[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



                 INNOVATION AND INFORMATION TECHNOLOGY:
                THE GOVERNMENT, UNIVERSITY, AND INDUSTRY
                ROLES IN INFORMATION TECHNOLOGY RESEARCH
                         AND COMMERCIALIZATION

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

                             FIELD BRIEFING

                               BEFORE THE

                          COMMITTEE ON SCIENCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 5, 2006

                               __________

                           Serial No. 109-48

                               __________

            Printed for the use of the Committee on Science


     Available via the World Wide Web: http://www.house.gov/science


                                 _____

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27-257 PDF              WASHINGTON : 2006
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                                 ______

                          COMMITTEE ON SCIENCE

             HON. SHERWOOD L. BOEHLERT, New York, Chairman
RALPH M. HALL, Texas                 BART GORDON, Tennessee
LAMAR S. SMITH, Texas                JERRY F. COSTELLO, Illinois
CURT WELDON, Pennsylvania            EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California         LYNN C. WOOLSEY, California
KEN CALVERT, California              DARLENE HOOLEY, Oregon
ROSCOE G. BARTLETT, Maryland         MARK UDALL, Colorado
VERNON J. EHLERS, Michigan           DAVID WU, Oregon
GIL GUTKNECHT, Minnesota             MICHAEL M. HONDA, California
FRANK D. LUCAS, Oklahoma             BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois               LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland         DANIEL LIPINSKI, Illinois
W. TODD AKIN, Missouri               SHEILA JACKSON LEE, Texas
TIMOTHY V. JOHNSON, Illinois         BRAD SHERMAN, California
J. RANDY FORBES, Virginia            BRIAN BAIRD, Washington
JO BONNER, Alabama                   JIM MATHESON, Utah
TOM FEENEY, Florida                  JIM COSTA, California
RANDY NEUGEBAUER, Texas              AL GREEN, Texas
BOB INGLIS, South Carolina           CHARLIE MELANCON, Louisiana
DAVE G. REICHERT, Washington         DENNIS MOORE, Kansas
MICHAEL E. SODREL, Indiana           DORIS MATSUI, California
JOHN J.H. ``JOE'' SCHWARZ, Michigan
MICHAEL T. MCCAUL, Texas
MARIO DIAZ-BALART, Florida





















                            C O N T E N T S

                              May 5, 2006

                                                                   Page
Witness List.....................................................     2

Briefing Charter.................................................     3

                           Opening Statements

Statement by Representative Lamar S. Smith, Presiding Chairman, 
  Committee on Science, U.S. House of Representatives............     9
    Written Statement............................................    10

Statement by Representative Michael T. McCaul, Member, Committee 
  on Science, U.S. House of Representatives......................    11
    Written Statement............................................    13

                               Witnesses:

Dr. Peter A. Freeman, Assistant Director for Computer and 
  Information Science and Engineering Directorate (CISE), 
  National Science Foundation
    Oral Statement...............................................    15
    Written Statement............................................    19
    Biography....................................................    21

Mr. Pike Powers, Partner at Fulbright & Jaworski L.L.P.; Chairman 
  of the Texas Technology Initiative
    Oral Statement...............................................    22
    Written Statement............................................    27
    Biography....................................................    31
    Financial Disclosure.........................................    33

Dr. Juan M. Sanchez, Vice President for Research; Temple 
  Foundation Endowed Professor in Mechanical Engineering, 
  University of Texas at Austin
    Oral Statement...............................................    34
    Written Statement............................................    35
    Biography....................................................    37
    Financial Disclosure.........................................    39

Dr. Randal K. Goodall, Director of External Programs, SEMATECH
    Oral Statement...............................................    39
    Written Statement............................................    43
    Biography....................................................    47
    Financial Disclosure.........................................    48

Dr. Neil Iscoe, Director, Office of Technology Commercialization, 
  University of Texas at Austin
    Oral Statement...............................................    49
    Written Statement............................................    51
    Biography....................................................    52
    Financial Disclosure.........................................    54

Discussion.......................................................    55





















 
INNOVATION AND INFORMATION TECHNOLOGY: THE GOVERNMENT, UNIVERSITY, AND 
INDUSTRY ROLES IN INFORMATION TECHNOLOGY RESEARCH AND COMMERCIALIZATION

                              ----------                              


                          FRIDAY, MAY 5, 2006

                  House of Representatives,
                                      Committee on Science,
                                                        Austin, TX.

    The Committee met, pursuant to call, at 2:00 p.m., in Salon 
B, 4th Level, of the Hilton Hotel at 500 East 4th Street in 
Austin, Texas, Hon. Lamar Smith [Chairman of the Briefing] 
presiding.



                         field briefing charter

                          COMMITTEE ON SCIENCE

                     U.S. HOUSE OF REPRESENTATIVES

                 Innovation and Information Technology:

                The Government, University, and Industry

                Roles in Information Technology Research

                         and Commercialization

                          friday, may 5, 2006
                       2:00 p.m.-4:00 p.m. (cdt)
                         salon b, hilton hotel
                          500 east 4th street
                             austin, texas

1. Purpose

    On Friday, May 5, 2006, the House Science Committee will hold a 
field briefing to examine how information technology research and 
development (R&D) sponsored or performed by government, industry, and 
universities contributes to U.S. competitiveness in the global 
information technology market.

2. Witnesses

Dr. Peter Freeman is the Assistant Director for Computer and 
Information Science and Engineering at the National Science Foundation.

Dr. Randal Goodall is the Director of External Programs at SEMATECH, an 
association of companies supporting pre-competitive semiconductor 
technology development.

Dr. Neil Iscoe is the Director of the Office of Technology 
Commercialization at The University of Texas at Austin.

Mr. Pike Powers is a Partner at Fulbright & Jaworski L.L.P., and 
chairman of the Texas Technology Initiative, which aims to retain and 
attract advanced technology industries, coordinate advanced technology 
activities, and accelerate commercialization from R&D to the 
marketplace.

Dr. Juan Sanchez is the Vice President for Research at The University 
of Texas at Austin.

3. Brief Overview

          Federal support for information technology R&D has 
        been a key to the development of the information technology 
        industry. The 2003 National Academy of Sciences report 
        Innovation in Information Technology lists 19 areas in which 
        federally-sponsored fundamental research underpinned the 
        innovations that eventually became multi-billion dollar 
        information technology industries. Examples include the 
        Internet and the World Wide Web, parallel and relational 
        databases, data mining, and speech recognition.

          Academic computer science research has direct 
        relevance to the information technology industry. University 
        research in computer science is funded by a several federal 
        agencies, but the largest contributor is the National Science 
        Foundation (NSF), which accounted for about 65 percent of the 
        roughly $1.1 billion of federal funding for research performed 
        at universities and colleges in mathematics and computer 
        sciences in fiscal year 2004 (FY04).

          Private companies also conduct information technology 
        R&D. While the majority of corporate R&D is focused on product 
        and process development, companies also conduct fundamental 
        research in their own labs and provide fiscal and in-kind 
        support for university research and education in information 
        technology.

          The success of the information technology R&D 
        enterprise depends on effective partnership among government, 
        industry, and universities. The briefing will focus on 
        highlighting the contributions of each group, especially how 
        all players interact in the support and utilization of 
        university research.

4. Overarching Questions

    The briefing will address the following overarching questions:

          How does the federal investment in information 
        technology R&D promote innovation in information technology and 
        foster the development and commercialization of new 
        applications?

          What role does university research play in innovation 
        in information technology? How do universities balance federal 
        and industry support for research projects? How do companies 
        balance support for research conducted within the company and 
        research performed at universities? What are the barriers to 
        use of university results in commercialization of new 
        information technology products?

          What areas of information technology research and 
        what type of programs should the Federal Government emphasize 
        to maintain U.S. competitiveness? How do these areas complement 
        the focus and investments of industry research programs?

5. Background

    Many of the technologies that enabled electronic commerce to take 
off in the 1990s are based on research initially conducted at 
universities and funded by federal agencies, such as NSF and the 
Defense Advanced Research Projects Agency (DARPA). The 2003 National 
Academy of Sciences report Innovation in Information Technology\1\ 
lists 19 areas in which federally sponsored fundamental research 
underpinned the innovations that eventually became multi-billion dollar 
information technology industries. Examples relating to e-commerce 
include web browsers, search engines, cryptography methods that allow 
secure credit card transactions, databases to manage information and 
transactions, and the protocols and hardware underlying the Internet 
itself. Often, the unanticipated results of such research are as 
important as the anticipated results. For example, the early research 
that led to e-mail and instant messaging technologies was originally 
done in the 1960s as part of a project examining how to share expensive 
computing resources among multiple simultaneous and interacting users.
---------------------------------------------------------------------------
    \1\ Computer Science and Telecommunications Board, National 
Academies, Innovation in Information Technology, National Academy Press 
(2003), pages 6-7.
---------------------------------------------------------------------------
    These innovations have helped create an information technology 
sector that is credited for nearly 30 percent of real growth in the 
U.S. gross domestic product from 1994 to 2000 and that accounted for 29 
percent of all U.S. exports in 2005.\2\ In 2005, Texas companies 
exported $31 billion in computers and electronic products; this 
industry has been Texas's largest source of exports since at least 
1997.\3\ The military also depends heavily on the information 
technology sector's products to meet its critical information 
technology needs.
---------------------------------------------------------------------------
    \2\ Data from the Information Technology Industry Council.
    \3\ From the Business and Industry Data Center, Texas Department of 
Economic Development. Available on line at http://www.bidc.state.tx.us/
overview/2-2te.htm.
---------------------------------------------------------------------------
    Since the pace of change in information technology products is so 
rapid, companies' main competitive advantage often comes from being 
first to market with a particular product or feature. If the U.S. 
research community isn't producing the ideas, or if the ideas are 
classified, it is less likely that U.S. companies will be the first to 
benefit from the research results.
    Academic research also contributes to the training of the 
information technology workforce. Research grants support graduate 
students, and undergraduate and graduate computer science and 
engineering programs at universities produce the software developers 
and testers, hardware designers, and other personnel that power the 
computing and communications industries and the industries that depend 
on information technologies. (For example, automotive and manufacturing 
companies rely on modeling and simulation for product development and 
production management, and the financial services sectors utilize 
information technology for modeling markets and securing financial 
transactions.)
Federal Agencies That Support Academic Information Technology Research
    University research in computer science is funded by several 
federal agencies, including the Department of Defense, the National 
Institutes of Health, the National Aeronautics and Space 
Administration, and the Department of Energy, but the largest 
contributor is NSF, which accounted for about 65 percent of the roughly 
$1.1 billion of federal funding for research performed at universities 
and colleges in mathematics and computer sciences in FY04.\4\
---------------------------------------------------------------------------
    \4\ Data on support for university research is from Academic 
Research and Development Expenditures: Fiscal Year 2003 (NSF 05-320), 
National Science Foundation, Division of Science Resources Statistics, 
(2005). Available on line at http://www.nsf.gov/statistics/nsf05320/.
---------------------------------------------------------------------------
    Coordination among the agencies primarily occurs through working 
groups organized under the multi-agency Networking and Information 
Technology Research and Development (NITRD) Program, which operates 
under the auspices of the White House Office of Science and Technology 
Policy. The total estimated federal spending on networking and 
information technology R&D in FY06 is $2.9 billion; this includes 
funding for government laboratories and industry, as well as university 
research. The breakdown by agency and proposed FY07 spending is 
outlined in Table 1.




    Areas of research supported by these agencies include 
supercomputing, cyber security, networking, software design and 
productivity, human-computer interaction, and workforce development 
issues. In general, each agency focuses on information technology 
research in areas relevant to its mission; for example, the Department 
of Health and Human Services and the National Institute of Standards 
and Technology are working on technologies and standards for 
information technology applications in health care, while the National 
Oceanic and Atmospheric Administration develops and implements improved 
weather modeling techniques.
            National Science Foundation
    At NSF, projects are selected for funding through a competitive, 
peer review process, in which NSF brings together panels of experts in 
a given field to review proposals anonymously. Researchers can send 
project proposals to NSF either in response to agency-issued requests 
for proposals in specific areas or as unsolicited proposals.
    Computer science research at NSF is conducted almost entirely in 
the Computer and Information Sciences and Engineering Directorate 
(CISE). Relevant CISE activities include support for investigator-
initiated research in all areas of computer and information science and 
engineering and support for the education and training of the next 
generation of computer scientists and engineers.
    Research supported by CISE is designed to promote advances in new 
software, hardware, systems, and algorithms. Specific areas of research 
include work relevant to homeland security, such as cyber security, 
machine translation, artificial intelligence, computer vision, 
robotics, and techniques for information retrieval, analysis and 
display (``connecting the dots''); research on new supercomputing 
hardware and software architectures; projects to support the systematic 
re-design of current network systems, such as the Internet, to make 
them more secure and stable and able to handle more traffic; and 
explorations of totally new approaches to computing, such as quantum 
and bio-computing.
    At the University of Texas at Austin, NSF funds projects in a wide 
variety of areas, including research on improving security and 
robustness by building distributed services that tolerate buggy, 
selfish, or malicious elements on the network; modeling of wireless 
networks to allow the design, development, and testing of the next 
generation of wireless network protocols; and new techniques for mining 
large data sets and delivering results in a timely manner. NSF also 
helps support the Texas Advanced Computing Facility, a computing 
facility that provides information technology resources to researchers 
and students, including supercomputing systems, advanced scientific 
visualization, and massive data storage/archival systems.
    Another NSF-supported program provides research experiences for 
undergraduates, including a program in which students from all over 
Texas come to the University of Texas at Austin for 10 weeks in the 
summer to perform research in communications applications, including 
networking, wireless, security, and signal processing. Particular 
effort is made to ensure participation by minorities and students from 
disadvantaged communities.
    At the University of North Texas, researchers are developing a 
geographically distributed, secure test bed to analyze vulnerabilities 
in Voice over Internet Protocol (VoIP)--an increasingly popular 
technology that turns audio signals into digital data that can be 
transmitted over the Internet. The project will investigate voice spam 
prevention (VoIP phone systems can be spammed like e-mail), attacks on 
networks and Internet resources that render them unavailable (denial of 
service), quality of service, and 911 service dependability.
Non-Federal Support for University Research and Development in 
        Information Technology
    The Federal Government is the largest source of funds for 
university information technology R&D. In FY03 in all fields, 
universities spent $40 billion on research and development, and $25 
billion of that was provided by the Federal Government. The remainder 
came from institutional funds ($8 billion), State and local government 
($3 billion), industry ($2 billion), and a variety of other sources ($2 
billion). In FY03 in computer sciences, the overall non-federal support 
was $279 million, more than double the FY96 level.
    Non-federal support for university programs often supports programs 
that supplements or expand the goals of federally funded research. An 
example in research is the Microelectronics Research Center at the 
University of Texas at Austin, which contains a mix of complementary 
programs, including a nanotechnology facility funded by NSF and an 
Advanced Materials Research Center supported by SEMATECH and the Texas 
Enterprise Fund (State funds). An example in education is the recently 
announced partnership between SEMATECH and several Texas institutions 
of higher education, including Austin Community College and the 
University of Texas at Austin. This workforce program will include 
development of new nanoelectronics curriculum materials and internship 
experiences for 160 community college, undergraduate, and graduate 
students.
Technology Transfer and Information Technology
    The results of information technology research conducted at 
universities find their way into commercial products via a variety of 
paths. Most formally, universities can transfer technology by 
protecting (via patents and copyrights) specific results of research 
conducted on their campuses and then licensing the new inventions to 
industry for commercial development. Universities also seed innovation 
in the information technology industry by attracting and cultivating 
entrepreneurial faculty, who form or support the formation of spin-off 
companies. In both of these mechanisms, the efficiency and ultimate 
success of technology transfer from the university depends not only on 
the federal support for research on campus, but also on federal 
intellectual property laws and policies and on the willingness of the 
venture capital community to fund technology commercialization.
    Finally, a very significant, although difficult to measure, impact 
of university research on commercialization comes from the education 
mission of academic institutions. Given the rapidly changing nature of 
information technology, the most efficient method of technology 
transfer may simply be industry's hiring of students who have worked on 
research projects at universities; the skills of the next generation 
workforce informs and enables the development of the next generation 
technology.
Industry Research and Development in Information Technology
    In 2001 in the U.S., $60 billion was spent on industrial research 
and development for computer and electronic products and software by 
companies, the Federal Government and others.\5\ $4.5 billion of that 
sum was spent in Texas. While the majority of corporate R&D is focused 
on product and process development, companies also support some longer-
term fundamental research (of the $60 billion, $1 billion was for basic 
research).
---------------------------------------------------------------------------
    \5\ Data in this paragraph is from Research and Development in 
Industry: 2001 (NSF 05-305), National Science Foundation, Division of 
Science Resources Statistics (2005). Available on line at http://
www.nsf.gov/statistics/nsf05305/.
---------------------------------------------------------------------------
    The fundamental, widely-disseminated research conducted at 
universities and often supported by the Federal Government complements 
the focused development projects undertaken in industry. However, the 
relationship between these two types of activities is often not linear. 
In the National Academy of Sciences report,\6\ the R&D for the 19 areas 
in which federally-sponsored fundamental research underpinned the 
innovations that eventually became multi-billion dollar information 
technology industries usually involved a complex history of interwoven 
university and industry efforts. In some cases, the original idea came 
from industry, but was not commercialized until federally-supported 
research at universities advanced the technology. In other cases, 
start-up companies spun off from universities were critical players, by 
providing that new technologies could be introduced into established 
markets or by being acquired by larger companies. As the National 
Academy of Sciences report notes, ``strong research institutions are 
recognized as being among the most critical success factors in high-
tech economic development,'' and it cites seven examples where the 
positive impact of thriving research universities can be seen, 
including Boston, Seattle, and Austin.\7\
---------------------------------------------------------------------------
    \6\ Computer Science and Telecommunications Board, National 
Academies, Innovation in Information Technology, National Academy Press 
(2003), pages 11-12.
    \7\ Computer Science and Telecommunications Board, National 
Academies, Innovation in Information Technology, National Academy Press 
(2003), page 20.
---------------------------------------------------------------------------
World Congress on Information Technology
    This briefing is being held concurrently with the 15th World 
Congress on Information Technology (WCIT) in Austin, Texas. WCIT is a 
biennial summit hosted by the World Information Technology and Services 
Alliance in which senior executives, government officials, and 
futurists from over 80 countries meet to discuss the future of 
information technology. This year's WCIT includes a Global Impact 
Program, focused on privacy and security, digital access, and health 
care; an Innovation Exchange Program, focused on technology, trade, and 
investment; and an Innovation Exchange Exhibition.

