by Steve LeVine
He said he was prepared to do a deal with Chamberlain and Schroeder. “We’ll figure out a way to make this happen,” he said.
Two weeks later, the man was fired for unrelated reasons. His successor didn’t warm to Trend Tracker.
Chamberlain and Schroeder tried another idea. A material known as a dendritic polymer was generating excitement. It was a compound that could be turned into a variety of products. What caught Chamberlain’s and Schroeder’s attention was that it could prevent melting in silicon wafers, a crucial need in computers—you needed to remove as much metal as possible and keep down the heat or your system would go down. A New England inventor had found a way to make dendritic polymers cheaply, and Chamberlain and Schroeder took his idea to Silicon Valley. Here was a certain path to fortune. But no venture capitalist they met felt the same confidence. All the pair heard was, “Do you have anything in energy?” The issue was timing. The smart money was shifting from chips to alternative energy.
The start-up failures coincided with a fiasco in their day jobs. The Cabot bosses created new employee performance evaluations based on general personal goals—something about “you know, honesty and integrity,” as Schroeder put it. A group meeting was held to select five such goals. Both Chamberlain and Schroeder voted against “excellence” as an objective, “the dumbest thing I’d ever heard,” an immeasurable metric, they thought. To illustrate its inanity, Schroeder nominated what he considered an equally unquantifiable goal—“courage.” Chamberlain and a bloc of colleagues voted with him. They won. An unamused boss marched up. “Do you want to work here?” he shouted.
Chamberlain resigned. Awhile later, Schroeder did too.
With three children, Chamberlain needed a new paying job. Start-ups could be attempted on the side. Only one place in the Chicago area was still looking at nanotechnology, the science with which he felt most familiar—Argonne’s Center for Nanoscale Materials. But when he applied, Argonne managers assessed his résumé differently—like his previous bosses, they saw a salesman.
The new Washington credo called for an alignment of government and business. Federal lab managers had a new mandate to “do science in a way that was relevant” to industry, Chamberlain was told. He clearly possessed risk-taking entrepreneurial credentials. Thus, he could help arm Argonne for survival in the new political environment, precisely where it most needed help.
The lab offered Chamberlain a position in its intellectual property unit, the office that sought to license inventions to companies. He would handle the licensing of battery patents, which seemed ripe for exploitation but bafflingly were going unnoticed. Chamberlain accepted. But he told Schroeder, “I’m not actually going to do anything. The performance of this group is terrible. No one will notice if I don’t perform.”
• • •
Generally speaking, the traditional role of the national labs was fundamental research, the type that moved science forward but might or might not be commercially applicable. But things were changing. Argonne and industry started with an existing symbiotic relationship. With American research labs dismantled, companies were looking for others to conduct this basic work while they concentrated on design, manufacturing, and marketing. Argonne took the long view and saw itself as a throwback to the old private labs. But it had no commercial profile—it didn’t scale up or manufacture anything. It required relationships with companies to put its advances in front of people. This mutual need was now reinforced by politics: one would invent and the other manufacture and sell.
Chamberlain understood this symbiosis intuitively. Schroeder noticed that he began to mention meetings with companies. “Hey, do you remember when you took this job and you said you weren’t going to do anything?” Schroeder said.
“Yeah, I tried,” Chamberlain said. “But I guess I’m working now.’”
For a year, Chamberlain familiarized himself with the Battery Department’s patents. He read a thirty-page primer on the patent portfolio drafted for the lab by Ralph Brodd, who at eighty years old was probably the country’s preeminent private consultant on lithium-ion batteries. Brodd’s paper singled out the lab’s NMC formulation as a particularly attractive property. Still, the invention only truly captured Chamberlain’s attention when, around industry conferences, he kept hearing the representatives of major Asian companies boast about their ingenious adaptations of NMC to suit consumer desires like durability and safety. Chamberlain felt he was “opening a box and finding gold.” But what he did not hear was any of these companies taking note of Argonne’s patent for the chemistry.
