Beating Swords Into Profit Motives

Industry is Irked at Some Aggressive New Competitors -- The DoE's Labs

Forget about global competition. A growing number of U.S. high-tech companies now say they have a formidable challenger right here at home -- the Department of Energy National Laboratories, whose aggressive self-marketing threatens to step on a chunk of private-sector turf.

With budgets tightening and the future unclear, Energy Department laboratories are hawking their knowledge, facilities and services to private industry and other federal agencies.

Most view the Department's initiative as a positive step, but there is a more complex side to that kind of technology transfer, as government scientists attempt to find niches in a crowded commercial marketplace.

One of them landed right on top of Alan Hill, president of Plasmatronics in Albuquerque, N.M., who spent $3.5 million developing and patenting a laser to treat severe burns. Then came a call from a Sandia National Lab representative who offered to license him an almost identical system.

"Sandia tried to sell me my own invention," said Hill. "It's appalling to me."

Sandia went on to enter into an estimated $16 million cooperative research and development agreement to further develop the laser debridement system with the Wellman Laboratories of Photomedicine in Boston, Mass. Hill is still trying to market his

laser. Not surprisingly, he views the Wellman-Sandia agreement as direct competition, not to mention a patent infringement.

"It would take us a fourth that amount of money to fully [commercialize]" our product, he said.

Officials from other, larger laser companies say they are seeing a similar pattern as Energy Department scientists seek CRADAs for technologies that may already be on the market.

A three-year, $5 million agreement between Lawrence Livermore National Laboratory and Plymouth, Mich.-based Rofin Sinar to develop high-brightness, diode-pumped industrial lasers is duplicating private-sector efforts, say industry experts. Adding salt to the wound: The lab is manufacturing and shipping diode lasers to outside customers.

Livermore program manager Richard Solarz counters that his lasers are cheaper and much more powerful than any found on the market. "In many areas, we are quite far ahead of commercial manufacturers," he said.

Solarz says he is trying to license the technology but is getting no takers. "I've been appalled at the lack of interest," he said. Laser industry sources say they aren't lining up because the technology wouldn't work well in commercial systems. Since there is no licensee, Solarz makes over 1,000 200-watt diode lasers each year to supply outside customers.

"We're doing what we shouldn't be doing... [but] we are the only game in town," he said.

In a bureaucratic twist, Rofin-Sinar's agreement with Livermore also competes with the Technology Reinvestment Project's $33.8 million precision-laser machining program -- with a German conglomerate reaping the benefits. Under the Advanced Research Projects Agency's management, a consortia of companies including TRW, Ford, Hughes and GM are designing next-generation industrial laser systems, a market the U.S. lost almost completely to Japanese and European companies, among them, notably, Siemens. It so happens Siemens owns Rofin-Sinar.

Critics say the government is funding research and development work with a foreign industrial laser leader while simultaneously supporting a U.S. effort to regain market share -- counterproductive, if not plain dumb.

"That [Rofin-Sinar] technology will go immediately to Germany... It was a bad choice of partners," said Ralph Burnham, vice president of Herndon, Va.-based Fibertek Inc., also a member of the precision laser consortia.

Private research and development companies are also coming up against unwelcome competitors. Tighter budgets have caused the labs to aggressively seek out R&D work from private sources.

For example, Sandia recently signed an agreement with a group of U.S.-owned maquiladoras, or cross-border manufacturing shops, to help reduce pollution. The companies will pay Sandia researchers for the services -- a deal that irks private, New Mexico-based research houses.

"They're using defense conversion as a cover," said Kevin Probst, president of CORE Group. "They're bringing in business that industry could easily do." The labs also bring resources and facilities that smaller private R&D companies can't compete with.

Larger defense contractors also are beginning to view the labs as competitors. Sandia Laboratories alone does $250 million in outside "work for others" each year. Industry sources say the labs are increasingly using their deep pockets and personnel to solicit work from defense laboratories. Through a system called a military interdepartmental purchase request, the Defense Department can quickly shuttle R&D and testing work to Energy labs without going out for private bids -- a practice that has gone on for decades.

An understanding of the competition issue appears limited at Energy's upper levels. "I'm unaware of any case where we are in competition with industry," said Paul Robinson, vice president of laboratory development at Sandia.

At Department of Energy headquarters in Washington, D.C.: "We've recognized it as a potential issue, but we haven't viewed it as a general problem," said Roger Lewis, director of the Office of Technology Utilization. However, the conflict may mushroom as Energy labs fight for existence in the post-Cold War economy. Terms like "customers" and "core business areas" are prevalent in the Department's budget planning, and presage a new market-based focus for the laboratories.

On Capitol Hill, several bills are pending that would boost partnering between Energy laboratories and industry. Given the present problems, Breck Hitz, executive director of the Laser and Electro-Optics Manufacturers' Association, wants to see some controls.

"We strongly support the expansion of the labs into non-military technologies...[but] they should be prohibited from going into areas where there is commercial activity," he said. Rather, Hitz supports lab work in pre-competitive niches where industry isn't spending any money.

Linda Capuano, vice president of Conductus in Sunnyvale, Calif., agrees that competition problems with the labs are getting more frequent. "This is not going to end soon," she said. Both Hitz and Capuano are scheduled to testify before the House Subcommittee on Energy and Power on laboratory tech transfer.

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