[Recorded by Electronic Apparatus]

Tuesday, November 26, 1996

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[English]

The Vice-Chairman (Mr. Lastewka): Pursuant to Standing Order 108(2), the committee will resume its review of science and technology and the innovation gap in Canada.

I remind the group that there will probably be some bells around 5:30 p.m. for a vote. We have a number of groups here this afternoon. Normally we leave ten or twelve minutes for each group to present, with the balance open for question and answers.

I'll begin with the Association of Universities and Colleges of Canada. We welcomeDr. Bernard Bressler.

Dr. Bernard H. Bressler (Association of Universities and Colleges of Canada): Thank you very much for allowing us the opportunity to present to this committee today.

Over the course of your committee deliberations, you have heard testimony from industry experts on R and D, venture capital and even taxation policy, as well as evidence from granting councils and the bureaucracy. I am here today to provide you with the university perspective. I think that what you will find surprising is just how much the different actors - that is, industry, the bureaucracy and universities - agree.

The issues identified at the preceding round tables are as follows. Our R and D effort relative to our trading partners and OECD nations is very poor. In 1995 Canada's gross expenditure on research and development decreased to only 1.53% of GDP, which is significantly below the 2.5% to 3% in countries such as Germany, France, Japan, the United States and Sweden. Even the emerging economies of the Pacific Rim such as South Korea, Singapore and Taiwan have set a target of 2.5% for expenditure on R and D as a percentage of their GDP.

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The world is passing us by. We have to increase our R and D effort if we are to thrive in today's globalized knowledge economy.

Contrary to popular belief, there is plenty of capital in Canada. The problem is getting smart capital to the right places. While there has been a renewed emphasis on spin-offs, networking and partnerships, universities have been doing this for years. However, we have to find ways of increasing our capacity to create even more spin-offs and partnerships.

These issues have also been identified by the university community, which is why we have developed an action plan entitled ``Putting Knowledge to Work: Sustaining Canada as an Innovative Society''. ``Putting Knowledge to Work'' is an innovative, realistic and achievable set of initiatives designed to meet the challenges of our modern economy.

The federal government has been cutting back on its investment in research perhaps because it does not see research as just that - an investment. It is absolutely crucial that all Canadians, from politicians through the general public, realize that R and D is an investment. It has a real and definite pay-off. The benefits are seen everywhere, while the costs of a lack of investment are all too plain. The benefits include new processes, technologies and procedures that have increased productivity and have brought a higher standard of living and numerous social benefits.

Economists have established the relationship between scientific research, productivity, growth, and more and better jobs. The net rate of return for R and D is somewhere between 10% and 40% higher than the rate of return on physical plant, and higher rates of return are obtained from basic versus applied R and D. In addition, valuable social benefits such as the support of health, education and social programs are made possible by the accumulation of net wealth to the country.

Examples of significant spillover effects are numerous. The inventors of the laser probably had no idea that it would eventually be used for removing cataracts or for playing music in a CD player or for storing and retrieving information. Similarly, the inventor of the transistor could not have imagined how that device would fundamentally change our lives by its use in radios, computers, space flight, medical equipment and countless electronic devices. Finally, the discovery of nylon showed that it was possible to create artificial fibres with remarkable properties. These examples of basic research have led to new research directions by thousands of other scientists or researchers.

However, it is increasingly apparent that advanced research in Canada is becoming difficult because of the underinvestment in the physical infrastructure that sustains innovative research. The costs of this are enormous. Without the resources to purchase up-to-date equipment and facilities, universities cannot attract and retain the best and brightest researchers. Nor can they attract as much industry-sponsored research as they otherwise might. This severely hinders the innovation system as well as stifles the economy.

Consequently, in ``Putting Knowledge to Work'' we suggest that the federal government enter into a partnership program to upgrade the research infrastructure of Canadian universities. This would help universities acquire the modern labs and facilities required to conduct advanced research. Over the long term we would urge the federal government to match provincial support of research infrastructure.

With respect to technology transfer, we've given you just one figure, and it's at the very back of your document, I believe. Figure 1 shows the virtuous cycle that is the key to ensuring Canada's future economic and social prosperity. Of note here is the critical role played by universities. They are the crucial element of the idea stage. Evidently, without the creative power of universities the virtuous cycle will come to a quick end.

Through their technology transfer activities, universities have identified that one of the most significant barriers to the successful and expeditious transfer of knowledge from universities to industry is the lack of funds to move innovations from the pre-competitive stage to technologies that can be commercialized - that is, the prototype development stage.

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It is noteworthy that the next stage of further development, the stage from prototype to commercial product, has been made easier in recent years by the growth of several private sector funds such as the Canadian medical discoveries fund, the working opportunities Fund, the neurosciences fund, and others. However, this still leaves us with the problem of the free competitive stage.

Over the last decade, universities have invested their resources in the establishment of technology transfer offices or, as they are often referred to, industry liaison offices. These offices function in that critical interface between the discovery process and the transfer of innovation to the private sector for commercialization. Currently the level of investment, institutional commitment, and relative development of these offices is highly variable from university to university. Accordingly, so are the results of their efforts.

The economic benefits of technology transfer involving academia arise from two distinct activities: first, from private sector access to university research expertise and facilities; and second, from the commercialization of university invention through licensing to both existing and new spin-off companies. UBC's activities in this area show the scope and benefits of university technology transfer.

During the last ten years, industry-sponsored research has increased from $1.7 million to $23.9 million last year at my university. This represents an increase from 2.5% to 17% of our total sponsored research budget, which was about $139 million last year. During this period, the industry liaison office has licensed a total of 193 technologies and has created over 72 spin-off companies - actually, since this speech was written, we now have 77 spin-off companies; we have added five more since this was written just last week. In the past year alone, there were 115 invention disclosures - and this has been pretty average over the last three or four years - we filed 74 patents last year, and UBC earned $1.3 million in royalties. We currently hold close to $3 million in publicly traded equity.

For the larger community, the benefits include the creation of jobs, higher productivity for Canadian firms and, of course, economic growth. We therefore propose a program to strengthen technology transfer offices in universities. The program would provide universities with the resources required to enhance their ties with the private sector, and with a part of the program funding targeted to overcoming the innovation gap.

Commercialization is also a means of disseminating knowledge, a more traditional role of universities. It is important to remember that universities do not just produce new and better widgets. They also produce knowledge, and we need better ways of distributing this knowledge. That is why, in ``Putting Knowledge to Work'', we are proposing the establishment of community research shops. Modelled on a very successful program in the Netherlands, they are designed to promote knowledge sharing and transfer by capitalizing on the skills, expertise and resources of universities in support of community social and economic development.

While more can always be done on behalf of universities to transfer technology, I would like to point out that university-industry partnerships are not a new thing. Canadian universities conduct almost twice as much business-sponsored research as any other G-7 nation, and have done so for at least the last ten years. Over the past decade universities have experimented with a variety of programs designed to encourage collaboration between universities and the private sector. They are often seen as two solitudes, with a large gulf between their cultures and motives.

This experimentation must continue, however. That is why we are recommending a program that would allow graduate students to gain research experience outside academe. Such research experience would be valuable, as it would enable them to acquire a better understanding of the reward structures, expectations, demands and imperatives of research settings in the private and public sectors. This program would also facilitate the transfer of knowledge between academe and the other sectors.

