GAO

United States General Accounting Office

Report to Congressional Requesters

April 2000 ADVANCED 

TECHNOLOGY 

PROGRAM

Inherent Factors in 

Selection Process 

Could Limit 

Identification of 

Similar Research

GAO/RCED-00-114

Page 1 GAO/RCED-00-114 Advanced Technology Program

Contents

Letter 3

Appendixes Appendix I: Scope and Methodology 20

Appendix II: Communication Intelligence Corporation Project

Summary 23

Appendix III: Accuwave Corporation Project Summary 27

Appendix IV: Tissue Engineering, Inc., Project Summary 31

Appendix V: Comments From the Department of Commerce 35

Appendix VI: GAO Contact and Staff Acknowledgments 39

Figures Figure 1: The Number of Patents Issued from 1985 Through 

1999 for a Handwriting Recognition System 9

Figure 2: The Number of Patents Issued from 1985 Through 

1999 for Wavelength Division Multiplexing Systems and 

Components 11

Figure 3: The Number of Patents Issued from 1985 Through 

1999 Related to Tissue Engineering 13

Abbreviations

ATP Advanced Technology Program

CIC Communication Intelligence Corporation

GAO General Accounting Office

MIT Massachusetts Institute of Technology

NIST National Institute of Standards and Technology

PTO U.S. Patent and Trademark Office

SEB Source Evaluation Board

TE Tissue Engineering

WDM wavelength division multiplexing
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United States General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-283784 Letr

April 24, 2000

The Honorable F. James Sensenbrenner

Chairman

Committee on Science

The Honorable John R. Kasich

Chairman

Committee on the Budget

House of Representatives

The Advanced Technology Program (ATP), administered by the National 

Institute of Standards and Technology (NIST), was established to support 

research that accelerates the development of high-risk technologies, with 

the potential for broad-based economic benefits for the nation. The 

Omnibus Trade and Competitiveness Act of 1988 (P.L.100-418), which 

established ATP, states that ATP program administrators should ensure that 

they are not funding existing or planned research that would be conducted 

in the same time period in the absence of ATP financial assistance. ATP is a 

competitive cost-sharing program that since 1990 has funded 468 projects 

at a cost of about $1.5 billion in federal matching funds. As of December 

1999, 236 projects had been completed.

Research can provide both private benefits, which accrue to the owners of 

the research results, and social benefits, which accrue to society as a 

whole. In some instances, the private sector does not fund research that 

would be beneficial to society because doing so might not provide an 

adequate return on firms’ investments. In other words, the market is unable 

to fund certain types of research either at all or at the most desirable or 

optimal level, resulting in what is commonly referred to as “market failure.” 

To address this situation, the federal government, through tax credits or 

direct public funding, supports research that has very broad social benefits, 

such as basic research and research focused on developing technologies in 

areas such as public health and nutrition, energy conservation, and 

environmental protection. However, there is a continuing debate over 

whether the private sector has sufficient incentives to undertake research 

on high-risk, high-payoff emerging and enabling technologies without 

government support, such as ATP. 

Because of your concern that ATP may have funded research that was 

similar to research already being funded by the private sector, you asked us 
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to review the NIST ATP document entitled Performance of Completed 

Projects, Status Report Number 1, dated March 1999, which provided the 

status of the first 38 completed projects. As agreed with your offices, we 

determined (1) whether, in the past, ATP had funded projects with research 

goals that were similar to projects funded by the private sector and (2) if 

such cases were identified, whether ATP’s current award selection process 

ensures that such research would not be funded in the future. To determine 

whether ATP has funded projects similar to private sector projects, we 

chose 3 of the 38 completed projects, each representing a different 

technology sector—biotechnology; electronics; and information, 

computers, and communications. These three technology sectors represent 

26 of the 38 completed ATP projects, or 68 percent. We analyzed the ATP 

project files and held discussions with industry and academic experts, 

technical reviewers, and award recipients to assist in our examination of 

these projects. We also conducted patent searches on the technical areas 

associated with each of the three projects. Our objective was not to provide 

an evaluation of the quality of the research funded by ATP or the private 

sector nor the impact these projects may or may not have had on their 

respective industries. To address the second objective, we reviewed ATP’s 

current award selection process. We did not review the overall 

management of the program. (See app. I for a detailed discussion of our 

scope and methodology.) We performed our work from October 1999 

through April 2000 in accordance with generally accepted government 

auditing standards.

Results in Brief The three completed ATP-funded projects, which were approved for 

funding in 1990 and 1992, addressed similar research goals to those already 

funded by the private sector. The projects included an on-line handwriting 

recognition system, a system to increase the capacity of existing fiber optic 

cables for the telecommunications industry, and a process for turning 

collagen into fibers for human prostheses use. In the case of the 

handwriting recognition project, ATP provided $1.2 million to develop a 

system to recognize cursive handwriting for pen-based (i.e., without a 

keyboard) computer input. We identified several private firms that were 

conducting similar research on handwriting recognition at approximately 

the same time the ATP project was funded. In fact, this line of research 

began in the late 1950s. In addition, we identified multiple patents, as early 

as 5 years prior to the start of the ATP project, in the field of handwriting 

recognition. We found similar results in the other two projects.
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Two inherent factors in ATP’s current award selection process—the need to 

guard against conflicts of interest and the need to protect proprietary 

information—make it unlikely that ATP can avoid funding research already 

being pursued by the private sector in the same time period. These factors, 

which have not changed since 1990, make it difficult for ATP project 

reviewers to identify similar efforts in the private sector. For example, to 

guard against conflicts of interest, the program uses technical experts who 

are not directly involved with the proposed research. Their acquaintance 

with on-going research is further limited by the private sector’s practice of 

not disclosing its research efforts or results so as to guard proprietary 

information. As a result, it may not be possible for the program to ensure 

that it is consistently not funding existing or planned research that would 

be conducted in the same time period in the absence of ATP financial 

assistance.

Background ATP, which began in fiscal year 1990, was initiated to fund high-risk 

research and development (R&D) projects with broad commercial and 

societal benefits that would not be undertaken by a single company or 

group of companies, either because the risk was too high or because the 

economic benefits of success would not accrue to the investors. ATP is 

viewed as a mechanism for fostering investment in areas in which social 

returns would exceed private returns. ATP has addressed other 

opportunities to achieve broader social goals such as small business 

participation, as well as the establishment of joint ventures—for high-risk 

technologies that would be difficult for any one company to justify, 

because, for example, the benefits spread across the industry as a whole. 

Thus, ATP is seen by some as a means of addressing market failure in 

research areas that would otherwise not be funded, thereby facilitating the 

economic growth that comes from the commercialization and use of new 

technologies in the private sector. Advocates of the program believe that 

the government should serve as a catalyst for companies to cooperate and 

undertake important new work that would not have been possible in the 

same time period without federal participation. Critics of the program view 

ATP as industrial policy, or the means by which government rather than the 

marketplace picks winners and losers. 