6. Witness Questions

    The witnesses were asked to address the following questions in 
their testimony:
Dr. Peter Freeman:

          How does the National Science Foundation (NSF) 
        investment in information technology research promote 
        innovation in information technology and foster the development 
        and commercialization of new applications?

          How does NSF work with industry to support 
        information technology research? How does NSF facilitate the 
        use of the research it supports in commercialization of new 
        information technology products?

          How do the topics and types of NSF programs in 
        information technology research complement other agencies' 
        programs in this area? How do they complement the focus and 
        investments of industry research programs?

Dr. Randal Goodall:

          How does the federal investment in information 
        technology research promote innovation in information 
        technology and foster the development and commercialization of 
        new applications?

          What role does university research play in innovation 
        in information technology? How do companies balance support for 
        research conducted within the company and research performed at 
        universities? What are the barriers to use of university 
        results in commercialization of new information technology 
        products?

          What areas of information technology research and 
        what type of programs should the Federal Government support to 
        maintain U.S. competitiveness? How do these areas complement 
        the focus and investments of industry research programs?

Dr. Neil Iscoe:

          How does the federal investment in information 
        technology research promote innovation in information 
        technology and foster the development and commercialization of 
        new applications?

          What role does university research play in innovation 
        in information technology? What are the barriers to use of 
        university results in commercialization of new information 
        technology products?

          What areas of information technology research and 
        what type of programs should the Federal Government support to 
        maintain U.S. competitiveness? How do these areas complement 
        the focus and investments of industry research programs?

Mr. Pike Powers:

          How does government investment in information 
        technology research promote innovation in information 
        technology and foster the development and commercialization of 
        new applications?

          What role does university research play in innovation 
        in information technology? How do companies balance support for 
        research conducted within the company and research performed at 
        universities? What are the barriers to use of university 
        results in commercialization of new information technology 
        products?

          What areas of information technology research and 
        what type of programs should government support to maintain 
        U.S. competitiveness? How do these areas complement the focus 
        and investments of industry research programs?

Dr. Juan Sanchez:

          How does the federal investment in information 
        technology research promote innovation in information 
        technology and foster the development and commercialization of 
        new applications?

          What role does university research play in innovation 
        in information technology? How do universities balance federal 
        and industry support for research projects? What are the 
        barriers to use of university results in commercialization of 
        new information technology products?

          What areas of information technology research and 
        what type of programs should the Federal Government support to 
        maintain U.S. competitiveness? How do these areas complement 
        the focus and investments of industry research programs?
    Chairman Smith. This briefing of the Committee on Science 
will come to order. I don't think I necessarily need a gavel. 
This doesn't look like too raucous of a crowd. I am delighted 
to be here with my colleague, Mike McCaul. He and I share an 
interest in the subject at hand. It was Mike McCaul who 
approached me with the idea of our briefing today. It was a 
good idea and it is coming to fruition right now.
    I want to thank everyone that is in the audience who has 
interest in this particular subject. You are going to be 
hearing from witnesses today who are experts in their field and 
who have a unique view of the subject and who have good 
recommendations for us to heed as well.
    The procedure today is I am going to recognize myself for 
an opening statement and then Congressman McCaul for his 
opening statement and introduce the witnesses and then we will 
get to their testimony immediately. We are probably not going 
to be as strict as we usually are in Washington, D.C. as far as 
enforcing the five-minute rule on testimony. We hope that you 
won't go too far over the five minutes. Nor are we going to 
enforce the five-minute rule on ourselves as far as questions 
go. There will be ample time for both testimony and the 
questions as well.
    Also I would like to introduce to my right Elizabeth 
Grossman. Elizabeth came down from Washington for today's 
briefing and has been instrumental in putting it together. She 
is Staff Director of the Subcommittee on the Science Committee 
and has just done excellent work with us here today. Both 
Congressman McCaul and I are Members of the Science Committee 
and we also share another committee together, Homeland 
Security, which is at least indirectly related to the subject 
at hand as well.
    Let me recognize myself for an opening statement. First of 
all, it is nice to be back home in Texas. We meet as the 
successful World Congress on Information Technology comes to a 
close next door at the Convention Center. Our topic today is 
``Innovation and Information Technology: The Government, 
University, and Industry Roles in Information Technology 
Research and Commercialization.''
    What better place to hold such a hearing as this than 
Austin, Texas, one of the most energetic high technology 
centers in our nation.
    As is evident from the distinguished panel of witnesses 
assembled here today, the government at all levels, the 
internationally recognized University of Texas, and a diverse 
and dedicated private sector work together to bring innovations 
to consumers the world over.
    Not only do those innovations better our lives, they are 
also vital to our future economic prosperity. Intellectual 
property industries account for half of our exports and 40 
percent of our increase in productivity in America. If we are 
to maintain a competitive advantage over China, India, and many 
other emerging countries, we must protect intellectual property 
rights and enhance our ability to innovate.
    To do that, we must leverage the unique strengths of each 
of the three sides of this triangle: government, universities, 
and industry. Unconstrained by the need to turn a profit, 
government can take research risks that private sectors cannot. 
For example, no private industry could have ever put a man on 
the moon, but the government did.
    Among many other things, the space program led to wonders 
like satellite television, satellite radio, and the global 
positioning system that now seem commonplace. Somewhere between 
government and private industry, a university can concentrate 
resources and intellectual power more quickly than can 
government, but without the need to make a profit.
    Finally, industry takes these innovations and turns them 
into products that make our lives better. Without that final 
step, the research process can lack meaning for the typical 
person. While few of us really understand how iPods and 
Blackberries work, many of us enjoy their benefits. In fact, 
Congressman McCaul has a Blackberry in his pocket right now.
    When we do, we grasp what all this research does for us. 
These kinds of innovations improve our lives and that is the 
point of the industry contribution to the research process.
    Let me digress for a moment and just touch on another 
subject that is important to the picture, education. If we are 
to continue to lead the world in innovation, we must strengthen 
our math and science education. Just a couple of months ago I 
stood with other members of the Speaker's High Tech Working 
Group to unveil competitiveness legislation.
    This legislation provided for loan forgiveness for math and 
science teachers as well as funding for new science Master's 
Degree programs to enhance America's talent pool. I am hopeful 
that this legislation can be enacted soon. I also want to 
commend the University of Texas for the work that it is doing 
in this area at the Dana Center and with the Texas Essential 
Knowledge and Skills programs.
    Now, turning back to the topic at hand, all three sides of 
the triangle, government, university, and industry are 
critical. Austin is a national model for the vibrant creative 
process that the close collaboration among them generates. I am 
privileged to represent a community that contributes so much to 
high technology research and innovation. And, of course, I look 
forward to the witnesses' testimony today.
    Let me acknowledge at the outset those who have come today 
to provide testimony. They have all put an incredible amount of 
time and effort into their testimony. We do appreciate the 
court reporter to my right who will be taking careful note of 
everything that you say. Congressman McCaul and I will be 
putting this in the record and passing it on not only to the 
Science Committee but to other committees as well when we get 
back to Washington. This information that we hear today and 
suggestions that you all have will be transferred into policy 
and/or legislation.
    Thank you all for being here. It is a happy pleasure to be 
here. I now recognize my colleague Congressman McCaul.
    [The prepared statement of Chairman Smith follows:]
          Prepared Statement of Representative Lamar S. Smith
    It is nice to be back home in the 21st District of Texas to have 
this briefing of the Committee on Science.
    We meet as the successful World Congress on Information Technology 
comes to a close next door at the Convention Center.
    Our topic today is ``Innovation and Information Technology: The 
Government, University, and Industry Roles in Information Technology 
Research and Commercialization.''
    What better place could there be to hold such a briefing than 
Austin, Texas--one of the most energetic high technology centers in our 
nation?
    As is evident from the distinguished panel of witnesses we have 
assembled here today, in Austin, the government at all levels, the 
internationally recognized University of Texas, and a diverse and 
dedicated private sector work together to bring innovations to 
consumers.
    Not only do those innovations better our lives, they are also vital 
to our future economic prosperity.
    Intellectual property industries account for half of our exports 
and 40 percent of our economic growth.
    If we are to maintain a competitive advantage over China, India and 
the many other emerging countries, we must protect intellectual 
property rights and enhance our ability to innovate.
    To do that, we must leverage the unique strengths of each of the 
three sides of this triangle: government, universities, and industry.
    Unconstrained by the need to turn a profit, government can take 
research risks that private industry never could.
    For example, no private industry could have ever put a man on the 
Moon, but the government did.
    Among many other things, the space program led to wonders like 
satellite television, satellite radio, and the global positioning 
system that now seem commonplace.
    Somewhere between government and private industry, a university can 
concentrate resources and intellectual power more quickly than can 
government, but without the need to make a profit.
    For example, one project that I have secured federal funding for is 
the remarkable Petawatt Laser Project at the University of Texas.
    When it is completed, it will be one of the strongest lasers ever 
constructed, and it will have numerous applications.
    Finally, industry takes these innovations and turns them into 
products that make our lives better.
    Without that final step, the research process can lack meaning for 
the typical person.
    While few of us really understand how iPods and Blackberries work, 
many of us enjoy their benefits.
    When we do, we grasp what all this research does for us.
    These kinds of innovations improve our lives and that is the point 
of the industry contribution to the research process.
    Let me digress for a moment and just touch on one other important 
aspect of this picture: education.
    If we are to continue to lead the world in innovation, we must 
strengthen our math and science education.
    Just a couple of months ago, I stood with other members of the 
Speaker's High Tech Working Group to unveil competitiveness 
legislation.
    This legislation provided for loan forgiveness for math and science 
teachers as well as funding for new science Master's degree programs to 
enhance America's talent pool.
    I am hopeful that this legislation can be enacted soon.
    I also want to commend the University of Texas for the work that it 
is doing in this area at the Dana Center and with the Texas Essential 
Knowledge and Skills program.
    Now, turning back to the topic at hand, all three sides of the 
triangle, government, university, and industry are important.
    Austin is a national model for the vibrant creative process that 
the close collaboration among them produces.
    I am privileged to represent a community that contributes so much 
to high technology research and innovation.
    And I look forward to hearing the testimony of our outstanding 
witnesses.

