[Senate Hearing 108-822]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-822
 
                ADVANCED MANUFACTURING AND BIOTECHNOLOGY

=======================================================================

                             FIELD HEARING

                               before the

                         COMMITTEE ON COMMERCE,

                      SCIENCE, AND TRANSPORTATION

                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 14, 2003

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation








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           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey
      Jeanne Bumpus, Republican Staff Director and General Counsel
             Robert W. Chamberlin, Republican Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel













                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 14, 2003...................................     1
Statement of Senator Cantwell....................................     1
    Prepared statement...........................................     4
Statement of Senator Wyden.......................................     5

                               Witnesses

Carter, Dr. Bruce, President and CEO, ZymoGenetics...............    17
    Prepared statement...........................................    18
Denton, Dr. Denice D., Dean, College of Engineering, University 
  of 
  Washington.....................................................    34
    Prepared statement...........................................    37
Hartwell, Dr. Lee, Fred Hutchison Cancer Research Center.........    12
Hood, Dr. Lee, Institute for Systems Biology.....................     7
Janicki, Peter, Janicki Industries...............................    40
Larson, Nona, Senior Materials Engineer, PACCAR Technical Center.    42
    Prepared statement...........................................    44
Overell, Robert W., Ph.D., General Partner, Frazier Healthcare 
  Ventures.......................................................    23
    Prepared statement...........................................    25
Rottsolk, James E., Chairman, President and CEO, Cray, Inc.......    19
    Prepared statement...........................................    20
Rutkowski, Rick, President and CEO, Microvision Inc..............    45
    Prepared statement...........................................    48
Statkus, Frank D., Vice President for Technology, The Boeing 
  Company........................................................    39
    Prepared statement...........................................    40
Wray, Susan D., DDS, JD, Director for Industry Relations, 
  University of Washington School of Medicine....................    14
    Prepared statement...........................................    16
















                ADVANCED MANUFACTURING AND BIOTECHNOLOGY

                              ----------                              


                         MONDAY, APRIL 14, 2003

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                               Seattle, WA.
    The Committee met, pursuant to notice, at 8:30 a.m. in 
conference room 3-B, Washington State Convention Center, 
Hon. Maria Cantwell, presiding.

           OPENING STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Good morning. We are here for a U.S. 
Senate Committee on Commerce, Science, and Transportation field 
hearing on Advanced Manufacturing and Biotechnology.
    I am going to be joined in a minute by my colleague from 
Oregon, Senator Ron Wyden, but before he comes into the room, I 
wanted to make sure that since we had such a good turnout of 
Northwest interest here, obviously concerned about a variety of 
issues that may be impacted by the work of the Senate Commerce 
Committee, I wanted to make sure that people also saw some of 
the staffers that are here.
    So if Floyd Des Champs and Chan Lieu and Gael Sullivan 
could stand up here in the front. Where did----
    Mr. Lieu. I am right here.
    Senator Cantwell. Oh, right here.
    Any of you who have other issues, materials or testimony 
that you would like to make part of the official record for the 
hearing, please see one of those gentlemen. I want to express 
my thanks and gratitude for their help in organizing this field 
hearing today and coming to the Northwest, and I hope that you 
will fill Senators McCain and Hollings in on the hard work that 
the Northwest is doing to continue to invigorate what has been 
a very stellar economy.
    I also want to thank our panelists for being here this 
morning. We obviously have a very distinguished group of people 
who have given up their time to come and try to focus our 
attention on what some of the opportunities are moving forward.
    We apologize in advance for asking you to be brief. I know 
that that is not necessarily a hard challenge, but there is so 
much to convey. If there are other things that we do not get 
through here this morning, please know that all of this 
material does become part of the official record of the field 
hearing and is shared with the rest of the Members of the 
Committee.
    Obviously the Commerce Committee, from the first panel's 
perspective having really the oversight of the majority of 
authorization for science and technology funding for the 
Congress, it is very important that we get those remarks to 
them, and obviously for the second panel, the aviation focus 
and the Aviation Subcommittee that both Senator Wyden and I 
serve on will benefit from any additional materials that 
individuals can give us today.
    Well, I think what I will do is as Senator Wyden is coming 
into the room, I will go ahead and start my comments and then 
turn it over to him so that we can get on with the panel.
    The hearing this morning is going to examine two industries 
whose innovations, I believe, can continue to serve as an 
economic catalyst for the Northwest, biotechnology and advanced 
manufacturing. Biotechnology is often touted as the next step 
in the technology revolution, but we already know here in the 
Northwest that it is transforming healthcare, agriculture, and 
is poised to protect us from attacks on American soil, chemical 
and biological weapons.
    Washington State has over 190 biotechnology companies 
employing more than 11,000 people, and in 2001, the annual 
revenue of these companies exceeded $1.2 billion, so Washington 
State has been well on the way.
    Nearly one half of these companies were based on 
technologies developed at research and development 
institutions, and over 40 percent of these companies have been 
established in the past six years.
    And I think that this is a very important note that our 
State's Academic Research Institutions attract a very large 
percentage of the NIH budget at $650 million in 2002, so the 
relationship that we have been able to garner and the good work 
that these individuals have done in securing Federal funds has 
played a critical role. I am sure we are going to hear more 
about that this morning.
    I want to stress how important the collaboration between 
higher education research institutions, private researchers and 
the capacity for the work force to work together in this region 
makes our future economic growth and opportunity viable.
    One of the bills that I have recently introduced with 
Senator Pete Domenici of Arizona, and something that I know 
that Senator Wyden is also interested in as well, is the 
Genomes-to-Life bill, a model of the kind of collaboration 
between the Federal Government and private industry that we 
need to promote the biotech industry.
    This bill capitalizes on the enormous success that the 
Human Genome Product has done and promises to take this 
important research to the next level. While mapping the human 
genome is an unparalleled accomplishment on its own, this new 
initiative will allow researchers to go beyond the science and 
descriptions and begin to explore the complex interactions of 
the elements within cells.
    This legislation ensures that the research within the 
origins of the Department of Energy, provides the science and 
technology basis for new industries and biotechnology, and 
ensures that DOE continues to play an important role in the 
commercial applications of these technologies.
    This bill would provide funds for the national research 
laboratories such as PNNL, and potentially a major investment 
in Washington State. I look forward to hearing from our panels 
and witnesses on these issues.
    I also want to bring up the fact that the second panel, the 
focus of advanced materials manufacturing, I think is an 
important opportunity for the Northwest to play a leadership 
role. Advanced manufacturing attempts to modernize materials 
with more sophisticated polymers, composites or light aluminum 
alloys. These materials are essential to national defense and 
to the aerospace industry.
    Manufacturing remains a leading sector in our State's 
economy employing over 10 percent of our work force. And as we 
all know, this sector is under some serious challenges, but it 
is by the planning for the future investment in innovation and 
technology here in the Northwest that I believe that we can be 
at the forefront of the composites area, and local companies 
can play an important role in using composites and advance 
materials in future commercial planes and other manufacturing 
applications.
    And while this investment is no guarantee that future 
planes like the 7E7 will be built in Seattle, it is clear in my 
mind that without this kind of investment in the 21st century 
technologies and the investment in the work force, we will not 
remain competitive unless we make this investment.
    In addition to the aerospace sector, Northwest companies 
from Bellingham to Bend are applying a wide range of advanced 
materials, including composites and other cutting-edge 
materials like aluminum alloys to manufacturing from everything 
from boats to recreational vehicles to lightweight trucks and I 
think in the future even bridge supports.
    So how do we have the best shot at this? Well, it is about 
transforming our manufacturing base to compete in the 21st 
century. It is about making an investment in the research and 
development of this kind of technology. That is why I have 
introduced Federal legislation for an aviation administration 
center of excellence that could be located at the University of 
Washington. This center would specifically focus on the 
research and encourage the broader use of advanced structural 
materials, including composites and the new aluminum alloys in 
future aircraft.
    This center for excellence would focus on the applied 
research and training and durability and maintenance of 
advanced materials in air frame structures, including the use 
of polymeric composites in large transport planes.
    We are looking to promote and facilitate collaboration 
among academic researchers, the Federal Aviation 
Administration's Transportation Division and the commercial 
aircraft industry including all the suppliers and carriers.
    So I believe that both of these opportunities, advanced 
manufacturing and biotechnology, could help play a very 
significant role in the region's future job growth. But we have 
to make the investments now, and that is why we are here today 
to hear from these panelists on both biotechnology and advanced 
materials.
    I want to welcome my colleague from Oregon, Senator Wyden, 
here. The Northwest has been blessed to have both Oregon 
senators on the Commerce Committee. I have been very happy to 
join them on that Committee. Senator Wyden has played a 
leadership role in biotechnology and in technology and is 
considered one of the most technology-savvy senators in the 
United States Senate, and we are pleased to have him here with 
us this morning to conduct this field hearing.
    [The prepared statement of Senator Cantwell follows:]

Prepared Statement of Hon. Maria Cantwell, U.S. Senator from Washington
    The United States of America has led the world in scientific 
research and in technological innovations in the 20th Century, and the 
21st century will undoubtedly provide new challenges and opportunities. 
The true engine of the American economy has been to turn our scientific 
discoveries into practical applications and advancements in technology 
have allowed us to improve our economy, our national security, and to 
live richer lives. Today's science and technology innovations are 
uniquely characterized by the speed and information processing 
capabilities of our new machines. Traditional biology, traditional 
chemistry, and traditional physics have been literally transformed by 
technology. We are presently on the verge of new sciences, which will 
undoubtedly produce exciting new technologies.
    The new fields of nanotechnology, genomics, bio-informatics, and 
micro-engineering, among others, grow out of a synergy of physics, 
biology, chemistry, engineering, and advanced computational modeling. 
Recent advances in proteomics and genomics promise to allow us to 
understand the complex interactions of proteins within living cells and 
provide important clues to the mystery of living organisms. This basic 
research in biotechnology will certainly have unique applications and 
the integrative and predictive understanding of biological systems will 
improve our ability to respond to the energy and environmental 
challenges of the 21st century. Nanotechnology is the other half of 
this complementary pair of new sciences. Like genomics, nanotechnology 
combines traditional sciences into a new 21st century science. 
Nanotechnology offers immense possibilities for scientific 
advancements, achievements, and applications, with immense potential to 
transform our lives. It has equally wide applications--from energy, to 
medicine, to electronics. Like genomics, nanotechnology is what 
scientists and technologists label as an ``enabling'' technology--a 
tool that opens the door to new possibilities constrained only by basic 
science principles and our imaginations.
    I have introduced legislation in the Energy Committee to spur 
development and research in the field of genomics and bio-informatics, 
and look forward to considering the complimentary roles nanotechnology 
legislation can play. Along with Senator Wyden, I convened a Commerce 
Committee field hearing earlier this April on the Northwest economy 
that focused on the innovative science and industries that will drive 
that region's economy in the future. The hearing highlighted the 
exciting arid unique opportunities that advanced manufacturing, 
including nano-scale fabrication, can have in spurring technological 
and economic development. At that hearing we heard about challenges 
facing these developing industries, and the role federal research and 
investment could play in growing those industries. In response to these 
findings, I have proposed legislation in partnership with the 
University of Washington to establish a Federal Aviation Administration 
Center for Excellence in Materials Science. Such a center would produce 
research that would develop techniques in maintaining and ensuring the 
durability of advanced material structures in transport aircraft, 
including at the molecular level.
    Another part of that same productive hearing on the Northwest 
economy revealed that biotechnology, including the nano-scale research 
into biological systems, can play a role in diversifying and driving 
economic development. I learned about many exciting advances fueled by 
biotechnology, and spoke with many bright innovators about challenges 
their research and their industries have faced. I am excited to say 
that many of these roadblocks will be removed, and a good deal of basic 
research provided, through the Genomes to Life bill, S. 682, I have 
introduced in this session. That bill capitalizes on the enormous 
success of the Human Genome Project, and promises to take this 
important research to the next level. While the mapping of the human 
genome was an unparalleled accomplishment on its own, this new 
initiative would allow researchers to go beyond the science of 
description, and begin to explore the complex interactions of the 
elements within cells--truly exciting and micro, if not nano-scale, 
research that promises great rewards in response to grand challenges.
    Other nations have already recognized the need to be at the 
forefront in these fields, and many have already provided support for 
genomic and nanotechnology research. In the U.S., both genomics and 
nanotechnology have been recognized by the Department of Energy, The 
National Research Council, and the National Science Foundation as high 
priorities for new research. American research institutions, companies, 
and universities have recently joined in these investigations. The 
State of Washington is already a national center for genomic research 
and the University of Washington is the first in the United States to 
offer Ph.D.s in nanotechnology. Washington is home to many world-class 
research facilities. We have over 190 biotechnology companies employing 
more than 11,000 people. In 2001, the annual revenue of these companies 
exceeded $1.2 billion. Nearly one half of these companies were based on 
technologies developed at research and development institutions and 
over 40 percent of the companies have been established in the past six 
years. I believe that federally funded research in genomics and 
technology will provide more economic benefits, not only for 
Washington, but also for the nation.
    While our past leadership in science and technology may provide us 
a head start, it must not lull us into a false sense of accomplishment. 
We cannot afford to become complacent, but must take proactive steps to 
ensure our economic and scientific future is a real possibility, and 
that barriers to these new technologies are removed through targeted 
federal involvement. While these new fields involve experiments at the 
microscopic level, they often require sizable instrumentation and 
investments of federal support. This support is an example of the 
targeted role the government can play, not in competing with 
businesses, but in training America's workforce and providing 
fundamental theoretical research into new fields of knowledge.
    We must provide the federal support for a coordinated national 
program of research and development in emerging sciences. Federal 
investment in these new sciences will produce important scientific 
breakthroughs and result in long term benefits to our health, our 
economy, and our national security. I look forward to hearing today how 
we can do just that.

    Senator Wyden?

                 STATEMENT OF HON. RON WYDEN, 
                    U.S. SENATOR FROM OREGON

    Senator Wyden. Well, thank you, Senator Cantwell, and I am 
really pleased to be with you. Let me say to the people of 
Washington, having chaired the Science, Technology, and Space 
Subcommittee in the last session of Congress, one of the very 
first people that I look to for input and counsel on these 
issues is Senator Cantwell who has a long record in these 
concerns both in the private sector and in Government.
    So, Senator Cantwell, it is great to have a chance to be 
with you. And suffice it to say, it is our judgment that Oregon 
and Washington can be a magnet for entrepreneurs and scientists 
with cutting-edge ideas and technologies. And the reason that 
we are here is that we want to advance public policies that are 
going to unleash those kinds of private sector talents.
    And I think it is worth just noting a bit what the 
Government's role is in all of this and we are going to hear 
from our panelists in just a second, but Maria and I do not 
have machines on our desks where we thrash them around a couple 
of times and then out spit the jobs.
    I mean, we do not create jobs in the United States Senate. 
The jobs come from good people like those who are on the panel 
and all of you in the audience, people in the private sector.
    But what Senator Cantwell and I are in the business of is 
setting the climate. Our job is to help set the climate. So if 
the proper decisions are made in the education area, for 
example, with respect to incentives research and development 
and the access to essentials like water, which are so important 
to the technology sector.
    If we can get that right, if we can set the climate 
properly, then all of you in the private sector can go do your 
thing, and we are going to create family-wage jobs in the 
private sector.
    So we are really here today to get information in those 
areas to help set the climate. And just by way of wrapping up, 
there are two special interests I have: One with Senator Allen, 
and his staff, I think, is represented here today, we note the 
presence of our Republican colleague staff. Senator Allen and I 
have introduced the first major nanotechnology initiative.
    Our Committee will be considering that legislation very 
quickly when we return from the recess. I think we can have it 
on the President's desk within a matter of months.
    Suffice it to say, the small sciences, as nanotechnology is 
known, is an area of extraordinary potential.
    I see, for example, with the interest there is in 
Washington and Oregon in the healthcare area, a special 
interest of mine, that with nanotechnology appliances, we are 
going to have small bulldozers, in effect, eliminating cancers 
and a variety of exciting therapies and applications will stem 
from that.
    Finally, a special interest of mine and I know Senator 
Cantwell's as well, is the importance that we get more women 
into the hard sciences and the fields that we are going to be 
discussing today.
    We cannot accomplish what we need to do in this country 
both from the standpoint of the private sector and from the 
national security standpoint unless women get a fair shake in 
these fields.
    There has actually been a reduction of the number of women 
in some areas, particularly computer sciences, in recent years, 
and I have called on the Federal Government to make an 
especially aggressive effort to get more women in these 
sciences.
    So this is going to be an exciting morning, and, Senator 
Cantwell, I thank you for doing this and the chance to be with 
your constituents. The Northwest is going to have a full court 
press, so to speak, between Oregon and Washington for jobs and 
economic opportunities in this area under your leadership, and 
I look forward to being your partner.
    Senator Cantwell. Well, thank you, Senator Wyden. And I do 
consider it a partnership with our neighbors to the south. We 
had an opportunity to, Senator Murray and I, address the 
Portland Chamber of Commerce last week, about 60 individuals 
who were there, and these same issues came up, and so we will 
look forward to working with you on them.
    We have a very distinguished panel here this morning. I 
would like to introduce them all at once, if I could, and then 
I will turn it over to them to start their presentations.
    But first we are going to hear from Dr. Lee Hood, the 
president of the Institute for Systems Biology. ISB is 
internationally renowned as a nonprofit research institute 
dedicated to the study and application of systems biology. Many 
of you know that ISB is having its second annual symposium on 
systems biology and human disease, and so I know that you will 
actually have to leave to go to that, so we feel very honored 
that you have taken the time to be with us this morning.
    I know that immediately following your testimony, Senator 
Wyden and I will have a few questions, and then we are going to 
let you rush back. But I am going to go ahead and introduce the 
rest of the panelists now.
    Dr. Lee Hartwell will be next on the list and no stranger 
to most of us in this room. Dr. Hartwell is the President and 
Director of the Fred Hutchison Cancer Research Center. Dr. 
Hartwell spent most of his research career at the Department of 
Genetics at the University of Washington where he used yeast 
cells to study the fundamental problems of cell biology related 
to cancer and in 1997 joined as the Director of the Fred 
Hutchison, and working with a variety of friends he co-founded 
the company Rosetta Infomedics.
    I think next on the list we are going to have Dr. Susan 
Wray. Dr. Wray is the Director of Industrial relations for the 
University of Washington School of Medicine. She has worked for 
a variety of biomedical and high-tech firms and has served on 
the board of the U.S. Patent and Trademark Office's 
Biotechnology Institute, a very important area of this whole 
field, and we obviously need to make sure that the Patent 
Office continues at the same funding to make sure that this 
process works smoothly for us in the Northwest.
    She and Dr. Paul Ramsey, Dean of the University School of 
Medicine, are key leaders in the university's research 
expansion efforts, and she is going to talk about that this 
morning.
    Next to her, Dr. Bruce Carter, President and CEO of 
ZymoGenetics, a local private biotechnology company is going to 
speak about the real products that are emerging from 
collaborations between higher education and research and 
private industry.
    Next to him, James Rottsolk who is Chairman and President 
and CEO of Cray, Incorporated, a company which he also helped 
co-found will be speaking about the shared computational 
capacity and that information technology and hardware 
advancements are going to be key in the leap forward in 
genomics, and we are very proud of the work that that company 
has achieved and that they are here in Washington State and 
look forward to his comments.
    In closing, Dr. Bob Overell, general partner at Frazier 
Healthcare and Technology Ventures is going to talk to us about 
the early stage investments and where we are in the Puget Sound 
area and in the Northwest in encouraging the access to capital 
at a time when the capital crunch seems to be quite severe, but 
how the role of capital formation will be critical for us 
moving forward.
    So with that, Dr. Hood, if you could start us off this 
morning. And again, we appreciate your time.
    Dr. Lee Hood. Sure.

