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR., 
LYNN C. WOOLSEY, California              Wisconsin
MARK UDALL, Colorado                 LAMAR S. SMITH, Texas
DAVID WU, Oregon                     DANA ROHRABACHER, California
BRIAN BAIRD, Washington              ROSCOE G. BARTLETT, Maryland
BRAD MILLER, North Carolina          VERNON J. EHLERS, Michigan
DANIEL LIPINSKI, Illinois            FRANK D. LUCAS, Oklahoma
NICK LAMPSON, Texas                  JUDY BIGGERT, Illinois
GABRIELLE GIFFORDS, Arizona          W. TODD AKIN, Missouri
JERRY MCNERNEY, California           JO BONNER, Alabama
LAURA RICHARDSON, California         TOM FEENEY, Florida
PAUL KANJORSKI, Pennsylvania         RANDY NEUGEBAUER, Texas
DARLENE HOOLEY, Oregon               BOB INGLIS, South Carolina
STEVEN R. ROTHMAN, New Jersey        DAVID G. REICHERT, Washington
JIM MATHESON, Utah                   MICHAEL T. MCCAUL, Texas
MIKE ROSS, Arkansas                  MARIO DIAZ-BALART, Florida
BEN CHANDLER, Kentucky               PHIL GINGREY, Georgia
RUSS CARNAHAN, Missouri              BRIAN P. BILBRAY, California
CHARLIE MELANCON, Louisiana          ADRIAN SMITH, Nebraska
BARON P. HILL, Indiana               PAUL C. BROUN, Georgia
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
                                 ------                                

             Subcommittee on Research and Science Education

                 HON. BRIAN BAIRD, Washington, Chairman
EDDIE BERNICE JOHNSON, Texas         VERNON J. EHLERS, Michigan
DANIEL LIPINSKI, Illinois            ROSCOE G. BARTLETT, Maryland
JERRY MCNERNEY, California           RANDY NEUGEBAUER, Texas
DARLENE HOOLEY, Oregon               DAVID G. REICHERT, Washington
RUSS CARNAHAN, Missouri              BRIAN P. BILBRAY, California
BARON P. HILL, Indiana                   
BART GORDON, Tennessee               RALPH M. HALL, Texas
                 JIM WILSON Subcommittee Staff Director
          DAHLIA SOKOLOV Democratic Professional Staff Member
           MELE WILLIAMS Republican Professional Staff Member
                 MEGHAN HOUSEWRIGHT Research Assistant


                            C O N T E N T S

                             March 11, 2008

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

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

                           Opening Statements

Statement by Representative Brian Baird, Chairman, Subcommittee 
  on Research and Science Education, Committee on Science and 
  Technology, U.S. House of Representatives......................     8
    Written Statement............................................     9

Statement by Representative Vernon J. Ehlers, Ranking Minority 
  Member, Subcommittee on Research and Science Education, 
  Committee on Science and Technology, U.S. House of 
  Representatives................................................     9
    Written Statement............................................    10

Prepared Statement by Representative Eddie Bernice Johnson, 
  Member, Subcommittee on Research and Science Education, 
  Committee on Science and Technology, U.S. House of 
  Representatives................................................    10

                               Witnesses:

Mr. Robert D. ``Skip'' Rung, President and Executive Director, 
  Oregon Nanoscience and Microtechnologies Institute (ONAMI)
    Oral Statement...............................................    11
    Written Statement............................................    14
    Biography....................................................    21

Dr. Julie Chen, Professor of Mechanical Engineering; Co-Director, 
  Nanomanufacturing Center of Excellence, University of 
  Massachusetts Lowell
    Oral Statement...............................................    22
    Written Statement............................................    24
    Biography....................................................    29

Dr. Jeffrey Welser, Director, Nanoelectronics Research Initiative
    Oral Statement...............................................    30
    Written Statement............................................    32
    Biography....................................................    40

Mr. William P. Moffitt, Chief Executive Officer, Nanosphere, 
  Incorporated
    Oral Statement...............................................    41
    Written Statement............................................    43
    Biography....................................................    47

Dr. C. Mark Melliar-Smith, Chief Executive Officer, Molecular 
  Imprints, Austin, Texas
    Oral Statement...............................................    48
    Written Statement............................................    50
    Biography....................................................    61

Discussion.......................................................    62

              Appendix: Answers to Post-Hearing Questions

Mr. Robert D. ``Skip'' Rung, President and Executive Director, 
  Oregon Nanoscience and Microtechnologies Institute (ONAMI).....    80

Dr. Julie Chen, Professor of Mechanical Engineering; Co-Director, 
  Nanomanufacturing Center of Excellence, University of 
  Massachusetts Lowell...........................................    83

Dr. Jeffrey Welser, Director, Nanoelectronics Research Initiative    85

Mr. William P. Moffitt, Chief Executive Officer, Nanosphere, 
  Incorporated...................................................    89

Dr. C. Mark Melliar-Smith, Chief Executive Officer, Molecular 
  Imprints, Austin, Texas........................................    92


 THE TRANSFER OF NATIONAL NANOTECHNOLOGY INITIATIVE RESEARCH OUTCOMES 
                   FOR COMMERCIAL AND PUBLIC BENEFIT

                              ----------                              


                        TUESDAY, MARCH 11, 2008

                  House of Representatives,
    Subcommittee on Research and Science Education,
                       Committee on Science and Technology,
                                                   Washington, D.C.

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


                            hearing charter

             SUBCOMMITTEE ON RESEARCH AND SCIENCE EDUCATION

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                     U.S. HOUSE OF REPRESENTATIVES

                The Transfer of National Nanotechnology

                    Initiative Research Outcomes for

                     Commercial and Public Benefit

                        tuesday, march 11, 2008
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

1. Purpose

    As part of the reauthorization process for the National 
Nanotechnology Initiative (NNI), on Tuesday, March 11, 2008, the 
Subcommittee on Research and Science Education will hold a hearing to 
review the activities of the NNI in fostering the transfer of 
nanotechnology research outcomes to commercially viable products, 
devices, and processes. In addition the hearing will review the current 
federal efforts related to support of research on nanomanufacturing.

2. Witnesses

Mr. Skip Rung, President and Executive Director, Oregon Nanoscience and 
Microtechnologies Institute (ONAMI)
    ONAMI is a cooperative venture between government, academic 
institutions and industry in the Pacific Northwest and provides open 
user facilities, research expertise, industry connection to academic 
research, and gap-funding.

Dr. Julie Chen, Co-Director, Nanomanufacturing Center of Excellence, 
University of Massachusetts Lowell
    The University of Massachusetts Lowell Nanomanufacturing Center of 
Excellence includes the Center for High Rate Nanomanufacturing, an NSF 
funded user facility that focuses research on manufacturing technology 
for nanoproducts.

Dr. Jeffrey Welser, Director, Nanoelectronics Research Initiative (NRI)
    The NRI is a consortium of companies in the Semiconductor Industry 
Association which funds research to demonstrate novel computing devices 
with critical dimensions below 10 nanometers.

Mr. William Moffitt, CEO, Nanosphere, Inc. and representing the 
NanoBusiness Alliance

Dr. Mark Melliar-Smith, CEO, Molecular Imprints, Inc.

3. Overarching Questions

          What are the barriers to commercialization of 
        nanotechnologies? How can the NNI enhance technology transfer 
        and help promote the commercialization of nanotechnology?

          Is the current investment in basic research for 
        nanomanufacturing under the NNI adequate? Are the research 
        areas supported under NNI relevant to the needs of industry? 
        How can the Nation's focus on manufacturing techniques position 
        us for global leadership in specific technologies?

          Are user facilities supported under the NNI effective 
        in assisting with the transfer of research results to usable 
        products that benefit the public? Are the current user 
        facilities adequate to meet the needs of the user community in 
        terms of number of facilities and types of instrumentation and 
        equipment available? Are there impediments to the use of 
        federally funded nanotechnology user facilities for industry, 
        such as intellectual property issues or administrative burdens 
        that discourage their use?

          Is there a need for a research and development 
        program under NNI focused on specific problems of national 
        importance?

          Are mechanisms available for industry to influence 
        the research priorities of the NNI?

4. Background

NNI Organization and Funding
    The National Nanotechnology Initiative was authorized by the 21st 
Century Nanotechnology Research and Development Act of 2003 (P.L. 108-
153). In accordance with the Act, the National Science and Technology 
Council (NSTC) through the Nanoscale Science, Engineering, and 
Technology (NSET) Subcommittee plans and coordinates the NNI. The Act 
authorized the National Nanotechnology Coordination Office (NNCO) to 
provide technical and administrative support to the NSET for this 
coordination. There are currently twenty-six federal agencies that 
participate in the National Nanotechnology Initiative, with 13 of those 
agencies reporting a research and development budget. The total 
estimated NNI budget for FY 2008 was $1.49 billion. Total funding for 
the NNI in FY 2007 was $1.42 billion.\1\ More information on the NNI 
program content and budget can be found at http://www.nano.gov/
NNI-FY09-budget-summary.pdf and http:/
/www.nano.gov/NNI-08Budget.pdf. Research related to the NNI 
is organized into eight program component areas including: Fundamental 
phenomena and processes; nanomaterials; nanoscale devices and systems; 
instrumental research, metrology, and standards; nanomanufacturing; 
major research facilities and instrument acquisition; environment, 
health, and safety; and education and societal dimensions.
---------------------------------------------------------------------------
    \1\ Summary of the FY 2009 National Nanotechnology Initiative 
Budget, February 2008. Available at http://www.nano.gov/.
---------------------------------------------------------------------------
    The FY 2008 estimated budget for nanomanufacturing research (a 
component that is closely tied to bridging the gap between basic 
research and the development of commercial products) was $50.2 million 
dollars which is 3.3 percent of the total budget. The NNI planned 
investment in nanomanufacturing research for FY 2009 is $62.1 million, 
a 23 percent increase. This amount is four percent of the total FY 2009 
proposed budget. A working group for Nanomanufacturing, Industry 
Liaison, and Innovation (NILI) was formed by the NSET to facilitate 
innovation and improve technology transfer for nanotechnology. NILI has 
helped to facilitate industry liaison activities for the electronics, 
construction, chemical, and forest and paper products industries.

User Facilities
    The NNI funding agencies support nanotechnology user facilities to 
assist researchers (academic, government, and industry) in fabricating 
and studying nanoscale materials and devices. The facilities may also 
be used by companies for developing ideas into prototypes and 
investigating proof of concept. The National Science Foundation 
supports 17 facilities under its National Nanotechnology Infrastructure 
Network (NNIN), four of which are focused on nanomanufacturing. The 
Department of Energy maintains five Nanoscale Science Research Centers, 
each focused on and specific to a different area of nanoscale research. 
The National Institutes of Health has a Nanotechnology Characterization 
Laboratory in Frederick, MD and the National Institute of Standards and 
Technology maintains a user facility in Gaithersburg, MD. The 
application processes for each facility varies; however, all are open 
to academic, government, or industry users. In addition to the user 
facilities, the NNI is carried out in over 70 centers and institutes\2\ 
throughout the country mostly on university campuses, many of which 
have user facilities that are open to all applicants.
---------------------------------------------------------------------------
    \2\ Information of NNI related user facilities and centers and 
institutes can be found at www.nano.gov

SBIR/STTR Programs
    P.L. 108-153 encourages support for nanotechnology related projects 
through the Small Business Innovation Research (SBIR) and Small 
Business Technology Transfer Research (STTR) programs by requiring the 
National Science and Technology Council to ``develop a plan to utilize 
federal programs, such as the Small Business Innovation Research 
Program and the Small Business Technology Transfer Research Program, in 
support of the [NNI activities]. . .''. Despite the lack of a formal 
plan, the SBIR and STTR programs have been used as a vehicle to bring 
nanotechnology research developed by small business concerns closer to 
commercialization. The total SBIR and STTR program spending in all 
technology areas in FY 2006 was nearly $2.2 billion, of that budget 
$79.7 million was identified as nanotechnology related research.\3\ 
This was 3.7 percent of the total SBIR/STTR spending in FY 2006 and 
included nine federal agencies. SBIR/STTR funding is allowable for 
development of technologies from concept to prototype; however, funding 
of scale-up to manufacturing does not fall within the SBIR/STTR scope 
of funding.
---------------------------------------------------------------------------
    \3\ The National Nanotechnology Initiative Supplement to the 
President's FY 2008 Budget. July 2007, p. 24.

Commercialization Issues
    Federal Government spending in nanotechnology research and 
development since 2001 exceeds $5 billion. Global revenues from 
nanotechnology products are estimated at $50 billion annually, and are 
expected to reach $2.6 trillion by 2014.\4\ Federal R&D funding 
vehicles traditionally limit funding to basic research through 
prototype development, leaving private sector funding to bring these 
emerging technologies to commercialization. A recent report by the U.S. 
Department of Commerce's Technology Administration cites ``funding 
which favors research over development and commercialization. . .'' as 
one of the most significant barriers to growth in the nanotechnology 
industry.\5\ To bridge this gap, some states are developing gap-funding 
programs or tax incentives. Globally, countries such as New Zealand and 
Israel have developed incubator and granting programs that attempt to 
provide funding for commercial development past the prototype stage. 
These programs are privately and/or government funded. In addition to 
federal, State, and local efforts to bring products beyond prototype, 
industry liaison efforts such as the Nanotechnology Research 
Initiative\6\ of the Semiconductor Research Corporation, and the Agenda 
2020 Technology Alliance\7\ are bringing scientists and industry 
partners together.
---------------------------------------------------------------------------
    \4\ Sizing Nanotechnology's Value Chain, Lux Research, 2004.
    \5\ Barriers to Nanotechnology Commercialization, U.S. Department 
of Commerce, September 2007, p. 11.
    \6\ The NRI is a consortium of companies in the Semiconductor 
Industry Association which funds research to demonstrate novel 
computing devices with critical dimensions below 10 nanometers that 
will have application beyond the potential of the current circuit 
technology (CMOS).
    \7\ The Agenda 2020 Technology alliance is a project of the 
American Forest & Paper Association and supports and directs research 
efforts in nanotechnology to benefit the forest and paper products 
industry.

Nanomanufacturing
    Commercialization of nanotechnology is dependent on the development 
of nanomanufacturing techniques and processes.\8\ There are 
difficulties with scale-up methods for nanotechnology that are unique 
to nanomanufacturing. Nanomanufacturing processes are difficult to 
control and can sometimes require more expensive instrumentation for 
the large scale manufacture of nanomaterials and products. In addition, 
manufacturing defects that would not affect reliability or performance 
of macro-technologies can and do render nanotechnologies unusable. 
Because of these unique challenges, manufacturers can often produce 
prototypes but the rates to scale-up are slow, and the hurdles for 
commercialization are often prohibitive. Products that rely on 
nanoscale building blocks (e.g., carbon nanotubes and nanoparticles) 
need better manufacturing methods to control variability and better 
high throughput characterization methods to measure that control.
---------------------------------------------------------------------------
    \8\ Chemical Industry R&D Roadmap for Nanomaterials by Design: From 
Fundamentals to Function. December 2003, p. 83-91.
---------------------------------------------------------------------------
    There is a need for instrumentation for measurement and inspection 
of nanomanufactured products on-line or at the very least, measurement 
at a higher rate. Current technologies for device measurement and 
inspection such as scanning electron microscopy (SEM), transmission 
electron microscopy (TEM), and atomic force microscopy (AFM) require 
time and instrumentation expertise and slow manufacturing processes 
when employed.

5. Witness Questions

    All of the witnesses were asked to provide their views on the 
effectiveness, scope, and content of the current efforts under the NNI 
to foster transfer of technology and any recommendations they have on 
ways to improve the process by which nanotechnology is commercialized 
including, but not limited to, development of prototypes, use of 
federally funded user facilities, and nanomanufacturing practices and 
processes. In addition, the following specific questions were asked of 
each witness:
Mr. Skip Rung

          What are the significant hurdles for companies trying 
        to commercialize nanotechnology? What examples of successful 
        activities to overcome these hurdles has ONAMI seen? What 
        recommendations for federal policy can you make based on the 
        success of the companies affiliated with ONAMI?

          How can policies for access to facilities supported 
        under NNI be structured to provide for increased use by 
        industry and increased transfer of technology and knowledge 
        from federally funded research?

          Are there ways that the NNI could be more effective 
        in assisting the transition of research results to prototype 
        development and full commercialization?

          What kinds of federal programs or activities can help 
        bridge the ``valley of death'' successfully? How effective have 
        the SBIR/STTR and ATP programs been in this regard?

          Are there any barriers to commercialization imposed 
        by current intellectual property policies at NNI-supported user 
        facilities, and if so, what are your recommendations for 
        mitigating these barriers?

Dr. Julie Chen

          Please review the findings of the 2006 Small Times 
        Survey of U.S. Nanotechnology Executives and comment on the 
        results regarding companies' attitudes and views regarding 
        federal support in nanotechnology research and development and 
        needs regarding user facilities.

          What is the current state of nanomanufacturing basic 
        research? What are the basic research needs to provide industry 
        with the tools necessary to move towards high-rate 
        nanomanufacturing?

          How does your center interact with industry in 
        setting research direction?

          Do the companies that interact with your center make 
        use of other facilities available through the NNI? Are current 
        policies under the NNI supportive of such use?

Dr. Jeffrey Welser

          How does the electronics industry interact with NNI 
        supported research activities?

          What is the role of industry in setting research 
        directions through the NRI?

          What role should the NNI play in helping to foster 
        commercialization of nanotechnology?

          Are federally funded user facilities meeting the 
        needs of industry? Are there impediments to their use? How can 
        user facilities be most effective in helping to bring NNI 
        funded research to commercialization?

Mr. William Moffitt

          What are the hurdles to the commercialization of 
        nanotechnology?

          What kinds of federal programs or activities can help 
        bridge the ``valley of death'' successfully? How effective have 
        the SBIR/STTR and ATP programs been in this regard?

          Are there areas of focus for commercialization that 
        will position the Nation for leadership in that technology?

          Are there any barriers to commercialization imposed 
        by current intellectual property policies at NNI-supported user 
        facilities, and if so, what are your recommendations for 
        mitigating these barriers?

Dr. Mark Melliar-Smith

          Please describe your company's experience with 
        federally funded user facilities (DOE, NSF, etc.)? Are user 
        facilities easily accessible to small and medium businesses? If 
        not, why not, and how would you recommend making improvements? 
        How can user facilities be most effective in helping to bring 
        NNI-funded research to commercialization?

          Is the research now being supported under the 
        nanomanufacturing component of the NNI meeting the needs of 
        industry? Do you believe industry has a voice in determining 
        research priorities for these activities?

          Was your company successful in attracting venture 
        capital? If so, at what stage in your products' development did 
        you obtain VC funding? Are there any federal policies or agency 
        directives that have impacted your ability to obtain VC 
        funding, either positively or negatively?

          Are there ways that the NNI could be more effective 
        in assisting the transition of research results to prototype 
        development and full commercialization?
    Chairman Baird. Good morning to everyone here in the room 
and particularly our witnesses today. Our hearing today is 
entitled The Transfer of National Nanotechnology Initiative 
Research Outcomes for Commercial and Public Benefit. I would 
like to welcome everyone today on the hearing designed to 
assess how to ensure that research outcomes from the National 
Nanotechnology Initiative are transitioned for commercial and 
public benefit. And I would like to thank all of our witnesses 
for being here.
    The hearing is the third in a series to review various 
aspects of the National Nanotechnology Initiative, or as we 
call it the NNI. These hearing will help guide our development 
of legislation to reauthorize the NNI during the current 
session of the Congress. In a past hearing, we received 
testimony on the importance of developing a prioritized 
research plan and implementation strategy to address the 
environment, health and safety implications of nanotechnology. 
In another hearing, we heard about the need to educate students 
at all levels of education about nanotechnology in order to 
ensure a workforce for this rapidly growing field.
    Today, the Subcommittee will review how well the NNI is 
supporting activities to make sure that the results of 
nanotechnology research are translated into commercial products 
and processes. We will also look at whether the research being 
supported by NNI in such areas as nanomanufacturing is relevant 
to the needs of industry.
    It is clear to me and this committee that nanotechnology 
can offer this nation and the world unimaginable benefits in a 
wide range of fields, including health care, energy efficiency, 
electronics and water remediation. Like many areas, a federal 
investment in basic research is critical to nanotechnology's 
development, but this investment will be squandered if we do 
not cultivate the technology to usable products or processes. 
The NNI now supports user facilities and basic research in 
nanomanufacturing. Also, the agencies participating in the NNI 
administer SBIR programs that fund projects to advance emerging 
concepts to commercialization.
    Certainly, the commercialization of nanotechnology, like 
any developing technology, is complex. However, nanotechnology 
has some unique challenges. The development of nanomaterials 
and devices most often requires highly specialized and 
expensive instruments. In addition, the scale-up of nanotech 
requires unique processes that have very low error rates. 
Furthermore, quality control in nanomanufacturing requires 
lengthy evaluations and expensive equipment.
    As I mentioned earlier, this morning I hope to assess 
whether the current investment aimed at technology transfer and 
commercialization under the NNI are adequate and reflect the 
most critical priorities. I also want to look at whether the 
research is relevant to the industry, and in addition I am 
interested in the views of our witnesses on whether the 
equipment and instruments available at NNI-supported facilities 
are adequate and accessible. Finally, I invite any 
recommendations our witnesses may have on how the NNI could be 
more effective in helping to bridge the gap between concept and 
commercialization.
    I thank our distinguished witnesses for being here today. I 
look forward to your testimony.
    And before introducing the panel, I would now recognize my 
good friend, the Ranking Member of the Subcommittee, Dr. 
Ehlers, for an opening statement.
    [The prepared statement of Chairman Baird follows:]
               Prepared Statement of Chairman Brian Baird
    Good morning. I'd like to welcome everyone to today's hearing on 
how to ensure that research outcomes from the National Nanotechnology 
Initiative are transitioned for commercial and public benefit, and I'd 
like to thank our witnesses for being here.
    This hearing is the third in a series to review various aspects of 
the National Nanotechnology Initiative, or the NNI. These hearings will 
help guide our development of legislation to reauthorize the NNI during 
the current session of Congress.
    In a past hearing, we received testimony on the importance of 
developing a prioritized research plan and implementation strategy to 
address the environment, health, and safety implications of 
nanotechnology. In another, we heard about the need to educate students 
at all levels of education about nanotechnology in order to ensure a 
workforce for this rapidly growing field.
    Today, the Subcommittee will review how well the NNI is supporting 
activities to make sure that the results of nanotechnology research are 
translated into commercial products and processes. We also will look at 
whether the research being supported by NNI in such areas as 
nanomanufacturing is relevant to the needs of industry.
    It is clear to me and this committee that nanotechnology can offer 
this nation and the world unimaginable benefits in a wide range of 
fields, including health care, energy efficiency, electronics, and 
water remediation.
    Like many areas, the federal investment in basic research is 
critical to nanotechnology's development. But this investment will be 
squandered if we do not cultivate the technological advancement to 
usable products or processes.
    The NNI now supports user facilities and basic research in 
nanomanufacturing. Also, the agencies participating in the NNI 
administer SBIR programs that fund projects to advance emerging 
concepts toward commercialization.
    Certainly, the commercialization of nanotechnology, like any 
developing technology, is complex. However, nanotechnology has some 
unique challenges. The development of nanomaterials and devices most 
often requires highly specialized and expensive instruments. In 
addition, the scale-up of nanotechnology requires unique processes that 
have very low error rates. Furthermore, quality control in 
nanomanufacturing requires lengthy evaluations and expensive equipment.
    As I mentioned earlier, this morning I hope to assess whether the 
current investments aimed at technology transfer and commercialization 
activities under the NNI are adequate and reflect the most critical 
priorities. I also want to look at whether the research is relevant to 
the industry. In addition, I am interested in the views of our 
witnesses on whether the equipment and instruments available at NNI-
supported facilities are adequate and accessible. Finally, I invite any 
recommendations our witnesses may have on how the NNI could be more 
effective in helping to bridge the gap between concept and 
commercialization.
    I thank our distinguished witnesses from being here today. I look 
forward to your testimony. Before introducing our panel, I now 
recognize the Ranking Member of the Subcommittee, Dr. Ehlers, for an 
opening statement.

    Mr. Ehlers. Thank you, Mr. Chairman, and in appreciation of 
the fact that we are having a nanotechnology hearing, I decided 
to offer a nano-opening statement so that we can quickly get 
into the hearing.
    Chairman Baird. So moved. I will now introduce the 
witnesses. (laughter)
    Mr. Ehlers. The authorization of the NNI is a prime 
opportunity for the Science and Technology Committee to 
continue to craft policies that encourage U.S. innovation and 
maintain our global competitiveness. We have invested more than 
$8 billion federal dollars into the NNI since it was initiated 
in 2003. The reauthorization measure will be a very important 
piece of legislation and deserves the full attention of this 
subcommittee and the full Science Committee.
    There is still much to learn about perfecting 
nanotechnology manufacturing processes. For those working in 
nanotechnology, it is evident that there are many challenges 
unique to the nanomanufacturing supply chain. The conventional 
balance of basic and applied research and development may not 
be a good fit for nanomanufacturing because of the high capital 
investments and substantial fundamental research necessary to 
overcome obstacles to commercialization.
    As we advance the reauthorization of the National 
Nanotechnology Initiative, this question of appropriate balance 
must be carefully considered. I look forward to hearing from 
our witnesses about their recommendations for investment 
priorities in the reauthorization process.
    Thank you, Mr. Chairman. I yield back.
    [The prepared statement of Mr. Ehlers follows:]
         Prepared Statement of Representative Vernon J. Ehlers
    Reauthorization of the National Nanotechnology Initiative (NNI) is 
a prime opportunity for the Science and Technology Committee to 
continue to craft policies that encourage U.S. innovation and maintain 
our global competitiveness. We have invested more than eight billion 
federal dollars into the NNI since it was initiated in 2003. The 
reauthorization measure will be a very important piece of legislation, 
and deserves the full attention of this Subcommittee and Full 
Committee.
    There is still much to learn about perfecting nanomanufacturing 
processes. To those working in nanotechnology it is evident that there 
are many challenges unique to the nanomanufacturing supply chain. The 
conventional balance of basic and applied research and development may 
not be a good fit for nanomanufacturing because of the high capital 
investments and substantial fundamental research necessary to overcome 
obstacles to commercialization.
    As we advance the reauthorization of the National Nanotechnology 
Initiative this question of appropriate balance must be carefully 
considered. I look forward to hearing from our witnesses about their 
recommendations for investment priorities in the reauthorization 
process.

    Chairman Baird. I thank the Ranking Member. And if there 
are other Members who arrive, as they tend to do, during the 
course of the hearing who wish to submit additional opening 
statement, their records will be added.

    [The prepared statement of Ms. Johnson follows:]
       Prepared Statement of Representative Eddie Bernice Johnson
    Good afternoon. Thank you, Mr. Chairman, for holding today's 
hearing on nanotechnology, and the needs of the community as Congress 
prepares to reauthorize the National Nanotechnology Initiative.
    I especially want to welcome Mr. Mark Melliar-Smith, CEO of 
Molecular Imprints, a Texas-based nanotech company that uses an optical 
technique to project and print nanoscale patterns.
    Texas is an international leader in nanotechnology research and 
development. I know that the state has made a strong investment in 
nanotechnology.
    University research, spin-off companies, and other small start-ups 
have been greatly assisted by the pro-research culture in our state.
    This subcommittee will be interested to know how to best support 
the nanotechnology research community.
    We want to know if the current funding for research is strong 
enough, or if some of the money should instead be utilized for user 
facilities.
    In addition, the Committee would like feedback on the barriers to 
commercialization of nanotechnology products, and whether a greater 
portion of the total investment should be directed toward that 
function.
    Today's witness panel covers the spectrum, from small company 
start-ups, to the academic environment, to organizations representing a 
consortium of businesses.
    All bring valuable perspectives to the issue at hand: how federal 
investments can best support and allow nanotechnology in the United 
States to succeed and flourish.
    Thank you, Mr. Chairman. I yield back the balance of my time.

    Chairman Baird. At this point, it is a privilege to 
introduce the witnesses. Mr. Skip Rung is the President and 
Executive Director of the Oregon Nanoscience and 
Microtechnologies Institute, who flew a red-eye flight here. 
Mr. Rung, welcome. I am sometimes referred to as the 
representative from the Third District of Washington or the 
Sixth District of Oregon, owing to how many people cross the 
river each day to work. We welcome you, particularly, here as 
well. Dr. Julie Chen is a Professor of Engineering at the 
University of Massachusetts Lowell, and Co-Director of their 
Manufacturing Center of Excellence. Dr. Chen, welcome. Dr. 
Jeffrey Welser is on assignment from the IBM Corporation to 
serve as the Director of Nanoelectronics Research Initiative, 
NRI, a subsidiary of the Semiconductor Research Corporation. 
Welcome, Dr. Welser. Dr. William Moffitt is the Chief Executive 
Officer of Nanosphere, Incorporated, and is also representing 
the NanoBusiness Alliance. Dr. Moffitt, welcome. And Dr. Mark 
Melliar-Smith is the Chief Executive Officer of Molecular 
Imprints, Incorporated. So we have folks from the academic/
research sector and the applied-industry/business sector.
    As our witnesses should know, spoken testimony is limited 
to five minutes each, after which Members of the Committee will 
have five minutes each to ask questions. And as I mentioned 
earlier, this is a friendly, bipartisan committee, and we 
really welcome your discussion. We will offer an exchange of 
questions. Always feel that if there is something critical we 
have yet to ask, that you can offer insights into that as well.
    We will begin our comments from Mr. Rung. Thank you for 
being here.