ATP’s cooperative agreements are made through announced annual 

competitions. The ATP provides multiyear funding to single companies and 

to industry-led joint ventures. The proposal review and selection process is 

a multistep process based on NIST regulations. In general, these steps 

include: a preliminary screening, technical and business reviews, 
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semifinalist identification, oral reviews, ranking, and final selection. At the 

beginning of each round of ATP competitions, NIST establishes Source 

Evaluation Boards (SEBs) to ensure that all proposals receive careful 

consideration. Each SEB is comprised of NIST technical experts as well as 

outside specialists with backgrounds in business and economics. ATP 

supplements the SEBs with outside technical reviewers, generally federal 

government experts in the specific industry of the proposal. Independent 

business experts are also hired on a consulting basis, including high-tech 

venture capitalists, people who teach strategic business planning, retired 

corporate executives from large and small high-tech businesses, as well as 

economists and business development specialists. All SEB members and 

outside reviewers must sign nondisclosure statements, agree to protect 

proprietary information, and certify that they have no conflicts of interest. 

As part of the proposal evaluation process, ATP uses the external reviewers 

to assess the technical and business merit of the proposed research. Each 

proposal is sponsored by both technical and business SEB members, 

whose roles include identifying reviewers, summarizing evaluative 

comments, and making recommendations to the SEB. The SEB evaluates 

the proposals, selects the semifinalists, conducts oral interviews with 

semifinalists, and ranks the semifinalists. A source selecting official makes 

the final award decisions based on the ranked list of proposals from the 

SEB. 

The three projects that we reviewed received funding through the ATP 

competitions announced in 1990 and 1992. In those years, the selection 

criteria included: scientific and technical merit, potential broad-based 

benefits, technology transfer benefits, the proposing organization’s 

commitment level and organizational structure, and the qualifications and 

experience of the proposing organization’s staff. Each of the five selection 

criteria was weighted at 20 percent. Today, these same selection criteria are 

used but are grouped into two categories, each weighted 50 percent. The 

“Scientific and Technical Merit,” category addresses a variety of issues 

related to the technical plan and the relevant experience of the proposing 

organization. The second category, “Potential for Broad-Based Economic 

Benefits,” addresses the means to achieving an economic benefit, 

commercialization plans, as well as issues related to the proposer’s level of 

commitment, organizational structure, and management plan. Technical 

and business reviewers complete documentation called technical and 

business evaluation worksheets addressing various aspects of these 

criteria.
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Three ATP Projects 

Addressed Similar 

Research Goals to 

Projects in the Private 

Sector 

The three completed projects that we reviewed addressed research goals 

that were similar to goals that the private sector was addressing at about 

the same time. The three projects were funded in the early 1990s, and our 

efforts to locate similar research involved identifying, retrospectively, 

research that we now know was going on at that time. Each of the three 

projects was from a different sector of technology—computers, 

electronics, and biotechnology. The projects include (1) an on-line 

handwriting recognition system for computer input, (2) a system to 

increase the capacity of existing fiber optic cables for the 

telecommunications industry, and (3) a process for turning collagen into 

fibers for human prostheses use. (Apps. II through IV describe each of the 

ATP projects and the private sector research projects whose goals were 

similar to the ATP-funded projects.) 

ATP Project on Handwriting 

Recognition 

Both the ATP project and several private sector projects had a similar 

research goal of developing an on-line system to recognize natural or 

cursive handwritten data without the use of a keyboard. This technology 

would make computers more useful where keyboard use is limited by 

physical problems or in situations where using a keyboard is not practical. 

On-line handwriting recognition means that the system recognizes 

handwritten data while the user writes. The primary technical problem in 

handwriting recognition is that writing styles vary greatly from person to 

person depending upon whether the user is in a hurry, fatigued, or a variety 

of other factors. While the technology for obtaining recognition of 

constrained careful writing or block print writing was commercially 

available, systems for cursive writing recognition were not commercially 

available because of the greater handwriting variability that was 

encountered.

The ATP project we reviewed sought to develop an on-line natural 

handwriting recognition system that was user-independent and able to 

translate natural or cursive handwriting. Communication Intelligence 

Corporation (CIC) was the award recipient. CIC used its ATP funding of 

$1.2 million from 1991 to 1993 to build its own algorithms 1

 and models for 

developing its handwriting recognition system. During the project, CIC 

created a database that includes thousands of cursive handwriting samples 

1

Algorithm here refers to the mathematical procedures involved in recognizing writing as it 

is being written on a computer device.
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and developed new recognition algorithms. Some of this technology has 

been incorporated into a registered software product that has the ability to 

recognize cursive writing in limited circumstances.

According to the experts we interviewed, as well as literature and patent 

searches, several companies were attempting to achieve a similar goal of 

handwriting recognition through their research around the same time that 

the ATP project received funding. Some of the key players in the private 

sector conducting research on cursive handwriting recognition included 

Paragraph International (in collaboration with Apple Computer) and 

Lexicus (which later became a division of Motorola). For example, Apple 

licensed a cursive handwriting recognition system from a Soviet company, 

Paragraph International, according to articles published in computer 

magazines in October 1991. According to these sources, this technology 

provided Apple with a foundation for recognizing printed, cursive, or block 

handwritten text.

Another indication of research of a similar goal appeared in the October 

1990 edition of PC Week, which reported that “handwriting recognition is 

an emerging technology that promises increased productivity both for 

current microcomputer owners and for a new breed of users armed with 

hand-held ‘pen-based’ computers.” Similarly a technical journal article 

indicated that there was renewed interest in the 1980s in this field of on-line 

handwriting recognition, from its advent in the 1960s, because of more 

accurate electronic tablets, more compact and powerful computers, and 

better recognition algorithms.2

2

IEEE Transactions on Pattern Analysis and Machine Intelligence, “The State of the Art in 

On-Line Handwritting Recognition.” (Aug. 1990), vol. 12, no. 8.
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Moreover, as shown in figure 1, according to the U.S. Patent and Trademark 

Office’s (PTO) database, over 450 patents3

 were issued on handwriting 

recognition software, concepts, and related products from 1985 through 

1999, indicating that research of a similar goal was being conducted around 

the time of the ATP project. Given the fact that it can take many years 

between the time a research project takes place and the time that an 

outcome is realized, this time period for a patent search allowed us to 

determine whether there was research ongoing during the time of the ATP 

project. The dates of the patents actually occurred sometime after the 

research was conducted. And, as we reported in a prior report,4

 the time 

between the point when a patent application is filed until the date when a 

patent is issued, or the application is abandoned, ranged from 19.8 months 

to 21 months, adding additional time to when the research was done.

Figure 1: The Number of Patents Issued from 1985 Through 1999 for a Handwriting Recognition System

Source: Prepared by GAO using PTO’s data.

3

A patent is a grant given by a government to an inventor of the right to exclude others for a 

limited time (usually 20 years) from making, using, or selling his or her invention.

4

 Intellectual Property: Comparison of Patent Examination Statistics for Fiscal Years 1994-

1995 (GAO/RCED-97-58, Mar. 13, 1997).