    Mr. McCaul. Thank you, Mr. Chairman. First I want to thank 
you for agreeing to do this. I think it adds a new dimension to 
the IT world of Congress. Also I want to thank you for your 
leadership on this issue. You have been an important part of 
this committee, particularly the intellectual property issues 
as it impacts the IT community. I look forward to working with 
you to enhance what we already have. Again, thank you for your 
leadership.
    I want to thank all the witnesses for being here. There are 
a lot of familiar faces. A lot of times the hearings are very 
formal. This one may be a little more entertaining and perhaps 
fun. We are here to also listen and learn from the experts and 
you are, indeed, the experts. I want to thank Elizabeth for 
coming down and spending time with us in Austin. I hope you 
enjoy your stay in Austin.
    I can't tell you how proud I am of Austin this week as the 
world turns its eyes to my hometown. I know that Austin is 
proud to call itself the technology capital of the World, and 
the home of the University of Texas, which does so much great 
work in research and development. Therefore, it is fitting in 
my view that the IT World Congress showcase what we have here.
    The companies and leaders of innovation that we see 
represented here this week are shaping the future of 
information technology worldwide. It is important to realize 
that this information can have a positive impact on our world's 
developing nations as we use technology to transform our 
undeveloped world and better their lives.
    As many of you know, many of the technologies which enabled 
electronic commerce to become a reality in the 1990s are based 
on research initially conducted at universities like the 
University of Texas. Many of those programs were funded by 
federal agencies, such as the National Science Foundation and 
DARPA. Substantial and sustained U.S. investments in research 
and development during the past 50 years provided breakthroughs 
which transformed American society and helped the U.S. become 
the world's dominant economy.
    When you use a web browser, send an e-mail, or even use the 
Internet, you can thank those thinkers and innovators at 
American universities who have helped develop these 
technologies that made our world actually a little bit smaller.
    Today, the technology developed in university labs 
translates into multi-billion dollar industries with many of 
the biggest and most profitable IT companies calling the Lone 
Star State home. For instance, in 2005 Texas companies exported 
$31 billion in computers and electronic products. And the IT 
industry has been Texas's largest source of exports since 1997.
    So you can see how important it is for us to hear from 
those of you on the front lines of research and development, 
and from those who are innovative and take those innovations 
and deliver them to the marketplace.
    While we are here this week at the World Congress on 
Information Technology working with the world's IT community, 
we must remember that America is still competing in the global 
marketplace. Nations such as China and India which are 
relatively new to the IT markets have recognized the importance 
of innovation to economic growth. They are pouring billions of 
dollars into their scientific and technological infrastructure, 
rapidly building their innovation capacity and dramatically 
increasing their ability to compete with U.S. businesses on the 
world stage.
    As our foreign competitors increase their investment in 
innovation, we too must do the same. That investment does not 
just mean dollars and cents, it also means building and 
maintaining a strong and well educated high tech work force.
    A company in my district told me that they have an 
operational need for 90,000 new engineers during the next ten 
years, but colleges over the entire United States graduate only 
about 60,000 per year. That is a problem. It means they will 
have to export or outsource some of these jobs and import 
skilled laborers from overseas. In other words, we need more 
homegrown talent right here in the United States.
    Improving math and science education for our kids and 
providing incentives for our college students to pursue degrees 
and careers in a technical field are equally important to any 
financial investment America could make in its quest for 
technological innovation.
    In closing, what we will do here today is listen to you, 
the experts, and we are eager to hear your thoughts on how to 
improve research and development and take innovations in the 
laboratories at places like the University of Texas and bring 
them to marketplace for America.
    Thank you, Mr. Chairman. It is a delight to be here today.
    [The prepared statement of Mr. McCaul follows:]
         Prepared Statement of Representative Michael T. McCaul
    Good afternoon, and thank you for being here today for this special 
meeting of the House Science Committee. I can't tell you how proud I am 
of Austin this week as the world turns its eyes to my hometown. And I 
know that Austin is proud to call itself the Technology Capitol of the 
World, and the home of the University of Texas, which does so much 
great work in research and development. Therefore, it is fitting that 
Austin host this year's World Congress on Information Technology. My 
thanks to all who have made this event possible.
    The companies and the leaders of innovation that we see represented 
here this week are shaping the future of information technology 
worldwide. We must also realize that this innovation can have a 
positive impact on our world's developing nations as we use technology 
to transform our developed world and better the lives of those in need.
    As you know, many of the technologies which enabled electronic 
commerce to become a reality in the 1990s are based on research 
initially conducted at universities like the University of Texas. Many 
of those programs were funded by federal agencies, such as the National 
Science Foundation and DARPA. Substantial and sustained U.S. 
investments in research and development during the past 50 years 
provided these breakthroughs which transformed American society and 
helped the U.S. become the world's dominant economy.
    When you use a web browser, send an e-mail or even use the 
Internet, you can thank those thinkers and innovators at American 
universities who have helped develop these great technologies that made 
our world smaller.
    Today, the technology developed in university labs translates into 
multi-billion dollar industries, with many of the biggest and most 
profitable IT companies calling the Lone Star State home.
    For instance, in 2005, Texas companies exported $31 billion in 
computers and electronic products. And the IT industry has been Texas's 
largest source of exports since 1997.
    So you can see how important it is for us to hear from those of you 
on the front lines of research and development, and from those who take 
innovations and deliver them to the marketplace.
    While we are here this week at the World Congress on Information 
Technology working with the world's IT community, we must remember that 
America is still competing in the global marketplace.
    Nations such as China and India which are relatively new to the IT 
markets have recognized the importance of innovation to economic 
growth. They are pouring billions into their scientific and 
technological infrastructure, rapidly building their innovation 
capacity and dramatically increasing their ability to compete with U.S. 
businesses on the world stage.
    As our foreign competitors increase their investment in innovation, 
we too must do the same. That investment does not just mean dollars and 
cents, it also means building and maintaining a strong and well 
educated high tech work force.
    A company in my district told me that they have an operational need 
for 90,000 new engineers during the next ten years, but colleges over 
the entire United States graduate only about 60,000 per year--meaning 
they will have to export many of those jobs and that is unacceptable.
    Improving math and science education for our kids and providing 
incentives for our college students to pursue degrees and careers in a 
technical field are equally important to any financial investment 
America could make in its quest for technological innovation.
    In closing, what we will do here today is listen carefully to you--
the experts in technology and innovation. We are eager to hear your 
thoughts on how to improve research and development, and take 
innovations in the laboratories at places like the University of Texas 
and bring them to marketplace for America and the world to enjoy and 
appreciate.
    We have a great opportunity here today and I know we all plan to 
make the most of it.

    Chairman Smith. We did not collaborate with each other but 
I think we put a lot of similarity between our emphasis on 
education, emphasis on high tech in Austin and India and China 
as well for good reason. We are all looking in the same 
direction.
    Let me introduce our witnesses. Our first witness is Dr. 
Peter Freeman, Assistant Director for Computer and Information 
Science and Engineering at the National Science Foundation. Dr. 
Freeman was previously at Georgia Institute of Technology as a 
professor. Dr. Freeman obtained a Bachelor's degree in physics 
from Rice University, a Master's degree in mathematics from the 
University of Texas, at Austin, and a doctorate in computer 
science from Carnegie Mellon University.
    Dr. Freeman, you also stated you have a daughter and 
granddaughter in the audience.
    Dr. Freeman. Son and granddaughter, yes.
    Chairman Smith. Can we embarrass them and recognize them?
    Dr. Freeman. That is up to them.
    Chairman Smith. Wave to us if you will. It is nice to have 
family in the audience. Good.
    Our next witness is Mr. Pike Powers, a Partner at Fulbright 
& Jaworski. Mr. Powers specializes in technology law and is 
currently the Chairman of the Texas Technology Initiative and a 
member of Texas Governor Rick Perry's Advisory Committee for 
the state's emerging technology industry.
    Mr. Powers received his Bachelor's degree from Lamar 
University.
    Mr. Powers. Good choice of name.
    Chairman Smith. Excuse me?
    Mr. Powers. Good choice of name.
    Chairman Smith. I like the name. A Bachelor's degree from 
Lamar University and a law degree from the University of Texas. 
Lamar has always been my favorite, or next to favorite 
university. Mr. Power, I should note, everyone else here has a 
doctorate. Since you have a J.D., I think we are going to call 
you doctor as well. Is that all right?
    Mr. Powers. I am willing to accept that designation but 
only for the purposes of academic discussion.
    Chairman Smith. Our next witness is Dr. Juan Sanchez, the 
Vice President for Research at the University of Texas at 
Austin and he holds a Temple Foundation professorship in the 
Department of Mechanical Engineering. Dr. Sanchez is the author 
and co-author of over 140 technical publications on a wide 
range of topics on material science and engineering. He 
received his Bachelor's degree in physics from the University 
of Cordoba, Argentina and a Master's and Doctorate degrees in 
material science from the University of California, Los 
Angeles.
    Our next witness is Dr. Randal Goodall, Director of 
External Programs at SEMATECH. Dr. Goodall has published 
numerous papers on R&D collaboration, information technology 
transition, productivity modeling, and advanced materials 
analysis. Dr. Goodall received a Bachelor's degree in physics 
from California Institute of Technology and his doctorate in 
physics from the University of Oregon.
    Dr. Goodall, I hope you don't feel too isolated since you 
are surrounded by four other witnesses all of whom have ties to 
the University of Texas.
    Dr. Goodall. My daughter goes to the University of Texas.
    Chairman Smith. Our final witness is Dr. Neil Iscoe, 
Director of the Office of Technology Commercialization at the 
University of Texas at Austin. He remains an adjunct professor 
at UT in the computer sciences department. Dr. Iscoe has been 
appointed by Governor Perry to serve on the Texas Product 
Development and Small Business Incubator Advisory Board. Dr. 
Iscoe has an engineering degree from the University of 
Wisconsin, a Master's and Doctoral degrees in computer sciences 
from the University of Texas at Austin.
    Once again, welcome to you all. We have your complete 
testimony and without objection it will be made part of the 
record. We look forward to your testimony at this point in time 
and we will start with Dr. Freeman.

   STATEMENT OF DR. PETER A. FREEMAN, ASSISTANT DIRECTOR FOR 
 COMPUTER AND INFORMATION SCIENCE AND ENGINEERING DIRECTORATE 
              (CISE), NATIONAL SCIENCE FOUNDATION

    Dr. Freeman. Thank you, Chairman Smith, Congressman McCaul. 
It is a delight to be here today to speak to you about the 
topics of this hearing and NSF's contributions to those topics 
in particular. I want to congratulate you for holding this 
hearing because I believe that innovation is indeed one of the 
most important things that our country has to face and 
information technology is clearly at the core of innovation.
    I am one of the seven assistant directors of the National 
Science Foundation heading the Directorate for Computer and 
Information Science and Engineering. In my remarks today I will 
draw upon perspectives I have developed over almost 45 years in 
the IT field, in industry, academe, and government.
    As a Texan, whose career started at Rice, as you have 
mentioned, and began to mature here in Austin where I did my 
Master's degree, I consider myself extremely fortunate to have 
been party to the birth of computer science as a field, both 
here and at Carnegie Mellon where I was in the first Ph.D. 
class. Since then it has been my honor to participate in the 
transformation of our society that research advances in IT have 
delivered.
    My position today at NSF, which I consider the penultimate 
of my career, provides me with both a domestic and an 
international view on IT research and education and its impact 
on a global scale. I would just note parenthetically I visited 
India for about two weeks two years ago, China for two weeks 
last year, and I will be back in China in 10 days. I have seen 
up close what is going on there.
    I will focus my remarks today on four important areas: How 
NSF investments in information technology research promote 
innovation in IT and foster the development and 
commercialization of new applications. How we work with 
industry to support IT research. How NSF facilitates the use of 
research it supports in the commercialization of new products. 
And, finally, how the topics and types of NSF programs in IT 
research complement investments made both by our sister 
agencies and by industry research programs.
    The importantance of IT research in contributing to growth 
in the economy is indisputable. Recent economic analysis tells 
us that the remarkable growth in the U.S. economy experienced 
between 1995 and 2000 was spurred by an increase in 
productivity enabled almost completely by factors related to 
IT.
    In fact, productivity has increased by an average of over 
three percent since 1995. This progress is attributed to 
several factors starting with innovation in IT products, some 
of which you have mentioned, and equally important, innovation 
in IT services that allow organizations to engender 
complementary innovations such as changing business practices, 
work flow design, decision making structures, interactions with 
suppliers, and customer relations.
    Increasingly, our studies show that investments in IT when 
accompanied with changes in organization and work practices 
contribute to an enterprise's productivity growth and its 
market value. One need look no further than this city of Austin 
where we are sitting to see how a research university with a 
major IT focus can have an impact on innovation and economic 
growth. The presentence of UT Austin, just UT in those days as 
I recall, was important in bringing the Microelectronics and 
Computer Technology Corporation, MCC, here in the 1980s.
    MCC, which was first created to protect U.S. interests in 
the computer market against foreign consortia, spawned a broad 
range of start-ups, and attracted high-profile corporations 
creating IT products that in turn triggered the economic boom 
that has helped make Austin the dynamic city it is today.
    Our nation's strong economic position in IT today is due 
largely to the fact that starting in the late 1950's we have 
been making critical investments in fundamental research. Let 
us look at a particular case in point, one that I am sure 
everyone in the room is familiar with and has probably used 
today, Google. In less than a decade Google has revolutionized 
the way the world accesses information. It has also become a 
corporate powerhouse.
    In the most recent quarter Google reported revenues of over 
$2 billion for a single quarter, an astounding 79 percent 
increase. Google's co-founders, Larry Page and Sergey Brin, 
while supported by an NSF-funded project on digital libraries 
at Stanford University, developed a new approach to online 
searching that quickly spread to information seekers around the 
globe.
    Google is now widely recognized as the world's largest 
search engine, an easy-to-use free service, that returns 
relevant results in just a fraction of a second. Who would have 
predicted that an investment totaling just thousands of federal 
research dollars would create a multi-billion dollar a year 
market and a service that has revolutionized the management of 
digital information.
    As we look to the future, we must ask ourselves what new 
products and services are out there on the horizon, but are not 
yet identified for the want of investments in basic research in 
IT. It is imperative that we make a robust and sustained 
commitment to the type of investments and education that a 
decade or more ago produced most of the fundamental concepts 
that fuel today's IT innovation.
    The NSF directorate that I head is now the principal source 
of federal funding for university-based research in computer 
science providing 86 percent of total federal support in this 
area to the Nation's universities which is where most of the 
fundamental research takes place.
    Now more than ever before our nation's future is dependent 
upon NSF support for fundamental research in IT. The 
fundamental research that is supported today will be enjoyed by 
and enhance the quality of life for generations to come. To 
accelerate the transition of basic research outcomes into 
technological innovations that seed market competitiveness NSF 
works closely with its partners in academe and industry. Let me 
give you some examples.
    CISE supports nine IT-oriented Industry/University 
Cooperative Research Centers (I/UCRCs in Washington speak), a 
well-established and exceedingly successful program at NSF. I/
UCRCs develop long-term relationships among industry, academe, 
and government. The centers are catalyzed by a small investment 
from NSF with the majority of research support provided by 
industry members of those centers.
    CISE-supported I/UCRCs focus on areas such as 
cybersecurity, a grave concern of this committee, e-design 
manufacturing, search and rescue robotics that contribute to 
homeland security, and wireless technologies. Each of these 
centers contributes to the Nation's IT research base and 
enhances the intellectual capacity of the IT workforce through 
the integration of research and education, a hallmark of NSF 
activities, while simultaneously speeding the movement of 
research outcomes into the marketplace.
    NSF also directly invests in IT research in the small 
business community through our Small Business Innovation 
Research (SBIR) program. To cite one example, again from here 
in Texas, we are supporting a research project conducted by a 
company in Dallas, Potential Research Solutions. They are 
developing new oil and gas reservoir IT management tools to 
optimize hydrocarbon recovery. Powerful analytic tools have 
been developed that provide robust solutions of fluid flow 
problems with complex, heterogeneous rock properties. This is 
an industry first, providing the ability to generate a brand 
new line of desktop hydrocarbon reservoir management tools. In 
particular, the results of this project will provide software 
and services to optimally locate new wells within existing 
hydrocarbon reservoirs.
    Having provided examples of industry-university 
partnerships, let me turn my attention now to a new activity 
that promises exceptional opportunities in the future. The 
directorate that I head, CISE, has recently called upon the 
broad IT research community, including academe and other 
private and public organizations, to form what we call a 
community proxy or representative necessary to guide the 
development of a major new opportunity in IT, a research 
facility concept called the Global Environment for Networking 
Innovations (GENI).
    As currently conceived, the GENI facility will provide IT 
researchers with the tools to explore transformational 
networking and distributed system architecture and services 
that will simultaneously advance science and stimulate 
innovation and economic growth.
    We hope GENI will incase the quality and quantity of 
experimental research outcomes supported by CISE, and to 
accelerate the transition of these outcomes into products and 
services to enhance economic competitiveness and secure the 
Nation's future. In planning for GENI we are working with 
industry, other U.S. agencies, and international groups. GENI 
is the first in what we hope will be a series of major efforts 
to reinforce fundamental research in computer science.
    Having provided some examples of the IT research supported 
by NSF with the significant engagement of the private sector, I 
would like to speak very briefly in closing to our interactions 
with colleagues in other federal agencies.
    NSF's investments in IT research are made in coordination 
with our sister agencies. Coordination is enabled through the 
National Coordination Office for Networking and Information 
Technology Research and Development which reports to the Office 
of Science and Technology Policy and the National Science and 
Technology Council (NSTC).
    NSF plays a leadership role in all of those activities. I 
personally co-chair the over-arching Steering Committee and 
members of my staff co-chair all of the subcommittees. As the 
focal point for coordination and policy development for the 
interagency federal IT research and development program, NITRD 
activities foster collaboration among federal agencies, 
university researchers, industry, and other members of the IT 
community.
    For example, NSF and the Departments of Energy and Defense 
have been making coordinated investments in fundamental 
research essential to the development of high-performance 
computing software and tools.
    In my testimony today, I have tried to provide examples of 
the ways in which NSF works with its partners in the private 
sector and in government to stimulate economic prosperity. This 
committee clearly recognizes the importance of innovation to 
the vitality of our economy. The President's American 
Competitiveness Initiative (ACI) also quite rightly points out 
that our Nation's continued ability to lead in research is 
essential to maintaining a competitive edge in a global 
economy.
    With robust, sustained support for fundamental research in 
both the executive and legislative branches, we have a unique 
opportunity to strengthen our nation's investments in that 
research and education, thereby securing our nation's economic 
future for many years to come.
    I look forward to your questions.
    [The prepared statement of Dr. Freeman follows:]
                 Prepared Statement of Peter A. Freeman
    Good afternoon, Mr. Chairman and Members of the Committee. I am 
delighted to have the opportunity to talk with you today about research 
partnerships in information technology and the contributions of NSF-
supported research to U.S. competitiveness, both now and in the future.
    I am Peter Freeman, Assistant Director of the National Science 
Foundation for Computer and Information Science and Engineering, and I 
head one of the seven directorates of NSF. In my remarks today, I will 
draw upon perspectives I have developed over my forty-five years in the 
IT field--in industry, academe, and government. As a Texan, that career 
started at Rice and began to mature here in Austin where I did my 
Master's degree. I consider myself extremely fortunate to have been 
party to the birth of computer science as a field--both here and at 
Carnegie Mellon University where I was in the first entering Ph.D. 
class. Since then, I have taken great pleasure in participating in the 
transformation of our society that research advances in IT have 
delivered. My position today at NSF provides me with both a domestic 
and an international vista on IT research and education, and its impact 
on a global scale.
    I will focus my remarks today on four important areas: How NSF 
investments in information technology research promote innovation in IT 
and foster the development and commercialization of new applications. 
How NSF works with industry to support IT research. How NSF facilitates 
the use of research it supports in the commercialization of new 
products. And finally, how the topics and types of NSF programs in IT 
research complement investments made both by other federal agencies and 
by industry research programs.
    The importance of IT research in contributing to growth in the 
economy is indisputable. Recent economic analysis tells us that the 
remarkable growth the U.S. economy experienced between 1995 and 2000 
was spurred by an increase in productivity enabled almost completely by 
factors related to IT. In fact, productivity in the U.S. has increased 
by an average of over 3.1 percent a year since 1995. This progress is 
attributed to several factors: innovation in IT products, and, equally 
importantly, innovation in IT services that allow organizations to 
engender complementary innovations, such as changing business 
processes, work flow design, decision-making structures, interactions 
with suppliers, and customer relations. Increasingly, studies show that 
investments in IT AND changes in organization and work practices 
contribute to an enterprise's productivity growth and in the commercial 
sector, its market value.
    One need look no further than the city of Austin to see how a 
research university with a major IT focus can have an impact on 
innovation and economic growth. The presence of the University of Texas 
at Austin was important in bringing the Microelectronics and Computer 
Technology Corporation (MCC) here in the 1980's. The MCC, first created 
to protect US interests in the computer market against foreign 
consortia, spawned a broad range of start-ups and attracted high-
profile corporations creating IT products that triggered the economic 
boom that has helped make Austin the dynamic city it is today.
    Our nation's strong economic position in IT today is due largely to 
the fact that starting in the late 1950's we have been making critical 
investments in fundamental research. Let's look at a case in point--one 
I am sure you are familiar with--Google. In less than a decade, Google 
has revolutionized the way the world accesses information. It has also 
become a corporate powerhouse. On March 31, 2006, Google reported 
revenues of $2.25 billion for the quarter ended March 31, 2006, an 
astounding increase of 79 percent compared to the first quarter of 
2005. Google's co-founders, Larry Page and Sergey Brin, while supported 
by an NSF-funded project on digital libraries at Stanford University, 
developed a new approach to online searching that quickly spread to 
information seekers around the globe. Google is now widely recognized 
as the world's largest search engine--an easy-to-use free service that 
returns relevant results in just a fraction of a second. Who would have 
predicted that an investment totaling just thousands of federal 
research dollars would create a multi-billion dollar a year market and 
a service that has revolutionized the management of digital 
information.
    As we look to the future, we must ask ourselves--what new products 
and services are out there on the horizon, but are not yet identified 
for the want of investments in basic research in IT. It is imperative 
that we make a robust and sustained commitment to the type of 
investments that a decade and more ago produced most of the fundamental 
concepts that fuel today's IT innovations.
    NSF's CISE directorate is now the principal source of federal 
funding for university-based basic research in computer science, 
providing 86 percent of total federal support in this area. Now more 
than ever before, our nation's future is dependent upon NSF's support 
for fundamental research in IT. The fundamental research that is 
supported today will be enjoyed by and enhance the quality of life for 
generations to come.
    To accelerate the transition of basic research outcomes into 
technological innovations that seed market competitiveness, NSF works 
closely with its partners in academe and industry.
    For example, CISE supports nine IT-oriented Industry/University 
Cooperative Research Centers (I/UCRCs), a well-established and 
exceedingly successful program at NSF. I/UCRCs develop long-term 
partnerships among industry, academe, and government. The centers are 
catalyzed by a small investment from NSF, with the majority of research 
support provided by industry center members. CISE-supported I/UCRC's 
focus on areas such as cyber security, a grave concern of this 
committee, e-design manufacturing, search and rescue robotics that 
contribute to homeland security, and wireless technologies. Each of 
these I/UCRC's contributes to the Nation's IT research base and 
enhances the intellectual capacity of the IT workforce through the 
integration of research and education, while simultaneously speeding 
the movement of research outcomes into the marketplace.
    NSF also directly invests in IT research in the small business 
community, through the agency's Small Business Innovation Research 
(SBIR) program. To cite one example right here in Texas, NSF is 
supporting a research project conducted by a company in Dallas--
Potential Research Solutions. They are developing new oil and gas 
reservoir IT management tools to optimize hydrocarbon recovery. 
Powerful analytic tools have been developed that provide robust 
solutions of fluid flow problems with complex, heterogeneous rock 
properties. This is an industry first, providing the ability to 
generate a brand new line of desktop hydrocarbon reservoir management 
tools. In particular, the results of this project will provide software 
and services to optimally locate new wells within existing hydrocarbon 
reservoirs.
    Having provided examples of industry-university partnerships 
already in place, I'd like now to turn my attention to a new activity 
that promises exceptional opportunities in the future.
    CISE has recently called upon the broad IT research community, 
including academe and other private and public organizations, to form a 
community proxy necessary to guide the development of a major new 
opportunity in IT--a research facility concept called the Global 
Environment for Networking Innovations (GENI). As currently conceived, 
the GENI facility will provide IT researchers with the tools to explore 
transformational networking and distributed system architectures and 
services that will simultaneously advance science and stimulate 
innovation and economic growth. We hope GENI will increase the quality 
and quantity of experimental research outcomes supported by CISE, and 
to accelerate the transition of these outcomes into products and 
services to enhance economic competitiveness and secure the Nation's 
future. In planning for GENI, we are working with industry, other U.S. 
agencies, and international groups. GENI is the first in what we hope 
will be a series of major efforts to reinforce fundamental research at 
scale in the computer science field.
    Having provided some examples of the IT research supported by NSF 
with the significant engagement of the private sector, I'd like to 
speak briefly to our interactions with colleagues in other federal 
agencies.
    NSF's investments in IT research are made in coordination with our 
sister agencies. Coordination is enabled through the National 
Coordination Office for Networking and Information Technology Research 
and Development which reports to the Office of Science and Technology 
Policy and the National Science and Technology Council (NSTC). NSF 
plays a leadership role in NITRD activities, and I personally co-chair 
the NSTC's interagency NITRD subcommittee. As the focal point for 
coordination and policy development for the interagency federal IT 
research and development program, NITRD activities foster collaboration 
among federal agencies, university researchers, industry, and other 
members of the IT community. For example, NSF and the Departments of 
Energy and Defense have been making coordinated investments in 
fundamental research essential to the development of high-performance 
computing software and tools. A study currently being conducted by the 
Council on Competitiveness with NSF and DOE support identifies five 
grand challenges in the oil and gas, chemical, and auto industries that 
provide concrete and quantifiable assessments of the economic benefits 
of high-performance computing-driven innovation, describing some of the 
``what if'' questions that high-performance computing can address and 
the new opportunities for economic growth it can create. This is but 
one area of many in which agencies are working together to add value to 
the cumulative federal investment in IT research.
    In my testimony today, I've tried to provide examples of the ways 
in which NSF works with its partners in the private sector and in 
government to stimulate economic prosperity. This committee clearly 
recognizes the importance of innovation to the vitality of our economy. 
The President's American Competitiveness Initiative (ACI) also quite 
rightly points out that our nation's continued ability to lead in 
research is essential to maintaining a competitive edge in a global 
economy. With robust, sustained support for fundamental research in 
both the executive and legislative branches, we have a unique 
opportunity to strengthen our nation's investments in fundamental IT 
research, thereby securing our nation's economic future for many 
decades to come.

