Laboratory bottleneck

Sandia researcher Isaac Ekoto, left, and former postdoc Will Colban prepare to conduct laser-based velocity measurements at the Combustion Research Facility. The measurements are used to help understand the flow features involved in the creation of in-cylinder carbon monoxide distributions in automotive diesel engines. (Courtesy of Sandia National Labs/RANDY MONTOYA)

Tom Brennan is one of the nation’s key movers and shakers in U.S. Department of Energy efforts to move new technologies from lab to market.

In the 1990s, he helped build the foundations for Emcore Corp., a global fiber-optics and solar-products manufacturer in Albuquerque that licensed much of its technology from Sandia National Laboratories and is now considered one of New Mexico’s biggest home-grown success stories.

Today he’s a partner at Arch Venture Partners — a national private-equity firm with $1.5 billion under management. And he heads a unique program to pull marketable technologies out of Los Alamos National Laboratory, providing a potential model for “technology transfer” that the DOE may replicate at more laboratories.

But Brennan says a chronic lack of funds and lackluster efforts at many of the DOE’s 17 national laboratories are crippling the ability of entrepreneurs and investors to put new DOE-developed technologies to work in the U.S. economy.

“It’s like paddling against an 80-foot wave,” Brennan said. “We see many efforts with good intentions that lack the inertia and horsepower to actually make a difference. We see an enormous number of dead bodies in the national lab space in terms of technology transfer.”

Great tech languishing

Like Brennan, many other local and national venture investors, entrepreneurs and tech-transfer professionals say cutting-edge discoveries are languishing at the national labs. The reasons include budget constraints, mixed priorities and encrusted bureaucracy that tends to resist opening the doors to private-sector involvement in federal facilities that were set up to work on national-security issues.

That’s a major problem, they say, because public- and private-sector partnerships that draw on advances at the labs are critical to improving the competitiveness of American industry in the global economy. Federally funded research, for example, has provided the

Sandia mechanical operations engineer Casiano Armenta checks out a heat exchanger that’s part of the labs’ free-cooling system. Free cooling has helped Sandia cut energy usage by more than 250 billion BTUs over the past six years and reduce greenhouse gas emissions.

launching pad for ground-breaking innovation in medicine, energy and computers.

On the plus side, the DOE has created a host of new policies and initiatives to accelerate technology commercialization since 2011, after President Barack Obama ordered all federal departments and agencies to work closer with the private sector. But DOE efforts have been slow to trickle down to the national labs as federal battles over budgets and cutbacks rage in Washington, D.C.

“The current administration has made this a priority, but the biggest challenge now is that technology transfer is largely viewed as an unfunded mandate,” said John Freisinger, president and CEO of Technology Ventures Corp. in Albuquerque, which works to facilitate technology commercialization at Sandia National Laboratories and other DOE facilities.

No new budgets

Under the 2005 Energy Policy Act, 0.9 percent of the DOE’s annual applied research and development budget was supposed to be earmarked for a new “technology commercialization fund.” That hasn’t happened since fiscal year 2009, Freisinger said. In part, that’s because Congress hasn’t approved any new federal budgets since then, forcing the government to operate on “continuing resolutions” that carry forward funding levels from the previous year.

Other priorities are also absorbing more lab money, such as modernization of nuclear weapons.

“Secondary missions get the hand-me-downs,” Freisinger said. “If the National Nuclear Security Administration says ‘guarantee the stockpile,’ that carries more weight with lab directors than someone reminding them they have to do technology transfer, too.”

The DOE has promoted tech transfer since the 1980s, after federal legislation made it a mission requirement at the national labs. A lot of activity took place in the 1990s, especially through Cooperative Research and Development Agreements, or CRADAs, that allow companies to access laboratory resources to jointly develop marketable innovations. But those activities receded somewhat after the 9/11 terrorist attacks, which reinforced a national-security focus at the labs.

Some private entrepreneurs say the lab’s primary nuclear mission sometimes inhibits transfer of technology out of the labs. Sandia National Laboratories researchers prepare pods that, if airborne, can track radiation to its source and analyze particulates and gases to identify a nuclear bomb’s origins. (courtesy of sandia national labs/RANDY MONTOYA)

Under Obama, the DOE has been more aggressive in pushing technology transfer. For one thing, outgoing Energy Secretary Steven Chu hired the department’s first dedicated “technology transfer coordinator,” a position created by the 2005 Energy Policy Act but unfunded until now. The new coordinator, Karina Edmonds, took office in 2010.

DOE taking steps

“We have a treasure trove of technologies that the private sector could build on,” Edmonds told the Journal. “We want to reduce barriers for industry to come and work with the labs. We especially want to support small businesses and startup companies.”

Under Edmonds, the DOE has attempted to streamline the process of licensing technology.