    STATEMENT OF DR. LEE HOOD, INSTITUTE FOR SYSTEMS BIOLOGY

    Dr. Hood. We stand at a fascinating convergence for 
biotechnology. With the completion of the human genome 
imminent, we have new opportunities for thinking about 
biotechnology. So in addition to healthcare, in addition to 
animal husbandry, agriculture, protection against bio-
terrorism, even mining, there are two areas that I find 
particularly fascinating that the Northwest may be uniquely 
qualified to participate in.
    One is the convergence between information technologies and 
biotechnology. Because they share the same kind of digital 
language, there are many strategies that will obviously be 
shared between the two.
    And the other is the convergence between nanotechnology 
material sciences and biotechnology. And I think it is in these 
latter two areas that there are really unique opportunities.
    Now, the Human Genome Project has clearly said the key 
thing about biotechnology is understanding information. And on 
the one hand there is a genome with the 30,000 genes that make 
the 30,000 proteins that are the molecular machines of life, 
but what has really emerged clearly, and it is what our 
institute is about, is those proteins participate in parties 
called systems. The heart and the brain each are systems, and 
understanding how to study systems is really the key to the 
future.
    And I might just illustrate some of the approaches that we 
have taken at the institute. The essence of systems biology it 
turns out fascinatingly enough, as cross-disciplinarian 
scientists, you have to put together mathematicians and 
computer scientists and engineers and chemists and biologists 
to be able to do this new kind of science.
    What is critical is to drive new technologies. So, again, 
at the institute, we have recently formed a nanotech alliance 
with Caltech and UCLA, and we are designing machines such as a 
new way of sequencing DNA that will be 3,000 to 4,000 times as 
fast as what we have today. And in 10 to 15 years, each of us 
can have our genome done on a little chip, and it will be the 
beginning of what we call predictive medicine.
    The institute is also a pioneer in this area called 
proteomics. Ruedi Aebersole is the world leader in this 
particular area.
    It is key to be a world leader in bio-informatics and 
computation and the mathematical sciences, for this is the 
means whereby systems biology really gets not done, but 
understood, whereby the models are created and so forth.
    And it is the understanding of human systems that will give 
us new insights into the IT world and how to do computing much 
better.
    The final area is the idea of predictive medicine. In the 
future, we will be able to look into your genomes and make 
predictions about your health history. We will be able to give 
you a little nanotech device which will prick your finger and 
make 10,000 measurements and tell you you are in a good health 
state or has some particular disease, cardiovascular or cancer, 
started. You will be able to monitor real-time disease.
    We will be able to use systems biology to place defective 
genes or pathologic environmental signals in the context of 
systems and understand how to circumvent their limitations. And 
medicine will be forced to treat us as individuals because we 
each differ from one another on average by 6 million letters of 
the DNA language, so we are predisposed to differing kinds of 
combinations of disease.
    And together with the Fred Hutchison, we have recently 
initiated a partnership to really push forward the technology 
and implementation of this predictive, preventive and 
personalized medicine.
    Finally, the institute is really committed to transferring 
knowledge to society, so we have spun off three new companies 
in the three years we have been in existence, and more recently 
we have put together what is called an accelerator, a 
partnership with three outstanding venture capital groups that 
puts up the capital for instantaneously setting up small start-
up companies that are testing out new kinds of ideas.
    Indeed, we have had six companies that have already been 
reviewed in the last two or three months. So this new world is 
an enormous driver of technology and its realization in the 
economy.
    So with all of this in mind, what should we really be 
thinking about? Well, I would argue that we really want to 
think very seriously about building on our unique strengths.
    I would say in the Northwest, one unique strength is this 
creation: The Institute for Systems Biology is the first place 
in the world that is doing systems biology. And systems biology 
is important not only because it is a new approach to biology, 
because it enormously enables classic smaller biology. Big and 
small science can work together in a very cooperative fashion.
    So how can we facilitate this interaction? How can we 
facilitate the pioneering of these new technologies that are 
going to transform biotechnology? How can we create an 
environment where not only we invent the future in bio-
informatics and computation, but it is made available to all of 
those, industry and academia alike, who are involved in these 
kinds of things?
    How are we going to be training scientists for the future? 
Again, the Northwest will have a really unique capacity for 
being able to do this.
    So I think we have an enormous, enormous opportunity. And I 
will tell you one of the things I worry about most is, frankly, 
the tax structure that exists, at least in Washington, because 
when I look around the country and see the kind of support that 
new start-up companies get, I can say Washington is a long ways 
behind how most of them do. My own view is it all starts with 
having an income tax, frankly, rather than sales tax which 
makes people desperate to do things like the business and 
occupation tax, which is an enormous hindrance to, I think, 
small start-up companies.
    So I think there has to be a review of this kind of 
infrastructure, too. But I would just say we are in a unique 
position to take advantage of this enormous inflection point 
and opportunity, and I hope we can all join and go forward and 
make the Northwest really a unique environment for this new 
kind of intellectual capital and intellectual opportunity that 
stretches out before us.
    So in closing, I would just like to thank Senators Cantwell 
and Wyden for the interest they have shown in this area, in 
particular Senator Wyden for the new nanotechnology bill.
    I think nanotechnology is going to transform, more than 
anything else, the field of biology, biotechnology, and 
medicine. So I applaud you for your efforts.
    Senator Cantwell. Senator Wyden?
    Senator Wyden. Thank you. Just one question on this tax 
structure issue, and I appreciate your kind words about 
nanotechnology. And by the way, Senator Cantwell has been a 
leader in this area as well, and we are going to be working 
together as we process this bill, and we may have some 
additions to the legislation as well.
    I am very interested in this question of the tax structure 
and have been particularly exploring the idea of saying that 
essentially start-ups, you know, innovative, creative start-ups 
that are not making any money, we just ought to say the taxman 
does not cometh. I mean, we just ought to say that as an 
incentive to get people to take those risks, that we ought to 
try something very different in the tax area.
    Congressman Chris Cox, the Republican Conference chair, and 
I are saying that in the hydrogen area. I mean, nobody is 
expecting anything anytime soon, so we said that with respect 
to developing hydrogen, why do we not say if somebody is going 
to set up a hydrogen filling station or sell equipment for 
hydrogen or do something to take a risk, let us say the taxman 
does not cometh for the next 10 years.
    I mean, we are not going to lose any revenue because nobody 
is expecting anything.
    Dr. Hood. Right.
    Senator Wyden. And I am just curious what your thought 
would be if Senator Cantwell and I with our colleagues, again, 
on a bipartisan basis were to explore the idea of basically 
being able to say to Northwest start-ups that when you are just 
starting out and you are trying to generate risk capital and 
risk funding, we just say this is going to be a tax-free zone 
for a while as a way to jump start this.
    Dr. Hood. You know, I think that would be a superb idea. I 
know Hawaii, I was over there recently, has actually set up 
enormous tax breaks for starting companies that extend years 
into the future. So it actually helps to support getting them 
started. And they are actually making available land and space.
    I mean, we are in the process of exploring a new systems 
biology company, which I think is going to have an enormous 
future in the biotechnology industry, and they made an offer of 
space and land and all of these tax-free benefits.
    So I think the more one can do to get started, and what you 
have suggested is really a good concrete possibility, the 
better off we will be.
    What we do have is this wonderful infrastructure of the 
University of Washington and the Fred Hutchison Cancer Center 
and the strength in biotechnology we have here, so people will 
be enormously attracted.
    So if we can even do minor perturbations like striking the 
business and occupation taxes for the first 10 years, in some 
ways that would be a terrific advancement.
    Senator Wyden. We will explore it, and I know Senator 
Cantwell wants to go on. Obviously when people make money, then 
we are saying clearly that is some----
    Dr. Hood. Absolutely.
    Senator Wyden.--you know, something where you have to, if 
you are going to fund services, generate some revenue. But as a 
way to reward the risk takers, this is an idea we would like to 
explore. I thank you.
    Senator Cantwell?
    Senator Cantwell. Thank you. Dr. Hood, I know you are not 
an economist, but when you look at the Institute of Systems 
Biology and where you think this will go, I mentioned in my 
opening comments about 11,000 people employed in the 
biotechnology field, where do you think that this leads us as 
far as, if not a number, a characterization about the 
opportunity for future employment in the Puget Sound area?
    Dr. Hood. Well, I can give you an example of the companies 
that I have been involved in starting in roughly the last 20 
years. It has been 11 different companies, including Amgen and 
Applied Bio Systems. I guess I do not know how many people they 
employ, but my point would be with the new kinds of science 
that we are talking about now, and particularly with 
predictive, preventive and personalized medicine, I think there 
are going to be myriad opportunities to create very, very 
strong biotech companies.
    These convergences that I have talked about, I think, 
really represent some unique kinds of opportunities. So I think 
we really could make Washington one of--not sixth in the 
country or seventh in the country in biotech, but right up 
there among the leaders.
    But it will require dealing with the infrastructural tax 
issues as well as the technical kinds of issues.
    Senator Cantwell. Do you think that that is a potential 
doubling of that work force? I guess when I look at the last 
decade in the 1990s when we transitioned from having a one-
company town to really having software be as predominant an 
employer as aerospace, we diversified our company. This is very 
positive.
    So part of our going back and looking at investment and 
obviously, I think, the NIH investment made in our State 
continues to be a main driver of what this work force could be, 
but how----
    Dr. Hood. So my guess is----
    Senator Cantwell. Is that a small, medium or large 
opportunity in the Northwest?
    Dr. Hood. I would be shocked in 10 years if we could not 
quadruple at least the work force if we were even partially 
successful in what we have talked about here.
    Senator Cantwell. Quadruple the 11,000 people?
    Dr. Hood. That is correct.
    Senator Cantwell. I would say that is a big opportunity. 
Big opportunity.
    Senator Wyden?
    Senator Wyden. Lots of jobs. We like that. I think the only 
other question I had is obviously there are some who are saying 
that the biotech sector has fallen on tough times in terms of 
access to capital and the like.
    We do not share that view, but what are the couple of steps 
that you think at the Federal level would most likely pump some 
new confidence in the bio sciences area and make it as 
attractive as possible?
    Dr. Hood. Well, you know, I think there are a couple of 
things. This conflict between big and small science is really 
reflected at the national level in equivocation about how to 
fund the future opportunities.
    The tendency in the funding agencies is always to do things 
as we have done them in the past, so that I think there has to 
be an acknowledgment of the enormous complementarity and power 
of big science in an integration together with small science.
    We can talk about ways that that could be done, but I think 
that is really going to be important. So pumping in resources 
to the academic side of things that lead to the discovery is 
really going to be critical.
    But I think the other thing that, again, NIH is only now 
coming up to par on is the realization of how much technology 
and computation and computer science are driving this new 
world. There has to be a focus on these new areas of 
nanotechnology and material science of the mathematical 
sciences and how we use those really effectively.
    So, you know, I always argue new ideas require new 
structures. Well, we are stuck with funding the structures, so 
how you get them to change in major ways, I think, is a 
fascinating question and a fascinating challenge.
    Senator Wyden. Well, we thank you. I think it is fair to 
say that those of us who have looked at nanotechnology think 
this really has the potential of the computer revolution, 
whether it is healthcare, the environment, agriculture. This is 
not nano-hype. This is on the level. I think there is great 
potential, and we are going to be working with you
    Senator Cantwell. Thank you, Dr. Hood. We will let you get 
back to your international symposium so that quadrupling can 
begin and thank you very much.
    We will go next to Dr. Hartwell. Thank you.

 STATEMENT OF DR. LEE HARTWELL, FRED HUTCHISON CANCER RESEARCH 
                             CENTER

    Dr. Hartwell. Senator Cantwell and Senator Wyden, thank you 
very much for the opportunity to be here today.
    Senator Cantwell. You might need to pull that microphone a 
little bit closer.
    Dr. Hartwell. From the instructions that I received, the 
purpose of this hearing, as we have heard, is to think about 
how to translate academic research to improve innovations and 
job growth.
    With this in mind, let me talk just briefly about how it 
currently works at the Fred Hutchison Cancer Center and the 
University of Washington and how it might be improved.
    Both institutions have successfully founded many companies 
out of biomedical advances. The University of Washington 
Medical School faculty receives over $600 million in sponsored 
research and the Fred Hutchison faculty receives about $200 
million. The vast majority of our research is funded by 
competitive grants, primarily from the National Institutes of 
Health with a small amount from other Government agencies, 
foundations and private donations.
    So the important point is that Federal research funding is 
the source of essentially all innovation and job growth that 
comes out of academic research institutions.
    An important point I will come back to, though, is that 
Federal research grant funds can only be used for the approved 
research, and, consequently, innovations that might impact the 
economy usually require additional funding.
    Now, there are really five important components in the 
equation that create economic growth from research. The first 
is the creativity of the academic faculty, the second is the 
Federal research funding that supports their work, the third is 
the environment and the infrastructure provided by the culture 
of the institution, fourth is additional funding to 
commercialize an invention, and fifth is the intellectual 
property laws that provide the rules of the game.
    One can do little to increase faculty creativity. It 
probably comes inborn. Federal research funding has been 
augmented by recent doubling of the NIH budget and innovations 
are certain to grow proportionately. The NIH peer review system 
has been enormously successful in assuring that these public 
funds are effectively utilized to advance biomedical science.
    Since most biomedical research is done by graduate and 
post-doctoral trainees, Federal research grants not only buy 
research, but also train the work force of biotechnology, 
achieving a two-for-one advantage.
    Individual institutions probably differ greatly in 
providing the culture that can balance free inquiry with 
entrepreneurial spirit necessary to catalyze commercialization. 
It is a very delicate balancing act, and I suspect that 
biologists still have a lot to learn from engineers and 
computer scientists on how to do this.
    Now, personally, and I am speaking only from my own 
opinions here and not necessarily those of the institutions 
that I represent, I think the strongest limitations to economic 
innovation and job growth as a result of federally funded 
supported research lies first in the lack of funding for 
commercializable research and second in the intellectual 
property laws as they are currently applied to academic and 
nonprofit research institutions.
    Academic research institutions usually have no source of 
funding to supply the missing link between Federal research 
grants and funds to support the proof of principal research 
necessary for commercialization. Consequently, many good ideas 
are never commercialized and others are unnecessarily 
restricted in their potential by those providing venture 
capital.
    Senator Wyden. Can I just interrupt for a second? Are you 
talking about the Bayh-Dole law here in your concerns about 
commercialization?
    Dr. Hartwell. I am going to come to that.
    Senator Wyden. Oh, excuse me.
    Dr. Hartwell. Okay. I am talking right now about the 
funding for taking something from an academic insight to a 
commercializable product.
    The process could be vastly accelerated by providing 
nonprofit research in academic institutions with a fund 
amounting to about 5 percent of their total Federal research 
grant base to be used at their discretion to develop the 
commercial potential of research findings.
    Second, I think that we are limiting innovation by the way 
that the Bayh-Dole Act and current patent law are being applied 
to research supported by taxpayer dollars. The current 
landscape for biotechnology looks a lot like a bunch of small 
farms each fenced off with patents to limit innovation and 
collaboration. Broad enabling technologies and reagents are 
sequestered in exclusively licensed arrangements and 
prohibitive cost structures.
    I think we should change the rules so that the methods, 
tools and reagents developed with public dollars are more 
readily available as platforms for further innovation. Thank 
you.
    Senator Cantwell. Thank you very much. And we will hear 
from the rest of the panelists before we go to any questions.
    Dr. Wray?

       STATEMENT OF SUSAN D. WRAY, DDS, JD, DIRECTOR FOR 
INDUSTRY RELATIONS, UNIVERSITY OF WASHINGTON SCHOOL OF MEDICINE

    Dr. Wray. Thank you for the opportunity to appear in front 
of you today. The 2002 report by the Brookings Institution 
entitled ``Signs of Life, the Growth of Biotechnology Companies 
in the U.S.'' describes the link between the formation of 
biotechnology companies and a well-recognized and well-funded 
medical research establishment.
    I am pleased to report today that the State of Washington 
is ranked as one of the five biotech hubs in the Nation largely 
due to the UW School of Medicine and the Fred Hutchison Cancer 
Research Center. However, I will also testify that the future 
promise of that link is in jeopardy.
    First, let me report the good news. Research faculty at the 
University of Washington brought in nearly $809 million in 
external research grants and contracts during the fiscal year 
ending June 2002. The School of Medicine faculty contributed 
more than half of that amount, with over $600 million from all 
the faculty at all the School of Medicine locations.
    For the tenth consecutive year, the School of Medicine was 
ranked number one in the Nation in primary care training. Thus, 
we do have that well-recognized and well-funded medical 
research establishment that is called for in the Brookings 
Institution report.
    This success is the direct result of the drive, 
intelligence and competitiveness of the faculty that we have, 
including, four Nobel Prize laureates, 26 members of the 
Institute of Medicine and 25 members of the National Academy of 
Sciences.
    The School of Medicine, therefore, winds up being second in 
the Nation, just behind Harvard, in total NIH research dollars 
received. And it has only been able to attain this status 
because of the Federal dollars received as research grants and 
the support given by the Federal Government to build research 
buildings.
    The State of Washington contributes only 4 percent of the 
UW Medicine's budget, 4 percent. In contrast, the steadfast 
support of Washington Senators and Congressmen has had much to 
do with the success over the decades.
    But what is most important for the Federal taxpayer is that 
we can show real benefits from all of this sponsored research 
that has been going on. For an example, a basic research 
experiment in yeast by Professor Benjamin Hall resulted in the 
development of a Hepatitis B vaccine. There are more than 
200,000 new cases of Hepatitis B each year in the United 
States, resulting in over 4,000 deaths. Again, this was a basic 
research finding. Professor Hall was not attempting to create a 
new vaccine. But the point is that successful technology 
transfer has occurred from hundreds of inventions from the 
University of Washington's basic science research programs.
    We can also show real benefits to the taxpayer in the form 
of new businesses and new jobs that have been created out of UW 
research efforts. Over 175 spin-off companies have resulted 
from UW research. For example, the origins of Immunex, which 
was acquired by Amgen, Icos and ZymoGenetics are in the School 
of Medicine's research enterprise. At least 20 medical device 
companies have been created.
    The School of Medicine, together with the research efforts 
of the Fred Hutchison Cancer Research Center, the Institute for 
Systems Biology, Washington State University, and several other 
research institutions in the State, can continue to invent new 
technologies and form new businesses. However, this can only 
occur if the Federal research dollars are increased beyond 
current levels and if we obtain new money to build new 
buildings.
    Prominent research faculty want to work where they can make 
the most exciting discoveries. We are fortunate that Dr. Robert 
Waterston, one of the leaders in the effort to sequence the 
human genome, has joined the School of Medicine as the Chair of 
the Department of Genome Sciences. We will soon break ground on 
the new building that will house this department, but no direct 
State dollars are available for this building.
    Exciting breakthroughs in computational biology, human 
genetics and other areas will continue to occur if we can 
continue to attract and keep the best and the brightest.
    The building complex that will house the new home for 
Genome Sciences will also have a new building for the 
Department of Bio-engineering. This department has been a focus 
of entrepreneurial activity with over 362 invention 
disclosures, 120 issued patents, 75 license agreements and 24 
spin-off companies. Again, that is just one department with 24 
spin-off companies.
    But the key to keeping these people working and on the job 
is to continue to have good facilities for them to do their 
jobs.
    Here is the dilemma: Even with these two new buildings, the 
School of Medicine is out of space. The creation of new 
facilities and the maintenance of older buildings is even more 
of a problem for the rest of the UW campus.
    Each year Washington State University and the University of 
Washington award degrees to more than 14,000 highly educated 
graduates, attract nearly a billion dollars in research funding 
from outside the state, and create scientific discoveries and 
technological advances that fuel the growth of the new economy. 
In the current economic climate, forward momentum at our two 
research universities is critical and important to our state. 
But the state's investment in higher education has been 
declining for years, putting our economic future in jeopardy.
    Obviously, this hearing cannot address all of the state's 
economic woes, but for the benefit of all Federal taxpayers, we 
would ask that the Federal dollars to not-for-profit research 
institutions continue to flow. There are many new medical 
challenges that face us--bioterrorism, an aging population with 
health concerns, an epidemic of obesity and diabetes--we can 
only meet these challenges if we have our medical research 
faculty hard at work on these problems.
    Thank you for this opportunity to provide this information.
    [The prepared statement of Dr. Wray follows:]