                     Biography for Peter A. Freeman
    Peter A. Freeman became Assistant Director for the Computer and 
Information Science and Engineering Directorate (CISE) on May 6, 2002.
    Dr. Freeman was previously at Georgia Institute of Technology as 
professor and founding Dean of the College of Computing since 1990. He 
served in that capacity as the John P. Imlay, Jr. Dean of Computing, 
holding the first endowed Dean's Chair at Georgia Tech. He also served 
as CIO for the campus for three years. In addition, as a general 
officer of the campus, he was heavily involved in planning and 
implementing a wide range of activities for the campus including a 
successful $700M capital campaign and the Yamacraw Economic Development 
Mission. He was in charge of the FutureNet Project, part of the campus 
technology preparations for the 1996 Olympic Village, that resulted in 
a very high-performance and broad campus network. In 1998, he chaired 
the Sam Nunn NationsBank Policy Forum on Information Security which 
lead to the creation of the Georgia Tech Information Security Center, 
one of the first comprehensive centers in the country focused on 
information security.
    During 1989-90 Dr. Freeman was Visiting Distinguished Professor of 
Information Technology at George Mason University in Fairfax, Virginia, 
and from 1987 to 1989 he served as Division Director for Computer and 
Computation Research at the National Science Foundation. He served on 
the faculty of the Department of Information and Computer Science at 
the University of California, Irvine, for almost twenty years before 
coming to Georgia Tech.
    He co-authored The Supply of Information Technology Workers in the 
United States (CRA, 1999) and authored Software Perspectives: The 
System is the Message (Addison Wesley, 1987), Software Systems 
Principles (SRA, 1975), and numerous technical papers. In addition, he 
edited or co-edited four books including, Software Reusability (IEEE 
Computer Society, 1987), and Software Design Techniques, 4th edition 
(IEEE Press, 1983). He was the founding editor of the McGraw-Hill 
Series in Software Engineering and Technology, has served on several 
editorial boards and numerous program committees, and was an active 
consultant to industry, academia, and government.
    Dr. Freeman was a member of the Board of Directors of the Computing 
Research Association (1988-2002), serving as Vice-Chair and Chair of 
the Government Affairs Committee. He was a member of select review 
committees of the IRS and FAA Air Traffic Control modernization 
efforts, and has served on a variety of national and regional 
committees. While at NSF, he helped formulate the High-Performance 
Computing and Communications Initiative of the Federal Government.
    Dr. Freeman is a Fellow of the IEEE (Institute for Electrical and 
Electronics Engineers), AAAS (American Association for the Advancement 
of Science), and the ACM (Association for Computing Machinery). He 
received his Ph.D. in computer science from Carnegie-Mellon University 
in 1970, his M.A. in mathematics and psychology from the University of 
Texas at Austin in 1965, and his B.S. in physics from Rice University 
in 1963. His research and technical expertise has focused on software 
systems and their creation. His earliest work (1961-63) involved 
developing advanced scientific applications in the days before there 
were operating systems and other support software. This led him to 
design and build one of the earliest interactive time-sharing operating 
systems (1964) and ultimately to early work applying artificial 
intelligence to the design process for software (1965-75). This 
culminated with the publication of his first book, Software System 
Principles (SRA, 1975).
    After a short stint teaching overseas for the United Nations, he 
focused his work on software engineering, ultimately being recognized 
for this early work by being elected a Fellow of the IEEE. Along with 
Prof. A.I. Wasserman, he developed one of the first software design 
courses (taken by thousands of industry practitioners) and published a 
highly popular text that served as a first introduction to software 
engineering. His research during this period focused on reusable 
software, especially using formal transformation systems. That work has 
resulted in several startup companies.
    Since 1987 when he was ``loaned'' by the University of California 
to the National Science Foundation, he has focused his attention on 
national policy and local action intended to advance the field of 
computing. In addition to his many activities as Dean at Georgia Tech, 
he headed an NSF-funded national study of the IT worker shortage 
(http://www.cra.org/reports/wits/cra.wits.html), started an active 
group for Deans of IT& Computing, and published several papers relative 
to future directions of the field.

    Chairman Smith. Thank you, Dr. Freeman.

 STATEMENT OF MR. PIKE POWERS, PARTNER AT FULBRIGHT & JAWORSKI 
      L.L.P.; CHAIRMAN OF THE TEXAS TECHNOLOGY INITIATIVE

    Mr. Powers. Thank you, Dr. Smith. It is a genuine pleasure 
to be here today. I have filed, along with the other speakers, 
some written testimony eight pages in length. What I would like 
to do, Mr. Chairman, is hit some Power Points and cover 
everything.
    Suffice it to say that out of all my colleagues on this 
dias, all endorse and subscribe, just as apparently the two of 
you do, to the tenets of Tom Friedman's incisive book, ``The 
World is Flat'' and the report by the National Academies, 
``Rising Above the Gathering Storm,'' and all that went with 
that. Ultimately, of course, the development of President 
Bush's American Competitiveness Initiative so lest there be any 
doubt about where I am.
    I think personally everybody I know in Austin, Texas, that 
works on these kind of issues stand to wholeheartedly and 
enthusiastically endorse President Bush's initiative. We know 
that this committee has a lot to do and has a wide degree of 
responsibility associated with the implementation of that 
package or program.
    We endorse what Norman Augustine did with ``Rising Above 
the Gathering Storm,'' and, as a matter of fact, at least three 
Texans are members of the 20-member commission, Lee Raymond and 
Peter O'Donnell, and a fellow named Bob Gates from Texas A&M. 
Congressman McCaul, I think you know him. Suffice it to say 
that those findings and those recommendations are crucial to 
this nation's future.
    I would echo your opening statements, Chairman Smith, 
dealing with education. In my paper, or document, on page one I 
describe the recent findings of National Geographic in 
conjunction with Roper Public Affairs. I hope everybody in the 
room has access to the paper on 18- to 24-year-olds. Shockingly 
and stuningly 63 percent cannot find Iraq or Saudi Arabia on a 
map of the Middle East; 37 percent could not identify Louisiana 
despite the fact that they had a hurricane recently, and so on 
and so forth. The interviews lasted an average of 27 minutes 
each so they were not short, snappy ones but rather protracted.
    National Geographic said in the executive summary 
accompanying the study, ``Taken together these results suggest 
that young people in the United States are unprepared for a 
increasingly global future.'' I guess if permitted the luxury 
of a quote or comment at this point, we might cite James 
Lovell's famous quote during the Apollo XIII, ``America, we 
have a problem.'' If this topical study is any indication of 
the state and quality of the American education, then yes, we 
have a problem.
    I go on there to say we must deal with education issues. I 
think that is an agreed-upon principle here for today's 
meeting, in addition to the reports that I endorsed previously. 
To make a few remarks where I would like perhaps to put a 
little bit more weight. Recently Chancellor Yudof of the 
University of Texas System, the offices of which are completely 
in your district, Congressman Smith, in downtown Austin, as you 
well know, recently convened a panel of business people who 
have dealt with everything from research issues to tech 
transfer to finding available capital formation for new 
ventures. There were a lot of comments at those meetings, just 
as we have all heard around the country, but on page two of my 
testimony at the top of the page it emphasizes some things that 
I think bear discussion and further investigation by your 
committee in no particular order of relevance.

         LLicense income is very much below what it can 
        be for these universities;

         LIndustry says that working with the 
        university community is difficult, to say the least. 
        (This is not intended to be a set of comments from my 
        colleagues to my left but they deal with me virtually 
        every day and this is what was reflected from a group 
        discussion or two or three.)

                 LUniversities do not do an adequate 
                job of what can be called ``internal 
                prospecting;''

                 LEarly-stage seed, angel, and venture 
                capital funding has essentially disappeared and 
                detached from university-based 
                commercialization;

                 LNo one is addressing the full 
                spectrum of what it takes to commercialize new 
                technology;

                         LUniversities do not have a 
                        good handle on the metrics of 
                        successful technology transfer.

