Collaborative Innovation: Technology Transfer and the Challenge of Homeland Security

1. rochester. 7-23-04.ppt © 2004 Battelle Memorial Institute Collaborative Innovation: Technology Transfer and the Challenge of Homeland Security Rochester Federal Subcontracting Initiative Carl F. Kohrt July 23, 2004

2. © 2004 Battelle Memorial Institute Agenda The global opportunity for collaboration and commercialization of IP Battelle’s history of innovation, IP commercialization and laboratory management Lessons learned about innovation and regional economic development Challenges and opportunities in Homeland Security

3. © 2004 Battelle Memorial Institute Technology Utilization is Increasingly Complex Most successful high-value products are increasingly complex Most of the interesting opportunities are “at the interfaces” – the fusion of physics, chemistry, biology with supporting computational science New generation of scientists being cross-trained in more than one discipline

4. © 2004 Battelle Memorial Institute Thirty Most Valuable Product Exports: 1970 and 1995

5. © 2004 Battelle Memorial Institute R&D Partnerships and Alliances are Increasing in Importance

6. © 2004 Battelle Memorial Institute Charitable trust Scientific research and development Creative activities of a scientific nature Reduction to practice, licensing, or other disposals of inventions, discoveries, and developments Advancement of learning and better education of men and women for employment Gordon Battelle’s 1925 Will Began 75 Years of R&D Partnerships Gordon Battelle, an Ohio industrialist, clearly saw R&D as a business He wanted to make American industry more competitive by applying the results of research to industrial problems He clearly foresaw the need for a connection between discovery and application of discovery He anticipated making a “profit” and specified that the returns from this innovation be shared with the stakeholders In creating a charitable trust, he envisioned treating the community as his shareholders He understood the foundational nature of education as a purpose In addition, with its founding in 1929, the first Trustees of Battelle foresaw the need for collaborative effort and established the concept of Battelle functioning in alliances with sponsors of research. Consequently they established Battelle as a resource that would work under contract to sponsors seeking innovation, and in so doing established the first generation of sponsored research in the United States. While this was initially an effort specifically for industry, as the Federal government became a major sponsor of research in the 1940’s Battelle was well positioned to become one of the major providers of research services at a time when the federal research establishment was just beginning to form. Gordon Battelle, an Ohio industrialist, clearly saw R&D as a business He wanted to make American industry more competitive by applying the results of research to industrial problems He clearly foresaw the need for a connection between discovery and application of discovery He anticipated making a “profit” and specified that the returns from this innovation be shared with the stakeholders In creating a charitable trust, he envisioned treating the community as his shareholders He understood the foundational nature of education as a purpose In addition, with its founding in 1929, the first Trustees of Battelle foresaw the need for collaborative effort and established the concept of Battelle functioning in alliances with sponsors of research. Consequently they established Battelle as a resource that would work under contract to sponsors seeking innovation, and in so doing established the first generation of sponsored research in the United States. While this was initially an effort specifically for industry, as the Federal government became a major sponsor of research in the 1940’s Battelle was well positioned to become one of the major providers of research services at a time when the federal research establishment was just beginning to form.

7. © 2004 Battelle Memorial Institute Battelle Fulfills its Strategic Intent Through Three Business Lines

8. © 2004 Battelle Memorial Institute Battelle Fulfills its Strategic Intent Through Three Business Lines

9. © 2004 Battelle Memorial Institute Battelle Now Manages or Co-Manages 4 National Labs

10. © 2004 Battelle Memorial Institute Battelle Often Seeks University Partners to Manage National Laboratories for DOE

11. Early 21st Century Research Themes At ORNL, we are expanding our capabilities for focusing on these three scientific thrusts. Advances in these areas will expand our understanding of matter and processes at the molecular scale. Nanoscale S&T: This 2440-atom molecular motor was designed using a combination of molecular dynamics and neural network simulations. Such motors consist of two concentric graphite cylinders (shaft and sleeve) with one positive and one negative electric charge attached to the shaft; rotational motion of the shaft is induced by applying oscillating laser fields (the wiggly orange lines). With sufficient shaft-sleeve clearance and in the proper regimes of laser field strength and frequency, stable rotational motion was induced at speeds up to about 1012 Hz. The ability to drive the motion of nanoscale components in a controlled manner is a crucial issue in the engineering of nanometer-scale machines. At ORNL, we are expanding our capabilities for focusing on these three scientific thrusts. Advances in these areas will expand our understanding of matter and processes at the molecular scale. Nanoscale S&T: This 2440-atom molecular motor was designed using a combination of molecular dynamics and neural network simulations. Such motors consist of two concentric graphite cylinders (shaft and sleeve) with one positive and one negative electric charge attached to the shaft; rotational motion of the shaft is induced by applying oscillating laser fields (the wiggly orange lines). With sufficient shaft-sleeve clearance and in the proper regimes of laser field strength and frequency, stable rotational motion was induced at speeds up to about 1012 Hz. The ability to drive the motion of nanoscale components in a controlled manner is a crucial issue in the engineering of nanometer-scale machines.