A perfect example of a partnership program that has exceeded expectations is the NCE program, or the networks of centres of excellence program. It is one of the most innovative research support programs of the last decade in our country. The 14 networks have brought together a critical mass of expertise in a variety of areas of strategic importance to the social and economic development of our country. The partnerships created with the private sector have also provided important leverage for the initial investment by the government.

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While still in an early stage of the innovation cycle, the NCEs are already showing significant results. They are developing new products, processes and services as well as creating new Canadian receptor capacity for some of their products. In addition, and of utmost importance, they are providing students with unique training and experience as well as creating the new entrepreneurs that are required if we are to form and benefit from the spin-offs. Continuing this program is critical if we are to reinforce the necessity for synergy between academia and business, and if we are to capitalize on that relationship for the benefit of our economy.

The NCE program is a perfect example of various partners capitalizing on the existing expertise available in universities. However, a problem remains for universities when trying to meet the needs of new researchers in emerging fields. The cost of equipping a modern lab can exceed $300,000. The result is that many of our best and brightest young researchers are going to better equipped labs in other countries, mostly in the United States. We therefore propose a program - the new research frontiers program - to address this need. It would have the federal government offering start-up grants that would induce research support for young scholars. Universities would demonstrate their commitment by assuming part of the costs of the equipment, and they would have to show that the new research and training thrust would address an unmet need in the country's research and training capacity.

Finally, in my concluding remarks, I would like to say that governments throughout the world are the major funders of research of all types, including the physical sciences, social sciences and the life sciences. In that regard, Canada is no exception. The motivation for these expenditures is to create a high-quality lifestyle for its citizens and to maintain a competitive position in the world marketplace. The return from public investment in research is enormous.

We live in a world where the value of innovation is clear. For Canada, it is no longer enough to concentrate on our natural resources. Our future depends on a well-educated workforce and a steady stream of new ideas. We need to turn those ideas into action by transforming them into new policies and new products and services for internal consumption and for export, thereby creating new jobs for Canadians. Only by recognizing these needs and by taking action to develop policies that will foster this activity can we reduce our structural unemployment rates and our debt. The university community will continue to be the seed for many of the emerging technologies that will be the engine for sustained economic growth into the next century.

I thank you very much for the opportunity to make this statement here today.

The Vice-Chairman (Mr. Lastewka): Thank you very much. I also thank you for sticking to the time limit, which is very helpful.

I would like to now ask for Mr. Brian O'Shaughnessy, from Bell Mobility.

Mr. Brian O'Shaughnessy (Vice-President, Technology Planning, Bell Mobility Cellular Inc.): Thank you.

I was going to use the overhead projector, if that's okay.

The Vice-Chairman (Mr. Lastewka): Okay. We have some reports here. They're only in English, but I'd ask if it would be all right to have them circulated.

Mr. O'Shaughnessy: Thank you very much for this opportunity to speak today. I would like to pick up on two of the topics from the terms of reference that were issued for this committee and talk specifically to them. The document I've handed out, by the way, goes into more detail on what I will be talking about, so I offer that for your further reading.

The two topics I wish to pick up on are the steps that should be taken to promote a climate that encourages both science and entrepreneurship, and the fifth item, which is how well Canadian institutions are meeting the skill needs of high-technology industries. I plan to follow through by talking a bit about what R and D is as it relates to a service provider and, from our point of view in the industry, how people factor into it and into the education of people; what the roles of universities are in working with us in R and D; and R and D incentives and how they can be best used to promote what I think is the desired action.

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As a starting point, I'll describe what Bell Mobility is, but I won't go through this in any detail. We are a company that offers wireless services across Ontario and Quebec - cellular, paging services, airline passenger services, as well as mobile satellite services - that accounted for approximately $1 billion in revenue this year. We employ 2,700 employees, with an average age of 34, which makes us a fairly young company. There are approximately 90 engineers, and that number is growing every day. And there about 220 technicians and engineering specialists within the company.

The first item on the terms of reference speaks to what the critical industries are that we need to be looking at in Canada in order to drive the economy into the next century. I have to say that the wireless industry is definitely one of those.

If we look at where we are today, the expectation is that we're going to grow from 10% of the Canadian population having cellular phones to approximately 30% over the next ten years. That's a three-times growth in the numbers over the next ten years, and even larger numbers are projected for after that. So the bottom line is that this is definitely one of the growth industries for Canada.

To start with the first point that I said I was going to talk about, from a service provider point of view, R and D takes a large number of steps. It starts with definition of needs and works right through to deployment of product. Service providers such as us, who do not manufacture products directly but work through other vendors, tend to work in the end of defining needs and working with researchers to develop breakthrough concepts. We will then work with partners - in the form of manufacturers and vendors - to help implement those needs into their products.

An example of where we have done a fair amount of this in Canada, from our company's point of view, is with Nortel, obviously a Canadian telecommunications manufacturer. We have worked with them over the last ten years to help them develop their cellular product line and move to being a significant player in exporting that product throughout the U.S., South America, and elsewhere in the world. We work with them to help to define what services the customers are looking for, and to help them to develop their products accordingly.

On a less grand scale, another company is one called C-Can Power Systems, out of Acton, Ontario. It's a small company that had ideas about how to develop power systems or power supplies for cellular systems. We worked with them, and they have basically become, again, an international player. They are exporting products around the world, based on meeting our needs as a carrier. Obviously they found those needs are similar to those of other people around the world.

The second point I'd like to talk to is what I really think is the fundamental building block for research and development, and that's people. No matter how many ideas you have as a company, what you really need are people to come up with ideas to begin with, and to work them through to completion. But when you start talking about people, you really have to start back at the point of getting the right people into the programs to begin with. That starts back in the teen years, with fostering the will of students to want to continue on to university.

Another point I'd like to make - and I mention it in two of the boxes that I list here - is that we need well-rounded students. There's a lot of talk about specializing and moving towards having one university that will focus on engineering and another university that will focus on another specific topic. Well, in the end, we don't really hire engineers who are engineers alone. They have to know how to present their ideas, how to write up their ideas, how to communicate their ideas. They have to have a certain amount of foundation in economics and business as well. So you really need that mixture and that well-rounded student to move on.

Moving on to students and engineers, the second point is that there is an extreme shortage of engineers in Canada, especially in the wireless industry. That shortage becomes even more critical as we move up into the masters and PhD levels of education. One of the big problems we have is that there is a demand around the world for the talent that we are creating in Canada. And as quickly as they get a degree or their initial experience, they are moving to other countries, such as the U.S., for other opportunities. So the Canadian education system is required to produce even more students than is required just for industry in Canada. It has to supply enough for Canada and make up for those who leave the country.

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One of the items we like to try to work on within our company and that we believe strongly in with respect to having a very real link between universities and industry is to have masters and PhD students working on projects that are linked to a real requirement within industry. So when we do have those people out in industry starting work on research, they go back and draw on the talent in universities to help them with the research.

Finally, it's very important for us as a Canadian company to provide a career path to keep that talent in Canada and to help them to develop the next generation of talent, so we foster an ability for people to move up within management and create the next generation of engineering talent within the country and try to slow down that brain drain. Industry can do so much. We need to find other ways as well to entice our best and brightest to stay in Canada.

The third point I want to talk about is industry-university collaboration. Here I believe there are some good success stories to point to. This really relates to having fundamental research done on behalf of industry in universities. Through the years, we have used universities through direct contracts as well as supporting programs such as the Telecommunications Research Institute of Ontario and the Canadian Institute for Telecommunications Research, which are organizations geared to promote industries and universities getting together to develop joint programs and joint research efforts.