                         LThere is a strong need for 
                        universities to have a rallying point 
                        for better and more lasting connection 
                        with the capital community; and

                         LToo many research 
                        universities have not constructed 
                        viable reward systems for innovative 
                        faculty.

    At the bottom of page two I talk about Karin Rivard, 
Assistant Director and counsel for MIT's Technology Licensing 
Program, she makes four statements that are on page two about 
myths that we all have to come to grips with and keep our eye 
on the ball. These are the myths.

         LRoyalties are already a significant source of 
        revenue for universities;

         LExpect a quick return on technology transfer 
        investment by the universities;

         LCompanies are eager to accept new 
        technologies from universities; and

         LOne should simply broadcast the availability 
        of technology for licensing in order for that to occur.

    She points out after referring to the myths that the real 
primary objective should be successful technology transfer, not 
the larger goals of maximizing income alone.
    On page three I did want to emphasize and make reference to 
a couple of comments in the middle of the page and I will talk 
more about this later with reference to Center for Economic 
Development Innovation and Commercialization for the Big 12 
Athletic Conference that some of my colleagues are here in the 
room today and I will introduce them in a minute.
    We have learned that significantly the federal program 
should strengthen multi-disciplinary, multi-state, multi-
institution development efforts and help bring universities, 
small companies, and large companies to develop new 
technologies needed for successful ventures.
    I specifically refer to and describe four programs that I 
think are mandatory for your support or continued involvement: 
Partners for Innovation, National Science Foundation, Dr. 
Freeman; the Rural Policy Research Institute (RUPRI) funded in 
part by the Department of Agriculture; and Department of 
Commerce and the EDA program. Last, but not least, the Advanced 
Technology Program at the National Institute of Standards and 
Technology, otherwise known as NIST.
    At the bottom of page three I make some comments about the 
ATP program which was started in the '90s by then President 
Clinton and has been controversial given the current political 
lay of the land in Washington, D.C. which the two of you 
reflect. While it has been controversial the solid evidence 
seems to indicate that ATP is a proven tool.
    Under the leadership of Gordon Moore of Intel of the famous 
Moore's Law, developing technologies within prescribed periods 
of a semiconductor world they concluded that it does work, that 
it is a solid program and in some form it should be continued. 
I am here today to support that proposition.
    Moving to page four, I once again endorse the comments that 
Chairman Augustine of ``Rising Above the Gathering Storm.'' You 
posed some questions in your invitation to appear, and we do 
appreciate the invitation, that I have attempted to answer in 
questions one, two, and three. Question number four was one 
that I did want to make a comment or two about.
    What are the barriers to use of university results in 
commercialization of new information technology products. You 
will hear this over and over and over again. I don't think it 
is anything new or it is not a big secret. In the middle of 
that paragraph, our country is short on support of the middle 
stage where the theoretical/conceptual ideas of a university 
are turned into prototypes. Often called the ``Valley of 
Death,'' this is where federal innovation award programs such 
as SBIR and ATP could provide a much-needed bridge across that 
valley. So I commend that to you.
    Turning to page six, my business partner Ron Kessler is 
here in the room along with a colleague, Cliff Drummond who has 
been working with me over the last 18 months to develop and put 
into place a Center for Economic Development Innovation and 
Commercialization.
    You will see on page six the Big 12 is Baylor University at 
Waco; University of Colorado at Boulder; Iowa State at Ames; 
University of Kansas at Lawrence; Kansas State University at 
Manhattan; University of Missouri, Columbia; University of 
Nebraska, Lincoln; University of Oklahoma at Norman; Oklahoma 
State at Stillwater; University of Texas at Austin; Texas A&M 
at College Station, and Texas Tech in Lubbock.
    We have created this center over the last 18 months and 
have worked closely with the chancellors and presidents of 
virtually every one of these universities in some degree of 
detail including my colleagues Dr. Sanchez and Dr. Iscoe. They 
have been very cooperative and have very supportive. We have 
developed a large body of information and received well over 
400 extensive briefings on R&D activities throughout the seven-
state region.
    We have heard university leadership of these 12 institutes, 
among others, that they need help, lots of help in globalizing 
the marketplace. The commercialization business tends to be 
rather parochial. We have seen and they have seen first-rate 
R&D. These 12 universities currently are conducting in excess 
of $3 billion of R&D activities from all funding sources. There 
are jewels within these research establishments that have been 
intensively developed and have demonstrated both technical and 
market merit.
    The purpose of the Big 12 CEDIC is to expand, foster, and 
facilitate and encourage and nurture in the processes of 
commercialization, innovation, entrepreneurship, research 
collaboration, and technology transfer activities from the 
member universities and the private sector wherever and 
whenever appropriate. CEDIC will connect identified programs to 
the private sector. We fully realize and appreciate that 
successfully commercializing new products and technology is not 
as simple as I have made it sound.
    It requires both specialized skills not normally in 
abundance within academia, as well as an understanding of the 
limits of academic research and the rigors of the marketplace. 
It also requires a deep working knowledge of the capital 
community as well as the models of successful companies 
throughout the broad spectrum of commerce.
    We believe that it is an innovative and novel approach and 
we have had conversations with people up and down the research, 
funding, and commercialization landscape who agree with that 
statement. At the end of the day the gap-bridging organizations 
like CEDIC have to know, understand, and work with the very 
different cultures of academics and commerce. These activities 
are very difficult and not for the risk-averse.
    What I want to say to you sort of as I wrap up and close, 
the information there on page seven about what we are trying to 
accomplish is really kind of the underlying set of values that 
we ought to encourage in commerce with the state and federal 
agencies working on these activities within our universities. 
It is about connecting, not just throwing people together. It 
is about thinking regionally. It is about relationships, not 
just ``good ideas.''
    It is about technical competency by the right members of 
expert panels covering all the right areas of science and 
engineering. It is about financial support for competent groups 
like CEDIC to successfully fill the gap between university 
research and commercialization. It is about university 
leadership. By the way, the 12 presidents of the Big 12 have 
been receiving copies of my drafts as we have gone along.
    While this is certainly not anything that they have 
condoned or endorsed in terms of my appearance and what I am 
saying here today, they have all seen every draft of what I 
have been doing so we have been trying to build a degree of 
relationships that focuses on your activities as well. I'll 
come back to that as I close in just a minute.
    The paradigm dramatically changed and a conscious decision 
to turn to industry to come alongside them in areas where 
academia can benefit from outside help. It is about multiple 
strategies to bridge the gap between university lab-to-market 
technology. It is about increasing university IP revenue. It is 
about business as usual no longer being the usual.
    We need new types of organizations to bring to the table 
unique skills which when combined with new approaches by 
university leadership have the best change to produce 
successful commercialization and technology transfer of 
university research. Everyone benefits, inventors, faculty, 
students, universities, business, government, consumers, 
customers, and ultimately the economy.
    We are putting together at some stage, and Congressman 
McCaul has had very early conversations with me about 
assembling a congressional caucus, Chairman Smith, that would 
have 54 Congressmen from seven states, 14 U.S. Senators and 
seven Governors to stand tall for concepts on a bipartisan 
basis that can be agreed upon that are very important in this 
area. We would hope that both of you would consider 
participating in that endeavor.
    Let me close and say thanks to both of you for a job well 
done. I have had the pleasure and privilege of working with 
both of you over a long period of time and I salute you. You do 
a terrific job. I am pleased and proud to have you as my 
Congressman, Lamar. Michael and I have become very close 
friends. We appreciate what the two of you do and know how hard 
it is in Washington. That is the doctrine I have and I just 
want to say thanks for all of us.
    Let me close and wrap up by saying my buddy, friend, 
colleagues down at the table here, Randy Goodall, who has been 
kind of our resident genius in crafting the Texas Technology 
Initiative has got some remarks. I have seen them and heard 
them because I have lived with them for the last three or four 
years. I close by saying that I endorse his testimony.
    I think it is more than just endorsing his testimony. What 
he has put together has been a framework for the future of the 
state of Texas. It has led to the implementation and the 
development of the Enterprise Fund which led to the development 
and implementation of the Emerging Technology Fund. We have 
just begun on a series of other initiatives that will hopefully 
help set the stage in the future of the State of Texas.
    We need your help actively, gentlemen, to participate in 
some of those projects. I just wanted to close by saying I 
think Randy Goodall will offer you a real true platform for the 
future that you can participate in. Thanks for having us here 
today.
    [The prepared statement of Mr. Powers follows:]
                   Prepared Statement of Pike Powers
    Many of the witnesses--myself included--who are testifying in these 
hearings will refer to Tom Friedman's incisive book, ``The World is 
Flat'' or the recent report by the National Academies, ``Rising Above 
the Gathering Storm.'' Along with the previous work by your committee, 
Mr. Chairman, you have seen a great deal of material and have received 
a host of thoughtful recommendations. I ask your indulgence to add to 
that pile just a little bit.
    Perhaps another study should be added to the record. Earlier this 
week, National Geographic, in conjunction with Roper Public Affairs, 
released their 2006 survey of 18-24-year-old young American adults. 
Some of the more salient results are stunning:

          63 percent could not find Iraq or Saudi Arabia on a 
        map of the Middle East;

          37 percent could not identify Louisiana, 48 percent 
        could not find Mississippi, 50 percent failed to pinpoint New 
        York State;

          only 35 percent correctly choose Pakistan from four 
        possible choices as the country hit by a catastrophic 
        earthquake in October 2005;

          only 18 percent know that Mandarin Chinese is the 
        most widely spoken native language in the world;

          when asked which of four countries has a majority of 
        Muslim residents, only 25 percent correctly identified 
        Indonesia.

    By the way, these interviews lasted an average of 27 minutes each! 
As National Geographic said in the executive summary accompanying the 
study, ``Taken together, these results suggest that young people in the 
United States are unprepared for an increasingly global future.''
    If I may be permitted a slight variation of astronaut James 
Lovell's famous quote during the Apollo XIII mission, ``America, we 
have a problem.'' If this topical study is any indication of the state 
and quality of American education, then yes, we have a problem.
    Mr. Chairman, among the questions you asked us to address deals 
with ``what areas of research and what type of programs should 
government support to maintain U.S. competitiveness?'' While the 
Science Committee is focused on innovation and commercialization, there 
is a clear message here for the Congress and the whole country that we 
must do a better job in education--all across the board.
    The Chancellor of the University of Texas System, Mark Yudof, 
recently convened a panel of business and community leaders to address 
how Texas and its research universities can best optimize research and 
technology transfer. Among the comments he heard were a number of 
observations based on the hard-earned experience of business people not 
directly involved in the awesome task of running our nation's 
outstanding research universities. These comments have very likely been 
heard at similar discussions around the country.

          Royalty and license income is very much below what it 
        can be for these universities;

          Industry says that working with the university 
        community is difficult, to say the least;

          Universities do not do an adequate job of what can be 
        called ``internal prospecting;''

          Early-stage seed, angel, and venture capital funding 
        has essentially disappeared and detached from university-based 
        commercialization;

          No one is addressing the full spectrum of what it 
        takes to commercialize new technology;

          Universities do not have a good handle on the metrics 
        of successful technology transfer;

          There is a strong need for universities to have a 
        rallying point for better and more lasting connection with the 
        capital community;

          Too many research universities have not constructed 
        viable reward systems for innovative faculty.

    From my own experience working with and listening to a great many 
presidents and chancellors of research universities, I believe it is 
fair to say they realize the great, inherent value of successfully 
commercializing new technology coming out of their research 
establishments. It's of great value to their mission of teaching and 
education--of great value to our students and to excellence within 
faculties, and--of great value to local, regional, and national 
economies.
    Last summer, Karin Rivard, Assistant Director and counsel for MIT's 
Technology Licensing Office, gave a brilliant and clear-headed 
presentation on the commercialization of university technology.
    Some of the myths that academia, the government, and the public 
will have to come to terms with include:

          Royalties are already a significant source of revenue 
        for universities;

          Expect a quick return on technology transfer 
        investment by the universities;

          Companies are eager to accept new technologies from 
        universities;

          One should simply broadcast the availability of 
        technology for licensing.

    She concludes that the primary objective is successful technology 
transfer, not solely the larger goals of maximizing income.
    I endorse her insights. We must keep our eye on the ball before us. 
What all the principal players are after--whether it's academia, the 
government, business, or the capital investment community--is to find 
those jewels of research that are mature enough and with clear 
advantages--and then to help successfully move them from the lab to the 
marketplace.
    One of the key goals of your committee is to examine new ways in 
which ``government investment in research that promotes innovation and 
fosters the development and commercialization of new applications'' can 
help not only the economic vitality of this country, but that also 
meaningfully contributes to a healthier set of global relationships.
    I know that your committee has looked closely at the advisability 
of the Congress establishing an ARPA-like agency within the Department 
of Energy. I know your committee has taken a keen interest in the 
Nation paying greater attention devoted to enhancing science and math 
education in the U.S. And, I also know that the Committee had a 
significant role in helping develop the President's ``American 
Competitiveness Initiative (the ACI).''
    From my vantage point of an active career in the law, in economic 
development, in supporting government's role in innovation, and in 
community affairs, I urge you and your colleagues in both bodies and on 
both sides of the aisle to commit meaningful investment in the 
principal tenets of the ACI:

          Doubling the federal commitment to the most critical 
        basic research programs in the physical sciences over the next 
        10 years;

          Encouraging the expansion of a favorable environment 
        for additional private-sector investment in innovation;

          Improving the quality of education to provide 
        American children with a strong foundation in math and science;

          Supporting universities that provide world-class 
        education and research opportunities;

          Providing job training that affords more workers and 
        manufacturers the opportunity to improve their skills and 
        better compete in the 21st century;

          Attracting and retaining the best and brightest to 
        enhance entrepreneurship, competitiveness, and job creation in 
        America by supporting comprehensive immigration reform; and

          Fostering a business environment that encourages 
        entrepreneurship and protects intellectual property.

    I would encourage the Committee--working in conjunction with your 
colleagues in appropriations and on other relevant committees--to work 
for and support those federal programs that strengthen multi-
disciplinary, multi-state development efforts and help bring 
universities, small companies, and large companies together to develop 
new technologies needed for future U.S. growth and competitiveness. Let 
me recommend four examples such as the very successful Partners for 
Innovation (PFI) program within the National Science Foundation, the 
various centers within the Rural Policy Research Institute (RUPRI) 
funded in part by the Department of Agriculture, programs at the 
Department of Commerce such as the Economic Development Administration, 
the Advanced Technology Program (ATP) at the National Institute of 
Standards and Technology (NIST).
    I know the Advanced Technology Program has sometimes been 
controversial, but that dates from the politics of the 1990s. In the 
post-9/11 environment, and with the striking emergence of China and 
India into the global economy, we are in a very different world, a 
world in which we need every tool we have. The good news is that ATP is 
a proven tool. Under the leadership of Intel's Gordon Moore, the 
National Academies of Science reviewed the operation of the ATP. Their 
report, The Advanced Technology Program: Assessing Outcomes, concluded 
that the program works. The National Academies found that ATP is 
meeting its legislative goals and is making possible advances in fuel 
cells, breast cancer diagnostics, and nanotechnology that will enhance 
the future welfare and wealth of the American people.
    As discussions go ahead on what we might do to set up new 
institutions to develop new energy technologies, we should not abandon 
programs that are already working. Accordingly, the ATP budget should 
be restored and I would suggest that the program be tasked with doing 
work for other agencies to help accelerated the transfer of university 
and laboratory technologies into the marketplace.
    I was greatly encouraged by your committee's hearing last October 
on the National Academies' report entitled: ``Rising Above the 
Gathering Storm.'' The Chairman of that study, Norm Augustine, 
distinguished retired Chairman and CEO of Lockheed Martin, provided his 
committee's summary of where things now stand--quite apart from all the 
shortcomings that have been identified.
    He said, ``the enigma is that in spite of all these factors, 
America seems to be doing quite well just now. Our nation has the 
highest R&D investment intensity in the world. We have indisputably the 
finest research universities in the world. California alone has more 
venture capital than any nation in the world other than the US. Two 
million jobs were created in America in the last year alone, and 
citizens of other nations continue to invest their savings in America 
at a remarkable rate.'' He concluded, ``Total household net worth (in 
the U.S.) is now approaching $50 trillion.''
    Specific answers to your questions, as posed, are as follows:

1.  How does government investment in information technology research 
promote innovation in IT and foster the development and 
commercialization of new applications?

