Who will fund the next big idea? / David J. Capos

Tiny robots, personalized medicine and other technologies that have the power to change our lives are waiting in the laboratory for implementation, but are not funded. Here is a way to solve the problem.

 

 

Our modern world is blessed with a wide variety of products and services, a selection of health services and medical treatments, gadgets and indulgences, which flood us at a rate that few of us can keep up with. We adapt to these innovations, rush to adopt them and develop dependence on them. And really, how did we get along before GPS, cell phone cameras, brain scans and laser surgery to improve vision?

 

All these things that make our lives easier and more comfortable and improve our safety and health are the result of basic discoveries that were discovered decades ago in the fields of materials engineering, software, computing, biology, chemistry, information technology, and other fields. And it seems that the rate at which new discoveries are made in government and academic research laboratories has not slowed down since then. In fact, according to indicators such as the number of scientific publications and patent applications, scientific output has not decreased, and is perhaps even higher today than it has ever been. More than that, since China, India and other countries are fully joining the research enterprise, we can expect more great scientific achievements in the future.

However, great scientific achievements do not automatically translate into technologies that move the world forward. This move requires time, money and patience, ingredients that are not in abundance lately. Indeed, the conventional ways of taking the discoveries out of the laboratories into the real world have encountered significant difficulties in the last generation. If we do not address these failures, the optimistic predictions will not be realized. In many ways, we are living on the returns of yesterday's investments.

The dwindling sources of financing and execution affected two crucial and expensive stages in the process of moving from the laboratory to the market: in the early stage, where promising practical uses are derived from new scientific ideas (even if their success is not guaranteed), and in the later stage, in which the technology is consolidated into an actual product that must be tested and perfected before being launched on the market . The means to safely lead basic research through these two stages, which carve out its fate for tribe or grace, used to be the business of the R&D laboratories of the big corporations, but these institutions hardly fulfill this role anymore. The venture capital companies did not undertake the task, but chose "risk-neutral" developments, which are very far removed from the raw product of the basic research laboratories.

This trend narrowed the pace of innovation in all fields. The experimental technology requires considerable investment to turn it into a [proven] marketable technology. And its economic viability is often questioned. Technologies in two key areas, communications and green technologies, are particularly prone to rapid copying in ways that intellectual property rights laws often cannot address. Generally, research and development in the pre-implementation phase is less magical for business investment than more advanced implementation phases, where the major difficulties have already been addressed. Unfortunately, there aren't many shortcuts from basic discovery to actual application.

The current crisis is an opportunity to create a more open and free system, built from the ground up, that will support the long journey from the laboratory to the market, a system that will, in the end, be more immune and better suited to today's technologies. Partnerships between governments, universities and companies will have to replace the corporate handshake that has passed from the world. For the move to be successful, a culture of innovation is needed where a large number of small parties work together to ensure flow in the pipeline of ideas.

Siri and other "dormant opportunities".

American science and R&D is a dominant factor in the world. From 1996 to 2011, the number of citable papers in scientific publications, including articles, reviews, and conference proceedings produced by researchers in the US increased from about 310,000 per year to about 470,000 per year, far more, in absolute numbers, than those produced by any other country, and at a higher growth rate from any other country, except China. In these years, the proportion of scientific articles published with the signatures of scientists from the US and at least one other country also increased from about 22% to almost 30%, which is due, among other things, to the expansion of international cooperation in scientific and technological development - a result of communication and improved data sharing. These numbers are impressive, but also worrisome.

To understand why, consider Siri, the iPhone's "cool" voice assistant, launched in 2011. Siri has its roots in a project initiated by the US Defense Advanced Research Projects Agency (DARPA), which lasted five years and cost $150 million. The research institute SRI International headed the project, in which 22 partners took part, including the Massachusetts Institute of Technology (MIT), Carnegie Mellon University and Stanford University. The SRI research institute continued the development of the technology before putting it up for sale as an independent company backed by a venture capital fund. In 2010, when Steve Job bought the company for Apple, the investment cost in Siri reached 175 million dollars, after seven years of development.

Siri is much more than just another innovation designed for smartphones. It is possible that the computational developments necessary to understand and process voice questions, such as where is the nearest Starbucks branch, and to answer them, will be used in the near future to answer much more important questions. Imagine being able to turn to a utility like Siri with questions about a suspicious lump you discovered in your breast, and you can trust its answer. Such dormant possibilities are often revealed in the transition from a research idea to product development.