The lab’s problem was that it lacked international patents for the invention. Seeking foreign rights could raise patent application fees to well over $100,000, especially if you filed in China, Japan, or South Korea, the places where, because of serious competition or thievery, one required protection. Much of that was legal fees, since the patent application was certain to be challenged on the first go-around. The patent team would not agree to international protection for every invention—it would be too expensive. So to save money on the NMC, the intellectual property unit had filed only for the American patent.
The simplest explanation for the lapse was that the patent team was not fully attuned to the coming international frenzy over batteries—the lawyers simply did not and perhaps could not know how big the market might become and just how unique the NMC could be within it. For the same reasons, Thackeray himself had not urged international filing.
Thackeray regretted it. You could detect the unhappiness in the battery group. In their view, it was one of those spectacularly shortsighted blunders that you could avert only by patenting everything, everywhere. Now the stuff was in the hands of numerous Asian companies that were either licensing a competing cathode manufactured by 3M, which held international patents, or, in most cases, simply availing of the NMC for free. Argonne—like John Goodenough with both of his big inventions—had not earned a dime.
Chamberlain was determined to corral back some of the lost payoff. It would not be simple, since no company would easily pay to license a product that it currently used for free, and those were the companies he was going after—those brazenly using the NMC with no license from anyone. One approach, of course, was a simple appeal to honor—Chamberlain could try to persuade one or more of the Asian players to buy a license out of fairness to Argonne. If that succeeded, other companies would probably take notice and, in order to avoid a potential lawsuit, pay for a license, too. But he doubted the strategy would work—what is fair in Asia, which seemed to him the most cutthroat business environment on the planet?
Here is where Chamberlain’s industry experience came in handy: he decided to create an artificial shortage of the NMC. The idea was to offer the sale of two—and just two—worldwide licenses to make the NMC. If anyone outside the United States wished to use Argonne’s NMC in their products, they would have to buy it from one of the lucky pair of companies, which, on purchasing the rights from the lab at a price to be set in a negotiation, would divide worldwide, non-American privileges to manufacture the material between themselves. Once those were dispensed, there would be no more such licenses. The result, he hoped, would be a suddenly excited market for the technology. It was a devilishly misleading strategy, since Argonne did not own international rights. Chamberlain thought it might just work. Anyone could gamble and manufacture an NMC-equipped battery technology without a license. But if they did, they could be assuming a big risk—one or both of these license holders were likely to sue.
It was a gutsy call for Chamberlain. What if the market simply ignored him?
Chamberlain had the advantage of Thackeray’s and Amine’s prestige. Over the years, the senior managers of virtually all the main manufacturers around the world had passed through and met with either or both of these battery stars. The pair introduced Chamberlain to the industry and he launched a global tour of companies. Two companies bit—the German chemic
al giant BASF and the Japanese chemical maker Toda. In separate 2008 ceremonies, Chamberlain signed them to agreements, among the largest in terms of cash in the lab’s history. Now there was a world market price for Argonne’s NMC, and the lab was earning money on a portfolio for which previously there had been none. If you wanted the NMC, and were normally averse to risk, you had to pay for it. That new fact had a measurable impact on the NMC’s desirability—Chamberlain’s phone began to ring. It was the same companies that had declined his NMC pitch. They had assumed he was bluffing. “How much did you say a license costs?” they would say. But he wasn’t bluffing—the two sole global manufacturing licenses were taken. There would be no more. Now they were upset. Chamberlain’s artificial shortage had turned into a genuine one.
As for the United States—no one was transgressing the Argonne patent for the simple reason that the United States had almost no lithium-ion industry. Virtually all the lithium-ion batteries sold in the United States were Asian. But Chamberlain wasn’t bothered by the thought of American violators—he wanted the NMC to be used in the United States. He wanted Argonne to be noticed at home, and if any companies did decide to slip some of the NMC into their products—such as the new electrified cars under development by Detroit—he would easily sign them up to licenses. No American company would openly flout such a clear-cut, government-funded patent.