    STATEMENT OF MR. ROBERT D. ``SKIP'' RUNG, PRESIDENT AND 
 EXECUTIVE DIRECTOR, OREGON NANOSCIENCE AND MICROTECHNOLOGIES 
                       INSTITUTE (ONAMI)

    Mr. Rung. Chairman Baird, and Members of the Committee, I 
am honored by the opportunity to speak with you today on a 
subject of great importance for the continued economic and 
social health of our nation. Winning at science-based 
innovation is critical for U.S. economic competitiveness, for 
the supply of jobs with productivity sufficient for the wage 
levels Americans have come to expect and for the prosperity 
that pays for all of the social goods, such as health and 
education, we would like to leave in tact for future 
generations. Reauthorization of the Nanotechnology Research and 
Development Act presents the opportunity both to re-up on a 
vital investment, and at the same time, be more intentional 
about social and economic returns.
    Oregon Nanoscience and Microtechnologies Institute, 
Oregon's first signature research center has so far received 
$37 million from the Oregon Innovation Council because they 
know that success and the global competition for jobs and 
prosperity completely depends on a sector that wins through 
innovation, fueled by research and entrepreneurship. And so 
that is the dual mission of ONAMI: growth in scientific 
research and growth at Oregon employers commercializing that 
research.
    I think we are an interesting case. We are a small state, 
but arguably, we have the world's most powerful collection of 
industrial nanotech R&D assets, Intel and HP's top research 
site, FEI Company, among others. But we have no wealthy private 
university, and we are not a traditional venture capital hot 
spot. Still, we know for certain that our research is 
competitive, and therefore should be able to grow our 
entrepreneurial sector.
    So therefore, one of ONAMI's core activities is a 
commercialization fund that provides grants to bridge the very 
real gap between what research agencies pay for and what 
pencils out for investors. We have so far enabled three very 
promising microtechnology companies, and four nanotechnology 
spin-out companies. Time permitting, at the end of my remarks--
and I probably won't--I will say a little bit about our nano 
group. For now, I will simply note that the support we provide 
is absolutely critical for these technologies to ever reach 
customers and create jobs.
    Before addressing directly the questions asked by the 
Committee, I will state my overarching point. Intentional 
federal investment in, and accountability measures for, 
entrepreneurial startup-company-driven commercialization of NNI 
research are just as necessary and important as the research 
itself, and therefore should be a prominent consideration in 
the reauthorization. It is interesting that today, in contrast 
to 30 years ago, most high-risk and disruptive innovation takes 
place in small companies, many of them venture-backed startups. 
Venture money originating in pension funds and endowments turns 
out to be more patient and risk-tolerant than corporate cash, 
and large companies increasingly innovate by acquisition and 
open-technology sourcing from small companies. This is why 
there needs to be intense focus on making U.S. nanotechnology 
entrepreneurs successful, understanding and addressing the 
myriad hurdles that they face.
    So then, what are those hurdles? They are the greater 
expense and time required for proof of concept demonstration, 
comparatively high capital requirements, the need for 
convenient access to specialized facilities and expertise, and 
often very complicated technology licensing situations. And 
this is not to mention the growing burden of regulatory 
compliance and related uncertainty. Investors see these things 
as risks, and they act accordingly. For all of these reasons, 
the appetite of venture capital for nanotechnology has turned 
out to be less than many hoped and expected. This may not 
necessarily be the case overseas as hungry global competitors, 
such as China, place a higher value on economic development.
    To address these hurdles, the Bayh-Doyle Act has enabled 
universities to own and out-license federal research results 
and in that process provide an incentive to faculty inventors. 
The NNIN has established 13 user facilities at universities, 
though with no recent additions, and the national labs have 
various access mechanisms. SBIR and STTR are vital programs and 
a lifeline for many small businesses, including our own 
nanotechnology spin-out, Crystal Clear Technologies. The new 
TIP program looks very promising for companies past the seed 
stage.
    All of these things are very good and should, if anything, 
be expanded, but they don't take as much advantage as they 
could of America's many local business and investor 
communities, so company and job creation still favor the 
already successful technology communities around the major 
centers. I would like to suggest to you two concepts based on 
our experience with shared-user facilities and our gap fund 
that I believe could increase the commercialization return on 
the NNIN investment.
    The first is to broaden the NNIN concept into what we call 
the ``high-tech extension'' service, the modern analog of the 
invaluable land-grant concept of 150 years ago. We started too 
late to be part of the NNIN, but boot-strapped private and 
federal equipment grants with university and State funds to 
create a network of shared user facilities, which consolidate 
major equipment and instrument assets in well-utilized and 
maintained facilities, open to all academic users from any 
campus on equal terms. They are also open for industry 
collaborations, and we can provide leased experimental and 
office space to both large and small company partners. All 
seven of our current gap-fund companies make critical use of 
these facilities. Since Oregon is a rural state, and the 
distance between our sites is up to 110 miles, we have also 
implemented high-quality webcam and virtual network connections 
on major tools to enable a very satisfying remote user 
experience. This also works well cross-country, so we have 
clients as far away as Florida.
    But the key points here are that there are measurable 
objectives and business models tied to facility utilization by 
industry, that we share and coordinate acquisitions, statewide 
to maximize unique capability, and that this approach does not 
need to be limited to the few NNIN sites, which are too far 
away for our companies to use on a regular basis. Our concept 
could conceivably go viral, so to speak, if other State and 
federal funding policies encouraged it.
    We are very proud to have opened our newest facility at the 
University of Oregon on February 19. It is a 30,000 square-foot 
underground lab, with about the best vibration performance 
anywhere in the world, and therefore, the best location 
possible for the latest in nanotech tools. We are installing, 
for example, the first of two FEI Titan transmission electron 
microscopes. We would love for our nanoscience user facilities 
to be part of the National Network and database of nanoscience 
assets, with or without NNI funding.
    The second concept is dedicated funding for 
commercialization tied to research centers. As far as we know, 
we are the only state-funded research centered to have its own 
dedicated gap fund. This has been running for about 15 months, 
and if we are sure of anything at this point, it is that the 
response to this incentive from academics and entrepreneurs has 
exceeded our expectations and changed the culture and 
conversation around commercialization. This fund is actively 
advised by the leading venture-capital partners investing in 
Oregon, including both small and large funds. The advisors get 
a heads-up look at potential deal flow and our inventors and 
entrepreneurs get early time with the best possible investor 
audience. We ask the advisors one question: if we fund this 
project, and it meets its technical objectives, can the partner 
company raise capital within 12 to 18 months and go on to build 
a successful business in Oregon? We get more insightful answers 
to this question than we could come up with ourselves and have 
always followed the advice.
    The gap fund has one success metric that the state measures 
us on: private capital dollars invested in our gap-fund 
companies. This is a very unforgiving metric and one that is 
impossible to fudge. Our four nanocompanies are very early 
stage and have a----
    Chairman Baird. Mr. Rung, I am going to ask you to 
summarize here at this point.
    Mr. Rung. Okay, so the gap fund, we think, is a great 
process to institutionalize with the National Nanotechnology 
Initiative. And thank you very much.
    [The prepared statement of Mr. Rung follows:]
             Prepared Statement of Robert D. ``Skip'' Rung
    Chairman Baird and Members of the Committee, I am honored by the 
opportunity to speak with you today on a subject of great passion for 
me and also, I believe, of great importance for the continued economic 
and social health of our nation.
    Success at science-based innovation--the current cutting edge of 
which just happens to be called nanotechnology--is critical for U.S. 
economic competitiveness, for the supply of jobs with sufficiently high 
productivity to offer wage levels Americans have come to expect, and 
for the prosperity that pays for all the social goods, such as health 
and education, we would like to keep intact for future generations. 
Reauthorization of the Nanotechnology Research and Development Act 
presents the opportunity both to re-up on a vital investment, and at 
the same time be more intentional about reaping social and economic 
returns.
    Oregon Nanoscience and Microtechnologies Institute, Oregon's first 
Signature Research Center, has so far received $37M from the Oregon 
Innovation Council because they know that success in the global 
competition for jobs and prosperity completely depends on a traded 
sector that wins through innovation--fueled by research and 
entrepreneurship. And that is the dual mission of ONAMI--growth in 
scientific research by means of deep inter-institutional and industry 
collaborations, and job growth at Oregon employers commercializing that 
research. I think we're an interesting case. We are a small state, but 
have arguably the world's most powerful collection of industrial 
``small tech'' R&D assets--Intel and HP's top research sites, FEI, 
Invitrogen--Molecular Probes. But we have no wealthy private university 
and are not a traditional venture capital hot spot. Still, we know for 
certain that our research quality and creative ideas are competitive 
with anyone's, and therefore we should be able to grow our 
entrepreneurial sector.
    Thus, one of ONAMI's core activities--coupled with our own set of 
user facilities--is a commercialization fund that makes grants to 
bridge the very real gap between what research agencies pay for and 
what ``pencils out'' for investors. We have so far enabled three very 
promising microtechnology spin-out companies and four nanotechnology 
spin-out companies. Time permitting at the end of my remarks, I'll say 
a little bit about our nano group. For now, I will just note that this 
support is absolutely critical for these technologies to ever reach 
customers and create jobs. Whether it is going to be enough to get us 
to success remains to be seen.
    Before addressing in detail the questions asked by the Committee, I 
will state my overarching point: Intentional federal investment in, and 
accountability measures for entrepreneurial startup company-driven 
commercialization of NNI research are just as necessary and important 
as the research itself, and therefore should be a prominent 
consideration in the re-authorization.
    It is interesting that today, in contrast to 30 years ago, most 
high-risk and disruptive innovation--not just technology research, but 
getting to market--takes place in small companies, many of them 
venture-backed startups. Venture money originating in pension funds, 
university endowments and the bank accounts of high net worth 
individuals turns out to be more patient and risk-tolerant than 
corporate cash, and large companies increasingly innovate by 
acquisition and open technology sourcing--from small companies. This is 
why there needs to be intense focus on making U.S. nanotechnology 
entrepreneurs successful; understanding and addressing the myriad 
hurdles and challenges they face. A $2M regulatory compliance cost that 
is easily absorbed by a Fortune 500 company is a deal killer for the 
entrepreneur who's inventing our future.
    Specific to nanotechnology, then, what are the hurdles? They 
include the greater expense and time required for proof-of-concept 
demonstration, comparatively high capital requirements, the need for 
convenient access to specialized facilities and expertise, and often 
very complicated technology licensing situations. And this is not to 
mention the growing burden of regulatory compliance and related 
uncertainty. Investors see these things as risks and act accordingly. 
For all these reasons, the appetite of venture capital for 
nanotechnology has turned out to be less than many hoped and expected. 
This may not necessarily be the case overseas as hungry global 
competitors such as China place a higher relative value on economic 
development.
    To address these hurdles, the Bayh-Dole Act has enabled 
universities to own and out-license federally funded research results, 
and in the process provide an incentive to faculty inventors. The NNI 
has established 13 user facilities at universities--with no recent 
additions, and the national labs have various access mechanisms, though 
they are mostly geared for publishable research and expensive for 
business to use. SBIR and STTR are vital programs and a lifeline for 
many innovative small businesses, including for our own lead 
nanotechnology spin-out, Crystal Clear Technologies. The new TIP 
program is very promising for companies past the seed stage.
    All of these things are very good and should continue--if anything, 
they should be expanded. But they don't take as much advantage as they 
could of America's many local business and investor communities, so 
company and job creation still favor the already-successful technology 
communities around the major centers. I'd like to suggest two concepts, 
based on our experience with shared-user facilities and our gap fund, 
that I believe could increase the commercialization return on the NNI 
investment around the Nation.
    The first is to broaden the NNIN concept into what we call the 
``high tech extension service''--the logical modern analog of the 
invaluable land grant concept of 150 years ago. Starting too late to be 
part of the NNIN, Oregon boot-strapped federal and private equipment 
grants with university and State funds to create a network of shared 
user facilities--the Northwest NanoNet--which consolidate major 
instrument and equipment assets in well-utilized and maintained 
facilities open to all academic users from any campus on equal cost and 
access terms. They are also open for industry collaborations, and can 
provide leased experimental and office space to both large and small 
company partners. All seven of our current gap companies make critical 
use of these facilities. Since Oregon is a rural state, and the 
distance between our sites is up to 110 miles, we have also implemented 
high-quality web cam and virtual network connections on major tools to 
enable a very satisfying remote user experience. This also works well 
cross-country, so we have clients as far away as Florida. But the key 
points here are that there are measurable objectives and business 
models tied to facility utilization by industry, that we share and 
coordinate acquisitions statewide to maximize unique capability, and 
that this approach does not need to be limited to the few NNIN sites, 
which are too far away for our companies to use on a regular basis. Our 
concept could conceivably ``go viral'' if other State and federal 
funding policies encouraged it.
    We are very proud, by the way, to have opened our newest facility 
at the University of Oregon, on February 13. It is a 30,000 square foot 
underground facility with just about the best vibration performance in 
the world, and therefore ideal for the latest SEM, microprobe, XRD, 
SIMS, FIB and TEM tools. And yes, we are bringing up the first of two 
FEI Titans! We'd love for our nanoscience user facilities to be part of 
the national network and database of nanoscience assets, with or 
without NNIN funding.
    The second concept is dedicated funding for commercialization tied 
to research centers. As far as we know, we are the only State-funded 
research center with specific technology themes to have its own 
dedicated gap fund. This has been running for about 15 months, and if 
we are sure of anything at this point, it is that the response to this 
incentive from academics and entrepreneurs has exceeded our 
expectations and changed the culture and conversation around 
commercialization. The fund is actively advised by the leading venture 
capital partners actively investing in Oregon--including both large and 
small funds. The advisors get a well-screened (by ONAMI staff) heads-up 
look at potential deal flow, and our inventors and entrepreneurs get 
early time with the best possible investor audience. We ask the 
advisors one question: ``If we fund this project and it meets its 
technical objectives, can the partner company raise capital within 12-
18 months and go on to build a successful business in Oregon?'' We get 
more insightful answers to this question than we could have come up 
with ourselves, and have always followed the advice. The gap fund has 
one success metric that the state measures us on: private capital $$ 
invested in our gap fund companies. This is a very unforgiving metric, 
and one that is impossible to fudge. Our four nano companies are very 
early stage and have excellent prospects, and we should have first 
results on our metric this year. I can assure you that it keeps me and 
our gap fund manager, Jay Lindquist, intensely focused.
    So the suggested concept here is to have some portion of NNI 
funds--perhaps in association with large multi-year awards--tied to 
commercialization, perhaps in the form of a gap fund, with a short-term 
outcome measure of leveraged private capital investment.
    As I mentioned at the beginning, we've so far funded seven gap 
projects, of which four are nanotechnologies. These are:

        1.  A bi-functional-ligand nanocoating technology for low-cost 
        drinking water purification in collaboration with Crystal Clear 
        Technologies. CCT is an NSF Phase II SBIR awardee and also 
        $100K California Clean Tech Open winner. They are sampling 
        major corporate partners with breakthrough material that we 
        hope will result in large orders and a very fundable company.

        2.  Dune Sciences is another outgrowth of our well-recognized 
        green nanotechnology program. They are already supplying--to 
        NIST and other customers--unique TEM analysis grids that are 
        ideal for nanoparticle analysis, which helps to fund strategic 
        development of their unique nanoparticle linking technology. 
        Confidential partnerships addressing large markets are being 
        set up.

        3.  NanoBits is yet another green nano company, this time from 
        the point of view of highly efficient production of precision 
        nanomaterials in low-cost, flexible microreactors. This is very 
        early-to-market technology, so it is fortunate that there are 
        also some opportunities to improve the efficiency and safety of 
        specialty chemical manufacture for the pharmaceutical industry, 
        among others.

        4.  Lastly, newly formed startup Inpria is our 
        commercialization partner for breakthrough inorganic solution-
        processed nanomaterials for printed and transparent 
        electronics. We think this could be big, and that is all the 
        detail we can share at this time.

    In summary, I believe that intentional focus--with targeted funds 
and incentives--on commercialization of National Nanotechnology 
Initiative research, can and should be a prominent feature of the 
second five years of the Nanotechnology Research and Development Act. A 
broader national network of shared user facilities and federally-
assisted gap funds that leverage the business and investor communities 
across the Nation--all managed according to the principle ``what gets 
measured gets done''--are my key recommendations for maximizing NNI's 
social and economic returns.
    Thank you again for the opportunity to speak with you today. I am 
submitting some additional written material that amplifies some of 
these points, and will also try to be as helpful as I can in answering 
any questions you may have.

Attachment

                21st Century Nanotechnology Research and

                          Development Act 2.0

              Protecting and Delivering on the Promise of
                 the U.S. Investment in Nanotechnology
    Oregon Nanoscience and Microtechnologies Institute, which has 
developed an increasingly successful model for growing collaborative 
research, industrial partnerships and technology commercialization in 
both existing companies and new startups, is pleased to offer the 
following perspectives and recommendations as Congress considers 
reauthorization of P.L. 108-153.
    First, it should be noted that while the concepts of nanoscience 
and nanotechnology are no longer new (or as mysterious as they were at 
first) to a substantial and growing fraction of the U.S. population, 
the following things remain true:

        1.  Nanoscale science and engineering represent the cutting 
        edge of a majority of endeavors in the applied chemical, 
        physical and biomolecular sciences.

        2.  No ``next new thing'' has emerged to replace ``nano'' on 
        this cutting edge.

        3.  Innovation based on advances in materials science is, 
        increasingly, the only means by which high-wage (relative to 
        emerging industrialized nations) jobs in the U.S. manufacturing 
        sector can be retained--or, perhaps more accurately, kept fresh 
        by earliest adoption of the most advanced technologies for 
        product performance and operational productivity.

        4.  Americans are generally positive and optimistic about 
        nanotechnology (in spite of various attempts to persuade them 
        otherwise). But they may not remain so if it appears that a 
        great deal of money is being spent with little result, or if 
        any major (real or perceived) adverse EHS incident should 
        occur.

    Thus, there is simply no imaginable alternative to pressing on with 
the U.S. investment in nanotechnology, unless we are prepared to 
sacrifice our high relative standard of living and the social goods 
(education, health care, security) that it renders affordable.
    Together, this lack of newness and the ever more pressing global 
competitiveness issue call for a ``refresh'' of the NNI and NNCO 
mandates, with the following key objectives and considerations 
uppermost in mind;

        1.  Commercialization: Harvesting the fruits of past years of 
        basic research by understanding and addressing the cultural, 
        financial and legal hurdles to commercialization of technology 
        developed under federal funding. While the commitment to basic 
        research, particularly in universities, must continue, it is 
        important to increase the translational (social and economic) 
        benefits of this investment.

        2.  Green Nanotechnology and NanoHealth: Addressing the ``EHS'' 
        issue in a proactive and comprehensive manner that results in 
        increasingly powerful methods for achieving desired 
        nanomaterial and nanostructure performance--while optimizing 
        manufacturing efficiency and minimizing potential health 
        hazards, occupational risks, and long-term environmental 
        impact.

        3.  Collaboration and Resource Leverage: Recognizing that 
        achieving either of the two above objectives in today's fast-
        paced and competitive world requires agile and adaptive 
        collaborations among similar and different institutions, and 
        that the era of ``stove-piped'' approaches to major initiatives 
        is over.

    These three themes and illustrative examples, including ONAMI's own 
experience and accomplishments, are briefly discussed below. 
Amplification is available upon request.

Commercialization: Harvesting the fruits of research by overcoming 
hurdles

    It is a good generalization to say that breakthrough technology 
development usually occurs in two ways: (1) Evolutionary: an 
established company or industry consortium with significant internal 
resources invents ``on demand'' to satisfy customer demand for improved 
products (e.g., semiconductors in 2007), and (2) Revolutionary/
disruptive: a new idea/new market niche that finds no fit with large 
company strategies is pioneered by an entrepreneurial startup/spin-out 
company. Most such efforts fall short of revolutionary expectations, 
but the few that succeed in a large way (e.g., semiconductors in 1957) 
make all the difference in the long run.
    Both of these modes are relevant to nanotechnology, but a number of 
hurdles also exist, some of which are new and some of which are 
perennial:

        1.  Break-through materials/process technology can take 5-20 
        years before deployment in mass production or mission-critical 
        situations.

        2.  Specialized and expensive human expertise and 
        characterization equipment is required, with the latter in 
        particular being out of reach for all but the largest companies 
        to own.

        3.  Federal and non-commercial private research funding is 
        oriented toward first-time discovery and publication, not 
        product development and ``go-to-market,'' which take much 
        longer and cost much more.

        4.  Academic, national laboratory, and other non-commercial 
        research institution cultures and reward systems respond to 
        funders' purposes (see above) and further emphasize individual 
        (or at most, small group) careers and accomplishments rather 
        than organizational achievements.

        5.  Commercial and research institution approaches to publicity 
        and intellectual property are different in many ways--as would 
        be expected due to differences in their fundamental purposes 
        (return to shareholders vs. dissemination of knowledge and 
        training).

        6.  Venture funds must show a superior return to their limited 
        partners (which include the retirement plans of many, if not 
        most, Americans), and this is very difficult to do without a 
        clear proof-of-concept for a product (not research result) that 
        is not more than five years from (a) profitable commercial 
        sales in the $10M/year or more, or (b) a high-multiple 
        acquisition by a large company.

    The above conditions together mean that the ``gap'' or ``valley of 
death'' is particularly wide for nanotechnology (and at a time when tax 
and regulatory policies are increasingly unfavorable toward 
entrepreneurship in the U.S.).

    ONAMI experience and accomplishments: Strongly urged by our Board 
of Directors, we have put significant funds and management resources to 
work for our commercialization program. We have deployed $3.5M 
(including interest) in an expert-managed and VC-advised (partners in 
5-6 funds plus one Battelle consultant) gap fund--with the explicit 
goal of enabling companies to raise private capital funds. We have so 
far funded seven university-startup projects (three ``micro'' and four 
``nano'' all of which use the ONAMI shared-user facilities). We expect 
that our lead nanotechnology company will be a very attractive 
candidate for a multi-$M A-round investment and will have substantial 
POs from major customers following acceptance of initial units. Many 
other proposals are pending. In addition, it has been essential that 
ONAMI partner institutions work closely together on IP matters. In 
fact, the Oregon research universities have just announced a common 
Innovation Portal featuring technologies from four campuses.



Green Nanotechnology and NanoHealth: Proactively addressing the EHS 
issues and enabling application at the same time

    This ``problem'' is actually an outstanding opportunity, and the 
ONAMI Green Nanotechnology approach, embodied in our Safer 
Nanomaterials and Nanomanufacturing Initiative with AFRL is a 
recommended model. The essential tenets are:

        1.  ``Application'' and ``implication'' work must be 
        coordinated--just as they are in the industry-funded world of 
        commerce. Application without attention to implications harbors 
        unacceptable risk, and implications without applications will 
        be a waste of effort--only what actually goes on to marketplace 
        demand and high volume manufacturing is going to matter.

        2.  The long-term goal is rational, ``right the first time'' 
        design of nanomaterials that are high in performance, low in 
        hazard, and efficient to manufacture (e.g., ``E-factor'': 
        minimized material and energy consumption in manufacturing). 
        This is a complex and multifaceted undertaking and so requires 
        judicious and insightful planning to coordinate:

                a.  Understanding the biological interactions of well-
                characterized engineered nanomaterials (ENM) through 
                careful application of experimental standards and 
                knowledge bases.

                b.  Development of heuristics, then predictive models 
                and design rules for ENM properties and performance.

                c.  Simultaneous optimization of accurate 
                characterization tools and efficient fabrication 
                processes.

        3.  The benefits of this approach go well beyond risk 
        identification and reduction. A common fundamental 
        understanding of nanomaterial-biological interactions will 
        enable unprecedented productivity in product development, 
        especially for medical and environmental applications.

    A very promising development in which ONAMI is integrally involved 
is the NIEHS- and NIBIB-led NanoHealth Enterprise Initiative:

http://www.niehs.nih.gov/research/supported/programs/nanohealth/
index.cfm

. . .which seeks to join the Foundation for NIH, industry, academia and 
numerous federal agencies in a public-private partnership aimed at 
effectively organizing and administering the accomplishment of this 
task. One important consideration is that, unlike the pharmaceutical 
industry, which funds much of the similar Biomarkers enterprise, the 
nanomaterials industry is newer, smaller, and more diverse/fragmented--
so probably not able or willing to fund this effort to the same degree.

    ONAMI experience and accomplishments: We were among the first to 
see the vital connection between the principles of green chemistry and 
nanoscience, and to emphasize deep collaboration between EHS-oriented 
research and nanotechnology product development (``implication'' and 
``application''). After inventorying assets among our collaborating 
institutions and building a relationship with the Air Force Research 
Laboratory, we believe we have the strongest Green Nanotechnology 
program in the world. We are participating in the ANSI TAG to ISO-229 
WG3 (EHS), and were asked to be one of the few regional centers 
involved in organizing the NanoHealth Initiative. Finally, we hold an 
annual ONAMI Greener Nano conference in March, which brings to together 
national experts from research and industry on all the major topics 
related to nano-EHS.



Collaboration and Resource Leverage: Required for such a broad and 
cross-cutting effort to be both successful and efficient

    It may be true that nanotechnology represents the largest single 
federal research effort since the Apollo moon program, but 
unfortunately it is not (and almost certainly cannot be) as tightly 
focused as ``landing a man on the Moon and returning him safely to 
Earth.'' It will soon influence/penetrate over 10 percent of GDP and 
has relevance to the mission of at least 25 federal agencies, of which 
13 have R&D budgets for nanotechnology (www.nano.gov). The NNI, led by 
the NNCO, has indeed broken new collaborative ground with interagency 
collaboration, even though it has no budget or real decision-making 
authority. This progress needs to accelerate.
    There are also established trends in industry and the academic/
research community (though not yet as pronounced or driven by need 
there) to form partnerships where tasks and sub-tasks in a larger 
effort are assigned to a global network of suppliers/contractors 
selected competitively based on capability, cost and other terms and 
conditions. The purpose is to provide the best product or service to a 
global customer base at the lowest cost in the shortest period of time.
    Of great importance to small/medium business and entrepreneurial 
startups is access to talent (not necessarily on a permanent/full-time 
basis) and to sophisticated research equipment and facilities--
particularly for measurement and characterization. The term ``high tech 
extension'' is used at ONAMI for this concept and suggests that there 
really needs to be greater geographic distribution and more local 
outreach than is currently possible for the 13 sites of the NNIN if the 
benefits of nanotechnology entrepreneurship are to occur in all but a 
few locations in the U.S. Universities and national laboratories are an 
ideal home for this mission, but only if they locate, organize and 
operate their major laboratory assets as ``shared user facilities'' 
that are truly open and available to all researchers and for industry 
collaborations (at appropriate market rates). It is also true that this 
shared/open business model makes better and more efficient use of 
federally funded equipment.
    Successful and highly-valued ONAMI collaborative efforts and 
experiences to date have included:

        1.  A network (NWNanoNetTM) of complementary facilities open to 
        all researchers on an equal cost/access basis, and available 
        for industry collaborations and small company assistance. These 
        facilities include:

                a.  Microproducts Breakthrough Institute (emphasizing 
                micro-energy and chemical systems, including 
                nanomaterial fabrication)

                b.  Center for Advanced Materials Characterization (2/
                19/08 public grand opening of one of the world's best 
                and quietest facilities for SEM/eSEM, STEM, HR-TEM, 
                FIB, SIMS, XRD and more)

                c.  Center for Electron Microscopy and Fabrication 
                (SEM, TEM, FIB, NT/NW fabrication and characterization

                d.  Additional facilities emphasizing microscopy/
                analysis for bioscience and nanoscale fabrication) are 
                planned.

        2.  Technology (e.g., web cams, virtual network connections) to 
        enable effective interactions with remote research or industry 
        clients.

        3.  Dramatic growth in collaborative projects (and overall 
        tripling of ONAMI-affiliated research volume between FY04 and 
        FY07), and even sharing of graduate students between campuses.

        4.  Formal and informal education (both children and adults) 
        collaborations with community colleges and NISEnet member 
        Oregon Museum of Science & Industry (OMSI). In particular, 
        joint public forums on the benefits and risks of nanotechnology 
        have been highly effective, showing that ``average citizens'' 
        are accepting/enthusiastic about nanotechnology when they 
        understand that the experts are conscientiously weighing these 
        factors.

Closing Comments and Additional Considerations:

    Nanotechnology represents the convergence of chemistry, condensed 
matter physics, and biology at the nanometer scale, so it is essential 
that the structure and management of the federal NNI investment reflect 
the multi-disciplinary interaction and collaboration implied in this 
convergence. This should be true of all agencies in the NNI, not just 
the five named in P.L. 108-153 (NSF, DOE, NASA, NIST, EPA). Multi-
disciplinary initiatives involving multi-disciplinary proposal review 
are recommended to the extent possible.
    At least one other critical cross-cutting topic (in addition to 
EHS) deserves to be called out for special attention: nanoscale 
metrology--for both physical and chemical measurements. This is of 
sufficient criticality that a significant extramural funding program 
(i.e., to capture the creativity at universities) is warranted.
    P.L. 108-153 called for certain specific centers to be established 
(i.e., American Nanotechnology Preparedness Center, Center for 
Nanomaterials Manufacturing). If the reauthorization is organized 
around the concept of center solicitations, topics deserving of special 
mention include:

         Chemical Imaging and Measurement at the Nanoscale

         Nanotechnology and Nanobiotechnology (with emphasis on 
        commercialization and industry collaborations)

         Green Nanomanufacturing

    All three of the above topics would be excellent fits for 
leadership from the Pacific Northwest, especially institutions in 
Oregon and Washington.
    ONAMI President & Executive Director Skip Rung and members of the 
ONAMI leadership team will be happy to answer questions or participate 
in discussions related to these recommendations.

                 Biography for Robert D. ``Skip'' Rung
    Mr. Rung is a senior high technology R&D executive with over 25 
years of R&D management experience in CMOS process technology, 
application-specific integrated circuit (ASIC) design and electronic 
design automation (EDA), IC packaging, MEMS, microfluidics, and inkjet 
printing.
    Mr. Rung was asked in December 2003 to serve as the initial 
Executive Director of the Oregon Nanoscience and Microtechnologies 
Institute (ONAMI), Oregon's first ``Signature Research Center'' and an 
unprecedented collaboration among Oregon's research universities and 
the Pacific Northwest National Laboratory. ONAMI's dual mission is to 
grow ``small tech'' research in Oregon and commercialize technology in 
order to extend the success of Oregon's world-leading ``Silicon 
Forest'' technology cluster, which includes the most advanced R&D and 
manufacturing operations for leading companies such as Intel 
Corporation, Hewlett-Packard Company, FEI Company, Invitrogen, Electro 
Scientific Industries, Planar Systems, Xerox Office Products, 
Tektronix, ON Semiconductor and many dynamic smaller firms. ONAMI has 
so far received $37M in State investment and approximately doubled 
Oregon's annual federal and private research awards in the fields of 
nanoscience, green nanotechnology, nanoscale metrology, and 
microtechnology-based energy and chemical systems (MECS).
    Following his retirement from Hewlett-Packard in 2001, Mr. Rung 
consulted in the areas of innovation management, technology business 
development, and intellectual property. He is a co-author of the 2004 
Oregon Research Competencies study commissioned by the Oregon Economic 
and Community Development Department and the author of the initial 
business plan for the Oregon Nanoscience and Microtechnologies 
Institute, successfully recommended for funding as Oregon's first 
Signature Research Center by the Oregon Council on Knowledge and 
Economic Development. OCKED's determination was aided and influenced by 
Mr. Rung's 2002 consulting study of Oregon's most commercially 
promising and industrially relevant research.
    Mr. Rung was a member of the Oregon Engineering and Technology 
Industry Council from 1999-2003 and a co-founder of the New Economy 
Coalition. He is currently a technical advisor to Northwest Technology 
Ventures, an Oregon seed-stage venture capital firm, a director of the 
Oregon Entrepreneur's Forum, Vice-Chair of the Corvallis-Benton County 
Economic Development Partnership, and active in several other community 
development efforts.
    From 1987 to 2001, Mr. Rung was the Director of Research and 
Development at Hewlett-Packard's Corvallis, Ore. facility, responsible 
for the development of future generations of HP's world-leading thermal 
inkjet technology, and for developing future business opportunities 
enabled by HP's microelectronics, MEMS, and microfluidics competencies. 
During Mr. Rung's 14 years as R&D director, inkjet printing became HP's 
largest and most profitable business, maintaining worldwide technical 
leadership through several major new generations of technology and 
holding market share nearly twice that of the next largest competitor. 
Prior to his work on inkjet, Mr. Rung was the R&D Manager for HP's 
Northwest Integrated Circuits Division in Corvallis, which achieved 
worldwide ASIC technology leadership in 1986 with a one-micron process 
comparable to those used for DRAM. Mr. Rung's organization also 
developed novel and performance-leading in-house IC design automation 
systems and custom IC packaging technologies (hybrids, flat packs, TAB) 
to enable calculators and other HP products.
    Mr. Rung began his industrial career in 1977 at Hewlett-Packard 
Laboratories in Palo Alto, CA, performing advanced research in the 
areas of CMOS process device isolation, latch-up, and comparison with 
alternative silicon and compound semiconductor technologies. In 1981-
1982, Mr. Rung was selected by HP to be a technology exchange engineer 
with Toshiba Corp. in Kawasaki, Japan, where he continued his research 
inside the world's leading semiconductor memory engineering group. He 
is the holder of two U.S. Patents, author or co-author of over 14 
refereed journal or conference papers on IC technology, four invited 
papers (two at leading international meetings), and four invited 
presentations on inkjet printing technology.
    Mr. Rung received his BSEE and MSEE co-terminally in 1976 from 
Stanford University, where he was elected to both Phi Beta Kappa and 
Tau Beta Pi in his junior year. His Master's thesis concerned the 
experimental determination of semiconductor doping profiles, and was 
part of the Stanford research on process simulation that was seminal 
for the rapid growth of computer simulation for solid state electronic 
processes and devices.