The case of Siri demonstrates how the road that appears to be a direct path from R&D to the market can be long and winding. More extensive innovations in the fields of clean energy and pharmaceuticals often require decades of development, and an investment of a billion dollars or even more. Many of tomorrow's promising technologies that may change human society await implementation, but are not funded. Personalized medicines, designed for the individual treatment of specific diseases, may one day alleviate much suffering. But because of the enormous cost and time required to develop these targeted drugs in the current regulatory regime, it is difficult to find investors for such projects. Advanced tiny robots, which can be inserted into the body to remove hardened plaque from the arteries, are another example of technology-in-waiting. Miniaturized unmanned aerial vehicles, which today are nothing more than laboratory toys, will be able to play an important role in advanced weather forecasting and air quality monitoring. But when government funding for research is getting smaller, and corporate laboratories are concentrating on short-term product development, there is no one to fund these technologies.

The legacy of corporate laboratories

From the middle of the 20th century until its end, the research laboratories of the large corporations served as a bridge from scientific research to the market. One of the most recent important examples of corporate finance is the stretched silicon technology

(strained silicon), thanks to which the performance of microprocessors has improved immeasurably in the last ten or twenty years. Silicon stretching is a technique to improve the performance of silicon-based electronic components; The process involves attaching a layer of germanium to the semiconducting silicon layer to increase the spacing between the silicon atoms, in a way that improves the performance of the electrical circuit. The origin of this technology is an idea that arose in a Cornell University laboratory in the late 80s of the last century and attracted the attention of researchers from ATT Bell Laboratories, who were looking for better semiconductors for telephone exchanges. The company invested a lot of resources in the technology even though the viability of the investment was not guaranteed. In 1996, the person who headed the research team, Gene Fitzgerald from MIT, founded the company Amberwave Technologies with the aim of making the technology commercial. Another seven years passed and another millions of dollars were invested until Intel unveiled for the first time the Pentium 4 processor, "Prescott", which it developed on the basis of the stretched silicon.

There are many more examples of technologies that shape our lives that would not have seen the light of day if it were not for the support of the R&D laboratories in the major companies. The hydraulic fracturing (fracking) technology was invented back in the 19th century, but gained widespread commercial use only after Stanolind Oil, a subsidiary of Standard Oil of Indiana [now, Amoco], adopted this technology in the 40s. 20. It took several more decades of development before it could be used to produce natural gas from sources that were unexploitable until then. The tortuous path taken by 50D printing technology began with ink-jet research conducted at Siemens in the XNUMXs, continued at the Stanford University School of Medicine, passed through IBM's research laboratory, and that of the paper manufacturer Mead, and finally reached Yolt-Packard (HP) and the manufacturers other of printers.

The path from the breakthrough in the research laboratory to the practical application and commercial success is long and unpredictable and involves countless repetitions. Modern product-oriented companies cannot be expected to bear the expenses associated with such a task. But it is essential to find a way to enable it. In practice, the reduction in the research activities of the large companies is already being felt, both in the US and elsewhere.

short-term pressures

Short-term market pressures We have already reduced the investment in the development of solar technologies and electric transportation. As for information and communication technologies, the American National Academy of Sciences warned that "the long-term basic federal research aimed at breakthroughs in science has been reduced in favor of the gradual and evolutionary development of products, the main purpose of which is to enable improvements in existing products and services." The US is no longer the leading country in the world in "research and development intensity", say the US Communications Industry Association, after it dropped to eighth place in the ranking of investment in R&D among the member countries of the Organization for Economic Cooperation and Development (OECD). "For the past 35 years," the union claims, "the US federal government has been the main funder of basic research... as only a few of the corporate R&D laboratories could continue to bear the high costs and many risks involved in basic research. The mandate they received from the corporations required them to engage in short-term R&D, and generate a quick return."

In Europe and Asia the situation is similar. Sources of corporate funding for pre-applied research have generally been reduced or unchanged due to the same short-term pressures and constraints of belt-tightening. The US has at least some venture capital that softens the blow. The fate of Europe and Japan did not improve in this respect.

The rise of China and India created a new dynamic. These countries can reinvigorate research, but they can also threaten established technology countries. China can invest billions of dollars of government capital in product development research based on basic research done in the US, Europe or Japan, and reap the fruits of their employment and economic prosperity. Usually, by the time such research reaches the market, the patent rights have expired, so in this case, China will not even get involved in violating any intellectual property rights. And in fact, since the development of basic research for commercial use carries its own intellectual property, China will even be able to collect royalties on inventions that originate from research done in other countries.

India's strategy is no longer encouraging. It effectively nationalized, even if unofficially, important patents for the benefit of its pharmaceutical industry. Time will tell if you will expand this approach beyond the health field.