So he began talking to American companies that were in the battery game. He pushed them to shift to the NMC. Johnson Controls and Procter & Gamble both said they could in principle manufacture batteries installed with the NMC. But they would have to give it a long think. Configuring factories anew for a different battery would take five years. That was too slow for Chamberlain. He wanted Argonne technology inside American-made devices now.
That is when he recalled Khal Amine’s electrolyte advance. Amine’s additive required the alteration of no machinery. He returned to Johnson Controls and Procter & Gamble. Both companies agreed that an electrolyte modification would be simple. Chamberlain had his first American customers.
Chamberlain noticed other changes. For the first time, he was receiving eager calls of general interest from American companies. They had heard about the NMC and the electrolyte additive. What else did Chamberlain have on the shelf? “We started getting visitors,” he said. Company managers wanted to see Argonne for themselves. The lab was becoming a player.
Chamberlain started to work up model licensing agreements covering all of Argonne’s battery portfolio. Companies had a choice: They could make an advance payment for rights to Amine’s additive, the NMC, or any other invention, then pay regular fees under a ten-year licensing plan. Or they could opt for the equivalent of success fees based on sales. Chamberlain treated it all as part of his evolving, big-picture strategy. “Portfolio management is part of the economic war,” he said.
12
A Little Talk with the South Koreans
Before long, word reached Chamberlain that the lithium-ion battery destined for GM’s new Volt plug-in hybrid-electric—the car-making giant’s attempt to take the early lead in electrified cars—would be supplied by LG Chemical, a South Korean company. Chamberlain also heard that the LG batteries relied on the NMC. He was not prepared to be seen as a sucker. He flew to Seoul.
Chamberlain was not going to sue LG—he doubted the U.S. government would approve a protracted patent battle, at least at the moment. For one thing, there was a strain of thinking that South Korea was not a direct competitor in the battery race. The argument was that the United States’ best hope might be an alliance, and if that was the case, it was an easy decision with whom: China, with its own geostrategic ambitions, was an illogical choice; Japan had established a record of working alone and not sharing its advances. That left South Korea, which itself perceived the advantages of an arrangement with the United States. In 2010, the Obama administration singled out LG for a huge, $160 million slice of a $2.4 billion stimulus fund created to launch the United States into the global race to dominate advanced batteries. LG joined a core group of companies that, by building federally backed battery factories in the United States, would give American industry a reasonable hope of winning the race.
Republican critics assailed the fund. Their gripe wasn’t what you might think—that the second-highest sum from the stimulus was going to a South Korean company. Instead, they complained that Obama was “picking winners.” He was ordaining that batteries and electric cars would undergird the next great economic boom without any credible way of knowing that was the case.
They had a point—no one could be certain that the foreseen industries would materialize. But the counterfactuals swamped such misgivings, including that the race itself was indisputably under way—battery makers were working to improve lithium-ion, carmakers were designing and planning the launch of electric cars, and governments around the world were awarding grants and subsidies to support their given teams.
Around Argonne, there was particular affinity for the South Koreans. When South Korean scientists and companies toured the lab, they behaved so collaboratively that after some years, they were treated as honorary Americans. They simply did not seem to pose the same threat as the Chinese.
Still, Chamberlain himself believed that, while the United States aggressively pursued its place in the battery age, it also had to nail down what was rightly its own. That was why, even though the South Koreans might be commercial allies, he was now going after them. He wanted Argonne to be paid.
So, in Seoul, he informed LG that it was about to infringe on Argonne patents. When the South Koreans took the stimulus money from the Obama administration, they accepted fine print in which they pledged to respect American patents. Even though LG was not itself necessarily bound by the Argonne patent outside the United States, it was in effect inducing GM—an American company that was bound by the patent—to infringe, which would be a contractual violation. This astute bit of legalistic arm-twisting persuaded the South Koreans—LG had to license, and it did.