  Prepared Statement of Susan D. Wray, DDS, JD, Director for Industry 
         Relations, University of Washington School of Medicine
    Thank you for the opportunity to appear in front of you today. I am 
Dr. Susan Wray, the Director for Industry Relations at the University 
of Washington School of Medicine. I am representing Dr. Paul Ramsey, 
Vice President for Medical Affairs and Dean of the Medical School, who 
could not be here today.
    The 2002 report by the Brookings Institution entitled, Signs of 
Life, the Growth of Biotechnology Companies in the U.S., describes the 
link between the formation of biotechnology companies and a ``well-
recognized and well-funded medical research establishment.'' I am 
pleased to report today that the State of Washington is benefiting from 
the results of that type linkage. In the Brookings study, Seattle was 
ranked as one of the five biotech hubs in the nation, largely due to 
the UW School of Medicine and the Fred Hutchison Cancer Research 
Center. However, I will also testify that the future promise of that 
link is in jeopardy.
    But first, let me report the good news. Research faculty at the 
University of Washington brought in nearly $809 Million dollars in 
external research grants and contracts during the fiscal year ending 
June 2002. The School of Medicine faculty contributed to more than half 
of that amount, with over $372 Million dollars flowing directly through 
the School of Medicine. When we include all of the research from all of 
the School of Medicine faculty at other locations, such as Children's 
Hospital, that number rises to over $500 Million. For the 10th 
consecutive year, the School of Medicine was ranked number 1 in the 
nation in primary care training. Thus, we have the ``well-recognized 
and well-funded medical research establishment'' called for in the 
Brookings Institution report.
    This success is the direct result of the drive, intelligence, and 
competitiveness of the more than 5,600 full-time, part-time and 
volunteer faculty at the School of Medicine. These include: 4 Nobel 
Prize laureates, 26 members of the Institute of Medicine, and 25 
members of the National Academy of Sciences.
    The School of Medicine is second in the nation (behind the Harvard 
University System) in total NIH research grant awards. The steadfast 
support of Washington's Senators and Congressmen over several decades 
has had much to do with this success, and the School of Medicine 
appreciates that continued support. Research awards, primarily from 
NIH, provide almost 45 percent of the School's financial support. The 
State of Washington only contributes 7 percent of the School of 
Medicine's budget--only 4 percent! The steadfast support of 
Washington's Senators and Congressmen over several decades has land 
much to do with this success, and the School of Medicine appreciates 
that continued support.
    But what is most important for the federal taxpayer, is that we can 
show real benefits resulting from that research. As an example, basic 
research in yeast by Professor Benjamin Hall resulted in the 
development of a vaccine against Hepatitis B. There are more than 
200,000 new cases of Hepatitis B each year, resulting in over 4,000 
deaths. Again, this was a basic research finding--Professor Hall was 
not attempting to create a vaccine. But this successful technology 
transfer is but one of 100's that have flowed from UW's basic science 
research into the biomedical industry for the development of new 
products that improve health and save lives.
    We can also show real benefits to the taxpayer in the form of new 
businesses and new jobs that have been created out of the UW research 
efforts. Over 175 spin-off companies have resulted from UW research. 
For example, the origins of Immunex (which was acquired by Amgen), 
Icos, and ZymoGenetics are in the School of Medicine's research 
enterprise. At least 20 medical device companies have been created, 
including ATL (acquired by Philips). Philips Medical Systems has now 
moved its North American headquarters to Washington.
    The School of Medicine, together with the research efforts of the 
Fred Hutchison Cancer Research Center, the Institute for Systems 
Biology, Washington State University, and several other research 
institutions in the state, can continue to invent new technologies and 
form new businesses. However, this can only occur if the federal 
research dollars continue to grow and if we obtain new money to build 
new research buildings.
    Prominent research faculty want to work where they can make the 
most exciting discoveries. We are fortunate that Dr. Robert Waterston, 
one of the leaders in the effort to sequence the human genome, has 
joined the School of Medicine as the Chair of the Department of Genome 
Sciences. We will soon break ground on the new building that will house 
Dr. Waterston's department, but no direct state dollars are available 
for this building. Exciting breakthroughs in computational biology, 
human genetics, model organism genetics, and other areas will continue 
to occur in the Department of Genome Sciences, but only if we can 
continue to attract and keep the best and the brightest with state of 
the art buildings, equipment, and research support.
    The building complex that will house the new home for Genome 
Sciences will also include a wing for the Department of Bio-
engineering. Bio-engineering is an unusual department, in that it is 
shared between the School of Medicine and the College of Engineering. 
The Department of Bio-engineering is number 1 in the nation in National 
Institutes of Health research awards to biomedical engineering, and it 
is number 1 in the nation in the number of graduate students. This 
department has been a focus of entrepreneurial activity, with over 362 
invention disclosures, 120 patents, 75 license agreements, and 24 spin-
off companies. Again, the key to keeping these excellent bio-
engineering faculty is to provide them with good research facilities.
    But that is the dilemma--even with these two new buildings, the 
School of Medicine is out of space. The creation of new facilities, and 
the maintenance of older buildings, is even more of a problem for the 
rest of the UW campus.
    ``Each year, Washington State University and the University of 
Washington award degrees to more than 14,000 highly educated graduates, 
attract nearly a billion dollars in research funding from outside the 
state, and create scientific discoveries and technological advances 
that fuel the growth of the new economy. In the current economic 
climate, forward momentum at our two research universities is 
critically important to our state as a whole. But the state's 
investment in higher education has been declining for years, putting 
our economic future in jeopardy.'' \1\
---------------------------------------------------------------------------
    \1\ Cougars and Huskies for Our Economic Future (http://
www.washington.edu/univrel/cougarsandhuskies/index.htm)
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    Of course we realize that this hearing cannot address the state's 
economic woes, but for the benefit of all federal taxpayers, we would 
ask that federal dollars to not-for-profit research institutions be 
increased. There are many new medical challenges facing us--
bioterrorism, an aging population with health problems, an epidemic of 
obesity and diabetes--and we can only meet these challenges if we have 
our medical research faculty hard at work on these problems.
    Thank you for this opportunity to provide these comments.

    Senator Cantwell. Thank you.
    Dr. Carter?

 STATEMENT OF DR. BRUCE CARTER, PRESIDENT AND CEO, ZymoGenetics

    Dr. Carter. Thank you and thank you for your interest in 
the health of our industry. I represent ZymoGenetics. We are 
focused on the discovery, development, and commercialization of 
protein drugs, that is to say, we look in the human body for 
proteins that might be useful as drugs and produce them by 
genetic engineering. And the most clear example of that is 
insulin as a protein. There are, in fact, five proteins on the 
market today that stem from discoveries made at ZymoGenetics.
    As Susan pointed out, we actually came out of the 
University of Washington. We were founded in 1981. Now we 
employ 360 people. And in fact, history is not always the best 
predictor of the future, but in the last 10 years, employment 
in the biotechnology industry in the State has tripled.
    We spend $100 million each year on research and development 
predominantly in the Northwest. I think it is fair to say that 
for many people, the world is a better place because of the 
collaboration we have had with the University of Washington.
    The majority of the people who have diabetes and get 
insulin get that insulin from a process that was discovered at 
ZymoGenetics. I used to say that Mr. Gorbachev probably today 
got insulin from a process discovered by ZymoGenetics in the 
old Gasworks Park over there until somebody told me nobody 
knows who Gorbachev is anymore.
    [Laughter.]
    Dr. Carter. And that came from a collaboration with Ben 
Hall at the University of Washington.
    Another protein that has saved people's lives in every 
continent in the world and certainly somebody that I know up in 
Everett who would have died without it is a drug called 
NovoSeven, and that again came from a collaboration with the 
University of Washington, this time with Ben Hall.
    Anybody in the room who is a diabetic knows that diabetic 
wounds heal very poorly. And another protein that is sold, 
Regranex by Johnson & Johnson, came from a collaboration 
between ZymoGenetics and the University of Washington through 
the late Russell Ross.
    I think it is no coincidence that if you look around this 
country and say ``Where do you see the foci of biotechnology 
companies? Where are most biotechnology companies located?'' 
You see them in Boston, in San Francisco, in San Diego and the 
Raleigh-Durham area. And what do they all have in common? They 
all have in common strong academic institutes and strong 
biomedical research.
    And if you look at those places, I think you also see 
something else, that is to say, when you have strong academic 
institutions and a vibrant biotechnology industry, there tends 
to be clustering, there tend to be more brought in. So that is 
where you get your tripling, I think, to your quadrupling.
    If you think about Boston, Boston had strong academic 
institutes, it had strong biotechnology, and now you see major 
pharmaceutical companies, the Merck and Pfizer putting in 
research there, you see British companies like AstraZeneca, you 
see Japanese companies like Eisai all bringing research 
facilities into that area.
    And most remarkably of all, the conservative Swiss 
pharmaceutical giant Novartis has moved its research and 
development headquarters from Basel, Switzerland to Boston.
    I think that we could see some similar clustering here with 
the strong academic institutions and a strong, vibrant 
biotechnology industry. I think that the companies that you see 
here like ZymoGenetics, they were founded really on ideas that 
were generated by academic institutions, and they actually 
thrive and will be developed by the people who are trained in 
those academic institutions. So I think it is very important 
that we maintain the strength of the academic institutions in 
this area, in the Northwest.
    Thank you very much.
    [The prepared statement of Dr. Carter follows:]

Prepared Statement of Dr. Bruce Carter, President and CEO, ZymoGenetics
    My name is Bruce Carter and the company I represent is 
ZymoGenetics. We are focused on the discovery, development and 
commercialization of therapeutic proteins for the treatment of human 
diseases. Five protein products on the market today stem from 
discoveries made at ZymoGenetics.
    The company was founded in 1981 by three university professors, two 
of whom came from the University of Washington. We now employ 360 
people and spend almost $100 million/annum on research and development, 
mainly in the Northwest. For many people the world is a better place 
because of the collaboration between the University of Washington and 
ZymoGenetics.
    A protein drug called Novoseven was born out of collaboration 
between ZymoGenetics and Earl Davie at the University of Washington. It 
has saved many people's lives who would have otherwise bled to death; 
people in Japan, Israel and many other countries including people in 
Washington State.
    Diabetics in every continent are being treated with insulin that is 
made by a process that was discovered at ZymoGenetics through 
collaboration with Ben Hall of the University of Washington.
    Diabetics who have wounds that won't heal have been helped by 
Regranex, a protein drug that came from collaboration between 
ZymoGenetics and the late Russell Ross of the University of Washington.
    It is, I think, no coincidence that the cities with the largest 
number of biotechnology companies are Boston, Raleigh-Durham, San 
Francisco and San Diego, all cities with strong academic institutions 
and strong biomedical research.
    I believe that strong Universities associated with vibrant 
biotechnology companies bring in other companies as we have seen in the 
Boston area, where Merck, Pfizer, AstraZeneca and many other companies 
have initiated biomedical research activities. Novartis has even moved 
its headquarters of R&D into the Boston area from Basel, Switzerland.
    Biotechnology like many other high tech industries has a tendency 
to clustering. The more companies located in a particular area, the 
more other companies join them. These companies depend on ideas 
generated in Universities and people trained in Universities.

    Senator Cantwell. Thank you, Dr. Carter.
    Mr. Rottsolk?

 STATEMENT OF JAMES E. ROTTSOLK, CHAIRMAN, PRESIDENT AND CEO, 
                           CRAY, INC.

    Mr. Rottsolk. Thank you for the opportunity to speak to you 
today. I would like to applaud your efforts and your leadership 
both in the genomics to life initiative as well as the 
nanotechnology initiative. I think these are the types of 
things that we should be pursuing, and the fact that you are 
taking the time to consider these important areas today I think 
is very useful.
    I did have a written statement, but I will just summarize a 
few comments that I have. It is clear that the life sciences 
themselves present tremendous challenges as well as 
opportunities.
    From our perspective, the challenges both in the area of 
computational biology itself as well as in computational 
science is what we find most interesting. It is--we have talked 
about a number of things involved with biotechnology here. From 
our perspective, what we are seeing is a burgeoning in the 
amount of data that is being generated in this field in this 
post-genomic era. And what is not so important is this vast 
amount of data itself, but what we can do to take advantage of 
it, how we use this data.
    And in that sense, what we at Cray are involved in, 
supercomputing, presents a tool with which to leverage the data 
that is being created.
    Market researchers in the computer arena are convinced that 
the leading segment, the highest future growth area in the 
computer marketplace over the next few years is likely to be 
biotechnology. This is caused to a large extent--I mean, just 
to put things in perspective when I talk about this burgeoning 
amount of data, we are all familiar with at least megabytes, 
millions of bytes of data, some of us even think about 
gigabytes or billions of bytes of data, but in fact what we are 
talking about and having to deal with increasingly are 
thousands of trillions of bytes of data.
    At Cray, we are involved in building systems, computer 
systems then, supercomputers, that can process vast amounts of 
data. Just as an example, we have set a target for ourselves to 
have systems available to researchers in biotechnology and 
nanotechnology and homeland security areas by the end of the 
decade that can process a thousand trillion instructions per 
second. It is almost an unfathomable amount of computational 
power, but it relates to what Dr. Hood was talking about. If 
you think about what a whole system can do, then you can think 
about what a single chip is able to do.
    We are already involved in a number of collaborative 
efforts in this area. We have a very important partnership with 
the Department of Energy and its research laboratories. We are 
in the process at the moment of designing and building a 
computer system to be installed in Sandia National Labs, but 
accessible to researchers within the community that should 
regain the leadership for the United States in high performance 
computing from the Japanese.
    I should point out that we take for granted that the U.S. 
has the lead here. In terms of a computational tool today, the 
most impressive tool available, in other words, the fastest 
supercomputer is the earth simulator system installed in Japan, 
and, in fact, it is already being used for breakthroughs in 
nanotechnology.
    We are also beginning to install a fairly large system at 
Oak Ridge National Labs. Both Oak Ridge and Sandia, as well as 
Pacific Northwest Laboratories here have been involved in early 
life sciences work, and these systems are expected to be 
utilized in the area of--you know, in the area of life sciences 
with the hope that new breakthroughs can be made.
    More locally we will actually install this quarter at the 
Arctic Region Supercomputing Center in Alaska two of our new 
systems, two of our new X1 systems, and we are working in 
conjunction with the Institute for Systems Biology to do early, 
early work developing algorithms and techniques necessary for 
science and research in the life sciences.
    Not surprisingly, all of these efforts require a fair 
amount of funding. I think a number of the areas have been 
touched upon, but most importantly we need to fund academia. In 
building life sciences expertise, this is computational 
biology, it is mathematical sciences as well as computer 
sciences. Beyond that, we need to make certain that funding is 
available for research utilizing advanced tools as they become 
available.
    Again, I applaud your efforts in this area and look forward 
to having Cray become a player in the Northwest in this area. I 
think we, the Northwest, could represent a major hotbed of 
activity and could be a real center of excellence in the life 
sciences arena. Thank you.
    [The prepared statement of Mr. Rottsolk follows:]