    Chairman Baird. Thank you very much. We will likely follow 
up with some questions about that. Excellent testimony.
    Dr. Chen.

     STATEMENT OF DR. JULIE CHEN, PROFESSOR OF MECHANICAL 
     ENGINEERING; CO-DIRECTOR, NANOMANUFACTURING CENTER OF 
         EXCELLENCE, UNIVERSITY OF MASSACHUSETTS LOWELL

    Dr. Chen. Thank you Chairman Baird and the other Committee 
Members for inviting me here today. I am Julie Chen. I am a 
Professor of Mechanical Engineering at the University of 
Massachusetts Lowell, and I am also co-director of a state-
funded Nanomanufacture Center of Excellence. I would be remiss 
not to pass along the best wishes and greeting of our 
university's new chancellor, and your former colleague, Marty 
Meehan.
    UMASS is also part of a very unique equal partnership with 
Northeastern University and the University of New Hampshire in 
a National Science Foundation-funded Center for High-rate 
Nanomanufacturing. This is one of only four such centers in the 
United States focuses on developing tools and processes for 
high-volume, high-rate production. The center has partnership 
with over two dozen companies, and these companies represent 
the full spectrum of industry sectors and company size, 
everything from start-up to Fortune 100.
    Mr. Chairman, we have seen that from drug therapies and 
efficient energy sources, to protection for our war fighters, 
innovative nanotechnology is going to be important for this 
nation. We are not the only country to recognize the 
possibility of nano. Several nations in Europe and Asia have 
made nano a national priority and have invested heavily in its 
expansion. As with much of the U.S., the City of Lowell has 
seen it share of industry strength and loss, from the textile 
industry to minicomputers to biotechnology. As a nation, we 
cannot afford to have a laissez faire approach to technology 
transfer of the research coming out of nanotechnology.
    Today, I would like to concentrate my specific comments on 
four points. The first one is company attitudes. I am aware of 
two major surveys that have been done of business leaders and 
their attitude toward the nanomanufacturing industry, the most 
recent, one conducted in 2006, by a team lead by Barry Hock, 
with collaboration between the UMASS Lowell Center for Economic 
and Civic Opinion and Small Times Magazine, the prior survey 
conducted by NSF was conducted in 2005. The results are 
consistent. Of the respondents, almost 90 percent felt that the 
Federal Government should participate or take the lead in 
fostering R&D and providing commercializing incentives. On both 
surveys, items like the high cost of processing, perception of 
lengthy times to market, and process scalability were cited as 
key areas. It is clear that industry believes that Federal 
Government funding is really a key to closing the gap between 
the early successes that we have had in the lab and delivery of 
products. An additional note is that 89 percent of these 
business leaders also stated the importance of EHS risks the 
Committee has addressed. At Lowell, we have EHS researchers 
working side by side with nanomanufacturing researchers, 
measuring potential levels of exposure and making suggestions 
in terms of the chemicals and materials that could be used to 
ensure that the products that we develop in the future, and the 
processes, are greener in their development. It is this type of 
multi-disciplinary partnership that we need to foster and to 
encourage to help move this technology forward.
    The second point is in terms of basic research. Over the 
past decade, we have made significant advances in fabrication 
of the building blocks, the nanotubes, the nanoparticles, and 
we are getting a better understanding through experimentation 
and modeling of how forces interact with these building blocks. 
We have only scratched the surface, though. We haven't yet 
gotten to the point to where we can sit down and design the 
process and the product for a nanotechnology-related product.
    Here, what I would like to do is emphasize that we need to 
think of nanotechnology not as a single-industry sector or a 
single way of making products. Differences that we see, in 
fact, today, in manufacturing between making steel, making a 
medical device, making an electronic device, carries over 
through nanotechnology, and we can see from the foreign NSF 
centers that that is true. Many different mechanisms are being 
used, and we need to recognize that there is a broad array of 
techniques.
    So I am going to talk about three examples in terms of 
basic research that cut across these different processes, 
rather than a specific one. The first example is in-line 
metrology. To paraphrase one of my colleagues, Professor Carrol 
Barry at UMASS Lowell, you can make 100 products an hour, but 
it is going to take you a week to find out if any of them are 
any good. You need end-line rapid measurement in order to move 
process development forward. Example B, processing equipment, 
it takes more than just making the filament to make the light 
bulb. You need to make the filament, the bulb, the battery, the 
switch, and put that all together. We need more efforts in 
terms of the processing equipment to integrate these things. 
And the third area is models. We see from nature that things 
are not perfect. In a spider web, you have radial lines, nice 
circular lines, but they are not all perfect, and yet the web 
is still able to catch the fly. We need to understand from 
modeling how perfect do we have to be in order to truly make 
commercial products.
    My third point is in terms of university industry 
interaction. We believe that a percentage of funds needs to go 
towards technology demonstration projects in the form, perhaps 
of an STTR program, but allowing both small and large companies 
to participate because nanotechnology is really going to be 
important to both. The other thing that we would say is that 
the bulk of federal support should not be targeted. We cannot 
prevent the discovery not yet envisioned from being funded, but 
the small percentage of funding for these technology-
demonstration projects will help to focus and drive the 
research forward and will help to dispel any concerns from 
venture capitals about the commercial viability of 
nanotechnology.
    My last point is in terms of user facilities. Over 90 
percent of the business leaders stated that user facilities 
were critical to their advancement, although smaller companies 
are more likely to use user-facilities because of lack of 
resources. But again, user facilities should not just be 
limited to the traditional characterization and lithography 
based. We found many different ways of making things, and we 
want to make many different types of facilities available 
across the country, so the idea of not just selecting a few but 
allowing any facility that shows that there is industry 
interest to have some funding to provide for that 
administrative support is important for moving this forward.
    In conclusion, Mr. Chairman, and Members of the Committee, 
I would like to thank you again for the opportunity to testify. 
I believe that there is an important role that NNI and the 
Federal Government can play in fostering this technology 
transfer. The bulk of funding for R&D must remain at the basic 
research level to conceive the emerging technologies of the 
future, but a few of these targeted funds, in terms of 
university-industry partnerships for technology demonstration 
for developing tools and processes are going to be important to 
move forward this technology. Thank you.
    [The prepared statement of Dr. Chen follows:]
                    Prepared Statement of Julie Chen

ABSTRACT

    Nanotechnology is facilitating the advancement of new applications 
across many fields and industries. While many major commercial 
applications of nanotechnology are still five to ten years out, private 
sector investors seek much shorter-term investment returns. Business 
leaders overwhelmingly identified challenges of high cost of 
processing, process scalability, perception of lengthy times to market, 
and Environmental, Health, and Safety (EHS) unknowns as barriers to 
commercialization. While a portion of the NNI's funds have been 
targeted towards efforts such as nanomanufacturing, R&D facilities and 
EHS research, much more needs to be accomplished in these areas. The 
United States remains the leader in nanotechnology R&D and maintaining 
this position and continually advancing nanotechnology is a major goal 
of the NNI. While the bulk of the federal funding for R&D must remain 
at the basic research level to ensure future discoveries and emerging 
technologies, some federal funding is needed to provide incentives for 
the university-industry partnerships that are needed--(1) to accelerate 
technology demonstration efforts; (2) to develop and expand the 
accessibility of new tools for rapid, in-line measurements and new 
processing equipment; and (3) to address concomitant issues such as 
environmental, health, safety, and intellectual property. Increased 
federal support for basic research and development and for technology 
transfer incentives is essential to maximize nanotechnology's potential 
and to maintain America's competitive advantage in the global 
marketplace.

INTRODUCTION

    Thank you, Mr. Chairman and the other Committee Members for 
inviting me here today to discuss the state of nanomanufacturing 
research and the National Nanotechnology Initiative's (NNI) efforts in 
fostering the transfer of our research and development efforts toward 
commercial products and greater economic competitiveness of the United 
States. While informed by discussions with many colleagues, the 
statements in this testimony are my personal opinions.
    I am a Professor of Mechanical Engineering at the University of 
Massachusetts Lowell and I am Co-Director of the Nanomanufacturing 
Center of Excellence. I would be remiss not to pass along the best 
wishes and greetings of our University's new Chancellor and your former 
colleague, Marty Meehan.
    In addition to being designated a State-funded Nanomanufacturing 
Center of Excellence, UMass Lowell is part of a unique equal 
partnership with Northeastern University and the University of New 
Hampshire in the National Science Foundation (NSF) sponsored Center for 
High Rate Nanomanufacturing (CHN).\1\ Funded as part of the NNI, this 
Center is one of only four NSF Centers in the country that focuses on 
nanomanufacturing. The Center has as its overarching goal, the creation 
of tools and processes that will enable high-rate/high-volume, 
template-directed assembly of nano-building blocks, such as carbon 
nanotubes and polymer nanostructures. The CHN thrives by integrating 
complementary expertise in semiconductor and MEMS (micro-electrical-
mechanical systems) fabrication, plastics processing, chemical 
synthesis and functionalization, and environmental health and safety. 
This theme of multi-disciplinary and multi-institutional partnerships 
is one that I will revisit throughout my testimony.
---------------------------------------------------------------------------
    \1\ CHN Director, Ahmed Busnaina (Northeastern), CHN Deputy 
Director, Joey Mead (UMass Lowell), and CHN Associate Director, Glen 
Miller (UNH) are the leads at their respective institutions. 
(www.uml.edu/nano, www.nano.neu.edu, www.nanotech.unh.edu)
---------------------------------------------------------------------------
    An important component of the NSF nanomanufacturing centers is 
external partnership--for example, the CHN has partnerships with over 
two dozen companies, other universities, government agencies including 
the Army Research Lab and Lawrence Livermore National Laboratory, and 
international collaborators. These companies represent the full 
spectrum of industry sectors--e.g., defense, electronics, biomedical, 
transportation--and sizes--e.g., from startup companies to Fortune 100 
companies. One of the specific goals of all of the NSF 
nanomanufacturing centers, as well as our Center of Excellence, is to 
help industry overcome the technical barriers to commercial 
applications of nanotechnology innovations.
    Mr. Chairman, from the drug therapies to clean water to more 
efficient energy sources to addressing the critical force protection 
needs of the war fighter, the transfer of innovative nanotechnology 
research to applications of commercial and public benefit is a primary 
objective of the National Nanotechnology Initiative. More personally, 
as a researcher and an engineer, my goal and that of many of my 
colleagues, is one of discovery but with the desire to see that 
knowledge creation lead to products that will benefit society. 
Unfortunately, such pathways to commercialization must navigate the 
commonly referenced ``valley of death'' between R&D and the 
marketplace. Even successful technologies can take decades to reach the 
marketplace. Yet, we see the lifetimes of technological advantage 
continue to shrink with the decreases in time to market and increases 
in global competition for manufacturing. For example, Lowell has seen 
its share of industry strength and stagnation from the textile industry 
to minicomputers to biotechnology. Biotechnology is one of the region's 
economic drivers, but the fierce competition can be seen by the 
aggressive presence of over 30 international delegations with pavilions 
at the 2007 BIO International Convention held in Boston.
    What does this global competition mean for the more nascent 
nanotechnology field? Since its inception in 2001, federal funding for 
nanotechnology research and development has more than doubled. While 
this is an impressive start, we are not the only country to recognize 
the remarkable societal and economic possibilities of nanotechnology 
research. Several nations in Europe and Asia have made nanotechnology a 
national priority and have invested heavily in its expansion. As a 
nation, we cannot afford a laissez-faire approach to technology 
transfer of R&D.

RESPONSES TO SPECIFIC QUESTIONS

    Today, I would like to concentrate my specific comments on four 
areas:

        1.  Companies' attitudes towards the need for federal support 
        of nanotechnology and the critical areas of investment

        2.  Areas of basic research that need greater support to move 
        industry towards high-rate nanomanufacturing

        3.  Interaction between universities and industry for setting 
        research direction

        4.  The role of user facilities in advancing technology 
        transfer

1.  Companies feel strongly about the need for federal support of R&D 
in high-rate/high-volume nanomanufacturing and commercialization 
incentives for nanotechnology

    I am aware of two major surveys that have been conducted on the 
attitudes of companies towards the developing nanomanufacturing 
industry. The most recent, conducted in 2006 by a team led by Barry 
Hock, was a collaboration between the UMass Lowell Center for Economic 
and Civic Opinion and Small Times Magazine\2\. Where relevant, I will 
also comment on comparisons to a prior NSF-funded survey conducted in 
2005 by Dr. Manish Mehta and the National Center for Manufacturing 
Sciences (NCMS).\3\ The former analyzed responses from phone surveys of 
roughly 400 business leaders in nanotechnology-identified companies, 
while the latter compiled results from online survey responses of 
roughly 600 industry executives.
---------------------------------------------------------------------------
    \2\ B. Hock, et al., ``Survey of U.S. Nanotechnology Executives,'' 
full report available on http://www.masseconomy.org/html/
3-0ceo-ceosurvey.html#nanoexec (accessed March 3, 
2008) and summary article available in Small Times Magazine, Jan/Feb 
2007 (and online at http://www.smalltimes.com/
display-article/281851/109/ARTCL/none/none/1/Survey-says:-
Manufacturing,-government-keys-to-US-success/, accessed March 3, 2008).
    \3\ M. Mehta, ``2005 NCMS Survey of Nanotechnology in the U.S. 
Manufacturing Industry,'' full report available on http://www.ncms.org/
publications/PDF/05NCMSNanoFinalReport.pdf (accessed March 3, 2008).
---------------------------------------------------------------------------
    Of the respondents in the 2006 survey, 45 percent felt that the 
Federal Government should take the lead in fostering R&D and providing 
commercialization incentives, while an additional 43 percent favored 
participation, but in a limited fashion. These results mirrored those 
of the 2005 survey, where over 90 percent favored ``Federal Government 
involvement in the commercialization of nanomanufacturing.'' In the 
2006 survey, when asked what single area of R&D needed the most 
strengthening, ``high volume manufacture of nanotechnology materials 
and products'' was selected by 39 percent of the respondents, with the 
second highest area (basic, long-term research) coming in much lower at 
15 percent. Again, this aligned well with the 2005 survey where ``high 
cost of processing,'' ``perception of lengthy times to market,'' and 
``process scalability'' represented three of the top five barriers to 
commercialization. It is clear that industry believes that Federal 
Government funding is critical to closing the gap between the early 
successes in the lab and the delivery of products.
    Surprisingly, environmental, health, and safety (EHS) was selected 
as a critical R&D area by only a small percent of respondents, even 
though the same executives overwhelmingly (89 percent) stated that it 
was very important for the government to address EHS risks associated 
with nanotechnology and that little was known about the risk (64 
percent). One possible explanation for this apparent discrepancy is 
that given the option of selecting only the single most important area, 
industry executives felt that R&D-fueled advances in high volume 
manufacturing would more directly impact their ability to make 
products. Nevertheless, the strong response on EHS risks, coupled with 
the testimony at the Research and Science Education Subcommittee's 
October 31, 2007 hearing on environmental and safety impacts of 
nanotechnology, clearly state the need for federal support for EHS 
research. This EHS research should be conducted, not in isolation, but 
rather in combination with R&D on new nanomanufacturing processes and 
targeted nanotechnology applications. At Lowell, we have EHS 
researchers in the lab, working side-by-side with the nanomanufacturing 
researchers, measuring potential levels of exposure and suggesting 
``greener'' chemical and materials choices, as new processes are being 
created. It is through this type of multi-disciplinary partnership that 
we can better ensure safer new products.

2.  Areas of basic research that need greater support to move industry 
towards high-rate nanomanufacturing include the need for research 
advances in supporting fields, such as metrology, multi-scale 
integration, modeling, and EHS.

    Over the past decade, we have made significant advances in 
fabrication of carbon nanotubes, nanoparticles, and other such nano-
building blocks, as well as in methods for depositing nanoscale layers 
of material. Through experimentation and molecular-level modeling, we 
have a better understanding of the interaction of forces, whether they 
are optical, electrical, magnetic, fluidic, chemical, etc., with 
nanoscale elements. We have, however, still only scratched the surface 
towards ultimately being able to predict and design the process and the 
end-product performance for a breadth of nanotechnology applications. 
Thus, while today, an engineer could sit down at a computer and design 
the mold, material, and process conditions to manufacture miniature 
plastic medical device parts or the layout of a semiconductor chip for 
your phone, we still have many challenges to address to achieve the 
same at the nanoscale.
    Here, I would first like to state that to think of 
nanomanufacturing or nanotechnology as a single industry sector would 
be a mistake. Unlike the biotechnology industry or the semiconductor 
industry, companies incorporating nanotechnology into their products do 
not all identify themselves as nanotechnology companies. Rather, 
nanotechnology and nanomanufacturing are methods to create more 
competitive products for automotive, aerospace, communications, 
electronics, energy, medical, and many more applications. Thus, the 
vast differences in the current processes for manufacturing steel or 
catheters or the iPhone, are also represented in the many different 
approaches towards nanomanufacturing research taken by the four NSF 
Centers--e.g., the University of Illinois in nanofluidics,\4\ UMass 
Lowell/Northeastern/UNH on template-assisted assembly, UMass Amherst 
using self-assembled block co-polymers,\5\ and UC-Berkeley/UCLA in 
plasmonic lithography.\6\ While technology roadmaps have been useful 
for industries such as the semiconductor industry, one would need to 
have multiple roadmaps, tying related product types to 
nanomanufacturing approaches. Therefore, here I have limited my brief 
remarks to challenges that cut across multiple processes and where I 
believe a significant federal investment in basic research will yield 
dividends over the next three to five years:
---------------------------------------------------------------------------
    \4\ http://www.nano-cemms.uiuc.edu/ (accessed March 6, 2008).
    \5\ http://www.umass.edu/chm/ (accessed March 6, 2008).
    \6\ http://www.sinam.org/ (accessed March 6, 2008).

          In-line Metrology--The NNI has sponsored several 
        workshops over the years to identify critical barriers and 
        grand challenges in nanomanufacturing.\7\ In every case, the 
        lack of measurement tools for in-line, large-area measurement 
        of product characteristics is cited as a barrier. To paraphrase 
        one of my Co-Directors at UMass Lowell, Professor Carol Barry, 
        ``you can mold 100 parts in an hour, but it will take you a 
        week of microscopy to figure out if what you have is any 
        good.'' Clearly, off-line, labor-intensive electron (SEM, TEM) 
        and atomic force microscopy (AFM) is not the answer for process 
        development and product quality control in these early stages. 
        Just as the development of the scanning tunneling microscope 
        (STM) in the early 1980's enabled the growth of nanotechnology 
        by allowing us to ``see'' and manipulate atoms at the 
        nanoscale, there is a need for new tools that can extend our 
        measurement capabilities to the manufacturing environment.
---------------------------------------------------------------------------
    \7\ J. Chen, H. Doumanidis, K. Lyons, J. Murday, M.C. Roco, 
``Manufacturing at the Nanoscale,'' NNI Workshop Report, http://
www.nano.gov/
NNI-Manufacturing-at-the-Nan
oscale.pdf (accessed March 3, 2008).

          Processing equipment for multi-scale and hierarchical 
        manipulation, assembly, and integration--Similarly, while we 
        can manipulate individual nanoparticles and molecules in the 
        laboratory using AFM and STM, doing so is not a practical 
        approach to manufacturing. Hence, much of the current 
        nanomanufacturing research focuses on self-assembly or directed 
        self-assembly using chemical, electrical, optical, fluidic and 
        other forces. While we can use these indirect forces to 
        manipulate many nano-building blocks into place, fabricating a 
        whole device or structure typically involves connecting one 
        component or layer to the others. Thus, precise positioning and 
        manipulation of each component or layer relative to the next is 
        needed. The semiconductor industry has extensive expertise in 
        this type of precision for 2D-layer-by-layer lithography-based 
        manufacturing processes, but other methods must be developed 
        for a full 3D capability. Some funding is available for 
        research on the fundamental mechanisms, but funding for 
        innovative processing equipment development is extremely 
---------------------------------------------------------------------------
        limited.

          Models incorporating statistical variation (robust 
        and redundant designs)--Being able to control material 
        structure at the nanoscale means that we can start to approach 
        fabrication of truly multifunctional structures. While such 
        control can be achieved over small areas, it is difficult to 
        maintain the same level of control over much larger areas. 
        Precise patterns begin to exhibit some variations. For 
        commercially-viable products, the answer is not to require 
        precision and exact replication over large volumes. Rather, 
        just as in nature, variation is acceptable as long as 
        functionality is maintained. For example, as beautiful as a 
        spider web is with its radial and circumferential lines, all of 
        the lines are not perfectly spaced nor are they perfectly 
        oriented. Nevertheless, the web is still effective at capturing 
        the fly, and a break in one radial line does not cause the 
        collapse of the entire web. Functionality is often maintained 
        through redundancy. To achieve this level of robustness in our 
        engineered materials and devices, our understanding of exactly 
        what degree of variation, defect, or damage is acceptable must 
        improve. Models that incorporate statistical variation and 
        uncertainty can help to define the precision required in 
        manufacturing.

          Life cycle analysis of environmental, health, and 
        safety--EHS was discussed already in reference to the survey, 
        so I will only make one additional comment here. While we are 
        actively looking at measuring exposures and quantifying 
        oxidative stress in cells due to exposure, another component of 
        the EHS question is understanding in what form nanomaterials 
        will exist through their entire life cycle, i.e., from 
        processing to disposal. For sustainability, one generally hopes 
        that products tossed into a landfill do biodegrade, but we must 
        also understand what intermediate separation of nanoparticles 
        from the bulk material may mean in terms of exposure.

3.  Universities and industry need to communicate better on setting 
research directions and on scalable approaches to addressing the 
challenges--a few key technology demonstrations would accelerate the 
R&D progress as well as sustain interest from capital investments and 
the public.

    Continued funding of basic research is critical to harvest the 
long-term benefits of the past and current investment in 
nanotechnology. Recognizing that even after over 50 years of studying 
heart disease we still much to learn, long-term basic research support 
is needed for emerging technologies. This must combat the trend of 
attention spans getting shorter and shorter. Funding sources for R&D 
and capital investments looking for the next big thing must recognize 
that we have yet to harvest the real promise of nanotechnology. Current 
first and second generation nano-products--pants that don't stain, golf 
balls that fly straighter, cars that are lighter--represent harvesting 
fruit trees to build a shelter--important for survival, but not reaping 
the full benefits. By continuing to care for and plant more trees for 
cross-pollination, we can eventually harvest the fruit from the trees 
for food and for future sustainability. For nanotechnology, we need to 
continue to fund basic R&D and to provide incentives for high-quality 
cross-pollination from university-industry partnerships.
    One approach would be to allocate a percentage of funds towards 
technology demonstrations or industry/university testbeds. The key to 
these testbeds is that they must be an active collaboration between the 
industry sponsor and the university researchers. Specific technical 
challenges and measurable targets must be identified that will lead to 
a commercially-viable product. For example, there are researchers 
working on sensors at every research university in the U.S.; yet, why 
do so many not make it to the marketplace? In many cases, there is a 
large gap between demonstrating a sensing mechanism that works in the 
lab and actually manufacturing a sensor with power, input/output 
signals, and robust sensing and packaging for a harsh environment. By 
encouraging researchers and sensor manufacturers or users to work 
together, the development can occur in a parallel and more effective 
fashion.
    The Center for High-rate Nanomanufacturing and the 
Nanomanufacturing Center of Excellence have taken an aggressive 
position in involving industry in our work. This is in part due to our 
research focus on nanomanufacturing but is also in part due to history 
of UMass Lowell and Northeastern and UNH working with industry, both 
regionally and nationally, on collaborative research to address real 
businesses' real needs. To initiate discussions of research directions 
with industry, we have active industrial advisory boards, host and 
participate in trade shows, conferences and workshops to introduce 
industry to our faculty, facilities and research, and solicit and 
secure industry funded research that extends a general discovery 
towards the needs of a specific application area. For example, as part 
of our Army Research Laboratory sponsored Nanomanufacturing of Multi-
functional Sensors program, we are working closely with the Army and 
with companies on developing manufacturable sensors to protect the war 
fighter.
    In general, the bulk of federal support of R&D should not be 
tightly targeted or directed, as this will inhibit the important 
discovery not yet envisioned. Nevertheless, a small percentage of funds 
supporting a few such technology demonstrations can serve many 
purposes: (1) they help to focus and drive the research forward more 
rapidly for a particular application; (2) they help to dispel concerns 
from sources of investment capital about the general feasibility of 
nanotechnology by providing examples of commercial successes; and (3) 
they help to capture the imagination of the general public, and 
communicated correctly, can help to generate continued support for R&D. 
Such incentives for technology demonstration partnerships between 
industry and academia could be a modified form of the STTR program, but 
with participation from small and large companies.

4.  User facilities (and complementary expertise) are needed to advance 
technology transfer, especially in support of small businesses.

    The 2006 survey responses towards use of university (mostly 
federally-sponsored) user facilities reflected the likely need for a 
broad range of equipment to develop nanotechnology products. Over 90 
percent rated access to unique equipment and facilities as very 
important. Although almost 60 percent rated their own infrastructure as 
excellent or very good, a similar percentage also indicated their 
company planned to use university user facilities. This suggests that 
companies are likely to have specialized equipment in-house that is 
critical to their product space, but that supplementary equipment for 
characterization or scientific and engineering support needed on a 
limited basis would be sought at universities or other user facilities.
    These survey results match well with our experiences. We have had 
success working with industry, but we have also encountered some 
challenges, primarily because of intellectual property (IP) concerns. 
Smaller companies are much more likely to collaborate with universities 
because they cannot afford to have all the facilities, such as a clean 
room, or the breadth of equipment that the university has built up. The 
piece that often is overlooked in the discussion of user facilities, 
however, is that it is the expertise associated with how to use the 
equipment, how to interpret the results, and how to move forward based 
on those results that can lead to success, not just the physical 
equipment. While many user facilities such as the NNIN have procedures 
where facility use does not require companies to share IP, 
revolutionary advances require the type of in-depth, open discussions 
between researchers who are at the cutting-edge and their industry 
counterparts that can be inhibited by IP concerns.
    Although the high cost of equipment tends to favor consolidation of 
facilities, it should be recognized that even with the power of the 
internet, distance is a factor. We find that companies located within 
our region are much more likely to collaborate with us because of the 
opportunity for face-to-face interaction, even though our capabilities 
could help companies across the country. Another consideration in 
establishment of user facilities is that there are many types of 
manufacturing approaches, with different equipment and facility 
requirements. For example, the earlier version of the NNIN was heavily 
focused on lithography-based processes and characterization. The NNIN 
has since added more bio-based capabilities with the inclusion of the 
University of Washington and other new partners, but there are dozens 
of other types of facilities that could be of use towards advancing 
technology transfer. Sharing these facilities with other universities 
and companies involves additional costs in terms of staff time and 
maintenance. It is difficult, however, to hire the one-third or one-
half of a staff person needed to assist the first few industry 
partners. One model that could be explored would be similar to the NSF 
Industry-University Cooperative Research Center Program (IUCRC) where 
NSF provides funding to cover administrative support, provided enough 
companies demonstrate their interest in the Center through direct 
funding of projects. Therefore, if a university could demonstrate 
enough industry interest in a particular characterization or processing 
facility--e.g., a multi-layered extrusion, nanocomposite dispersion, or 
nano-molding facility--then federal funds could be made available to 
provide initial stability for the additional staffing needed. The 
federal funds could then be phased out or adjusted as the facility 
grows the number of users. This would ensure that federal funds are 
going to facilities that are in demand and that user facilities have an 
incentive to grow their number of users.

CONCLUDING STATEMENT

    Mr. Chairman, Members of the Committee, I would like to thank you 
again for the opportunity to testify before your committee. I believe 
that there is an important role that the NNI and the Federal Government 
must play in fostering the transfer of technology from the research lab 
to the marketplace. While the bulk of the federal funding for R&D must 
remain at the basic research level to ensure future discoveries and 
emerging technologies, some federal funding is needed to provide 
incentives for the partnerships that are needed--university-industry 
partnerships to accelerate technology demonstration efforts, to develop 
and expand the accessibility of new tools and processing equipment, and 
to address concomitant issues such as environmental, health, safety, 
and intellectual property. That concludes my prepared remarks and I 
look forward to answering any questions you may have.

                        Biography for Julie Chen
    Dr. Julie Chen is currently one of the three Co-Directors\8\ of the 
UML Nanomanufacturing Center (she is responsible for the NCOE\9\ 
component) and the Co-Director of the Advanced Composite Materials and 
Textile Research Laboratory at the University of Massachusetts Lowell, 
where she is a Professor of Mechanical Engineering. Dr. Chen was the 
Program Director of the Materials Processing and Manufacturing and the 
Nanomanufacturing Programs in the Division of Design, Manufacture, and 
Industrial Innovation at the National Science Foundation from 2002-
2004. Dr. Chen has been on the faculty at Boston University, a NASA-
Langley Summer Faculty Fellow, a visiting researcher at the University 
of Orleans and Ecole Nationale Superieure d'Arts & Metiers (ENSAM-
Paris), and an invited participant in the National Academy of 
Engineering, Frontiers of Engineering Program (U.S., 2001, U.S.-
Germany, 2005, and Indo-U.S., 2006). In addition to co-organizing 
several national and international symposia and workshops on composites 
manufacturing and nanomanufacturing for NSF, ASME, ASC, and ESAFORM, 
Dr. Chen has also served on editorial boards, advisory committees, and 
review panels for several journals and federal agencies, including NSF, 
NIH, the National Academies, ARL, and AFOSR.
---------------------------------------------------------------------------
    \8\ With Professors Joey Mead and Carol Barry.
    \9\ The Nanomanufacturing Center of Excellence (NCOE) is a state-
funded center with the mission of fundamental scientific and applied, 
industry-collaborative research on environmentally-benign, 
commercially-viable (high rate, high volume, high yield) manufacturing 
with nanoscale control.
---------------------------------------------------------------------------
    Dr. Chen received her Ph.D., MS, and BS in Mechanical Engineering 
from MIT. She has over 20 years of experience in the mechanical 
behavior and deformation of fiber structures, fiber assemblies, and 
composite materials, with an emphasis on composites processing and 
nanomanufacturing. Examples include analytical modeling and novel 
experimental approaches to electrospinning and controlled patterning of 
nanofibers, nanoheaters, and forming, energy absorption, and failure of 
textile reinforcements for structural (biomedical to automotive) 
applications.

    Chairman Baird. Mr. Welser.

