3rd Ceramic Leadership Summit

Authors


mpascucci@ceranova.com

Abstract

The Ceramic Leadership Summit is designed to explore business opportunities, emerging technologies, and critical issues that challenge the ceramic and glass materials community. In 2012, the 3rd Ceramic Leadership Summit was held in conjunction with the 4th International Congress on Ceramics (ICC4). The one-day program focused on technology transfer, entrepreneurship, and product innovation. Important topics discussed included strategies for creating and sustaining a small business, intellectual property protection, technology transfer, and mechanisms for government–university–industry partnerships. International speakers in the case study session addressed these topics from the perspective of their local and national policies and practices. Several of the case study presentations highlighted the use of “waste materials” in the creation and application of new technologies and products.

Introduction

The one-day program for the 3rd Ceramic Leadership Summit consisted of several components: a morning plenary lecture followed by a moderated panel discussion, a luncheon plenary lecture, and an afternoon case studies session. In addition, a Senior Executive Forum breakfast meeting focused on two topics: U.S. public–private partnership initiatives and technology transfer opportunities for mature companies.

Major Issues Identified

  1. Intellectual property (IP) — Understanding the new “first to file” rule for patent protection and the effect of this change on small businesses in particular was a significant concern for many present. Determining ownership of IP for companies spun out of academic settings and in technology transfer situations, and determining what to protect and how to protect (e.g., patent versus trade secret) were among the major issues identified.
  2. For start-up companies, assessing whether an idea has value and deciding how to develop the technology and bring it to market are critical steps to success. Business models discussed included demand pull versus technology push; product versus market oriented; and whether to license technology, sell the product directly, or partner/joint venture.
  3. Funding is always a major issue for entrepreneurs and start-up companies. Funding from different sources may be appropriate at various stages — proof of concept, development, prototyping, testing, manufacturing/scale-up, etc.

Major Emerging Opportunities Identified

  1. Opportunities for small companies to work with large companies appear to be increasing as large companies decrease their in-house efforts on long-term research and create mechanisms to seek out, support, and partner with entrepreneurs developing new technologies and products.
  2. Many opportunities exist for industry to access and license technology developed at National Laboratories, especially U.S. Department of Energy (DOE) Labs. In addition, funding for technology transfer and manufacturing initiatives is often available.
  3. Technologies focused on energy, environment, and health care were highlighted at this Ceramic Leadership Summit (CLS), and several speakers described successful technology developments for making valuable, marketable products from “waste” materials.
  4. Developing a technology that can then be licensed to several entities for different markets and/or applications represents a very successful business model.

Plenary Sessions

Delbert Day (Mo-Sci Corporation) presented the morning plenary entitled “Entrepreneurship from the Academic Perspective” in which he discussed the skills and resources necessary to establish and maintain a successful small business. A significant portion of Mo-Sci's revenue is attributed to commercialization of glass microspheres that are used in a variety of applications. As an example of the need for perseverance, Dr. Day pointed out the FDA approval of microspheres for medical applications took 17 years.

Like many of the academicians who spoke throughout the Ceramic Leadership Summit events, Dr. Day discussed the importance of the support he received from his academic institution. The resources available at Missouri University of Science and Technology (Missouri S&T), including facilities and personnel, were essential during the research and development phase. Dr. Day noted that in addition to teaching, research, and service, Missouri S&T has added economic development (creating wealth from knowledge) to its academic mission. Start-up expenses were reduced in the early stages of his company through the use of shared facilities at an incubator program funded by the state of Missouri. The federal government's Small Business Innovative Research (SBIR) program was an important source of income early on and helped maintain interest in research as the business grew.

Like many entrepreneurs, Dr. Day provided 100% of the financing to start his company, had no formal business training, and did his own marketing. However, successful entrepreneurs must know their product/market and their strengths/weaknesses and must have a plan for generating income. Above all, a supportive environment and dedication are absolutely essential.

Dr. Michael Murray, Morgan Crucible Co., presented the afternoon plenary “Emerging Ceramic Technologies” where he discussed how global megatrends were driving Morgan's investment decisions. Emerging markets of interest to Morgan included those that addressed population growth, the aging population, the increasing energy demand per capita, and concern over global warming.

Panel Discussion: Technology Entrepreneurship — The Next Generation of Technology Transfer

Tim Lavengood (Executive Director, Technology Innovation Center) served as moderator for the panel discussion which included Collin Anderson (CEO, Digital Innovations), Alex Arzoumanidis (Founder, Psylotech, Inc.), John Banta (CEO, Illinois Ventures LLC), Delbert Day (Founder, Mo-Sci Corporation), Jonathan Goodman (Synthesis Intellectual Property, LLC) and Leslie Millar (Director of the Office of Technology Management, University of Illinois Urbana-Champaign).

