Secretary of Energy Steven Chu

DOE's Chu on Tech Transfer

June / July 2011 Volume 9 Number 3

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Secretary of Energy Steven Chu is a distinguished scientist and co-winner of the Nobel Prize for Physics. Before his appointment by President Obama in 2009, he was the director of the Lawrence Berkeley National Lab, where he led the lab in pursuit of alternative and renewable energy technologies. He also taught at the University of California as a professor of physics and professor of molecular and cell biology. Previously, he held positions at Stanford University and AT&T Bell Laboratories.
Chu’s research in atomic physics, quantum electronics, polymer and biophysics includes tests of fundamental theories in physics, the development of methods to laser cool and trap atoms, atom interferometry, the development of the first atomic fountain and the manipulation and study of polymers and biological systems at the single molecule level. While at Stanford, he helped start Bio-X, a multi-disciplinary initiative that brings together the physical and biological sciences with engineering and medicine.
He received degrees in mathematics and physics from the University of Rochester and a Ph.D. in physics from UC Berkeley as well as honorary degrees from 15 universities. He spoke with Bob Cochnar, editor of Innovation, in his Washington office.

Q:Over the years, even though Congress has done a lot of pushing  of technology transfer with the Energy Department, it’s never had a very high priority at the energy labs.  The Energy Policy Act of 2005 called for the establishment of a tech transfer coordinator.  But we didn’t have one until last year when you appointed one.  What do you think accounts for that kind of foot dragging and what’s happening now?
A:My understanding is that then Secretary [Samuel] Bodman went to Ray Orbach  [under secretary for science] and said, why don’t you be head transfer officer. 

He didn’t have enough to do?
That  was the issue. He [did have] other things to do.  When I came in I said we need a dedicated person whose charge was to actually increase the rate of tech transfer and so that’s the decision that I made. I wanted that person to report to me to give it priority.  This was based on my previous experience as director of the Lawrence Berkeley National Laboratory. Having been at Stanford I knew that tech transfer was actually not a dirty word.

It actually works there, doesn’t it?
It worked well. I was trained as a graduate student in the 70s as a post doc at Berkeley and at that time tech transfer was considered, oh, applied, oh, no.  We should be concentrating on science. So, I guess through my upbringing  I had a slightly different attitude.  When I got to Berkeley Lab, I found that although some people were enthusiastic [about tech transfer], there were other people that said, well, no, this is not our job. One of the first things I did was to bring over a friend of mine at Stanford to talk to our tech transfer people.  How do we design it so it becomes more effective, becomes more friendly to the inventors, which is one of the things I noticed at Stanford.  If you’re a scientist writing a paper, you do not want to have all that complicated stuff.
Our tech transfer was not as friendly as Stanford’s.  You know, they said, you want us to patent this, well prove to me it’s going to be the greatest thing since sliced bread, da da da.  So there was some of that.  But, mostly, it was the incentive.  We had at Berkeley Lab…a very complicated system on how to evaluate employees every year. It was taken pretty seriously.  I looked at this and said, it’s way too complicated.  There are 14 criteria, and tech transfer wasn’t one of them.  So, I said, look, we’ll simplify it.  It should be about what you contribute in science.  What do you contribute to the overall well-being of the laboratory, things like that.  But, aside from scientific papers and patents, patent disclosures was Number 2.  Just reordering that all of a sudden turned a generation of patent and patent disclosures on and very quietly, all of a sudden, [people realized that] oh, we’re being evaluated on that. 
The head of tech transfer now calls it the “Chu effect.”  We had meetings where we brought in entrepreneurs into the whole system and said, come and look at us.  Come and look at what we’re doing.  Come and look, because I knew they were crawling around Stanford all the time.
Many of these entrepreneurs would walk into my Stanford office and ask, when are you going to go on a sabbatical?  Do you want to start a company with us?  Some of them didn’t even know what I was doing.  But, they said, you have a good track record. 
But they knew Stanford was an exciting place and they were trying to find out who were the faculty members who were generating new things. That was actually very good.  [They didn’t know] there was so much exciting stuff going on could potentially be commercialized. 

So the effort might then be to replicate this in the other laboratories, which, for them  might be foreign?
Yes. Karina Edmonds [DOE’s technology transfer coordinator] is saying that it’s best if it comes from the top, from the laboratory director.  And, it’s best that they say this is a significant part of why [congress] funds us.  Right? They fund science, especially mission-driven, mission-oriented science, because they think it will add to our economic prosperity.  Ultimately, they think it will add to solutions so we can transition to sustainable energy. 

One result of this was the DOE policy statement on tech transfer you issued recently? [The policy statement begins on page 19]
Right.