But there is also a positive aspect to the growth of China and India. Since these countries support an increasing proportion of the world's scientists, they are likely to produce more scientific breakthroughs. This will benefit consumers worldwide. Even if China takes, for example, American research and develops products from them, it is better than leaving them without development at all.

Closing the research gap

in nothing Corporations fund, the US, as a country, must change its approach to support the transition from the research laboratory to the commercial application in the market. To do this, it will be necessary to give up certain aspects of the sacred principle of competition in the free market and it will be necessary to recognize that some steps in the difficult, expensive and uncertain process of innovation need the support of the federal government, of the state governments [in the USA] and of the local government authorities.

The recent public uproar caused [in the US] by the bankruptcies of the solar energy company Solyndra [after receiving federal loans of more than $500 million] and of the battery manufacturer for hybrid vehicles A123 Systems [after receiving a federal grant of approximately $250 million] Bad for federal investment in commercial development of technologies. But such an investment should continue. The American government must spread the risks it takes and finance a wide range of entities that have the power to turn research into products and services, starting with government research laboratories and ending with privately funded technology start-up companies. After all, the Internet grew out of research conducted at the US Department of Defense, the GPS was born from military research, and the fireproof clothing used by firefighters today originates from NASA. When the US National Science Foundation (NSF) celebrated its 2010th anniversary in 60, it published a list of 60 discoveries and developments it helped fund over the years, including magnetic resonance imaging (MRI), optical fibers, supercomputers, encryption methods, and more.

Federal support is only one step. The US should also encourage partnerships that combine the public resources of government agencies and its leading research universities with an investment of time and money from the private sector.

This approach of combined investment, public and private, is not new, but until now it was mainly limited to marginal projects, many of which lacked sufficient funding. The implementing companies of the leading universities are not sufficiently integrated into the main activity of the academic community. Collaborations organized by the state between researchers who receive public funding and between private industrial companies whose goal is to establish new companies to apply research knowledge, which, by the way, increase the pool of high-value jobs, are still not extensive enough to allow investments even in the earlier stages of the process.

Still, some useful models emerge. The RAMP program for the development of manufacturing and innovation of the state of Pennsylvania encourages and coordinates cooperation between Carnegie Mellon University and Lee University and between companies from Pennsylvania in order to develop new technologies and accelerate the flow of knowledge between academic research institutions and between private industry. The investments within the RAMP program are intended, among other things, for the advancement of next-generation research in the field of industrial applications of XNUMXD printing and the production process of biological materials based on blood plasma.

Other countries in the US are also building frameworks to encourage such collaborations. In fiscal year 2012, Ohio allocated $25 million to fund international private-public research laboratories focused on topics such as advanced materials, organ regenerative medicine, fuel cells and energy storage and alternative energy. In 2005, Texas established the Fund for the Advancement of Emerging Technologies, which provides adequate funding to private companies seeking to commercialize research done at the University of Texas or at NASA's Lyndon Johnson Space Center in Houston.

Long term financing

The US needs more such collaborations. How can private and public entities be encouraged to participate in them? The National Advisory Committee for Innovation and Entrepreneurship, established by the US Department of Commerce, brought together leading figures from industry, venture capital firms and academia to discuss this question. The committee made several recommendations to encourage cooperation between these groups. Federal government agencies can foster opportunities for high-risk innovative research. Industry and universities can increase their strategic investment in promoting technologies that are of common interest to both parties. And all the parties can run programs that will connect the academic staff and students in the universities with potential partners from the industry, mentors for entrepreneurship and sources of "proof of concept" financing.

Federal authorities can help universities incorporate elements of innovation into grant applications. Universities that use their intellectual property in collaboration with industry parties will be able to receive tax benefits. At the same time, the application companies of the universities will be able to strive to maximize the social benefit inherent in the discoveries, instead of maximizing the profits they can generate for the benefit of their university.

The regulatory processes in the US also need streamlining. In industries that have strict regulation, but also rapid progress, such as the field of green energy, regulations that were installed in the days when data was scarce and processing was slow unnecessarily hinder innovators. Opening bottlenecks will speed things up and reduce costs.

In Europe and Asia, steps are being taken to provide incentives to innovators. France, China and Japan adopted a method of tax credits for research activity based on the scope of the activity, according to which companies are rewarded according to the total amount of their R&D activity. On the other hand, the US grants tax credits gradually, in a cumbersome method that many companies in the US do not bother to take advantage of. The continued development of the European Research Area (ERA) which was first launched in 2000 and secondly in 2007, with the aim of concentrating efforts to formulate a common vision towards the year 2020, resulted in an increase in investment in R&D and collaborations between European countries. The US can also establish a similar regional research organization for cooperation between North America and South America.

