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Big Bucks for Tiny Technology

By From the Chronicle of Higher Education


Nobody on this University of Massachusetts campus imagined that the institution might be creating the next darling of the nanotechnology world when it set out to create a solar-energy company based on a scientific breakthrough by its best-known professor.

People here thought they were commercializing a plastics invention.

Four years later, that spinoff, Konarka Technologies, has attracted nearly $35-million in venture capital and is considered by many in the emerging nanotechnology industry to be an A-list 'nano' company. It is using microscopically small bits of metal, or nanoparticles, to develop a new generation of flexible solar-energy panels that are as thin as photographer's film.

'They didn't know they were a nanotechnology company' until others started calling them that, says Louis J. Petrovic, the university's director of commercial ventures.

Nanotechnology -- the science involving matter that is smaller than 100 nanometers, about one one-thousandth of the diameter of a human hair -- is becoming the next big thing in academic research.

State and federal authorities are pouring billions of dollars into universities for research in the nascent field.

Universities, eager to see their research transformed into useful products -- and perhaps a commercial blockbuster -- are aggressively filing for patents on new nanotechnology inventions. Many are also seeking out companies, or establishing their own, to develop and market the ideas flowing from their laboratories.

And venture-capital firms and other investors are locking up commercial rights, with some investors offering substantial sums to sponsor early-stage research on the chance that campus labs will discover something of commercial value.

The list of institutions with new nano companies grows longer every day: New York and Northwestern Universities; the Universities of Minnesota, Oklahoma, and Texas at Austin; several campuses of the University of California; the Massachusetts and California Institutes of Technology (see 'Nanotechnology Spinoffs'). MIT also is home to the two-year-old Institute for Soldier Nanotechnologies, which has received $50-million from the U.S. military and $22-million from defense contractors and other companies to develop clothing and equipment for soldiers.

Even Boston College, hardly a technology powerhouse, has a four-year-old spinoff company called NanoLab.

'We're building the nanotechnology industry,' says Peter Sherman, acting director of the Office of Technology Transfer at Rice University, where Richard Smalley's groundbreaking work in stretching tiny, soccer-ball-shaped carbon molecules into tubes became the basis for a company called Carbon Nanotechnologies Inc. Rice has started three other nanotechnology companies and has four more in the works.

But for all the nanotech buzz, universities could find themselves navigating rough seas.

Intellectual-property experts say many of the nanotechnology patents being issued in the United States are overly broad. Expensive court challenges are inevitable, they warn, and many of the patents could be narrowed or struck down. The first infringement fights could start showing up soon, as more companies begin to make and sell products.

'Nobody really litigates until there is money to be made,' says Stephen B. Maebius, a patent lawyer in Washington who specializes in nanotechnology.

In addition, some public-interest activists question whether academic leaders are being too ambitious in selling far-reaching rights to inventions that rely on nanotechnology, much the same way they erred with some biotechnology breakthroughs a generation ago.

Some of those early deals have become obstacles to bringing certain medicines and nutritionally enhanced crops to sick and starving people in developing parts of the world.

An Inventor Perishes
'It seems as if the universities haven't learned the lessons' of the past, says David M. Berube, a professor of communication studies at the University of South Carolina at Columbia. He studies the social and ethical implications of nanotechnology and is writing a book, tentatively titled Nanohype, to be published in 2005.

The excitement over nanotechnology evolves from a new understanding of the laws of physics. The properties of matter change when it is nano scale -- smaller than one ten-thousandths of a millimeter. At that size, matter can be designed to be stiffer and stronger, emit more light, or conduct electricity better. For those reasons, nanotechnology holds promise to revolutionize industries as diverse as computing and medicine, as well as solar energy.

The technology behind UMass's Konarka was developed by Sukant K. Tripathy, a renowned professor who drowned in Hawaii in December 2000 after delivering the keynote speech at an American Chemical Society meeting there. He died one month before he was to take a sabbatical to start the company. He was 48.

Mr. Tripathy had hoped that his invention would eventually help bring electric light to rural communities in India, where he was born, and other parts of the developing world by creating portable solar panels that could recharge batteries.

Rather than give up on the company, Mr. Petrovic and other leaders on the Lowell campus persuaded a 2000 Nobel Prize winner in chemistry, Alan J. Heeger, of the University of California at Santa Barbara, to be Konarka's chief scientist. (They named the company after one of Mr. Tripathy's favorite places in India, a Hindu temple called Konarka that is dedicated to the god of the sun.)