There are examples of where we have used universities. We had a study at Ottawa University performed on antenna diversity research, which basically allowed us to develop a unique type of antenna with a local Ottawa company to deploy in our cell network and allow us to deploy equipment much more quickly.

Probably a more important example is that we've used the University of Toronto over the last number of years to do a fair amount of research into a new digital technology called CDMA, and that research was instrumental in helping us make a decision on how to spend the next $500 million on our network over the next five years.

So there is a fair amount that can be done. There is an obstacle, however, as it relates to working with universities. Unfortunately, university research must be pre-competitive. This means that they must be able to publish whatever their results are for the public as part of the normal education process. As we've shown here, we've had a number of projects where we've been able to work with universities to successfully work in the pre-competitive world, but it would be even better if we could expand that further and open up universities to doing competitive research that would allow us to keep the knowledge and not have it made public after it's complete.

The next one I wanted to talk about is the R and D process and some of the R and D incentives we receive as an industry. As part of our licence as a licensed radio service provider in Canada, we must spend 2% of our revenues on R and D in Canada. However, the definition of this revenue is linked to the Revenue Canada definition. That is a recent change.

We used to be allowed to spend that on a broader level of research, and this diagram tries to depict that. The level of research that is allowed today under the Revenue Canada definition is just the area in the green box and a little bit of the other two areas, which is really breakthrough-concept research.

However, as I discussed earlier, the areas of R and D that a service provider can really bring to a manufacturer are areas of customer needs identification and service needs identification, as well as codifying the breakthrough into standards and so on.

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We have found that it has severely limited our ability to really work with vendors in the synergistic ways that we have in the past. What we would like to do - and what we suggest - is to find ways of modifying the Industry Canada definition of R and D to allow this broader level of R and D.

How would it benefit the country? First, it again puts us back on the footing of allowing service providers and manufacturers to work together to the best of their ability to get products out, with each focusing on where they have expertise. Secondly, another item we would like to propose is giving us the ability to spend a certain portion of money on educational institutes and in setting up research labs in universities and having that count towards our R and D goal on our licence conditions. It would help supplement dwindling public funds for education and would also encourage the proactive involvement of the service provider industry in university research.

In closing, we are proposing a number of recommendations.

First, we encourage the support for activities that help teens to create their own vision to stay in school. That's the first fundamental building block we were talking about. There are examples of programs out there such as a group called Shad Valley, which works at getting high school students into universities for a program and showing them how they can develop and where they can go if they stay with universities. There are other examples such as the Futures Conference that is run here in Ottawa with grade 7 students to help give them direction.

We want to continue to support activities such as TRIO, CITR and NSERC, which foster industry working with universities on joint research and people development.

We want to find ways to allow post-graduate students to work in the competitive arena so we can expand the area of collaboration between universities and industry.

We need to find ways of slowing down the Canadian brain drain and keep more of our talent here in Canada.

Finally, we want to expand the Industry Canada licensing definition of R and D so that we can work to allow synergies between service providers and manufacturers and encourage service providers to apply a portion of their funding to university institutions to help develop more talent for the future.

Thank you very much for this opportunity.

The Vice-Chairman (Mr. Lastewka): Thank you very much.

I also welcome the people who are located at our off-site boardroom.

We have one more presentation here in Ottawa. I'll ask Mr. Dennis Senik from CITec to come forward.

Mr. Dennis Senik (Director, Réseau CITec): Good afternoon. I want to talk to you about the work we have done together with companies and universities in allowing companies to make better use of the tremendous research resources that we have in the universities. This is a presentation that we recently made to the Natural Sciences and Engineering Research Council as a result of the work that we have been doing across Canada with various universities.

CITec was founded almost ten years ago thanks to the vision of people like Raymond Cyr, the chairman of BCE, and David Johnson, at the time principal and vice-chancellor of McGill University. Those two leaders brought together, in the Montreal region, the heads of all of the universities and the chief executives of the largest companies to really put their heads together on how they could tap into the very significant research assets of the universities. On Montreal Island alone, the universities are investing some $300 million per year in research activities. That's significant.

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What we have attempted to do is very simple. I want to stress that we believe the reason it has worked is because we've tried very hard to focus on the specific needs of individual high-technology companies. In other words, what we're doing is very market driven. The big question is what research projects have the companies determined they can advantageously pursue by involving university researchers.

Réseau CITec is a non-profit organization. Any benefits generated go straight to the companies and to the universities. At the present time, Réseau CITec has been operating with all of the Quebec universities, which represents about a quarter of the research effort in science and engineering in Canada, and with 11 Montreal companies. That doesn't sound like a lot, but the 11 companies were very deliberately chosen. With limited resources, we focused on the companies with the largest research and development operations, hence the greatest number of possibilities to augment company objectives with university research.

Those very carefully chosen companies - and these are 1994 figures - are currently spending more like $650 million every year in research and development. That's about one-third of all the private sector R and D in Montreal. Another thing we've learned in working with the largest corporations is that these are the companies that have the depth of resources to really sustain and develop effective relationships with the universities.

This isn't something that just happens. This takes a concerted effort. It takes time, people, and real commitment, and the larger companies are best positioned to do that.

To give you an idea of some of the things we do, I want to focus very briefly on the first three items here, what we call technology collaboration forums, joint industry-university graduate thesis work, and efforts we have made to really work the other way around and take the university research expertise and bring it to the companies. The real emphasis is on relationship-building. We're talking about long-term links between industry and university.

Technology collaboration forums are very straightforward efforts, beginning with the company. An individual company defines the research and development projects where it really feels it can benefit from bringing university resources on board. It takes time and effort. You don't just make a few phone calls and set these things up.

One of the first ones we did was with Pratt & Whitney, a company that now does $300 million per year of R and D. It took 18 months of concerted effort with it to pinpoint the research projects where it felt it could benefit from university expertise.

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Once we pin down the agenda companies can pursue with the universities, we work very closely with the university liaison offices to really pinpoint the very best people who can come in to help the companies make the yards on the projects they feel are really important.

The actual exchange is in the form of a one-day forum. During that one day, invited university researchers have a two-way exchange with key company research officers. They present briefs to each other of what their major objectives are in research to get a notion of how they can work together. Once that is done, it typically takes about six months to sit down and really do the necessary follow-up work to get the projects up and running. Again, sustained commitment over time is what works.

One of the most effective ways the companies and the universities have found to make these relationships work is to actually have the best graduate students at the masters and doctoral levels undertake some of these R and D projects as thesis projects. They do it on company premises with company data and equipment and under joint industry-university supervision.

The university has total control over what has to be done to qualify for the degree and the company is there to say, great, and here are the issues we really want to solve together. It permits a much better joining over time of the university people and the industry people.

People talk about technology transfer. The best technology transfer instrument is a comfortable pair of shoes. You have people going back and forth between the two worlds of industry and university, and the graduate students are a significant, substantial and sustaining link.

Another effort is particularly important in the case of Montreal. Our strongest university research asset is in the biomedical area, but the companies they can work with in biomedical research are spread from California across to Europe - that's where the best industrial partners are - so we're bringing them to Montreal. We're doing that by putting together the combined resources of our two universities with medical schools and associated research. We fully expect to have a good 300 people who will take part in that to create new partnership opportunities for the universities and industry.

Finally are the companies - the actors who create the wealth out of the know-how generated by themselves and the universities. It has made a significant difference in all of the companies that have worked with us to tap into the universities' great strengths.