  STATEMENT OF DR. JEFFREY WELSER, DIRECTOR, NANOELECTRONICS 
                      RESEARCH INITIATIVE

    Dr. Welser. Good morning. My name is Jeff Welser, and I am 
on assignment from the IBM Corporation to head the 
Nanoelectronics Research Initiative, or NRI. I appreciate the 
opportunity to testify today on behalf of the NRI, the IBM 
Corporation, the Semiconductor Industry Association, and the 
Semiconductor Research Corporation.
    Let me start by noting that as its name implies, NRI is 
focused on nanoelectronics, which is the application of 
nanotechnology to the electronics field, including the 
semiconductor devices and chips which fuel our economy today 
from supercomputers to laptops to cell phones to automotive 
electronics. This industry has been built on constantly 
shrinking the size of these components and arguable was the 
first industry to begin exploit nano for commercial products. 
But now, we are quickly approaching the fundamental limits of 
the current technology, and we will need to find entirely new 
devices to continue these unprecedented technological advances. 
It is not just about shrinking things anymore. It is about 
taking advantage of the physics that comes with small sizes to 
create new functionality, the same promise nanotechnology hold 
for so many other fields of science as well.
    And since so many of the advances in these other fields, as 
well as in the economy as a whole, will depend on 
semiconductors, our success will be crucial to America's 
overall competitiveness. Simply put, whichever country is first 
to market with the new chip technology will lead in the coming 
nanoelectronics area the way the U.S. had led for half a 
century in the microelectronics era.
    In the next five minutes, I would like to focus my remarks 
on two key questions submitted by the Committee. I will answer 
these in the context of how our initiative is advancing and 
commercializing nanoelectronics, but I feel strongly that the 
partnership model and approach we employ can be utilized across 
all of the areas of nanotechnology that the NNI addresses.
    First, given our industry's grand challenge of finding a 
new semiconductor device, how to we interact with government to 
set research directions and manage research activities? The 
NRI's model is to do goal-oriented, basic research. This model 
balances the need for a broad range of research into many 
different science phenomena with the need to drive the research 
in the most productive directions for future commercialization. 
All of the NRI's research is done at multi-university centers, 
and we are currently supporting work at 25 universities in 13 
states.
    Centering the work at universities rather than in our own 
industrial labs or at national labs is important, not only for 
driving the research, but also to expand the number of involved 
students which will up a future workforce and leverage related 
university work. To engage the largest number of top 
researchers across the U.S., we have set up three centers 
already, in the West, the Northwest, the Northeast, and 
Southwest, and are looking to open a fourth in the Midwest 
later this year. Building a strong university capability for 
nanotechnology research in general is crucial in increasing 
American competitiveness for all industries.
    Utilizing both the federal NNI funding and State 
initiatives, we currently partner government in three different 
ways. First, our centers are strongly supported by funding from 
the lead state in each case, California, New York, and Texas. 
These states recognize that close industry-government-
university partnership leads to faster commercialization of the 
research, thereby increasing the potential for future economic-
development activity. In short, they see the impending 
technology transition point to grow an entirely new industry 
around their university base, the same way Silicon Valley grew 
up around the transistor.
    Second, NRI and NSF provide supplemental co-funding of 
nanoelectronics projects at existing nanoscience and 
engineering university centers. Our industry liaison team then 
interacts with the centers and gives industry input on the 
individual projects as well as the overall center research. 
This leverage has a significant NSF investment in these 
centers, guiding that work towards areas we think will have 
large potential for future commercialization and giving us a 
broad view of many emerging areas of research.
    Third, NRI and NIST started a new partnership last 
September to extend the NRI Center work. NRI and NIST now 
jointly choose projects to fund, conduct joint reviews, and 
hold monthly meetings to direct the ongoing program. In 
addition, NIST labs and researchers can interact directly with 
university professors to support the nanotechnology work, 
leveraging the lab's capabilities for advance nanometrology and 
helping to guide their continued work, internally, on new 
revolutionary tools that can have the most impact on future 
commercialized products. This partnership model is unique and 
utilizes the best of university and government partners to 
produce results most likely to benefit future products.
    This leads, naturally, into the Committee's second 
question: how can NNI help foster commercialization of 
nanotechnology? First, increase funding across the agencies for 
nanotechnology equipment and research at universities. This is 
similar to what NSF has been doing with the National 
Nanotechnology Infrastructure Network, but expanding the 
equipment base to enable nanomanufacturing and prototyping of 
early devices will facilitate a more rapid transition from the 
lab into a commercial product.
    Second, encourage direct partnership with industry to 
pursue this research. Industry involvement leads, naturally, to 
identifying early commercialization opportunities for 
technology, such as the recent introduction of nano self-
assembly to fabricate air-gap wiring in IBM's computer chips, 
based on work being done at the Albany Nanotech Center. And 
industry involvement can even help direct basic research in the 
most promising directions. As an example, at a 2006 NRI review, 
a physics professor presented work on a new phenomenon he 
dubbed pseudo-spintronics, which occurred far below room 
temperature. After discussion with industry research engineers 
about the potential for utilizing this phenomenon in a future 
device, by the next review, he was showing us how the 
phenomenon could be made more robust for higher temperature 
operation and even had a novel idea of his own for a new 
transistor based on this affect. This is the university-
industry synergy that NNI should strive to achieve in all areas 
of nanotechnology research.
    In my written testimony, I have given five specific 
recommendations to the Committee, but the two key points I hope 
to leave you with today are, one, we would like to see the NNI 
reauthorization increase federal funding for both equipment and 
research at universities and strongly encourage government, 
university, and industry partnerships to guide this research 
into commercial applications rapidly; and two, we would like to 
see the NNI reauthorization include a strong focus on 
nanoelectronics in particular, including it as a priority 
program activity across the agencies.
    In closing, I would like to point out that the magnitude of 
the effort we face, finding a new transistor, is equivalent to 
what was done in the 40s and 50s as we developed the first 
semiconductor device that replaced the vacuum tube. Research on 
this scale, both in terms of time and money, is more than 
individual companies can possibly fund. It is also more than 
universities, alone, can conduct with current, limited federal 
funding; thus, close collaboration among industry, academia, 
and government is absolutely necessary in order to solve this 
grand challenge and ensure that the U.S. remains the leader in 
the nanoelectronics era.
    Thank you, and I look forward to answering any questions 
you might have.
    [The prepared statement of Dr. Welser follows:]
                  Prepared Statement of Jeffrey Welser
    Good morning. My name is Jeffrey Welser, and I am on assignment 
from the IBM Corporation to serve as the Director of the 
Nanoelectronics Research Initiative (NRI). I am testifying today on 
behalf of the NRI; the IBM Corporation; the Semiconductor Industry 
Association; and the Semiconductor Research Corporation.
    The Nanoelectronics Research Initiative (NRI) is a research 
consortium that supports university basic research in novel computing 
devices to enable the semiconductor industry to continue technology 
advances beyond the limits of the CMOS\1\ technology that we have been 
using for the past four to five decades. The NRI leverages industry, 
university, and both U.S. state and Federal Government funds to support 
research at universities that will establish the U.S. as the world 
leader in the nanoelectronics revolution. Fundamental breakthroughs in 
physical sciences and engineering resulting from NRI leadership will 
ensure that the U.S. remains a world leader in high-technology.
---------------------------------------------------------------------------
    \1\ Complementary Metal Oxide Semiconductor
---------------------------------------------------------------------------
    At IBM, we lead in the business of innovation. IBM takes its 
breadth and depth of insight on issues, processes and operations across 
a variety of industries, and invents and applies technology and 
services to help solve its clients' most intractable business and 
competitive problems.
    The Semiconductor Industry Association (SIA) has represented 
America's semiconductor industry since 1977. The U.S. semiconductor 
industry has 46 percent of the $257 billion world semiconductor market. 
The semiconductor industry employs 216,000 people across the U.S., and 
is America's second largest export sector.
    The Semiconductor Research Corporation is a world class university 
research management consortium that seeks to solve the technical 
challenges facing the semiconductor industry and develop technical 
talent for its member companies. SRC manages several semiconductor 
research programs, including the NRI. Since its founding 25 years ago, 
the SRC has managed through its core program in excess of $1 billion in 
research funds, supporting 6,976 students and 1,598 faculty at 237 
universities, resulting in 39,536 technical documents and 302 patents. 
In July 2007, SRC was awarded the National Medal of Technology by 
President Bush with a citation recognizing the unique value of this 
organization: ``For building the world's largest and most successful 
university research force to support the rapid growth and 10,000-fold 
advances of the semiconductor industry; for proving the concept of 
collaborative research as the first high-tech research consortium; and 
for creating the concept and methodology that evolved into the 
International Technology Roadmap for Semiconductors.''

Executive Summary

          Semiconductor technology advances have been credited 
        with driving the increased productivity that the U.S. economy 
        has enjoyed since the mid-1990's.

          The Nanoelectronics Research Initiative (NRI) 
        leverages industry, university and government resources (both 
        State and federal) to fund university research that will keep 
        America at the forefront of the nanoelectronics revolution. 
        NRI, in partnership with the National Institute of Standards 
        and Technology (NIST), currently works largely through three 
        regional university centers headquartered in California, Texas, 
        and New York, as well as with some of the National Science 
        Foundation (NSF) Nanoscience centers across the country.

          The interaction of industry, government, and 
        university researchers in the NRI facilitates the sharing of 
        ideas, enables each partner to focus on its particular 
        strength--such as NIST's expertise in metrology, allows 
        efficient utilization of expensive nanoelectronics equipment, 
        and promotes increased student interest in nanoelectronics. 
        This partnership ultimately will result in faster 
        commercialization of the research results.

          The semiconductor industry strongly supports the 
        reauthorization of the National Nanotechnology Initiative (NNI) 
        to ensure continued critical research and interagency 
        activities in the area of nanoelectronics, specifically. Since 
        current semiconductor technology is approaching its physical 
        and other limits, a new electronic switch must be identified to 
        replace the current technology if the U.S. is to continue 
        receiving the benefits of smaller, faster, and denser 
        electronic devices. The country whose companies are first to 
        market with a new logic switch likely will lead in the 
        nanoelectronics era for decades to come, the way the U.S. has 
        led for the last half a century in microelectronics.

          Current federal funding levels for nanoelectronics-
        focused research are inadequate in light of the enormity of the 
        research challenge in this area.

          Specifically, the NNI reauthorization should:

                1.  Explicitly include as a priority program activity 
                the support of nanoelectronics research;

                2.  Include a request for the National Nanotechnology 
                Coordination Office to develop and implement a plan to 
                ensure U.S. leadership in nanoelectronics;

                3.  Request that the National Academies include a 
                nanoelectronics study as part of its triennial external 
                review of the NNI;

                4.  Include specific and higher-than-current 
                authorization levels for nanoelectronics-focused 
                appropriations from within total NNI authorization 
                amounts;

                5.  Address the need for nanoelectronics research 
                infrastructure, i.e., equipment and equipment operating 
                funds, at universities and national laboratories;

                6.  Specifically encourage direct industry-government 
                partnerships in support of nanoelectronics research at 
                universities and national laboratories.

NNI should be reauthorized, and include specific and increased 
                    authorizations for nanoelectronics

    Let me state at the outset that the semiconductor industry strongly 
supports the reauthorization of the National Nanotechnology Initiative 
(NNI) to ensure continued critical research and interagency activities 
on nanotechnology.
    The legislation should include specific and higher-than-current 
level authorizations for nanoelectronics research and equipment. This, 
in turn, would enable the U.S. to be the first in the world to 
demonstrate a nanotechnology-based electronic logic switch that is able 
to replace the solid state transistors that store and process 
information in integrated circuits. Finding a new switch should be a 
priority area for the NNI.
    Before discussing the importance of the NNI, I should note that the 
industry's support for increased federal research funding is part of 
our complete set of competitiveness recommendations, which include 
increased availability of green cards and H-1Bs visas through 
immigration reform; increased numbers of science, technology, 
engineering and math (STEM) graduates; improved K-12, undergraduate and 
graduate STEM education; enactment of a permanent and enhanced R&D 
credit; and increased awareness of the impact of foreign tax 
incentives.
    Federally funded basic research, and in particular, funding for 
nanoelectronics research, is vital to America's future economic growth 
and global competitiveness. Simply put, as we approach the fundamental 
limits of the current technology that has driven the high tech 
industry, the country whose companies are first to market in the 
subsequent technology transition likely will lead the coming 
nanoelectronics era the way the U.S. has led for half a century in 
microelectronics. NNI can play a critical role in ensuring that America 
earns this leadership position.
    Today I would like to address four topics:

          the technical challenges we have as we move to the 
        nanoelectronics era;

          why U.S. leadership in nanoelectronics is vital to 
        our nation;

          the Nanoelectronics Research Initiative (NRI), as an 
        example of industry-government collaboration that can be 
        furthered by the NNI; and

          policy recommendations that should be included in the 
        NNI to help maintain U.S. leadership in nanoelectronics.

To continue semiconductor technology advances, we must find a new 
                    switch

    Semiconductors are the enabling technology for computers, 
communications, and other electronics products that, in turn, have 
enabled everything from Internet commerce to sequencing the human 
genome.
    Better, faster, and cheaper chips are driving increased 
productivity and creating more jobs throughout the economy. For over 
three decades, the industry has followed Moore's Law, which states that 
the number of transistors on a chip doubles about every eighteen 
months. The transistor is the basic building block within the 
semiconductor chip and can be thought of as an electronic switch or as 
a device to retain one bit (a one or a zero) in memory. The transistor 
is composed of a series of precisely etched and deposited layers of 
materials, and with as many as two billion transistors integrated on a 
single silicon chip, modern computer chips are the most complex product 
manufactured on the planet.
    The phenomenal advances in technology may slow drastically as 
semiconductor technologists have concluded that we will soon reach the 
fundamental limits of Complementary Metal Oxide Semiconductor (CMOS) 
technology, the process that has been the basis of innovation for the 
semiconductor industry for the past 30 years. By introducing new 
materials into the basic CMOS structure and devising new CMOS 
structures and interconnects, further improvements in CMOS can continue 
for the next ten to fifteen years, at which time, CMOS begins to reach 
its physical (layers only a few atoms thick) and power dissipation 
limits. For the U.S. economy to benefit from continued information 
technology productivity improvements, there will need to be a ``new 
logic switch'' to replace the current CMOS-based transistor.
    There are a number of candidates for the new switch, including 
devices based on spintronics (changing a particle's spin) and molecular 
electronics (changing a molecule's shape). Scientists must address many 
challenges in many different basic research fields (chemistry, physics, 
electrical engineering) in the search for the new switch. The 
challenges include:

          measuring the dimensions, shapes, and electrical 
        characteristics of individual molecules;

          manipulating and measuring the spin of individual 
        electrons;

          fabricating whole new classes of materials with 
        unique electronic properties, and then characterizing their 
        fundamental physical behavior and their long-term reliability;

          inducing novel chemical compounds to self-assemble 
        into the precise structures needed by the new devices and 
        architectures, and doing so in a way that can be manufactured 
        at commercial volumes;

          developing complex circuits to take advantage of, or 
        overcome limitation of, the properties of the new devices; and

          finding ways to interconnect the devices and 
        integrate them into our technology infrastructure in a cost-
        effective manner, which will enable us to continue the 
        historical cost and performance trends for information 
        technology.

    Note that addressing these challenges not only will require the 
best minds from industry and academia, but it also requires new 
equipment for fabricating and characterizing these nanostructures. 
While existing facilities at university centers already enabled by 
NSF's continuing investment in the National Nanotechnology 
Infrastructure Network (NNIN) can be used, significant additional 
investment in new specialized equipment is required, particularly to 
enable the realistic prototyping of new nanoelectronic devices and 
circuits. This will be crucial to transitioning these into both 
commercial and manufacturing environments.

U.S. leadership in nanoelectronics is vital to our nation

    As stated earlier, the country that finds a new logic switch 
undoubtedly will lead in the nanoelectronics era. Moreover, this 
leadership will have widespread impact across our entire technology and 
science-driven economy, since nanoelectronics have significant 
applications in information technology, communications, medicine, 
energy, and security.
    Research investments to continue the increased circuit density 
described in Moore's Law have immense benefits to the U.S. economy. 
Moore's Law has resulted in a 65 percent drop in the price of a 
computer over the past 10 years, while increasing the computer's speed, 
memory, and functionality. Harvard economist Dale Jorgenson has noted, 
``The economics of Information Technology begins with the precipitous 
and continuing fall in semiconductor prices.'' Professor Jorgenson 
attributed the rapid adoption of IT in the U.S. to driving substantial 
economic growth in the U.S. gross domestic product since 1995, 
concluding, ``Since 1995, Information Technology industries have 
accounted for 25 percent of overall economic growth, while making up 
only three percent of the GDP. As a group, these industries contribute 
more to economy-wide productivity growth than all other industries 
combined.'' \2\
---------------------------------------------------------------------------
    \2\ Dale W. Jorgenson, ``Moore's Law and the Emergence of the New 
Economy'' in ``2020 is Closer than You Think''; 2005 SIA annual report.
---------------------------------------------------------------------------
    To see the impact of the productivity gains on a single sector, it 
is instructive to consider the benefits the government (federal, State, 
and local) receives as a consumer of semiconductors. The Department of 
Commerce's Bureau of Economic Analysis has data indicating that the 
government sector of the economy purchased $8 billion of computers in 
2006, but that it would have had to spend $45 billion for that same 
amount of computing power if it were paid for in 1997 prices. The 
cumulative benefit from technology improvements and resulting price 
declines from 1997 to 2006 is $163 billion of ``free'' computing. In 
this tight budget environment, it is important to remember that federal 
investments made to support basic research not only are beneficial to 
the overall U.S. economy, but they also allow the government itself to 
do more with less as a result of falling computing costs.
    Nanoelectronic computing also will have benefits in medicine and 
energy. It is not an overstatement to say that mapping the human genome 
is as much a success of computer science as biology, and future 
challenges such as modeling protein folding and creating cheaper and 
clearer MRIs and 3D X-ray imaging will require continued advances in 
computing speed. The Technology CEO Council has documented the effects 
of improved information technology on improving energy efficiency, 
which advances U.S. energy security and climate change policies. While 
automobiles' miles per gallon have improved 40 percent since 1978, and 
replacing a 1978 incandescent bulb with today's compact fluorescent 
bulb improves the lumens per watt by 339 percent, the improvement in 
computer systems' instructions per second per watt since 1978 has 
increased 2,857,000 percent.\3\ Continuing these trends into the 
nanoelectronics era is absolutely essential to continue the 
improvements in U.S. energy intensity (increased economic output per 
unit of energy). In addition, many of the technologies developed to 
further the semiconductor chip industry now are utilized in new 
innovations for the renewable energy sector, most notably to develop 
cheaper and more efficient solar cells.
---------------------------------------------------------------------------
    \3\ Technology CEO Council, ``A Smarter Shade of Green--How 
Innovative Technologies are Saving Energy, Time, and Money,'' 2008.
---------------------------------------------------------------------------
    So too, nanoelectronics computing is important for national 
security. Precision weapons, satellite imaging, submarine detection, 
secure global communications, monitoring of adversaries' 
communications, and real time identification of allies' positions to 
avoid friendly fire casualties are but a few of the examples of why 
many people consider leadership in semiconductor technology to be in 
the Nation's security interests. Indeed, the original semiconductor 
diode was implemented as a mission-critical project at universities and 
industrial labs in the 1940's, funded largely by the Department of the 
Defense because it recognized the urgency of being the first country to 
have this technology in its weapon systems.
    Finally, it should be emphasized that all of these commercial 
benefits only will be realized if we invest heavily now in basic 
nanoelectronics science and engineering. Many of the breakthrough 
products and innovations we see today are being built on basic research 
that was done in the 1990's. With more federal money focused on near-
term--rather than long-term--research projects, the country runs the 
risk of under-funding the basic research pipeline which our industries 
rely on for future innovations.
    Fortunately, the House Appropriations Committee recognized 
nanoelectronics as a priority area when it singled out NSF's work with 
the Nanoelectronics Research Initiative in its FY 2008 committee 
report, stating:

         ``Given the economic importance and pervasive impact of 
        semiconductors, the Committee supports NSF's continued 
        sponsorship of the Nanoelectronics Research Initiative and 
        other programs to advance semiconductor technology to its 
        ultimate limits and to find a replacement technology to further 
        information technology advances once these limits are reached. 
        The Committee encourages NSF to continue its support for such 
        research in fiscal year 2008.'' \4\
---------------------------------------------------------------------------
    \4\ House Report 110-240--Commerce, Justice, Science, and Related 
Agencies Appropriations Bill, 2008.

The NRI is an industry-university-government partnership to find a new 
                    switch

    As the laws of physics narrow the potential for the kind of scaling 
that historically has characterized the semiconductor industry, 
attention has turned to the discovery of a new logic switch as a means 
to continue the progress depicted by Moore's Law. To take on the 
daunting task of identifying and demonstrating the commercial 
feasibility of a new logic switch, the SIA launched the Nanoelectronics 
Research Initiative (NRI).
    The NRI pulls together semiconductor companies,\5\ the National 
Science Foundation, the National Institute of Standards and Technology, 
State governments, and 25 universities in 13 states with about 60 
professors and 70 students/post-docs. The industry contribution through 
the NRI is over $5 million per year; this is in addition to about $60 
million that the semiconductor industry invests in universities through 
other research consortia, with millions more invested directly by 
individual companies.
---------------------------------------------------------------------------
    \5\ The semiconductor companies funding the NRI are Advanced Micro 
Devices, Freescale, IBM, Intel, Micron Technology, and Texas 
Instruments.
---------------------------------------------------------------------------
    The research activity is organized within three NRI university 
centers that were established in 2006, plus NRI and NSF supplemental 
co-funding of nanoelectronics projects at 10 existing NSF university 
centers. The three NRI university centers are virtual centers, grouped 
largely by geography. While all of the centers are working on research 
aimed at discovering a new logic switch, the focus of the programs at 
each center has its own specific character:
    The Western Institute of Nanoelectronics (WIN) is headquartered at 
UCLA and includes UC-Berkeley, UC-Santa Barbara, and Stanford 
University. WIN focuses solely on spintronics and related phenomena, 
extending from material, devices, and device-device interaction all the 
way to circuits and architectures. In addition to its NRI funding, this 
center receives additional direct support from Intel and California's 
UC Discovery program.
    The Institute for Nanoelectronics Discovery and Exploration (INDEX) 
is headquartered at the State University of New York-Albany (SUNY-
Albany) and includes the Georgia Institute of Technology, Harvard 
University, the Massachusetts Institute of Technology, Purdue 
University, Rensselaer Polytechnic Institute and Yale University. INDEX 
focuses on the development of nanomaterial systems; atomic-scale 
fabrication technologies; predictive modeling protocols for devices, 
subsystems and systems; power dissipation management designs; and 
realistic architectural integration schemes for realizing novel 
magnetic and molecular quantum devices. INDEX also receives additional 
direct support from IBM and New York State.
    The South West Academy for Nanoelectronics (SWAN) is headquartered 
at the University of Texas-Austin and includes UT-Dallas, Texas A&M, 
Rice, Notre Dame, Arizona State and the University of Maryland. SWAN 
focuses on a variety of new devices, including spin-based switches, 
nanowires, nano-magnets, and devices which use electron wave or phase 
interference. In addition, work is being done on modeling; novel 
interconnects, such as plasmonics; and nano-metrology techniques. In 
addition to its NRI funding, SWAN receives additional support from 
Texas Instruments and the Texas Emerging Technology Fund.
    In addition to these centers, NRI and NSF co-fund supplemental 
grants for NRI-related research at existing NSF nanoscience centers, 
Nanoscale Science and Engineering Centers (NSECs), Materials Research 
Science and Engineering Centers (MRSECs), and the Network for 
Computational Nanotechnology (NCN). We currently are supporting 12 
projects at 10 NSF centers, which range from advanced computer 
simulation of spin-based devices to measurements of non-equilibrium 
coherent transport in single-layer graphene sheets to directed self-
assembly of quantum dot and wire structures for novel devices. The goal 
in making this joint investment with NSF is not only to complement the 
work going on in the NRI centers, but also to jointly leverage the 
knowledge gained from work going on in both NSF and NRI centers.
    NSF's involvement with nanoelectronics was highlighted by the 
recent announcement of the Science and Engineering Beyond Moore's Law 
initiative in the President's FY 2009 budget request. The $20 million 
request ``will support research to develop the next generation of 
materials, algorithms, architectures and software with capabilities far 
beyond those available today, and governed by new empirical laws. With 
these advances, computing power will become even more concentrated, 
integrated and ubiquitous.'' \6\
---------------------------------------------------------------------------
    \6\ Remarks by NSF Director Arden Bement, Jr.; Presentation of the 
NSF FY 2009 budget request to Congress; February 4, 2008.
---------------------------------------------------------------------------
    In 2007, NIST concluded an open competition by entering into 
partnership with the NRI to accelerate research in nanoelectronics. 
Under the partnership, NIST and NRI will jointly provide $18.5 million 
over five years toward high-priority university research projects 
identified by industry and NIST researchers. NIST scientists and 
engineers have been leaders in nanoelectronics research, especially in 
the science of measurement. The partnership implements the conclusion 
of NIST's major February 2007 report which called for the development 
of measurement techniques for frontier technologies such as post-CMOS 
electronics.\7\
---------------------------------------------------------------------------
    \7\ NIST, ``An Assessment of the United States Measurement 
System,'' February 2007, http://usms.nist.gov.
---------------------------------------------------------------------------
    The NRI complements another government-industry partnership, the 
Focus Center Research Program (FCRP). This program is cosponsored by 
the semiconductor industry and the Department of Defense to fund 
research at 38 universities. It seeks to advance the current CMOS chip 
technology to its ultimate limits, while the NRI's objective is to go 
beyond the limits of the current technology. Both the NRI and FCRP are 
administered by the Semiconductor Research Corporation (SRC), a non-
profit consortium of companies representing of the full spectrum of the 
semiconductor industry. The SRC also administers the Global Research 
Collaboration (GRC), which funds a large research program focused on 
addressing the challenges in the nearer-term semiconductor roadmap, 
crucial to continuing the rapid rate of industry innovation.
    While still in its early stages, the NRI already is beginning to 
show results with over 100 technical publications and five patent 
disclosures. As the research begins to come to fruition, prior industry 
involvement will facilitate technology transfer, even before the 
ultimate goal of finding a new switch is realized. An example of this 
kind of early commercialization due to close industry-university work 
outside of NRI is the air gap wiring announcement made by IBM in 2007, 
based on work being done at the Albany Nanotech Center. It is a very 
early application of self-assembly, which has been actively researched 
for many years, in a real product in an unexpected way, and it points 
out the importance of universities and industry working together. Rapid 
commercialization of academic research is in the interest of 
universities and government funding agencies, as well as industry, as 
it directly contributes to American competitiveness. The NRI is 
building on 25 years of experience by its parent, the SRC, in managing 
university research, in partnership with industry and the government.

Industry-Government-University Roles in Nanoelectronics Research

    From the beginning, the NRI has welcomed input from the government 
on our overall program, and it would like to see these partnerships 
increase going forward. NSF, DARPA, and NIST attend the NRI's Governing 
Council meetings. The Council provides executive oversight to the 
program. Due to the magnitude of the scientific challenges ahead and 
the large diversity of scientific disciplines required, government 
expertise and resources are absolutely critical.
    The overall model for the NRI is to do mission-focused basic 
research at multi-university centers. This best balances the need for a 
broad range of research into many different science phenomena with the 
need for a clear goal to drive the research in the most productive 
directions. Five research vectors are used to provide a concrete 
framework for the mission focus, as well as focus the work on the 
overall goal of finding a new logic switch. These vectors, distilled 
from an initial list of thirteen, were considered the top research 
priorities based on a series of industry-government-university 
workshops and studies conducted by SRC, SIA, and NSF.
    Centering the work at multi-university centers--rather than in 
industry or national labs--is crucial not only for driving the 
research, but also to expand the number of students and the capability 
of universities engaged in nanoelectronics-related research. This will 
sustain and expand the industry in new directions in the future. It is 
equally important to set up several of these centers across the U.S. to 
engage the largest number of top researchers at many different 
universities. To this end, we are currently looking to open a fourth 
NRI center later this year in the Midwest, complementing the three 
existing centers in the East, West, and Southwest.
    We have used two models to enable the multi-university work. With 
the NSF, we jointly fund research in existing NSF nanoscience centers. 
These projects are chosen by independent reviews by the NRI industry 
team and the NSF itself. An industry liaison team is assigned to 
interact with the centers and give industry input on the individual 
projects as well as the overall center research. This model works well 
for leveraging the significant NSF investment in these centers, helping 
to guide that work towards areas we think will have large potential for 
future commercialization and giving us a broad view on many emerging 
areas of research.
    At the NRI centers themselves, we take this partnership model even 
further, both for joint funding and technical guidance, with the hope 
of accelerating the discovery process. Initially, the multi-university 
centers were set up geographically, and strong partnerships were 
developed with State governments for funding the work. The state 
partnership is unique in that states not only are providing several 
million dollars annually to their universities to support the NRI 
research, but they also are investing hundreds of millions into new 
Nanoelectronics buildings, centers and infrastructure to enable the 
next generation of this research. Examples includes the New York Albany 
NanoTech center (www.albanynanotech.org), the California NanoSystems 
Institute (www.cnsi.ucla.edu), as well as major support for recruiting 
and endowing new faculty for Nanoelectronics research in Texas. These 
investments are focused not simply on enabling the research, but also 
on enabling the rapid commercialization of any new technologies that 
emerge from the research. Hence, this support is crucial to translating 
discovery into product innovation.
    And the states are investing for the same reason the NNI needs to 
be investing: economic competitiveness. The transition to a new switch 
will be challenging and uncertain, meaning that the companies, states, 
and universities that benefited from the previous technology era may 
not be the ones to lead in the new era. State governments see this 
transition point as an opportunity to grow an entirely new industry 
around their university base to drive their economies, the same way 
Silicon Valley grew up around the transistor.
    The NIST agreement extends the work in the NRI centers to now 
include a federal partner in a unique technical, management, and 
funding role. We think this should be a model for future engagements. A 
Technical Program Group (TPG), consisting of members from both NIST and 
industry, evaluates the project proposals to determine where the funds 
from both groups will be invested in the universities, as well as 
oversees the on-going research through a variety of mechanisms. The TPG 
has monthly meetings to make decisions on the overall program, and sub-
teams from the TPG meet monthly with the lead professors from each of 
the NRI centers to discuss the progress of the technical work and 
center logistics in detail. Moreover, the industry has full-time 
assignees working alongside the professors and students at each of the 
centers to provide daily input and guidance on the research. In 
addition to the usual publication of results in technical journals and 
conferences, the centers also hold annual on-site reviews and produce 
semi-annual reports for both the NRI industry members and NIST. Lastly, 
we intend to strongly leverage the expertise and facilities within the 
NIST labs themselves, by having university researchers at the NRI 
centers work directly with the labs on projects to advance the NRI 
mission.
    Nanometrology and characterization are key to any advances in 
nanoelectronics--particularly in trying to link experimental work to 
theory. The partnership with NIST should open the door not only to 
utilizing the existing NIST facilities, but also to help guide their 
continued work on new characterization tools to those most vital for 
developing and characterizing the next generation of nanoelectronic 
devices. For example, it is now becoming possible to measure the spin 
of an individual electron, but to truly characterize spintronic 
devices, we would want to be able to track that spin's evolution as it 
is manipulated in the switch itself. This is precisely the kind of 
grand challenge that NIST is uniquely suited to undertake. By working 
closely with NRI university and industry researchers, the results of 
this new capability will have much more rapid impact on new device and 
product development.
    While the NIST labs--and the other national labs--offer a very 
valuable resource for enabling nanoelectronics research, we continue to 
believe it is equally important to invest federal funding in state-of-
the-art facilities directly at the universities themselves. While some 
work, such as characterization utilizing large neutron or synchrotron 
radiation, can be done most efficiently at the national lab facilities, 
much device and materials research relies on daily work in a facility 
local to the university, where the students are working directly with 
their professors and other group members. This cannot easily be 
replicated remotely. To balance the desire to have easy access by the 
largest number of faculty and students with the large investment costs, 
having an extended network of nanoelectronics infrastructure capable of 
fabrication, characterization, and early prototyping at a number of 
multi-university centers (such as NNIN) is particularly effective. And 
with the NRI model, the states and universities are already doing their 
part to invest in new buildings and base infrastructure. What they need 
is expanded federal funding to match their investments for equipment 
and on-going support.
    To summarize, we feel the NRI model for direct partnering between 
industry, government, and universities is the most effective way to 
conduct mission-oriented basic research that most rapidly leads to new 
product innovations. And far from hindering basic science research, 
this close early industry involvement can actually accelerate it in 
promising directions. As an example, at one of the first NRI reviews, a 
professor presented work on a new phenomenon he dubbed 
``pseudospintronics.'' As a physics professor looking to understand the 
basic science, all of his work had been at very low temperatures. After 
discussions at the review with other engineering professors and 
industry researchers on the potential for this phenomenon to be 
utilized in a future device, he continued his basic research, but he 
also focused on understanding its extendibility to room temperature. By 
the next review, he not only had several exciting new insights into the 
science, but he had ideas about how it could be made more robust for 
higher temperature operation. He even had a novel idea for a new logic 
switch based on the effect. This experience is precisely the kind of 
new thinking that comes from conversations between the science and 
engineering worlds (and the industrial and academic worlds) that NRI 
hopes to foster, and it ultimately will result in faster 
commercialization of the ideas it produces.

