The 'Future Lab' Fraunhofer is praised in this Spiegel Online article. Top statement: German Fraunhofer Society is the top German scientific corporation where creative geniuses are questing for innovative products between the poles of science and economics. Fraunhofer is described in contrast to the Max Planck Society where fundamental research is usually done. According to this, Max Planck scientists (among others who do basic research in general) are called 'sophisticated' and 'high-browed' and only the Fraunhofer way is contemporary and promising.
Just a few comments from a has-been-scientist who worked in a scientific institution that was part of the Helmholtz Association and that has been taken over by Fraunhofer.
First: nothing against "Research of Practical Utility". MP3 is a tremendous success and the only reason why they didn't get rich was that they were just too early when releasing MP3. Establishing contacts to the industry and working together with professionals can be extremely inspiring, and to be a part of a great project that finds its way to happy customers is amazing.
But: there is a reason why Germany has produced only a handful of Nobel Prize candidates in the last years. Fraunhofer isn't interested in scientific glory: money is the big thing and only third-party funds do matter. If a student wants to do her thesis she has to prove the economical value of that work. But maybe there isn't any. Under this circumstances, my own thesis wouldn't have been possible. Additionally, a lot of important research disappears behind the iron curtain of patents and theis holders.
In the meantime, students and scientists became sort of scientific merchants who have to streamline and polish their work to make it interesting for possible investors. Why should somebody want to do this? Scientific careers are paid as bad as they always were. If a scientist in Germany wants to stay in the German scientific community (without becoming a businessman à la Fraunhofer), she may do so for 10-12 years, because there is an upper limit in years she might work in public scientific institutions (including public universities). Maybe not everybody is supposed to be a great scientist who wants to work in the university, but to urge people to go the Fraunhofer way is - IMHO - the best method to make them leave their country because they are not compatible to common sense. This is plain disgusting and proves once more the influence of our neoliberal terriers.