The idea behind these initiatives is to bring about a change in the cultural perception, so that you recognize the value of the long-term investment and the need to provide incentives that will encourage investment in research. If the US knows how to do this correctly, it will be able to establish an ecosystem of innovation that will turn great scientific achievements into technology that will change the face of the world even in the next hundred years.

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About the author

David J. Kappos was the US Under Secretary of Commerce and head of the US Patent and Trademark Office before joining Cravath, Swaine Moore as a partner in early 2013. He is a member of the Global Agenda Council on the Intellectual Property System of the World Economic Forum.

More on the subject

Funding Breakthrough Technology: Case Summary: Inkjet Printing. Jonny Thompson. Cambridge Integrated Knowledge Center, 2009.

Hydraulic Fracturing: History of an Enduring Technology. Carl T. Montgomery and Michael B. Smith in Journal of Petroleum Technology, pages 26-32; December 2010. www.spe.org/jpt/print/archives/2010/12/10Hydraulic.pdf

Inside Real Innovation: How the Right Approach Can Move Ideas from RD to Market – And Get the Economy Moving. Gene Fitzgerald, Andreas Wankerl and Carl J. Schramm. World Scientific Publishing, 2010.

The ranking of the availability of venture capital in the countries of the world, including Israel, in 2011-2012 according to the World Economic Forum: www3.weforum.org/docs/FDR/2012/20_Pillar_7_Financial_access_FDR12.pdf

subsidiary article

The power of many minds / Subra Suresh

In order for us to tap into the enormous, growing global potential of new ideas, we need new rules.

In the rainforests of Central Africa, a team of researchers and students from the USA, Cameroon, Gabon, Great Britain, Germany, France and the Netherlands is preparing a regional conservation plan that takes into account climate change and the economic development of the region. This group, funded by the US National Science Foundation, includes biologists, agricultural experts and researchers in the social sciences.

Collaboration between researchers from a large number of different fields and from different countries, for a common goal and using common resources, is becoming more and more common in the fields of science and engineering. The diverse composition of research teams accelerates innovation, perhaps because researchers with different backgrounds see the problems from different perspectives, and together, they can offset each other's hidden, preconceived and biased opinions.

However, despite the increasing cooperation and the expansion of the range of possibilities, a certain tension simmers under the surface. Countries plan their public spending on research and education in a way that reflects their national priorities, but the knowledge resulting from this investment is not limited by political borders. Indeed, in a world without borders, connected through the Internet, how can each individual country ensure the sustainability and survival of its innovation engine? How can countries that under the circumstances must cooperate with each other agree on common principles of action, on standards for the quality of the results, and on free access to these results? And who will guarantee the loyalty of the various countries to these agreements? These are the issues that are currently at the top of the scientific policy agenda. Without a blueprint for developing principles of action, global science will be paralyzed.

Scientists working in international teams, especially those who have only recently joined the global research enterprise, need standards of research ethics and other clear norms concerning the actual conduct of research. Among other things, there is a need to formulate ways to evaluate research proposals and means that will allow scientists to share and transfer the results of their research to the archives, all without compromising privacy, confidentiality and intellectual property rights. We need a clear policy and a sustainable economic model that will regulate the free access to publications and data of the stakeholders in universities, libraries, professional associations and publishing houses.

The institutions and governments that fund research in the world have already begun to be required to address these issues. In 2012, the Global Research Council (GRC), a body that brings together the heads of institutions that finance scientific and engineering research from almost 50 countries in the world, convened to determine common principles for the evaluation of research proposals and applications for research grants. The council develops common norms from the perspective of the institutions that fund scientific research, and it is currently examining ways to involve the research bodies in the discussion, led by the most important research universities in the world.

The aspiration to establish a consistent and harmonious framework in which science and research personnel from different countries and fields can work from Nablus to Nablus is an important step on the way to establishing a global culture of innovation. We, the researchers and educators, have an obligation to the taxpayers of the world to extract the most innovations from public research budgets. The research team in the rainforests of Central Africa needs standards that will help it fulfill its scientific and social mission effectively, and the same is true for anyone who expects science to benefit our communities and improve our lives.

on the notebook

Suresh, former director of the US National Science Foundation and founding chairman of the World Research Council, is president of Carnegie Mellon University.

The article was published with the permission of Scientific American Israel