Now there was GM. Because LG already possessed a license to the NMC, GM was not technically obliged to pay for one as well. But the carmaker was intrigued with Chamberlain’s talk of a higher-performance NMC 2.0. It specifically was captivated by work outside San Francisco by a small start-up called Envia Systems that, collaborating with Argonne, had itself licensed the NMC and already begun carving out new ground for it. Envia had improved upon the capabilities of the Thackeray and Johnson cathode, an indicator that NMC 2.0 could soon break out of the lab and become a commercial reality. GM wanted to be the first to have it. The cost of its Volt hybrid electric cars could be slashed and its sales trajectory elevated. Moreover, it could also power a future pure electric car that, unlike the Volt, would have no gasoline-fueled backup engine. So GM paid for an NMC license. Attached to the agreement was a clause—if Argonne succeeded in creating the advanced version of the NMC, and GM could deploy it in its future electric cars, the lab would receive a substantial bonus payment.
Chamberlain, Thackeray, Johnson, and Amine were elated. The patent-free environment in which the Asian juggernaut was operating had been breached. These companies could not simply decide they were going to use Argonne technology with impunity. They had to pay for the intellectual property. That precedent captured the attention of nonprofit labs around the country, research centers that had been victim to the same offense, especially universities. Chamberlain felt he had arrived when an MIT intellectual property lawyer pulled him aside at a conference. “We wish we could cut these kind of deals,” meaning the LG contract, the MIT man said. “With us, it’s all about start-ups. But you license start-ups and the big companies. If it’s a big company, you know the material is going to be manufactured.”
Now Argonne was being noticed by the big guys. It was licensing not only to the garage outfits, the ones that might or might not even exist next year, but also to the GMs of the world, those that could actually use the
licenses in products.
• • •
Chamberlain strolled through the Battery Department with numbers scribbled on mini Post-it notes. “You’re going to have this added to your next paycheck,” he told Chris Johnson, who, in protective glasses, was working at the bench. Johnson looked in disbelief.
“It’s for the licenses,” Chamberlain said.
The scientists were divvying up about $1.8 million. Chamberlain informed Thackeray, then Amine, and so on. Everywhere there was a stunned reaction. Chamberlain enjoyed it. As for the men, they held new respect for him. One day, Thackeray said, “You’re a battery guy now.”
• • •
In the summer of 2010, Argonne management assigned Chamberlain added duties—while retaining his IP licensing responsibilities, he was to lead the Battery Department. Thackeray intended no offense to Chamberlain’s predecessor, but from a leadership standpoint, he thought the lab now changed for the better. He called Chamberlain “a real superstar.” He might be expected to say that since it was his patent that was finally moving into automobiles, which is a big deal if that’s been your life’s work. But he meant to refer to Chamberlain’s attention to the commercial cachet of the lab as a whole. The average government functionary was a wimp when it came to patent enforcement—federal labs were not commercial enterprises, after all. But not Chamberlain. As he left the lab in his $63,000 BMW one day, Amine said, “This car is bought from the licensing money.” He credited Chamberlain. After a string of licensing deals, Xiaoping had new expectations. Amine would return home from the lab and she would ask, “Did you license again?”
The respect of peers is considerable juice for a scientist, but for Thackeray and Amine, commercialization was equivalent validation—and perhaps even greater. They would be eternally grateful to Chamberlain.
Thackeray saw the achievement from a highly personal perspective. In his thinking, these licenses meant that the “dominoes in the technology are beginning to fall.” Science was shifting from the lab to the factory. Now, the sixty-two-year-old Thackeray was looking for NMC 2.0 to close out his career. “I just keep plugging away,” he said. “I feel as though I got into a wave in South Africa and I am surfing. I am waiting to be dumped on a beach,” but so far the latter had not happened. Thackeray felt good about his career. Chamberlain made him believe he could leave proudly once NMC 2.0 was out the door. “Now there are so many people, and very good people coming up,” Thackeray said.