 Prepared Statement of James E. Rottsolk, Chairman, President and CEO, 
                               Cray Inc.
Introduction
    Cray Inc. is the premier provider of supercomputing solutions for 
the world's most challenging computational problems. We design, 
develop, market and service high performance computer systems, commonly 
known as supercomputers. These systems provide capability and capacity 
far beyond typical mainframe computer systems and address the world's 
most challenging computing problems for government, industry and 
academia. For scientific applications, the increased need for computing 
power has been driven by highly challenging problems that can be solved 
only through numerically intensive computation. Cray systems are used 
to design safer vehicles, create new materials, discover life-saving 
drugs, predict severe weather and climate change, analyze complex data 
structures, safeguard national security, and a host of other 
applications that benefit humanity by advancing the frontiers of 
science and engineering.
    The recently introduced Cray X1 TM supercomputer is available with 
up to 52.4 trillion calculations per second of peak computing power and 
65.5 terabytes of memory. The high-efficiency, extreme-performance 
system is aimed at the critical computing needs of classified and 
unclassified government, academic research, and the weather-
environmental, automotive, aerospace, chemical and pharmaceutical 
markets. Cray has accepted the challenge, as stated in a 1999 report of 
the President's Information Technology Advisory Committee, to provide 
actual, sustained (not merely ``theoretical peak'') petaflop computing 
speed--1,000 trillion calculations per second--for critical next-
generation applications by 2010. The Cray X1 system represents a major 
milestone on the path to reaching this goal of delivering a 
supercomputer capable of sustained petaflops speeds on a variety of 
challenging applications.
Supercomputing Requirements for Life Sciences
    Cray systems provide a powerful platform on which software 
applications can be developed and run to handle leading-edge problems 
being pursued by life scientists today: from processing and analyzing 
large volumes of data to handling increasing levels of complexity 
introduced by higher levels of abstraction.
    The life sciences industry is just beginning to embrace the 
tremendous benefits that computational power can bring to advancing 
their efforts. The mapping of the human genome was just the beginning 
of a new era in drug discovery and development. With advances in 
laboratory technology like high-throughput sequencing, x-ray 
crystallography, NMR structure determination, micro-arrays, and mass 
spectrometry, the field is experiencing a deluge of data. The amount of 
data being generated is growing faster than Moore's Law, creating 
terabytes of information today and rapidly moving to petabytes. The 
true value of this information is not in the data itself, but what we 
do with it. In order to effectively process this amount of data, 
application performance must move into the teraflop and petaflop range. 
This is where high-performance computing and Cray Inc. play a key role. 
Teraflop (trillions of calculations per second)--and in the near 
future, petaflop (thousands of trillions of calculations per second)--
computing is a crucial ingredient to advances in modern biology and 
Cray is, and always has been, an acknowledged leader in high-
performance supercomputing.
    Today, the industry is working with a handful of genomes, generated 
at a high cost. To date, there are genomes available for seven major 
organisms. And with a current sequencing rate of 60 billion base pairs 
per year, it is expected that there will be 50 to 100 in the next five 
years. Lab sequencing technology is rapidly advancing which will allow 
not only higher throughput, but also lower cost. Today we have one 
human genome mapped--the future promises the ability to rapidly and 
inexpensively process individual human genomes. Better life science 
research and drug discovery and development will come from the ability 
to examine not one, but many genomes. But computational boundaries are 
already stressed in dealing with the comparison and manipulation of a 
few genomes, needed to decode and understand their components and 
functions. Running an analysis with hundreds or thousands of human 
genomes will be a supercomputing application.
    The impact of high-performance computing on the industry is even 
more profound when you look beyond genomics. With genomics, we can 
determine the DNA sequence of an organism or animal/human. But DNA is 
just the information carrier--proteins are the structural and 
functional molecules within a cell. Understanding under what conditions 
proteins are produced by a cell, what their functions are, and how they 
interact is key to understanding how diseases are manifested as well as 
how best to fight them. This area of computational biology holds the 
greatest promise for impact on the drug discovery and design process. 
Teraflop and petaflop computing is required to support such areas as 
molecular modeling, rational drug design, structure prediction and 
structural genomics. For example, current applications can only support 
simulations of small molecules (hundreds of base pairs) and for 
relatively short periods of time (picoseconds). But the ability to 
simulate large molecules or sets of molecules (thousands of base pairs) 
for longer periods of time (microseconds) is required to support the 
drug discovery process and crucial to support systems biology.
    The ultimate goal is to utilize computer applications to understand 
life beginning at the cellular level and ultimately develop models of 
whole organisms. The complexity of these simulations--from data volume 
to variations in simulation time scales--will require well-balanced and 
highly efficient computer systems. It is only through supercomputing 
vendors like Cray, focused on these extreme requirements, that these 
systems will be available.
Advancement Through Collaborations
    Cray's high-performance computing systems are used by research 
institutes, government laboratories and universities throughout the 
world to support projects focused on advanced computational biology.
    The advances and innovations produced by these organizations will 
ultimately be moved into the commercial biotech and pharmaceutical 
industries, allowing them to reduce drug discovery and development 
time, decrease overall drug discovery cost and create more effective 
and safer medicines.
    Organizations like Oak Ridge National Laboratory, Sandia National 
Laboratories, Pacific Northwest National Laboratory and the Arctic 
Region Supercomputing Center all have significant research efforts 
targeted at advanced computational biology. All expect that the level 
of investment by their organizations in the area of biotechnology will 
continue to increase.
    A good example of the type of work these organizations are involved 
in is the Genomes-to-Life program under the Department of Energy.
    Oak Ridge National Laboratory and Sandia National Laboratories, 
both significant Cray customers, are working with nine other 
institutions on a $19.1M project under the Genomes-To-Life program. 
This particular project, titled ``Carbon Sequestration in Synechococcu 
Sp.: From Molecular Machines to Hierarchical Modeling,'' focuses on 
developing new algorithms, simulation methods, software, and computing 
infrastructures for computational biology applications. The team will 
develop and apply experimental and computational methods to understand 
proteins, protein-protein interactions and the gene regulatory networks 
that control the production of these proteins. They will prototype 
these capabilities on Synechococcus, a marine micro-organism which 
plays a significant role in the earth's carbon cycle.
    Cray has also facilitated multiple collaborations around the world 
to provide high-performance computing expertise to researchers 
developing new life science applications as well as work with experts 
in the field to enhance Cray's product offering in support of 
application development work. One such collaboration is with the Arctic 
Region Supercomputing Center in Fairbanks, Alaska and the Institute for 
Systems Biology in Seattle, Washington. This collaboration has resulted 
in support for enhancements to the Cray Bio-informatics Library, a 
library of routines to perform searching, sorting, alignment, and low-
level bit-manipulation operations useful in the analysis of nucleotide 
and amino acid sequence data.
Commercial Adoption
    We are just beginning to see the early adoption of computational 
biology in the commercial sector.
    Early demonstration of the impact of supercomputing on actual drug 
development and discovery is on the horizon. A prime example of this 
achievement is BioNumerik Pharmaceuticals, a company focused on the 
discovery and development of agents for the treatment of patients with 
cancer and a key Cray customer.
    BioNumerik has been a Cray customer for several years, and received 
a Cray SV1TM system in December of 2000. They have been utilizing the 
system to model and simulate molecular systems at a scale and speed 
unattainable with other systems. Their approach demonstrates the 
significant impact that supercomputing can have on the drug discovery 
and development process by providing a means to assess the efficacy and 
safety of new drugs before the expense and time of clinical trials.
    BioNumerik's founder and CEO, Dr. Fred Hausheer, believes that his 
``mechanism-based'' drug discovery can be effectively used to cut the 
overall drug discovery time. ``Mechanism-based'' drug discovery 
utilizes a combination of chemistry, biology, and quantum physics to 
identify and simulate the mechanisms by which potential drugs and their 
targets interact. Using high-performance computing technology, these 
simulations can be turned rapidly, allowing for quick iterations not 
possible in a lab environment. This predictive approach allows for 
focus on drug candidates that have a higher likelihood for success, 
thus eliminating some expensive and ultimately unsuccessful lab 
testing.
    Dr. Hausheer is on his way to proving this theory with BioNumerik's 
BNP7787 product candidate, currently in Phase III clinical trials. 
BNP7787 was developed to prevent the damaging side effects associated 
with widely used cancer drugs, allowing for higher dosage levels 
leading to greater effectiveness with lower risk. BioNumerik has two 
other product candidates in the clinical trial phase: Karenitecin 
BNP1350 and MDAM.
    BioNumerik is a prime example of how Cray systems can be used to 
develop new computational methods in bioinformatics. The company is an 
early adopter of computational methods for drug discovery as 
demonstrated by the investment the company has made in personnel 
(computational biologists and programmers) as well as computing 
environments. The application development within BioNumerik is similar 
to activity within universities and government research labs throughout 
the world.
    Interest level in the methodology behind BioNumerik's success is 
increasing as their product candidates get closer to approval. With 
fierce competition in the pharmaceutical industry to bring new drugs to 
market as quickly and inexpensively as possible, it can be expected 
that the mainstream commercial pharmaceutical and biotech industries 
will rapidly move to a proven methodology.
Economic Development
    Computational biology is a multi-disciplinary field that will 
require teraflop and ultimately petaflop computing platforms as well as 
advanced software applications. New tools and methods are being 
developed within universities and research labs today and once proven, 
will rapidly move to support the commercial industries.
    Historically, all examples of rapid growth in job creation have 
occurred when you have a critical mass of different skills in one 
geographic location. The Pacific Northwest has the basis for creating 
such an environment for biotechnology. The region has several prominent 
research facilities like the Fred Hutchison Cancer Research Center and 
the Institute for Systems Biology, high-performance computing 
facilities like Pacific Northwest National Laboratory and the Arctic 
Region Supercomputing Center, an academic source of students and 
researchers at the University of Washington and other Northwest 
institutions to provide the necessary educated workforce, and high-
performance computing experts like Cray Inc.
    Continued investment in these anchor organizations can create a 
biotechnology hub through the synergies that are more easily developed 
through close physical proximity and interaction.
Summary
    The field of life sciences, affecting everything from drug 
discovery and development to agriculture and national security, is 
going through a revolutionary change which requires a more tightly 
integrated set of disciplines: biology, computer science, and computer 
engineering. Recent technological advancements are creating data at 
rates that exceed current processing capabilities. Teraflop to petaflop 
computing has become critical to the advancement of biology--from drug 
development and discovery to agriculture and national security.
    Cray Inc., the premier provider of supercomputing solutions for the 
most challenging technical problems, is positioned to provide the 
computing platform on which advanced application software development 
to meet the demanding needs of biotechnology can occur. Together with 
research institutes, government laboratories and universities, advanced 
life sciences applications can be developed, proven, and launched into 
full commercial use to support higher productivity in the 
pharmaceutical and biotech marketplace.
    In the Pacific Northwest, there is an abundance of organizations 
which together provide all of the necessary components to build a 
geographic center of excellence in biotechnology. Cray Inc.'s 
supercomputing technology supports this vision with its track record of 
providing supercomputing power for challenging scientific problems.

    Senator Cantwell. Thank you.
    Dr. Overell?

STATEMENT OF ROBERT W. OVERELL, Ph.D., GENERAL PARTNER, FRAZIER 
                      HEALTHCARE VENTURES

    Dr. Overell. Well, Senator Cantwell and Senator Wyden, 
thank you for your indulgence on these points. I think they are 
of great importance to the region as well as nationally. We are 
a healthcare venture capital group. We have been in business 
for over 10 years. We invest in seed stage companies as well as 
later stage of private investment, so we can speak with some 
conviction about the formation as well as financing of private 
biotechnology and medical device companies.
    We have been involved in about 15 companies locally, 
including Bruce's company, ZymoGenetics. And many of the people 
here at Frazier were from Immunex originally, so we have got a 
lot of operating experience. We invest nationally, and about 15 
percent of our investments are in the Seattle area.
    I thought it would be helpful to stand back and ask the 
question why we or any other venture capital group invests in 
biotech. And I think it is helpful to stand back and ask that 
question, and obviously it goes back to the tremendous 
morbidity and mortality that is associated with disease that 
today is intractable to drug therapy. So this costs the 
economy, you know, hundreds of billions of dollars a year, and 
there is really a dire need for new medicines.
    Second, the pharmaceutical industry needs drugs to fuel its 
pipeline. About half of those drugs, it turns out, are actually 
licensed by pharmaceutical companies. They do not come out of 
their internal research and development, and finally drug 
development is hard. It has about a 95 to 97 percent failure 
rate.
    So the biotechnology industry really has the capability to 
address not only the need for new medicines, but also the need 
for new technologies. And that is really why investors such as 
ourselves invest. A point I will come back to later is we 
should not lose sight of the fact that what we are really 
investing in here is drugs, and drugs are made of chemicals and 
chemicals are made by chemists. I would like to come back to 
that point a little bit later.
    We have wonderful top-tier institutions in both Washington 
and Oregon. We have some of them represented here from 
Washington State. As has been pointed out, the biotech 
community has grown dramatically over the last decade, and I am 
sure it will continue to grow. Many of those institutions and, 
just as importantly, the people in those institutions can be 
traced back to either the UW or to the Hutchison.
    I believe we now have a critical mass not only of academic 
research activity in the area, but also commercial activity. We 
have a large number of public as well as private biotech 
companies and a lot of experienced executives that are able to 
go around and found new companies. And that is incredibly 
important to the region.
    Access to capital, I think it is important to point out 
that there is a large amount of private equity capital that is 
available for investment in biotech, both locally here in town 
as well as nationally. In 2001 alone, $5 billion of private 
equity funds was raised. Our $400 million fund was about 10 
percent of that. So the point I am trying to make is there is 
no shortage of capital for investment in the biotech sector.
    I think the dynamic you have in the marketplace and the 
capital crunch that Senator Cantwell was alluding to earlier 
really has to do with a market dynamic in which the public 
market for biotech companies today is relatively weak. There 
has not been an IPO market since the year 2000-2001 of any 
significant magnitude, and so venture firms such as ourselves 
that founded companies in the 1999-2000 time frame are now 
experiencing difficult follow-on financings for those 
companies. And that has had, if you will, a flow-back effect to 
company formation.
    So I think it has really slowed the pace of company 
formation, and I think that is a national challenge. It is not 
just a local challenge. Finally the point of company formation 
is that, I would say, the focus is increasingly on 
therapeutics.
    Academic links are vital to us. Almost all the companies 
that we found involve either people or technology from academic 
centers. It is absolutely vital. We have local institutions 
which are gems and we need to protect them from State budget 
cuts and fund them well.
    I think it is important to realize that some academic areas 
are more likely to give rise to commercial entities than 
others. And so I applaud the initiatives that Senator Cantwell 
and Senator Wyden are sponsoring.
    If I had to add anything, I would say that chemistry is 
incredibly important, and I believe that the integration of 
biology and chemistry will underpin some very important 
commercial enterprises, and I would love to see some focused 
funding in that area locally.
    Finally cross-training is very important. And that applies 
both between chemistry and biology and between the basic 
sciences of genomics and translocational research.
    Thank you for giving me the opportunity to speak here 
today.
    [The prepared statement of Dr. Overell follows:]

   Prepared Statement of Robert W. Overell, Ph.D., General Partner, 
                      Frazier Healthcare Ventures





    Senator Cantwell. Well, thank you all panelists for those 
succinct but enlightening remarks about the opportunity before 
us.
    I will just start in with some questions. It sounds like 
the future looks bright for us, at least from the opportunity 
perspective of what is already here as far as investment and 
where we are as far as capital flowing in at least from the 
Federal level.
    It raises a question when you think about the concept of a 
potential quadrupling of a work force, what do we need to do 
here to prepare for those opportunities in the Northwest? That 
is, having been an employer myself and knowing what it is like 
to have to ship a product and get it out the door, you hire the 
best skilled work force you can find, and you would love it if 
they were right here, but sometimes they are not.
    And that opportunity of quadrupling sounds very exciting, 
but how do we make the right investments so that the Northwest 
reaps the benefit of employing people who are here in those 
opportunities for the future?
    Any one of the brave panelists can answer.
    [Laughter.]
    Dr. Overell. I will take a whack at that. I think if I go 
back to something Lee said which I agree with is there is a 
real funding gap between the type of basic sciences going on in 
institutions and the ability of people like ourselves to really 
fund ventures that are going to have a solid foundation.
    Again, if you have a pool of capital that is committed to 
making that technology evolve to a point where it can be funded 
either through ATP grants or some other type of grants, I think 
that is quite important.
    And the second point I would add to Lee's comment is that 
many of the projects that we see tend to be very biology-
oriented, which is good, but, again, unless you have the 
chemistry involved, you do not have the drug aspect of it, and 
that is really the missing component on a large number of them.
    Dr. Carter. I think it is very important that the INS 
allows people like Bob and myself into this country.
    [Laughter.]
    Dr. Carter. But one of the things that I have heard Paul 
Ramsey say, and maybe Susan could comment on it, is that while 
we have a very strong medical school here, we perhaps do not 
train as many researchers as peer organizations.
    Dr. Wray. Yes, one of the challenges that we have is that 
we are the only medical school for a five-state area, and so 
you wind up really having the challenge of how do you grow your 
academic capabilities enough to supply the industry? And that 
is a challenge.
    BIO has some figures showing that the majority of science 
Ph.D.s in Washington State are actually hired from outside the 
state, and that is because we just do not have a big enough 
university system here to create the needed people to fill 
those jobs.
    So on the academic side, we need to really pump up our 
universities in their ability to train more people in computer 
science as well as the biological sciences.
    Senator Cantwell. Well, what can we do to be more creative 
on that front given that we have faced this dilemma, you know, 
from a broader perspective being that we have 110,000 
dislocated workers and we have so many slots at the educational 
institutions as controlled by the State budget, but there is a 
dilemma because you are showing job growth and creation, and 
yet, yes, I think the INS should definitely let Dr. Carter and 
Dr. Overell into the State, but we also want the opportunities 
for people here, and we do not want to be, I think it is 42nd 
in the country as far as the number of four-year degree people 
that we graduate. We have to own up to the fact that we have 
imported this population because of the companies like 
Microsoft and Amazon and others, and employers would rather 
hire locally if they could, but how do we grow that?
    So part of the problem is that the entity in charge for 
that expansion is the State, and yet we are pumping in Federal 
dollars for the research and development side of it. How do we 
become more flexible?
    Dr. Wray. Well, certainly Federal support for more 
buildings on campus would help throughout the nation. The 
university infrastructure throughout the country has a lot of 
problems just maintaining the old buildings that they have, and 
there is no money for that even in the private institutions, as 
well as the public institutions.
    So I know that in the past, there have been NIH grants, 
there have been DoD monies for actual buildings and 
infrastructure support, and that would be a good area to look 
at in terms of how do we grow the building infrastructure so 
that we can train more students.
    Senator Cantwell. Dr. Hartwell?
    Dr. Hartwell. Just to add one thing, you mentioned the fact 
that we import a lot of our work force, which is certainly 
true, and one of the things that is very important to the 
young, bright people who we try to recruit is education for 
their children. And although it is not a Federal issue, it is a 
State issue, the K through 12 education system really needs to 
be strengthened.
    Senator Cantwell. Anybody else on this subject? Well, I 
think we need to engage more on it. When I was in the State 
legislature, we worked with Steve Duzan at Immunex to create 
the first targeted sector education program on biotechnology at 
the community college level just to get entry-level people 
trained in that area because we saw a growth opportunity.
    While I think people are well aware of what the educational 
needs are and the infrastructure needs, we have to figure out a 
way to free this flow between the State limitations that we now 
have.
    I mean, we cannot allow the quadrupling of the work force 
and the opportunity in the Puget Sound area to slip away to 
outside residents just because we cannot figure out how to get 
that infrastructure funding or educational access question 
solved. So hopefully we can come back and engage you on more 
creative ideas.
    I am going to turn it over to my colleague Senator Wyden 
for questions.
    Senator Wyden. Well, all of you have been excellent, and 
let me start by soliciting your ideas on how Oregon and 
Washington might be able to work together. I mean, I think when 
we look at the competition, talk for example about California, 
you know, we mentioned San Diego, we mentioned Silicon Valley. 
Oregon has five Members of Congress, I think Washington has 
something like eight or----
    Senator Cantwell. Nine.
    Senator Wyden. Eight or nine. Okay. So we have 14 in the 
Pacific Northwest. Together that is less than a third of what 
they have in the State of California. So clearly in magnifying 
our voice as a region in Oregon and Washington, a coalition 
would be helpful.
    Do the panelists have any ideas on how Oregon and 
Washington could team up to enhance our clout?
    Mr. Rottsolk. It is unfortunate that appropriations do not 
come from the Senate. Things would be more balanced.
    Senator Wyden. Senator Murray has done an excellent job in 
that regard. We can certainly use ideas on that front.
    Mr. Rottsolk. I think you might also consider, you know, 
there are--the entire Northwest--I do not know if you include 
Alaska in the Northwest, but it is clearly collaborative 
efforts that are going to result and be more fruitful than each 
State going out on its own. Looking--I mean, I should think in 
order to create a center of excellence, you are going to have 
to avoid squabbles between relatively small States such as 
Oregon and Washington are compared to the Californias and New 
Yorks and Massachusetts.
    Senator Wyden. I do not know of any squabbles. I mean, I 
would like to see, for example, the Oregon Health Sciences 
Center and the University of Washington teaming up more. I 
think that would be an attractive way to take on, for example 
Harvard and institutions in the East.
    Is that going on? Are you all working on any projects?
    Everybody is looking at their shoes at this point, and I am 
curious about whether I am hitting a sore spot or we just have 
not talked about it or----
    Dr. Hartwell?
    Dr. Hartwell. I think we have a lot of respect for our 
colleagues at the University of Oregon and the Oregon Health 
Sciences, but we do not see very much of them. And I am just 
trying to think about why that is, and I think it is really 
transportation. It is that--you know, it is a long ways. And 
you see people who are close to you. And, you know, if we had a 
fast train between here and there, we would see each other 
more.
    Senator Wyden. Alright. It is sort of hard to think that a 
two-and-a-half-hour car ride even is the principal obstacle, 
but certainly Senator Cantwell and I can help on trains as 
well.
    [Laughter.]
    Senator Wyden. We are anxious to do that. It just seems to 
me that we have got to figure out a way to magnify our clout, 
to magnify our voice. And if you look at the numbers of Members 
of Congress and you look at population, for example, alone, you 
see there are some challenges.
    Dr. Hartwell, Bayh-Dole, I am convinced that Bayh-Dole did 
not work for anybody. I do not think it works for taxpayers who 
are concerned about the rate of return. I do not think it works 
for companies that get caught up in the morass of the 
bureaucracy and red tape, and I think it does not work very 
well for the universities who are frustrated and would very 
much like to have more of these partnerships.
    Tell me if you could wave your wand over Bayh-Dole, and you 
mentioned it in your testimony, you could see that I was 
interested in it, what would you do to improve Bayh-Dole for 
the big stake holders companies, taxpayers, and universities?
    Dr. Hartwell. Well, I do not feel that I am an expert in 
this area or have studied it very well, but the thing that I 
think Bayh-Dole probably has had an effective catalytic role in 
developing academic research to the commercial sector, but I 
think we need to make a distinction between things like 
products and molecules and things that take a lot of money to 
develop and require investment and things like methods and 
reagents and platforms that everybody needs to get their work 
done.
    I think it is a failure to make that distinction that is 
causing unnecessary problems that the whole system could be 
helped by.
    Senator Wyden. Others on Bayh-Dole?
    Dr. Overell. I would like to comment on that because I 
agree with what Lee is saying, and I think, however, we have to 
be very careful. The reason we have to be careful is that 
biotech and medical device companies are able to grow and 
thrive in large part is because of intellectual property.
    So in meeting the needs that Lee is talking about, which I 
agree with, we have to be very careful that you do not 
undermine the, if you will, barrier to entry that a biotech or 
a medical device company has because if you take away that 
patent protection or you weaken it, you will effectively weaken 
the market position, and you will thereby weaken the enthusiasm 
of investors to invest in those companies.
    I think I would make a little bit of a different 
observation with Lee. I do not think it is all technology 
platforms. I think that is where the problems are. I think 
there are one or two patents out there, and I do not want to 
name names, where the patent office has gone a little bit too 
far, in granting very broad claims.
    In other words, somebody has got a very specific 
technology, and they have been able to get a very broad patent 
out of that, and, you know, that is a wonderful thing for that 
company, and if they are willing to license it in a 
constructive way, then that is positive, but it can have a very 
dampening effect on new investment in that particular area, and 
thereby you get whole tracts of new potential technologies that 
are not receiving private sector investment because of the 
patent. So I think it is actually a very careful balance that 
needs to be struck.
    Senator Wyden. Let me just invite the panel, this is an 
area I have been very interested in and one of the things I 
would very much like to do in the days ahead is essentially 
bring the three big areas of interest, you know, groups 
representing companies, technology companies, groups 
representing, you know, universities and the various taxpayer 
groups that have been concerned about the rate of return 
together for some informal discussions about ways in which we 
might improve Bayh-Dole.
    I would welcome your ideas and suggestions. I chaired a 
hearing when I ran the Subcommittee in the last session where 
Hewlett-Packard and others basically said we are washing our 
hands of Bayh-Dole. It is just too cumbersome, too unwieldy, 
and we cannot make it work. So we would welcome your ideas and 
suggestions in that area.
    Dr. Overell, the question of access to capital has come up, 
and you have heard me touch on it earlier with respect to how 
we get some of the private capital off the sidelines right now.
    I mean, there seems to be an awful lot of money just really 
sitting out there waiting to see perhaps at the end of the war 
and other developments where our economy is headed. I suggested 
the idea of some sort of tax forgiveness, you know, for start-
ups as a way to encourage risk takers.
    Do you have other ideas with respect to how we can speed up 
the flow of private capital to biotech ventures and other 
innovation driven, you know, companies that require these risk 
takers?
    Dr. Overell. Yes, I think it is a good question. The 
dynamic of the moment is that the capital--I would say it a 
little bit differently--is not so much sitting on the 
sidelines, it is being invested, but it is tending to be 
invested in established companies. In other words, the balance 
of investment between seed stage investing and investment in 
established private companies is shifting more towards the 
latter and less towards seed stage investment.
    I think from the standpoint of the region, it is really the 
new investment that we need to nurture.
    How can we help that? I think there are several things that 
we can do and potentially not do to nurture it. One of the big 
problems that we have in our companies is that because of the 
more stringent criteria that are being applied to investment in 
the biotech sector, companies are having to focus their 
programs on typically lead therapeutic programs, they are 
having to be pushed forward more rapidly, capital is being 
focused more on those lead programs. One of our companies in 
particular has been very successful at getting grants from the 
NIST through the ATP program, and I think that program is 
enormously important, and anything that can be done to fund 
through sizable grants inside of companies, things that are not 
quite ready for private sector investment yet I think can be 
enormously valuable.
    It is a little bit like Lee was saying, it is kind of the 
other side of the coin from having some kind of fund that 
academic medical centers can invest. If biotech companies could 
be started with some kind of a grant that could get the 
technology to the next level, I think that could be quite 
important.
    The other thing I will say which is not necessarily on 
point for this meeting, but what we are really talking about 
here is investment in making drugs. So to the extent we have 
regulation of prescription drug prices, we need to be very 
careful. I fully acknowledge all of the issues about being able 
to pay for medicines and all those types of things, but if you 
effectively reduce the pricing on drugs, you will cut down on 
investment in the sector.
    Senator Wyden. Well, the only thing I would say in response 
to that, having sponsored a major bipartisan prescription drug 
bill with Senator Olympia Snowe, the Republican Senator from 
Maine, that uses marketplace forces, it is hard to see how this 
will not be helpful for the drug companies who have an enormous 
market with the demographics and economy. So know that we are 
prepared to work closely with you and work in a bipartisan way 
on it. And our view is this is a chance for the companies to 
step up and have an extraordinary market both now and in the 
days ahead.
    Dr. Wray, if I could, just one question for you: I think we 
need to have a very aggressive push to increase the number of 
women in math and science coming out of the universities. In 
2002, out of the 1.2 million college graduates with degrees in 
math and hard sciences, 70,000 of them were women, and I think 
we have got to do better.
    Do you have any ideas and suggestions given your having 
achieved great professional success on how we do that?
    Dr. Wray. Unfortunately I think it does go back to K 
through 12, as Lee was saying. Having a well-trained work force 
is important to all of us, and that can only start with the 
basic education. And certainly having girls and women trained 
so that they can actually go into the sciences is extremely 
important.
    I know that the University of Washington and other 
universities have worked hard to get that balance, and, in 
fact, in some areas such as bioengineering, it is--I have the 
figures with me, it is surprising how many women have actually 
been enrolled in those programs. They just have to be mentored. 
They have to be encouraged.
    And not being an education expert, I would not go further 
than that. But I know that there are studies in the field as to 
how you do encourage girls to participate in the sciences.
    Senator Wyden. Do you have any idea what the progress is at 
your program? I would be curious because we are looking for 
good models.
    Dr. Wray. No, but I know that there has been substantial 
progress, and I can provide that data to you today.
    Senator Wyden. I would like to have it. Thank you.
    Madam Chair?
    Senator Cantwell. I would just note that a couple of weeks 
ago in Washington, Intel had their annual national science 
contest that they fund scholarship grants to high school 
students for science and math projects, and there were 40 
finalists throughout the country who were honored at this, and 
then they selected the top 10 recipients, the number one 
recipient receiving a $100,000 scholarship to the institution 
of their choice and the others receiving anywhere from $10,000 
to $20,000. But out of the 40 finalists, about 14 of them were 
women, so we were making some progress, but the best news is 
that out of the 10 finalists that were selected, that out of 
the 10, 7 of them were women, and the number one recipient of 
the $100,000 scholarship was a woman from Florida. So we are 
making some progress. When we compete, we compete well.
    [Laughter.]
    Senator Cantwell. So we just have to increase our numbers. 
So we will be looking for that.
    The sad news to that story, though, is that there were no 
finalists from Washington or Oregon in that competition, very 
heavily participated in by the East Coast. And so it may not be 
one of our foci here in the Northwest, but maybe we should make 
that Intel program an opportunity for us to catalyze the 
interest of young women in the Northwest.
    Well, I want to thank the panelists for their input and for 
their ideas today. I want you to know as you are driving around 
the rest of this week, that we will be keeping our record open, 
so if something else pops into mind that you want to have 
officially made part of the record so that we can discuss with 
our colleagues, we appreciate that. We very much look forward 
to capitalizing on the opportunity that you see for the 
Northwest, continuing to make that investment from the Federal 
level, but also talking about how we can build the bridges on 
infrastructure and transportation and education that you have 
pointed out. So thank you very much for being here this 
morning.
    So we will now move to our second panel. If I could have 
them make their way forward, I will start with their 
introductions.
    The second panel, as I mentioned in my opening comments, is 
to explore ways in which composite and advanced materials and 
manufacturing can boost companies and expand our manufacturing 
base in the Puget Sound area.
    We are going to be joined by Dr. Denice Denton from the 
University of Washington. Dr. Denton is the Dean of the College 
of Engineering and will testify not only to the University of 
Washington's lead in this particular area, but what our region 
is doing as a whole.
    Believe it or not, I am going to keep talking because this 
is the way we get this done. Also we are going to be joined by 
Dr. Frank Statkus, Boeing's vice president of technology, and 
he will be discussing the important role of advanced materials.
    Peter Janicki is the head of Janicki Industries and is 
specializing in advanced materials for aerospace, marine and 
transportation companies. Nona Larson is the senior 
technologist from PACCAR. Ms. Larson is responsible for the 
development of material standards and research in advanced 
cohesives and coatings.
    And Rich Rutkowski is the CEO of Microvision and will talk 
about the collaborative efforts between academic institutions 
and private industries.
    So as our panelists are moving up here, I am going to ask 
people who have questions and comments for your colleagues that 
are in the audience, if you can move those comments and 
discussions out into the hall, that would be helpful to us this 
morning before we get started.
    Again, I want to thank our panelists for being here this 
morning and, again, apologize for our tight schedule, but this 
is the way we get this done in Washington, and we are very 
appreciative that you are spending your time with us this 
morning.
    Obviously, manufacturing employs about 300,000 
Washingtonians, but we know that those Washingtonians are 
facing some serious challenges. So part of this morning's panel 
was to talk about ways in which we can grow jobs in the future 
or better maybe yet to say ``Keep jobs in this particular area 
of manufacturing by being aggressive about the type of 
investment in research and development and the investment that 
needs to be made so that we can continue to capitalize on the 
new materials that might be used in manufacturing.''
    This is something particularly important in aviation, but 
in my travels around the State, I am finding that it is an 
important aspect of material development in a whole variety of 
areas. I see no reason why we in the Northwest should not play 
a leadership role in this particular area.
    So, Dr. Denton, we are going to start with you and thank 
you for being here.