Number of patents

0

20

40

60

80

100

120

1985 1987 1989 1991 1993 1995 1997 1999

Year patent issued
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 ATP Project on Capacity 

Expansion of Fiber Optic 

Cables

Another ATP project we reviewed, which proposed to develop a system to 

increase the capacity of existing fiber optic cables for the 

telecommunications industry, also had a similar goal to that of research in 

the private sector. At the same time, firms in the private sector were 

attempting to increase the number of light signals that can be transmitted 

through a single strand of fiber optic cable using a technology called 

wavelength division multiplexing (WDM). 5

 In the 1980s, telephone 

companies laid fiber optic cables across the United States and other 

countries to create an information system that could carry significantly 

more data than the copper wires they replaced. Tremendous increases in 

cable traffic, primarily from the Internet, have crowded these cables. WDM 

technology was aimed at providing a cost-effective alternative to the 

expensive option of installing additional fiber optic cables.

Accuwave Corporation (Accuwave) was the ATP award recipient. 

Accuwave used its ATP funding of approximately $2 million from March 

1993 through March 1995 to develop a wavelength division multiplexing 

system that would substantially increase the number of signals that could 

be transmitted through a single optical fiber strand, using the concept of 

volume holography. Volume holography uses holograms to direct multiple 

light signals simultaneously through a single fiber strand. Accuwave was 

able to make improvements on these issues but not enough to fully develop 

and market a successful WDM system for the telecommunications market. 

In 1996, a competitor beat Accuwave to the market. After the completion of 

the ATP project, Accuwave filed for bankruptcy protection due to its 

inability to successfully commercialize a wavelength division multiplexing 

system.

Other private firms were involved in research with a similar goal of 

increasing the capacity of fiber optic cable at about the same time as 

Accuwave was conducting its research. Conceptual research on such 

systems dates back to the early 1980s, but development and 

commercialization did not flourish until the mid- to late 1990s. Bell Labs 

(now Lucent Technologies), Nortel Networks, and Ciena Corporation, 

among others, were considered some of the major competitors in the 

industry. In the early 1990s, these firms were attempting to develop WDM 

technology using different methods and materials. For example, Ciena 

5

A fiber optic cable consists of many extremely thin strands of glass or plastic, each capable 

of transmitting light signals. Wavelength division multiplexing transmits separate light 

signals through a single optical fiber strand at different wavelengths.
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Corporation developed a system that incorporated fiber-Bragg gratings, 

which are filters embedded directly onto fiber optic cable that help to 

separate multiple light signals through a single fiber strand. 

We also found an indication of WDM-related research through a review of 

issued patents. According to PTO’s database, over 2,000 patents were 

issued related to wavelength division multiplexing components, systems, 

and concepts from 1985 through 1999. As shown in figure 2, the patents 

issued ranged from 10 patents in 1985 to 493 in 1999.

Figure 2: The Number of Patents Issued from 1985 Through 1999 for Wavelength Division Multiplexing Systems and

Components

Source: Prepared by GAO using PTO’s data.

 ATP Project on 

Regenerating Tissues and 

Organs

Both the ATP project and private sector projects we identified in the tissue 

engineering field had similar broad research goals of developing biological 

equivalents for defective tissues and organs utilizing diverse technical 

approaches. ATP’s project proposed procedures for extracting, storing, 

spinning, and weaving collagen (the main constituent of connective tissue 

and bones) into fibers suitable for human prostheses that could induce the 

body’s cells to regenerate lost tissue. Tissue Engineering, Inc., received 

Number of patents

0

100

200

300

400

500

600

1985 1987 1989 1991 1993 1995 1997 1999

Year patent issued
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ATP’s award of about $2 million for use over the years 1993 through 1996. 

The company’s long-term and yet unrealized goal is to transplant these 

prostheses into humans, after which the collagen framework, or scaffold, 

would induce the growth and function of normal body cells within it, 

eventually remodeling lost human tissue and replacing the scaffold. 

Within the very innovative field of tissue engineering, however, many 

competitors were attempting to achieve similar broad research goals. 

Organogenesis, the Collagen Corporation, Integra LifeSciences, Advanced 

Tissue Sciences, Genzyme Tissue, Osiris Therapeutics, Matrix 

Pharmaceuticals, and ReGen Biologics are key players in the market to 

develop structures that could replace or regenerate cells, tissues, and 

organs such as skin, teeth, orthopedic structures, cartilage, and valves. A 

number of these companies have subsequently received ATP awards. In 

addition, universities and medical schools have researchers investigating 

the many possibilities to engineer human tissues, and eventually complex 

organs, such as the liver, pancreas, and heart. According to one expert, 

there is a great deal of competition within the field of tissue engineering. 

Although the Tissue Engineering, Inc., research focused on the use of 

collagen as the basis for these structures, other companies were pursuing a 

variety of technical approaches for addressing the goal of developing 

biological equivalents for defective tissues and organs. In addition to 

research in collagen, other companies and researchers have also been 

attempting to create human tissues and organs from other biological 

materials, synthetics, and hybrid products, which are both biologic and 

synthetic. For example, researchers from the Massachusetts Institute of 

Technology (MIT) developed an artificial skin product using collagen and a 

natural polymer. Several companies have since developed comparable 

products. In 1986, researchers from MIT and a hospital in Massachusetts 

began inserting cells into scaffolds created of biodegradable polymer. As 

the cells multiply, tissues form. The magazine BusinessWeek reported this 

concept as “an elegantly simple concept that underlies most engineered 

tissue.”6

 Two competitors, Integra LifeSciences and Organogenesis, 

reported that they were also doing work on the use of collagen in various 

applications. Although their technical approaches were different than the 

ATP project, the broad research goals were similar.

6

“Biotech Bodies,” BusinessWeek, July 27, 1998.
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In addition to our discussions with experts and literature searches, patent 

research shows that there was activity related to the field of tissue 

engineering prior to and during the ATP project. According to a search 

done on the PTO website, at least 370 patents were issued related to cell 

culturing, scaffolding or matrix development, and tissue engineering from 

1985 through 1999. Experts have also indicated that there are several 

patents related to the field, with a considerable amount of overlap in the 

technologies described in those patents. Figure 3 depicts patents issued for 

research related to tissue engineering from 1985 through 1999.

Figure 3: The Number of Patents Issued from 1985 Through 1999 Related to Tissue Engineering

Source: Prepared by GAO using PTO’s data.

Number of patents

0

5

10

15

20

25

30

35

40

1985 1987 1989 1991 1993 1995 1997 1999

Year patent issued
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ATP’s Current Award 

Selection Process Is 

Unlikely to Avoid 

Funding Similar 

Research 

Two factors in ATP’s current award selection process could result in ATP’s 

funding research similar to research that the private sector would fund in 

the same time period. These two factors are inherent in the review process 

and limit the information the reviewers have on similar private sector 

research efforts. Due to conflict-of-interest concerns, technical reviewers 

are precluded from being directly involved with the proposed research, 

making them less likely to know about all the research in an area. Also, the 

information available about private sector research is limited because of 

the private sector practice of not disclosing research results. Until a patent 

is issued, a private sector firm generally publishes very few details about 

the research to protect proprietary information. Therefore, it is difficult for 

the reviewers to identify other cutting edge research.

