Foreign Firms with Deep Pockets Test U.S. Labs : Research: Science needs open borders, but critics say other countries are acquiring key knowledge on the cheap.

When Gerard Mourou, director of a big research laboratory at the University of Michigan, accepted $1 million in research funding from Japanese electronics giant Fujitsu Ltd., it seemed like a simple decision.

Without the money, key technologies under development at the university’s Center for Ultrafast Optical Science would wither, and neither the U.S. government nor U.S. industry was offering any funds.

But when a lab researcher filed for a patent on one of the center’s technologies and left to form his own company, the university was left in a quandary. Fujitsu had been promised exclusive rights to any inventions in exchange for its support. But now a U.S. firm was pledging to use the technology to create jobs in America.

This dilemma is becoming a common one in research institutions across the country. Taxpayer-supported universities and government laboratories--many of which had grown dependent on Cold War defense research--are starving for funds, and they are increasingly turning to foreign corporations for sustenance.

Critics say these firms are getting valuable technology on the cheap and transferring it overseas and that American workers and taxpayers are getting the short end of the deal.

“There is a lot of taxpayer money spent at universities and laboratories,” says Norman Kreisman, an adviser on international research at the Department of Energy, the agency which oversees national laboratories such as Lawrence Livermore Laboratory. “You have to ask whether there are situations where the taxpayer is subsidizing the export of his own job.”

Adds Erich Bloch, former director of the National Science Foundation and a frequent critic of the U.S. research establishment: “The U.S. taxpayer pays for the MITs and Stanfords of the world. The foreign companies just pay incremental costs. . . . They’re paying 10 cents on the dollar for the research.”

European drug companies have been among the most aggressive in mining America’s rich trove of technology. Two years ago, for example, Swiss drug maker Sandoz agreed to pay La Jolla-based Scripps Research Institute $300 million for first rights to patents coming out of the institute over a 10-year period. (Pressure from the National Institute of Health later forced Scripps to renegotiate some terms of the agreement.)

But because America’s trade with Europe is largely balanced and Europe’s top research institutions are accessible to American scientists, there has been little alarm about European access to U.S. research.

Most of the concern centers on Japan, which has a large and growing trade surplus with the United States. Because Japanese research efforts are structured differently, with most important research taking place at private corporations, there is a sense of injustice among American companies. They don’t have access to the leading-edge research in Japan in the same way Japanese companies do in America.

Many American researchers are also more concerned about Japan because of the comprehensiveness with which it has targeted every level of America’s technology food chain--from basic research to acquisitions of technology companies. There is fear that the Japanese will use American technology against American industry, just as they did in the television and semiconductor industries.

“The question is, do we get as much R&D; from them as they get from us?” Bloch asks rhetorically. “No. We have to look at this as a business relationship.”

Few believe that American research universities should cut off foreign access to basic research. A free flow of information is critical if America is to maintain its strength in the basic sciences, and the country’s research universities would be handicapped without access to talented foreign graduate students.

But cash-strapped universities are now focusing more of their efforts in areas with potential commercial applications. In fields such as biotechnology, scientific research is spawning commercial products much more quickly than in the past. That has raised new questions about exactly what constitutes the type of research that should remain accessible.

Well-funded foreign corporations that think long-term may be in a better position to capitalize on basic research advances than American corporations, which are often fixated on quarterly profits. U.S. firms voice support for university research and complain about foreign access, but they often fail to underwrite their rhetoric with dollars.

For example, Craig Barrett, chief operating officer at Intel Corp., is a former Stanford University professor and a staunch supporter of the institution. “Our research universities are an incredibly valuable commodity,” he says, warning that universities should resist focusing on research with two- or three-year targets.

Yet Intel itself is negotiating with USC to fund a short-term research agreement on image and data compression.

And the universities’ longtime sugar daddy, the federal government, simply doesn’t spend the way it once did. Universities grew fat on federal research through much of the 1970s and ‘80s, with annual federal research spending reaching $20 billion a year by the late 1980s. Since then, the trend has reversed itself. Federal support for research has dropped by 7% since 1988, and there are twice as many scientists competing for those shrinking dollars than there were two decades ago.

For many scientists, issues of competitiveness and job creation take a back seat to the simple thirst for dollars, which Japanese corporations stand ready to quench.

Japanese firms have developed elaborate networks of institutions to tap American research. There are about 195 Japanese corporate laboratories in the U.S., according to recent Commerce Department surveys, most located in key high-tech centers--and most were established in the past five years.

Fanuc, a big Japanese robot company, has built a new lab in the Bay Area to develop sophisticated sensors that would give robots a sense of touch. The lab has a staff of just three, but it plans to plug into research on a core technology called force sensing that is under way at UC Berkeley’s department of mechanical engineering.

“They have been working on force sensing for many years,” says Hadi Akeel, general manager for the Fanuc lab. “The technology has many applications, and we will work on the robotics” applications. Akeel expects a warm welcome. The company’s close ties to the department are reflected in a generously endowed Fanuc professorship and an oak-paneled Fanuc meeting room.

Japanese firms make good use of university industrial liaison programs, which gives them early access to research papers, regular updates on new research projects and welcome mats for corporate visitors--all for fees of $50,000 a year or less. The companies have also developed a broad range of more elaborate and expensive relationships with universities.