Building on the government-industry NRI partnership: recommendations 
                    for the NNI

    As outlined above, the obstacles for identifying a viable new 
switch are daunting, but the benefits of being the leader in this new 
technology are huge. The semiconductor industry supports the 
reauthorization of the National Nanotechnology Initiative to ensure 
continued critical federal research and interagency activities on 
nanotechnology. The industry specifically recommends that Congress 
include the following:

        1.  The NNI reauthorization should explicitly include as a 
        priority program activity the support of a research, 
        development and demonstration program in nanoelectronics.

                  The National Nanotechnology Coordination Office and 
                the federal agencies that participate in the National 
                Nanotechnology Initiative should be asked to develop 
                and implement a plan for the above activity, with the 
                goal of ensuring that U.S. researchers are the first in 
                the world to demonstrate a nanotechnology-based 
                electronic logic switch that is scalable, reliable, 
                low-power, capable of being manufactured in commercial 
                volumes, and potentially able to replace solid state 
                transistors in integrated circuits.

        2.  The NNI reauthorization should require that the National 
        Academies include, as part of its triennial external review of 
        the NNI, a study on nanoelectronics research opportunities. The 
        study should identify the most promising research opportunities 
        in the application of nanotechnology to electronic logic 
        switches. The study also should include a recommended research 
        and development roadmap for federal agencies that conduct or 
        support nanoelectronics research.

        3.  The NNI should include specific and higher-than-current-
        level authorizations for nanoelectronics appropriations from 
        within the NNI authorization amounts for the NSF, NIST, and 
        Department of Energy. The authorizations should reflect the 
        pervasiveness of information technology in the U.S. economy, 
        IT's impact on U.S. economic growth, and the magnitude of the 
        challenges involved in identifying and demonstrating an 
        electronic switch capable of replacing our current technology.

        4.  The NNI reauthorization should address the need for 
        nanoelectronics research infrastructure, i.e., equipment and 
        equipment operating funds, in addition to funding for research. 
        This applies not only to authorizations for NSF to support 
        infrastructure at our nation's universities, but also to NIST 
        for equipping and operating the equipment for the 
        nanoelectronics research at the Gaithersburg and Boulder labs.

        5.  The NNI Reauthorization should specifically encourage 
        direct industry-government partnerships in support of 
        nanoelectronics research at universities and national 
        laboratories. These partnerships promote cross-fertilization of 
        ideas, facilitate technology transfer and ultimately 
        commercialization of nanoelectronics devices, as well as 
        promote potential economic development around nanoelectronics 
        research clusters.

Summary

    Discovering, developing, and implementing a new logic device is a 
daunting task, but it is not unprecedented. In the 1940's, when vacuum 
tubes were state-of-the-art but reaching their own limits, the U.S. 
Government realized a critical need for finding smaller, faster, and 
lighter devices for its radar and guided missile systems. The result 
was not only technology to enable advanced weapon systems, but the 
birth of the solid-state transistor, which became the foundation of the 
information technology revolution that drives our economy to this day. 
It was the combination of the best basic science research coming out of 
the universities, the practical guidance and mission-focus of the 
industrial labs, the significant research funding from the government, 
and the collaborative interaction of all of these groups that enabled 
both the scientific breakthroughs and the reduction to practical 
implementation necessary for such a project to succeed.
    As we look for a switch to replace our current CMOS transistor, we 
now face a similar transition. We are just beginning this research, and 
the initial efforts are small in comparison to what was done in the 
1940's and 1950's. It is critical we grow these efforts significantly 
over the next several years, and finding flexible models for industry 
and government to interact will be critical to success. To this end, 
increasing attention and research funding in the nanoelectronics area 
are absolutely essential if we are to continue our accelerated economic 
growth and productivity, thereby enabling America to lead in the coming 
nanoelectronics era.

                      Biography for Jeffrey Welser
    Dr. Jeffrey Welser is on assignment from the IBM Corporation to 
serve as the Director of the Nanoelectronics Research Initiative (NRI), 
a subsidiary of the Semiconductor Research Corporation (SRC). The NRI 
supports university-based research on future nanoscale logic devices to 
replace the CMOS transistor in the 2020 timeframe.
    Dr. Welser received his Ph.D. in Electrical Engineering from 
Stanford University in 1995, and joined IBM's Research Division at the 
T.J. Watson Research Center. His graduate work was focused on utilizing 
strained-Si and SiGe materials for FET devices. Since joining IBM, Jeff 
has worked on a variety of novel devices, including nano-crystal and 
quantum-dot memories, vertical-FET DRAM, and Si-based optical 
detectors, and eventually took over managing the Novel Silicon Device 
group at Watson. He was also working at the time as an adjunct 
professor at Columbia University, teaching semiconductor device 
physics. In 2000, Jeff took an assignment in Technology group 
headquarters, and then joined the Microelectronics division in 2001, as 
project manager for the high-performance CMOS device design groups. In 
May 2003, he was named Director of high-performance SOI and BEOL 
technology development, in addition to his continuing work as the IBM 
Management Committee Member for the Sony, Toshiba, and AMD development 
alliances. In late 2003, Jeff returned to the Research division as the 
Director of Next Generation Technology Components. He worked on the 
Next Generation Computing project, looking at technology, hardware, and 
software components for systems in the 2008-2012 timeframe. In mid-
2006, Jeff took on his current role for NRI, and is now based at the 
IBM Almaden Research Center in San Jose, CA.

    Chairman Baird. Mr. Moffitt.

 STATEMENT OF MR. WILLIAM P. MOFFITT, CHIEF EXECUTIVE OFFICER, 
                    NANOSPHERE, INCORPORATED

    Mr. Moffitt. Thank you Mr. Chairman, Ranking Member Ehlers, 
and Members of the House Research and Education Subcommittee of 
the Committee of Science and Technology, for the opportunity to 
testify on this important issue. I am Bill Moffitt, Chief 
Executive Officer of Nanosphere, Incorporated. Nanosphere 
develops, manufactures, and markets an advance molecular 
diagnostics platform, the Verigene System, that enables simple, 
low-cost, and highly sensitive genomic and protein testing on a 
single platform. Our mission is to improve the diagnosis and 
treatment of disease by enabling earlier access to and 
detection of new and existing biomarkers of disease.
    Nanosphere was founded in 2000, based upon nanotechnology 
discoveries made by Dr. Robert Letsinger and Dr. Chad Mirkin at 
Northwestern University and Evanston, Illinois. We have taken 
basic science, funded by NIH and NSF out of the university 
research setting and translated it into a diagnostics platform 
that delivers three distinct value propositions across a 
variety of fields, the ability to economically move complex 
genetic testing into mainstream medicine; second, early 
detection of diseases, such as cardiovascular disease, cancer, 
and neurodegenerative diseases, as nanoparticle probes improve 
detection sensitivity by orders of magnitude; and third, the 
potential to test for disease where no test exist today. 
Moreover, while we are focused on medical diagnostics, this 
same technology platform is applicable to biosecurity, 
agriculture and food safety testing and industrial 
contamination control. Nanotechnology has a potential to shift 
markets on a global economy and replace or greatly modify 
existing leadership positions. As such, it represents both a 
challenge and an opportunity for American competitiveness.
    With that as the context for my remarks, I would like to 
share with you my thoughts on the four on which the Committee 
has sought input. First, the hurdles to commercialization of 
nanotechnology. First and foremost is the lack of early stage 
capital for cutting-edge, translational research. Much of the 
government's direct spending in nanotechnology has been on 
scientific discovery. It takes extensive capital to translate 
nanoscience discoveries into platform technologies and 
demonstrate potential and commercial viability in order to 
attract the capital required for commercialization. For 
example, at Nanosphere, up to the point first commercial 
product launch, we invested over $100 million in converting 
nanoscience to scalable product technology platform. Many great 
nonscientific discoveries fail to attract the extensive capital 
required for commercialization, and for this reason, the gap 
between the research lab and the product prototype is often 
referred to as the Valley of Death. There is a great need to 
balance spending on basic research and translational work or 
goal-oriented development programs and to focus such programs 
on specific areas with the greatest promise of benefit to 
national interest.
    Another hurdle to commercialization of nanotechnology is 
the difficulty in finding technical talent. Nanotechnology has 
need for highly trained scientists from multiple disciplined. 
These highly paid, high quality jobs are difficult to fill 
because of the well-documented decline in STEM graduates. In 
addition to Ph.D.s, nanotech companies also need trained and 
skilled laboratory and manufacturing technicians. There are 
currently very few technical-training programs that fill this 
need. We can address both issues by developing vocational 
curricula and deploying them at community colleges and 
encouraging internships by high school and college students 
that expose them to nanotech as a career.
    The second question was federal programs that can help 
bridge the Valley of Death and how effect SBIR, STTR, and ATP 
programs have been. Conceptually, these programs have helped in 
this process, but often these grants fail to provide a 
sufficiently significant amount of capital. Of the $100M in 
high-risk capital spent by Nanosphere in its March 1 commercial 
launch of products, approximately $7M was provided by 
government-funding sources. However, if I subtract the 
biosecurity contract, the total government support has been 
less than $2 million.
    To some degree, the competitive process of grant-review and 
award provides third-party verification of the potential value 
of the science, especially in the early-development phases 
where capital is high risk. What the government can do to 
address this need is to provide additional incentive for 
private-sector investment in the form of a program of tax and 
investment credits will help mitigate risk for early capital 
and provide additional incentive for investments directed at 
goal-oriented research and development programs. Focusing 
investment and tax-credit programs at specific problems enables 
the governments to broadly direct investment while placing the 
onus of efficiency and effectiveness of investment on the 
private sector. Since private investors use a competitive, 
market-driven mechanism to select companies, these tax and 
investment credits will benefit those companies with the most 
potential to produce meaningful applications.
    The third question was whether or not there are areas of 
focus for commercialization that will position the Nation for 
leadership. These goal-oriented development programs will 
translate much of this new science into platform technologies 
that will likely impact several industries, but clearly there 
are two areas of focus where the U.S. has strong potential: 
energy and health care. Our growing energy needs are evident, 
and in health care, we are both the largest provider and 
largest consumer in the world. Historically, health care has 
not scaled the way other industries have, driven by innovations 
and technology. Where is the leverage? Nanotechnology holds 
promise for impacting every aspect of medical care from 
research, to diagnostics, to imaging to therapeutics. 
Nanosphere's molecular diagnostics platform is but one example 
of nanotechnology enabling breakthroughs in medical 
diagnostics, replacing technologies that are decades old.
    In conclusion, the U.S. must retain its leadership in this 
industry, changing technology, which has the potential to 
realign global competitiveness. The U.S. Government must set 
the gold standard in supporting an efficient and productive 
climate, not only for discovery, but also for commercializing 
nanotechnology innovation. Not only will such an initiative 
enhance American competitiveness, but it will also address 
significant issues that will impact generations to come. Thank 
you, Mr. Chairman and Members of the Committee.
    [The prepared statement of Mr. Moffitt follows:]
                Prepared Statement of William P. Moffitt
    I would like to thank you, Mr. Chairman, Ranking Member Ehlers, and 
Members of the House Research and Education Subcommittee of the 
Committee on Science and Technology for the opportunity to testily on 
this critically strategic question.
    My name is Bill Moffitt and I am the Chief Executive Officer of 
Nanosphere, Inc. Nanosphere develops, manufactures and markets an 
advanced molecular diagnostics platform, the Verigene System, that 
enables simple, low cost and highly sensitive genomic and protein 
testing on a single platform. Our mission is to improve the diagnosis 
and treatment of disease by enabling earlier access to, and detection 
of, new and existing biomarkers.
    Nanosphere was founded in the year 2000 based upon nanotechnology 
discoveries made by Dr. Robert Letsinger and Dr. Chad Mirkin at 
Northwestern University in Evanston, Illinois. Among other 
achievements, these discoveries made possible the reliable production 
of functionalized gold nanoparticles that have molecules such as DNA, 
RNA or antibodies attached to them. These functionalized gold 
nanoparticle ``probes'' very specifically bind to nucleic acid and 
protein targets of interest thereby creating a platform for accurate 
and sensitive diagnostic applications.
    Since its founding, Nanosphere has made continuous enhancements to 
the original technology advances by coupling the gold nanoparticle 
chemistry with multiplex array analysis, microfluidics, human factors 
instrument engineering and software development to produce a full-
solution, molecular diagnostics workstation, the Verigene System. The 
underlying core nanotechnology imparts characteristics to diagnostic 
tests that result in a platform that is very sensitive, easy to use, 
accurate and inexpensive, thus further enabling decentralization of 
complex diagnostic tests while lowering the cost of such testing.



    Nanosphere is now a fully-integrated diagnostics company with 
established cGMP manufacturing operations, leading edge research and 
development teams, and veteran customer service and support teams.
    In November 2007, Nanosphere received FDA clearance to market the 
Verigene System and the first warfarin metabolism test ever cleared by 
the FDA. Warfarin-based anticoagulants, perhaps more commonly known by 
a leading brand name, Coumadin, are widely prescribed to treat 
thrombosis, abnormal clotting of blood, which can lead to stroke and 
other life-threatening conditions. While this is an effective drug, it 
is also the second leading cause of all adverse drug reactions, second 
only to insulin. Adverse reactions include excessive internal bleeding 
which can lead to complications including hemorrhagic stroke and death. 
According to the FDA, tens of thousands of such adverse reactions occur 
each year. The Nanosphere warfarin metabolism test, which detects 
certain genetic mutations in patients, is used to guide appropriate 
initial dosage to ensure safety in patient care. This is one example of 
a complex genetic test that must be readily available to physicians on 
a timely basis. This is just one example of how nanotechnology is 
addressing significant issues in health care.
    These nanotechnology probes also create an ability to detect 
proteins, the building blocks and warning signs of the body, at a level 
at least 100 times more sensitive than current technologies, which may 
enable earlier detection of and intervention in diseases associated 
with known biomarkers and may also enable the introduction of tests for 
new biomarkers that exist in concentrations too low to be detected by 
current technologies. We are currently developing diagnostic tests for 
a variety of medical conditions including cancer, neurodegenerative, 
cardiovascular and infectious diseases, as well as pharmacogenomics, or 
tests for personalized medicine.
    There is a growing demand among laboratories to implement molecular 
diagnostic capabilities but the cost and complexity of existing 
technologies and the need for specialized personnel and facilities have 
limited the number of laboratories with these capabilities. We believe 
that the Verigene System's ease of use, rapid turnaround times, 
relatively low cost and ability to support a broad test menu will 
simplify work flow and reduce costs for laboratories already performing 
molecular diagnostic testing and will allow a broader range of 
laboratories including those operated by local hospitals, to perform 
molecular diagnostic testing.
    Our effort at Nanosphere to improve diagnostic testing and provide 
for earlier detection of diseases ranging from cancer to Alzheimer's to 
cardiovascular disease is but one example of the potential for 
nanotechnology. Developments in science support the prospects for 
nanotechnology to have a significant impact on many industries. 
Nanotechnology has the potential to shift markets in a global economy 
and replace or greatly modify existing leadership positions. As such it 
represents both an opportunity and a challenge for American 
competitiveness.
    The U.S. currently leads in science, but could lose the 
commercialization race. While we are bearing the burden of fundamental 
research a significant global investment in development programs to 
commercialize nanotechnology is occurring in Asia. In fact, when 
purchasing power and exchange rates are accounted for, Asia now leads 
the world in nanotech funding.
    In decades past, large corporations had significant internal 
translational research efforts, but the landscape has changed. 
Investments tend to be made in shorter-term improvements to existing 
product platforms, while relying upon acquisitions of start-up 
companies to provide longer-term replacements for core competencies. It 
is a question of risk adjusted capital investment.
    At the same time, start-up companies struggle to attract 
significant venture capital funding until they have established the 
commercial viability of their technologies. As a result, much of 
nanotechnology's potential remains locked in the translational phase of 
its life cycle. We have solid fundamental research but inadequate 
effort is being made to translate that fundamental science to 
specifically address important societal and economic problems. 
Nanoscience needs to be directionally focused to enable fundamental 
improvements in a number of industries ranging from energy to health 
care to telecommunications and computing technology.
    With that as context for my testimony, l would like to share with 
you my thoughts on the Transfer of NNI Research Outcomes for Commercial 
and Public Benefit, specifically addressing four questions:

1.  What are the hurdles to the commercialization of nanotechnology?

        a.  First and foremost, lack of early stage capital for 
        cutting-edge, translational research. To go from lab to 
        product, a nanoscience concept must first find capital to 
        develop the core science into a ``platform technology.'' Such 
        platform technologies are usually novel materials or material 
        combinations that have the ability to generate multiple 
        products. It takes extensive capital to develop the platform 
        and demonstrate its potential and commercial viability. This 
        includes being able to reliably and cheaply produce the 
        platform, integrating the platform into a specific application, 
        tailoring it to improve the application's efficiency and then 
        scaling the manufacturing of the platform. Only at this point 
        can commercial efforts generate revenue and profits to reinvest 
        for commercialization of additional applications. The 
        significant amount of capital required and the early-stage, 
        high-risk nature of translating technology from lab to market 
        makes it difficult to raise capital for emerging nanotech 
        businesses. Many great nanotech scientific discoveries fail to 
        attract the extensive capital required for commercialization 
        and for this reason the gap between the lab and product 
        prototype is often called the ``valley of death.''

        b.  Second, lack of a good mechanism to balance focus on 
        multiple, high-potential technologies. The government should 
        focus more spending on translational work or goal-oriented 
        development programs with an appropriate balance on scientific 
        research. To realize the societal and economic benefits of 
        nanotech, government and private sector funds need to focus on 
        the nanotechnologies with the greatest potential applications. 
        Quite often capital is redundantly spread across too many 
        organizations each of which is aiming for the same target. As 
        an example, we still see requests from the military for the 
        development of a biosecurity testing platform that Nanosphere 
        has already developed and provided under contract. The 
        government needs to develop methods to address a broader 
        spectrum of nanotechnologies and control redundant spending. 
        Spending should factor in the existing investment in an area 
        and the potential of the technology to lead to an important 
        product.

        c.  A third hurdle to commercialization of nanotechnology is 
        difficulty in finding technical talent. Nanotechnology is 
        unique in its need for highly-trained scientists from multiple 
        disciplines. Since a given nanotechnology can enable multiple 
        applications, nanotech companies find themselves needing Ph.D.s 
        in both the underlying nanotechnology and in the specific area 
        of application. These highly-paid, high-quality jobs are 
        difficult to fill because of the well-documented decline in 
        STEM graduates. In addition to Ph.D.s, nanotech companies also 
        need trained and skilled laboratory technicians. There are 
        currently very few technical training programs producing 
        workers that fill this need. We can address both issues by 
        developing vocational curricula and deploying them in community 
        colleges and encouraging internships by high school and college 
        students that expose them to nanotech as a career.

2.  What federal programs or activities can help to bridge the ``valley 
of death'' successfully? How effective have the SBIR/STTR and ATP 
programs been in this regard?

        a.  We must find a way for government funds to bridge the 
        ``valley of death'' where promising science is unable to 
        attract sufficient capital to bridge the gap to corporate 
        sponsorship. This gap is in part a result of the fact that 
        corporate America is more interested in developing and 
        improving already proven technology platforms and the 
        government is largely focused on fundamental research rather 
        than goal-oriented research. Countries such as Taiwan, Korea 
        and China regularly leverage America's investment in 
        fundamental research by using government sponsored programs to 
        directly fund companies to commercialize that research and 
        develop products. America's position in the global market may 
        rest on retaining leadership in nanotechnology. To close the 
        ``valley of death,'' we must invest more in goal-oriented 
        research and in helping translate research from the lab into 
        the marketplace.

             Conceptually programs such as SBIR/STTR and ATP have 
        helped in this process, but often these grants fail to provide 
        a sufficiently significant amount of capital. Up to the point 
        of the first product launch of our nanotechnology-based 
        diagnostic platform Nanosphere had spent approximately $110M in 
        ``high risk'' capital, with only $7M coming from government 
        funding sources including TSWG, SBIR/STTR grants and others. 
        However, if I subtract the biosecurity contract funding, the 
        total government support has been less than $2M.

             While much of the early work on the science was funded 
        through NIH and NSF in a university research setting, those 
        expenses are minor in comparison to the cost of platform 
        development and commercialization. What SBIR/STTR and TSWG 
        funding did do was provide a certain element of validation for 
        private sector investors. To some degree the competitive 
        process of grant review and award provides third party 
        verification of the potential value of the science, especially 
        in early development phases where capital is at the highest 
        risk.

             What the government can do to provide additional incentive 
        for private sector investment is to develop a program of tax 
        and investment credits which will help mitigate risk for early 
        capital and provide additional incentive for investments 
        directed at goal oriented research and development programs. 
        Focusing programs at specific problems enables the government 
        to broadly direct investment while placing the onus of 
        efficiency and effectiveness of investment on the private 
        sector. Since investors use a competitive, market-driven 
        mechanism to select companies, these tax and investment credits 
        will benefit those companies with the most potential to produce 
        meaningful applications.

3.  Are there areas of focus for commercialization that will position 
the Nation for leadership in nanotechnology?

        a.  While there are areas of focus that will position the U.S. 
        for leadership, it also makes sense to support goal oriented 
        research and development more broadly beyond today's primary 
        focus on basic science and discovery. Such goal oriented 
        development programs will translate much of this new science 
        into platform technologies that will likely impact several 
        industries.

        b.  Clearly there are two areas of focus where the U.S. has 
        strong potential, energy and health care. Our growing energy 
        needs are evident and in health care we are both the largest 
        provider and largest consumer in the world. Historically, 
        health care has not scaled the way other industries have, 
        driven by innovations in technology. Where is the leverage? 
        Nanotechnology holds promise for impacting every aspect of 
        medical care from research to diagnostics to imaging to 
        therapeutics.

             In my own company we have taken basic science from 
        Northwestern University's Nanotechnology Institute and 
        converted it into a diagnostics platform that delivers three 
        distinct value propositions: 1) the ability to move complex 
        genetic testing into mainstream medicine, 2) the prospect of 
        earlier detection of diseases such as cardiovascular disease 
        and cancer as nanoparticle probes improve detection sensitivity 
        by orders of magnitude and 3) the prospect for developing tests 
        for diseases where none exist today as biomarkers of active 
        disease are undetectable by current technologies. Imagine a 
        future where economical, widely available genetic testing 
        provides the architectural game plan for personalized medicine 
        and a panel of ultra-sensitive biomarker tests specifically 
        tailored to an individual monitor for the earliest on-set of 
        disease, a timeframe when therapies are most effective.

4.  Are there any barriers to commercialization imposed by current 
intellectual property policies at NNI supported user facilities, and if 
so, what are your recommendations for mitigating these barriers?

        a.  The issues for user facilities are:

                  i.  Availability and proximity--Although the user 
                facilities are geographically dispersed, they are not 
                always proximate to business users. Furthermore, there 
                is no single source of data on the services these 
                facilities provide or the equipment they have, making 
                it difficult for many companies to access them 
                efficiently. An effort should be made to create a 
                central database where potential users can see all 
                facilities and their available services and equipment 
                and to create new facilities in locations where 
                nanotechnology centers of excellence are emerging and 
                translational development can be most effectively 
                developed. As an example Chicago does not have a user 
                facility in the National Nanotechnology Infrastructure 
                Network (NNIN) in sufficiently close proximity even 
                though the surrounding area has many nanotech 
                companies.

                 ii.  Cost and intellectual property--These facilities 
                charge ``full cost recovery'' which means a significant 
                overhead burden (not related to the facility or service 
                itself) is layered onto the direct cost of the service 
                provided, typically making the cost of use 
                significantly higher than the value of the service 
                provided. In addition, the facilities need strong 
                assurances that protect companies with regard to IP and 
                trade secret information that may develop.

                iii.  Support services--Most start-ups do not have 
                personnel that are trained and proficient in using 
                these facilities. Users need support personnel to make 
                use of the facilities or must invest significant time 
                and effort into educating facility personnel prior to 
                engaging for what may ultimately be short-term 
                projects. This may also add to the concern for 
                protection of confidential information and intellectual 
                property, especially in circumstances where the 
                facility sponsor may try to claim joint ownership of IP 
                generated during the use of the facility. These issues 
                make the use of these facilities cost-inefficient for 
                most businesses.

Conclusion

    The U.S. must retain its leadership position in this industry-
changing technology which has the potential to realign global 
competitiveness. The U.S. government must set the ``gold standard'' in 
supporting an efficient and productive climate, not only for discovery, 
but also for commercializing nanotechnology innovation. Not only will 
such an initiative enhance American competitiveness, but it will also 
help us address significant issues that will impact generations to 
come.
    Thank you for the opportunity to voice my concern and share my 
perspective with the Committee.

                    Biography for William P. Moffitt
    William Moffitt became President, Chief Executive Officer and a 
Director of Nanosphere, Inc. in July 2004. Nanosphere (NSPH) is 
developing and commercializing a nanotechnology-based molecular 
diagnostics platform for earlier detection of disease and economical 
decentralization of complex genetic testing. Mr. Moffitt has 35 years 
of experience in the diagnostics and medical device industry, and has 
spent the last 20 years developing novel technologies into products and 
solutions that have helped shape the industry.
    Prior to joining Nanosphere, he served as President and CEO of i-
STAT Corporation, a developer, manufacturer and marketer of diagnostic 
products that pioneered the point-of-care blood analysis market. Mr. 
Moffitt led i-STAT from its early research stage to commercialization 
and through its initial public offering in 1992 to its acquisition by 
Abbott Laboratories in 2003. Prior to i-STAT, Mr. Moffitt held 
increasingly responsible executive positions from 1973 through 1989 
with Baxter Healthcare Corporation, a manufacturer and distributor of 
health care products, and American Hospital Supply Corporation, a 
diversified manufacturer and distributor of health care products, which 
Baxter acquired in 1985. Prior to entering the medical device and 
diagnostics field, Mr. Moffitt was director of an experimental 
education program in science funded under Title III of ESEA in the city 
school system in Washington, N.C.
    Mr. Moffitt is also active on the boards of other companies and 
industry associations. He is Non-executive Chairman of the board of 
Glysure, Ltd., a privately held U.K.-based company developing 
continuous intravascular blood glucose measuring devices for monitoring 
insulin therapy in critical care settings; he is a Director of Nevro, 
Inc., a privately-held company developing therapeutic pain management 
devices; he is a Director of Rapid MicroBiosystems, a privately-held 
company commercializing systems for rapid detection of contamination in 
pharmaceutical manufacturing; and, he is a Director and a member of the 
Executive Committee of the Illinois Biotechnology Association 
(``iBIO'') where he also serves as an entrepreneurial coach for start-
up companies.
    Moffitt earned a B.S. in Zoology from Duke University.

    Chairman Baird. Dr. Melliar-Smith.