ATP’s Conflict-of-Interest 

Provision Limits Its Ability 

to Identify Similar Research

ATP selection officials rely on outside technical reviewers to evaluate a 

proposal’s scientific and technical merit. All reviewers must certify that 

they have no conflicts of interest. To minimize possible conflicts of interest, 

the technical reviewers are generally federal government employees who 

are experts in the specific technology of the research proposal but are not 

directly involved with the proposed research area. Although this approach 

helps to guard against conflict of interest, it has inherent limitations on the 

program’s ability to identify similar research efforts. The technical 

reviewers rely on their own knowledge of research underway in the private 

sector. One of the technical reviewers we interviewed said that he did not 

personally know of other companies that were doing similar work. 

However, he believed that it was unlikely that there were not dozens of 

others working on the same issue.

Proprietary Information 

Limits ATP’s Ability to 

Identify Similar Research

ATP reviewers are significantly limited in their ability to identify similar 

research efforts by an inherent lack of information on private sector 

research. Although ATP officials use several sources such as colleagues, 

conferences and symposia, and current technical literature, to try to 

identify research efforts conducted by the private sector and the federal 

government, this information is often proprietary. Most of the private 

sector and university experts we consulted agreed that it can be very 

difficult to identify the specific research that private sector firms are 

conducting, especially considering the competitive nature of most 

industries. The early release of information on a company’s research could 

be costly to the firm. If a competing firm could determine the nature and 

progress of another company’s research, it could help the competitor to 
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develop and commercialize an identical or higher-quality product before 

the other firm. At the very least, the early release of research information 

by a firm can give competitors an idea as to the focus of the firm’s strategic 

plan. Thus, many firms are very careful about releasing detailed 

information related to research and development activities they are 

conducting.

Conclusions Our retrospective look at the three ATP research projects showed that their 

goals were similar to research goals already being funded by the private 

sector. Looking at the process that ATP currently uses to select projects, 

we found two inherent factors—the need to guard against conflicts of 

interest and the need to protect proprietary information—that limit ATP’s 

ability to identify similar research efforts in the private sector. These two 

factors have not changed since the beginning of the program. We recognize 

the valid need to guard against conflicts of interest and to protect 

proprietary information; thus, we are not recommending any changes to 

the award selection process. However, we believe that it may not be 

possible for the program to ensure that it is consistently not funding 

existing or planned research that would be conducted in the same time 

period in the absence of ATP financial assistance. 

Agency Comments We provided a draft of this report to the Department of Commerce for its 

review and comment. The Department’s National Institute of Standards and 

Technology (NIST), which administers the Advanced Technology Program, 

disagreed with both the methodology that we used and the conclusions that 

we reached in the draft report. NIST’s disagreement focused on six areas, 

which are discussed in the following sections. NIST’s comments and an 

enclosure describing the technical approaches of the three ATP projects 

that we reviewed are in appendix V.

First, NIST states that the report implies that the federal government 

should not fund research that shares the same overall goal as research 

funded outside of the government. We disagree. NIST believes that it is 

appropriate for the federal government to fund research projects that have 

similar research goals to research funded by the private sector as long as 

that research has an innovative technical approach and has the potential 

for broad-based economic benefits. However, the Omnibus Trade and 

Competitiveness Act, which established the ATP, states that ATP program 

administrators should ensure that they are not funding existing or planned 
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research that would be conducted in the same time period in the absence of 

ATP financial assistance.

Second, NIST believes that our report failed to understand and address a 

central aspect of the ATP: that it selects projects for innovative, high-risk 

technical approaches for break-through solutions to challenging problems 

and that these technical innovations offer broad potential national benefits. 

To the contrary, throughout the report we state that the goal of the program 

and the criteria for project selection support innovative research that 

accelerates the development of high-risk technologies with the potential 

for broad-based economic benefits for the nation. Furthermore, our report 

states that advocates of the program believe that the government should 

serve as a catalyst for companies to cooperate and undertake important 

new work that would not have been possible in the same time period 

without federal participation.

Third, NIST states that our report fails to define or address the distinction 

between funding projects with similar “research goals” versus funding 

projects with “unique project-specific objectives and technical 

approaches.” We disagree. Throughout our report we distinguish between 

broad research goals and specific technical approaches. In determining 

whether, in the past, ATP had funded projects with research goals that were 

similar to projects funded by the private sector, our report identifies many 

competitors who were attempting to achieve similar broad research goals 

to those of the three ATP-funded research projects, albeit using different 

technical approaches. Our report includes descriptions of the unique 

technical approaches of the ATP-funded projects and states that the other 

firms were attempting to develop these technologies using different 

methods and materials. NIST included, as an enclosure to its comments, a 

description of the technical approaches of each of the projects, which we 

believe generally mirrors much of our descriptions of the projects, included 

in appendixes II through IV. While the ATP-funded projects had unique 

technical approaches, nevertheless, the broad research goals were similar 

to research goals of projects being funded by the private sector.

Fourth, NIST states that our report does not discuss the competitive value 

of having differences in the technical approaches of the research within the 

broad research fields being addressed. NIST further noted that the report 

does not mention the national benefits, which would result from 

accelerating the high-risk, yet critical technology resulting from specific 

projects. We agree that there could be value to funding a number of 

technical approaches or to accelerating critical technologies. However, if 
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ATP is to ensure that it is not funding existing or planned research that 

would be conducted in the same time period in the absence of ATP 

financial assistance, the fact remains that we found that the three ATPfunded projects that we reviewed addressed similar research goals to those 

already funded by the private sector. If the private sector is funding any of 

the technical approaches toward the broad research goal, the benefits 

resulting from these efforts may be realized without federal funding.

Fifth, NIST states that in conducting our review we “hand-picked” 3 of 38 

completed projects, “presumably with the intent of making the strongest 

possible argument,” and that we used these projects to draw conclusions 

that are unreasonably far reaching. This assertion is not correct. We 

selected these projects without prior knowledge of the industries or the 

technological approaches of the research projects. We chose three projects 

each representing a different technology sector. These three technology 

sectors represent 26 of the 38 completed ATP projects, or 68 percent. We 

have added additional information to explain the scope and methodology 

used in our case study approach. Our conclusion based on the review of the 

three projects is that the research goals of these three projects were similar 

to research goals already being funded by the private sector. To assist in 

our examination of these projects, we held discussions with outside 

experts, as well as with ATP technical reviewers and Source Evaluation 

Board members. These outside experts helped us to understand the 

industries within which each of the projects selected as case studies were 

operating and provided their professional assessment of whether similar 

research to that undertaken by the ATP award recipient was ongoing. We 

identified two inherent factors in ATP’s current award selection process—

the need to guard against conflicts of interest and the need to protect 

proprietary information—that led us to the conclusion that it may not be 

possible for the program to ensure that it is consistently not funding 

existing or planned research that would be conducted in the same time 

period in the absence of ATP financial assistance. This conclusion was 

based principally on our analysis of the current award selection process 

supplemented by our analysis of the three ATP-completed projects. 