      STATEMENT OF DR. DENICE D. DENTON, DEAN, COLLEGE OF 
             ENGINEERING, UNIVERSITY OF WASHINGTON

    Dr. Denton. Thank you for the opportunity to comment on 
these very important issues. I will first describe the role of 
higher ed vis-a-vis advanced manufacturing in the Pacific 
Northwest and then describe the use of composite materials in 
manufacturing, and I will close with some comments on the 
impact of composites on the aerospace industry.
    The Pacific Northwest has a long history of excellence in 
manufacturing. In order to continue this excellence, we must 
ensure that there is a steady supply of technicians, scientists 
and engineers to do the basic research required and the design 
and manufacturing work that are essential to economic 
development and stability in the region.
    Higher education in the State of Washington plays a key 
role in ensuring that advanced manufacturing in the region 
thrives. First, we educate the technical work force, and, 
second, we generate the research and development that undergird 
advances in the field. And you heard a lot about the research 
activities at UW and WSU in the previous panel.
    The UW produces 800 bachelors degrees and 400 advanced 
degrees in engineering and computer sciences each year. There 
are very strong research efforts at UW and WSU and, in 
addition, the Washington Technology Center or WTC plays an 
important role statewide with respect to advanced 
manufacturing.
    The WTC helps Washington companies overcome the technical 
challenges of product development by linking them with the 
scientific and engineering resources of the State's 
universities.
    Let me say a few words about composite materials and 
advanced manufacturing. They will play a key role in 
manufacturing in the Pacific Northwest. The WTC, UW and WSU 
have partnered with firms in the Pacific Northwest who are 
developing composite materials for applications in road 
construction, body armor, construction materials and 
recreational equipment.
    In the past three years, the WTC has awarded over $1.6 
million of State money in advanced materials and manufacturing 
projects. Other applications involving composites include 
micro-electronic device fabrication, filtration technologies, 
photonic materials for telecom and display and fabric treatment 
for biochemical threat protection.
    One of the fastest-growing areas of advanced materials 
development in the Northwest is micro-electromechanical systems 
or MEMS. The WTC, WSU and UW have clean room facilities that 
are larger than 15,000 square feet, and the WTC's facilities 
are used by 35 companies for manufacturing applications such as 
fuel cells, image display and acquisition systems, artificial 
muscles, optical switches for photonics, biochips, 
cardiovascular implants, fuel delivery systems for aircraft 
engines, water purity monitors, Anthrax and other bio-agent 
detectors and medical devices.
    The growing interest in nanotechnology research and 
development has created the UW's Center for Nanotech which has 
the Nation's first Ph.D. program in the field. Joint programs 
between the Center for Nanotech and the Pacific Northwest 
National Labs have an immediate focus on advanced materials for 
biomedical and environmental applications and will be extended 
to include programs in lighter, stronger aerospace materials 
utilizing self-assembly techniques.
    Let me switch now to the use of composites in the 
commercial aircraft industry. The use of structural composites 
in commercial transport aircraft is expanding rapidly. For 
example, the entire tail section of a Boeing 777 is produced 
using polymeric composites. The 777 tail section is the largest 
composite structure ever used in a Boeing transport aircraft. 
Structural composites will be used to an even greater extent in 
the Boeing 7E7.
    At the same time, there are remaining concerns regarding 
the durability and maintainability of composite structures 
following long-term exposure to the low-temperature moisture 
cycles encountered by a commercial transport aircraft.
    Further research is needed to fully explore the implication 
of aging composite structures so as to ensure long-term safety 
of aircraft composites. The UW is heavily involved in 
structural composite research used in the aerospace industry.
    You have heard from Senator Cantwell that she has proposed 
legislation for a new center of excellence devoted to the use 
of advanced materials in transport aircraft that will be 
established in the Pacific Northwest. The founding members of 
the center would include the University of Washington, WSU, 
Oregon State and Edmonds Community College. The center 
personnel would be involved in research, education and 
technology transfer, and this center would play a key role in 
ensuring the Northwest's leadership position in manufacturing.
    In closing, in order to ensure that advanced manufacturing 
in Washington State continues to thrive, we must also continue 
to educate the work force of the future and carry out the 
research needed to move manufacturing processes to the next 
level of competitiveness.
    It is essential that the Federal Government continue to 
fund research in key areas relevant to manufacturing such as 
the development of advanced composite materials.
    In addition, the State must provide additional resources to 
higher ed to educate students in the applied sciences, 
engineering and technology. We also need additional support for 
the recruitment and retention of prospective students, 
particularly those from under-represented groups, especially 
women and people of color.
    The demographics of our State and our Nation are changing, 
but the demographics of our faculty and student bodies do not 
reflect this change around the country.
    Senator Wyden has proposed that Title IX be used as a tool 
to increase the numbers of women in the sciences and 
engineering. This is one key mechanism to accelerate the 
required demographic shift nationally among those who study and 
teach in these disciplines.
    The College of Engineering at the UW has a strong focus on 
and commitment to enhancing the ethnic and gender diversity of 
our student body and faculty, and we will continue to provide 
national leadership in this essential arena. For example, our 
faculty in engineering is 15 percent women. You might guess 
what that would be around the country at peer universities. It 
is only 4 to 8 percent nationally. So we are more than double 
and in some cases triple that peer group.
    In closing, there is no doubt that the Pacific Northwest 
can continue to lead the Nation and the world in advanced 
manufacturing, but it will require a strategic partnership of 
the public and private sectors, including local, State and 
Federal Government, K-12, higher ed and the corporate sector.
    The proposed FAA Center of Excellence in advanced materials 
for transport aircraft is one very important component of this 
strategic partnership. Thank you.
    [The prepared statement of Dr. Denton follows:]

 Prepared Statement of Denice D. Denton, Dean, College of Engineering, 
                        University of Washington
    Introduction. The Pacific Northwest has a long history of 
excellence in manufacturing. In order to continue this excellence, we 
must ensure that there is a steady supply of technicians, scientists 
and engineers to do the basic research required design and 
manufacturing work that are essential to economic development and 
stability in the region.
    Higher education in the State of Washington plays a key role in 
ensuring that advanced manufacturing in the region thrives. First, we 
educate the technical workforce and second, we generate the research 
and development that under gird advances in the field. The University 
of Washington (UW) is a leader in both of these arenas in that we 
produce 800 bachelors degrees and 400 advanced degrees in engineering 
and computer sciences each year. We also have a very strong effort in 
the research disciplines that support manufacturing in the region. 
Washington State University (WSU) is also a key contributor to this 
effort.
    The Washington Technology Center (WTC) plays an important role 
state-wide with respect to advanced manufacturing. It is a state 
science and technology organization that helps Washington companies 
overcome the technical challenges of product development by linking 
them with the scientific and engineering resources of the state's 
universities. The WTC funds and fosters industry-university 
collaborations and connects entrepreneurs and scientists who often need 
each other to bring commercially promising ideas to fruition
    Composite Materials in Advanced Manufacturing. Composite materials 
will play a key role in manufacturing in the Pacific Northwest. The 
WTC, UW and WSU have partnered with firms in the Pacific Northwest who 
are developing composite materials for applications in:

    Road construction

    Body armor

    Construction materials (e.g., replacement of forest 
        product-based lumber)

    Recreational equipment (aluminum metal matrix bicycle 
        wheels, laminated baseball bats).

    In the past three years, the WTC has awarded over $1.6 million of 
state money and over $2 million of private industry money in advanced 
materials and manufacturing projects. In addition to projects in the 
composite materials areas mentioned above, other applications include:

    Micro-electronic device fabrication and packaging materials

    Filtration technologies (for internal combustion engine 
        exhaust or purification of drinking water, for example)

    Photonic materials for telecommunication and display 
        technologies

    Fabric treatment for bio-chemical threat protection.

    One of the fastest growing areas of advanced materials development 
in the Northwest is micro-electromechanical systems (MEMS). The WTC's 
15K sq. ft. user-supported cleanroom provides a full range of 
processing and characterization capabilities to academic and industrial 
users involved in the research, development and early stage 
manufacturing of MEMS products. Over 200 users from 40 different 
university research groups and 35 companies rely on these facilities to 
develop advanced materials and manufacturing methodology for 
application in such diverse fields as:

    Fuel cells

    Image display and acquisition systems

    Artificial muscles

    Optical switches and other devices for photonics-based 
        telecommunications

    Biochips

    Cardiovascular implants

    Fuel delivery systems for aircraft engines

    Water purity monitors

    Anthrax and other bio-agent detectors

    Medical devices.

    The growing interest in nanotechnology research and development has 
created the UW's Center for Nanotechnology, with the nation's first 
Ph.D. program in this field. Joint programs between the Center for 
Nanotechnology and Pacific Northwest National Laboratories have an 
immediate focus on advanced materials for biomedical and environmental 
applications, and will be extended to include programs in lighter, 
stronger aerospace materials utilizing self-assembly techniques. A 
proposal is being presented to the state's congressional delegation to 
further identify, quantify, and validate the State's economic 
development opportunity in micro and nanotechnology.
    Commercial Aircraft Industry. The use of structural composites in 
commercial transport aircraft is expanding rapidly. For example, the 
entire tail section (i.e., the ``empennage'') of a Boeing 777 is 
produced using polymeric composites. The 777 empennage is the largest 
composite structure ever used in a Boeing transport aircraft. It is a 
virtual certainty that structural composites will be utilized to an 
even greater extent in the new Boeing 7E7. The expanding use of 
composites is the direct result of research performed throughout the 
1970-1990 time frame at many institutions worldwide, not least of which 
was the University of Washington.
    At the same time, there are nagging concerns regarding the 
durability and maintainability of composites structures following long-
term exposure to the load/temperature/moisture cycles encountered by a 
commercial transport aircraft. Since these materials are relatively 
new, practical experience with composite aircraft structures over long-
times simply does not exist. Consider that the Boeing 777 began revenue 
service with United Airlines in 1995, or only about 8 years ago. In 
contrast, the service life of a transport aircraft usually exceeds 25 
years. Under these circumstances the durability of composite structures 
will naturally be suspect following any serious airliner accident for 
the next decade or two. This point is illustrated by the tragic crash 
of American Airlines flight 587, which occurred near New York City in 
November 2001. The aircraft involved was an Airbus model A300-600. The 
vertical stabilizer on this aircraft, a large graphite-epoxy composite 
structure, broke off nearly intact in mid-air just prior to the crash. 
There were initial suspicions that the crash had been caused by the 
failure of this composite structure, and these suspicions were widely 
reported in the public media. Results from subsequent investigations by 
the FAA, NASA, and others indicate that failure of the vertical 
stabilizer was not the root cause of the accident. Still, many issues 
involving aging or damaged composite structures were uncovered during 
the investigation of this accident. Further research is needed to fully 
explore the implication of aging composite structures, so as to ensure 
long-term safety of aircraft composite structures.
    Faculty and students at the University of Washington remain heavily 
involved in structural composite research used in the aerospace 
industry. Senator Maria Cantwell will propose legislation for a new 
Center of Excellence devoted to the use of advanced materials in 
transport aircraft that will be established in the Pacific Northwest. 
Founding academic members of the center would include the University of 
Washington, Washington State University, Oregon State University, and 
Edmonds Community College. Center personnel will be involved in three 
main activities: research, education, and technology transfer. The 
integrated result of these activities will be to help ensure that 
structures used in the transport aircraft fleet operating within the 
USA continue to be safe and reliable.
    Summary. In order to ensure that advanced manufacturing in 
Washington state continues to thrive, we must continue to educate the 
workforce of the future and carry out the research needed to move 
manufacturing processes to the next level of competitiveness. It is 
essential that the Federal Government continue to fund research in key 
areas relevant to manufacturing such as the development of advanced 
composite materials. In addition, the state must provide additional 
resources to higher education to educate students in the applied 
sciences, engineering and technology. This will also require additional 
support for recruitment and retention of prospective students, 
particularly those from under-represented groups, especially women and 
people of color. The demographics of our state and our nation are 
changing, but the demographics of the faculty and student bodies do not 
reflect this change. Senator Wyden has proposed that Title IX be used 
as a tool to increase the numbers of women in the sciences and 
engineering. This may be necessary to accelerate the required 
demographic shift nationally among those who study and teach in these 
disciplines. The College of Engineering at the UW has a strong focus on 
and commitment to enhancing the ethnic and gender diversity of our 
student body and faculty and we will continue to provide national 
leadership in this essential area.
    In closing, there is no doubt that the Pacific Northwest can 
continue to lead the nation and the world in advanced manufacturing, 
but it will require a strategic partnership of the public and private 
sectors including local, state and Federal Government, K-12, higher 
education and the corporate sector. The proposed Center of Excellence 
in advanced composite materials is one very important component of this 
strategic partnership.