    Government investment in IT research, either at the early research 
stage (e.g., 10 years out) or at the commercialization stage (two years 
out), is important. However, since companies can rarely fund high-risk, 
visionary research, it is most important that the government provide 
support for that basic research either in universities or in government 
research labs.
    Fund challenge grants that are targeted on high priority needs of 
U.S. economy (e.g., Alternative Energy Initiative and Health Care 
Policy).

2.  What role does university research play in innovation in 
information technology?

    Most industry-based research focuses on near-term (one to five 
years out) technical challenges related to their existing product line 
and/or economic niche. (This is often called ``applied research'' or 
``development''.) In contrast, universities, for the most part, focus 
on IT challenges that are ten or more years away from 
commercialization. (This type of research is often defined as ``basic 
research''.) Because of this freedom to explore ideas in new, uncharted 
territory, university research can identify completely new software or 
hardware IT principles that can open the possibilities for new economic 
sectors based on new IT products.
    Hence, university-based research is exceedingly important as an 
engine for commercialization of products that will impact the economy a 
decade or more in the future. It is this futuristic research, or basic 
research, in the universities that spawns the new companies of 
tomorrow.
    Prioritize research that leads to convergence between IT-, nano- 
and bio-science.

3.  How do companies balance support for research conducted within the 
company and research performed at universities?

    Companies, if they support research at universities, typically 
support applied research that addresses relatively near-term challenges 
that can be uniquely solved by a university due to the university's 
specialized capabilities. In the U.S., both our companies and our 
universities have different niche capabilities. It is the universities 
that are focused on applied research that have the best alignment 
between their capabilities and a company's applied research needs.
    Peer review raw laboratory science for its market viability.
    ``Open Innovation'' between investigators and other public, private 
research labs.
    Create additional tax incentives for private sector R&D investment, 
especially alongside university research.

4.  What are the barriers to use of university results in 
commercialization of new information technology products?

    To me, the biggest barrier is that the U.S. does not have 
sufficient investment funds (either public or private) to take the 
university research results that are typically at the theoretical or 
conceptual stage to a ``proof of concept'' and prototype product stage. 
Private funding from venture capital or existing companies is easy to 
obtain at the prototype stage. However, our country is short on support 
of the middle stage where the theoretical/conceptual ideas of a 
university are turned into prototypes. Often called the ``Valley of 
Death,'' this is where federal innovation award programs like SBIR and 
ATP provide a much needed bridge across the valley. The interesting 
thing is that the awards not only provide capital at a critical phase 
in the development of new technologies, the awards also attract private 
sector investment, what some analysts have called a ``halo'' effect, 
meaning that a company that has a technology that can win a competitive 
award may well be worth private sector investment as well.
    As noted, it is very important that we augment our investments in 
physics and chemistry and other disciplines, but at the same time, we 
need to ensure that the innovation chain remains unbroken, with the 
necessary incentives provided to bring the results of that research 
forward into the market. Other countries have recognized the strengths 
of programs like ATP and SBIR. Many of them are in fact emulating these 
programs or, like Finland and Taiwan, already have similar programs, 
often with proportionally greater funding.
    I recommend that the U.S. create a mechanism to fund early-stage 
``hardening'' of raw university technology.
    As you and your committee well know, Norm Augustine's National 
Academies' committee made four broad recommendations as the basis of a 
``prosperity initiative'' which included 20 specific actions required 
to make those broad recommendations a reality. If the Congress and this 
nation is committed to innovation and to international leadership, each 
of these 20 recommendations must be adopted and supported.
    Ron Kessler, my business partner, and I (Powers & Kessler L.L.C.) 
have developed, with the Big 12 Athletic Conference,

         Baylor University

         University of Colorado

         Iowa State University

         The University of Kansas

         Kansas State University

         University of Missouri-Columbia

         University of Nebraska-Lincoln

         University of Oklahoma

         Oklahoma State University

         University of Texas at Austin

         Texas A&M University

         Texas Tech University

the Center for Economic Development Innovation and Commercialization 
(or CEDIC for short). During the concept-validation phase of our work 
over the past 18 months, we have worked closely with each university 
president and chancellor, with all the provosts and vice presidents for 
research, with the deans of each of the major colleges, and with a very 
large number of key individual faculty investigators. We have received 
well over 400 extensive briefings on R&D activities throughout the 
seven-state region of the conference.
    We have heard university leadership say they need help--lots of 
help. In a globalizing marketplace, the commercialization business 
tends to be rather parochial. We have seen first-rate R&D. These 12 
universities currently are conducting in excess of $3 billion R&D 
activities from all funding sources. There are jewels within these 
research establishments that have been intensively developed and have 
demonstrated both technical and market merit.
    The purpose of the Big XII CEDIC is to expand, foster, and 
facilitate the processes of commercialization, innovation, 
entrepreneurship, research collaboration, and technology transfer 
activities from the member universities to the private sector where 
appropriate. CEDIC will connect identified programs to the private 
sector. CEDIC contemplates generation of additional financial and 
intellectual resources for the universities and the stimulation of the 
larger economic community. CEDIC will serve as the key focal point by 
providing improved access to knowledge capital, leadership capital, and 
financial capital on behalf of the twelve member universities.
    We fully realize and appreciate that successfully commercializing 
new products and technology is not as simple as perhaps I have made it 
sound. It requires both specialized skills not normally in abundance 
within academia, as well as an understanding of the limits of academic 
research and the rigors of the marketplace. It also requires a deep 
working knowledge of the capital community as well as the models of 
successful companies throughout the broad spectrum of commerce.
    CEDIC is an innovative and novel approach.
    At the end of the day, gap-bridging organizations--like CEDIC--have 
to know, understand, and work with the very different cultures of 
academia and commerce. These activities are very difficult, and not for 
the risk-averse.
    While CEDIC faces the same challenges as do the investment and 
capital communities, its spectrum is considerably larger and much more 
complex. Typically, investors specialize in certain industries, types 
of deals, and stages of development. CEDIC's charter is more broadly 
addressed to a much larger gamut of possibilities. CEDIC is 
vigorously--

          about connecting, not just throwing some folks 
        together;

          about thinking regionally;

          about relationships, not just ``good ideas;''

          about technical competency, by the right members of 
        expert panels covering all the right areas of science and 
        engineering;

          about financial support for competent groups like 
        CEDIC to successfully fill the gap between university research 
        and commercialization;

          about university leadership realizing that their 
        paradigms have dramatically changed, and a conscious decision 
        to turn to industry to come alongside them in areas where 
        academia can benefit from outside help;

          about multiple strategies to bridge the gap between 
        university lab-to-market technology;

          about increasing university IP revenue;

          about business-as-usual no longer being the usual. 
        New types of organizations--like CEDIC--bring to the table 
        unique skills which, when combined with new approaches by 
        university leadership, have the best chance to produce 
        successful commercialization and technology transfer of 
        university research. Everyone benefits--inventors, faculty, 
        students, universities, business, government, consumers and 
        customers, and the economy.

    In closing, I would underscore the testimony of Dr. Randy Goodall 
by emphasizing:

        1.  The semiconductor industry has created a collaborative 
        model/platform for research, development, and 
        commercialization, consisting of a well-defined pipeline and 
        roadmap--that is needed/can be used by the whole IT sector 
        (communications, software, elec. systems, semiconductors).

        2.  The need to understand and plan for the convergence of 
        technologies--necessary to be able to afford costly R&D.

        3.  The importance of awareness and adoption/use of the model 
        (pipeline, roadmap, etc.) in emerging, nascent technologies.

        4.  The importance of preserving and capitalizing on our 
        relative strengths/resources as innovation engine, technology 
        developers. Don't let what we have slip away.

                       Biography for Pike Powers

Experience

    A partner since 1978, Pike Powers is Partner-in-Charge of Fulbright 
& Jaworski L.L.P.'s Austin office. Mr. Powers was Executive Assistant 
to Governor Mark White in 1983 and from 1972 to 1979 represented 
Jefferson County in the Texas House of Representatives. He has 
extensive experience in handling complex legal and political issues 
before state courts and federal courts, as well as federal and State 
agencies.

Professional Activities and Memberships

    Mr. Powers has been a member of the Board of Directors of the State 
Bar of Texas and has held various posts as well in the American Bar 
Association and in the Texas and American Bar Foundations. He is a 
former Chairman of the Board of the Austin Chamber of Commerce. Mr. 
Powers is a member of the Maritime Law Association of the United 
States, the Federation of Insurance and Corporate Counsel and the 
National Association of Railroad Trial Counsel.

Professional Honors

    He was named as a ``Texas Super Lawyer'' in general litigation law 
in the November 2003 issue of Texas Monthly.

Educational Background

    Mr. Powers received a B.A. in 1962 from Lamar University and a J.D. 
in 1965 from the University of Texas. He was admitted in 1965 to 
practice law in Texas.



    Chairman Smith. Thank you. We appreciate your testimony.
    Mr. Powers. Thank you, Lamar.

    Chairman Smith. Dr. Goodall, that is high praise. We look 
forward to your testimony.
    Dr. Sanchez.

STATEMENT OF DR. JUAN M. SANCHEZ, VICE PRESIDENT FOR RESEARCH; 
TEMPLE FOUNDATION ENDOWED PROFESSOR IN MECHANICAL ENGINEERING, 
                 UNIVERSITY OF TEXAS AT AUSTIN

    Dr. Sanchez. Chairman Smith, Congressman McCaul, I want to 
thank you for the opportunity to comment on this important 
subject of Innovation and Information Technology.
    I will just begin by stating the obvious. I think there is 
overwhelming evidence that in the 21st century information 
technology will influence the welfare and security, and the 
quality of life of every citizen. It will be the fundamental 
pillar of modern society, modern science and engineering and 
will be a factor in business and every technological 
enterprise. The evidence is compelling. Over the last 10 years 
or so we have seen few areas of science that have had such a 
profound impact on society and the world. None has effected 
these changes at a faster pace.
    From my perspective as a member of a major research 
university I know firsthand that the federal investment in 
information technology was very key to the wave of innovation 
that we have experienced in the last 10 years. This federal 
investment is what sustains a vibrant community of scholars and 
researchers at universities across the Nation.
    This is the same community that created, among other 
things, the first web browser at the University of Illinois, 
and the Google search algorithm at Stanford, both of which in 
Thomas Friedman analysis were key factors in ``flattening'' the 
world. I think the return on the investment, even to a casual 
observer, has been extraordinary.
    At the University of Texas at Austin research and education 
on information technology, Computer Sciences, Computer 
Engineering and Computational Science and Engineering are of 
the highest priority. I would like to mention the Texas 
Advanced Computing Center and our Institute for Computational 
Science Engineering.
    The Texas Advanced Computing Center has established strong 
partnerships with several industry leaders in IT. As a 
consequence of that we have been able to provide significant 
computational resources on campus. That benefits researchers on 
campuses across Texas and across the Nation. We have been very, 
very effective in leveraging federal funding the center 
receives.
    In the process we have engaged the industry in support of 
the Nation's research agenda. At the Institute for 
Computational Engineering and Science we have faculty, 
students, and researchers using this powerful 
cyberinfrastructure to develop the next generation of 
applications. One example of these applications includes 
predictive modeling of cardiovascular bypass surgery, no doubt 
breaking new ground in the emerging field of Simulation Based 
Medicine. Developments like these promise to completely change 
medical practice in the future.
    We are now looking at the emergence of a new field that the 
community has named ``Simulation Based Engineering and 
Science.'' We are now evolving towards the pervasive use of 
simulation and high performance computing to predict with a 
high degree of confidence the outcome of the most complex 
biological, geophysical, engineering, scientific, behavioral, 
and social processes, and I would say political processes.
    I refer to these two examples because I want to briefly 
comment on models of federal investment. First, let me stress 
that the major planned investments by the National Science 
Foundation in cyberinfrastructure will provide the next 
generation of computational platforms needed to keep us 
competitive at the international level in the coming age of 
science and technology.
    These investments are greatly needed for us to gain, or 
some would say regain, unquestionable leadership in information 
technology. This investment in cyberinfrastructure, however, 
must be matched by the equally aggressive support of the 
research that will create the applications running on those 
platforms. I would like to join many of my colleagues in 
recommending the creation of long-term programs in simulation 
based engineering that cut across all directorates of NSF and 
other federal agencies.
    With the Committee's indulgence I would also like to 
recommend the significant increase in federal support for 
programs aimed at the development of the next generation of 
software and hardware technologies that achieve high 
performance from thousands of computational nodes, that are 
easy to program and tolerate failure when running applications 
by the thousands of processes for many days and weeks. DARPA's 
High Productivity Computing Program is a good example of the 
type of program that I am referring to. I know that program 
involves also the National Science Foundation.
    In my opinion conventional planning has three levels, 
cyberinstrastructure, applications, and the next generation of 
software and technology. This will bring significant balance to 
the federal research portfolio. Federal support of the three 
areas is, in my opinion, well aligned with the President's 
American Competitiveness Initiative. The principles behind each 
call for the federal investment to be a long-term high-risk 
research that prioritizes the investment in terms of impact on 
the Nation's economic competitiveness and addresses the current 
models in federal support of engineering and physical sciences.
    With that I will also express my thanks for all you do on 
behalf of the people of Texas and the University of Texas also. 
Thank you very much.
    [The prepared statement of Dr. Sanchez follows:]
                 Prepared Statement of Juan M. Sanchez
    Chairman Smith, Congresswoman Johnson, Congressman McCaul, I thank 
you for the opportunity to comment on the subject of Innovation and 
Information Technology, and more specifically on the Government, 
University and Industry roles in IT research and commercialization.
    There is overwhelming evidence, and a strong consensus among 
leaders in science and technology worldwide, that the broad range of 
disciplines and technologies encompassing information technology will 
be of critical importance to the industrialized world during the 21st 
century. Progress and prosperity in America will be greatly affected by 
the components of information technology, which include computational 
and computer engineering and science, high-performance computing, 
simulation, high-bandwidth networks, high-volume data storage and 
management, computational visualization, and their underlying 
scientific and technological disciplines. Information technology will 
affect virtually every aspect of modern life; it will influence the 
welfare, security, and quality of life of every American as well as 
other citizens of the planet, and it will change the way information is 
distributed, represented, and manipulated. It will be a crucial factor 
in industrial competitiveness, a fundamental pillar of modern science 
and engineering, and a transforming factor in business, education, 
science, communication, medicine and virtually every technological 
enterprise.
    The evidence is compelling. Over the last 10 years or so, few areas 
of science and technology have had such a profound impact in society 
and the world as information technology, and none has effected these 
societal changes at a faster pace. And we are, no doubt, just at the 
beginning of one the most significant and deeply transforming 
revolutions in human history.
    Chairman Smith has put forward a set of key questions to be 
addressed during this hearing. In what follows, I attempt to respond to 
these questions from the perspective of an educator, researcher and 
administrator at a public research university.

  How does the federal investment in information technology 
research promote innovation in information technology and foster the 
development and commercialization of new applications?

    Federal investment in information technology played a critical role 
in launching the wave of innovation that we have experienced in the 
last 10 years in business, education, communications, and research and 
development across all disciplines. This federal investment is what 
sustains a vibrant community of scholars and researchers at 
universities across the Nation; a community that created, among other 
things, the first web browser at the University of Illinois, and the 
Google search algorithm at Stanford, both of which, in Thomas Friedman 
analysis, were key factors in ``flattening'' the world. The return on 
the investment, even to a casual observer, has been extraordinary.
    Equally important is the impact of the federal investment in 
information technology research into virtually every field of science 
and engineering. In fact, this investment affects almost every aspect 
of the federal research portfolio and, directly or indirectly, promotes 
innovation across the entire science and engineering spectrum. A well-
balanced information technology research portfolio is thus critical to 
national competitiveness in the 21st century.