Lockheed Martin hosted the most recent technology collaboration forum on September 27. For the first time we reached out across Canada from UBC, Dr. Bressler's school. We had a representative from there come to see how UBC could work together with Lockheed Martin.

Marconi has established an important program with McGill University. It has brought several other universities in the Quebec region up to speed on the very specific kinds of basic research it would like to see done to permit more significant applications of some of its advanced technologies with global positioning satellites.

Pratt & Whitney Canada has broken new ground with some of the universities by getting professors who previously weren't working with it to come on board and do things in new areas.

Spar Aerospace Limited has achieved a significant breakthrough in spacecraft antennas. As a matter of fact, it has had such significant results from the program that it is working with us now to go out across Canada to find the university partners that could undertake up to $1 million of new research that Spar wants to do, based on the excellent results it has had working with the Quebec schools. It's prepared to go there and understands the barriers of distance. It will go out west and meet with the universities. We'll work with them to make it happen.

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In any case, that was just to give you a very brief overview of some of the things we've worked, together with the universities and the larger companies, to help make happen.

Thank you very much for inviting me here. I'd be happy to answer your questions after.

The Vice-Chairman (Mr. Lastewka): Thank you very much.

We'll start with questioning here, and then whenever we can get back on-line we'll stop the questioning and hear the other reports.

Mr. Leblanc, I'll start with you.

[Translation]

Mr. Leblanc (Longueuil): I would like to ask a question to Mr. Bressler. He says that partnerships between companies and universities have been around for ten years. I think he is right, but how common are they? Bell Mobility says that there is little cooperation and that it should be improved. I would like you to elaborate further.

[English]

Dr. Bressler: I apologize; I only got the last part of the question due to the translation.

The Vice-Chairman (Mr. Lastewka): The question goes to the fact that you mention in your report that there's a lot of cooperation between universities and industry, while we've heard from witnesses such as Mr. O'Shaughnessy from Bell Mobility that there should be a lot more cooperation. I think Mr. Leblanc was referring to a previous witness also.

Dr. Bressler: Yes, I believe there is a lot of cooperation. There's been a significant increase in it.

It's important to put in perspective the timeframe over which this has been occurring. As for technology transfer offices or industry liaison offices, ours is 12 years old, and I think the majority of them in the country are in that range, of the universities having these kinds of offices.

It has taken time to bridge our two cultures; that was clearly part of what went on at the beginning. So the numbers I quote for UBC show a dramatic increase in collaborative grants and contracts, last year approaching $23 million at UBC, out of a total research budget of $139 million.

The obstacle mentioned by Brian O'Shaughnessy from Bell Mobility is one we're very aware of. Universities have an obligation, of course, to publish. We try our best at UBC - and I know other universities do as well, but certainly at UBC - to include in our contracts limited restriction so the company with whom we've signed a research contract has first look at any intellectual property that's coming out.

Time lines govern the publication to allow for patenting time. We are doing that. We are trying to put as many strategies in place as we can to increase collaboration. We're doing it in consultation with industry so there's feedback.

When Brian O'Shaughnessy sat down, I whispered to him that I'd never met him before, and I felt it sounded as though we'd written the same speeches, more or less. At least I read it that way, in terms of what we were trying to say. And we've never met before; that's the truth. That's quite telling.

Mr. O'Shaughnessy: Our industry, the wireless industry, is a very young industry coming to maturity as we speak now. We've come from a phase of just learning to build and we're now learning to go to the next generation of product.

As a result, there's more and more university collaboration every day. However, even more would be possible if two items could be met. One is the item that was just discussed relating to competitive versus pre-competitive. If there were abilities to do more competitive research that could be maintained confidential to the company for a significant period of time, that would open up the amount of research we could do at the university.

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Second, given that we have a licensed mandate to spend a certain percentage of revenue on R and D every year, if the spending of funds with universities to set up research chairs or research labs would qualify under the R and D definition in our licence condition, we could direct some of those funds towards that end. We cannot now, because we have to spend it on other items per the Revenue Canada tax definition of R and D. So there is a potential to allow us to spend some funds.

To give you an idea of the magnitude of those funds, we expect that over the next five years we will spend $100 million in this direction. If you look at the whole industry, somewhere between $300 million and $500 million will be spent over the next five years on meeting this R and D licence condition that has been mandated on us. A portion of that funding would be available for universities; that's the point I was making.

The Vice-Chairman (Mr. Lastewka): Mr. Bressler.

Dr. Bressler: On that one, I personally have been very involved with Revenue Canada for several years now in trying to work with that particular definition in the Income Tax Act. I believe it's in regulation 2900 of the act. We've been trying to change the definition to take out the wording that will allow for the funding of capital and chairs.

This industry has a 2% obligation. The industry that attracted me several years ago was the pharmaceutical industry, which has a 10% obligation in terms of R and D spending in the country, and of course universities have chased that one since Bill C-22 in 1987-88. We're still chasing it. So it's very gratifying to hear this from another industry that also has an obligation.

It's a winner on both sides, I believe. I don't think it's a big loser with respect to government revenue. It's definitely a winner for the universities, and it has economic spin-offs back into the economy. So I strongly support that.

The Vice-Chairman (Mr. Lastewka): I'm going to interrupt here and just check if we are on-line now.

Can we welcome the people at Waterloo? They are people from the University of Waterloo and from the Canadian Industrial Innovation Centre.

Welcome to this round table. As I mentioned earlier to the group here, we've allowed every one of the groups to have 10 to 12 minutes in order to make their presentation, leaving the balance for questions.

I would like to now go to Mr. Gordon Cummer from the Canadian Industrial Innovation Centre, if I may.

Mr. Gordon Cummer (Chief Executive Officer, Canadian Industrial Innovation Centre): Thank you, Mr. Chairman.

The Vice-Chairman (Mr. Lastewka): How's the weather down there? Is there lots of snow?

Mr. Cummer: Yes, and we're probably going to send some up to Ottawa today.

The Vice-Chairman (Mr. Lastewka): Okay.

Mr. Cummer: This is a very interesting technological experiment we're running today.

The Vice-Chairman (Mr. Lastewka): We'll just have to wait for a minute until we adjust the volume.

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.1627

The Vice-Chairman (Mr. Lastewka): We'll leave it with the technicians and carry on with questioning here. I would like to have Mr. Leblanc ask a short question so we can get on with questioning.

Mr. Leblanc.

[Translation]

Mr. Leblanc: In the same vein, Mr. Senik from Réseau CITec says that he was working mostly with big companies that are doing a lot of research. You are a private independent company and you establish links between universities and research centres. Your job is similar to that of a broker. What role are you playing exactly? I didn't really understand how things work for you.

Mr. Senik: It's really quite simple. We are essentially a non- profit organization and our purpose is truly simple. Quite some time ago, in Montréal, industry CEOs and university heads decided that Montréal had to prepare itself for a new society based on know-how. They firmly believed that the best way to do it was to build on the assets of our universities. We have simply followed this scenario.

Mr. Leblanc: I'm trying to understand. I assume that big companies give money to universities so that they undertake some specific research.

Mr. Senik: Exactly.

Mr. Leblanc: We said earlier that academics had an obligation to publish the results of their research. How do you manage everything so that it ends up being fair for everyone, including taxpayers who also fund universities? Maybe there are small companies that need those research findings. How do you manage all this so that it is fair for everyone?