The three panelists who had started companies each spoke about very different experiences based on decisions they made regarding, for example, funding sources, technology push versus market pull models, assessing risk, and IP protection. Materials engineering start-up businesses may face specific challenges because the tendency is to discover/design a “product” and then search for a market. This “technology push” model worked well for Mo-Sci, because the company then became a sole-source supplier to a customer for whom their material was critical. However, Psylotech's early experience involved a sensor that was a “technical success and a business disaster” because a viable market for the product was not found. Subsequent modification of the product for a particular market (“market pull” model) resulted in commercial success.

When starting a company, it is important to assess risk and the probability of failure by critically examining, among other things, whether one's idea has value, solves a problem, and whether the intellectual property can be protected. A carefully prepared business plan is needed to get funding and customers. When the company is privately funded by the founder, he/she is more able to determine the direction of the company; when external funding sources are used the company may need to proceed along a different path. It is also important not to overvalue the initial IP and to appreciate that the best way to protect the value of IP may be to build the business and sell the product.

Some panelists felt that the technology founder/innovator is not the optimum choice to serve as CEO of the start-up company. While the innovator may understand the technology very well, he/she may not necessarily understand how to transfer the technology into making a commercial product and how to deal with customers. It was noted that “lifestyle” companies are typically led by the technology founder. As start-up companies grow it is often a good idea for the “C” level employees (i.e., CEO, COO, etc.) to come from a background in sales and marketing, and for the “C” level leader (e.g., the CEO) to be engaged in raising money at all times.

A large portion of the discussion and questions during the panel session focused on issues of intellectual property (IP) protection. In particular, many were concerned about the potential effects of the new “first to file” patent laws. This change brings the United States in line with the rest of the world, but could have a significant negative impact on smaller companies. In light of these changes, companies should adopt a policy of not disclosing anything until a patent application is filed.

Implementation of the new patent rules may place small businesses at a significant disadvantage in the patenting process by increasing the pressure on small businesses to file more frequently and at every stage of development. The cost of filing and the time involved will be felt more strongly by the small business community. Large, multinational corporations have the resources to file more applications and to file earlier in the development process and therefore will have an advantage.[1]

Patent protection can cost $50–100K in the United States, and considerably more for worldwide protection. Initial IP may eventually develop into a portfolio of IP resulting in patents for the material, the process, its uses, and applications. Despite the cost, patents are very useful for (i) building company valuation, (ii) improving marketing, and (iii) keeping others out of the technical “space.” When developing technology with funding from outside sources, it is critical not only that the funding received is in line with the desired direction for the company but also that ownership of the IP is understood and spelled out in contract details.

A question regarding the applicability of new “crowd funding” methods was addressed by the panel members who felt that this approach was useful only for products with very short development times that were essentially ready to commercialize. Many felt that this was not usually the case with most materials-related technology development.

Although the subject was not explicitly included in the meeting's agenda, the issue of hiring well-qualified foreign nationals in the United States was a recurring topic of discussion. The problem in the United States is being compounded by increasing restrictions on visas. In addition, other countries recognize the value of hiring well-qualified workers from outside. There was discussion about whether these two factors taken together are leading to a decrease in U.S. competitiveness in high technology industries.

Case Studies Session — International Technology Transfer and Entrepreneurship

Four international case studies involving technology transfer and entrepreneurship were presented by Janez Pirs (Jozef Stefan Institute, Slovenia), John Hellman (Pennsylvania State University, USA), Jinlong Yang (Tsinghua University, PRC), and Ryoji Funahashi (AIST, Japan).

Entrepreneurial Success of Balder LTD — Electro-optic Light Shutters for Eye Protection

Dr. Janez Pirs presented the case of Balder LTD, a small, privately owned company which is a spin-off from Jozef Stefan Institute (IJS). Balder was founded in the late 1990s to commercialize the IP of IJS in the field of automatic electro-optic LCD light shutters for eye protection. To kick-start the company, IJS received three internationally funded applied research grants with Balder as the end-user. All research funds obtained by this mechanism were used by the Institute, but Balder benefited through knowledge transfer and access to IP. Balder has an unlimited exclusive license to the intellectual property developed at IJS (including patents). The company was recently acquired by Kimberly-Clark Professional, but Balder maintains strong links with IJS and continues to utilize the expertise, basic scientific knowledge, and equipment of the Institute.

Balder's market strategy is to maintain superior performance through redundant quality control and active participation in establishing international standards. Several years ago, the major U.S. manufacturer of LCD auto-darkening filters filed a lawsuit against Balder for patent infringement. The lawsuit took more than 3 years to resolve but eventually was settled in Balder's favor and the Plaintiff granted a free license to Balder for all the Plaintiff's patents as compensation for damages. This example pointed out the extent of the time and financial resources needed for a small business to withstand such a situation.

