Industry Committee on May 13th, 2008

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

Mr. Gavrel, you wanted to comment. Very briefly, please.

[Jean-Claude Gavrel]

Simply to add that a success story in this area has been one of our networks, the intelligence systems for innovative structure. We've been developing new technologies for bridge repair and concrete deck surface changes and rehabilitation. They have worked for 14 years closely with government, both at the provincial and federal level, with Public Works, with Transport Québec, and with companies both in Quebec and in Manitoba, and have now brought new technologies. Also, they have brought something that is key in this industry, and that is changes to the building code that allows the use of those new materials that will replace steel in concrete structures.

So these things happen, but they sometimes take a long time to develop the solutions.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Ms. Nash.

We'll go to Mr. Simard, please.

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you very much, Mr. Chair.

Thank you for being here this morning.

I would like to continue on strategic procurement for a few seconds, Mr. Dale, if I may. If your country doesn't buy your technology, you have a problem. That seems to me to be the first step. An example that I use is Magellan in Winnipeg, which developed a satellite and was up for tender with the government and lost to a U.K. company. The reason the U.K. company could produce it cheaper is because the U.K. government had sponsored four satellites with that company.

Again, we have to respect trade rules, which is another issue we have. What do you recommend specifically? Because with all the treaty rules that are now in place with our free trade agreements we can't favour Canadian companies. I'm not sure that what you just proposed is possible--in other words, having selective bids for those young companies.

[Jeffrey Dale]

I don't profess to be a trade specialist, so I can't help you with that. I know that other jurisdictions, especially in the United States and Mexico, which we have NAFTA agreements with, are supporting their small businesses and buying their products. They're doing it under defence programs and under the SBIR program that Paul mentioned. They're doing it, and they're under the same GATT rules and NAFTA rules that we are.

I would put it back to you that other jurisdictions are finding a way to support it, and that we also need to find a way to support it. I'm not sure if my proposal with respect to the sole sourcing complicates the matter, but I know we need to create a program that gives the advantage to Canadian innovation.

[Raymond Simard, Liberal, Saint Boniface, MB]

We have to find a way.

[Jeffrey Dale]

We have to find a way, as others have.

[Raymond Simard, Liberal, Saint Boniface, MB]

You've probably heard that this committee is traveling within the next couple of weeks, and one of the things that attracted the committee, it seems, by the agenda, is big science projects: the Canadian Light Source Synchrotron in Saskatoon, and the Level 4 Canadian Science Centre for Human and Animal Health in Winnipeg. How beneficial are they, compared with smaller research programs? Do we get much more out of these big science programs, and is Canada doing enough of these?

[Jean-Claude Gavrel]

We need big science in Canada for a number of reasons. We need big science to attract the best scientists, to be part of the club internationally, and to focus on the areas where we have clear benefits.

You mentioned the Canadian Light Source Synchrotron, and I think that's a superb example, which could have significant commercial benefits. They're providing a fabulous research environment for the small companies to go and test a whole lot of new ideas, technologies, etc.

These things have been very helpful in the past and will continue to be. We have a nuclear industry in this country that was initially positioned by significant government investment, and we need to continue that.

[Raymond Simard, Liberal, Saint Boniface, MB]

Mr. Corr, you have indicated that Waterloo allows their researchers to own their own IP. Can you tell me if you're the exception to the rule? Is this something that is now happening in many universities? Is it a standard formula? Do universities usually share the IP with researchers? How does it work?

[Tom Corr]

Most of the universities have a policy whereby the ownership of the IP is split between the researchers and the university, so that the universities can gain from commercialization. The university shares in the funds that are generated through either royalties or ownership in the company.

Our philosophy is different. Our philosophy is that the results of the gain should go to the researchers and the people who created the IP. This gives them every incentive to move forward with commercialization. Working at other institutions, I've found that if they don't have a financial incentive to move it forward then many times the IP just sits on the shelf. They would rather do more research than get some small percentage of what may come from the commercialization.

That's our view of it. Many universities believe that taking a percentage of the royalties generated by commercialization will somehow fund their technology transfer operations. Frankly, there are a handful of universities in all of North America that actually pay their own way.

The universities have to look at commercialization as simply a cost of doing business, a way to attract good researchers, to attract industry to the table to make it easier for them to live with. We get our money back in spades—way more than we get through royalties.

For example, over the last number of years, RIM has given back to the university community and research institutions, through their founders, over $200 million. This isn't money that they had to pay back because the IP was originally developed here and there was some contract to do so. It's because they feel that the community gave them this opportunity and they're simply donating funding back. They are one of the many companies doing this.

[Raymond Simard, Liberal, Saint Boniface, MB]

We don't talk a lot about the indirect spinoffs. We talk about the commercializations, which are direct. In Winnipeg, for instance, Smith Carter Architects and Engineers Incorporated has now been involved with the last four to five projects undertaken by the level-4 lab. It generated $1.2 billion in revenue for these guys.

We don't talk about that indirect spinoff. Are there examples of that?