Mr. Senik: Right from the start, we addressed one problem. Academics had to be allowed to publish their findings. We simply put together a working group of all universities participating in the program. This working group was headed by one of the CEOs and spent six months trying to solve the problem of universities and businesses having different needs. In the case of business, it was maintaining the confidentiality of what it had developed and for universities, it was publishing their research findings. It was not always easy.

Nowadays still, before embarking on a new project, a university and a company have to negotiate a specific agreement every time to protect both parties.

Mr. Leblanc: I suppose big companies are funding the research done by universities for them.

Mr. Senik: Absolutely.

Mr. Leblanc: Fine. Are companies giving enough money to justify protecting research findings for their benefit? I know it is hard to reach an agreement that is fair for all parties. For example, in Québec, there are a lot of small and medium-sized companies that would certainly need to know about those findings.

.1630

I also know that for the funding companies, some confidentiality of research findings needs to be maintained. I wonder how you can reach a fair agreement that can be satisfactory for all parties, since universities are also greatly subsidized by taxpayers.

Mr. Senik: I believe you understand perfectly well that the only way to generate profits is for ideas to be considered as a natural resource and to be developed into an application for the real world by someone. That's what is being done. A company will invest on average a minimum of $20,000 for each graduate student.

We pay according to the rates set by the university. For example, Marconi has paid $120,000 to McGill University for some fundamental research.

It is really decided case by case. We have no magic formula to link up businesses and universities. It is not easy. It is a very lengthy and slow process, but it is worth it because in a know-how- based society, universities are essential partners.

Mr. Leblanc: I totally agree with what you are doing. I just wanted to understand better how you operate.

[English]

The Vice-Chairman (Mr. Lastewka): Thank you. Mr. Bodnar.

Mr. Bodnar (Saskatoon - Dundurn): In one of the slides that was presented, Mr. Senik, you indicated that industry must work with universities to implement programs and develop the right kind of resources.

First, I don't know what you mean by resources. Second, I'm wondering whether you believe that the role of the university is to tailor the type of graduate you want with a specific type of skills, or that a university is an institution in which general knowledge is obtained by a person who then hones that knowledge toward a particular type of industry after graduating from university.

In other words, I'm wondering whether, from that comment you made, there would be too much interference by industry in structuring the type of education given to students, while there would not be enough emphasis on students getting general knowledge or knowledge that can subsequently be used in the innovation process.

Mr. Senik: I don't believe it's a problem at all. What we have found, and what we have very greatly encouraged from day one, is that there is no way you want to turn the universities into a very focused, development-oriented - call it a ``screwdriver'' - resource that comes in to tweak the project so that it works for the companies. This is what has tended to happen.

The great benefit in allowing the two parties to work together has been that university researchers have become sensitized to the fact that by a very slight modification in the direction of their research, suddenly their basic research gets industry excited. They're totally disinterested as to whether they do project A or A prime. It turns out that industry is saying that this A prime, this basic research, is really going to help them do things.

I'll give you an example. Undersea fibre optics technology is now in its fourth generation. It's a multimillion dollar business with all kinds of incredibly interesting basic research problems to be solved. To the best of my knowledge, no Canadian university to date has picked up on the fact that there is basic research that needs to be done here that is also of great interest to the companies working on the leading edge, trying to make products and services out of this.

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That is the comment we've gotten time and time again. The greatest benefit the university gets is that they see the areas of basic research that are going to make sense from a company perspective. There's no way, no how, to turn them into applied problem-solvers. That's not the objective.

Mr. Bodnar: Thank you.

Dr. Bressler, I enjoyed your paper very much and the summaries you have given. Perhaps there is one item or two that I may not fully agree with without further explanation, and your comments on how poorly we are doing in R and D is something that I think is certainly a concern to all of us, and as well, your comment that the federal government has been cutting back on its investment in research - and then the speculative part here - perhaps because it does not see research as just that, an investment. I think it is speculative, and I can tell you they're probably wrong and there are other matters that deal with this and guide this.

But you commented with respect to capital in Canada and the poor R and D efforts that are being made, but you do indicate that there is plenty of capital in Canada. If that's the case, how do we tap it? That's the million-dollar question.

Dr. Bressler: Yes. That comment you referred to was designed to be provocative anyway, to raise awareness of the issue. Understandably there are several sides or several components to it.

In terms of tapping into the capital, just today I was involved in some discussions regarding the development of a western Canadian universities technology transfer fund. The capital is going to come from existing capital in the financial community, either the banking community, so-called charter A banks.... One company we're talking to is Royal Bank Capital Corporation, as an example.

We're also talking to the Business Development Bank, to a local company in British Columbia called Ventures West, and Seed Management out of Oregon. These are companies that have capital that are looking for ways. The purpose of that capital we're trying to tap, that we say exists, is to try to do more at this pre-competitive stage and early commercialization stage, where seed capital that's patient is put on the table. As I referred to in my document, that's where in fact some of the funds that have been created are trying to serve that need - the Canadian medical discoveries fund and so on.

Mr. Bodnar: Are you aware of the program between the Royal Bank and Western Diversification for the leveraging of money out of Western Diversification into the biotech industry?

Dr. Bressler: Yes.

Mr. Bodnar: Is that type of program similar to those that you're referring to that may be beneficial or not?

Dr. Bressler: Parts of it are beneficial. It doesn't always address the issue of the spin-off company that starts from scratch or the development of the prototype back at the university before you get to that stage where they'll make the investment, if I'm correct on that. That's still where some of the gap is. Where the capital exists, I think we have to link the capital with that in a way that.... I was going to say in a way that reduces risks. There is no easy way to reduce risk. There is no easy way to gaze into the crystal ball. So you just have to do it. I think we're reaching a point where there is a climate in which it's beginning to happen in this country. So that's positive. It's a matter of forming the linkage.

Mr. Bodnar: Is it the conservative approach of Canadian investors, or is it generally the rules that the government has put in place that cause this lack of investment at this particular stage of development of a product?

Dr. Bressler: I don't know, but my sense of it is that it's the conservative approach to the investment, at least in my interaction with the financial community and comparing the two kinds of financial communities, the more venture side versus the more charter A banks side, if I could use that expression - not to be quoted, but I'm going on the record here. I don't know what to call them, but there is a difference in terms of where they want to place their money.

We had representations from both those groups in Vancouver two or three weeks ago this Friday for us to try to decide where to go to develop this fund. You could really see the level of conservatism versus the level of risk-taking from those two different sectors of our economy.

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The Vice-Chairman (Mr. Lastewka): Thank you, Mr. Bodnar.

I do believe that we're ready to go to Waterloo. I ask Mr. Gordon Cummer to begin if he can hear us and we can hear them.

Mr. Cummer: Thank you very much and good afternoon.

Mr. Chairman, ladies and gentlemen, the Canadian Industrial Innovation Centre in Waterloo has about twenty years of experience in identifying and encouraging new ideas that lead to commercial potential. In those twenty years we have formally evaluated the potential of more than 11,000 Canadian product, process and service ideas.

I thank you for the opportunity to appear before you and to present some observations on the issue of innovation in Canada and the processes that we believe can support innovation. The perspective I'm going to take is from a very early stage, where ideas are just born.

I thought it might be useful to use the analogy of growing healthy plants versus growing healthy companies or healthy ideas. What is required to grow both, I think, initially is a seedbed. In an idea sense, that's probably a country with a healthy economic environment. You of course need seeds, or ideas for products, processes or services. You need somebody to do the planting and to give the early support to those ideas - support aside from the support the idea gets from the individual who has the idea. As in growing plants, you need a hothouse environment, which is a receptive economy with some available capital even at the very early stages.