12. © 2004 Battelle Memorial Institute Brookhaven’s National Synchrotron Light Source — Potential impacts in nanoscience, advanced materials, medical, and biology Large Science Instruments Can Have Considerable National and Regional Impact

13. © 2004 Battelle Memorial Institute

14. © 2004 Battelle Memorial Institute Battelle Fulfills its Strategic Intent Through Three Business Lines

15. © 2004 Battelle Memorial Institute BSTI Converts Discoveries to Integrated Prototypes and Finished Systems Focus on systems engineering, product development, and pilot manufacturing Design Rapid prototyping Provides small scale manufacturing of devices and materials Multi-disciplined approach combines biological sciences, physical sciences, information, and engineering knowledge to solving complex problems Teams with other companies on large complex programs – U.S. and internationally

16. © 2004 Battelle Memorial Institute Integrated S&T and Business Strategies Generate Battelle Signatures

17. © 2004 Battelle Memorial Institute Battelle Fulfills its Strategic Intent Through Three Business Lines

18. Battelle’s Commercialization Strategy is Based on Linking Sustained Commercial Relationships with Unique Intellectual Property Targeted on Compelling New Businesses Reflects role of both lab capabilities as well as applied program base to building commercial businesses. Also calls for sustained engagements, not “one-night-stands” Reflects role of both lab capabilities as well as applied program base to building commercial businesses. Also calls for sustained engagements, not “one-night-stands”

19. © 2004 Battelle Memorial Institute Commercialization Business Objectives Venture capital-like financial returns Identify full range of value achievable with Battelle associated technology Four technology commercialization business models New ventures Value sharing (equity and/or royalty) Licensing Operating companies Talking points: Our goals are consistent with those of the venture capital organizations We will act as seed stage investors for our internal developments, engaging third party capital at appropriate stages Typical definitions of this work with agreements that can be disclosed New Ventures; Battelle is investing in developing a new corporation for which it will initially have the controlling interest. (Vitex, WaveID, BattellePharma, Velocys) Value share for equity; Battelle is making in-kind and/or cash investments with the primary return based upon an equity position in a company controlled by others. (Flow Fiber) Value share for royalty; Battelle is making in-kind and/or cash investments with the primary return based upon milestone and royalty payments. (Cytyc) Licensing Battelle is licensing what is already protected or can be protected without further development rather than requesting funds to invest in business or technical development. Talking points: Our goals are consistent with those of the venture capital organizations We will act as seed stage investors for our internal developments, engaging third party capital at appropriate stages Typical definitions of this work with agreements that can be disclosed New Ventures; Battelle is investing in developing a new corporation for which it will initially have the controlling interest. (Vitex, WaveID, BattellePharma, Velocys) Value share for equity; Battelle is making in-kind and/or cash investments with the primary return based upon an equity position in a company controlled by others. (Flow Fiber) Value share for royalty; Battelle is making in-kind and/or cash investments with the primary return based upon milestone and royalty payments. (Cytyc) Licensing Battelle is licensing what is already protected or can be protected without further development rather than requesting funds to invest in business or technical development.

20. © 2004 Battelle Memorial Institute Sources of Technology

21. Regional Impacts

22. © 2004 Battelle Memorial Institute Lessons Learned R&D organizations and universities are poorly prepared to operate like VC without help Over estimate value to others Underestimate time to profitability Limited access to true market needs Leadership is as important as the technology – and may be more so in many cases “Valley of Death” is real Bundling strategies work best for commercializing university IP and going outside company’s traditional marketplace Impose portfolio discipline – “lemons ripen first” Seek OPM (critical for early seed investments)

23. rochester. 7-23-04.ppt © 2004 Battelle Memorial Institute Opportunity: Homeland Security

24. © 2004 Battelle Memorial Institute Homeland Security presents a “Grand Challenge” With us for the long term Global in nature and “market demand” Once again –“Necessity has become the mother of invention”

25. © 2004 Battelle Memorial Institute The Biggest Challenge

26. © 2004 Battelle Memorial Institute The Department of Homeland Security

27. © 2004 Battelle Memorial Institute National Strategy for Homeland Security Critical Mission Areas Intelligence and warning Border and Transportation Security Domestic counterterrorism Protecting critical infrastructure and key assets Defending against catastrophic threats Emergency preparedness and response

28. © 2004 Battelle Memorial Institute Effective Homeland Security Programs Must: Address specific threats Be practical, affordable, and effective Support operational concepts Be part of a comprehensive solution Be flexible and adaptable Be “user friendly”

29. © 2004 Battelle Memorial Institute Example: Battelle’s Approach to Homeland Security (Principles) Dedicated organization close to the customer (DHS) Align unique competencies with specific segments of DHS mission (and the ones most likely to be funded) Consistently deliver on near-term needs, but provide the S&T for the long-term system solution in specific segments Team with others whenever possible Be technologically neutral

30. © 2004 Battelle Memorial Institute A Comprehensive Homeland Defense Program Involves Many Elements

31. © 2004 Battelle Memorial Institute Threat Detection A successful detection system implementation requires:

32. © 2004 Battelle Memorial Institute Battelle developed the Joint Biological Point Detection System (JBPDS) for DoD joint service use Threat Detection (cont.)