  What role does university research play in innovation in 
information technology? How do University balance federal and industry 
support for research projects? What are the barriers to the use of 
university results in commercialization of new information technology 
products?

    Historically, research universities in the U.S. have led the way in 
innovation in all areas of technology, and information technology is no 
exception. There are, however, unique aspects of information 
technology--such as its strong multidisciplinary nature, rapid pace of 
evolution and societal impact--that demand new approaches to research 
and education. In fact, many universities across the Nation have begun 
to restructure their academic programs in preparation for this 
information revolution.
    At the University of Texas at Austin, research and education in 
information technology, Computer Sciences, Computer Engineering and 
Computational Science and Engineering are of the highest priority. Over 
the last several years, the University has made important investments 
in its physical infrastructure, upgraded its computational capacity, 
hired world-renowned faculty, and created and strengthen graduate 
programs and research centers. I should stress that this investment has 
been matched by major contributions from private individuals, industry, 
and the Federal Government. The federal investment has been in the form 
of major research grants awarded to the University by, primarily, the 
National Science Foundation, the Department of Defense, the Department 
of Energy, and NASA.
    Our Texas Advanced Computing Center has established strong 
partnerships with several industry leaders in information technology, 
which have resulted in the deployment of major computational resources. 
This computing capability benefits researches on campus, across Texas 
and the Nation. Last year, the Texas Advanced Computing Center joined 
NSF's TeraGrid, which is the world's largest, most comprehensive 
distributed cyberinfrastructure for open research. Researchers at the 
Center are also actively developing and deploying new software 
technologies that help connect and aggregate advanced computing 
systems, such as High-Performance Computing, storage, visualization, 
networks, etc., into powerful computational Grids.
    At the same time, at our Institute for Computational Engineering 
and Science, faculty, students and researchers are using this powerful 
cyberinfrastructure to develop the next generation of applications that 
will ensure the Nation remains at the cutting edge of innovation. One 
example of these applications include predictive modeling of 
cardiovascular bypass surgery, no doubt breaking new ground in the 
emerging field of Simulation Based Medicine. Developments like these 
promise to revolutionize future medical practice. There are many more 
examples of applications being developed at universities and at 
national and industrial laboratories across the Nation that will have 
profound, perhaps unimaginable impact on all areas of science and 
engineering.
    In fact, we are witnessing the emergence of a new field that the 
community has named ``Simulation Based Engineering and Science.'' The 
concept is not necessarily new, since it is practiced in many 
engineering disciplines, except that we are now evolving towards the 
pervasive use of simulation and high-performance computing to predict, 
with high degree of confidence, the outcome of the most complex 
biological, geophysical, engineering, scientific, behavioral, and 
social processes.

  What areas of information technology research and what type 
of programs should the Federal Government support to maintain U.S. 
competitiveness? How do these areas complement the focus and 
investments of industry research programs?

    Major planned investments by the National Science Foundation in 
cyberinfrastructure will no doubt provide the next generation of 
computational platforms critical to keeping the Nation competitive at 
the international level and at the cutting edge of information 
technology. And the consensus among the experts is that the investment 
has to be sustained and long-term in order for us to gain, and some 
will say regain, unquestionable leadership in information technology. 
It is clear, however, that the investment in cyberinfrastructure must 
be matched by an equally aggressive support of the research that will 
create the applications running in those platforms. So, I would like to 
join many of my colleagues in recommending the creation of a long-term, 
high-risk research program in Simulation Based Engineering that cut 
across all directorates of NSF and other federal agencies. Such program 
will not only develop the computational tools that will be 
indispensable in the 21st century, but they will help produce the next 
generation of multi-disciplinary scientists and engineers who will 
ensure the Nation remains at the cutting-edge of scientific discovery.
    Such a crosscutting, multi-agency program in Simulation Based 
Engineering will help to bring balance to the federal investment in 
information technology. However, I would like to point out that a third 
aspect of the federal investment in information technology is in need 
of immediate attention, namely, the dearth of federal programs aimed at 
the development of the next generation of software and hardware 
technologies that achieve high performance on thousand of computational 
nodes, that are easy to program and that tolerate failure of individual 
components when running applications spanning thousands of processors 
for many days or weeks. The DARPA High Performance Computing Systems 
(HPCS) program, in partnership with several federal agencies, is to be 
commended for funding such research and development program. I would 
submit to the Committee that a significant increase in the level of 
funding of programs such as DARPA's HCPS is needed to properly balance 
the Nation's research portfolio since, by and large, the market 
currently does not reward companies for long-term, high-risk research 
in this area.
    Federal investment in three critical areas of information 
technology--cyberinfrastructure, simulation based engineering and 
science, and next generation software and hardware technologies--are 
well aligned with the President's American Competitiveness Initiative 
and the principles behind the initiative. In particular: 1) the Federal 
Government will be fulfilling its responsibility to fund long-term, 
high risk research; 2) advances in information technology will continue 
to have a major impact, and on a relatively short time frame, on the 
Nation's economic competitiveness; and 3) the tools developed by 
information technology research will have a direct impact in the 
advancement of all disciplines, including engineering and the physical 
sciences.

                     Biography for Juan M. Sanchez
    Dr. Juan M. Sanchez is the Vice President for Research at the 
University of Texas at Austin and holder of the Temple Foundation 
Endowed Professorship #4 in the Department of Mechanical Engineering. 
He obtained his B.S. in Physics at the University of Cordoba, 
Argentina, 1971; M.S. in Materials Science, 1974; and Ph.D. in 
Materials Science, 1977 at the University of California, Los Angeles.
    Dr. Sanchez is the author and co-author of over 140 technical 
publications on a wide range of topics in materials science and 
engineering. His current research interests are in the electronic, 
thermodynamic and structural properties of materials including inter-
metallic compounds, magnetic and non-magnetic alloys, thin films and 
magnetic multi-layers. Primary interest is the development and 
application of first principles computational methods for the 
construction of phase diagrams of multi-component material systems. 
Other research interests include the development of laser-controlled 
selective chemical vapor deposition processes for metals, alloys and 
ceramics.
    Dr. Sanchez serves on the Council of Federal Relations of the 
Association of American Universities; on the Board of Directors as 
Council Vice Chair for the Oak Ridge Associated Universities, and the 
Texas Nanotechnology Initiative. He also serves as a Representative to 
the Government-University-Industry Research Roundtable of the National 
Academies, as Trustee for the Southeastern Universities Research 
Association, Inc., as a Board Member of the Institutional Oversight 
Committee for the National Partnership for Advanced Computing 
Infrastructure (NPACI), the Board of Visitors of the U.S. Army War 
College, Member of the International Consulting Board, Advisory Board 
for the Texas Coalition for Capital, the National Scientific and Policy 
Advisory Council for the Hogg Foundation for Mental Health, and Member 
of the AusTech Alliance of the Greater Austin Chamber of Commerce.




    Chairman Smith. Thank you, Dr. Sanchez.
    Dr. Goodall.

   STATEMENT OF DR. RANDAL K. GOODALL, DIRECTOR OF EXTERNAL 
                       PROGRAMS, SEMATECH

    Dr. Goodall. Thank you very much. I appreciate the emphasis 
here on brevity and you compelled me to actually edit out part 
of my remarks but they are in the record. As people here 
assembled know, that is not always easy. Chairman Smith and 
Congressman McCaul, I know you both, I know your service, and I 
appreciate and thank you very much for having us and inviting 
me here today.
    As a representative of the industry, the semiconductor 
industry in particular, I am going to be responding to your 
question about the IT industry with respect to the hardware 
side. I mean specifically the semiconductor chip point of view 
which is really the heart of information systems ultimately.
    It is worth reminding ourselves what the semiconductor 
segment achieves and the cost of that achievement, usually 
referred to as ``Moore's Law.'' This year a quintillion 
transistors will be manufactured around the world. They will be 
put into 100 billion chips. They will all work. A quintillion. 
You don't use that word very often in industry. All the world's 
memory from 25 years ago is on one single wafer today. 
Semiconductors became the world's first large-scale 
nanotechnology industry several years ago when the 90 nanometer 
chip generation went into volume production. Every two or three 
years that dimension will be halved and halved again.
    Semiconductor companies spend 15 to 20 percent of revenue 
on R&D to make this all happen. A single plant developing 300mm 
wafers, as we now have two of them in Texas, cost $3 to $4 
billion for one. Unfortunately most are being built outside the 
United States. Ultimately, the semiconductor industry is an 
innovation power house and among the world's highest in value-
add and economic multiplier.
    Much of the world's information technology industry growth 
and concomitant wealth and opportunity creation depends upon 
the continued trust and belief that an impossible product 
designed today will come to market just in time for smaller, 
faster, denser chips to enable it. We never want to stop 
believing that is true because when it does, the entire 
industry basically grinds to a halt.
    I am from SEMATECH which is an R&D consortium with members 
including most of the world's largest leading edge 
semiconductor manufacturers. The consortium was spawned in a 
previous era back in '87 when the question of the U.S. 
competitiveness in the IT marketplace was again one of concern. 
SEMATECH is a 50/50 partnership in the U.S. Government and U.S. 
industry and is instrumental in turning the tide for 
semiconductor manufacturing and the chip manufacturing 
equipment supply chain in America, and is a clear legacy of a 
government-industry partnership that actually worked.
    The world today is a very different place, although we are 
asking the same questions, I suppose. After its early success, 
SEMATECH flexibly adapted to the global environment of our 
industry, and is today an international, structured family of 
R&D organizations that continues to propel the industry 
forward.
    You laid out several questions which I will address each 
one and I will answer them in light of the last 20 years of 
semiconductor research, development, and commercialization 
collaboration that SEMATECH has lived through.
    The first question is how does federal investment promote 
innovation. The federal investment in information technology 
research always has and always will play a crucial role because 
it literally enables the basic layers of the IT ecosystem the 
most fundamental research.
    I have actually included a figure in the document that you 
can look at at your convenience. It outlines for our industry 
the collaboration pipeline that begins with the most advanced 
research that is 15 to 20 years into the future in terms of 
use. The Microelectronics Advanced Research Corporation 
Research, which the government actually does support; the SRC 
research which is principally universities; SEMATECH which cuts 
a wide slash in the middle of development; then the various 
private collaborations and then actually post competitive 
collaborations that SEMATECH also supports in manufacturing 
initiatives.
    This pipeline is a requirement for just the wild and crazy 
technology innovation world that this industry actually has to 
deal with to do its job in the economy. These three competitive 
efforts are really threaded together by what is called the 
International Technology Roadmap for Semiconductors which I 
highlight because it is important. It is now a web-based 
document of nearly 1,000 pages and is annually updated by 
nearly 1,000 people in our industry because it is very 
important.
    It is worth noting in this figure that a lot of the 
research that is in our industry is not exclusively embodied in 
the United States. It is true that the U.S. does enjoy a legacy 
of semiconductor leadership and we, of course, have a vested 
interest in that because the Federal Government drives along 
defense and homeland security interests. But it is not an 
entitlement that the U.S. be a leader. As the era of 
nanoelectronics and advanced technology convergence emerges 
simultaneously around the world, we will find ourselves 
competing in a pre-globalized mega-industrial complex in 
technology and we have got to be ready for that.
    Federal funding in the figure that I showed there is 
heaviest in the areas that are focused on the far future (right 
hand side) and they systematically decrease as efforts converge 
to the now which is where we are all competing in the 
industrial world.
    The Semiconductor Industry Association, as you have 
probably heard from them, has established priorities for 
federal research funding. That includes substantial increases 
in funding for the physical sciences, funding for the Focus 
Center Research Program by DOD, and specific support of NIST in 
various of its activities. This funding provides feedstock for 
the collaboration pipeline. It is not sufficient to the task 
because we have research gaps still and they define those very 
well. Additional funding from any government will assure a 
higher level of participative innovation for that region. That 
is just another one of the facts of globalized R&D environments 
that governments that are putting money on it are going to be 
participating in the benefits for that.
    Your second question had to do with the university 
research-industry relations. The speakers around me are going 
to speak to that in great detail but I will summarize my 
remarks there. It is challenging to build adequate research 
programs that fit into a fast-moving commerce industry. There 
are some challenges to tie into university research and 
commercializing it.
    I have three outlines that I will summarize in one sentence 
each. The first one is that the industry moves at such amazing 
speed. I call it warp speed in here. It actually exceeds in 
many cases the speed of the university to move graduate 
students into programs and to hit the industry's timelines as 
defined in the roadmap so often research is left behind.
    The industry is also huge in complexity and cost of R&D. A 
lot of times universities just don't have the infrastructure to 
do the work that has the right match to what the industry is 
doing. I will talk to that in my recommendations because that 
is an area that perhaps you can help with.
    And then, finally, IP mapping is often difficult in our 
industry in particular simply because it is so complex to 
manufacture chips that only large portfolios of IP really sort 
of contain the problem space of the industry. Single research 
results that are usually, certainly once we think about it, it 
is going to provide the model of IP at universities. How they 
contribute to the technical content of the industry often 
doesn't match the economics.
    Thirdly, you asked how can the Federal Government support 
this competitiveness going forward? I have three basic 
recommendations for that I would like to read for you.
    The first one is Innovation Process Connection: As the 
semiconductor industry begins to mature in the coming 10-20 
years, staying on Moore's Law will require a broader base of 
technology R&D investments than might be afforded by our 
industry alone. Other industries that need nanoscale 
fabrication, measurement techniques, and exotic materials 
(which is what we need) can help support that effort if two 
things occur:

        (1) LThere is intentionality in technology convergence 
        so that common industrial needs are identifying and 
        optimized; and there is sufficient and appropriate R&D 
        infrastructure and funding direction to drive these 
        efforts together, beginning with research. I believe 
        the U.S. Government, to really keep the U.S. 
        competitive in this kind of global technology 
        converging future, should consider offering specific 
        support and direction to emerging technology areas 
        requiring nanofabrication and nanomanufacturing to 
        construct roadmaps with clear linkages to the 
        semiconductor industry so that we find these 
        convergences and we actually work them on our own soil.

        (2) LSecondly, that we are using the collaboration 
        example of the semiconductor industry as a model and 
        offer support to other IT, and emerging technology 
        segments, for building collaboration pipelines of their 
        own that incorporate the best capabilities that the 
        U.S. has to offer.

    Secondly, I would like to recommend Innovation 
Infrastructure Connection. The Federal Government can form 
partnerships with states to create higher funding impact by 
matching state economic development programs targeted at 
semiconductor manufacturing and technology development. This 
should be particularly supported when existing leading-edge 
semiconductor infrastructure (buildings, labs, equipment, know-
how) can be expanded for multiple use by emerging technology 
researchers like biotech scientists and nanotech scientists. I 
believe interagency collaborations with the states in 
convergent technology infrastructure should be increased and 
rewarded.
    Thirdly, and finally, Innovation People Connection. This 
has been mentioned by every speaker and I am going to say the 
same thing. The Federal Government can identify additional 
funding for nanoelectronics and other convergent technology 
education and workforce development programs, in particular 
those that engage advanced sites for hands-on training 
purposes. Again, partnerships with the states will bring the 
largest impact. A significant challenge that I wish I had 
clearance for. I would love to work on a clearance report.
    There is a significant challenge that requires the 
collaboration of educators and industry to get early experience 
and exposure to high school students in particular to 
technology career opportunities to motivate them to engage the 
curriculum that they are experiencing. They have some good 
curriculum. They just need to be motivated to engage it so they 
become the people of the 21st century. I think that is 
extremely important.
    In closing I would like to say in the modern world there is 
no country, including ours, that can afford to lose any piece 
or portion of its technology research, technology development, 
and technology manufacturing base. These are increasingly 
interconnected due to complexity and high cost. Losing pieces 
of them always takes more than you think away from them.
    SEMATECH is an independent industry representative 
organization. It has a long and rich history of driving 
technology development, transferring research results from 
universities, commercializing technology, roadmapping the 
collaboration pipeline, and assembling and operating 
sophisticated R&D infrastructure. We offer our support to you 
for further discussions on any of these matters. Thank you very 
much.
    [The prepared statement of Dr. Goodall follows:]
                Prepared Statement of Randal K. Goodall
    Honorable Members of the Committee on Science of the House of 
Representatives of the United States, I would like to thank you for 
inviting me to speak on the important subject of how the government-
industry-university research partnership maintains U.S. competitiveness 
in the global information technology (IT) market. As a representative 
of industry--the semiconductor industry segment of information 
technology--I will be responding from the perspective of the 
``hardware'' side of the IT industry, specifically the semiconductor 
chips that are the heart of all information systems. Even more 
specifically, my comments are most directly derived from the issues of 
the technology intensive domains of logic processors and high-density 
memory chips.