Sixth, NIST stated that if we “were to review all 199 ATP completed 

projects to date, the GAO might still have come to the same conclusions, 

i.e. that the research goals may have been similar to those funded by the 

private sector.” However, NIST states that even a review of all of the 

completed projects “would utterly fail to capture the impact of the ATP.” 

Our objective was not to provide an evaluation of the quality of the 

research funded by ATP or the private sector nor the impact these projects 
B-283784

Page 18 GAO/RCED-00-114 Advanced Technology Program

may or may not have had on their respective industries. We have added this 

clarification to the report. Our review of completed projects was limited to 

identifying whether, in the past, ATP had funded projects with research 

goals that were similar to projects funded by the private sector. 

As arranged with your offices, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days after its 

issuance date. At that time, we will send copies of this report to the 

appropriate House and Senate committees; interested Members of 

Congress; the Honorable William M. Daley, Secretary of Commerce; 

Raymond G. Kammer, Director, National Institute of Standards and 

Technology; and Alan Balutis, Director, Advanced Technology Program.

If you have any questions regarding this report, please contact me at (202) 

512-3841. Key contributors to this report are listed in appendix VI.

(Ms.) Gary L. Jones

Associate Director, Energy, Resources,

 and Science Issues
Page 19 GAO/RCED-00-114 Advanced Technology Program
Page 20 GAO/RCED-00-114 Advanced Technology Program

Appendix I

Scope and Methodology ApApenednxidxeiIs

To determine whether the Advanced Technology Program (ATP) had 

funded projects with research goals similar to projects being funded by the 

private sector, we examined 3 of 38 completed ATP projects from ATP’s 

status report entitled Performance of Completed Projects, dated March 

1999. These projects were chosen from the following technology sectors: 

information, computers, and communication; electronics; and 

biotechnology. These three technology sectors represent 26 of the 38 

completed ATP projects, or 68 percent. We consulted with ATP officials at 

the beginning of our review regarding which technology sectors would 

provide a useful framework for our review. These officials supported our 

selection of the three industrial sectors and gave us information showing 

that they had each received increasing numbers of awards, since the start 

of the ATP program. ATP funded the selected projects as a result of two 

different competitions held in 1990 and 1992. We rank-ordered all of the 

projects within the three technology sectors by dollar value. All three 

selected projects had received a medium to high dollar award from ATP. As 

with all case studies, we did not attempt to generalize to the entire 

program. 

It can be very difficult to identify the specific research that private sector 

firms are conducting. Firms are very careful about releasing detailed 

information related to research and development activities they are 

conducting given the competitive nature of most industries. Also, it can 

take many years between the time a research project takes place and the 

time that an outcome is realized. Thus, we chose projects that ATP 

awarded as a result of competitions held in the early 1990s to 

retrospectively identify similar research projects. 

To fully understand the technologies under review, we studied the official 

ATP project files, located at the National Institute of Standards and 

Technology (NIST) headquarters in Gaithersburg, Maryland, for the three 

projects we selected. According to NIST officials, all documents 

maintained in these files are considered proprietary information. Within the 

project files, we reviewed the original project proposals, technical and 

business reviewer comment sheets, sponsor summaries and 

recommendations, and the project manager’s quarterly status reports and 

final report. To ensure the confidentiality of the proprietary information, 

none of this information was shared with the experts that we consulted. 

These experts were provided project information drawn from ATP’s March 

1999 Status Report. 
Appendix I

Scope and Methodology

Page 21 GAO/RCED-00-114 Advanced Technology Program

We interviewed ATP staff, outside experts, and award recipients to gain an 

understanding of each of the technology sectors and related research and 

to obtain their professional assessment of whether similar research to that 

undertaken by the ATP award recipient was being funded by the private 

sector during the same time period. To identify the ATP staff, we used 

NIST’s list of the technical and business reviewers and members of the 

Source Evaluation Board (SEB), who had reviewed the project proposals. 

We asked these reviewers to identify additional knowledgeable contacts to 

interview and applicable reports and articles that would supplement our 

knowledge of the technologies under review. For the handwriting 

recognition project, we interviewed five NIST scientists who were either 

technical reviewers or members of the SEB related to the project and 11 

experts from industry and academia. For the electronics project, we 

interviewed four NIST scientists who were either technical reviewers or 

members of the SEB related to the project and 13 experts from industry, 

academia, or other government agencies. For the biotechnology project, 

we interviewed two NIST scientists who were technical reviewers related 

to the project and 18 experts from industry, academia, or other government 

agencies. These outside experts represented Fortune 500 companies, such 

as Lucent, Microsoft, and IBM; major universities such as MIT and the 

University of Maryland; and government agencies, such as the National 

Aeronautics and Space Administration and the National Science 

Foundation.

We developed a structured interview to facilitate our conversations with 

the ATP staff, outside experts, and award recipients. The interview 

document provided questions that addressed issues such as the level of 

similar research at the time of the ATP funding, the identification of private 

sector firms that conducted similar research, and the innovativeness of the 

ATP proposals, among others.

To gather published and other information about each industry, we 

conducted a literature search, as well as an Internet search. The literature 

search used technical library sources to identify both academic journal and 

industry-specific publications with articles addressing the research goals 

relevant to each project. In addition, many of the technical experts 

identified articles for us that we reviewed. The Internet searches provided 

further information about the technologies under review and the private 

sector companies involved in similar research at the time that the ATP 

projects received funding. For example, we conducted a search on 

“wavelength division multiplexing” on the Internet, and we identified 

several articles related to this technology that provided background 
Appendix I

Scope and Methodology

Page 22 GAO/RCED-00-114 Advanced Technology Program

information for our work. In addition, these articles provided contact 

names at some of the private firms conducting similar research and 

academic and/or consultant contacts who have expertise in the 

technologies under review. The project files at NIST provided contact 

information for the ATP award recipients.

To show the level of related research that firms were conducting during 

and around the time ATP funded the projects we reviewed, we also 

conducted patent searches on the technical areas associated with each 

project. To conduct our patent search, we accessed the U.S. Patent and 

Trademark Office’s (PTO) website (www.uspto.gov ), which contains PTO’s 

patent data base. For each of the three technologies we reviewed, we 

conducted a full-text keyword search of the PTO’s patent data base, using 

key words that describe each technology as the criteria. For example, for 

our search for patents on related research to the ATP project on 

handwriting recognition software, we executed a search using 

“Handwriting Recognition” as the criterion. We repeated this search for 

individual years of patent issuance, beginning with 1985 and ending with 

December 1999. The patent information demonstrates that the private 

sector was working on research topics that related to the ATP projects we 

reviewed because the patents were issued after the research was 

conducted.