    STATEMENT OF DR. C. MARK MELLIAR-SMITH, CHIEF EXECUTIVE 
           OFFICER, MOLECULAR IMPRINTS, AUSTIN, TEXAS

    Dr. Melliar-Smith. Good morning. My name is Mark Melliar-
Smith, and I am the Chief Executive Officer of Molecular 
Imprints. I am please to be able to provide testimony today in 
support of the Nation's efforts in nanotechnology. My company 
is but one example of the successful support of new technology 
by the U.S. Government, and I am happy to talk about this 
success.
    Molecular Imprints is a start-up company which was spun off 
the University of Texas at Austin in 2001. The company was 
created to commercialize a newly invented technology called 
step-and-flash imprint lithography, which has demonstrated the 
capability to pattern features down as small as the diameter of 
a DNA molecule.
    Nano-lithography is the method used in creating very small 
patterns on a substrate. The technology is critically 
important, especially in the production of electronic devices 
such as computer chips. Today, the technology used to do this 
is an optical technique, much like making photographic prints, 
where the patterns are projected onto a light-sensitive resist 
on the substrate using a very sophisticated and expensive 
camera.
    Chairman Baird. Could you make sure you mic is on, Dr. 
Smith?
    Dr. Melliar-Smith. It began to be limited by the wavelength 
of light. It is a very difficult to make a 50 nanometer feature 
with a 20 nanometer light source.
    Molecular Imprints has developed a superior alternative 
technique called nano-printing. We make a very accurate master 
using an electron beam tool of almost unlimited resolution and 
then use the master to simply print, using a special ink, the 
features on the substrate.
    [Graph.]
    Dr. Melliar-Smith. As you can see from this graph, the 
quality of the images are much better, and the simplicity of 
the tool makes it much less expensive. The analogy to 
photography can be extended here. We don't make prints 
photographically anymore; we simply print them.
    The step-and-flash imprint development will have 
significant impact on the United States economy. The original 
optical photographic techniques were invented in the United 
States in the late '50s and early '60s and build up into a 
billion-dollar industry. However, in the '80s and '90s, the 
U.S. lost this capability to superior products from Europe and 
Japan, and now this $10 billion industry is almost entirely 
sourced from outside of the United States, as shown in this 
chart.
    [Chart.]
    Dr. Melliar-Smith. At Molecular Imprints, we intend to turn 
this around and bring the business back to the U.S. through the 
use of new and superior nano-printing technology.
    However, the economic impact extends well beyond the $10 
billion annual market for the litho tools themselves. This 
technology enables multiple industries. The largest is a $250 
billion computer chip industry, with companies such as Intel 
and Texas Instruments, which itself enables the $1.5 trillion 
electronics industry and much of our advanced weapons systems. 
This industry has been built over the past 50 years on our 
ability to make smaller transistors every year.
    The disk drive industry, with companies such as Seagate and 
Western Digital is also moving into nanotechnology. To increase 
the density of their drives, they will soon have to start 
patenting the magnetic disks themselves, and I have shown an 
example of this in this particular chart here.
    [Chart.]
    Dr. Melliar-Smith. What you can see are 20 nanometer 
magnetic pillars on a magnetic disk drive, and a large disk 
drive in the future will have ten trillion--yes, that is 
trillion with a t--on each drive. We are also working with the 
LED industry to place nano-features on high-brightness light 
emitting diodes to increase the efficiency and brightness. The 
objective is to make the LED a replacement for all forms of 
architectural lighting, which if completed, would serve a 
significant fraction of all of the electricity used in the 
United States, and would remove about 50 million tons of carbon 
from the air each year. Finally, looking further out, there is 
growing interest in the use of nano-medicines. By making the 
drugs into small particles, typically less than 50 nanometers, 
and of a particular shape, there is evidence that they can be 
made much more effective and much more specific.
    [Slide.]
    Dr. Melliar-Smith. To create this opportunity, we received 
a large amount of help from many different government agencies, 
shown in this slide here, and the purpose of my testimony today 
is to mention that.
    As you can see--and I won't read through them--we have 
received support in significant amount from several different 
government agencies and also from the University of Texas. In 
all of the cases, the programs and project management of these 
funding agencies has, in my mind, been impeccable, maintaining 
fiscal responsibility for the taxpayer without overly micro-
managing the technical efforts.
    We have also received extensive help from government-funded 
facilities. Recently, especially useful has been our access to 
state-of-the-art electron beam tools at the molecular foundry 
at Lawrence-Berkeley National Laboratory in California, to make 
the very fine imprint marks required for our technology.
    The government funding has been supplemented by over $60 
million of venture capital and industry investment, and in 
fact, in my experience, I found no dichotomy between the two 
sources of funding. They seem to be synergistic and 
collaborative. We are grateful for all of this support. Our 
company has already grown to 90 people, and I might add, with 
an average salary of $95,000 a year, so they are really good 
jobs. And we expect to get $25 million in revenue this year, 
twice that of 2007. And essentially, we see an almost unlimited 
future for ourselves and our customers. None of this would have 
been possible without the various forms of support I have 
described.
    Now, I think we all know that one swallow does not a summer 
make, but if you will grant me an example of one, I would say 
that the programs have been very successful. Thank you.
    [The prepared statement of Dr. Melliar-Smith follows:]
              Prepared Statement of C. Mark Melliar-Smith
    Good morning. My name is Mark Melliar-Smith and I am the Chief 
Executive officer of Molecular Imprints. I am pleased to be able to 
provide testimony today is support of the Nation's efforts in 
nanotechnology. My company is but one example of the successful support 
of new technology by the U.S. Government, and I am happy to talk about 
this success.
    Molecular Imprints is a start-up company, which was spun out of the 
University of Texas at Austin in 2001. The company was created to 
commercialize a newly invented technology called ``Step and Flash 
Imprint Lithography,'' which has demonstrated capability to pattern 
features down as small as 3nm, or about the diameter of a DNA molecule.
    Nano-lithography is the method of creating very small patterns on a 
substrate. The technology is critically important, especially to the 
production of electronic devices such as computer chips. Today, the 
technology used to do this is an optical technique, much like making 
photographic prints, where the patterns are projected onto a light 
sensitive resist on the substrate using a very sophisticated and 
expensive camera. However this technology has begun to be limited by 
the wavelength of light. It is very difficult to make a 50nm feature 
with a 200nm light source.
    Molecular Imprints offers a superior alternative based on nano-
printing. We make a very accurate master using an electron beam tool of 
almost unlimited resolution and then use the master to simply print, 
using a special ink, the features on to the substrate. As you can see 
the quality of the images are much better and the simplicity of the 
tool makes it much cheaper. The analogy to photography can be extended 
here. You don't make prints photographically any more--you simply print 
them.
    The Step and Flash Imprint development will have a significant 
economic impact on the United States. The original optical 
photolithographic techniques were invented in the United States in the 
late fifties and early sixties and build up into a billion dollar 
industry. However, in the eighties and nineties the U.S. lost this 
capability to superior products from Europe and Japan, and now this 
$10B industry is almost entirely sourced from outside the United States 
as shown on this chart. At Molecular Imprints we intend to turn this 
around and bring the business back to the U.S. trough the use of a new 
and superior nano printing technology.
    However, the economic impact extends well beyond the $10B of litho 
tools themselves. This technology enables multiple industries. The 
largest is the $250B computer chip industry with companies such as 
Intel and Texas Instruments--which itself enables the $1.5T electronics 
industry and much of our advanced weapons systems. This industry has 
been built over the past fifty years on our ability to make smaller 
transistors every year. The disk drive industry, with companies such as 
Seagate and Western Digital, is also moving into nanotechnology. To 
increase the density of their drives, they will soon have to pattern 
the spinning magnetic disks--an example of which is shown here. These 
are 20nm magnetic pillars and a large disk drive in the future would 
have 10 trillion--yes, trillion with a T, on each drive. We are working 
with the LED industry, to place nano features on high brightness LEDs 
to increase their efficiency and brightness. The objective to is make 
LEDs a replacement for all architectural lighting which if completed 
would save a significant fraction of all the electricity used in the 
United States and remove 50M tons of carbon from the air each year. 
Finally, looking further out, there is a growing interest in the use of 
nano medicines. By making the drugs into very small particles--less 
than 50nm, and of a particular shape, there is evidence that they can 
be made much more effective and much more specific.
    So our technology has multiple applications from semiconductors to 
drugs to energy saving device for clean technology.
    To create this opportunity--we have received a large amount of help 
from many different government agencies--and that is the purpose of my 
testimony today. Chronologically we have been supported by:

          The University of Texas where the basic invention was 
        created in the mid nineties and I would be remiss if I did not 
        put in a word for the large research Universities in the 
        country--they have become a great resource especially as the 
        large corporate labs like Bell Laboratories are less available, 
        and a resource that is hard to duplicate/outsource.

          Some of the early funding to the University of Texas 
        in the late nineties came through the joint activities of my 
        colleague from SRC and Defense Advanced Research Projects 
        Agency DARPA.

          Our first funding for Molecular Imprints in 2001 came 
        from the DARPA to the tune of $3.5M.

          We also won a major Advanced Technology Program grant 
        of $9M in 2004 from the Department of Commerce.

          And finally a $2.6M contract from the Office of Naval 
        Research to help make the process more production worthy.

    In all cases the program and project management from these funding 
agencies has been impeccable, maintaining fiscal responsibility without 
overly micro-managing the technical efforts.
    We have also received extensive help from government funded 
facilities. Especially useful has been our access to state-of-the-art 
electron beam tools at the Molecular Foundry at Lawrence Berkeley 
National Laboratory in California to make the very fine imprint masks 
required for our technology.
    The government funding has been supplemented by over $60M worth of 
ventures capital and industry investment--and I have found no dichotomy 
between the two sources of funding. They are synergistic and 
collaborative.
    We are grateful for all of this support. Our company has already 
grown to 90 people, and I might add with an average salary in excess of 
$95K per year, so these are really good jobs, and we expect $25M in 
revenue this year, twice that of 2007, and essentially we see an almost 
unlimited future for ourselves and our customers. None of this would 
have been possible without the various forms of support I have 
described.
    Now I think we all know that one swallow does not make a summer, 
but if you will grant me an example of one--I would say the programs 
can be very successful.


















                  Biography for C. Mark Melliar-Smith

Experience Summary:

          General management (President and CEO of SEMATECH, 
        CEO Molecular Imprints, CTO for Lucent Microelectronics)

          Managing a start up operation (GM of AT&T 
        Microelectonics Lightwave Business Unit; CEO Molecular 
        Imprints)

          Extensive R&D and manufacturing experience in 
        integrated circuits, photonics, fiber optics (Executive 
        Director at Bell Labs; managed large electronic component 
        factory for AT&T Technology Systems)

          Venture capital--selection and support of start-up 
        companies (Venture Partner, Austin Ventures; President MSC)

          Managing a large collaborative program (CEO of 
        SEMATECH)

2004-Present--COO and then CEO (from October 2005); Molecular Imprints
    Molecular Imprints, located in Austin, Texas, was founded in 2001 
with the objective of developing a totally new form of lithography for 
the semiconductor industry. Founded by two Professors at UT-Austin, it 
has been very successful both in terms of product development and 
sales, and also in raising venture funding. The company is growing 
rapidly and has 80 employees.

2003-Present--President; Multi-Strategies Consulting (MSC)
    Consulting and investment company focused on high tech, early stage 
start-ups in Central Texas.

2002-2003--Venture Partner; Austin Ventures
    Austin Ventures is one of the largest venture capital companies in 
the southwest, focusing on software, telecommunications and 
semiconductors. With several billions in investment and some 40+ 
companies in its portfolio, the organization focuses not only on 
finding and funding innovative new high tech companies, but also 
supporting and nurturing them through the first five years of their 
existence. My responsibilities focused on semiconductors, photonics and 
components.

1997-2001--President and CEO of SEMATECH
    Responsible for all aspects of a $160M, 600 person semiconductor 
R&D consortium, reporting to a board of 13 member companies which 
represent about 50% of all integrated circuit production in the world. 
Lead a direction change from the original mission for SEMATECH 
(restoring U.S. preeminence in manufacturing) to one of driving the 
technology roadmap acceleration from three to two year development 
cycles. Expanded membership to include the major semiconductor 
companies in Europe, Taiwan and Korea.

1990-1997--Chief Technical Officer, Lucent Technologies 
Microelectronics
    Responsible for R&D and Technology for Lucent Microelectronics 
Business Units including silicon integrated circuits, photonics, 
gallium arsenide, power supplies and printed wiring boards. Reported to 
the President of Lucent Microelectronics and was a member of Executive 
Committee. Greatest challenge was to not only maintain state of the art 
R&D, but also to help transition an historically vertically integrated 
cost center (AT&T Western Electric) to an independent, market based 
entity with profitable P&L and $4B in revenue, 80% of which came from 
outside the company. Member of the 12 person Bell Labs Council advising 
President of Bell Labs.

1988-1990-- Vice President and General Manager--AT&T Microelectronics, 
Lightwave Business Unit

1987-1988-- Executive Director, Bell Laboratories Photonics and 
Microelectronics Division

1984-1987-- Director of Engineering and Operations, AT&T Kansas City 
Works, Western Electric.

1970-1984-- Various engineering and management responsibilities in Bell 
Laboratories

    Various pre-1970 employment in Canada (technical sales), Australia 
(chemical engineering), Europe (technician, manufacturing tech)

Board Memberships

Power-One Inc., Camarillo, CA; Chair of Governance Committee, Member of 
Audit Committee

Technitrol Inc., Trevose, PA; Chair of Audit Committee

Molecular Imprints Inc., Austin, TX

Metrosol, Austin, TX

Education

1967--BS Chemistry, Southampton University, England

1970--Ph.D. Chemistry, Southampton University, England

1986--MBA, Rockhurst College, Kansas City, MO

Community activities:

1998-present:  Member of the Engineering Advisory Board at the 
University of Texas.
    Drawn from around the United Sates, this group meets several times 
per year to advise the Dean and faculty of the College of Engineering 
on a wide variety of policy issues such as intellectual property 
strategies, fund raising, government and funding agency relations etc. 
In addition, members of the EFAC also provide resources for students as 
needed in special cases.

2006-present:  Member of Board of Trustees for Huston-Tillotson 
University
    HTU is a Historically Black University located in Austin. The Board 
of Trustees meets on a regular basis to advise the President of the 
University and to provide expensive support in the area of business 
affairs, fund raising, community relations, student internships, etc.

1998-present:  Board of Capital IDEA (Board Chair 2002-2004)
    Capital IDEA is a non-profit organization devoted to adult 
education in Central Texas. Using government and private funding, it 
provides financial assistance, mentoring, books and tuition for under-
employed adults to allow them to build their skills to achieve a 
position with a living wage and benefits; graduating approximately 100 
people each year.

                               Discussion

    Chairman Baird. Outstanding testimony, and we appreciate 
very much your insights and expertise. I want to focus on two 
things as we look to reauthorize the bill. Give us, if you 
use--and I am going to rule out one option. You can't just say 
more money. We hear that enough on Capitol Hill. We have a $400 
billion deficit this year, a multi-trillion-dollar debt, as you 
know, and so the more money thing I will take off the table. 
Apart from that, if you could each pick one thing to do and one 
thing not to do as we look towards reauthorizing this bill, 
what would be? And I will go with you, Mr. Rung, and work 
across from you.
    Mr. Rung. The one thing to do would be to have some 
intentional and accountable with measures funding for 
commercialization associated with multi-year, large award so 
that might take the form as a gap fund such as ours that 
provides an incentive and some specific funding. In our case, 
it is grants to university projects in collaboration with 
entrepreneurial startups with the goal being that the startups 
raise funds.
    In terms of the one thing not to do, I wasn't prepared for 
that question, so I guess I will just say ``more of the same'' 
without thinking through----
    Chairman Baird. We have yet to repeal the law of unintended 
consequences. That is the one law that doesn't sunset here, so 
I am always cognizant. I ask this very often whatever the 
topic, because I just want to not make mistakes that set you 
back in our effort to move things forward.
    Dr. Chen.
    Dr. Chen. The one thing to do, I think I would mirror what 
Mr. Rung said, which is to take a portion of it and have it 
targeted to help and support university-industry partnership on 
a few specific areas and projects.
    In terms of things not to do, I think the flip side is for 
the basic research funding. You don't want to target that too 
much. You want to leave that open, because that is where you 
don't want to pick and choose what the winners are because then 
you prevent the unexpected discovery from happening.
    Dr. Welser. Because they already took my university-
industry partnerships, the other thing I would say is do look 
to what the states are doing as well in this. I mean the states 
are being very responsive to the NRI, in particular, in terms 
of finding it as an opportunity to build up new economies. And 
they are willing to invest money in buildings and facilities 
around the universities. They can't necessarily afford all of 
the equipment and things that are going to go into that or the 
types of infrastructures costs that go along with it, but they 
are ready to catch a lot of this stuff as it comes out and will 
be more than willing to fund startups as well on that, so I 
think leveraging that capability with federal funds is very 
important.
    Mr. Moffitt. I would like to see the initiative balance 
spending between basic research and bridging the gap to 
commercialization of products. Historically, we focused a 
tremendous amount of money and effort at developing the 
science. It is not time to bring some of that through to 
fruition so that those industries profit and jobs can being to 
fuel and repay back in to the cycle, if you will.
    The thing I wouldn't do is ignore the need for funding to 
develop human resources. To all of us that are in the 
commercial side of this, this is extremely critical.
    Dr. Melliar-Smith. I think the point that I would like to 
focus on are the utilization of the national laboratories. They 
have been built up over 50 year or longer in the country, and 
they are an enormous resource for the economy and the well 
being of the Nation. I think anything that we can use to try to 
draw the national labs more into the world of innovation and 
commercialization would be enormously beneficial.
    After the Second World War, this nation and a lot of its 
industries were built on the basis of large, corporate 
laboratories, which now, unfortunately, have fallen, generally, 
onto harder times, so it is rare that you can find a really 
talented group of multi-disciplinary world-class scientists. 
And those are located in the national labs now, but somehow we 
need to find a way to get them more involved.
    And the thing that we don't want to do, it is always 
difficult for me to say stop doing something, because I have 
only dealt with mostly successful activities with the 
government, so if I might be excused from straying a little bit 
of, perhaps, this committee, I would like to see us not deny 
immigrants the chance to work in this country. Many of the 
universities have got large numbers of graduate students who 
were not born in the United States. They are another enormous 
beneficial aspect of our university system which we ought to be 
able to exploit. Thank you.
    Chairman Baird. Outstanding comments. My time will shortly 
expire, so on the second round I will be asking you about 
education issues. Expensive infrastructure may be better said 
that it costs to do nanotech work, how do we export that? Can 
we use web-based instruction or remote access to help, for 
example, community college students, et cetera, along the lines 
of something Mr. Moffitt said, but I hear it from nanotech 
folks as well that that pipeline of students that would get 
this great gee-whiz development, great economic potential, but 
we don't have the pipeline, and that is on of our risks in 
terms of where we lose the technology, is another country has 
the human resources to exploit the developments that we make 
here. We have seen this in other fields in the past. So I will 
yield to Dr. Ehlers or recognize Dr. Ehlers for five minutes, 
but I will get back to that question in a moment.
    Mr. Ehlers. Thank you, Mr. Chairman. And first, I would 
just like to make an observation. Looking around the room, you 
will notice that this hearing is fairly lightly attended, both 
in the audience and by Members, and I don't even know if 
members of the press are here. But yet I think this particular 
hearing, and certainly this topic, will have much greater 
impact on the future of this nation and its economy than most 
anything, certainly more so than whether or not Roger Clemens 
took steroids, which has preoccupied the press and part of the 
Congress for some time.
    Chairman Baird. If we had the proper chips, we could have 
assessed whether he took steroids--a plug for Mr. Moffitt.
    Mr. Ehlers. Right. It is just striking to me, and it shows 
me the importance of this committee and the lack of 
understanding of the public and occasionally our colleagues of 
the importance of the issues that we deal with.
    I thank the panel for being here. Your testimony has been 
outstanding and very helpful to me. In some cases, you have 
answered the questions I was going to ask, but let me just try 
to get a cross section. A few of you have answered this 
already, but I want a broader and more complete response.
    For example, Mr. Moffitt and I think Dr. Chen, as well, 
mentioned that the U.S. currently leads in the science of 
nanotechnology but could lose the commercialization race. Now, 
the question is how can we turn that around? It is not just a 
matter of money, you know as well as I. Education comes in here 
and a lot of other factors. You also mentioned immigration. I 
think I would refer you to John McCain's campaign. Maybe you 
could help in that process because he seems to be the only one 
supporting proper immigration.
    But what is the answer, or what can we do in the Federal 
Government to help with the commercialization, given our 
current budget situation, not a lot of money. What do you need? 
Do you need more encouragement? Do you need more security to be 
able to raise money, et cetera? What is your response?
    Dr. Chen, why don't you kick it off?
    Dr. Chen. I would say that actually one of the things goes 
back to what you referred to which is why people aren't 
interested. And it is the technology demonstration projects, 
actually, is something that can address both issues because if 
you have a few examples of things where we have taken things 
from the lab and turned it into a commercial success, it starts 
to feed the pipeline. People see that you can succeed, that you 
can accelerate progress in a particular area, and the success 
there makes people realize that you can have success in other 
directions, so I think these technology demonstration projects 
where university and industry work together is one area where 
you don't need a huge amount of investment because you are not 
going to invest in hundreds of them, but if you invest in a few 
as a starting point, you can make things move forward.
    And in terms of the education and immigration, I totally 
agree. I think that this country needs to recognize that we are 
going to lose a lot of knowledge if we make it difficult for 
people to stay here. My parents came here as graduate students. 
I was born here, and so that is an example of how encouraging 
the people we train to stay here is going to help this country.
    Mr. Ehlers. Mr. Moffitt.
    Mr. Moffitt. The single greatest hindrance to 
commercialization, I think, today, and keeping it in this 
country is at the root of that education. We simply lack the 
workforce. This requires a highly skilled, very technical labor 
organization, not dissimilar from what the semiconductor 
industry required 15, 25 years ago. So this, again, is against 
a falling tide of graduates, STEM graduates, if you will, so I 
think education is certainly one yet to the answer here.
    And I think the second is the ability to provide validation 
for the private sector investments in a given nanoscience. Now, 
one of the greatest difficulties is that extremely high risk 
capital that is used to start a small venture, and then have 
the ability to cover the gap, if you will, and prove out the 
commercial viability or value of the product and that, I think, 
is where if the government would focus spending--I won't say 
more--but spending on the gap, if you will, that serves to 
validate, and validation brings in private-sector money, of 
which there is an abundance in this country.
    Mr. Ehlers. Okay, I appreciate those comments because I've 
spent about 40 years of my life trying to improve math and 
science education in the elementary and secondary schools, 
including during my time in Congress.
    Just a quick follow-up, Mr. Moffitt, and then there will be 
a quick question for Dr. Melliar-Smith. Are you having trouble 
filling spots in your company? Are you having trouble hiring 
qualified people?
    Mr. Moffitt. Most definitely. In fact, I would tell you 
very quickly that yesterday, in a staff meeting, we discussed 
the potential to move manufacturing of our products offshore to 
get access to a labor force that would be sufficient to supply 
our needs.
    Mr. Ehlers. Okay, and a quick follow-up from Dr. Melliar-
Smith. You commented about use of the National Labs. How about 
the university centers?
    Dr. Melliar-Smith. I believe the universities also fall 
into the same category of being a national resource for 
research and development. And what I might add, that is very 
hard to duplicate or outsource. It takes several generations to 
build a great research university, and we need to support those 
activities.
    The only comment I would make in the form of sort of 
constructive criticism, if I may, is that I think that the 
universities could provide an increasing reference toward 
commercialization in their tenure decisions for professors. We 
have been very fortunate in having a professor at the 
university who spent a lot of time at Molecular Imprints as our 
chief technical officer. I am not sure that it has helped his 
tenure track to a full professor position, and I think in some 
universities such activities are, in fact, almost frowned on. 
So any encouragement we can give to universities that 
commercialization of the inventions of which they act as a 
wellspring for could be used further the academic career of the 
professor.
    Mr. Ehlers. In my experience in universities, the answer 
has been that the professors go off and form their own 
companies and take care of the commercialization that way, 
which is not healthy for the universities. With that, I yield 
back.
    Chairman Baird. But it makes tenure a whole lot less 
relevant if you are successful.
    Mr. Ehlers. Go back and donate a building.
    Chairman Baird. Dr. Lipinski.
    Mr. Lipinski. Thank you, Mr. Chairman, and I want to try 
not to repeat the same questions. I think all three of us 
doctors up here think alike on these questions, but I want to 
echo a little bit what Dr. Ehlers said about that is apparently 
here on this issue. Tomorrow, we are going to have Bill Gates 
in this room, and I am sure that everyone will be packed out 
the doors and media will be here, and Bill Gates is going to 
come and address, talk to the Democratic Caucus. I really think 
what we should have, what would probably be more helpful to our 
country is to have the five of you come and speak to the 
Democratic Caucus and see if you could really raise the 
interest.
    I have been discussing this. I don't know if it is because 
people hear nanotechnology, and they just don't understand it, 
they feel that it is too complicated. But I really think that 
this is critical to the future economic prosperity of our 
country. And there is a couple of things sort of around the 
margins, coming off of the questions before: what have some of 
the states done that you see as very successful in terms of 
helping to promote nanotechnology. I know that New York has 
done a lot, but who else has done things that you think are 
successful? I will start with Dr. Welser.
    Dr. Welser. I would say, New York, I think is a great 
example, so I won't dwell on that one right now. The other 
things we have seen going on, though, in Texas, they put 
together an endowment for pulling in new faculty, specifically 
in the area of nanoelectronics and nanotechnology, when they 
started the center, which then allowed them to pull in more of 
a critical mass of people there working on this effort, both 
for training the students and for doing the research. I think 
that is extremely useful because getting enough people at a 
given university center to work on it oftentimes makes the 
difference between whether you just have a few good products 
coming out from professor's lab or a whole bunch of ideas 
building off each other.
    The other thing we see is, in one of the Midwestern States 
we are looking at right now, they are specifically looking to 
try and build up incubators outside of the university that can 
catch some of the spin-offs, but have the university professors 
help them in the design of that and actually be able to utilize 
those facilities in the early-stage research before it is ready 
to be, necessarily, a technology that is going to go out for 
actual R&D. I think this is a somewhat smaller investment than 
what, say, New York did to build the entire nanotech center 
there. But by doing that in a targeted way, I think it is still 
going to have a big impact.
    Mr. Lipinski. Anyone else have anything on what other 
states have done?
    Dr. Melliar-Smith. If I might mention that Texas has 
something called Emerging Technology Fund, to the tune of about 
$100 per year, and that money is passed out to aspiring small 
startup companies. Many of them are actually pre-venture 
capital companies, so they are very early stage funding. Some 
are later-stage funding. And that actually has been very 
successful in terms of Texas being able to support a wide 
variety of different startup companies in different industries. 
I think that program has been pretty successful.
    Mr. Moffitt. I am also aware that in the past, the State of 
New Jersey has allowed small entrepreneurial companies in 
certain industries and meeting certain qualifications to sell 
their State net operating loss carry-forwards to large 
industries. The large industry buys it and uses it as a credit 
against their own taxes if you will. The State of Wisconsin has 
a program of matching grants in certain segments of the 
industry. The State of Indiana has a program that supplies SSRT 
grants for the development of science that is invented inside 
of the state and commercialized inside of the state and the 
State of Illinois is considering a number of different of these 
approaches to try to build a greater center, if you will, of 
nanoscience, and a center of excellence in that area.
    Mr. Rung. Well, the State of Washington, for many years has 
had an organization called the Washington Technology Center 
which is a State-funded or initiated user facility that 
performs work for a large number of companies and also has a 
twice annual competition for research support grant for 
companies. They are right adjacent to the University of 
Washington Nanotechnology Center. They have been a model for us 
in a lot of what we have done.
    In Oregon, we have the Signature Research Program. ONAMI is 
the signature research center. There are two more now. I think 
one of the things that has worked very well, maybe better than 
we thought it would, is to encourage the research universities 
and the state to collaborate very deeply with one another. That 
sounded like something that might be difficult at first, but it 
has gone exceedingly well, and we have ideas, successes in 
regarding research funds and commercialization that would not 
have occurred but for that collaboration.
    Dr. Chen. I think one thing that is a little bit of a 
difficulty in terms of State funding is that, again, because 
nanotechnology cuts across industry sectors--it can have 
relevance to biotech; it can have relevance to energy, to 
automotive--it is not like a sector where you can have whole 
bunch of companies that come together and go to the State and 
say we need this. We have that in the state in terms of 
biotechnology, but there is not really that equivalent cluster 
of nanotechnology identified in the state, even though many of 
the companies in the state do benefit from nanotechnology. I 
think that is one consideration.
    Mr. Lipinski. Thank you. Let me throw this out. I don't 
want to get an answer. It will go into the question that the 
chairman had. In terms of education, what do we really need--I 
should say are we looking for in a workforce, to work in 
nanotechnology? What exactly are we trying to do and does that 
just mean encouraging STEM education across the board, across 
all students, or are we looking for something more 
concentrated? But I will turn it over to Chairman Baird for his 
questions on education.
    Chairman Baird. Let us take that as a friendly amendment to 
my question and open that up to what we need to do and how we 
can better do that and how the nanotechnology initiative might 
adapt it in some fashion to encourage that or if their another 
vehicle that might be better to do it.
    Mr. Rung. I guess I will start. One of the panelists 
mentioned internships or experiences for students. We call this 
inquiry-based science and think this is extremely important. 
You know, you can talk to a child and try to push information, 
but the experience of doing something is very powerful. The 
Nanoscale Informal Science Network is a great thing. We are 
very proud of our local Oregon Museum of Science and Industry 
and for the outreach that they are doing, even in rural parts 
of the state, also towards those experiences.
    The goal, of course, is to have, you know, U.S. citizen 
student, you know, persist, you know, through graduate degrees. 
There is an increased demand for graduate degrees, and in the 
absence of sufficient numbers of those at the time being, I 
have to agree very strongly with the other panelist that we 
must keep the immigrant advanced-degree people that we have 
educated here. Otherwise, in the short-term, they will create 
jobs overseas.
    Chairman Baird. Let me follow up on that issue for just a 
second. My own belief is, and I can tell you in our local 
community, there are industries who have really stepped up to 
the plate to better educate the local populous. They take Ph.D. 
levels and put them into the schools. They bring high school 
and community college students into their labs to work in an 
internship, and quite frankly, there are other, comparable 
high-tech industries that don't. And interestingly enough, it 
is the latter that tend to be busting down our doors to expand 
H1-Bs.
    And I would much more be inclined to link increased H1-Bs--
and we will hear tomorrow, I think, from Mr. Gates, probably, 
about the need to expand H1-Bs. I would be much more inclined 
to expand H1-Bs based on a demonstrated effort to educate the 
domestic populous rather than just ignore the domestic 
populous. And I am aware that there is this piddling $1,500 fee 
you get for an H1-B and that goes to an education, and that is 
being used pretty well. But quite frankly, given some of the 
data about under-funding and underpayment of H1-B recipients 
here, how can we do this? How can you folks in the industry 
reassure the American people that we are going to try to 
educate our own kids so they can fill these gaps rather than 
just trying to get folks from overseas, as valuable as they 
are, and maybe have a synergy there to where every H1-B you 
get, you have to demonstrate you are educating ten Americans, 
something like that. I just put that out there.
    So I am sympathetic to it, but I hear it far too often when 
high-tech people come to us and say expand the H1-Bs, and we 
knock on their door and say what are you doing for mentoring? 
What are you doing for internships? What are you doing to 
invest in the local school? Oh, gosh, you know, we are just too 
busy. The economic climate is just too competitive, blah, blah, 
blah, and I am kind of tired of it.
    Dr. Melliar-Smith. Again, I guess my recommendation would 
be to identify and speak with the large industry associations 
that are asking for the H1-B visa and just lay it on the table. 
They understand a simple partnership as well as anybody. I tend 
to agree. My biggest goal is in fact to make sure that we 
provide, you know, a green card to every student that graduates 
from a large research university with a post-graduate degree in 
an area this country needs. Now, I know that is difficult to 
put in place in the present environment, but it is such a 
simple thing to do, and I think everyone agrees that it would 
be good thing to do, but it is difficult for us to make it 
happen.
    Chairman Baird. I would fully support it, providing that 
the green card gets revoked if you don't dedicate some of your 
time after you got the green card to educating American 
citizens.
    Dr. Melliar-Smith. That is fair enough. You can have them 
do whatever you want.
    Dr. Welser. I guess, just briefly back to question on 
education, I think the first thing that, obviously, that we 
would love to see is that the NNI can, in fact, fund all of the 
stuff that is in the America COMPETES Initiative, and 
obviously, we weren't successful in getting that through every 
year. I think there is a lot of really good programs there, 
both for helping research as well as education.
    But the other thing that I think the NNI could do in its 
reauthorization is try to identify some grand challenges and 
big initiatives that can capture the public mind. I think the 
nanotechnology is so large and so vague that sometimes it loses 
some of its graspability by the general public. Maybe, you 
know, looking for the next transistor isn't quite as sexy as 
putting a man on the moon, but we can find some things out 
there in nanotech that is stuff to grab people's mind, and 
hopefully encourage students that this is an interesting area 
to go into.
    And lastly to your question on what kinds of education we 
need. I do think it is much more cross-functional than it used 
to be. One of the things we have found is we are working a lot 
more with physicists and chemist and wishing we had more people 
who knew organic chemistry in the semiconductor side as we are 
trying to transition into more nanoelectronics sorts of 
applications. Most of us were trained more in the inorganic 
side of things and more on the engineering side, so we need 
people with those skills, but we need them from the very 
beginning to be talking with engineers and getting an 
engineering background in their education so they understand 
how you take organic chemistry and actually make a device or 
make a product out of it.
    Chairman Baird. As you may know, the America COMPETES Act 
specifically addresses cross-disciplinary research and funding 
for that kind of training. Unfortunately, we didn't get to the 
appropriation last year. But in the budget, which just passed 
the Committee last week, we have made space for substantial 
increases. We'll bring that budget up tomorrow on the floor, 
and expect the democratic budget will pass, and it has large 
allowances for substantial increases in funding for America 
COMPETES related activities.
    Other comments on the education issue, especially how we 
can skill it up to people who are not necessarily located in 
the centers where you have got your equipment directly 
available.
    Dr. Welser. We have been involved in a project in the FEI 
Company with a table-top scanning electron microscope that was 
actually demonstrated here in Congress last year. I believe 
there is a Nanotechnology in Schools Act that Congress is 
considering that would provide funding or an opportunity to 
place low-cost tools that expose students to hands-on 
nanoscience, and so that would be one example, looking for 
placement of those in community colleges or traveling units.
    Chairman Baird. If I were a kid in rural Southwest 
Washington, is there a way I could go on the net and tinker, 
remotely, with some nanotech equipment? Dr. Chen, you seem to 
have----
    Dr. Chen. Yeah, there are programs where they have set up 
through the Internet you can access atomic force microscope and 
get a feel for what sort of images you could get out of it, and 
so I think those are things that we need to do to excitement in 
there. I mean a middle-school kid may not end up working in 
nanotechnology, but if they get excited in science and STEM 
areas, that is a win for this country. I think you make a very 
strong point in terms of forward thinking in that we can't just 
rely on people from overseas over the long-term, because as 
things get better, they are not going to come. Why are going to 
leave their country if things are as good there.
    We need to get kids in this country excited about science 
and engineering because if they don't get excited at the middle 
school level, there is not a lot we can do to recapture them at 
the under-grad or graduate level.
    Dr. Welser. I am a former middle school science teacher, so 
I can appreciate a lot of these comments. I think there is 
tremendous opportunity in dealing with the community colleges 
in this country. There is a great network of resource there. 
There is an opportunity there, not to train necessarily Ph.D.s, 
but the supervisory/managerial technical talent that we require 
in order to commercialize. And I think a government-industry 
cooperation to pull together a curriculum that could be broadly 
disseminated across these community colleges would go long way 
to solving problems within the next few years as opposed to a 
generation away.
    However, we still need to underwrite the generation away, 
and that simply is just more math and science teachers. I 
personally participate in education of math and science 
teachers with respect to nanotechnology and have done a lot of 
local work, but the local work alone is not sufficient.
    Chairman Baird. I appreciate that. We had comprehensive 
review in my district, and one of the interesting things was I 
invited a fellow in charge of production management for SEH 
America, and he listed a number of the thing that he needs 
employees to be able to do, and it was such things as looking 
at an array of numbers and trying to get a sense of what the 
mean and the standard deviation is an what numbers are beyond 
the bounds, and then trace that through some other charts and 
figure out what here may have caused the deviation here.
    He said they can't find people to do that, and we are 
talking high-level jobs. We are talking potential billion 
dollar investment in the community and just a fairly 
rudimentary mathematical reasoning sequence is difficult. But 
what was also intriguing was the local educators said that they 
had been trying for a long time to get the high-tech community 
to articulate clear-cut defined, achievable goals, and until he 
had done that at that presentation, they had lacked that. So 
there is a huge disconnect between the educational community 
and the consumers of the so-called supposedly educated work 
force, and we need to close that gap, and your notion of a 
curriculum may go well along the way towards that.
    Dr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. The one surprise so 
far is that no one has mentioned health and safety issues, and 
so I feel obligated to raise those issues. Dr. Chen, you 
mentioned that you have environmental health and safety 
researchers working side by side with the nanomanufacturing 
researchers in your center for excellence. I want you to 
amplify that with Dr. Melliar-Smith and Mr. Moffitt. I am 
wondering what type of health and safety precautions do you 
have to take in your facilities to minimize employee exposure 
to nanoparticles.
    Dr. Chen, first, and we will just work down the line.
    Dr. Chen. One of the things that we discovered, actually, 
in talking to the EHS researchers, they were so happy to be 
involved at the stage where we were looking at creating new 
processes because what they said was usually what happens is 
people call us in after the fact and ask us to clean up the 
mess. And so the exciting thing there is that they really are 
side by side. I mean there is someone making product, and there 
is someone measuring exposure, and so they can, by being right 
in the lab, they can make suggestions, they can take 
measurements, they can understand how the manufacturing process 
might go so that they can also make suggestions as to how that 
process could be designed to be more environmentally friendly.
    And so I think that is a key. The EHS research, a good 
chunk of it, can't be done in isolation because there is too 
much to look at. It needs to be focused in terms of what are 
the issues if we go down a certain pathway for a manufacturing 
process. What are the issues for a particular type of 
application? And I think in the near-term, that is going to get 
us there a little faster. I mean we won't be able to solve all 
of the problems, but we may be able to address some of the more 
urgent problems sooner if we get those groups together.
    Mr. Ehlers. Would you consider your center to be a green 
center?
    Dr. Chen. I would. I mean it is a very important piece, and 
it is a unique part of Lowell that we have this very strong 
health and environment group as well as the manufacturing.
    Mr. Ehlers. Mr. Moffitt.
    Mr. Moffitt. We make a biologically reactive gold 
nanoparticle, so we must concern ourselves, both with the 
biological components of what we do, as well as the 
nanoparticle structure. We start with the premise that gold is 
inert noble metal, and as such, it is not an active particle if 
you will. But once we functionalize it, it becomes active, so 
we do some--I would not call it core research--but we do some 
basic safeguard measures that you would expect in any 
biological facility, so we manufacture products in a clean-room 
environment, in an isolated environment. We have P-2 labs, 
which are labs that are capable of handling infectious agents 
and disposing of them properly, and monitor, of course, on a 
safety basis, every step we take in the handling of these 
materials.
    Mr. Ehlers. Dr. Melliar-Smith.
    Dr. Melliar-Smith. Well, I think health and safety goes 
without saying. It would be incredibly irresponsible for any 
CEO or any citizen, for that matter, of a country to do 
something that would risk the health of their employers or 
their neighbors or what have you.
    In our particular case, the nanoparticles that we produce 
are actually patented onto a substrate so they stick to the 
substrate. They never come free. They never float in the 
environment in the way if you were manufacturing carbon 
nanotubes or something of that sort. So in fact, the product we 
make does not represent any form of nano- or biohazard to the 
community, but I strongly agree that the nano-industry has to 
step to the environmental risks that potentially very small 
particles do or could create in the environment, and I think it 
goes without saying we have to do that.
    Mr. Ehlers. Thank you very much. I have no further 
questions.
    Chairman Baird. Dr. Lipinski.
    Mr. Lipinski. Very quickly, what can we do in the NNI, if 
anything, to, first of all, do all we can to make sure the 
proper work is done so that we do not have these environmental 
concerns, health concerns with any kind of nanotechnology, and 
what can we do to convince the public about that? Is there 
something that should be done in the NNI? I think you 
univocally talked about what you do where you are at, but is 
there something more general that the government could help in 
this area?
    Mr. Rung. If I may, I have written extensively about this 
in my written testimony. Green nanotechnology is ONAMI's single 
largest program, and in fact, in about ten minutes, day two of 
our Greener Nano Conference will be getting underway.
    The summary is that you want to link the research on 
implications with the research on applications, and you need to 
have a comprehensive program that is multi-disciplinary, unites 
multiple agencies and objectives together. The best example 
that I am aware of this, and we are heavily involved in it at 
the leadership level, is the NIEHS Nano-health Initiative, 
which is breaking out into three projects, one on 
characterization of nanoparticles, which is critical--without 
data, nothing else is going to be achieved--biological assays 
that are efficient and practical to perform, and then very 
importantly, a system of federated databases so that data can 
be shared and be consistent on the interactions of engineered 
nanomaterials with biological systems.
    This three-part project would be a great way to fill the 
gap between what current EHS funding in the NNI is and the ten 
percent or so that the Nanobusiness Alliance and other groups 
have suggested. It brings together multiple federal agencies, 
industry, academic centers, and I think it is an extremely 
promising initiative and following exactly the right approach.
    Dr. Chen. I have already made some prior comments, so I may 
just add one additional thing. I think we want to also 
recognize that EHS research also will benefit from the creation 
of tools that will make it easier to measure and understand 
what is going on, so I think we want to make sure that there is 
a recognition for that piece of the EHS research aspect.
    Mr. Lipinski. One other quick question--well, first a plug 
for my alma mater, Northwestern University. Northwestern has 
really put a lot into nanotech and has been very successful, 
and the commercialization has been very successful. It is best 
to have some centers of excellence rather than to spread the 
federal funding around? Is it better to do that way? I think 
maybe someone had suggested that earlier, and I just wanted to 
put that out there.
    Dr. Welser. Well, I think is a balance. Unfortunately, a 
lot the tools that we are going to be needing for this sort of 
work are extremely expensive, so you can't afford to put one in 
every university, but I think the idea of doing multi-
university centers that span across our geographies has worked 
well. It has worked well with the NNIN that the NSF put in 
initially for nanofabrication work. It is the same kind of 
thing we are trying to do with NRI.
    I think a balance is then trying to limit your investments 
to what can be afforded, but also tried to pull in as many 
universities as you can. And I would note that even though we 
center these in distinct states, they actually do pull in 
schools from other states, so actually to your questions 
earlier, for example, the California center in the proposal 
that we are just about to announce is pulling in the University 
of Iowa because there are a couple of professor there who were 
doing very interesting work. Geographically, we will have to 
work it out with telecons, but it is a way to get that school, 
also, very much involved in that work.
    So I think that you can work around centers and then expand 
them out, but you have to give them a mission that they are 
going after so everyone understands why they are working 
together on this problem.
    Dr. Melliar-Smith. I guess I would like to second that. In 
my experience in the industry, I think the SRC and the marker 
centers have done a very good job of balancing individual 
contributors who can come from anywhere because any good idea 
can come from anywhere, with the larger organizations which 
have got the center of gravity they need to actually be 
successful in commercialization. If you are looking for a 
model, I think the semiconductor research organization is a 
good one.
    Mr. Moffitt. I would just echo the comment that I think the 
center of excellence approach is the right approach simply 
because it does focus and channel available resources and they 
are constrained, as we all know, and then I think they do 
locally and organically grow from that center. As developments 
are made, companies get spun out for commercial viability and 
commercial translation to this science, but that just loops 
right back in to the university and the universities in the 
area as well as other companies, so you tend to think of it as 
just dropping a few seeds here an there, and from that will 
grow, I think, a tremendous industry.
    Dr. Chen. One thing I would say in caution, though, with 
the center for excellence approach is that we want to make sure 
that we don't define nanomanufacturing as only one type of 
process because as we have seen with the predecessor to the 
NNIN, that was very heavily based in lithography-based 
processes, because that is the industry that was more actively 
in the nano-areas. So we don't want to too narrowly define what 
we mean by nanomanufacturing when we define what type of 
centers of excellence we should have, so I think that is 
important.
    Dr. Welser. I think every center of excellence is going to 
be a center of excellence in nanoscale science because that is 
the cutting edge of chemistry, condensed-matter physics and 
molecular biology. Nanotechnology affects every conceivable 
economic sector, and so we should think of this not as 
something esoteric or tied to a single industry, but it is 
very, very broad. So there are going to be many, many centers 
of excellence, each of them focusing on something they do 
uniquely well, and so that, I think, might be the appropriate 
vision to have.
    Mr. Lipinski. Thank you.
    Chairman Baird. We will finish shortly, but I wanted to 
raise two other issues.
    The issue of access to federal facilities, particularly Dr. 
Melliar-Smith, you mentioned the DOE labs. How well is that 
working? Can we make it better? What are the obstacles that any 
of you have experienced in terms of access to these federal 
facilities that provide the infrastructure that allows people 
to do some of this work? How can we improve it and what are any 
strengths or weaknesses?
    Dr. Melliar-Smith. My experience has been very successful. 
Inevitably, there is a balance between what a company wants to 
do in a research facility and what the facility, itself, can 
let them do. There are obviously, ultimately certain 
constraints, but our experience at Berkeley has been excellent. 
They have allowed our research engineer to come in and use the 
equipment, largely unsupervised after full training.
    These are things that we could not afford to put into the 
infrastructure ourselves and they are crucially important to 
us. Generally, we have not had a problem with them. At any 
given point in time, there may be an aggravation over this that 
or the other, but they are all solvable on both side, so we 
have been very supportive.
    Dr. Welser. Since we just formed this new partnership with 
NIST, we are very interested in how we can leverage the labs, 
and one of the things that the partnership started off with was 
the idea that NIST was very interested in having people come 
and utilize the labs, and we were very interested in taking 
advantage of what was there. But without an actual set of 
project to further, oftentimes it was difficult to figure out 
how you start the collaborations off, so one of their goals was 
funding some of the research at the universities as part of the 
NRIS to get better insight into what the researchers are doing 
to understand what they actually needed for future 
characterization tools.
    Measuring the spin of an electron is something that is 
extremely important to us right now, and that is the kind of 
grand challenge that NIST can go after extremely well, and 
probably no individual university can really solve that problem 
with its own recourses. So I think leveraging the labs on 
specific projects, particularly for things that require tools 
or capability that is really beyond what a university can have 
is very important.
    What I think is less effective is if we rely on them to 
have all of the fabrication and facilities that are needed to 
do the daily research of the students. I mean it is fine for a 
student to go to a lab for a week, a month, or whether to go 
work on a specific aspect of this project, but he really needs 
to be also back at his university working with his research 
group and his professor as he goes through. So that is why 
there needs to be a balance one-of-a-kind sorts of tools and 
capabilities with the labs with more pervasive investment at 
university centers to allow students to be able to do work at 
both places.
    Chairman Baird. The number of people nodding their heads to 
that, apparently there is a consensus on that.
    One last question, Mr. Moffitt, you talked about the $100 
million venture cap or financial investment in bringing it from 
concept to manufacturing. Obviously, if we took the entire NNI 
and we would pretty quickly use up our funds. I was thinking of 
a gentleman named Yosi Verdi who is venture-cap, high-tech 
entrepreneur in Israel, and he had a very intriguing idea, and 
I won't articulate as well as he knows it, but an example where 
the Federal Government somehow indemnifies the venture cap 
folks, that we share the risks but also share in the profits so 
that you are able to leverage up-front money.
    Any thought about a mechanism like that, versus say just a 
grant that goes and then we don't' necessarily net anything 
back from it, but some kind of a collaborative indemnification/
repay model wherein we recycle the funds. Any thoughts about 
that?
    Mr. Moffitt. I hadn't though about the repay part of it 
yet.
    Chairman Baird. That would not surprise me. The repay 
question, oh, you mean we have to pay this back? But that 
allows us to leverage the money, and you would get it up front. 
You would get the real startup kick, and then we can give it to 
somebody else.
    Mr. Moffitt. Of course, the repay comes in the form of us 
being successful and ultimately paying taxes, in part, but I 
would say----
    Chairman Baird. So you are calling for special higher taxes 
for----
    Mr. Moffitt. No, I do think there is--I would make the 
point again the programs that exist today, they do serve as 
validators, and you know, as I said, there is a tremendous 
amount of private equity out there willing to be invested. The 
question is where and how do they separate the winners from the 
loser. They certainly will pick the right industry and industry 
segments, and I do think that there is a way to develop a 
program of investment credits so that the government does share 
in the up-front risk. But I agree. It is appropriate to share 
in the downstream reward, and perhaps something over and above 
just paying routine corporate taxes.
    Dr. Melliar-Smith. Certainly, in the Texas Emerging 
Technology Fund I spoke about one of the criteria for that 
investment is the company receiving the investment provides the 
state with common stock such that when the company is 
successful and goes through an IPO, the state essentially gets 
paid with a lot of profit to boot, assuming the IPO is 
successful, so I think there are many way. And again, I would 
encourage Congress to be innovative about asking for what you 
think you want from industry. It seems to me it is not at all 
unreasonable that if the government or a state establishment 
makes a significant investment in the company that there is a 
way to get the money back, and the venture-capital industry has 
lots of different ways for you to get your money back. That is 
why they specialize in it. It is what they do all of the time.
    And so it is just a matter of sitting down and saying, 
okay, I want to try to form a partnership with industry, and 
where is what I want, and here what you want, and it isn't just 
a one-way street with checks being cut in Washington, but it is 
in fact a partnership.
    Chairman Baird. Other thoughts or additional responses?
    Dr. Welser. An additional though is I strongly agree with 
that and the Texas model, as it was described to me is 
excellent.
    I contended fairly strongly for gap funds, and I will 
simply add that I don't think that that is going to take a 
great deal of money or would be a large percentage of any given 
grant or the NNI. The needs of our gap grants are about 
$250,000, maximum, and that can do a great deal to get a 
company from the proof-of-concept stage to the point where a 
venture capitalist, you know, can consider it as an investment, 
so I simply would leave the thought that these don't have to be 
large amounts.
    Chairman Baird. We have a bill called the Bridge Act which 
we introduced a couple of years ago which would allow rapidly 
growing companies to reinvest their tax liability in building 
the company, and then later on, once you've built up, you would 
pay the tax back with modest interest. So you are basically 
loaning yourself the money. It is one of those Catch 22s. If 
you had the money, you could expand, and if you could expand, 
you could pay more taxes, but because you don't have the money, 
you can't expand. And especially in your kind of industry, we 
need to find creative ways to not penalize, but in fact reward 
and incentivize the risk-taking, the expansion, and this Bridge 
Act, which I introduced on the House side and Senator Kerry is 
our Senator sponsor, we want to make a run at it.
    Interestingly enough, there is some up-front cost to the 
treasury, but in the long run, our best estimates would 
generate hundreds of thousands of jobs with a net profit to the 
Federal Government because we would actually generate revenue. 
Here is a tax reform, not a tax cut at all, just a change in 
how and when we collect the tax and what is done with the money 
in the interim, and if anyone wants information on that, we 
would happy to share that with you.
    Dr. Ehlers, any closing comments or questions?
    Mr. Ehlers. Not really. I was just going to say that is the 
same rationale for the Bush tax cuts.
    Chairman Baird. No, it is actually much different than 
that.
    Mr. Ehlers. But I won't say that.
    Chairman Baird. It is actually completely different. It is 
not a cut. You are paying it back. The point is you are still 
paying the same rates on it. You are paying it back over time, 
but only on the proviso that you reinvest the money. But you 
actually have to pay it back. It is a much, much different 
structure.
    Mr. Ehlers. Thank you. I didn't intend to start that 
discussion, but I couldn't resist that.
    Chairman Baird. I would let you pass on the John McCain 
seems to be the only person that is dealing with immigration in 
a responsible way, but I just couldn't let the tax cuts go by. 
If President Bush would actually support the Bridge Act, I 
would support--I want to thank our witnesses. We have digressed 
to much less pleasant topics, but this has actually been very, 
very fascinating, highly informative. I hope we will use your 
information well enough to justify the red-eye and the time 
away from your most important research. We look forward to 
great things, and we may well follow up. Also, if there are 
suggestions that you feel you want to add--sometimes these 
interactions stimulate further thought. You may go back and say 
here is a creative way. The reason we do these hearings is so 
that the legislation that comes out in a few months will 
actually be the best we could possibly make on this round. And 
it is an interactive process, as you know, so if there are 
further thoughts, we would welcome those.
    And thank you. With the gratitude of the Committee, this 
hearing stands adjourned. We are grateful for your presence. 
Thank you.
    [Whereupon, at 11:38 a.m., the Subcommittee was adjourned.]
                               Appendix:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Robert D. ``Skip'' Rung, President and Executive Director, 
        Oregon Nanoscience and Microtechnologies Institute (ONAMI)