Have you gotten any reaction to that from the labs?
I think they are pretty positive about it, but I had been talking about it.  It wasn’t out of the blue.  In the last two years they’ve known how I feel about it;  I have said  this is an important part of what we do.  It would go a lot further if each of the lab directors conveyed that in a personal way to all of their people, [saying] this is part of the reason why we are being funded, you know.  And, now more than ever, we think that the scientists, both in the research universities and the national labs will need to come to the aid of our country, really. Just like in World War II.  That this is an incredible challenge and an incredible opportunity.  I think they know how I feel, so I don’t think  that if there is someone who is opposed to it  [that person would say],  no, Mr. Secretary I think you're wrong.  Because I wear my feelings on this on my sleeve.  But I think, to be fair, most all of them are very positive about this. It’s just that there’s an inertia. And there’s an old guard that says, well you know are we selling our souls?…No, you’ll be adding quite a bit of luster to them.

Well, the trick is to cut through some of the bureaucratic red tape that any entrepreneur has had to go through to get anything out of any laboratory.
Right, so we’re doing that.  That’s the other thing.  Tech transfer has to be friendly to the inventors and to the companies trying to license.  That was one of the things that I found at Berkeley Lab, that the [tech transfer people] would be quite proud of how good a deal they could get. I would tell them, no, you want to leave lots of change on the table. We are not trying to get the best deal we can to enhance any particular income for the laboratory because we want repeat customers and Karina and I understand this very, very well. Stanford understood it very well.  You  don’t want to appear greedy.
The first order of business is to do some fabulous science and engineering that lead to these inventions.  The second order of business is to say, here it is. We’ll get some, but we’re not going to get every last nickel because it leaves a bad taste in people’s mouths.  This actually happened in one particular case.  I happened to know the venture capitalist personally and he just licensed this patent. It was a fantastic patent, but it was painful, because the tech transfer was so demanding that it dampened one’s enthusiasm to want to look where else in the laboratory great things were being done.
So, again, I think the director of the laboratory should be telling the tech transfer people and the tech transfer people should be telling each other that a best practice is leave the change on the table.  Don’t be greedy.  Get a good working relationship and trust with the entrepreneurs. …If you are a really small startup company, you may not have the cash to do something. They’d  rather give an equity position rather than a high royalty fee.  It may have been in the past that a going-in requirement was to pay for the patent costs up front.  You know, this is tens of thousands of dollars, and then a high royalty fee… .We’ve given clear instructions, we don’t want to do that.  I mean the announcement we’ve made in the [Energy Innovator Challenge] will actually decrease those barriers, including costs,  greatly.  And, that’s just one example of what we’re trying to do.

That’s  a six-month program and you’re going to evaluate it at the end of that period to see if it made sense? 
[We'll] see whether it generated more business and whether it made sense…You have to strike a balance.  The inventors need incentive, because after all, if I’m an inventor, I’m also a scientist. If I’m willing to sit down with patent attorneys and do all those things, which is kind of a foreign world to scientists, I want this to be incentivized so that it could be a gain for my organization, myself, whatever.  Not to make a bazillion dollars, but at least to make it overcome this hurdle…. We’re piloting it, we have good hopes for it.  Another thing: we developed new rules about CRADAs. It’s a collaborative agreement; the company says there’s some expertise in the laboratory that we want so we want you to do research and we’ll pay for it. But the companies were required by the Department of Energy that they put up 90 days worth of budget, a running 90 days.  This was probably established [because some company] didn’t have enough to pay for the bills, and all of a sudden you’re in a bit of a bind.
Government laboratories have to charge the work to some account…. The smaller companies do care about these costs because that’s a cash advance that they cannot afford.  Remember, they do not have a lot of assets.  And, so we shrunk it to 60* days with the idea can we get it to go to 30.  Now, what’s the risk?  I don’t think there’s much risk.  You have to have a modern accounting system that keeps track of spending.  What you don’t want to do is to overspend and if the company goes belly-up, then you’re stuck.  But, if you have a modern accounting system, having money forward one quarter didn’t really make any sense to us.  I mean, if you have that old-fashioned accounting system you should clean that one up too.
[*The original 90-day requirement was to make sure the labs followed the Antideficiency Act, which states
that funds appropriated for one purpose may not be used for another. The updated accounting system makes
it possible to reduce the requirement to 60 days or fewer.]

The same Energy Act of 2005  that we talked about called for the establishment of a technology commercialization fund that would require .9 percent of lab budgets to set it up.  Where are we on that?
Well, it turns out that historically we’ve been putting in much more than that  but not in a proactive way. After the fact we looked at all the things at the labs  that would jointly support [commercialization] and said of course we spent that much money. So it was a justification after the fact, which was not the intent of the law. Let’s  make it proactive to actually spur much more of the transfer and to give the right signals that this is an important part of our process…. This is why we’re here.  This is a good thing to do and the country really needs the Department of Energy and its laboratories and the research universities to be more out in front of this. This is really about doing the science that leads to the discoveries that leads to things that we can handle with the private sector. 