Development and Commercialization of High Performance Ceramics for Oil and Natural Gas Recovery

Dr. John Hellman of Penn State University stated that “hydrofracturing is a critical technology for the development of unconventional gas and oil reserves in the continental United States.” Hydrofracturing and horizontal drilling enable access to a 50–100 year supply of hydrocarbons. Proppants – small (0.5–2 mm diameter) spherical ceramic aggregates – are needed to prop open vertical cracks to allow for the release of hydrocarbons. Worldwide demand for proppants has increased tenfold in the past 5 years to at least 100 billion pounds/year. As a result of increased demand, raw materials availability and manufacturing capacity for proppants have been stretched to the limit, and suitable aluminosilicates are becoming scarce and expensive. Synthetic proppants represent 20% of today's market and are typically made from sintered alumino-silicates, such as bauxite.

The focus of Dr. Hellman's work is to find alternative raw materials, available closer to the site of application, for the manufacturing of high performance proppants. By understanding phase diagrams, liquid phase sintering, and other lessons from the refractories industry, less pure starting materials can be used effectively for this application. Nontraditional raw materials for the manufacture of proppants include fly ash, mine tailings, drill cuttings, slags, and recycled glass. Through compositional and microstructural control, mechanical and physical properties can be tailored to meet the high specific strength requirements of the application. Dr. Hellman's talk focused primarily on ion-exchanged glass beads produced from domestic recycled glass cullet, glass ceramics derived from alumino-silicate by-products of mining operations, and glass ceramics derived from drill cuttings from Marcellus wells.

Nittany Extraction Technologies LLC was formed in 2010 to commercialize the technology using IP licensed from Penn State. Their strategy continues to be to “exploit indigenous raw materials and manufacturing/transportation infrastructure to ensure success.” In addition to beneficial reuse of waste materials, transportation cost savings are also realized due to the effective use of materials available close to the mining site. Successful scale-up to tonnage quantities has been demonstrated with industrial partners.

Although Hellman described a successful commercial technology transfer, he also noted challenges which can exist with academic/industrial relationships including how to deal with (i) “publish versus patent” and related effects on tenure and promotion decisions, (ii) IP protection, confidentiality, and conflicts of interest in an academic setting, and (iii) differences in both funding mechanisms and research/development time scales for academia versus industry.

From Technology Innovation to Industrialization: A Case of Ceramic Microbeads Based on Gel-Bead Forming

Dr. Jinlong Yang of Tsinghua University discussed success obtained through his patented process for colloidal injection molding. Gel-bead forming has been used to prepare ceramic microbeads leading to three new products: grinding media, pen-microbeads, and far infrared beads. Hebei Y&L Company was established by Dr. Yang to scale-up production from the laboratory to mid-level production, so the technology could be successfully transferred to larger companies which depend on a reliable, reproducible technology.

Dr. Yang noted that in addition to having an innovative and competitive product, a good business model is critical to small business success. Yang's business model — scaling up the technology to mid-level production to make it more attractive for purchase by larger entities — has worked well. He has sold/transferred his technology for making ceramic beads to several companies for various applications. The gel-bead forming method was transferred to Saint Gobain in 2005 for a grinding media application. A successful process was also developed for manufacturing ceramic microbeads for gel pens and ball point pens. The company is currently in technology transfer discussions with the largest pen manufacturer in the world (10 million pens/day). Dr. Yang also anticipates a growing market for ceramic microbeads with far infrared function used in health care. These beads emit radiation in the far infrared when exposed to body temperature and can be used, for example, to increase blood circulation and reduce muscle fatigue. The beads were used successfully to treat athletes at the 2008 Beijing Olympic Games. This technology was transferred to a joint Sino-German high technology company in 2007.

Dr. Yang and his colleagues at Tsinghua University and North University of China have also created a new method for producing micro-hollow-spheres (both open pores and closed pores) from coal gangue and fly ash — waste materials from power generation plants. This technology was transferred to the Shanxi Coking Coal Group in 2010. The Shanxi Coking Coal Group produces 50 million tons of coal gangue every year, and there are 1.2 billion tons of coal gangue that could be processed to make micro-hollow-spheres. Other waste materials that can be used to produce these spheres include slag, mining gangue, sludge, and red mud. Micro-hollow-spheres can be utilized in numerous applications such as fillers, sound absorption/noise reduction, thermal insulation, building materials, and refractories. Dr. Yang discussed a new mandate in China which requires that insulation materials used in civil construction must be nonflammable. Fireproof insulation board prepared using micro-poly-hollow-spheres has thermal conductivity and density comparable to flammable polystyrene and polyurethane materials, but with much higher strength. The market for these nonflammable insulation materials is $34 billion per year in China alone.

Dr. Yang has received significant support from the local Chinese government for his efforts. He employed different models and financial arrangements for technology transfer depending upon the application and the company to which the technology was transferred. Issues regarding intellectual property rights were not presented in Dr. Yang's talk.