We also reviewed ATP’s current award selection process to determine 

whether it could ensure that ATP would not fund research similar to that 

undertaken by the private sector. This process applies to all project 

proposals submitted to the ATP program. In conducting this review, we 

examined published reports on the ATP program, legislation that created 

and shaped the ATP program, and internal NIST documentation that 

describes the rules and processes of the ATP program. We also discussed 

ATP’s award selection process with various NIST officials, including ATP 

management, project managers, and SEB members. We did not 

independently verify the data we obtained from NIST or the other entities 

we contacted. We conducted our review from October 1999 through April 

2000 in accordance with generally accepted government auditing 

standards.
Page 23 GAO/RCED-00-114 Advanced Technology Program

Appendix II

Communication Intelligence Corporation 

Project Summary ApendxiI

This ATP project received funding from the 1990 competition, the first 

solicitation for the program. The project was completed in 1993. The ATPfunded software technology is widely licensed, and a new product fully 

incorporating the software is due on the market soon. The company also 

has several new products related to multilingual handwriting recognition 

systems and other software technologies that have been successful in the 

marketplace. 

Project Title 

Computer Recognition of Natural Handwriting (Communication 

Intelligence Corporation (CIC))

Amount of Funding Granted

$1,264,000 (58%), with CIC contributing $912,000 (42%) toward the project.

Summary of Project Purpose

To develop a natural handwriting data-entry system for computers for 

applications where pen-based entry works best and for use by people who 

do not or cannot use a keyboard.

Market Data 

Dataquest, Inc., predicted the market for pen-based computers would 

increase, potentially to $13.1 billion by 1995. 

Description of Industry/Technology 

Handwriting recognition was an emerging technology promising increased 

productivity both for microcomputer owners and for users utilizing new 

hand-held “pen-based” computers. Starting in the late 1950s, character 

recognition developed into two areas—whether the characters to be 

recognized were machine-printed or handwritten. Thus, a separate body of 

technology research grew out of the areas of machine print and 

handwritten text. For handwritten text, further research efforts were 

focused on two additional areas—printed and cursive writing. To facilitate 

handwritten text recognition, a pen-based, or stylus-based computer, 

(essentially a tablet computer) that uses an electronic pen, or stylus, in 

conjunction with a digitizing screen for data input is employed. These 

systems were expected to supplement, rather than replace, traditional 

desktop systems. There was concern, however, that high introductory 

prices and lack of consistent handwriting recognition capabilities would 

impede the growth of pen-based systems. 
Appendix II

Communication Intelligence Corporation 

Project Summary

Page 24 GAO/RCED-00-114 Advanced Technology Program

Limitations in the technology’s accuracy rate made it unsuitable for every 

user. While the technology had the potential for expanding the use of 

computers to people who find conventional keyboards unnatural or 

intimidating, for such tasks as text editing, dictation, or taking notes in a 

meeting, its accuracy rate and speed were inconsistent. In October 1990, 

handwriting recognition systems could only interpret unconnected block 

writing, and no system offered 100 percent accuracy. Complaints about 

hardware, software, and related components were common. For example, 

processing power was often inadequate, leading to inconsistencies in the 

machine’s ability to capture data and analyze it. In addition, digitizers were 

often slow at recording the flow of the pen on the screen. This situation 

was expected to remain for the foreseeable future, until a new generation 

of hardware and software could be developed. 

CIC proposed to conduct research and development in natural or cursive 

handwriting recognition to try to provide the means by which ordinary 

handwriting skill could be used to communicate with computers for a wide 

variety of applications. 

Private Sector Research Activities

Handwriting recognition research has focused on print recognizers and 

cursive recognizers. Unlike printed character recognition, cursive 

recognizers must determine distinct characters in a continuous string of 

writing. In addition, the natural handwriting of most people consists of a 

mix of printed and cursive; therefore, the recognizer must be able to 

determine when a break means a new word and when it does not. Cursive 

recognizers can also exhibit some uncertainty in the identification of 

words. Since most cursive recognizers are dictionary-based, the system will 

attempt to approximate the word that a sequence of characters represents 

and then cross-reference a dictionary or glossary to see if such a character 

string exists. If the recognizer is uncertain, the system will select 

alternative word possibilities. 

In October 1991, Paragraph International announced a licensing and 

development agreement with Apple Computer for Paragraph’s cursive 

handwriting recognition technology. Paragraph’s technology provided 

Apple with a foundation for recognizing printed, written, or block 

handwritten text.

In 1989, Paragraph JV, the Soviet half of the joint venture, started 

developing a cursive handwriting recognition technology, in affiliation with 

two Soviet agencies: the Council for Economics and Mathematics, and the 
Appendix II

Communication Intelligence Corporation 

Project Summary

Page 25 GAO/RCED-00-114 Advanced Technology Program

Academy of National Economics. Paragraph developed two main 

recognition technologies. The first, Calligrapher, is software that can 

decipher written text as it is written; in addition, it is the basis for the penbased recognition system. The second technology, Parascript, is a static 

recognition system for use with an optical character reader. Lexicus, a 

division of Motorola, concentrated research on cursive recognition as well, 

as did Go Corporation, Palm Computing, and others.

ATP Review Process

For its technical evaluation, CIC was assessed on the quality and 

innovativeness of the proposal, coherency of the technical plan, overall 

scientific and technical merit, and staff quality, among others. The three 

technical reviewers were government scientists from NIST and DOD. For 

the technical categories, the evaluations consistently supported CIC.

Regarding its business evaluation, CIC was assessed on several issues, such 

as potential to improve U.S. economic growth, staffing and facilities, 

evidence of commitment to complete project beyond federal grant, and 

overall business merit, among others. For business and economic related 

criteria, CIC received scores that recommended funding. 

Results/Status of Project 

CIC researchers sought to perfect software that could effectively recognize 

cursive handwriting and now has products that provide handwriting 

recognition for printed English and some foreign languages. Currently, the 

company’s core software technologies include multilingual handwriting 

recognition systems, dynamic signature verification, natural messaging, 

and operating system extensions that enable pen input. CIC describes its 

products as technologies designed to increase the ease of use, 

functionality, and security of wireless electronic devices ranging from 

handheld companions to cellular telephones. Key licensees of the 

company’s technologies include companies such as Ericsson, Fujitsu, 

Hitachi, Microsoft, Mitsubishi, and National Semiconductor. 

During the project, CIC researchers created a data base with thousands of 

cursive handwriting samples and developed new recognition algorithms. 

After analyzing the handwriting sample data base and developing the 

recognition methods, the researchers developed procedures that permit 

fast computation with modest computer memory requirements. The 

company has achieved other goals as well. For example, CIC has:
Appendix II

Communication Intelligence Corporation 

Project Summary

Page 26 GAO/RCED-00-114 Advanced Technology Program

• incorporated some of the ATP-funded technology into a registered 

software product, Handwriter, which recognizes cursive writing in 

limited circumstances (previously it recognized only printing);

• licensed the Handwriter software to more than a dozen computer 

manufacturers worldwide, generating $360,000 in revenue from sales of 

30,000 units in 1997; 

• launched a new product in 1996 called Handwriter MX, a stylus and 

tablet data entry device using upgraded Handwriter software;

• sold 11,000 copies of handwriter MX in 1997, with sales totaling more 

than $2.2 million; and 

• received the “Ease of Use Seal of Commendation” from the 

Commendation Program of the Arthritis Foundation for the company’s 

handwriter products—indicating their value to disabled people who 

have trouble with keyboard entry.
Page 27 GAO/RCED-00-114 Advanced Technology Program

Appendix III

Accuwave Corporation Project Summary ApendxiI

This ATP project was awarded funding from the 1992 competition. 

