Spinoff to Market Technology from NEC Research Institute

Article excerpt

Ever since going against the grain of corporate cutbacks in science and opening its basic research institute in Princeton, New Jersey, electronics giant NEC has drawn raves from the press and policymakers alike for its visionary approach to research.

Privately, however, competitors have noted the institute's Ivory Tower approach, its isolation from development and manufacturing, and the vast geographic and cultural separation from company headquarters in Japan-questioning whether the scientific outpost could ever produce anything meaningful to its mother corporation.

It has taken nearly a decade, but some of those questions seem on the verge of being answered. Although research findings have long been shared with Japan, the institute is quietly seeking its first outright commercial transfer by creating a start-up company to develop its watermarking technology for digital copyright protection. The spinoff is funded by a recently established NEC venture capital arm, and apparently marks the only such enterprise launched by a major Japanese corporation in the United States.

But while optimistic about their chances, its architects acknowledge suffering through a painful process that highlights important lessons in managing research.

Innovative but Risky

The NEC Research Institute Inc. opened to great fanfare in 1989 along Princeton's famous Route 1 research corridor. Teeming with recruits from Bell Labs and top universities, its mission centered on far-reaching studies that might not bear fruit for a decade or longer: innovative if risky ideas that included using DNA molecules for computing, and examining fly vision for tips on processing external stimuli.

By most accounts, the institute has retained its unique flavor. The budget for the more than 100-strong operation has proven remarkably steadyroughly $27 million for 1997-'98, bringing NEC's investment close to $200 million over the past nine years-on the premise that such stability is key to conducting long-term research. However, as NEC has contended with the same accountability issues facing virtually every company these days, and with the retirement or death of several venerable "angels" in Japan, institute president Bill Gear and his charges have felt a subtle pressure to prove their worth through more than good public relations.

Enter the watermarking project. The basic problem is that in today's increasingly digital times, perfect copies of photos or movies can be easily distributed without anyone knowing whether a person has a legal right to use the images. Watermarking involves hiding data-in this case invisibly-within the image in a way that is easily scanned for copyright protection but makes it hard to remove without degrading the picture.

NEC got onto watermarking in late 1995 when three of its researchers co-authored a paper on the subject with a Massachusetts Institute of Technology professor. The concept quickly mushroomed into the institute's first attempt to construct a prototype; and as the rapidly growing team-including several university collaborators-moved toward that goal, institute members began investigating commercial opportunities. …