You also need a process of thinning or pruning ideas, which in our sense is early objective evaluation of the potential. As with any plant, you need sunshine. In the business idea sense, that could be equated to encouragement and management skills. You need water, and water is investment. You also need the ability to weed ideas, and I think that is what occurs in a competitive and fair marketplace. Finally, you get to harvest. You harvest plants to give you fruit or flowers or something like that, and to give you more seeds. You harvest business ideas into businesses and to develop more ideas.

This country has many creative innovators with the seeds of ideas. What is missing, or at least in short supply, I believe, are gardeners who encourage the sowing of lots of seeds, and the hothouse that gives the seeds the warmth and moisture and that allows many of them to germinate. I don't believe we have recognized fully that it takes many, many ideas started to have the proper germination.

What is also missing, I believe, are the pruners who have the capability, the efficient processes and sufficient resources to identify at an early stage those innovations with potential.

And I believe we need more sunshine. We need more encouragement and celebration of risk-taking, and we need to recognize the potential for sufficient reward if the risks pay off. As well, I believe we need more seasoned developers and managers of new innovation.

For the very few ideas that survive and overcome the lack of those items, I do believe there are sufficient other resources available. There is sufficient water, sufficient investment capital to go to ideas at a later stage. I believe we have a fair, competitive environment that encourages the best to grow. I know that we have a healthy marketplace that allows the output to be absorbed.

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With that analogy in mind, I would like to turn to the issue of the innovation gap. I believe the innovation gap is really an information gap.

All ideas start as high-risk inspiration. In most cases no one really knows whether the idea has the potential to create sufficient return. The current wisdom is to let the marketplace decide which are the best job-creating opportunities, the marketplace being defined as knowledgeable investors or consumers or both. However, there are a number of studies on new product values that point out the disadvantages of marketplace filtering. There's a high cost to developing products that subsequently fail: the discouragement of those involved in the process, the wasting of resources that could be better utilized, and often very long periods of lost time.

The external investment decisions are also a filter, but knowledgeable investment decisions are late in the process. Venture capital waits for the information to be gathered and presented in the form of a business plan.

Somewhat earlier are the angels, but they often do not have sufficient information to be make good business decisions on the opportunities they see. Therefore they must invest in the individual with the idea in spite of the lack of information. While the individual is critical to the success of a good idea, even a good individual will have trouble having success with a bad idea.

At an even earlier stage, the risk-reward equation is overbalanced on the risk side and no objective investor is interested. Not enough information exists to determine if the risk can be reduced. Almost all very-early-stage financing comes from the personal resources and love money that are associated with the idea. This is often not objective knowledge investment but it is the best available at the time.

To make earlier investment decisions, earlier information is required. The lack of good information at the earliest stages is what we call the ``information gap''. The earlier the filter, the lower the percentage of high-potential ideas that pass through. This then means large volumes of ideas must be examined in order to find the ones that will lead to good jobs in the future, just as large numbers of seeds are planted in a seedbed. If there is no pruning activity, then even the best ideas can fail to flourish, as time, money, and attention are spent on many that won't succeed. Given the early stage of such a filter, the payback from the successes often will not occur until as long as ten years or more into the future. Thus a filtering process, no matter how efficient, will have a significant front-loaded cost and will not see any return either to the machine that runs the process or to the economy for many years.

On the other hand, an early filter reduces the amount of wasted effort that would go into chasing an idea that has little or no potential. In Canada the Canadian Industrial Innovation Centre is the best example of this type of filter. More than 11,000 ideas that have been filtered have led to an estimated 200 commercial successes, some of which are returning significantly to the economy years later.

However, the Canadian Industrial Innovation Centre has only scratched the surface. We're evaluating some 800 to 900 new ideas each year. That's less than 1 per 40,000 Canadian citizens. We believe the gap is not in the availability of innovative ideas but rather in the availability of enough effective mechanisms to find the best ideas from a large population of potentials.

We would encourage the standing committee to give serious thought to how we are going to ensure all Canadians have their best ideas given due consideration. Nothing will contribute more to our economy, to our economic future, than the creation of a climate and the enhancement of mechanisms that support innovation from the earliest stages.

Thank you for the opportunity to present these thoughts today. I'm looking forward to the discussion, Mr. Chairman.

The Chairman: Thank you very much, Mr. Cummer.

I'll now go over to the University of Waterloo. I just want to give some advance warning to the witnesses that we're trying to keep everything to between 10 and 12 minutes for each group to leave time for questions. We will probably have a 5:30 p.m. or 5:40 p.m. vote in the House, so we'll have to adjourn at that time. I would ask the witnesses to go right to the point.

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I'll begin with Dr. Campbell.

Professor Melanie Campbell (School of Optometry, University of Waterloo): Thank you very much. My name is Melanie Campbell. I am a professor at the University of Waterloo in optometry and physics.

In my presentation today, I would like to emphasize several themes: the importance of basic and pre-competitive research to emerging technologies; the commercialization gap and the need for more programs at the pre-venture-capital stage; and the importance of a flexible, interdisciplinary education.

Critical industries and technologies include materials, manufacturing, information technology and biotechnology, but this doesn't cover all the industries and technologies of importance. Others that will be important include photonics, environmental technologies and communications.

All science and engineering disciplines will contribute, and any breakthroughs are likely to occur at the interfaces between disciplines. I would like to add the important caveat that it is difficult to predict in advance important new breakthroughs, so it is important to foster a long-term view.

In the six years that I served on an NSERC highly qualified personnel committee, the prevailing view evolved from seeing little need for life scientists, to seeing their importance in biotechnology. Investment in our best minds and in research and development capabilities should be emphasized.

Government has an important role through the granting councils in encouraging the full spectrum of basic and applied research. A research infrastructure program would be particularly important at this time.

The provision of pre-venture-capital funding for researchers to take emerging technology to the level at which it can be attractive to private sector funding should be considered. Hopefully, the newly launched Canadian science and technology growth fund may provide this type of funding.

Government also plays a beneficial role in encouraging students to consider careers in science and technology.

The greatest impediment to emerging technology is at the proof of concept stage, which is at the stage of attempting to raise initial investment capital. There are government programs in place in the U.S.A., SBIR grants for example, that might be helpful at this stage. Reluctance regarding undertaking high risk and the desire for large short-term profits for risk capital play a role here.

Over the last few years, universities have become more attuned to commercialization opportunities and responsibilities. The commercialization gap needs to be closed from the industry side as well.

In a recent Coopers and Lybrand report, it was stated that growth companies in the U.S.A. with university ties have productivity rates almost two-thirds higher than that of their peers, yet only four out of ten of them forge these links.

Over the years, my own research has evolved from a basic understanding of the optical quality of the eye, to using this understanding to develop a new instrument for the improved diagnosis of conditions that threaten vision. For years, this research was supported by NSERC's basic research programs, followed by support from their research partnerships program.

More recently, I and two other professors established a spin-off company, Biomedical Photometrics Inc., in order to commercialize biomedical optical instrumentation. This process has been facilitated by the University of Waterloo's intellectual property policy.

This experience has led to the full realization of the commercialization gap. The university's mandate extends to the development of the bench-top instrument, but not to prototype development or market research, which are necessary to proving viability. On the other hand, investors are not generally interested in this early stage investment.