Headquartered in a converted cotton mill here, Konarka employs more than two dozen people in Lowell, including several who came from nearby Polaroid as that company was going under, and an additional 15 or so in Europe.

Konarka's solar panels are manufactured with a coating made from microscopically small nanoparticles of titanium dioxide to which a light-absorbing dye is applied. By using the tiny, ice-cube-shaped particles, Konarka is able to increase the effectiveness of the panels by giving them more surface area upon which to apply the dye. A company scientist explains the principle with a sporting-goods analogy: If golf balls and baseballs were each stacked into equal-sized pyramids, you would need more paint to coat all of the golf balls than to coat the smaller number of baseballs.

Mr. Tripathy invented a technique for 'painting' nanoparticles at temperatures below 500 degrees Celsius, making it feasible to apply the dye to rolls and strips of flexible plastic instead of heavier sheets of glass. The technique, which also reduces manufacturing costs, could be used on clothing fibers as well. A soldier outfitted in such clothing could in effect be wearing his own lightweight source of electricity.

The invention, an applied-technology breakthrough, is the kind of thing for which the Lowell campus is known, says Paul M. Wormser, entrepreneur in residence at the university's business incubator: 'It suits the genes of this campus.'

The campus was established in the 1890s to train technicians for the textile industry at a time when Lowell was the textile capital of the United States. Textile manufacturing all but disappeared after World War II, and the city, northwest of Boston, has seen plenty of economic ups and downs ever since. Now university leaders hope that the institution's specialization in manufacturing, in combination with its burgeoning expertise in small-scale science, will attract new companies -- and jobs -- to the region.

'Nanotechnology has been a central focus of ours, in particular nanomanufacturing,' says William T. Hogan, chancellor since 1991 and a campus fixture since 1963.

Spurred by its success with Konarka, the university is now looking into commercializing a professor's new techniques for creating polymer particles that can be designed to form nano-size spheres. Other scientists are focusing on the biological fabrication of nanoparticles called quantum dots. The nanospheres have potential for use in the targeted delivery of drugs; the quantum dots, for sophisticated genetic testing.

A Nascent Industry

More immediately, officials are hoping to hear from the National Science Foundation this month about a major grant to establish a center that would expand upon the university's expertise in nanomanufacturing. Nearby Northeastern University and the University of New Hampshire would be part of the center.

The focus on manufacturing makes sense for UMass at Lowell. Moreover, manufacturing advances here and at other NSF centers could advance the nanotechnology industry, which is at a stage of development akin to that of biotechnology in the late 1970s and early '80s, says Lynn E. Foster Jr., director of emerging technologies at Greenberg Traurig Consulting Inc., in California, an affiliate of a law firm.

'There hasn't been that one killer application' in nanotechnology, he says. 'The vast majority of it is still in the research stage.'

Mr. Foster, who like Mr. Berube is writing a book -- his deals with how society will adapt to nanotechnology innovations -- says payoffs from nanotech aren't likely to rival the blockbuster successes some universities have realized from biotechnology. With biotechnology, he notes, 'you either cure that disease or you don't,' and if you do, you get rich. In nanotech you might develop a great new sensor, but if it's too expensive and only marginally better than an existing one, 'it sits on the shelf.'

Last month a closely watched company called Nanosys, which boasted a portfolio of nanotechnology patent licenses from Columbia and Harvard Universities, the University of California, MIT, and other prestigious institutions, abruptly withdrew its plans to go public. Company officials cited market conditions on Wall Street, but critics of Nanosys said its product plans were too vague. The aborted initial public offering was also a measure of the difficulty of commercializing an emerging field, several analysts said.

The technological and market challenges of commercializing nanotechnology inventions, along with the pervasive concerns over the validity of new patents, make investors cautious, says Chris Rizek, a senior vice president at the venture-capital firm Ardesta, which specializes in companies doing small-scale science. 'As an investor,' he says, 'it takes more work to get comfortable.'

The nanotechnology patents are an issue, say experts, because, with such an interdisciplinary field, the U.S. Patent and Trademark Office may be mistakenly assuming that the inventions being claimed are novel, when in reality some of the underlying science is not all that new.

Ardesta, based in Ann Arbor, Mich., has invested about half of its $100-million fund in more than 15 companies, including a small investment in Konarka. It also owns Small Times, a new periodical that tracks the nanotechnology industry and university research efforts in the field.

According to 'Nanotech Report 2004,' an analysis from the venture-capital firm Lux Capital, 109 nanotech start-ups have secured $1.1-billion in financing since 1998, although more than 20 percent of the money has gone to just 5 percent of the companies. The report predicts total venture investments of about $200-million in nanotech start-ups in 2004.