Although Accuwave eventually filed for bankruptcy protection and was 

unable to commercialize a wavelength division multiplexing system, it did 

complete the terms of its ATP cooperative agreement by the end of the 

project in 1995.

Project Title 

Expanding the Number of Light Signals in an Optical Fiber (Accuwave 

Corporation).

Amount of Funding Granted

$1,987,000 (69%), with Accuwave Corporation contributing $898,000 (31%) 

toward the project.

Summary of Project Purpose

To develop holographic-optics technology1

 that will increase (by more than 

10 times) the number of signals that can be transmitted through a single 

optical fiber strand. 2

 This technology is based on the concept of 

wavelength division multiplexing (WDM), which transmits separate light 

signals through a single optical fiber strand at different wavelengths. 

Market Data 

According to consultants hired by Accuwave at the time of the ATP 

proposal, the total market for Accuwave’s technology was expected to 

reach $40 million. Another consulting firm estimates that by 2003, sales of 

WDM systems will reach $40 billion worldwide.

1

Holography is a technique that allows the recording and playback of true, threedimensional images, called holograms. 

2

A fiber optic cable consists of many extremely thin strands of glass or plastic, each capable 

of transmitting light signals.
Appendix III

Accuwave Corporation Project Summary

Page 28 GAO/RCED-00-114 Advanced Technology Program

Description of Industry/Technology

Due to the increased use of telephones, fax machines, mobile telephones, 

and particularly, the Internet, U.S. telecommunication firms have 

experienced an increased demand for capacity of their transmission 

networks, which primarily consist of fiber optic cables. The installation of 

additional fiber optic cables to deal with the increase in demand for 

capacity can be very costly. WDM provides a cost-effective alternative to 

installing additional fiber optic cables. WDM allows for the simultaneous 

transmission of multiple light signals through the same fiber at different 

wavelengths. Conceptual research on WDM systems dates back to the early 

1980s, but the development and commercialization of WDM systems did 

not begin to flourish until the mid-1990s. One of the primary reasons why 

WDM had not become practical until recently was the lack of suitable 

amplifiers for signals traveling long distances.3

 According to experts we 

interviewed, serious research in WDM began in the early 1990s as amplifier 

technology evolved.

This ATP project focused on using a holography-based approach to aid in 

the development of a WDM system to increase the capacity of existing fiber 

optic cables. Accuwave’s approach employed volume holography, which 

uses a series of holograms as filters, stored in a volume of photorefractive 

(light-bending) material, to direct different light signals to separate 

wavelengths on a single fiber strand. The concept of volume holography 

dates back to the 1970s and was applied primarily to research on optical 

signal processing and memory storage. However, volume holography fell 

into disfavor during the 1980s, primarily because of two problems: 

efficiency (amount of signal loss) and reliability (deterioration of filters due 

to changes in temperature). According to the experts we consulted, no one 

else in the industry seriously considered volume holography as a method to 

direct multiple signals onto different wavelengths of an optical fiber strand 

for telecommunications.

3

Light signals traveling through fibers fade to undetectable levels after a couple hundred 

kilometers, therefore requiring amplification to increase the strength of the signal.
Appendix III

Accuwave Corporation Project Summary

Page 29 GAO/RCED-00-114 Advanced Technology Program

Private Sector Research Activities 

Several private firms were involved in research activities related to WDM in 

the late 1980s and early 1990s. One of the early participants in this industry 

was AT&T and its research arm, Bell Labs. Lucent Technologies, which 

used to be part of Bell Labs, developed an 8-wavelength WDM system in 

1995. Ciena Corporation, a company formed in 1992, received a total of $40 

million in venture capital funding and developed a 16-wavelength WDM 

system,4

 which was commercially unveiled in March 1996. Several other 

companies were researching and developing WDM systems in the 1990s, 

including Nortel, Pirelli, Alcatel, and others. The other companies 

competing in this industry used different methods and materials, other than 

holographic filters, to develop their WDM systems. For example, Ciena 

Corporation used fiber-Bragg gratings, which are filters that are written 

onto the fiber optic cable itself, to help separate multiple signals onto 

different wavelengths within a single optical fiber strand. Much of the 

research in this industry was kept proprietary and was not released to the 

public. 

ATP Review Process

Technical reviewers from NIST, the U.S. Air Force, and the National 

Security Agency evaluated Accuwave’s proposal on issues such as quality 

and innovativeness of the proposal, coherency of the technical plan, overall 

scientific and technical merit, as well as staff quality, and others. For these 

categories, three of the four technical evaluations were consistent, stating 

that Accuwave’s proposal was innovative. The fourth technical evaluator, 

however, was more critical of the proposal, stating that Accuwave’s method 

was “another in a long line of techniques under consideration for high 

density WDM systems.”

Business reviewers assessed Accuwave’s proposal on issues such as the 

potential to improve U.S. economic growth, staffing and facilities, evidence 

of commitment to continue project beyond federal grant, and overall 

business merit, among other items. For these categories, the business 

reviewers were critical of the proposal, citing poor commercialization 

planning, lack of manufacturing capability, etc. ATP officials, however, 

listened to the company’s oral presentation. As a result of the presentation 

and despite both technical and business reviewer concerns, ATP decided to 

fund the project. 

4

WDM systems with more than 8 wavelengths are called dense wavelength division 

multiplexing (DWDM) systems. 
Appendix III

Accuwave Corporation Project Summary

Page 30 GAO/RCED-00-114 Advanced Technology Program

Results/Status of Project 

According to a former Accuwave official, problems of efficiency and 

reliability arose during Accuwave’s research to develop a WDM system. 

Accuwave was able to make improvements on these issues but not enough 

to fully develop and market a successful WDM system for the 

telecommunications market. In addition, Ciena Corporation, a competitor, 

beat Accuwave to the market in 1996 with a 16-wavelength WDM system. 

Accuwave did not learn about Ciena until 1995, and Ciena’s research was 

kept proprietary. Accuwave did commercialize a few WDM components; 

the most successful of which was called the wavelength locker, a device 

that controls the frequency of the laser. Accuwave’s wavelength locker was 

a limited commercial success, according to a former Accuwave official. 

Sales of Accuwave’s components reached about $3 million. According to a 

former Accuwave official, this was not enough to appease the Board 

members and the venture capitalists, and the decision was made to file for 

bankruptcy protection in October 1998.
Page 31 GAO/RCED-00-114 Advanced Technology Program

Appendix IV

Tissue Engineering, Inc., Project Summary ApendxiIV

This ATP project was awarded funding from the 1992 competition. Tissue 

Engineering (TE) was able to successfully complete their ATP project goals 

by the end of the project in 1996. However, the company has not yet 

developed a prostheses product that can be transplanted into humans and 

eventually be reabsorbed by the body. 