Questions submitted by Chairman Brian Baird

Q1.  Both Dr. Chen and Mr. Moffitt remark that user facilities require 
technical support, particularly for small company users. This raises 
the issue of how to safeguard the companies' intellectual property. Do 
you have suggestions on ways to reduce these concerns that now appear 
to inhibit use of the facilities by industry?

A1. Although I am not familiar with the user policies at all of the 
NNIN facilities, I do not believe there should be any fundamental or 
terribly difficult issues related to intellectual property. The 
remainder of this response is based on experience and practice at 
ONAMI-affiliated user facilities.
    We distinguish between two types of usage that we believe are both 
valid and important roles for publicly supported nanoscience and 
microtechnology facilities: (a) research--including industry-sponsored 
or collaborative R&D involving industry partners, and (b) fee-for-
service, i.e., access to sophisticated equipment and expert staff 
assistance. In the former case, research contracts with the university 
are in place, and these contracts will normally contain provisions 
related to intellectual property. Contracts with businesses typically 
include some kind of preferred right to negotiate a license (but see 
note at end regarding complexities created by federal private-use 
restrictions). In the fee-for-service case, no new IP is created by 
university or facility personnel, but there may be concerns about 
disclosure of client IP (unpatented inventions, trade secrets) that 
need to be dealt with by means of a non-disclosure agreement (NDA). 
When the actual work is done, the client specifies a measurement or 
fabrication task to be performed, and provides as much or little 
information to facility personnel as desired. The facility collects the 
data or performs fabrication steps as requested and provides the 
results to the client. Market rates (as best they can be determined) 
are charged for this type of service, and it is often best if the 
service is performed by professional staff rather than students (who 
may not be compelled to sign an NDA and have, by their nature, high 
turnover rates). Data is given to the client (e.g., on CD or thumb 
drive) and not retained by the facility unless the client desires it to 
be, and no attempt is made to publish the work unless the client wants 
to do so. State law and university system administrative rules can have 
an important influence on how these matters are handled.
    Regarding private use restrictions (please note that I am not a 
professional bond counsel): Many research buildings and facilities--
especially at State-supported institutions--have been financed with 
tax-exempt bonds. This results in a (federal) limitation (e.g., 10 
percent) on the fraction of structure capacity that may be engaged in 
``private use'' activities without jeopardizing the tax-exempt status 
of the bonds. It is the responsibility of State and university 
officials to ensure compliance with related law, which in Oregon's case 
is done system-wide. ``Private use'' can include such things as street-
level retail (which is sometimes required of urban campus buildings by 
city councils) and valuation/sale of IP before it is created under the 
auspices of industry-sponsored research (e.g., advance grant of 
exclusive license or non-exclusive royalty-free license) For these 
reasons, much of the industry-sponsored research in the U.S. is long-
range and ``pre-competitive,'' funded by large industry consortia such 
as the Semiconductor Industry Association. All new ONAMI-affiliated 
facilities are being financed with taxable bonds, but this does not 
help us with the many existing buildings in which many of our 
researchers have their labs. A suggestion to consider that might make 
universities freer to engage in nearer-term commercialization is to 
create a way to ``reimburse'' the Federal Government for the value of 
foregone taxes related to capacity used for ``excess'' private use.

Q2.  Relative to your comments on establishing a ``gap'' fund under NNI 
analogous to the fund your organization has, how would this work on a 
national level? Do you see it as a fund the Federal Government could 
use to support projects that would meet defined federal needs or 
requirements?

A2. My comments (``the suggested concept here is to have some portion 
of NNI funds--perhaps in association with large multi-year awards--tied 
to commercialization, perhaps in the form of a gap fund, with a short-
term outcome measure of leveraged private capital investment'') were 
not sufficiently clear on this point. I do not advocate creation of a 
national gap fund, which already exists to an extent in the SBIR, STTR 
and TIP programs. What I do suggest is that NNI funding encourage (and 
possibly help fund) local gap fund efforts similar to ours--which 
engage the business and investor communities closest to the researchers 
and facilities. I believe this could be very beneficial for technology 
entrepreneurship growth outside the most familiar venture ``hot spots'' 
such as Silicon Valley and the Boston and Austin areas. One possible 
form this could take would be requiring that a modest portion (perhaps 
five percent) of ``center-sized'' awards be managed as a gap fund, with 
incentives (e.g., cost-share) to augment these funds with state, campus 
and private resources. In addition to their nanoscience investors and 
commercialization partners having access to the ONAMI gap fund, Oregon 
research universities are now able to offer tax credits (up to a cap) 
for donor investments in ``university venture funds'' which may be used 
for proof-of-concept work and entrepreneurship development. Again, the 
purpose behind all of these programs is accelerated commercialization 
in partnership with small businesses and spin-out/start-up companies, 
which are often the best places to develop and introduce disruptive 
technology. As I will say in answer to Ranking Member Ehlers' first 
question, clear measures of success for this type of activity will be 
important.

Q3.  One of the examples you give for a project supported with your gap 
funding (drinking water purification) also received a Phase II SBIR 
award. Were the two sources of funds used to fund different aspects of 
the project and did the SBIR award precede the gap funding award?

A3. Crystal Clear Technologies received its $500K NSF Phase II SBIR 
award in 2006, using those funds for technology development. The ONAMI 
gap award--made in 2007 to the University of Oregon to work with CCT--
is being used for fabrication and laboratory scale-up of material 
samples for customers and certification testing.

Questions submitted by Representative Ralph M. Hall

Q1.  Do you think that tax and investment credits for nanotechnology 
investment is a good idea? Do you have any thoughts as to what would be 
eligible for such a credit?

A1. I am no expert on tax policy, and in fact somewhat hesitant to 
suggest anything that further complicates federal and state tax codes, 
but the fact is that the tax codes are extensively used to encourage 
desired activity, and therefore they should prioritize incentives for 
those things which are most strongly in the national interest. 
Accordingly, I believe that an investment tax credit for investors in 
research-based businesses that can create high-wage R&D and advanced 
manufacturing jobs in the U.S. is worthy of serious consideration. This 
is because, except in cases where shipping costs dominate, research-
based intellectual property is going to be the only durable basis for 
retaining manufacturing (physical activity-based) high-wage jobs in the 
U.S. and other affluent countries. We cannot simultaneously complete 
mainly on cost and maintain the world's highest standard of living.
    The reason for making this an investor, rather than corporate, tax 
credit is that startup and growth stage companies are usually not 
profitable, and in fact should not be profitable until they reach a 
size commensurate with their targeted market share range. A venture-
backed company, for example, is better off investing generated cash in 
growing the company than in distributing profits and paying taxes. 
Those things are the ultimate/mature objectives, of course, but it is a 
mistake to do them too soon and fail to realize the company's 
potential. A good example of this principle is Amazon--one of the 
successful dot.com companies. Their investors' and shareowners' 
patience with years of losses and negative cash flow has been rewarded, 
and it can be argued that if they had not ``bought'' market share with 
their large IPO proceeds, they could even have lost their position to 
competitors who did. The key point is that corporate tax credits and 
tax relief don't help innovative companies at their most critical 
stage. But investor tax credits can make them more attractive 
investments, so that is where any tax incentive for nanotechnology 
commercialization needs to be targeted.
    As for determination of eligibility, it seems likely that law 
writing and rule-making in support of this idea will be complex. The 
things that should be emphasized are some of the same things emphasized 
in SBIR, STTR and TIP awards: high research content and technical risk, 
a preponderance of high-wage activity conducted in the U.S., potential 
for high economic impact and contribution to areas of high national 
economic and security interest.

Questions submitted by Representative Vernon J. Ehlers

Q1.  You mention in your testimony that ``accountability measures'' are 
as important as the research itself--could you elaborate?

A1. My comment in testimony (``Intentional federal investment in, and 
accountability measures for entrepreneurial startup company-driven 
commercialization of NNI research are just as necessary and important 
as the research itself. . .'') meant to suggest that there be (a) 
funding for the purpose of accelerating commercialization of NNI 
research along the lines described in my answer to Chairman Baird's 
second question above, (b) clear goals for what this funding is 
intended to achieve. In ONAMI's case, the ultimate goal of our 
commercialization ``gap'' funding is to create high-wage jobs in new 
traded sector companies. Since it typically takes several years before 
startup companies employ dozens, let alone hundreds, of people, a 
meaningful proxy metric that can show results much more quickly was 
chosen: private capital investment in the new company, with the 
expectation that this would happen within 12-18 months of the start of 
the gap project. Such capital investment is usually spent on staff 
salaries and locally purchased services and materials. It also 
indicates that professional investors have confidence that the company 
represents a growth opportunity.

Q2.  How is ``gap-funding'' defined and identified? Since this type of 
funding seems to be a need unique to this industry, is there a point 
where the cost-benefit tradeoff will not be worth it? How do you know 
when the hurdles to commercialization are insurmountable?

A2. This ``gap,'' by no means limited to the field of nanotechnology, 
is between what research agency funding will support and what private 
investors need to see before advancing capital to a company. Gap 
projects are alternatively referred to as ``proof of concept 
demonstration'' or ``translational research,'' and their typical goal 
is to produce one or more product prototypes sufficient to convince 
customers to enter into supply agreements. Investors need to see 
reduced technical risk (i.e., something can be done repeatably) and 
customer ``traction'' (there is a demonstrated willingness to buy on 
the part of significant customers in a large market). Even with these 
things achieved, there still remain significant management team and 
execution (e.g., manufacturing and supply chain scale-up) risks, but 
investors are used to judging and managing these things. They just 
don't want to be surprised by unexpected technology or market risk.
    Nanotechnology and other manufacturing businesses typically need 
this type of pre-investor R&D funding more than software, information 
technology and retail businesses because of their much greater 
technical risk and higher cost/longer cycle time of experiments and 
prototype builds. ``Pulling the plug'' on an investment is always a 
difficult decision to make. In our case, we will invest a maximum of 
$250K in a gap project, and we administer the award in three or four 
``tranches,'' with each tranche contingent upon meeting specific 
project and business development milestones. This is quite different 
than a one-time grant where all funds are committed up front. We follow 
all of our gap projects closely, and often take an active role in 
business plan improvement and introduction to investors. We are 
intensely focused on the one goal--and only success measure for the 
program--of securing private capital investment in the new company.
                   Answers to Post-Hearing Questions
Responses by Julie Chen, Professor of Mechanical Engineering; Co-
        Director, Nanomanufacturing Center of Excellence, University of 
        Massachusetts Lowell

Questions submitted by Chairman Brian Baird

Q1.  Both you and Mr. Moffitt remark that user facilities require 
technical support, particularly for small company users. This raises 
the issue of how to safeguard the companies' intellectual property. Do 
you have suggestions on ways to reduce these concerns that now appear 
to inhibit use of the facilities by industry?

A1. Chairman Baird is correct in identifying IP concerns as a major 
hindrance to collaborations between industry and universities. Many 
universities have been wrestling with this issue. The IP issue may not 
be as difficult for user facilities as it is for funded research 
contracts for a large percentage of the cases. Perhaps in terms of 
overall numbers, the IP issue may be significant due to the greater 
number of industry interactions with the user facilities. There are 
three types of interactions:

          Type 1--the company is only interested in using 
        standard characterization and processing equipment available in 
        the user facility. The testing or processing is according to an 
        established standard method or protocol, or the company is 
        providing their own people to use the equipment, and no new IP 
        is being contributed by the university. In this case, the 
        company clearly retains all rights to the IP. I believe many 
        user facilities have policies that work this way.

          Type 2--new R&D must be conducted by the university 
        personnel to help address a design or processing problem, or to 
        develop a new characterization method for the technology 
        brought by the company. Here the university is clearly 
        contributing IP, and the overall IP is thus shared.

          Type 3--this is where things get murky. There is no 
        anticipated IP, as the effort starts out appearing to be a Type 
        1 effort. In the course of running some standard 
        characterization or processing, however, university personnel 
        discover a new idea. Here is where most of the IP negotiation 
        problems reside and this small possibility also causes problems 
        with negotiations for the Type 1 cases.