For universities, however, some of the more interesting financing deals are not following the traditional venture-capital model, but involve direct support for nanotechnology research still at the lab-bench stage.

At Caltech, for example, Arrowhead Research Corporation is providing $500,000 over five years to each of the labs of three professors.

In return, the company gets first crack at rights to license their work.

'I like to get in early and get the real leverage,' says Bruce Stewart, Arrowhead's president, who envisions striking similar deals at other universities.

Before forming Arrowhead, Mr. Stewart had helped found Acacia Research Corporation, which has some notoriety among colleges. Acacia has been attempting to extract royalties from hundreds of institutions that deliver courses using video-streaming technology that the company says is covered by its patents. Mr. Stewart says Arrowhead is not following that licensing-business model. It will use its rights to nanotechnology patents to create new companies, he says.

Caltech welcomes the arrangement with Mr. Stewart. 'He's willing to take risks and come in before there's a product,' says Scott R. Carter, assistant director of technology transfer.

Arrowhead has competitors. One of them is a new company called NanoHoldings, led by Daryl S. Boudreaux, who until April was director of technology transfer at Rice and architect of the many start-up companies there. NanoHoldings is seeking out promising, early-stage nanotechnology inventions at universities and offering sums of $50,000 to $200,000 to help the institutions advance the research.

In return, the company would receive the rights to license the ideas. Mr. Boudreaux has already struck one such deal at Rice and another at the University of North Texas. He says he plans to do as many as a dozen.

At the University of California at Los Angeles, an investor group called Nanoverse is plying the more traditional 'options' strategy. Cheaper than a license, an option gives an investor a chance to evaluate the commercial potential of an invention for a short time before committing to license it. The university gets some upfront cash to cover its patenting costs. In the past six months, UCLA and Nanoverse have reached six such deals in nanotechnology.

Missing the Public Interest?

With all those investors and venture-capitalists locking up rights, and universities licensing nanotechnology to big companies like IBM and General Electric, few institutions seem focused on protecting the rights from being sold off too broadly.

That's a problem, says Michael Gollin, a patent lawyer in Washington and founder of an organization that helps developing nations overcome intellectual-property barriers to gaining access to drugs and agricultural products. He worries that, as universities press ahead with the patenting and licensing of their nanotechnology inventions, the same types of barriers may impede the benefits of those discoveries.

'There's no national or international body that would be looking at the public interest of nanotech,' as the National Institutes of Health and the World Health Organization have begun to do in biotechnology and medicine, he says. 'There should be.'

Mr. Gollin, founder of the nonprofit Public Interest Intellectual Property Advisors, acknowledges that a lot of what is coming out of campus labs right now is not applicable in the third world. The time to take those steps is now, he argues, while there is less at stake, and 'people are more willing to make agreements.'

Lita Nelson, director of licensing at MIT and an advocate for what is called humanitarian licensing, says comparisons to biotechnology are not fair.

'There, in hindsight, we should have worried about it in the beginning,' she says. 'We knew that it was applicable to food and medicine. A good fraction of nanotech isn't, except I guess when it's biotech being called nanotech.'

Others say that at this stage of the nanotechnology revolution, holding back rights would not be practical.

Alan Thomas, director of technology commercialization at the University of Chicago, says that is especially true for the kinds of early-stage inventions now coming out of universities. He cites the technology behind Chicago's best-known nanotech spinoff, Arryx, as an example.

At the beginning, he says, 'it's a rig in a lab and some scientific papers.' To convert that into a product and a company takes millions, and the people putting up the money want assurances that they will have full rights to commercialize the invention. Arryx has raised about $7-million from investors. 'No nonexclusive licensee is going to provide that kind of money,' he says.

As with Mr. Tripathy's idea at UMass, Chicago at first did not think of the micro-robotics technology underlying Arryx to be nanotechnology.

'Retrospectively, the label 'nano' has been applied to it,' Mr. Thomas says.

At UMass these days, nanotechnology is no longer an afterthought. If an invention involves nanoparticles or nanowires, that's a key part of the pitch to potential backers of start-up companies. Mr. Petrovic, director of commercial ventures, says he is particularly excited about the invention that involves nanospheres. It might be a boon to drug companies, he says, or perhaps a technique for administering cosmetics or nutrient-enhanced foods.

Mr. Petrovic is not sure how the nanosphere invention will play out. But the gleam in his eyes betrays an unmistakable confidence that, in this nano-crazed environment, the invention could be the next Konarka, or an even bigger nanoprize. 'It's something,' he says.