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On promoting a climate that encourages both science and entrepreneurship, such a climate already exists at the University of Waterloo through its education program and policies. More generally, such a climate can be encouraged through general education and encouraging literacy, science and technology from the earliest grades. This could include industry sponsorship of more undergraduate summer research programs and more programs like Shad Valley and Engineering Science Quest, which the university runs to expose young students to research in science and technology.

University education, particularly programs like UW's co-op programs, encourage interaction with industry and exposure to industry problems. At the graduate level, NSERC's industrial post-graduate scholarship program and industrial post-doctoral fellowship program play a similar role.

Novel interdisciplinary programs are also important; for example, the University of Waterloo's new joint co-op program in business and science. There must also be recognition that with continually diminishing resources it is particularly difficult for universities to take on more of the burden of commercialization of technology.

Canadian universities are meeting the needs of high-tech industries for skilled personnel. University of Waterloo students are in demand around the world. There will be a future need for highly qualified personnel in computer science, mathematics, science and engineering. There is a need for both skills training and broader interdisciplinary education, which must encourage independent thinking and creativity in order to produce innovative thinkers.

In the future, the workforce will need to be adaptable and flexible. Training in specific skills should be a joint responsibility of educational institutions and industry.

A great deal of skills transfer and technology transfer takes place via cooperative students. Professors gain from students' insights and experiences and a large amount of technology transfer to industry takes place on the two feet of the students who are at the leading edge of their fields.

At the advanced level of education, federal government funding of highly qualified personnel through the granting agencies is of paramount importance both to research programs at the university and because of the role these people have in transferring technology when they join the private sector.

We all accept the importance of public accountability, but care should be taken that the proliferation of reporting structures, reviews and programs does not become counter-productive. Long-term investment in research and development by the government and industry and the encouragement of our best minds would all be positive steps. In preserving excellence in research and development, knowledgeable review by independent experts, as exemplified in peer review, is necessary. This is consistent with weighting the quality of the work in order to predict its impact on both basic understanding and the economy.

I'm pleased to participate in these discussions this afternoon. I hope my remarks have been helpful and I look forward to questions. Thank you.

The Vice-Chairman (Mr. Lastewka): Thank you very much. It's the question part I'm beginning to worry about. Your partners only have about three minutes now, so I'm going to give them about three minutes apiece to summarize so we can get into questions and be able to share some questions and answers. Is that all right?

Dr. Frank Tompa (Department of Computer Science, University of Waterloo): Yes, that will be fine. We missed the discussion with you earlier, so we don't know what has already been said. That's a real shame.

My name is Frank Tompa. I am a software researcher in the university and the chair of the computer science department. I'm a founder of Open Text Corporation, which is a spin-off company from the University of Waterloo.

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I want to talk about research as it shows up in industry, government labs and universities and try to distinguish between them. The university part of the research includes not only the actual technology being developed but also the development of highly trained personnel, and my two colleagues have addressed that.

The difference between the government labs and universities on the one side and industry on the other side has to do with the timeframes in which product development needs to take place and the research to support that goes, compared to the basic research times in the universities.

University and government-based research, however, provide the only basis for introducing radically revised technologies, providing new vantage points for launching internal industrial activities that can meet short concept-to-product constraints. I can point to several of the experiences within the university here and with the spin-off companies locally, and we can elaborate on that if you wish.

What are the impediments that stand in the way of emerging technologies from university and government research, and what steps should be taken to promote a climate that encourages both science and entrepreneurship? Technology transfer with existing software companies or other receptors for new information technology involves communication of ideas through oral and written means, delivery of software prototypes, and the interchange of personnel. Commercialization of technology can also be achieved by the formation of a spin-off company, for which all of the above must still take place. This requires a lot of effort on everybody's part and a lot of time.

In recognition of the cost of technology transfer, increasingly more research expenditures within universities and government labs have been directed to programs that foster industrial interactions. You've heard of several of these before and I won't repeat them.

The universities have come to the call and responded as much as they have been able to, and we're eager to continue. Government labs have similarly responded to this call. However, industry has not been sufficiently encouraged to seek expertise and technology from the public research community. University and government researchers universally lament that industry does not have sufficient interest in examining and adopting commercially relevant technology.

The government may be able to play a significant role in increasing receptor inclination as well as receptor capacity. For example, perhaps a larger percentage of R and D support to industry could be restricted to initiatives that involve technology transfer as opposed to just in-house development.

I hope I can now participate in your discussion.

The Vice-Chairman (Mr. Lastewka): Thank you very much for making your points very clear.

Dr. Sujeet Chaudhuri (Department of Electrical and Computer Engineering, University of Waterloo): I am the third speaker from the University of Waterloo. My name is Sujeet Chaudhuri. I specialize in rf technologies and optical communications and I'm also the chair of the electrical and computer engineering department in the engineering faculty.

In keeping with your request, I will keep it very short. I have not made any separate submission but I have had an opportunity to look at my vice-president Dr. Hansson's submission and also Dr. Bernie Bressler's submission. I think they have captured everything I would have said, and I agree with all the points made there.

There are two specific items I would like to discuss. One of the special features of Waterloo engineering is that we are a fully co-op system. It has been a co-op school for 40 years, right from day one, and we put 3,600 undergraduate students into co-op jobs every year. My department takes care of 1,200 of those students. One-third of the engineering faculty is now in electrical engineering and computer engineering.

We have had tremendous success at the undergraduate level and it has become very clear to us that we have to extend this to the masters level and the graduate level. We have focused on software engineering and wireless communications. We have tried to bring in industrial partners to help us create masters-level jobs.

I think I heard discussions a little earlier here about how industry should help to create masters thesis and relevant projects. We are indeed doing that. We have had a very successful interaction with Ericsson Communications Inc. and it has put in $1 million to establish a centre for wireless communications.

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This is slightly different from the industrial research program of NSERC. We do not have any opportunity to match that kind of industrial contribution. If we get opportunities to match that kind of activity on the part of industries, I think we can expedite this industry-university collaboration in creating highly qualified technical personnel at a much faster rate.

So my one suggestion would be that at the federal government level this kind of industry-university partnership in creating infrastructure for specialized training, for specialized education, in areas of strategic importance to our country ought to be looked at. In my experience a lot of industries are ready to become partners. Universities like ours are very well placed to provide leadership in that partnership. The federal government can really be a great catalyst here.

The Vice-Chairman (Mr. Lastewka): Thank you very much. Mr. Leblanc.

[Translation]

Mr. Leblanc: Given the fact that government funding to universities will probably not increase in the next few years, I assume that private sector funding will have to increase.

Also, our population is quite sparse in relation to that of Japan and the U.S. How can we keep our research and development in Canada in order to compete against those big countries? My question is to Dr. Bressler. Can you elaborate on the marketing aspect of the technology you mentioned in your presentation earlier?

[English]

Dr. Bressler: In the first instance I think the government has to accept its responsibility in funding university research. We're not here to discuss the specific funding of the operating budgets of the university; we're here to discuss the specific research effort. It is a government responsibility. Protection of the budgets of the granting councils is fundamental. So it's not a matter of ``the government won't do it''. The government has to take that particular role very seriously.

I don't think the private sector can pick up all that difference. As I said, in my own university, while we're proud of the fact that we're $23 million and going up, out of a budget of $139 million in private sector funding, we can't expect $100 million in private sector funding to pick up the slack. It's just not doable.

It's just a message. I would offer the same opportunity for my colleagues in Waterloo to comment on that.

You asked specifically about the marketing of our specific products. There are at least two ways in which we commercialize our products. One is that an invention that is patented by the university is then licensed.