Thermoelectric Power Generation in Wide Temperature Region

Dr. Ryoji Funahashi (AIST, Japan) discussed the design and development of thermoelectric materials and modules which generate electricity from natural heat sources and from recovery of waste heat. Dr. Funahashi began his talk by pointing out that about two-thirds of the energy generated worldwide is lost as waste heat. Therefore, systems capable of recovering waste heat will provide new sources of energy, will be beneficial to the environment, and will provide for economic growth.

Many materials can be used for thermoelectric generation, but each one typically operates most efficiently only in a defined temperature region. Dr. Funahashi and his colleagues are developing a “cascade system” which uses stacked modules — each one operating in a different temperature region — to increase efficiency and power density.

A very strong IP portfolio was created by Funahashi and his colleagues in collaboration with AIST. According to their website,[2] “AIST is one of the largest public research institutes in Japan which supports Japanese industry. AIST functions as a hub of Open Innovation among industry, academia and government.” Funding for research, material processing, prototype development, and module fabrication was obtained from various sources including the IP Integration section at AIST, the Japan Society for the Promotion of Science (JSPS), Japan Science and Technology Agency (JST), and NEDO. NEDO (the New Energy and Industrial Technology Development Organization) is Japan's largest public management organization promoting research and development as well as deployment of industrial, energy, and environmental technologies.

Initially, Dr. Funahashi's efforts to license his IP to companies were not successful, so he founded a start-up company to focus on modules for waste heat recovery. AIST and NEDO provided funding and resources to assist the business to focus on this new market. The new company, TES NewEnergy, continues to use the facilities and equipment at AIST to prepare modules.

Additional financial support is now needed for testing, approval, and standardization to ensure that his product is market-ready to meet the large potential demand for thermoelectric power generation.

Senior Executive Forum Breakfast

This invitation-only breakfast was held prior to the opening of the Ceramic Leadership Summit. The Executive Forum focused on two key topics. Dr. Mark Peters, Deputy Laboratory Director for Programs, Argonne National Lab, described U.S. public–private partnership initiatives and discussed how companies of various sizes might participate in these partnerships. In addition, technology transfer opportunities for mature companies were also discussed.

Dr. Peters explained that many large companies are moving away from the “Bell Labs model” and are no longer conducting long range R&D. Instead, there is stronger emphasis on working with small businesses and implementing technology transfer models. National Laboratories are actively engaging in outreach for technology transfer opportunities, and there are often preferred licensing arrangements for start-up companies. Dr. Peters discussed several methods for DOE laboratories to work with industry including CRADA arrangements and SBIR/STTR projects. Transfer opportunities may involve technology that is not yet mature enough to attract VC funding. In that case, the DOE Lab can reinvest Technology Maturation Funds to help small businesses with technology transfer.

David Bem (Global R&D Director, Dow Chemical) pointed out that Dow Chemical has a venture fund to purchase stakes in companies that have technology of interest to Dow. There are also other mechanisms by which large companies can foster technology transfer, for example, seed funding, investing, acquisitions. Establishing the ground rules for how a large company and a small company can work together successfully may require considerable negotiation. It is important for both parties to share the risk as well as the profit.

Summary

All sessions and components of the 3rd Ceramic Leadership Summit were well-attended and generated considerable discussion and interaction. Recurring themes included patents and intellectual property protection, business models for effective commercialization and technology transfer, opportunities for small businesses to collaborate with large businesses and National Laboratories, and funding sources required for moving from idea generation through product development. Important take-away messages include:

  • Changes in patent laws from “first to invent” to “first to file” will have a large impact on the way that companies — particularly small businesses — protect their IP. There will be added pressure to file patents to reduce the risk of being blocked by a competitor. Policies for protecting and licensing intellectual property are not uniform internationally.
  • It is useful to examine and compare the ways in which different countries manage and enable interactions between large and small businesses, universities, and National Laboratories to get the best overall outcome and return. In the United States, it is especially difficult to fund the gap between pioneering technology and established product — the so-called “valley of death”. Basic R&D funding is relatively plentiful and investment is available for established businesses to expand production. Funding profiles are different in other countries which changes the business landscape.
  • Large companies and National Laboratories are starting to view small businesses as a resource for new technology. This trend is already prevalent in the pharmaceutical industry, and it seems to be occurring more frequently in the advanced materials area.
  • Technologies that address issues involving population growth, energy demand, global warming, waste reuse, and environmental remediation are of particular interest both nationally and internationally.
  • Successful entrepreneurs are resourceful — many are “affiliated” with academic or research institutions where they are able to utilize facilities, expertise, staff.

Acknowledgments

Thanks to Richard Weber, Materials Development, Inc., chair of the Case Studies Session, for providing summary comments.

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