Critics say this access by Japanese companies comes much too cheap and easy. Massachusetts Institute of Technology has been frequently criticized for appearing overeager to accommodate Japanese researchers. And UC Irvine drew fire for a 40-year agreement allowing Hitachi Chemical Research to build a laboratory on campus in exchange for the university’s use of part of the building.

Hiroshi Sumiyama, president of Hitachi’s facility, says the company is primarily interested in developing a broad base of basic research for drug development rather than picking up commercial technology.

But Bloch, for one, is not satisfied with this explanation, maintaining that Japanese companies are paying peanuts to pick the brains of America’s best scientists. “You are going to spend more time with the individual who contributes money to your program,” says Bloch. “The taxpayer who paid for the lab for the past five years is out of mind. To the researcher, what is more important is who is paying for his research today.”

Corporate Japan’s stepped-up information-gathering efforts are a response to the nation’s failure to foster quality in its own basic research institutions, Japanese and American researchers agree. Japanese university research is held back by dilapidated laboratories and tiny research budgets, and generally cannot attract top talent.

“In some areas, you are eight to 10 years ahead of us,” says Takashi Kiuchi, director of the Cypress-based subsidiary of Mitsubishi Electric. The company’s research facility in Cambridge hires some of nearby MIT’s and Harvard’s best graduates.

“We have the top minds of Hungary, Israel, France, India, China and Germany,” says Kiuchi. “The ideas they bring in are fabulous. You can’t imagine that kind of discussion in Japan. This diversity--this is the source of U.S. creativity.”

Meanwhile, at home, insular Japanese corporations and universities are reluctant to tap foreign talent. “They don’t want to pay the price (of ethnic diversity),” says Chalmers Johnson, president of the Japan Policy Research Institute. “The attitude is ‘Let America absorb the foreigners and do the science, and we will buy the technology from them.’ ”

Some universities are trying to address concerns over foreign access by establishing tougher conditions. At UC San Francisco, officials are requiring foreign donors to pay for all direct and indirect costs of any research for which they are given patent rights. The university signed a $20-million, five-year deal last year with Daiichi Pharmaceuticals to establish a center to study atherosclerosis, or hardening of the arteries, a cause of heart disease.

Daiichi will get the first rights to negotiate for exclusive licenses to any drugs developed at the center and the right to delay publication of research while it decides whether or not to apply for a patent.

Without private money from companies such as Daiichi, says Karl Hittelman, associate academic vice chancellor at UCSF, “important work gets left undone.”

Some advocate far stricter rules. Richard Samuels, a political science professor at MIT, suggests that universities should charge higher fees for foreign corporate employees who come to university labs for short stays, and then channel the money to graduate students born in the United States. Still, some observers argue that having American technology developed by Japanese companies and made available to Americans in the form of finished products ends up benefiting Americans.

The crux of the problem, they say, lies not with Japanese acquisition of U.S. technology, but with the lack of a coherent American strategy to exploit the country’s superior research establishment.

“U.S. universities, laboratories and companies should figure out a way to be coupled together to maximize the flow of people and knowledge,” says Praven Chaudhari, a scientist at IBM’s Watson Research Center. “Otherwise, the knowledge is out there in the literature and available to anybody.”

Numerous programs designed to address this problem have been launched in recent years, with the Commerce, Energy and Defense departments each offering grants to corporations to work with universities in turning basic research into marketable products. These programs typically include provisions requiring participants to show that they will contribute to the U.S. economy through local manufacturing or other activities.

In the end, it will probably take a combination of stricter rules on foreign access to research and a greater sense of responsibility on the part of American universities and corporations to assure that Americans see the benefits of taxpayer-supported research.

At the University of Michigan, for example, the Center for Ultrafast Optical Science eventually granted the disputed patent to Picometrix, the firm co-founded by the center’s American researcher. But the action was taken only after Picometrix’s chief executive, Rob Risser, marshaled his extensive ties at the university to force the issue. (Fujitsu still received a non-exclusive patent and was allowed to transfer know-how from the center to its own labs.)

Risser is only partially mollified. “You have hundreds of millions of (tax) dollars spent on a technology, and it can all be transferred overseas in a couple of years,” he says. “It’s because faculty members will do anything for development and research dollars to run their labs.”

Japan’s Stake in American Know-How

Japan maintains a huge trade deficit with the United States in the area of technology, as represented by the royalties companies in the two countries pay for using other firms’ inventions and processes. Royalty payments, in billions of dollars:

Japan’s payments to U.S.: $2.92

U.S. payments to Japan: $1.12

Note: Assumes $1=100 yen

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While overall Japanese investment in the United States is down sharply, Japanese firms continue to build research facilities here.

Company Year opened Location Fanuc Ltd. 1994 Union City, Calif. Casio Computer 1994 San Jose NEC Corp. 1994 San Jose Zuken 1993 San Jose Nissan Motor 1993 Cambridge, Mass.

Company Focus of research Fanuc Ltd. Sensors for robots Casio Computer Personal digital assistants NEC Corp. Computer software Zuken Computer-aided design Nissan Motor Human sight and physiology

Sources: U.S. Department of Commerce. JEI Report