In the University of British Columbia we retain the rights to all the technology. Not all universities work that way. We will apply for a patent and then look for a licensee, or we will work jointly with the private sector company that may have provided the research funds in the first place to apply jointly for the patent and then provide an exclusive licence to that company. Each condition is a little different.

That's one way. The other way is to create a spin-off company. Some universities do a lot of that and some do very little. Our university has taken that as an active way of doing it because we've been trying very hard to spin our companies out into the province of British Columbia, and we've done that successfully. Of our 77 companies, 95% or 96% of them actually reside and work in British Columbia, creating a direct local economic advantage from our university spin-off.

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The same thing is true, by the way, for my other institutions: Simon Fraser and the University of Victoria. I'm not here to represent them, but I know they have approximately the same policies in terms of spinning out their company.

So that's another way of commercializing a product, through a spin-off company.

The Vice-Chairman (Mr. Lastewka): Are there any comments from the Waterloo group on that question?

Dr. Chaudhuri: I would like to add to the comments made by Dr. Bressler. I think government has to come in, and as to the view that government is putting in money to help universities, government has to look at it as an investment.

I will give you specific examples. At my department in the last 10 or 12 years, with the help of government, research has been done so that we're the root of three large companies here. One has created 120 jobs; another one has created another 80 jobs. One is in the encryption area; one is in the semiconductor CCD area. There is a third company next door to us that is by a group of students from our department, and this company is going to be in the forefront of RIM.

I can see from my department alone at least 200 jobs created in high-tech industries, from very small government support. Fundamental research, to commercialization, to job creation has taken place in 12 to 15 years. I do not see how government can not participate further in here.

The Vice-Chairman (Mr. Lastewka): Mr. Shepherd.

Mr. Shepherd (Durham): One of the things our committee has been trying to deal with is the concept of focusing research and development. I think it's at the university level that we have a lot of difficulty with that, because I hear that some of your research program is basically driven by industry generally.

In other words, the dilemma we seem to have as policy planners is if we define certain technologies that Canada can excel at as a nation, looking at the whole global aspect of research and development and how Canada can grab a market share rather than simply trying to be all things to all people, and we hear the contrary view from the university saying, no, it's driven by the need of our industrial sector. In other words, it's conceivable that some in our industrial sector are doing research and development in areas that possibly are part of the old economy or not going to be conducive to maybe the three or four or five strategic areas that Canada sees as its potential to be successful in the world. How do you reconcile those two views?

The Vice-Chairman (Mr. Lastewka): Dr. Bressler.

Dr. Bressler: I'm not sure if I understand the question completely. Are you saying that universities are disconnected from the priorities that are being set either by the country or by the private sector? Is that the nature of your question?

Mr. Shepherd: I think that has a tendency.

Let me give you a very specific example through NSERC. NSERC, one of the previous witnesses to our committee, talked about funding research into building better railway ties. I tried to take that and look at what the National Research Council is telling us - telecommunications, biomedical research - and how it fits into that. I'm told it was driven by the demand from the industrial sector. But when I think of railways, I think of China, which has tons of railways, and Canada is no longer building any. How are we reconciling the need to focus our technology to manage the scarce resources we have for research and development?

Dr. Bressler: Again I'll try, if I genuinely understand the question, and please stop me right away if I'm off on the wrong track here.

I think one of the things the private sector very much should be taking greater responsibility for is the things they really need that are specific to them. For the most part they try to do that. They do it in-house where they can, and they do it fairly successfully. They come to the university community for specific expertise that exists in our arena, which they either don't have or don't want to necessarily buy and set up themselves, because it's a need for the time, not necessarily for the long term.

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The university community, on the other hand, has the other side of it. It is good at doing the basic research and it's also good at responding to the needs of the applied community from a basic point of view.

When the private sector community that's looking for a specific application requires a fundamental new bit or several new bits, we're good at that. We're trained to do that.

Is that connecting it for you?

Mr. Shepherd: The University of Waterloo seemed to have a focus on certain specific areas. They defined them in passing, and they talked about computer engineering, etc. But clearly -

The Vice-Chairman (Mr. Lastewka): Should we ask for a comment from Waterloo? They might have a comment on your question.

Mr. Shepherd: Sure, yes.

Prof. Campbell: Yes, I'd like very much to comment on the question.

I think the question has two parts. First of all is the issue of how you decide what areas are going to be of strategic importance. As I said, I'm a little concerned about that sometimes. There's a caveat there. In the short term, industry can tell you what's of strategic importance to them immediately. It's important that there is an investment in those areas and that there is research and development done in the areas driven by the industrial needs of today.

But it's equally important that the research is going on at a more basic level and is going on, even in technology, in terms of novel ideas and new inventions. If you shut off the pipeline back at the novel ideas and the new inventions, five years down the road you won't have the things that need to be applied then. That's a very important issue.

The example I gave of my own experience on a committee was that people didn't see the importance of life sciences; they didn't initially see the importance of biotechnology. It's only over the years that people have realized the enormous importance it will have. You need a balance between the immediate, very applied research and the novel, inventive research, both in technology and in more basic areas, that will provide the things that will be important in the longer term.

Most of the industries, particularly industries within Waterloo, have an eye now on export markets. I don't think it's as much of an issue of what they can provide for the home market versus an overseas market. Many of the spin-off companies from the University of Waterloo have over 90% of their sales overseas. So industry has an eye on what the worldwide markets are. I don't know that they need to be told about that.

Dr. Tompa: I have one more point.

The Vice-Chairman (Mr. Lastewka): I need to ask you to make it short because of the bells for the vote.

Dr. Tompa: Yes.

The software sector moves extremely quickly. It would have been very hard to predict several years ago that pieces for the World Wide Web and the Internet would be important now, or that something bringing up the CANARIE project would be important, or that encryption would be important.

I don't think the government should try to say ``There are three things, and we know exactly what they are. This is the way we're going to focus all of our energy, and all of the universities and all of the industry had better follow that.'' There has to be a spread.

The Vice-Chairman (Mr. Lastewka): Thank you very much.

I want to ask Dr. Bressler a very short question.

You've all mentioned items concerning the infrastructure program for modernizing labs and facilities. In the last infrastructure program, in many of the provinces, universities were given money. Could you tell me what percentage of that went towards research labs and facilities?

Dr. Bressler: I don't know. I didn't realize universities -

The Vice-Chairman (Mr. Lastewka): For example, in the province of Ontario, each university was given so much money. How much of that money went into research and development facilities?

Dr. Bressler: Well, apparently that was only specific to Ontario.

If I could, I would ask Robert Davidson, who's here with me, to answer that. In B.C. we didn't see any of that money. I think most of the provinces did not flow that through to the universities, and very little went to the infrastructure.

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The Vice-Chairman (Mr. Lastewka): It will be very interesting for our researchers to go back through our infrastructure programs for the province of Ontario, then. Did the universities pick that infrastructure money as a priority for research and development, or did they fix roads and other things? And it might be just Ontario, so we'll have to go back and take a look at it.

I want to thank everybody in Waterloo. I apologize for the connections not being right on time.

I also want to thank the witnesses here today for coming. It's been an excellent round table.

As we gather more and more information and have more and more exchanges, if you people in Waterloo would like to forward any other information, please do so to the clerk. That applies also to our witnesses here. Thank you.

I adjourn this meeting until Thursday, November 28, at 9 a.m., when we'll reconvene on this subject. Thank you very much.

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