Project Title 

Prostheses Made of Biomaterials that Regenerate Body Parts [Tissue 

Engineering, Inc. (TE)]

Amount of Funding Granted 

$1,999,000 (48%), with TE contributing $2,128,000 (52%) toward the project.

Summary of Project Purpose

To develop techniques for extracting and storing collagen and spinning and 

weaving collagen fibers into fabrics and other forms suitable for human 

prostheses that could induce the body’s own cells to rebuild lost tissue 

while gradually replacing the prosthesis.

Market Data

According to BusinessWeek magazine, the president of the Pittsburgh 

Tissue Engineering Initiative research consortium has estimated that the 

potential overall market for engineered and regenerated tissues to be $80 

billion.

Description of Industry/Technology

One industry expert said that the premise of the tissue engineering field is 

to create devices that are bio-regenerative, so that the body can eventually 

mimic and remodel what is damaged; potentially, experts believed that the 

result could be more natural than other transplants. In addition, engineered 

tissues could possibly replace donated organ transplants, which are very 

limited in supply. According to industry experts, by the early 1990s, the new 

multidisciplinary field of “tissue engineering” was drawing scientific 

interest.1

 For over a decade before,

1

In 1987, the National Science Foundation sponsored a conference where the term “tissue 

engineering” was first defined.
Appendix IV

Tissue Engineering, Inc., Project Summary

Page 32 GAO/RCED-00-114 Advanced Technology Program

however, related basic research was being conducted. Industry experts 

explained that research using synthetics as well as the protein collagen2

 led 

to discoveries; scientists were looking for a way to package cells in a threedimensional format, like tissues and organs. According to industry experts, 

there are remaining challenges; particularly, the challenge to develop 

products that can be reliably transplanted into and interact with the body 

without creating a negative reaction by the host.

According to industry experts that we interviewed, tissue engineering 

research in the early 1990s focused upon synthetics and collagen 

technology for the development of products, as well as research attempting 

to understand extracellular matrix from a biological and cell biology 

perspective. 3

 Some of these experts identified academic and private labs 

that were conducting research on collagen structures by 1993. 

Private Sector Research Activities

Prior to 1992, a number of other private sector and university groups were 

also working on a variety of technical approaches to develop biological 

equivalents for defective tissues and organs for use in the human body. 

Among the groups involved in tissue engineering, the experts that we 

interviewed named the following: Organogenesis; Integra LifeSciences; 

Advanced Tissue Sciences; Collagen Corporation; Genzyme; Osiris 

Therapeutics; Matrix Pharmaceuticals; and, researchers at MIT and other 

universities, hospitals, and laboratories. A study published in the journal 

Tissue Engineering estimated that the government has provided less than 

10 percent of tissue engineering funding.4

 According to one industry expert, 

this may have been an advantage as it forced researchers to start 

companies and move forward, rather than spend many years in academic 

settings. Projects by other companies included attempts to bioengineer 

bone, skin, teeth, cartilage, valves, or other cells, tissues and organs. For 

example, Integra LifeSciences, Organogenesis, and Advanced Tissue 

Sciences have all been involved in research leading to bioengineered skin. 

In addition, Genzyme Tissue, Integra LifeSciences, Advanced Tissue 

2

Collagen is a structural protein that occurs in vertebrates as the main constituent of 

connective tissue fibrils and in bones. It is the most widely distributed protein in the human 

body.

3

Extracellular matrix is described as molecular networks that are crosslinked and are 

swollen in fluids surrounding the cells.

4

 “An Economic Survey of the Emerging Tissue Engineering Industry,” Tissue Engineering, 

Fall 1998.
Appendix IV

Tissue Engineering, Inc., Project Summary

Page 33 GAO/RCED-00-114 Advanced Technology Program

Sciences, ReGen Biologics, and Osiris Therapeutics are companies in 

competition to develop engineered cartilage products using different 

technical approaches. 

According to some of the industry experts that we interviewed, some of 

what TE proposed and did during the ATP project did not advance the core 

of the technology of regeneration. However, in 1992, the industry had not 

defined an industry-wide critical or core technology goal. The TE project 

was intended to provide a unique structural support for defective tissue to 

be gradually replaced by healthy tissue. No other therapy was available at 

the time of the award. Nonetheless, one expert described TE’s technology 

as a derivative technology, rather than a high-risk and innovative 

technology. 

ATP Review Process

During the ATP selection process, technical reviewers assessed the TE 

project on scientific and technical merit, feasibility, coherency, and 

appropriateness of staff and equipment. The three reviewers, all federal 

employees, evaluated the project as innovative. Based on these reviews, 

evaluations by three business reviewers, and a Source Evaluation Board 

decision, ATP funded the project.

Results/Status of Project

According to TE, the company had a profitable and rewarding start with 

the ATP award. According to the company’s founder, the ATP project was 

highly innovative because it would use naturally occurring collagen to regrow tissue. The company developed a collagen spinning technique, which 

allows them to imitate the scaffolding of tissues in the body. A TE official 

claims this can be done on a commercial scale. In addition, the company 

has also been able to insert cells into the collagen to re-grow tissue in the 

laboratory. Some of the company’s accomplishments include:

• Two patents were awarded to the company for its work under the ATP 

award: “Apparatus and Method for Spinning and Processing Collagen 

Fiber”5

 and “Bipolymer Foams Having Extracellular Matrix 

Particulates.”6

5

“Apparatus and Method for Spinning and Processing Collagen Fiber” U.S. Patent Number 

5,562,946, granted on 10/8/1996.

6

“Bipolymer Foams Having Extracellular Matrix Particulates” U.S. Patent Number 5,709,934, 

granted on 1/20/1998.
Appendix IV

Tissue Engineering, Inc., Project Summary

Page 34 GAO/RCED-00-114 Advanced Technology Program

• TE indicated that it would soon begin animal trials for its orthopedic 

products and eventually progress into human trials. TE also mentioned 

that it has initiated collaborative efforts with larger biotechnology 

companies.
Page 35 GAO/RCED-00-114 Advanced Technology Program

Appendix V

Comments From the Department of 

Commerce ApendxiV
Appendix V

Comments From the Department of 

Commerce

Page 36 GAO/RCED-00-114 Advanced Technology Program
Appendix V

Comments From the Department of 

Commerce

Page 37 GAO/RCED-00-114 Advanced Technology Program
Appendix V

Comments From the Department of 

Commerce

Page 38 GAO/RCED-00-114 Advanced Technology Program
Page 39 GAO/RCED-00-114 Advanced Technology Program

Appendix VI

GAO Contact and Staff Acknowledgments ApendxiVI

GAO Contact Robin Nazzaro (202) 512-6246 

Acknowledgments Phil Amon, Shannon Bondi, and Diane Raynes also made key contributions 

to this report.

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