    I believe what might help reduce these concerns is to have a group 
representing industry, federal funding agencies, and universities look 
at developing template agreements addressing these three cases. If the 
majority of companies and universities come up with an approach that 
seems reasonable to all parties, then such a template will help to 
reduce the time and effort required to come to an agreement for each 
individual case. Obviously, special cases will occur, but a template 
would help to speed up the process for the majority.

Q2.  You indicate in your testimony that there would be value in 
federal support for technology demonstration partnerships between 
industry and academia that could be carried out using a modified form 
of the Small Business Technology Transfer Research (STTR) program. How 
would this program work; how would it differ from the STTR?

A2. Currently, the STTR program has two limitations that would hinder 
its utilization to encourage industry-university collaboration:

        (1)  only small business is eligible--in the case of 
        nanotechnology, much of the R&D activity is still quite 
        entrepreneurial in nature; even within the large companies, the 
        nanotechnology group is typically a relatively new, relatively 
        small group. Thus, allowing these groups within large companies 
        to participate in the modified nano-STTR's would support some 
        of the exciting opportunities

        (2)  most STTR topics are defined by the funding agency in 
        terms of identified needs (e.g., Army, Navy, NASA, . . .)--for 
        the nano-STTR's the topic should be identified by the industry-
        university partners.

    The Phase I and II structures of the STTR program would be 
beneficial to supporting university-industry partnerships. The amount 
of funding and the timeframe would need to be looked at to determine if 
it is sufficient to lead to successful technology demonstration 
efforts.

Questions submitted by Representative Ralph M. Hall

Q1.  Do you think that tax and investment credits for nanotechnology 
investment is a good idea? Do you have any thoughts as to what would be 
eligible for such a credit?

A1. I am not an expert when it comes to tax and investment credits, so 
I cannot answer this question with respect to the economic aspects; 
however, I will try to answer with respect to the impact on R&D.
    Cash flow is constantly a concern for small companies and large 
public companies also have to worry about quarterly outcomes. Thus, any 
company investment in R&D typically has to have a very short time of 
return. This can be very ineffective in developing and/or transferring 
new technology. Tax and investment credits for R&D conducted as part of 
a partnership with a university could be one example that would 
encourage efforts on bridging the ``valley of death.'' Also, even 
without a university involved, I like the idea of having credits that 
companies could ``borrow'' to reinvest, but then would ``pay back'' 
after successful product development. Yes, they do this in terms of 
paying taxes on earnings, but having some portion directed funneled 
back into the credit program would lead to a more direct connection 
(albeit, some complicated bookkeeping) between the objective of the 
fund and its success in achieving that objective. I am not sure the 
best mechanism, but we need a way to encourage U.S. companies to 
support some longer-term R&D.

Questions submitted by Representative Vernon J. Ehlers

Q1.  How is ``gap-funding'' defined and identified? Since this type of 
funding seems to be a need unique to this industry, is there a point 
where the cost-benefit tradeoff will not be worth it? How do you know 
when the hurdles to commercialization are insurmountable?

A1. I view ``gap-funding'' as the funds that bridge between the current 
R&D funding for universities and venture capital. For example, federal 
R&D funding will address the creation and understanding of a sensing 
method (e.g., functionalized nanoparticle sensor for chemical agents), 
but it will not typically fund the effort required to figure out how to 
connect the nanoparticles to the power, input/output, and packaging 
needed to make a working sensor.
    The reason why this gap-funding is needed for the nanotechnology 
industry, is because many of the potential new products (beyond the 
``1st generation'' products, which represent relatively minor 
modifications to existing processes) require major changes to the 
manufacturing process, and are thus viewed as risky by VCs. In 
addition, VCs are quite cautious these days due to recent history; 
until we have more examples of successes, there is a need to provide 
some gap-funding.
    Cost-benefit analysis is crucial to deciding where to invest the 
gap-funding. Clearly, if significant funding is required for just an 
incremental improvement with little societal impact, this is not a 
useful investment. On the other hand, if significant funding is 
required for a huge advancement of major societal impact, but there is 
concern about ``insurmountable hurdles,'' I think the requesters of 
such gap-funding have to make a case that is plausible to experts in 
the field. There will still be risk, but I think we need to pick a few 
examples, learn from them, and continue to push forward.
                   Answers to Post-Hearing Questions
Responses by Jeffrey Welser, Director, Nanoelectronics Research 
        Initiative

Questions submitted by Chairman Brian Baird

Q1.  Both Dr. Chen and Mr. Moffitt remark that user facilities require 
technical support, particularly for small company users. This raises 
the issue of how to safeguard the companies' intellectual property. Do 
you have suggestions on ways to reduce these concerns that now appear 
to inhibit use of the facilities by industry?

A1. NRI is focused on basic research undertaken largely by university 
professors and students. Virtually all of this research is destined for 
public disclosure. To the extent confidentiality is needed, it is for 
only the short time necessary to decide whether to seek intellectual 
property protection. For these purposes, the confidentiality measures 
within the university community have proven to be quite sufficient.

Q2.  NIST recently awarded the Nanoelectronics Research Initiative a 
grant of just under $3 million. What was NRI's level of funding before 
the NIST award? Did industry members of NRI contribute new funds to the 
project because of the NIST grant? If so, how much extra industry 
funding was leveraged by the NIST grant?

A2. From the beginning, the model for funding the NRI research has been 
to create centers where industry and state funding could be combined 
with federal supported university research, so it is important to 
consider all contributions. The industry funding directly to the NRI 
consortium has been about $5 million a year. In addition, individual 
companies have been contributing approximately $1.5 million a year to 
some of the NRI university centers, as well as in-kind donations of 
tools and equipment. The largest of these donations has been a $10 
million commitment of equipment to the Western Institute of 
Nanoelectronics (WIN). The states have been contributing approximately 
$15 million a year in cash, equipment, and endowments for recruiting 
new Nanoelectronics faculty, in addition to major investments in new 
buildings, such as the expansion of the College of Nanoscale Science 
and Engineering's Albany Nanotech Complex in Albany, N.Y. to house the 
NRI's Institute for Nanoelectronics Discovery and EXploration (INDEX), 
estimated at over $200 million.
    While NIST has just joined a few months ago, we have already 
successfully completed a new round of proposal awards, expanding the 
work at both the existing centers, including the addition of new 
universities and projects submitted independently, and opening a new 
center, the Midwest Academy for Nanoelectronics and Architectures 
(MANA) centered at Notre Dame in Indiana. The base industry 
contributions to the NRI directly have remained constant, but as a 
result of this expansion, industry is contributing approximately $2 
million a year in additional support between the Midwest center and the 
expanded INDEX center in New York; New York state has committed an 
additional $1.5 million a year to the INDEX center; and Indiana and the 
City of South Bend have committed approximately $5 million a year to 
support the new MANA center, in addition to a $40 million investment in 
nanoelectronics buildings for both research on the campus and eventual 
commercialization in a new Innovation Park adjacent to the campus. 
Finally, the NIST partnership was instrumental in convincing the NRI 
sponsor companies to commit to additional years of industry funding for 
the program beyond 2008. This is exactly the kind of increased support 
we hoped the NIST partnership would foster, and we are very excited to 
see it happening in such a short period of time.

Q3.  What is NIST's role in determining where NRI funds will be 
awarded? Do NIST scientists participate in the NRI application review 
process? If NIST does not feel a particular application merits an 
award, are there cases in which NRI would still grant that award?

A3. NIST participates directly in the full proposal and review process, 
as an equal member on the NRI Technical Program Group (TPG) and 
Governing Council (GC). NIST also receives a variety of rights and 
benefits with respect to the research results. For the process we just 
completed, NIST helped to write the initial call for proposals; helped 
to insure the open call was distributed broadly across all U.S. 
universities; and helped review, rank, and choose all of the proposals 
that were submitted. The successful proposals all were chosen by 
consensus between NIST and industry participants, and it is our goal in 
this process to have everyone agree with the final decisions that are 
made. However, if NIST felt strongly that a certain proposal did not 
merit funding, it would be possible that NRI could still choose to fund 
that award using industry funds alone.

Q4.  You indicate that the NNI should develop a research plan for 
nanoelectronics. At present, what mechanisms are available for industry 
to influence the prioritization process for NNI-supported research? Do 
your member companies interact with the President's Council of Advisors 
for Science and Technology (PCAST), which currently serves as the 
advisory committee for the NNI?

A4. Our primary mechanism for influencing NNI prioritization is through 
informal interaction with the agencies. We have advisory members from 
NSF, NIST, and DARPA who attend our NRI monthly meetings, and industry 
members participate on some of the NSF review panels. At the PCAST 
level, I have presented the NRI work as a model for public-private 
partnership to one of the subcommittees in August, 2007, and George 
Scalise, the president of SIA, is on the PCAST.
    While these mechanisms are valuable, it is not the equivalent of 
having a national research plan for nanoelectronics. What is needed is 
a more formal effort that can identify key technology challenges, such 
as discovering a new logic switch and the milestones that need to be 
achieved to meet the challenge. This type of effort can provide the 
basis for a focused and integrated national technology program.

Q5.  You have stated in your testimony that there is a need for both 
large scale user facilities such as the NIST Center for Nanoscale 
Science and Technology user facility and smaller, university-based 
facilities where researchers can work directly with students and other 
researchers daily. Do you think that the current user facility 
infrastructure for nanotechnology at universities is sufficient to meet 
the needs of the research under the NNI?

A5. Many of our U.S. universities have excellent facilities for doing 
micro-electronics research, and this has served them well for both 
finding the new discoveries and training their graduate students to 
drive the semiconductor so effectively over the last 10-15 years. Much 
of this infrastructure was enabled by a combination of universities and 
states investing in the brick and mortar infrastructure, and the 
Federal Government supporting much of the specialized equipment through 
the NSF's National Nanotechnology Infrastructure Network (NNIN). 
However, as we move forward into the nano-electronics era--where it is 
not just about making things smaller, but rather about exploiting new 
effects and materials that exhibit entirely new behavior when less than 
10nm in size--more specialized tools for fabricating and characterizing 
these structures are needed. And there needs to be increased focus on 
the right level of equipment to move beyond the initial single device 
lab demonstrations to doing small scale prototypes, in order to help 
expedite the process of commercializing these new discoveries.
    The SIA, after multiple consultations with university and 
government experts, is suggesting a program be included as part of the 
NNI re-authorization to create a National NanoElectronics Research and 
Manufacturing Infrastructure Network [(N2)ERMIN] at U.S. universities 
based on the NRI model of centers of excellence. Note that the entire 
idea presented here is for strengthening the U.S. university 
infrastructure--no funding would go to the industry itself. This 
network will operate in the field of nanoelectronics, somewhat 
similarly to the way the NNIN operates in the field of nanotechnology 
in providing users' access to facilities, but with additional 
significant focus on both fundamental research and manufacturing 
components. This approach will place a major emphasis on the areas with 
the greatest potential for future economic development and societal 
impact for Nanoelectronics applications. In order to assure success, 
there is the need for a visionary and fully integrated approach that 
cannot be addressed by fragmented and less coherent activities. This 
program will establish the U.S. as the world leader in the field of 
nanotechnology, and especially nanoelectronics.
    The (N2)ERMIN would operate as a virtual organization, utilizing 
and building upon the facilities and infrastructure of the U.S. 
universities focused on nanoscience and technology and sponsored in 
large part by NSF. It should be noted that the states and universities 
at the NRI centers, as well as at other locations, are already 
investing hundreds of millions of dollars in the necessary buildings 
and infrastructure, so the federal investment in tools, equipment, and 
operating costs will be well-leveraged. In considering the appropriate 
budget for (N2)ERMIN, it should be noted that many of the individual 
tools for nanoelectronic fabrication and characterization can cost 
between $3-10 million each. And based on experience from the existing 
university nodes of the NNIN, purchasing the equipment solves only half 
the problem. One needs to budget monies for long-term (10 years) 
warranty/maintenance and personnel support. Typical warranty costs are 
10 percent of the tool cost per year. A typical operating staff member 
with appropriate overheads costs about $150,000 per year.
    In addition to the academic facilities and infrastructure, a close 
partnership for conducting research should be formed between industry 
and the national labs, such as those owned by NIST, DOE and NASA. 
Similar to the current partnership between NIST and NRI, this 
collaboration should not only include government and industrial co-
funding and technical guidance of the university research, but also 
leverage the key assets in the national labs for advancing the research 
program. (N2)ERMIN will provide nanoelectronics researchers a key 
advantage in conducting cutting-edge research, and through the 
partnership with industry, a rapid path for developing commercial 
technologies ahead of competitors in other countries is assured. And 
while the SIA focus is largely on Nanoelectronics, this same 
infrastructure can also be utilized for many other areas of 
nanotechnology, including bio-technology and new energy source 
research.
    To realize the maximum benefit from the investments in 
Nanoelectronics, we propose a three-pronged approach to setting up 
(N2)ERMIN:

    First, an agency, such as the NSF, should be charged with funding 
the large investments for the nanomanufacturing equipment and 
infrastructure at the universities, similar to what they have done with 
NNIN. To create a network of these facilities across the United States, 
they should target funding 4-6 multi-university centers using a budget 
of $100 million a year for the next five years. Such funding should be 
awarded based on merit peer review, including inputs from academia and 
industry on the review panels, following the usual approach well 
demonstrated by NSF. Preference should be given to universities that 
are working closely with industry, states, and multiple (at least two) 
government agencies on specific NNI objectives with high impact, such 
as finding a new switch. It should be noted that the states currently 
involved in the NRI centers are already investing hundreds of millions 
of dollars into new buildings and centers for Nanoelectronics research 
and product commercialization, so a ready infrastructure is emerging to 
house this new equipment, offering good leverage for the NSF 
investments.
    Second, additional funding for ``one-of-a-kind'' tools should be 
allocated to the national labs, such as those owned by NIST and DOE, to 
support the university research efforts. This not only accelerates the 
pace of the research, by enabling capabilities beyond the scope of a 
university facility, but also increases the impact of the work in the 
national labs on research that can lead to new commercial applications.
    Third, additional government funding on the order of $20 million a 
year should be directed through the agencies to be used for funding and 
managing the university research in collaboration with industry 
partners, similar to the NRI model with NIST currently. Involving 
industry early will help guide even the initial science research in 
directions that offer the most potential for future commercialization, 
and will insure that new breakthroughs can be validated and rapidly 
translated into product innovations.

Questions submitted by Representative Ralph M. Hall

Q1.  Do you think that tax and investment credits for nanotechnology 
investment are a good idea? Do you have any thoughts as to what would 
be eligible for such a credit?

A1. The industry does not have a position with regard to specific tax 
credits for nanotechnology. We do strongly believe, however, that the 
Congress can best support nanotechnology research by expanding and 
making permanent the research and experimentation tax credit, which 
expired in December 2007. It is worth noting that, according to a study 
by the Information Technology and Innovation Foundation, the United 
States now provides one of the weakest R&D incentives, below our 
neighbors Canada and Mexico, and other nations including Japan, Korea, 
and France.

Questions submitted by Representative Vernon J. Ehlers

Q1.  How does industry measure how much basic nanoresearch is the 
``right'' amount?

Q2.  How is ``gap-funding'' defined and identified? Since this type of 
funding seems to be a need unique to this industry, is there a point 
where the cost-benefit tradeoff will not be worth it? How do you know 
when the hurdles to commercialization are insurmountable?

A1, 2. The answers to both questions follow. The semiconductor industry 
is somewhat unique in its approach to research, due to the basic 
science which governs the scaling of the transistors (currently CMOS) 
on our integrated circuit chips. For the past 30 years, scaling has 
enabled us to double the number of devices on a chip on predictable 
basis, allowing us to build a plan for growth. The increased devices 
not only mean that existing products and application will run faster 
and cheaper, but also means that whole new applications and products 
are enabled. For example, personal GPS units were enabled once we had 
scaled the key components for them to be small enough to fit on just a 
couple of chips in a portable, affordable unit. This is what has 
allowed the industry to grow exponentially--and hence has justified the 
subsequent increases in R&D funding to continue the cycle.
    The nature of scaling also allows us to more accurately assess how 
much research will be needed to reach the next node, based on an 
understanding of the current challenges we see in front of us. In the 
case of CMOS technology, there exists the International Technology 
Roadmap for Semiconductors (ITRS), developed by a worldwide group of 
domain experts, that provides a fifteen year forecast for technology 
advancements required to advance or scale integrated circuit technology 
during this period. Basic research needs are identified using this ITRS 
forecast data. Estimates of existing annual research funding are 
obtained from contacts in international and domestic industry and 
governments and from publicly available data. Projections of funding 
required to address the basic research needs are developed based on the 
collective research management experience of the SRC staff and several 
industry advisors. The `research gap' is the difference between annual 
research funding needs and the actual annual expenditures and was 
estimated to be on the order of two billion dollars in 2007.
    Undoubtedly, we will eventually reach a point where the projections 
for the required research to advance forward may seem to be too large. 
However, the semiconductor industry, which was founded on innovation, 
has learned that its growth is tightly linked to its ability to 
continue to provide exponential increases in time of functionality per 
unit cost. Worldwide spending from all sources for basic semiconductor 
research that would sustain industry growth is less than one percent of 
the aggregate semiconductor sales and we think that the `breaking 
point' for cost-benefits from research is not very near.
    If research results point to the need for capital and human 
investments that are far outside the norm for the industry and/or if 
the projected performance per unit cost doesn't offer the potential for 
order-of-magnitude improvements over conventional technology, then it 
is likely that the new technology will not be implemented. A proviso is 
that the new technology could offer or open new market opportunities or 
distinct advantages in defense applications that might justify its 
commercialization.
    It should be noted that as we approach the current challenge of 
finding a ``new switch'' to replace the CMOS transistor in the next 10-
15 years, we do anticipate a need for much larger investments in basic 
science and research. And similar to when we made the last major 
transition--from the vacuum tube to the solid state diode--it will 
require joint work between industry and universities, with substantial 
investment from the Federal Government. In the 1940's, the Department 
of Defense made most of these investments, working with both university 
and industry labs, and it is estimated that the total investment over a 
10-year period was approximately $5 billion (in today's dollars) to do 
the first prototypes of the solid state diode that went into their 
weapons systems. Leveraging this investment, Bell Labs created the 
first solid state transistor which launched the entire semiconductor 
industry. This is now a $250 billion industry, enabling a much larger 
electronic products industry and driving much of our Information 
Technology based economy today.
                   Answers to Post-Hearing Questions
Responses by William P. Moffitt, Chief Executive Officer, Nanosphere, 
        Incorporated

Questions submitted by Chairman Brian Baird

Q1.  Both you and Dr. Chen remark that user facilities require 
technical support, particularly for small company users. This raises 
the issue of how to safeguard the companies' intellectual property. Do 
you have suggestions on ways to reduce these concerns that now appear 
to inhibit use of the facilities by industry?

A1. Given that early stage development companies are typically still in 
the ``exploratory'' phase of technology development (even though they 
may have specific commercialization targets), investors expect 
discoveries made to be the property of the company, which adds to the 
value and provides some measure of liquidation risk mitigation. 
Therefore, discoveries made while using such facilities require 
significant negotiation for the company to retain sole ownership of 
those rights. At the same time, there is always a certain amount of 
``trade secret'' information developed, which the company would like to 
hold as proprietary, but how does one keep learned knowledge in the 
minds of the facility staff from spreading? This becomes a question of 
value gained from use of the facilities versus risk of loss of 
important proprietary information. Add to this perhaps the requirement 
to disclose confidential information to educate facility personnel in 
order to perform projects and the risk can often outweigh the value 
gained by using such a facility. The only recommendation I can make is 
to ensure that all proprietary information (whether jointly developed 
or not) remains exclusive property of the company using the facility. 
How to prevent spread of learned knowledge is another matter and one 
that does not have an immediate solution other than non-disclosure 
agreements.

Q2.  You comment in your testimony on the need of nanotechnology 
companies for trained and skilled lab technicians, as well as Ph.D.s. 
What is the experience of your company in finding the skilled workers 
you need and is this a widespread problem among the companies in the 
NanoBusiness Alliance?

A2. Nanosphere has had a difficult time finding highly skilled 
technicians who are necessary to build both R&D and production staffs. 
We continually have open job requisitions. Some training in 
nanotechnology is important to understanding why and how certain 
important processes are dissimilar from other highly technical 
industries (chemical, semiconductor, etc.). We have not had as great a 
problem finding Ph.D.s as we are located in close proximity to the 
International Institute for Nanotechnology at Northwestern University 
in Evanston, IL. I believe you would find other nanotech companies in 
the NanoBusiness Alliance struggling with the same issue.

Q3.  Please expand on your comment regarding cost of use of NNI 
supported facilities by businesses. Is there a difference in the level 
of user costs for facilities supported by NSF versus DOE? Is there much 
variation in the quality of user support or the administrative burden 
associated with different facilities? And, what specific 
recommendations do you have to make these facilities friendlier for 
industry users?

A3. My company has no direct interaction with such facilities, 
therefore, my remarks are confined to information I have gathered from 
other members of the NanoBusiness Alliance. Recommendations for 
improving use of such facilities include:

        1.  Resolve IP issues (see above).

        2.  Develop and disseminate a single, national resource listing 
        of all facilities and the equipment and capabilities/services 
        they offer. To my knowledge this does not exist in one place 
        today.

        3.  Price services on a direct cost basis for time and resource 
        usage, without inclusion of overhead burden and administrative 
        fees. While these latter costs are real, inclusion of 
        unabsorbed overhead burden in the cost of use diminishes value 
        received and can be a deterrent to usage.

Questions submitted by Representative Ralph M. Hall

Q1.  You mention in your testimony that it would be good for the 
Federal Government to create an additional incentive for private sector 
investment by developing ``a program of tax and investment credits 
which will help mitigate risk for early capital and provide additional 
incentive for investments directed at goal oriented research and 
development programs.'' What form do you think these tax and investment 
credits should take?

A1. First, I believe the government can direct resources by funding 
selected industries, those with the likely greatest payback to society 
(health care and energy). There are a few ways to construct such 
programs:

        1.  Within certain guidelines and certain qualifications, 
        permit small companies who are still cash flow negative to sell 
        federal net operating loss carry-forwards (``NOLs'') to larger 
        companies who can then apply them to their taxes. This has the 
        effect of reinvesting tax revenue in entrepreneurial efforts 
        that will create jobs and drive product development in a given 
        area, not just research. The net effect is the small company 
        raises capital at the government's cost of capital, not that of 
        a small, high risk start-up.

        2.  Tax credits for investors in specific nanotech sectors. 
        Deductions for qualified losses of high risk capital, not just 
        offsets to gains.

Q2.  You state in your testimony that the U.S. currently leads the 
science in nanotechnology, but could lose the commercialization race. 
How would an early regulatory regime affect the growth of the 
nanotechnology commercial industry?

A2. Assuming I have correctly understood the question, my comments were 
originally directed at the need to more evenly balance funding for 
commercialization efforts with basic scientific research. It is 
incumbent upon all in the nanotechnology space to ensure safety of 
their products and practices and to that end a question is whether 
current regulations suffice to ensure public safety. More regulations 
specifically directed toward nanotechnology may be required or 
appropriate. I do not have sufficient visibility to data outside my own 
company to have an opinion. However, greater regulatory requirements in 
the absence of data to support the need would risk unnecessarily adding 
to the burden, cost and timeline for commercialization. Those companies 
in health care (as is Nanosphere) already come under regulatory 
oversight of the FDA, which, while history will show has protected 
public health, has added to the burden and cost of product 
commercialization. An additional layer of regulations applied to 
nanotechnology would further hinder commercialization. If data prove 
such regulations necessary, I would strongly support implementation, 
but in the absence of data, added regulations make no sense.

Questions submitted by Representative Vernon J. Ehlers

Q1.  How does industry measure how much basic nanoresearch is the 
``right'' amount?

A1. At the highest level, it becomes an understanding of whether there 
is a backlog of discovery in the absence of advancing discoveries to 
commercialization and the solutions to problems where nanotech holds 
promise. At some point (how to define?), nanotech must provide society 
with a return on investment by contributing to or providing solutions 
for key problems in society or we run the risk of funding science for 
the sake of interesting science. It is always easy to make the 
``undiscovered breakthrough'' argument in favor of continued heavy 
investment in basic science, but that must be tempered with practical 
application of discoveries.
    Whether the government and we as a society back one technology or 
another should be measured by the ability to convert science to 
solutions. In the case of nanotechnology, the science is early, so the 
risk for commercialization is still very high. This creates the ``gap'' 
referenced in the second question below. Venture capital needs to see 
some early successes to underwrite confidence and/or see the commercial 
promise of a given technology before committing significant funding. It 
is this early stage gap between science and building a portfolio of 
commercial successes for a new technology that is difficult to fund. 
Government support can help bridge this gap. Once nanotechnology begins 
to build a portfolio of successes, gap funding requirements will 
diminish, if not disappear. Moreover, one would think that continued 
funding of basic science in the absence of meaningful practical 
applications would underwrite the likely false pretense that nanotech 
holds no value (as measured by society).
    As for a quantitative measurement of the ``right'' amount of basic 
nanoresearch, do data exist to compare invention disclosures (NSF, NIH, 
DOD, etc.) with commercialization or licensing activity? How does the 
current status of nanotech compare with other platform technologies? 
How often do government-funded development contracts result in products 
with sustained usage? These measures of productivity may be part of a 
formula to balance basic science with development of applications.

Q2.  How is ``gap-funding'' defined and identified? Since this type of 
funding seems to be a need unique to this industry, is there a point 
where the cost-benefit tradeoff will not be worth it? How do you know 
when the hurdles to commercialization are insurmountable?

A2. (Reference the answer to the question above as well.) I am not 
certain that ``gap funding'' is unique to the nanotechnology industry. 
Rather, I would submit that such fundamental breakthroughs in science 
are not that common and we happen to be in the midst of one now, 
creating the appearance that this is the only industry with such 
requirement. Moreover, because nanoscience has the potential to 
significantly impact virtually every industry we know, there is 
significant inertia. Did not the semi-conductor industry require 
significant government funding in the earliest of days? What about the 
human genome project? However, the question concerns time and cost for 
a return on the investment in nanoscience and recognition of whether 
and when challenges are insurmountable. It strikes me that this is not 
dissimilar from resolving whether the microprocessor has actually 
improved productivity in society. There have been arguments to the 
contrary.
    No question that it is difficult to objectively measure the return 
(or lack thereof) on scientific discovery that unfolds over decades. 
One source of data would be government funded nanoscience programs 
seeking to develop applications and whether those have been successful. 
At a higher level, an analysis of the percentage of any given industry 
now represented by nano-enabled technology would also provide both an 
understanding of the success of nanotech development and an opportunity 
to understand return on investment.
                   Answers to Post-Hearing Questions
Responses by C. Mark Melliar-Smith, Chief Executive Officer, Molecular 
        Imprints, Austin, Texas

Questions submitted by Chairman Brian Baird

Q1.  Both Dr. Chen and Mr. Moffitt remark that user facilities require 
technical support, particularly for small company users. This raises 
the issue of how to safeguard the companies' intellectual property. Do 
you have suggestions on ways to reduce these concerns that now appear 
to inhibit use of the facilities by industry?

A1. In my mind, the issue is less about protecting a company's IP than 
it is about how the two organizations (the company and the national 
facility) seek to protect their own IP as they work together. Every 
company has the responsibility to protect its IP and should do this 
through patent applications before the begin working with any other 
entity--be it commercial or national. The real issue in my experience 
has been that the national facility, which also wants to protect its 
own IP on behalf of the taxpayers, will often get into overly legal 
battles with the companies seeking to do business with the national 
facility. In this respect they are no different than any other 
enterprise.
    Congress should send a clear directive to the DOE as to what role 
they want the National Labs to play. If the purpose is to enhance the 
U.S. economy by working with U.S. companies, then the directive can be 
towards a laxer protection approach to existing and new IP generated by 
the National Labs. Congress should also ask the DOE to measure the 
success of this activity and report back to the Congress on these 
objectives on a regular basis.
    Squabbles over IP are not a new item. They are a regular 
occurrence. They are usually solved through negotiation. Small 
companies also need to understand that they cannot simply use all the 
IP at the National Labs without charge, and the National Labs should 
view the small companies as customers.

Q2.  Is the research now being supported under the nanomanufacturing 
component of the NNI meeting the needs of industry? Do you believe 
industry has a voice in determining research priorities for these 
activities?

A2. My company has not been that involved with NNI programs and 
funding--most of our funding has come from DARPA, ATP and the U.S. 
Navy. I would say that this support has been excellent.

Question submitted by Representative Vernon J. Ehlers

Q1.  How does industry measure how much basic nanoresearch is the 
``right'' amount?

A1. This can be a somewhat different answer if the question is related 
to either companies or the government. For companies the answer is 
relatively straight forward. It is what the management and the board of 
directors feel is appropriate. This can range from 50 percent plus of 
revenues for small start up companies to a more typical 15 percent for 
established high tech companies.
    For governments, I think the answer should be more focused on the 
value and outcome of the research rather than the absolute amount of 
money. There is certainly a place for fundamental research to expand 
the frontiers of knowledge, but even in this case it should be 
structured around the eventual objective or benefit. The best research 
is always done in this context.
    I believe that the total funding being spent by the U.S. Government 
on research is adequate at present. Congress should make it a point to 
measure the value of the research outcomes on a regular basis.
    The National Labs and also the large research universities are a 
very valuable, and probably under utilized resource, for the Nation. 
Such entities are hard to duplicate and take many years to build up to 
their full potential. Funding for these institutions should be 
predicated on the expectation that over time, they serve the needs of 
the Nation.

Questions submitted by Representative Ralph M. Hall

Q1.  You mention in your testimony that you are working with the LED 
industry to place nano features on high brightness LED's to increase 
their efficiency. How exactly will nano features increase efficiency? 
What properties of nanoparticles allow for an increase in efficiency?

A1. High brightness light emitting diodes are built from high 
refractive index semiconductors such as gallium nitride. As a result a 
significant fraction of the light photons emitted by the semiconductors 
are trapped inside the LED by total internal reflection. By adding an 
array of specially designed nano features, called a photonic crystal, 
to the surface of the LED, it is possible to breakdown the total 
internal reflection at the semiconductor/air interface and let the 
photons escape. This enhances the efficiency of the LED--light out per 
watt of electrical energy used by the LED.
    In addition, photonic crystals can be used to coalesce the light 
into a sharper beam as it is emitted from the LED. This is important 
for some applications where a focused light source is required--for 
example automobile headlights. This improvement is referred to as an 
increase in brightness.

Q2.  You mention an ATP grant that your company received in 2004. Would 
you say that this award helped bring in venture capital? Has your 
company benefited from the SBIR program and, if so, how?

A2. Our ATP grant was a great value to the company. It helped us fund 
the evolution of our capability well into manufacturing and to build 
strong customer relationships. It was a very important facilitation to 
help move Molecular Imprints to the next level. It was not directly 
related to our venture capital funding in that no VC actually came to 
us and said ``we will not invest unless you have ATP money.'' However, 
as we have approached later stage funding from the VCs it is clear that 
the contribution made by the ATP grant has helped as make a stronger 
company and hence a stronger case for additional VC funding. We have 
not used SBIR funding.

Q3.  Do you think that tax and investment credits for nanotechnology 
investment is a good idea? Do you have any thoughts as to what would be 
eligible for such a credit?

A3. Generally not. Most small companies do not pay any federal taxes 
and so tax credits are irrelevant in the early stages where cash flow 
is critical. Once the companies become profitable they should pay taxes 
like anyone else.

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