33. © 2004 Battelle Memorial Institute Passenger/Pedestrian Weapon Screening Threat Detection (cont.)

34. © 2004 Battelle Memorial Institute Radiation and Nuclear Detectors for Port and Border Security Threat Detection (cont.)

35. © 2004 Battelle Memorial Institute First bullet: Problem: Determine if the origin of chemicals found at field sites can be traced to specific chemical sources/processes PNNL Solution: Evaluated chemicals present at site Used chemical database to estimate chemical stability & reactions at site Analyzed co-present chemicals to project back-in-time to identify & estimate source contributions Successfully performed analysis at several waste sites Capabilities Employed to Meet Client Needs: Atmospheric dispersion modeling; oil spill modeling; chemical and biological agent database developments; probability analysis; accident and consequence analysis; fate and transport modeling applications; waterborne pathway determinations; source-term contributions; population exposure modeling; mass balance and biotransformation effects analysis. Second bullet: Problem: Need non-invasive approaches for monitoring chemical exposure of personnel and animals PNNL Solution: Use of saliva, urine and breath to replace blood in monitoring chemical exposure Integrated microfluidic/electro-chemical sensor platform increases sample throughput, reduces analysis time, sample quantity, cost Demonstrated lead detection in saliva Applicable to mixtures of heavy metals and many organic compounds including organophosphates (pesticides, chemical warfare agents) Capabilities Employed to Meet Client Needs: Animal modeling; toxicology, electrochemical sensors; micro-fluidics; statistical data analysis, physiologically based pharmacokinetic (PBPK) modeling; GC-MS. First bullet: Problem: Determine if the origin of chemicals found at field sites can be traced to specific chemical sources/processes PNNL Solution: Evaluated chemicals present at site Used chemical database to estimate chemical stability & reactions at site Analyzed co-present chemicals to project back-in-time to identify & estimate source contributions Successfully performed analysis at several waste sites Capabilities Employed to Meet Client Needs: Atmospheric dispersion modeling; oil spill modeling; chemical and biological agent database developments; probability analysis; accident and consequence analysis; fate and transport modeling applications; waterborne pathway determinations; source-term contributions; population exposure modeling; mass balance and biotransformation effects analysis. Second bullet: Problem: Need non-invasive approaches for monitoring chemical exposure of personnel and animals PNNL Solution: Use of saliva, urine and breath to replace blood in monitoring chemical exposure Integrated microfluidic/electro-chemical sensor platform increases sample throughput, reduces analysis time, sample quantity, cost Demonstrated lead detection in saliva Applicable to mixtures of heavy metals and many organic compounds including organophosphates (pesticides, chemical warfare agents) Capabilities Employed to Meet Client Needs: Animal modeling; toxicology, electrochemical sensors; micro-fluidics; statistical data analysis, physiologically based pharmacokinetic (PBPK) modeling; GC-MS.

36. © 2004 Battelle Memorial Institute New York State has Unique Capabilities & Resources to Meet the DHS Challenge A world-class national laboratory (Brookhaven) and leading research universities Large urban, border, and port facilities serve as real-world sources of information, product/system needs, and provide test platforms for technical advancements A robust multicultural and small-business environment World-class commercial companies with research, manufacturing, and distribution capabilities (Kodak, Xerox, GE, IBM,-----) Influential Congressional delegation

37. © 2004 Battelle Memorial Institute How Small Business Can Compete in the Homeland Security Marketplace Technology moves rapidly today and regions should not expect to be the sole developers/owners/ manufacturers of technology-based products Not easy to “go it alone”; partnering or alliances can match you with additional expertise, and some partners may need to come from other regions Rochester has many technology strengths that play into the Homeland Security scene – e.g., optics, photonics, microelectronics, life sciences, new product development

38. © 2004 Battelle Memorial Institute How Small Business Can Compete in the Homeland Security Marketplace (cont.) “Valley of Death” is a real challenge for all businesses (small, medium, and large) who want to aggressively pursue IP; organizations like Brookhaven, Battelle Ventures, and others can be helpful in looking at early stage technologies and assessing future commercial potential Be cognizant of Federal trend toward bundling of many contractual tasks into large procurements Homeland Security needs are in such areas as detection, infrastructure, warning devices, rapid deployment, and safe buildings. What expertise do you have that may be a positive factor for the future?

39. © 2004 Battelle Memorial Institute Summary For Battelle, Homeland Security is: a business opportunity A challenge for which we are well-suited A partnership A moral responsibility Securing our homelands is a global challenge…We will have met the challenge when Tokyo and Washington are equally secure Collaboration is key to solving the complex problems before us NYS has unique resources to dedicate to the solution