 Can you talk a little bit about the Memorandum of Understanding  you’ve done with  Defense, which would make the DOD one of the first adopters?
This is something [that was the result of] looking at what had happened in the past in the development of technology.  Take aerospace, for example. You can go way back when and say the Wright brothers invented the plane and that’s why we’re great in aerospace.  They did invent the first airplane.  But Europe took the lead and by 1915 it was well-known the lead had completely passed over us.  The Wright brothers’s design actually stagnated and Europe was racing ahead. There were no U.S.-built  planes in World War I.  There were German planes, there were French planes and there were British planes. 
So the government stepped in and said we need to create a market so that the private sector could invest.  The first thing it did was almost unthinkable.  It allowed private companies to carry the U.S. mail.  This is a big deal. Then the military… looked at what Europe did and it could see that airplanes might be a significant part of a future war.  By the end of World War II, battle ships were obsolete. The aircraft carrier was dominant by the end of the war. 
Let’s [consider] semiconductors. Although they might have been invented by private firms, the earliest adopter was the military, because it knew the first discreet transistor circuits were not that good.  I’m old enough to remember the first transistor radios, they were pretty low quality.
So, again, the military made a significant contribution to the evolvement of a key technology.  They were buying up the microchip, the higher frequency stuff. They developed a market where all of a sudden commercially you know it’s not the best stuff, it’s the least expensive stuff.
We have a similar thing in a lot of energy efficiency issues.  If you have to forward deploy fuel to generate electricity to run things it gets to be very expensive.  It puts troops at risk because of the convoys, they become ready targets and as we’ve learned in Afghanistan and Iraq and other places this is a real issue…. They also know that if you have only one [major] source of transportation fuel—oil, you’re really at great risk.  The secretary of the Navy is really forward looking and says we’re going to try to decrease our use of fossil fuel by 50 percent, and by 2020.  Okay, how do you do this?  Partly, efficiency [but] also advanced biofuels would be direct substitutes for jet fuel and for diesel fuel…. We’re trying to diversify in the United States so we don’t get whipsawed by whatever happens to oil prices.
We’re thinking that the MOU is based on the fact that the military has been moving forward in the past.  It’s worth it to pay a premium.  But, even if they don’t pay a premium  they have a long-term view that sometimes our civilian businesses don’t have. They will say, all right, we can buy biofuels at market price.  That will help the private sector. If we can supply this at a competitive cost they will buy it from us.

Let’s talk about nuclear power in light of the situation in Japan.  Where do we stand in terms of moving forward?
Well, a couple of things. I think that nuclear has to be part of this century’s energy mix.  We are 20 percent  nuclear. Because of Japan we will learn some lessons.  Our nuclear reactors are very safe and they could be made safer.  We also shouldn’t overreact.  If you look at what has happened in the energy mix, look at natural gas and the natural gas disaster in California.  The issues in recovering natural gas, they have to be done in an environmentally safe way.  Look at oil in the Gulf, look at coal in the [mine disaster] and normal pollution.  All these energies have problems; we must recognize that and just make them safer. 
We are very bullish on small modular reactors.  The  concept is very simple.  Before, because of the licensing and everything else, you go to bigger and bigger reactors, a gigawatt, one and a half gigawatts.  These are now $6, $8 maybe even $10 billion-dollar ventures.  Now, suppose you’re a company and you want to invest $8 billion dollars and suppose it’s  delayed a couple of years.  That’s $8 billion dollars on the table.
These reactors are driven by the economy of scale because there’s a certain cost in licensing.  So now there’s another economy, it’s economy of numbers.  If you can truly mass-produce these things and stamp out hundreds in a single factory, where you have much better quality control, where because of that you can make a lot of them…. We think that ultimately they can be much safer.  The whole thing can be put underground.  A lot of things are going for it, but the thing you have to prove is if you make a lot of them in a quasi-mass produced way, you get around that other economy.

And, it would be a lot cheaper, what $10, $20 million a copy?
We don’t know what they will cost.  These are all projections, because in the end you know, the proof is in the pudding after you’ve made the first 50 and drive the cost down, or the first 20 and drive the cost down. It’s mass production.  And it’s something you can market and sell around the world.  You can actually put it on a ship.  You can’t do that with a one and a half gigawatt  reactor.  So we’re pretty excited about that ….We think this is another way of helping getting us back in the game as technology leaders. So, I think we are enthusiastic about small modular reactors, and hope that they become a commercial reality.