    Senator Cantwell. Thank you.
    Mr. Statkus?

 STATEMENT OF FRANK D. STATKUS, VICE PRESIDENT FOR TECHNOLOGY, 
                       THE BOEING COMPANY

    Mr. Statkus. Good morning, Senators. I appreciate the 
opportunity to talk to you about advanced materials today and 
provide that for the record. I have made a statement. I will 
just summarize that statement.
    About 100 years ago on the other side of this continent, a 
place called Kill Devil Hills, Kitty Hawk, North Carolina, 
there was a couple of brothers, and they had set out on a path 
to try to find a way to handle manned aircraft flight.
    The first thing that they had to learn, of course, and they 
knew this, was something about aerodynamics, what made lift, so 
they worked that in their wind tunnels.
    They decided that control would be the third thing they 
needed to learn because they did not have any reason to search 
for those answers until they had an airplane that could fly.
    So the second thing they worried about was materials. 
Materials was important then because the aerodynamics that they 
knew suggested that the materials had to be extremely light and 
strong. The things that they have learned and the impetus for 
development of new materials through research and development, 
that remains today. And in those hundred years, we have 
improved those materials through research and development, 
associated research with organizations, universities, other 
industries to the point where we have the capability now to 
produce some of the best aircraft in the world.
    I want to take just a couple of minutes to talk to you 
about the next best airplane and the relationship of the needs 
and values of that airplane to materials development today and 
in the future.
    When the Wright brothers were worrying about Sitka spruce 
and white ash and Irish linen, those were their composites of 
the time and those provided them the strength-to-weight ratios 
that they needed to fly.
    Today competitiveness in our business is measured in not 
just the performance of the product, but the cost of the 
product. And that performance of the product can be measured in 
the weight, can be measured in the payload, it can be measured 
in the performance of engines, but generally to the customers 
that we serve, it is measured in the economic value of that 
product.
    First and foremost, the economic value of these products is 
predicated on how well you have done in achieving the 
development of the kind of materials that would provide you 
that performance and give you that weight advantage and allow 
your customers to carry either more passengers or more payload. 
It will allow the performance of engines with specific fuel 
consumptions to drive those airplanes further because they are 
lighter.
    So the technologies of the materials we talk about today 
are a lot about the most advanced composites, the most advanced 
aluminum alloys, the most advanced titanium alloys, refractory 
kind of metals. It is all about finding the kind of material 
that you could put in an airplane today that absolutely 
provides the competitive advantage for both you and your 
customers.
    If we are intent on making sure that the Great Northwest 
continues to build these best airplanes and continues to carry 
on heritages of folks like the Wright brothers, we had better 
first make sure that we are capable of providing the kind of 
materials technology in general that would allow you to 
continue to do that.
    It pleases me to no end that folks like the Senators have 
taken this effort on in detail. It is absolutely critical that 
in the Northwest we not just have capable institutions, but we 
have capable people ready to take on those kinds of tasks that 
would allow industries like the Boeing Company to be 
competitive for the next 100 years. Thank you.
    [The prepared statement of Mr. Statkus follows:]

Prepared Statement of Frank D. Statkus, Vice President for Technology, 
                           The Boeing Company
    I appreciate this opportunity to discuss the value of new material 
forms on behalf of The Boeing Company and our new commercial product 
development activity, the 7E7. Over time, improvement in material forms 
together with the development of new materials and their applications 
have been the basis for continuing benefits to commercial aviation 
platforms. My personal background in composite and metal alloy 
development in this industry spans approximately 30 years. My composite 
work has involved graphite epoxies, various toughened Thermoset 
materials and also thermoplastics. Metals development for material 
forms and applications has involved titanium alloys, stainless steels, 
and more recently, newer aluminum alloy development and application. I 
believe the importance of material improvements and development in 
support of new airplane programs to improve capability and competitive 
value has not diminished over time. On the contrary, The Boeing Company 
continues to increase its reliance on new and improved material forms 
as we improve airplane capabilities for our customers. As a leading 
developer for commercial airplanes, Boeing expects 30 percent or more 
of the improvements made to airplane efficiency and performance to come 
from new materials and their applications, and every product we develop 
relies on a greater percentage of applied, improved material forms. 
Research and development, with regard to material forms, is not limited 
to Boeing labs or other Boeing resources, but is an amalgamation of 
results from private and public research labs, related industry 
research, and government sponsored state of the art programs. Research 
funding directed toward local institutions with state of the art labs 
and staff is a very positive step toward improving statewide capability 
for new materials development. As the future competitiveness of our 
products increasingly rely on the values and benefits of the newest 
materials, these investments help provide the foundation for a 
technically competitive great northwest.

    Senator Cantwell. Thank you, Mr. Statkus.
    Mr. Janicki?

         STATEMENT OF PETER JANICKI, JANICKI INDUSTRIES

    Mr. Janicki. Thank you. About in the time of the Civil 
War----
    Senator Cantwell. Peter, you might have to move that a 
little bit closer to you.
    Mr. Janicki. During the time of the Civil War, coal miners 
would go into these big coal mines after they had set dynamite 
in there, and as they walked in, they would see these carbon 
strings hanging from the ceiling. They could not break them, 
they did not know what they were, but they knew they were very, 
very strong, and that was the first time that anyone had ever 
created carbon fiber.
    Another gentleman a little bit later on actually learned 
how to synthesize this. Thomas Edison created a carbon fiber in 
the creation of his light bulb. He did not really know what it 
was, but he knew that it could go to 5,000 degrees Fahrenheit 
and not fall apart.
    In the 1960s, they first figured out how to synthesize 
carbon fiber for production, which was a big deal, and a carbon 
fiber laminate made with epoxy resins can be stronger than the 
very best steel and at one-fifth the weight. So it is an 
incredible material. But in 1960, it cost $200 a pound for 
carbon fiber, and so it was used only in the most exotic 
applications.
    The next big step in that technology was the creation of 
the B2 bomber. That was the first all-composite airplane. I 
think the reason they called it a B2 was because it cost $2 
billion.
    [Laughter.]
    Mr. Janicki. I do not know. But it was a very expensive 
airplane.
    Over a period of time, I think last year I was buying 
carbon fiber for about $20 a pound, today it is $15 a pound, 
and they are predicting by sometime in the next two years, that 
it will be $3 a pound.
    So we are looking at the same kind of thing that happened 
in the computer industry where computer chips were so expensive 
that only IBM mainframes were made from them. Nobody ever 
predicted or ever thought that you could produce a PC for 
$1,000.
    Well, that is where the composite industry is going. It is 
going to happen and someplace on God's green earth is where 
this technology is going to find a home, just like Detroit is 
the home of the automobile, Pittsburgh is the home of metal, 
Bellevue happens to be the home of the software industry, and I 
think the last time I said this, Maria told me Redmond was the 
center.
    [Laughter.]
    Mr. Janicki. The bottom line is some place on earth is 
going to be this technology center from which composites become 
home. And what I like to call it is critical mass. I heard some 
of the people earlier today talk about groupings, they called 
it. I call it critical mass. You have to have--I think Albert 
Einstein is the first one came up with that term when he was 
creating nuclear energy, they said that if you do not have 
enough mass, the thing will never, ever do anything. But as you 
get over a certain mass of fuel, it explodes into something as 
brilliant as the sun.
    Well, that is where we are here. The State of Washington is 
leading that technology, not just with Boeing, although Boeing 
is a major player, the marine industry, the recreational 
industry, all kinds of areas are utilizing composite 
technology.
    But we need a big push. An example that I have is there is 
a company right next door to me, and they know me because they 
are next door to me. And they build--the name of the company is 
Team Corporation, and what Team Corporation builds is vibration 
equipment where they have these tables that shake in different 
directions for a multitude of different applications, and they 
sell their product worldwide.
    Well, with vibration equipment, you need the table to be 
very lightweight and very, very stiff. And they have 
competitors like everyone else and they struggle against their 
competitors.
    But because I am next door, and they know me, they walked 
into our building, and we figured out how to create--all the 
other tables in the world are made with metal. They are made 
out of magnesium. We created a table for them out of carbon 
fiber. That carbon fiber table will give them more than two-
and-a-half times the performance of anybody else in the world.
    So now all of a sudden Team Corporation which was 
struggling to survive is going to explode, okay, but it is just 
me and it is them. And I see--bear with me on my lack of 
knowledge with the universities, but when I went to the 
universities, composites were either not talked about or were a 
very, very small part. There was whole departments about metal 
and metal technology and how you test it, how you know if it is 
going to work, how it is going to fatigue over many, many 
years. I mean, it was so mature. In the metals technology, you 
know, they started building steam locomotives in 1830. That is 
a very, very mature technology.
    With composites, we are looking at a baby. This thing is in 
its infancy. I meet on a daily basis with engineers from a 
multitude of technologies of different industries. None of them 
went to college and studied composites. We have all learned it 
since we got out of school.
    So I am really glad to see that the universities are coming 
on, but there is a huge, huge gap in goal from the educational 
side, particularly higher, higher education, the very top, the 
people that write the books that say how we do this stuff, 
there is a big gap there.
    Once we create jobs in the composite technology, what I 
find the most inspiring about this particular area is that you 
talk about 100,000 unemployed, well, the problem with that 
100,000 is they are very diverse. You have some highly 
educated, highly intelligent individuals all the way down the 
spectrum. And when you create jobs in composite technology, you 
are creating jobs for everyone.
    When you look at somebody that is manufacturing composites, 
they have really top engineers, they have chemists, they have a 
whole spectrum of people on the high end, and then you have 
people actually building the product who have very little 
education that are putting parts together, they are fitting 
things, so it employs everybody, and it is a neat area to 
expand into.
    Senator Cantwell. Thank you very much.
    Ms. Larson?

  STATEMENT OF NONA LARSON, SENIOR MATERIALS ENGINEER, PACCAR 
                        TECHNICAL CENTER

    Ms. Larson. Good morning everyone. My name is Nona Larson, 
and I am a senior materials engineer at the PACCAR Technical 
Center which is in Mount Vernon (WA). Thank you for inviting 
PACCAR to participate in this hearing. We appreciate the 
opportunity to talk about some of the advanced materials we use 
on our trucks. The technical center provides materials 
expertise to PACCAR's worldwide truck brands, including 
Kenworth and Peterbilt in North America and DAF and Foden in 
Europe.
    PACCAR products are used in a broad range of applications, 
from long distance hauling, regional and local deliveries, 
refuse collection and heavy construction. Last year, PACCAR 
produced 92,000 trucks worldwide.
    PACCAR is recognized as the technological leader in our 
industry for use of electronics, aerodynamic design and 
innovative use of materials. Composites play an important role 
in medium and heavy-duty trucks. The lighter weight when 
compared to metals improve vehicle fuel economy and 
performance. For example, a 1,000-pound weight savings will 
save at least $350 per year in fuel costs for a truck. Weight 
savings are also important as many operators can carry more 
goods which results in greater revenue. As a result, customers 
place a value in dollars for each pound of weight that advance 
composites can save.
    The formability benefits allow more complex shapes for 
better aerodynamic performance and styling options. Aerodynamic 
performance is important because it improves fuel economy, 
reducing the fuel consumed by the truck, which is an important 
strategic goal for our country.
    PACCAR's T600, the first aerodynamic truck on the market, 
resulted in a fuel consumption savings of 22 percent through a 
number of design changes which include greater use of 
composites on exterior aerodynamic surfaces. The T600 received 
the 1995 Department of Transportation award for advancement of 
Motor Vehicle Research and Development.
    In the 1950s, we started using composites to produce parts 
with shapes difficult or impossible to build out of metal. By 
the 1980s, the majority of our roofs and hoods were composite. 
Currently the exterior surface of our trucks range from 20 to 
40 percent composites depending on the truck model.
    Because these advanced materials can be molded precisely, 
they give us the additional advantage of more consistent parts 
which lend themselves to robotic assembly methods. The cabs of 
our two newest truck models are assembled robotically. This 
improves the quality and durability of our trucks, making them 
a better value for our customers.
    The improved part properties of advanced composites include 
smoother appearance and the ability to optimize weight and 
strength resulting in more durable, cost-effective parts.
    Our customers typically run their trucks 120,000 miles per 
year for well over a million miles in the lifetime of a truck, 
so those composites we use on our parts must be very strong.
    Additional properties advanced composites provide are 
conductivity and molded-in color options. Our customers request 
many different colors of paint each year, making the 
development of viable in-mold color attractive. Both 
conductivity and molded-in color reduce the amount of paint 
used on our trucks, thus reducing emissions from our plants.
    Two of our most recent Class 8 truck models, the Kenworth 
T2000 and the Peterbilt 387 make extensive use of composites. 
For example, both trucks use SMC for doors, door openings and 
the firewall which separates the cab from the engine 
compartment.
    The T2000 roof is the largest SMC part ever molded for a 
production application. The tool for this part weighs 30,000 
pounds and would fill a two-car garage. The floor material is 
also very unique. It uses a vinyl ester skin and a balsa wood 
core. This gives you maximum strength with minimum weight.
    This technology is also used in the aerospace industry, so 
this is an example of where developing these materials can 
benefit both industries.
    We have active projects with State universities, including 
the Virtual Reality Technology Consortium with Washington State 
University. This consortium is working on developing virtual 
reality tools for improving manufacturing efficiencies and 
ergonomics.
    We share materials and research projects with Western 
Washington University. A couple of examples of completed 
projects include a recyclability project for thermoplastic 
forming and a project on building composite suspension parts. 
The PACCAR foundation also provides an endowment to the 
University of Washington to fund the PACCAR Professorship in 
the College of Engineering.
    We have active material development cost-share projects 
with the Government. These projects range from forming new 
materials to commercializing potential assembly methods. We 
fully support the continuing cooperation of Government and 
industry in the development of new material technologies.
    We recognize the universities and national laboratories as 
excellent sources of basic research. This research, when 
developed with input from private industry regarding viability 
and commercialization, should be a significant asset to both 
the trucking industry and the industries we serve. Thank you 
for your attention.
    [The prepared statement of Ms. Larson follows:]

     Prepared Statement of Nona Larson, Senior Materials Engineer, 
                        PACCAR Technical Center
    Good morning everyone. My name is Nona Larson, and I am a Sr. 
Materials Engineer at the PACCAR Technical Center which is located in 
Mount Vernon, Washington.
    Thank you for inviting PACCAR Inc. to participate in this field 
hearing. We appreciate the opportunity to talk about some of the 
advanced materials we use on our trucks. The Technical Center provides 
materials expertise to PACCAR's worldwide truck brands including 
Kenworth and Peterbilt in North America and DAF and Foden in Europe. 
PACCAR products are used in a broad range of applications including 
long distance hauling, regional and local delivery, refuse collection 
and heavy construction. Last year, PACCAR produced over 92,000 trucks, 
worldwide.
    PACCAR is recognized as the technological leader in our industry 
for its use of electronics, aerodynamic designs and innovative use of 
materials. Composites play an important role in medium and heavy duty 
trucks. The lighter weight when compared to metals improves vehicle 
fuel economy and performance. For example, a 1,000 pound weight savings 
will save at least $350 per year in fuel cost for a truck. Weight 
savings are also important as many operators can carry more goods that 
produce revenue. As a result customers place a value in dollars for 
each pound of weight that advanced composites can save. The formability 
benefits allow more complex shapes for better aerodynamic performance 
and styling options. Aerodynamic performance is important because it 
reduces the fuel consumed by the truck, an important strategic goal for 
our country. PACCAR's T600, the first aerodynamic truck on the market, 
was able to reduce fuel consumption by 22 percent through a number of 
design changes, which included greater use of composites for 
aerodynamic exterior surfaces. The T600 received the 1995 Department of 
Transportation award for advancement of Motor Vehicle Research and 
Development.
    In the 1950's we started using composites to build parts with 
shapes difficult or impossible to form in metal. By the 1980's the 
majority of our hoods and roofs were made of composites. Currently the 
exterior surface of the truck is about 20 to 40 percent composite, 
depending on truck model.
    Because these advanced materials can be molded precisely, they give 
us the additional advantages of more consistent parts which lend 
themselves to robotic assembly methods. The cabs of our newest two 
truck models are assembled robotically. This improves the quality and 
durability of the trucks, making them a better value for our customers. 
The improved part properties of advanced composites include smoother 
appearance, and the ability to optimize weight and strength resulting 
in more durable, cost effective parts. Our customers typically run 
their trucks 120,000 miles each year and well over 1 million miles in a 
lifetime, so any composite used in our trucks must be very strong.
    Additional properties advanced composites provide are conductivity 
and molded in color options. Our customers request many different 
colors of paint each year, making the development of viable in-mold 
color attractive. Both conductivity and molded in color reduce the 
amount of paint used on a truck, thus reducing emissions from our 
plants.
    Two of our most recent class 8 truck models, the Kenworth T2000 and 
the Peterbilt 387 make extensive use of composites. For example, both 
use sheet molding compound for parts such as doors, door openings, and 
the firewall which separates the cab from the engine compartment. The 
T2000 roof is the largest SMC part ever molded for use in a production 
application. The tool for this part weighs 30,000 pounds and would fill 
a 2-car garage. This trucks floor material is also very unique. It uses 
a vinyl ester skin and balsa wood core for maximum strength with 
minimum weight. This technology is also used in the aerospace industry, 
so developing advanced composites can benefit both.
    We have active projects with State Universities, including the 
Virtual Reality Technology Consortium with Washington State University 
which is developing virtual reality tools for improving manufacturing 
efficiencies and ergonomics. We share materials research programs with 
Western Washington University. Some examples of the research projects 
completed are a recycling study for thermoplastic forming and building 
composite suspension parts. The PACCAR Foundation also provides an 
endowment to the University of Washington to fund the PACCAR 
Professorship in the College of Engineering.
    We have active material development cost share projects with the 
government. These projects range from forming new materials to 
commercializing potential assembly methods. We fully support the 
continuing cooperation of government and industry in the development of 
new material technologies.
    We recognize Universities and National Laboratories as excellent 
sources of basic research. This research, when developed with input 
from private industry regarding viability and commercialization, should 
be a significant asset to both the trucking industry and the industries 
it serves.

    Senator Cantwell. Thank you. And we will get to questions 
in a moment, but we want to hear from Mr. Rutkowski. I 
appreciate you being here this morning.