[Tom Corr]

There are many. If we look at the economic activity generated through our spinoffs, we have thousands of employees in the Waterloo region—250 spinoffs from the University of Waterloo alone. There are many suppliers and many more customers. There is a lot of indirect economic activity created through spinoff activities. It goes far beyond the company itself.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll have Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you.

Thank you to the panel for appearing before us again today.

I am intrigued, Mr. Corr, by your policy at Waterloo.

We had the privilege of meeting with a bunch of Google executives, and these guys are amazing. It's an amazing company. They've pretty much thrown off all the traditional ways of running a business. They seem to attract a whole new crowd.

My question is, first of all, whether you find the same thing happening at Waterloo. Is there a revolution of sorts? I think this probably happened with the inventors of Microsoft and Mr. Gates and that group of people. They seemed to have just started this revolution, which created this incredible industry in the United States. Are we seeing the seeds of that in Waterloo at this time?

[Tom Corr]

I can just speak to the results. I don't know if what we're seeing is a revolution. But I think that the culture in the community; the IP policy; the attitude the students come out with--they're not afraid to do a start-up; the capital that's available; the community that gives back, both from an investment standpoint and in terms of spinoff companies; and the mentors who are there all came together to create what is the magic of Waterloo today.

Again, I don't know if that can be replicated elsewhere. I know that it works in Waterloo, and it works well. I think the danger, again, is in trying to just nail it on one thing--if we had this program and replicated it everywhere else, it would work just fine. I think that if the culture isn't there, from the university and right through the whole community, it's tough to replicate.

It's working, and that's pretty much all I can tell you.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

First of all, this was a decision made by Waterloo. The question would be whether this is something that is also adopted by other universities. Can the federal government ask them to do it? Will the result of your policy be that you're going to attract so many of these young, bright new minds that the other universities will follow suit?

[Tom Corr]

The IP policy we have is just part of the puzzle in terms of the commercialization successes at Waterloo. We're very easy to deal with. If a company or an investor wants to know who owns the IP, just talk to the guys who created it. It's theirs; end of story. You're not dealing with the university research departments assigning IP, taking back IP, or saying “I want 25% of this”. Sometimes universities can be very hard to deal with when they're dealing with commercialization. They think they have something worth a zillion dollars, and they want a big piece of it. In fact, it's worth nothing until somebody commercializes it. So it's very much an attitudinal thing.

If I were trying to come up with a policy for other universities to adopt, I think it would be to give it to the researchers so that the incentive was at the right place to make the commercialization happy. Or it would be to be very easy in terms of dealing with industry and investors to help make it happen. The more blocks you put in their way, the more likely they'll be to say “Oh, forget it, we're just going to do it ourselves”.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

To play devil's advocate, if I were a student, I'd want to work on some of the technologies that are going to have big benefits and big payoffs. Are we losing, possibly, down the road, somebody maybe discovering an innovation of scientific benefit?

[Tom Corr]

Not at all, because at the root of this commercialization opportunity is basic research that's being done by the professors and the researchers. And that's being dictated by the grants they get through NSERC and the other granting agencies. What we're seeing is basic research being done, but we're seeing more of an incentive, perhaps, at Waterloo for having this basic research turned into commercialization opportunities, because there are financial incentives for people to do so.

I don't think there's any less or any more pure research, on a relative basis, going on at Waterloo than anywhere else. I just think we're grabbing opportunities from this research and trying to commercialize it, where perhaps others aren't.

[The Chair, Conservative, James Rajotte]

Thank you.

Go ahead, Mr. Dale.

[Jeffrey Dale]

I just have a quick comment about what Tom was saying.

There are many different policies. As an example, in Ottawa, Carleton University has the same policy as the University of Waterloo. Ottawa U has a combination policy in that it's university-owned and inventor-owned.

What you actually see is that the granting councils right now and the research we're doing are attracting some really young, bright minds. In any institution, you can walk in and identify what we call the low-hanging fruit. These are the researchers who want to deal with industry and want to try to commercialize their products. They have a high need to get out there to try to find out how they can make money from their research. We spend a lot of time trying to identify those researchers, and then we pair them up with entrepreneurs and/or companies.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Van Kesteren.

We'll go to Mr. Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chairman.

Good morning everyone.

I read your submission, Mr. Johnston, and I found it to be quite interesting. I'd like to read a few excerpts:

As noted by the Conference Board of Canada in its June 2007 report, How Canada Performs: A Report Card on Canada, we as a nation have not been good at managing the innovation system; we have not been good at integrating our efforts along the continuum. Canada was given a mark of “D”, putting us 14th of the 17 countries studied. At page 63 they note: Canada's ranking in the innovation domain reveals underlying deficiencies; we are not keeping up with other countries on the commercialization of knowledge.

Further on in your submission, you note:

Part of the difficulty to date has been the failure of governments to recognize a simple truth inherent in the above system: companies create wealth in the innovation system by commercializing products and services; universities do not.

You also say that R&D activities must be linked to the needs of the marketplace and of clients.

My question is for all of you. What can we do to promote commercialization? What steps can we take to ensure that government funding of all research systems produces better results?