Among other things, DOE has:

⋄  Lowered up-front costs that private companies pay for research at the labs.

⋄  Radically cut the price tag for “options” or first rights to a full license if the company later decides to take it to market.

⋄  Created two new Web portals for companies to review technologies available at DOE labs.

⋄  Published a guide to help navigate investors through the licensing process.

The DOE also created a new network of public-private research partnerships to develop emerging energy technologies through the Advanced Research Projects Agency-Energy, or ARPA-E, which was created in 2007. Since 2009, the Obama administration has allocated about $800 million to ARPA-E.

Those efforts have inspired some lab teams to do more, especially at Sandia and LANL, which have launched new programs and initiatives to accelerate technology transfer.

Truman Fellow Anne Ruffing looks at a flask of cyanobacteria with precipitated fatty acid floating on top. She has engineered two strains of cyanobacteria to produce free fatty acids, a precursor to fuels, as she studies the direct conversion of carbon dioxide into biofuels by photosynthetic organisms. (courtesy of sandia national labs/RANDY MONTOYA)

Launching new programs

“Under Secretary Chu, technology transfer as a concept and a discipline has gone to the next level,” said LANL Technology Transfer Division leader David Pesiri. “He’s set expectations that this is a priority in a way we’ve not seen before.”

LANL in particular has achieved success with a novel program to allow experienced investors to vet marketable technologies and to act as liaisons with entrepreneurs and venture capitalists to move the most-promising innovations forward. The “LabStart” program, jointly managed by Arch Ventures and the Verge Fund in Albuquerque, is seen by DOE as a potential model.

“For the last year, we’ve been in discussions with the DOE to expand LabStart to more national labs,” said Brennan of Arch Ventures.

At Sandia, the Federal Laboratory Consortium named lab head Paul Hommert as its 2013 Laboratory Director of the Year for his efforts to reinvigorate technology transfer programs.

Sandia is pushing scientists to consider the market potential of new inventions from the earliest stages of research as part of a new “life-cycle” approach to technology transfer. It also hired a new senior manager of industry partnerships in 2012 to identify marketable innovations and engage scientists in discussions with entrepreneurs and tech-transfer executives.

Other labs involved

Similar progress is under way at a number of other labs, particularly those that do applied research, such as the National Renewable Energy Laboratory in Colorado, or Lawrence Livermore and Berkeley in California, Brennan said.

But at most labs — including those that have excelled in technology transfer — there is a pervasive culture of secrecy. It is a deeply ingrained focus on national security and the difficulty for many scientists to look beyond pure, or basic, science to embrace research and development for market applications is undermining technology transfer.

An Emcore Corp. technician inspects a large solar-cell array manufactured by the company at its operations in Albuquerque. (JOURNAL FILE)

“These are weapons laboratories. That’s their true mission,” Brennan said. “The million-dollar question is, will they ever truly adopt technology transfer and commercialization?”

Moreover, bureaucracy and unrealistic expectations at the labs about what steps are needed to commercialize scientific discoveries often impede effective agreements with investors and entrepreneurs.

When businesses come to the labs, they find most technologies have barely progressed beyond initial development stages. They require a lot more capital and lab work to build them into marketable products.

But laboratories often underestimate the additional energy and investment that companies must expend to get beyond what industry calls the “valley of death.” That is the gap between a great idea demonstrated in a lab and its development into a proven prototype that can attract the money and market interest needed to move it to the mainstream.

‘Valley of death’

“In our opinion, the labs need to work with companies to get technologies through the valley of death, otherwise industry has all the heavy lifting to do,” Brennan said.

Perhaps most important, the labs need to let veteran investors and entrepreneurs vet the technologies that truly have market potential, something scientists are not trained to do, said TVC Special Projects Manager Antonio Sandoval.

“It’s push versus pull,” Sandoval said. “The labs try to push technology out, but what’s really needed is for the market to pull them out.”

To do that, the labs need to swing open their doors to allow business-people in behind the fences, said John “Grizz” Deal, a serial entrepreneur who has worked for 20 years to commercialize LANL technologies. His current company, IX Power (pronounced “Nine Power”), is now marketing water-purification technology from LANL.

A IX (nine) Power technician installs a pilot OrgainClear water treatment unit in the Farmginton area. The Los Alamos National Labs commercialized technology cleans dirty water from oil and gas operations. (journal file)

“The labs have yet to attract more businesspeople — the ones who have actually done this work — inside of the technology transfer process,” Deal said. “That’s what will make a difference.”

The bottom line, Brennan said, is that the labs need to fully embrace the concept of technology transfer and work to develop effective partnerships with the private sector.

“They need to come to Jesus and state that technology commercialization is a critical mission of the labs and that they’re open for business,” Brennan said. “As much as many of us hear that, we don’t see it.”