  STATEMENT OF RICK RUTKOWSKI, PRESIDENT AND CEO, MICROVISION 
                              INC.

    Mr. Rutkowski. Thank you. Thank you Senator Cantwell and 
Senator Wyden for the opportunity to address the Committee this 
morning. And I do have a written statement, although, I think 
what I will do is summarize and perhaps amplify with the 
benefit of some of what we have heard.
    One thing I think that is a common theme here is we are all 
looking for ideas with how to create jobs and what kind of 
industries will drive those. And I wanted to applaud the 
Committee's role, and we are asking what can be done. Certainly 
nothing can be done without communication, without dialogue, 
and your leadership in taking this initiative is much 
appreciated.
    Microvision is a company I am Chief Executive Officer of 
and cofounder of. We also cofounded a second company in late 
1999 called Lumera. Both companies operate in the electro-
optics domain, and Dr. Denton during her statement actually 
made reference to two technologies: One is micro machining 
technology and another is polymer materials technology in which 
we have collaborated with the University of Washington.
    Both companies have supplied two of the largest commercial 
research contracts to the University of Washington that the 
University of Washington has received. And this is really 
interesting in this context. These are both relatively early-
stage companies.
    I think that when we speak to the issue of job creation, 
Senator Wyden made the point that jobs are not stamped out of 
printing presses in his office or any other office. But what 
does create jobs? Jobs are created by economic activity. There 
have been several statements sort of made around the notion of 
the types of economic activity that are created here, but I 
think it is a fair statement that if we look at periods in 
history where we saw profound acceleration of economic 
activity, you can almost always trace those back to something 
that we would call a disruptive technology.
    So there are really two terms that appear in my statement 
that I think are key to this: One is this notion of 
disruptiveness and the other is a notion of a platform. A 
platform technology is one that has the kind of breadth of 
application that micro-electronics does. We see micro-
electronic chips in everything from refrigerators to 
automobiles and cellular phones and, of course, personal 
computers.
    The economic revolution that surrounded the micro-
electronics era was indeed profound and an example, certainly 
within recent history and recent memory, to draw on.
    We see the same kinds of potentials here in advanced 
materials, certainly the kinds of structural materials that we 
are talking about with respect to composites.
    In the case of Lumera, the electro-optic materials that we 
are working with can be used in everything from 
telecommunication switches to next-generation computer back 
planes. Indeed, we are working with the Intel group out of 
Oregon on how we interconnect high-speed chips. We have a 
bearing on the aerospace industry, both with respect to phased 
array antenna that can be enabled by these kind of polymers at 
high speeds and also integrating them into the actual skins of 
aircraft to form what we call a smart skin so that these can--
stealth can be achieved through active electro-optic activity 
of the skin of an aircraft.
    So these are very powerful technologies, but thematically 
the job creation comes from the economic impact. The economic 
impact comes from ultimately a benefit to consumers.
    We have to stimulate the economy through this sort of 
disruptive innovation, and that is the power of these kinds of 
technologies. So I am here to offer and put on a couple of 
different points. I think that is sort of the broad view.
    Two is in addition to materials biotechnology, we work a 
lot with the whole arena of nanostructures in the molecular 
level engineering that we do at Lumera. These are very 
important technologies, and that is the fine point here really 
is that in order to create this kind of impact, we have to 
identify those types of technologies which are leverageable, 
those types of technologies which give us those opportunities.
    We also believe that electro-optics technologies is key in 
this domain and offers great potential for the region in this 
regard.
    The other area that I think we bring to bear, and I touched 
briefly on our collaboration with the University of Washington, 
I think it is essential that these kinds of collaborations 
continue. We have benefitted greatly. We have benefitted with 
the Human Interface Technology Laboratory, with the chemical 
engineering department at the university as well as with the 
Washington Technology Center and the micro fabrication facility 
there.
    There is, in fact, an issue of a funding gap that these 
entities encounter, although, we have had some good news in the 
last year in that the National Science Foundation designated 
University of Washington one of six national centers in the 
area of technology. With this particular designation, they were 
rewarded a reward in photonics at a rate of about $16 million 
over the next five years, and certainly this level of Federal 
support is going to be significant in enabling that technology 
to advance.
    So I think key to many of these things are creating a forum 
for the dialogue, identifying those technologies that are 
strategically important, and I think, Senator Wyden, you made a 
very good point about what can we do to foster collaboration. 
And I am not so sure either that trains are the answer. I think 
a lot of it really is about creating opportunities to interact 
and collaborate and to encourage those collaborations through 
other kinds of structural elements.
    In fact, it was interesting to sort of hear the notion of 
how do we as a region sort of create some critical mass, to 
borrow your phrase, politically in order to sort of bring these 
resources to bear on the region. I think there are tremendous 
opportunities.
    One area that we are trying to exercise some initiative in 
is simply bringing other participants within that industry 
together, so reaching out to other folks who are in the 
electro-optics domain and the advanced materials domain and 
forming industry coalitions that can facilitate those kinds of 
communications.
    But we have had enormous success to date. We think we can 
be a tremendous job creator going forward in the electro-optics 
industry. We actually believe there will be another Silicon 
Valley centered around the electro-optics industry. We believe 
that in the Northwest we do have a leg up on the creation of 
that. Technologies like advanced materials and the chemical 
engineering foundation for that are important to it as well as 
nanostructures.
    So these things really do come together, and it is about 
creating that community around them to drive the ideas because 
I think key to this is we are going to be faced with the fact 
that we are going to have, to a certain extent, fewer resources 
than some other regions in the country.
    So it is incumbent upon us to be resourceful and creative 
in the application of those resources, and I think that is 
going to be critical to how we do it. It is not us looking to 
Federal Government saying what can you do, but I think more to 
the point how we can create an effective partnership between 
Federal Government, State government, industry and academia to 
make these things realizable.
    I thank you for taking a leadership role in doing that.
    [The prepared statement of Mr. Rutkowski follows:]

 Prepared Statement of Rick Rutkowski, President and CEO, Microvision 
                                  Inc.
    Thank you very much Senator Cantwell and Senator Wyden. It is my 
pleasure to be here today to discuss Microvision, our subsidiary, 
Lumera, and their role in advanced electro-optic component and 
materials technologies. Most importantly it is a great honor to be here 
to support Senator Cantwell in her efforts to develop public policy 
that will help create and maintain a more robust advanced materials 
industrial base in the Pacific Northwest by providing stimulus for 
broadly enabling technologies such as these. I would like to begin by 
thanking Senator Cantwell for her efforts in initiating a public 
dialogue about this critical issue.
    As we all well know, the State of Washington and the Puget Sound 
region are facing difficult and uncertain economic times. The decisions 
and actions taken by Washington state political and business leaders 
today will determine whether we return to a more vibrant, diverse, and 
prosperous period of economic growth.
    Washington State is fortunate and proud to have a leader like 
Senator Cantwell whose experience and expertise in technology, 
business, and public policy allows her bring a different level of focus 
to these critical future economic issues. Senator, bringing us together 
today to discuss these important industrial base issues is a clear 
example of that leadership and is greatly appreciated.
    We at Microvision and Lumera are committed to doing our part to 
help enable your vision of a robust Northwest-based advanced materials 
industry that will serve as a key next-generation employment and 
revenue driver in the State of Washington and provide a consistent, 
quality vendor base and workforce to support existing regional 
industries such as commercial aircraft production and others
    Let me now move on to provide you with a brief overview of our 
companies and how I believe we fit into this vision.
    Microvision has become a leader in the emerging photonics industry 
by developing and patenting high-value, high-precision micro-optical 
scanning components and products for a wide range of applications 
across a broad range of aerospace, defense, medical, industrial, 
professional, and consumer applications.
    Lumera, a Microvision subisidiary, is focused on developing a new 
and highly superior class of electro-optic materials that will enable 
optical component devices to deliver unprecedented levels of 
performance while achieving significant gains in reduced system 
complexity and overall system cost.
    When I joined Microvision in 1994, part of what guided me was a 
notion that I had developed over several years that the next industrial 
tidal wave to emerge in the technology world would be in the area of 
electro-optics and photonics.
    The microelectronics revolution, simply put, has been about making 
devices ``smaller, faster and cheaper'' at an alarmingly fast rate, and 
the economic benefit to the consumer has been absolutely extraordinary. 
When such compelling benefits exist for consumers, they are motivated 
to buy these products and the industry thrives and grows at an equally 
dramatic rate. One could make the assertion that most cases of profound 
structural change or growth in global economies can ultimately be 
traced back to disruptive technologies--be it the internal combustion 
engine, electrical transformers or vacuum tubes or the transistor.
    At Microvision, I saw the potential to impact information products 
of all kinds in a powerful way through such a disruptive innovation. We 
have developed optical scanning microchips based on micromachining 
techniques that can perform the same display and imaging functions that 
today require substantially larger and more complex--and therefore more 
expensive--solid-state devices. As a result, we can achieve dramatic 
improvements in cost and performance to enable a broad range of 
products that can be applied in markets ranging from healthcare, to 
military, to consumer electronics, and commercial aviation--all based 
on the same core technology.
    That is really what we mean when we refer to a platform 
technology--one that can have a broad impact in the marketplace. When 
that broad impact also delivers more than just a marginal cost 
performance impact in these spaces, it will be disruptive to the status 
quo and the combination of the two can make for profound economic 
impact, as it has done in the microelectronics industry.
    I had done my first work with Electro-optic polymers in 1988 and 
1989 and that led me to see some distinct parallels between what was 
happening in Electro-optics and what had occurred at the birth of the 
microelectronics revolution. The technological power--and the economic 
power--of microlectronics has been fundamentally disruptive in nature. 
When we moved from vacuum tubes to transistors, and then from solid 
state electronics (based on discrete components) to integrated 
circuits, we saw powerful improvements in cost and performance that 
enabled improvements in many existing products as well as important new 
products like the calculator and ultimately the personal computer. This 
set off a chain reaction of continuing and rapid improvements based on 
having unlocked the enormous potential of silicon as a platform 
material capable of supporting the ever denser packing of millions of 
transistors into smaller and less expensive pieces of material, and the 
equally powerful potential of innovation in process and device design 
in this platform.
    The reason that the economic impact of microelectronics has been so 
broad is because of the huge scope of applications and markets that 
have emerged to take advantage of integrated circuit technology. The 
entire electronics world, from refrigerators, to cars, to consumer 
products, and, of course, computers and mobile phones, has become a 
customer for the billions of chips that emerge each year from foundries 
the world over.
    Today in electro-optics, while people have talked for many years 
about integrated optics, no one has yet achieved this kind of 
disruptive step, and, as a consequence, optical and photonic systems 
today resemble the electronics systems of many years ago in their size, 
cost and general utility. So the revolution has yet to occur, but there 
are many signs that it is near. At Lumera, while our first targets are 
dramatic improvements in the cost, performance, and size of discrete 
components used in a variety of systems, we are pursuing the goal of 
developing a platform material for integrated optics to set off a 
similar kind of technological and economic ``chain reaction'', and we 
believe that electro-optic and microphotonic systems will have the same 
kind of profoundly disruptive impact in enabling new products and 
improving existing ones.
    Over the past several years Microvision has been fortunate to 
receive widespread support from our Washington State Congressional 
delegation and from Defense Department program offices, which have 
recognized the potentially significant impact of our technology in a 
variety of Military systems. More recently, we have been awarded 
contracts by companies such as Canon, Inc., BMW, and Ethicon 
Endosurgery and have collaborated on product development with Stryker, 
Siemens, and other industry leaders from around the globe.
    Several things about this are gratifying. These companies not only 
possess very recognizable brands, but they are without exception, 
companies that are recognized for technological excellence and for 
leadership in innovation. We also like to make the point that each of 
these companies is pursuing distinct applications of a common core 
``platform'' technology that emerged in large measure as a result of 
our work on these Defense projects, and that in each case the market 
potential for the underlying products is significant, and in many cases 
the products themselves potentially transformative. As a result, the 
potential economic impact for our company and for the region is also 
significant. We are also delighted to measure an accelerating rate of 
progress in our technology. One thing that defines a ``disruptive'' 
technology is the rate at which the technology can progress and provide 
greater and greater cost and performance benefits, and we have had 
great success in the past year in particular in collapsing the 
timelines between innovation milestones.
    Finally, I would like to briefly touch on the importance of our 
partnerships and experience with local academic institutions, and I 
would also like to commend Senator Cantwell for introducing legislation 
to establish a federally financed aviation research center at the 
University of Washington. We have experience working in similar 
partnerships with the University of Washington, and we strongly believe 
that cooperation has generated great benefit to our company, the 
University, and the region and that still greater benefits lie ahead.
    The University is home to the Washington Technology Center's micro-
fabrication facility which has received important support from 
commercial partners like Microvision and from Washington State. Last 
May, the University of Washington was designated as one of six new 
science and technology centers in the nation, by the National Science 
Foundation. Dr. Larry Dalton was appointed as the Director of the new 
Center for Materials and Devices for Information Technology Research.
    This designation has placed the university at the leading edge of 
research to develop groundbreaking technology in the area of photonics 
and will establish Washington as the epicenter of this groundbreaking 
work. The NSF is providing $16 million in funding for at least the next 
five years, without this level of federal support, we would not be able 
to realize the many benefits of this powerfully disruptive technology 
as quickly--if at all.
    Federal investment is essential to the success of research and 
innovation. The Federal Government has the ability to apply the 
``patient capital'' necessary to enable these strategically important 
technologies in ways that too often are not fully enabled by other 
sources of private sector investment.
    Again, I want to thank Senator Cantwell and Senator Wyden for the 
opportunity to participate in today's dialogue. Establishing a strong 
and vibrant base for advanced materials and other technologies in the 
Pacific Northwest is critical not only for supporting the existing 
anchors of our economy such as commercial aircraft production, but also 
for the emergence of a more broadly based advanced materials industry 
that can have explosive economic impacts in its own right. I look 
forward to working with and supporting the Senator on this initiative 
going forward.
    Again, thank you for the opportunity to join you here today.

    Senator Cantwell. Thank you. I want to thank all the 
panelists for your testimony this morning. You know, we have 
talked in this panel about fueling the Northwest economy 
through innovation, but it is clear that this focus on 
composites as it relates to aviation is really about domestic 
competition in aviation, or I guess my question is: Where do we 
stand as it relates to the major competitor in the aviation 
industry as it relates to composite materials?
    Is their investment an advantage, where are they, what do 
we need to do to maintain our U.S. competitiveness in aerospace 
manufacturing?
    Mr. Statkus. Senator, I think in general in composites, we 
probably are the best in the world in the U.S. within the State 
of Washington, I would say we have some very good technical 
industries. The gentleman right here is an example. I think 
that we look to many of the petroleum companies to develop the 
kind of resin matrices that we would use for the composites 
that we need.
    Around the world, there are fiber developers, carbon fiber-
based elements. I think any number of--well, in the three major 
composite areas, epoxies, what we call VMIs, toughened carbon-
based materials, and also in the very tough arena of, like, 
thermoplastics, we can look to the United States petroleum 
industries for most of those developments.
    I think in general, the newer the material, the higher the 
price. If you go to fabrics that the resins are implanted on, 
those fabrics have been around for years. There are not too 
many new fabrics today that I could point to. There are 
different forms of the fabrics. But the resin systems, 
themselves, those are being developed and have been developed.
    I think the institutes that would use the newer systems 
today should focus, in order to be very competitive, should 
focus on the--not just the system, itself, but the way the 
system is used, how it is applied, the form that it comes in, 
how it is cured. Many of the systems today require ovens, 
autoclaves, very precise cycles over long periods of time.
    The cycles that we need for future products and competitive 
material applications likely will require short cycles, no 
cycles, room temperature cures and things like that.
    So we should be developing materials, material forms, labs, 
structural activities, folks with the right kind of background 
that would allow us to research in those areas.
    Senator Cantwell. Dr. Denton, did you want to comment on 
that?
    Dr. Denton. I would just second what Mr. Statkus said, and 
I think that we are extremely competitive vis-a-vis our 
European colleagues in this arena of research in composites. So 
if we move forward with the FAA Center, I think we would be 
able to move ahead.
    Senator Cantwell. And then you both are saying that it is 
more about where the materials are found and how affordable 
they are as to how often--how long they have been on the 
market?
    Mr. Statkus. That is certainly a large part of it. We are 
not going to be able to produce products that are competitive 
that would specifically be of large value to the Northwest 
unless we find those kinds of materials that have huge, large 
cost-to-weight advantages and are more on the order of in a raw 
material form $25 to $30 a pound.
    Some of those materials which would provide the maximum 
strength-to-weight ratios are generally on the order of $100 to 
$200 a pound today in a raw form. That is before process. Then 
for any pound of that material, you could add as many as 20 to 
40 hours of preparation.
    So, as you can see, if you have a very high strength 
material that has large economic value to an industry like 
aviation or other structural purposes, then you would like to 
try to reduce not only the raw material costs, but also the 
applications and production costs in order to be truly 
competitive.
    By the way, expectations should be that material costs 
continue to reduce over time just as Mr. Janicki had said 
earlier.
    Senator Cantwell. Mr. Janicki, you have won some of these 
contracts from a variety of sources and have a growing business 
in Skagit County and this area. What do you see as some of 
those challenges of maintaining our competitiveness?
    Mr. Janicki. First of all, on his comment about--I am sorry 
to change the subject just slightly, but as we are looking at 
the Boeing Company particularly, there is a huge shift from 
metal technology to composite technology. And as he states, 
currently the composite technology is very, very expensive on 
commercial airplanes. Okay. The rest of us are all using 
composite technology and getting all the benefits, but we do 
not have to deal with making a commercial airplane that puts 
500 passengers in the sky and all the Federal regulations that 
go with that.
    So there are materials out there that are really cool, do 
all the neat stuff, and there are processes to build product 
with this technology. The problem is that, maybe this is a 
place where the university could come in, is getting those new 
materials and new processes qualified for a commercial airplane 
is such an unfathomable problem that people who manufacture the 
resins, the processes, will not even try. Okay. It is just too 
big a hurdle to even make the attempt to try to qualify new 
materials.
    So we are stuck with these old materials that ran on 
fighter jets or they ran on something else, and they have been 
tested, we know they work, and so the engineering body is just 
limited to using some of those materials.
    So trying to be able to get people to be able to create 
stuff that they would be able to take is a big part of it.
    Senator Cantwell. Well, one of the reasons we think the 
center will be helpful in establishing that.
    Dr. Denton. We would really hope that the FAA Center would 
be able to partner with the smaller companies that would not be 
able to take on these large challenges alone of qualifying 
materials and facilitate that process.
    Senator Cantwell. Senator Wyden?
    Senator Wyden. A question--a couple of questions, and thank 
you, Madam Chair. The gentleman from Boeing, your testimony is 
very helpful, and I was very interested in it. There is an 
article recently in the ``Technology Quarterly'' entitled 
``Desperately Seeking Lightness.'' The argument basically is 
the ball game in the aviation sector is about lightness and 
that that is really where you get the opportunity for 
innovation and a chance for us to get a leg up.
    I am particularly interested in the way these areas 
intersect. Is this not a natural in terms of composites because 
composites ought to be a way to get rid of some weight?
    Mr. Statkus. Absolutely, Senator.
    Senator Wyden. Am I missing something?
    Mr. Statkus. No, no, you are right on point.
    Senator Wyden. How do we promote it?
    Mr. Statkus. First of all, I think the recognition that 
composites add strength-to-weight value to a product would 
suggest that possibly the strength is there because the weight 
is down. And that is exactly true in many material areas.
    I think that to a point made just a minute ago, the 
qualification of that material is not just about its weight 
though. It is about its mechanical properties. It is about its 
manufacturability. It is about the way that you could apply it 
in certain areas. It is about its longevity, its life cycle. It 
is about its ability to act as maybe an insulator in some cases 
depending on whether you use honeycombs or not.
    And so I think what we need to do, particularly with the 
university in areas like this is we need to partner to do the 
kind of research that would tackle some of the aspects of the 
values of this kind of technology in the industry.
    There are many aspects, corrosion is a huge one, that when 
you put composites, a carbon next to aluminum, for instance, if 
you are not careful, you have created a battery in the midst of 
moisture. So knowing that, what you want to do is rather than 
generate a corrosive atmosphere, maybe figure out how to coat 
the materials to keep from allowing that to happen and have 
better applications.
    I think there is any number of--20 or 30 areas of high 
technical value that if you just think of composites alone, 
that you could partner with the university on and have huge 
value to, not just our industry, but structural industry in 
general.
    Senator Wyden. Yeah, it sure would fit the theme of Senator 
Cantwell's hearing because this is an ideal way to innovate. I 
am looking at a diagram that basically shows that composites, 
you know, would change the rear of an airplane essentially, in 
effect replace some of the aluminum essentially, which is 
essentially the argument you are talking about. So excellent 
testimony.
    Dr. Denton, I am going to ask you a question and get you 
and Mr. Rutkowski into this with respect to academic 
institutions and private industry and particularly roles.
    By the way, before I start, Dr. Denton, thank you for your 
nice words with respect to Title IX and the fight to get more 
women in the sciences. You know, everybody in this country 
thinks Title IX is a sports statute, and we held a hearing 
actually on it with our colleagues on the Republican side of 
the aisle, Senator Allen, and we were just amazed that Title IX 
is not, in its history, is not primarily a sports statute.
    Title IX is primarily a lever, a kind of fulcrum to go out 
and get more women academic opportunities. And we are going to 
use Title IX until we get justice in the hard sciences, and I 
thank you for your nice words for it and I want to commend 
Senator Allen and our colleagues on the other side of the aisle 
with their help on it.
    What I would like to do with you, Dr. Denton and Mr. 
Rutkowski, get your thoughts on this Bayh-Dole issue as well. I 
think you have heard some of my concerns early on. I have just 
been stunned at the frustration of essentially all of the 
stakeholders on this.
    The companies have been frustrated, the universities have 
been frustrated, and people look at the rate of return, I mean, 
just at agencies like the Department of Energy and the National 
Institutes of Health. Billions and billions of dollars are 
spent on these programs, and people cannot find a whole lot 
that ends up getting commercialized. And I do very much want to 
bring all of the stakeholders together in some ways to be 
innovative.
    Maybe we can start with you, Dr. Denton, and bring you into 
this as well, Mr. Rutkowski.
    Dr. Denton. I think it is really timely to review Bayh-
Dole. It has been around for a while now, and we have had a lot 
of opportunity to attempt to apply it in ways that are 
appropriate and that lead to the results that we all hoped it 
would have.
    I think that there are still some ambiguities around Bayh-
Dole, and some of the interpretations of Bayh-Dole are 
different from one organization to another.
    The thing that I observe as the dean of engineering is that 
whether it is because of Bayh-Dole or not, there has been a 
chilling effect on tech transfer and intellectual property in 
the academy. We have a very difficult time partnering with our 
corporate folks and transferring that technology because people 
cannot quite find a way to efficiently and effectively and 
legally move through that process.
    And we see a lot of frustration on the part of our 
corporate partners, and a lot of the faculty are frustrated, so 
the stakeholders feel like they are just kind of frozen out, 
and it is tough to navigate through the system.
    I am not an expert on Bayh-Dole, and I would really love to 
take the opportunity to get some of our best minds on campus to 
a meeting like the one you described where we could sit down 
and try to figure out why is it that we are in some ways 
paralyzed.
    I mean, there are things that are working. Tech transfer is 
happening. But I think--and it is happening and some great 
things are going on like what you heard about this morning on 
the panel and today here, but I think we could do better, and I 
think we really need to follow up.
    Senator Wyden. Mr. Rutkowski?
    Mr. Rutkowski. Not only am I not an expert on Bayh-Dole, I 
am embarrassed that I am probably the only person in this room 
who does not--is not familiar with that particular piece of 
legislation because you have referred to it several times.
    Senator Wyden. Well, put it then more generally just with 
respect to academic institutions and private industries. Set 
aside the statute. Wave your wand and talk about the 
relationship you want.
    Mr. Rutkowski. Well, there are lots of things that are 
highly productive, but I think one of the most interesting 
things is culturally you have two very different worlds coming 
together, and one of the challenges I recall we had early on 
dealing with the whole nature of intellectual property 
transfer, and I think Dr. Overell made reference to a similar 
kind of thing, is that in the university, the motivation, of 
course, is to publish your findings and so on, and, of course, 
in the commercial world, it is often very much counter to that. 
Now we are going to maintain this as proprietary and that is 
going to be a barrier to entry.
    So I think we have had a lot of good success, although, it 
was an interesting dynamic over time, and we have had some 
practice at it. So I think there is just that whole, again, 
being cognizant of some of the different needs and how we 
accomplish this.
    In this case, it was--there was some very simple protocols 
that we put in place just between ourselves and the university 
in terms of delaying publication until we had had an 
opportunity to patent and really ensuring that that is a 
collaboration and that both parties are recognizing the needs 
of the other institution, I think is key to that.
    Similarly, we would get into situations where the question 
was we are trying to cooperate, but are we finding ourselves 
competing, for example, when going out for Federal dollars or 
other kinds of--responding to other kinds of solicitations?
    So I think it is incumbent upon the institutions themselves 
working with industry to, again, find ways to make these kinds 
of things work. We are encountering some of these issues. It is 
sort of an interesting time in the relationship between Lumera 
and the University of Washington because Lumera is accessing 
capital from private equity markets, which are in a state of 
disarray today, and we have got a significant funding 
commitment to the university. The university has just run--won 
a very recent significant award.
    So what is making that work, though, is the willingness to 
come together, sit down at the table and say, ``OK. Where were 
we when we set out and had these intentions and these sort of 
arrangements and where are we now, how have things changed and 
how can we help each other?''
    And I have to say it is working exceedingly well right now, 
and I attribute that in part to the fact that we have had sort 
of an experience at this one time around with Microvision, and 
I am hopeful that it has been an experience for the university 
as well. But they have been about as good a partner as you 
could ask for for an early stage company.
    I suppose it goes without saying, but, one of the 
challenges here is that environments for these early-stage 
companies are very dynamic. Things are very fluid, you are 
trying to be agile, you are trying to be opportunistic. That is 
in very stark contrast, of course, to the more predictable and 
defined environment of a university.
    So it is more of an accomplishment than it may seem to 
really make that dialogue work well. And it has been, I think, 
a very productive exercise for us.
    Senator Wyden. For somebody who has never heard of an 
obscure Federal law, that was a great answer, and I thank you 
for it.
    [Laughter.]
    Senator Wyden. Just one question for you, Mr. Janicki. It 
seems to me there are some potentially exciting intersections 
between nanotechnology and composites as well, composites and 
materials. I mean, all of the discussion about carbon, 
nanotubes and, you know, generally about nanotech, you know, 
spreading into materials. The argument is maybe sort of like 
plastics was in the 20th century.
    What are your thoughts on that and the intersection between 
nanotechnology and the areas on which you have been testifying?
    Mr. Janicki. Well, you know, I am not real knowledgeable 
about the nanotech sector of things. I read about that in my 
mechanical engineering books, but it is an area that I am not 
real familiar with.
    Senator Wyden. OK. We will spare you.
    Senator Cantwell. I saw a couple of nods from----
    Senator Wyden. Are there others that want to get into that?
    Mr. Statkus. Let us see. At Boeing in the technology area 
in the commercial side, we probably spend in excess of a couple 
hundred million dollars a year, and some of that is in nano- 
and nanostructural areas. We foresee, not in the current 
products, but in the reasonably short distant future products 
that we would be employing nanotechnology.
    We look to partner with people who have a whole lot more 
skill in that area than we do. By the way, I truly believe that 
this would be an excellent area for a university to pick up on 
because it is--not only is it new, it actually requires some 
fairly high mathematical skills in order to generate the--well, 
it would need to generate the polymers that we need to look at 
future products.
    So I think a partnership in this area would be wonderful 
with the university.
    Senator Wyden. Thank you.
    Madam Chair?
    Dr. Denton. I would just add that since we have one of the 
oldest centers for nanotechnology in the country, to partner 
that with the new FAA Center would be very synergistic and 
would allow us to explore the intersection that Senator Wyden 
talked about.
    Mr. Rutkowski. What we do at Lumera is an awful lot of 
this. We are engineering materials at the molecular level, so 
we are actually synthesizing materials for what we call 
particular structure function relationships. And I think that 
is certainly going to have a bearing.
    As I mentioned, you are going to find some of these things 
coming together where we will actually have aircraft skins that 
are themselves active as opposed to just passive materials, and 
I think that is an exciting area.
    Senator Cantwell. I do want to mention, too, that Dr. Len 
Peters who is the new Director at the Pacific Northwest 
National Labs is with us as well, if you want to stand up.
    Obviously the Northwest Lab has been involved both in 
nanotechnology, nanosciences and in composite materials and a 
great partnership of everybody that is up here on the stage. So 
we thank you and welcome to the Northwest in your new capacity.
    Mr. Peters. Thank you.
    Senator Cantwell. We are running down on time here, and we 
appreciate the focus that you have given to this, but one 
question that stuck in my mind about the last panel and this 
panel as well is, again: How do we make this all work for the 
Northwest economy and the work force in general?
    We were successful last year in getting $500,000 from the 
Department of Defense budget to start this process with Edmonds 
Community College and the University of Washington in trying to 
develop a curriculum in composite manufacturing.
    But what is our task in the sense of getting the transition 
of this work force who has become very skilled in aviation and 
manufacturing in general, to get them skilled in this area of 
composites, and what are the competitive advantages of having 
that work force skilled at this level?
    Peter, you probably employ the biggest work force now in 
this area, so why do you not start?
    Mr. Janicki. Well, I just want to offer a suggestion, a 
very concrete idea here, is that there are a lot of small 
companies. The company that I am the founder of has 120 
employees, so our resources are limited. A tremendous number of 
the companies that I deal with are even smaller than me. So we 
are limited in how much research we can do. We just do not have 
the funds.
    Now, in the last two years, I have traveled all over the 
United States and seen a lot of companies, and what I am 
realizing is that the Federal Government has already spent the 
money. OK.
    Last week I was at NASA in Huntsville, Alabama, and they 
are working on a cryogenic tank for the space shuttle. That 
great big tank that they strap the shuttle to currently is made 
out of aluminum, and every time they launch the shuttle, they 
throw that tank away. It is a $60 million tank. They are 
considering making that out of composites, and it would be able 
to be reused.
    They have spent millions and millions of dollars doing 
research. I did not know, but that is all public information. 
OK. I happen to know that. My question is: How many of my 
colleagues in the State of Washington know that that is all 
public information?
    At the same time, two weeks ago, I was at Wright-Patterson 
Air Force Base in Dayton, Ohio, they have a building full of 
scientists and chemists and all these engineers. I looked in 
their lobby, and there are all these books that are written on 
all this really cool stuff. I happen to know that now, but I 
did not know that two weeks ago, and I have engineers who are 
trying to figure out how to do something, and all this public 
information is already out there.
    So my suggestion would be: Is there some way to put all of 
this information together? I will call it a library of some 
kind, and maybe you would have to have some kind of a 
membership, maybe you have to be a citizen of the State of 
Oregon or Washington to get to have access to this library, but 
it is just simply summarizing all this data and putting it into 
some kind of a manner where people can look at it.
    So when I tell one of my engineers ``Tell me what the 
density of this particular carbon fiber is and what is its 
yield strength or whatever,'' this guy just goes to this place 
and that information is all there and all of the documentation 
is there.
    We do not have that right now. We do not know where to go. 
And it is a huge effort for little, tiny companies to find this 
information.
    Senator Wyden. Peter, you are being too logical for the 
Federal Government----
    [Laughter.]
    Senator Wyden.--because that is really, and correct me, Dr. 
Denton or others, that is what the Bayh-Dole law and the spirit 
of it was supposed to be all about is trying to get that kind 
of information out.
    I mean, the Federal Government is to a great extent an 
information and technology treasure trove. There is an enormous 
amount of information exactly along the lines of the examples 
you gave with respect to NASA and other agencies, and somehow 
this information just sort of gets buried somewhere rather than 
getting into this kind of pipeline where once taxpayers have 
paid for it, it then gets out and it can be used in various 
kinds of ways for commercialization.
    So I am very anxious to pursue this with you. I know 
Senator Cantwell is as well. We are going to try to make that 
kind of example sort of Exhibit A at some of these discussions 
we want to have with academia, with university researchers and 
with private companies because the Government has got it. It is 
a treasure trove of information and technology expertise, and I 
just think it is outrageous for the public and for companies 
and innovators and risk takers not to have it, and particularly 
not to have it when we are not talking about giving away 
proprietary secrets or national security or something of that 
nature. We are talking about information that ought to be in 
the public domain and for a variety of reasons it is not 
getting out.
    Dr. Denton. I would second what Mr. Janicki said, and I 
would indicate that this would be a role where the higher ed 
organizations in Washington and Oregon could partner around----
    Senator Wyden. Right.
    Dr. Denton.--how to harness this information explosion and 
use some of our very best research in areas like data mining to 
understand how we can effectively find what your folks need 
when they are solving problems.
    Because we have, between Oregon and Washington State, some 
of the best work in the country in computer science and 
information retrieval and analysis. And I think putting all of 
that together would be a very powerful thing to do.
    Senator Cantwell. Mr. Statkus or Dr. Denton, my original 
question about the work force, how the investment that we need 
to make in creating skills----
    Dr. Denton. I think that vis-a-vis the work force, the kind 
of things that the Federal Government has done historically, 
graduate training grants are very powerful, undergraduate 
scholarships, I know there is some movement in that direction 
in Washington, DC to enhance the numbers of scholarships for 
young people either in community colleges or four-year schools 
who are majoring in engineering and the physical sciences.
    One thing I would mention is that there is a collection 
right now between Washington State, Alaska and Hawaii that we 
are calling the Pacific Alliance, and what we are doing there 
is we are leveraging the fact that we have a very large number 
of Native American indigenous folks in those three States, and 
we are building a pipeline from K-12 to undergrad to grad 
school for Native American and indigenous folks in the three 
States and perhaps Oregon, I am not familiar with the 
demographics of Oregon, but pulling Oregon into that might be--
make it a more powerful alliance.
    So those are some things about building capacity on the HR 
side.
    Senator Cantwell. Mr. Statkus?
    Mr. Statkus. Thank you, Senator. I would respond in this 
way: I think a lot of the knowledge that we have in the 
industry and certainly in the Federal Government is there 
because of a number of processes and activities that have taken 
place over time, and it, in many cases I believe, is part of 
the historic record. And I think there are ways to find it. And 
as long as it is not Government secrets or intellectual 
property in the area of industry, it is available.
    To your specific point, I think if opportunities like the 
partnerships between an FAA and a Center of Excellence and a 
university with specific subject matter and specific charters 
takes place, then I think you have already proven to certainly 
a student body and likely the industry, too, that there is 
specific emphasis placed in certain areas, and I think it will 
draw people, those people of intelligence in those areas, to do 
that kind of work maybe at that site, for instance. And in the 
end, the obvious likelihood will be increased value to the 
industry.
    I will say that, back to your question, Senator, at Boeing, 
for instance, we have a site, and if you go to that web site, 
you will find technology. And within those technology sites, 
you will find hundreds of activities that we are working on and 
status and even a person to call.
    And it was not too long ago where the Chief of Technology 
for PACCAR called me, and this lady had gone to our web site, 
and she found, of all things, fluidic wall paper, and I will 
not go into that, but it is interesting in that it has values 
in terms of insulation, sound deadening, things like that, and 
we had a meeting on it.
    So I think industry cooperation, institutional cooperation, 
Government cooperation, that is our future.
    Senator Wyden. Frank, all I am saying is all the more 
reason when a company like yours is doing that then and making 
sure that information gets out, that the Federal Government 
stop dawdling and pick up on the kind of idea that Peter is 
talking about. My point is that people in the private sector 
are doing a lot better job of no longer sitting on the treasure 
trove of information they sort of pick up along the way, they 
are getting it out, but somehow the Federal Government cannot 
figure out how to do it.
    Mr. Statkus. Well, I think the information is not all that 
obvious. I agree with that. It is hard to find.
    Senator Cantwell. Well, and certainly to smaller businesses 
it is definitely harder to find.
    Mr. Statkus. Absolutely. And then the archives are huge 
places.
    Senator Cantwell. Well, we are running out of time. We want 
to adjourn this at 11:00, and that hour is upon us. This has 
been a great field hearing of the Commerce Committee.
    I think the staff that is here, I know you have done 
hearings across the country, but we have had a great turnout 
this morning, and I do not know that--they have had so many 
field hearings around the country at this size, so obviously it 
communicates a great interest in the Northwest by these two 
particular issues.
    I want to give my colleague an opportunity if he wants to 
have any closing comments on either of these two panels or our 
hearing this morning.
    Senator Wyden. I would only say a couple of things: One, I 
want to express our thanks to the minority staff that is here, 
particularly Senator Brownback, Senator Allen, Senator McCain, 
you have been so helpful to us in advancing all of these 
issues. They could not be with us here today, but I want to 
express my thanks to them for their support.
    And to all our witnesses, one of the things that has been 
enormously helpful to me is that I think between Senator Murray 
on the Appropriations Committee and Senator Cantwell on the 
Commerce Committee, the State of Washington is ideally 
positioned to help the Pacific Northwest, both Washington and 
Oregon, on these kinds of issues. As you can see, it is going 
to take this kind of partnership to maximize our clout.
    So all of you have been excellent in terms of giving us 
very specific ideas. With the issues that Peter brought up and 
many of you, we can now take and walk through the system and 
look at ways to get them off the ground.
    So you have been very helpful, and, Senator Cantwell, to 
your leadership in particular, I thank you for the invitation. 
And any time I can wangle an opportunity to work with you, I am 
interested in doing it. I thank you for the chance.
    Senator Cantwell. Well, Senator Wyden, we may have to 
entice the Committee to have a similar hearing in the Portland 
area, but I certainly appreciate your leadership on the 
Science, Technology, and Space Subcommittee, on aviation, 
particularly the work that you are doing on nanotechnology and 
look forward to looking at ideas and ways to combine our 
legislation, and certainly to your leadership on the Committee 
as it is related to investment and how to get the technology 
information out there in a better process.
    We have heard today obviously about the investment in two 
particular areas for the Northwest that I believe have great 
benefit, continuation of biotechnology into the nanosciences 
and how we best capitalize on that by things as simple as 
transportation infrastructure and as complex as new 
relationships with the Northwest and with the Oregon Health 
Institute and the University of Washington and a variety of 
resources at the Federal and State levels.
    We have also heard from the second panel about some very 
basic recommendations that I think could be helpful on the 
qualification for new aviation materials that might be used in 
commercial airplanes that I think would be very helpful, and 
obviously the increased value to the industry that such a 
center could have if it existed here in the Northwest or, for 
that matter, if it existed in the United States, but we 
certainly would make the point that that center of excellence 
would be very well placed here in the Northwest given the type 
of work that has already been done.
    So that has been very helpful information that we will 
carry back to Washington, and we will look forward for both 
panels in strategic ways that we really can come to greater 
terms with this issue about how we marry the work force in the 
Puget Sound area and in the larger Northwest with these 
opportunities.
    We have some great infrastructure in the individuals who 
are here and the past and history that we have had in these 
particular areas, but we also want to capitalize on that in the 
future by giving more Washingtonians and Oregonians 
opportunities in these fields, and we will come back with 
recommendations on that.
    So unless there is any further business before the Senate 
Commerce field hearing, this Committee will be adjourned.
    [Whereupon, the hearing adjourned at 11:05 a.m.]

                                  
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