Background

    It is worth reminding ourselves what the semiconductor segment 
achieves and the cost of that achievement, usually referred to as 
``Moore's Law'':

          This year, 1 quintillion transistors and/or memory 
        bits will be manufactured on 100 billion chips. They will all 
        work.

          A single 300mm wafer today contains as much memory as 
        the entire world's production of DRAM in 1985. One gigabit of 
        DRAM cost $32,000 in 1985, but is a mere $8 today.

          Semiconductors became the world's first large-scale 
        nanotechnology industry several years ago when the 90 nanometer 
        chip generation went into volume production. Today, transistors 
        with active areas less than 50 nanometers across with 
        insulating materials applied to them in layers only a few 
        nanometers thick are being produced. In less than a decade, 
        these dimensions will be halved again.

          15-20 percent of semiconductor revenues are spent on 
        R&D. A single 300mm wafer fabrication plant costs $3-$4 
        billion. Most are being built outside the U.S.

          Ultimately, the semiconductor industry is an 
        innovation power house and among the world's highest in value-
        add and economic multiplier.

    Much of the world's information technology industry growth and 
concomitant wealth and opportunity creation depends upon the continued 
trust and belief that an impossible product, designed today, will come 
to market just in time for smaller, faster, denser chips to enable it.
    SEMATECH is an R&D consortium with members including most of the 
world's largest leading edge semiconductor manufacturers. The 
consortium was spawned in a previous era (1987) when the question of 
U.S. competitiveness in the IT marketplace was one of active concern. 
Initiated as a 50-50 partnership of U.S. Government and U.S. industry, 
SEMATECH was instrumental in turning the tide for semiconductor 
manufacturing and the chip manufacturing equipment supply chain in 
America--a clear legacy of a government-industry partnership that 
worked. The world of today is a very different place (although the 
questions we find ourselves asking seem familiar). After its early 
success, SEMATECH flexibly adapted to the global environment of our 
industry, and is today an international, structured family of R&D 
organizations, which continues to propel the industry forward.

Committee Questions

    The Committee has laid out three key questions to be addressed in 
this hearing, and I will answer them in light of the last 20 years of 
semiconductor industry research, development, and commercialization 
collaboration as embodied in SEMATECH.

1.  How does the federal investment in information technology research 
promote innovation in information technology and foster the development 
and commercialization of new applications?

    The innovation ecosystem in any area, including IT, has many 
layers. The most fundamental is the basic science and engineering 
research that expands the boundaries of knowledge and brings new ideas, 
useful or not, into the environment. At higher levels in the ecosystem, 
we find product development, commercialization, manufacturing, and 
industrial scaling. Federal investment in information technology 
research has and will play a crucial role in quite literally enabling 
the basic research layer of the IT ecosystem. Industries broadly have 
to a large degree come to rely on universities for this research, and 
to an increasing degree, anticipate its funding through federal grants 
and sponsored research. Beginning in the 1980's and enabled by the 
National Cooperative Research and Production Act, the semiconductor 
industry began the task of constructing a cooperative framework for 
solving the increasingly daunting problem of bringing together all the 
technologies needed for the industry. It was realized that much of that 
effort is ``pre-competitive,'' that is, needed by all participants but 
not strongly connected to their own core business value propositions.
    Figure 1 illustrates the collaboration pipeline of the 
semiconductor industry today. Although the specific companies at each 
stage vary somewhat, there is consistent participation by advanced 
logic and memory manufacturers all through this pipeline. The pre-
competitive R&D efforts in the semiconductor industry globally are 
coordinated through the International Technology Roadmap for 
Semiconductors (ITRS), a (now web-based) document of nearly 1,000 
pages, annually updated by nearly 1,000 contributors around the world. 
Note that this pipeline is not exclusively embodied in the U.S. While 
it is true today that the U.S. enjoys a legacy position of 
semiconductor leadership (as well as a continued vested interest in 
that leadership driven at the federal level for defense and homeland 
security reasons), it is by no means an entitlement, and as the era of 
nanoelectronics and advanced technology convergence emerges 
simultaneously around the world, we will find ourselves competing in a 
pre-globalized mega-industrial complex.




    In Figure 1, federal funding is heaviest in areas that are focused 
on the far future (right hand side) and decreasing applied as efforts 
converge on the competitive ``now'' (the vertical axis on the left). 
The Semiconductor Industry Association (SIA) as the representative 
organization of the industry in America, has established priorities for 
federal technology research funding (http://www.sia-online.org/
backgrounders-technology-funding.cfm). I will not 
detail them here, but they include substantial increases in funding for 
the physical sciences through the NSF (through partnerships with SRC 
and in conjunction with the National Nanotechnology Initiative), the 
funding of the Focus Center Research Program (MARCO) by DOD, and 
specific support of NIST. This funding provides feedstock for the 
collaboration pipeline, although it is not sufficient to the task and 
additional funding from any government will assure a higher level of 
participative innovation for that region.

2.  What role does university research play in innovation in 
information technology? How do universities balance federal and 
industry support for research projects? What are the barriers to the 
use of university results in commercialization of new information 
technology products?

    As noted above, university research brings new ideas into the 
innovation ecosystem. Within the complex academic environment, there 
are several priorities that offer friction to the movement of these 
ideas to the marketplace. The most important is that a large fraction 
of these ideas are not honestly intended to ever go there. They are 
byproducts of the most significant mission of research universities--
educating the scientists and engineers of the future. Commercialization 
(and commercializability) of these ideas is ad hoc. Even when research 
is directed by the funding source and the research results are 
specifically intended to contribute to a higher and specific mission, 
successful commercialization is still not assured.
    One key factor in this lack of transfer is that semiconductor 
research often departs from the mainline of the ITRS (through its very 
innovative nature) and therefore sees a large barrier to entry into 
manufacturing. The industry's technology conveyor belt is moving at 
``warp speed.'' A professor trying to support a graduate student who 
needs 3-4 years to complete his Ph.D. thesis will often select a 
topical point on the ITRS which his laboratory can support (processing 
and test equipment, etc.). Since the duration of this Ph.D. effort can 
be two technology generations for the industry, it is often discovered 
that by the time the student has completed his work, valuable data for 
the industry has been obtained, but the insertion point for that 
research has passed--the industry picked from whatever was available 
and moved on. These decisions are often irreversible.
    Another challenge to the commercialization of university research 
is found in the shear complexity and difficulty of beyond-leading-edge 
chip design and fabrication. A leading-edge company might employ 
hundreds of engineers and spend hundreds of millions of dollars 
developing a new chip technology. This is far beyond the capability of 
a university researcher, so he must focus on an increasingly small 
portion of the technical space and at an increasingly distant portion 
of the ITRS timeline. But he will almost always have significantly less 
capable infrastructure (usually older, donated equipment). Even in the 
best of circumstances, targeting these pin-point selections so that 
they produce, within the vagaries of research, commercially blendable 
results is very challenging.
    A final confounding factor for technology transfer in the 
semiconductor industry is IP. In the semiconductor industry, large 
portfolios of IP are often exchanged among industry players to acquire 
and/or maintain leading-edge design and production and capabilities. 
Isolated or disconnected patents on university developments can delay, 
complicate, or even kill the opportunity to integrate a university 
result into a semiconductor manufacturing process, tool, or material 
effort. Unless a portfolio is constructed and actively maintained, 
which is a sophisticated endeavor not often possible within the 
administrative structure of a university research commercialization 
office, semiconductor research results are difficult to process through 
the conventional thinking of the Bayh-Dole act, despite their potential 
for contributing to the industry's moving forward.

3.  What areas of information technology research and what type of 
programs should the Federal Government support to maintain U.S. 
competitiveness? How do these areas complement the focus and 
investments of industry research programs?

    In addition to the specific directions provided by the SIA on 
research funding, R&D and manufacturing investment tax policy, and 
education and workforce development, I would like to offer the 
following for the Committee's consideration:

          Innovation Process Connection: As the semiconductor 
        industry begins to mature in the coming 10-20 years, staying on 
        Moore's Law will require a broader base of technology R&D 
        investments than might be afforded by our industry alone. Other 
        industries that need nanoscale fabrication, measurement 
        techniques, and exotic materials can help support that effort 
        if two things occur: (1) there is intentionality in technology 
        convergence so that common industrial needs are identifying and 
        optimized; and (2) there is sufficient and appropriate R&D 
        infrastructure and funding direction to drive these efforts 
        together, beginning at the research phase. Therefore, the U.S. 
        government could consider:

                  Offering specific support and direction to emerging 
                technology areas requiring nanofabrication and 
                nanomanufacturing to construct roadmaps with clear 
                linkages to the ITRS.

                  Using the collaboration example of the semiconductor 
                industry as a model and offer support to other IT (and 
                emerging technology!) segments in building a 
                collaboration pipeline that incorporates the best U.S. 
                capabilities.

          Innovation Infrastructure Connection: The Federal 
        Government can form partnerships with states to create higher 
        funding impact by matching state economic development programs 
        targeted at semiconductor manufacturing and technology 
        development. This should be particularly supported when 
        existing leading-edge semiconductor infrastructure (buildings, 
        labs, equipment, know-how) can be expanded for multiple use by 
        emerging technology researchers. Inter-agency collaborations 
        with the states in convergent technology infrastructure should 
        be increased and rewarded.

          Innovation People Connection: The Federal Government 
        can identify additional funding for nanoelectronics and other 
        convergent technology education and workforce development 
        programs that engage advanced sites for hands-on training 
        purposes. Again, partnerships with the states will bring the 
        largest impact. A significant challenge requiring collaboration 
        of educators and industry is early experiential exposure of 
        high school students to technology career opportunities to 
        motivate them to engage the curriculum of the 21st century.

    In the modern world, no country can afford to lose any of its 
technology research, development, and manufacturing base, even as these 
are increasingly interconnected due to complexity and high cost. I have 
fully avoided specific technical program recommendations today, as they 
are well documented elsewhere, and these additional details can be 
provided as needed. As an independent industry representative 
organization, with a long, rich history of driving technology 
development, transferring research results from universities, 
commercializing technology, roadmapping the collaboration pipeline, and 
assembling and operating sophisticated R&D infrastructure, we offer to 
you to please contact us for further discussions on any of these 
matters.

                    Biography for Randal K. Goodall
    Dr. Goodall received his Bachelor's of Science in physics from 
Caltech (1977) and his Master's (1979) and Ph.D. (1984) in experimental 
solid-state physics from the University of Oregon.
    After working with an advanced software applications startup, Dr. 
Goodall entered the chip industry in 1987, joining ADE in Boston, 
Massachusetts to form the Systems Technology Group to identify and 
develop next generation measurement technologies, system architectures, 
and computational applications.
    In early 1994, Randy joined SEMATECH as a Senior Member of 
Technical Staff in the Silicon Materials group on some of the world's 
earliest 300mm wafer efforts.
    In late 1995, Dr. Goodall was one of six members of the startup 
team for the International 300mm Initiative (13001), leading Enabling 
Technologies, including the silicon wafer, metrology, standards, and 
productivity programs. In 1998, the 13001 programs merged with 
International SEMATECH, and in 2000, Randy was named Associate Director 
of a new Manufacturing Methods and Productivity division, focusing on 
productivity for existing and future fabs and equipment.
    Beginning in 2002 on special assignment to the Office of the Chief 
Executive, Randy worked on the $200M leveraged funding for the Albany 
EUV program. He subsequently developed the Texas Technology Initiative 
(TTI) and worked with the Governor and other State and local officials 
to pass 2003 legislation which enabled funding for SEMATECH and 
university programs through a new Advanced Materials Research Center, 
spanning semiconductor, nanotechnology, biotechnology, MEMS, and 
advanced energy. As the first Director of the newly-formed SEMATECH 
External Programs office, Randy provided leadership in 2005 for the 
TTI, the State Strategy on Advanced Technology, and the $200M Texas 
Emerging Technology Fund legislation.
    Dr. Goodall has published numerous papers on silicon wafer 
technology, R&D collaboration, industry technology transitions, 
including 300mm wafers, and productivity modeling. He continues to 
engage local, State, and national government efforts to drive 
technology innovation and economic development, and he works with 
technology leaders, university administrators and researchers, and 
State officials to develop mechanisms for co-leveraging the 
semiconductor infrastructure of SEMATECH and the nanofabrication needs 
of emerging technologies.



    Chairman Smith. Thank you, Dr. Goodall.
    Dr. Iscoe.

  STATEMENT OF DR. NEIL ISCOE, DIRECTOR, OFFICE OF TECHNOLOGY 
        COMMERCIALIZATION, UNIVERSITY OF TEXAS AT AUSTIN

    Dr. Iscoe. Chairman Smith, Congressman McCaul, for the sake 
of brevity I am going to summarize what I have in written form.
    We live in an age in which inventions that were previously 
the stuff of science fiction are pretty common. Cell phones, 
computers, and other information technologies shape our reality 
and give us new ways to see what the future will bring.
    Predicting the future is a risky bet, a difficult bet for 
companies with payroll to make and stockholders to satisfy. 
Even sophisticated market research cannot determine the needs 
of markets that do not yet exist. How is it possible then to 
choose where to spend development dollars when it is ultimately 
the market that determines success? How can the Federal 
Government work with universities and industry to maintain the 
United States' lead in innovation?
    It is appropriate that these questions be asked at the 2006 
WCIT because it is the ecosystem that is shared by the Federal 
Government, universities, and industry that created the 
science, protocols, the technology that is today's Internet.
    Ecosystems include the participants, the complex set of 
relationships between them, and the externalities. The 
relationships between government agencies, universities, 
industry, and capital are linked that promote and sustain 
technological advancement even when buffeted by the cyclical 
flows of the market. Like a biological ecosystem, it is the 
robustness and complexity of the relationships, the links 
between the players, that makes the ecosystem work. If we can 
clarify and transparently understand, strengthen, and explain 
these relationships, we can accelerate our ability to maintain 
the United States' lead in innovation.
    Since this is a Texas field briefing, let us look at a 
local example of an ecosystem. We can see the success of 
Bluebonnets in the display of color that we are privileged to 
watch each spring. Each season's output is determined by 
parameters that include the number of seeds from the previous 
spring, and the conditions (temperature, drought, bulldozers, 
animals) of the previous fall. Different seeds sprout under 
different circumstances so that there will always be a next 
season.
    Similarly, the ecosystem of government, university, and 
industry can be both robust and sustainable. While not all 
scientific paths produce a commercial product, the interplay of 
federal funding, university exploration, and industrial 
application has the potential to provide enough inventions 
(i.e., the seeds) that U.S. entrepreneurs and corporations can 
turn them into products even while facing the challenges of 
cyclical economies, changing technologies, and international 
competition.
    As industries mature, they become efficient at product 
improvement. However, as Clayton Christensen noted in ``The 
Innovator's Dilemma.'' mature industries have difficulty 
understanding and valuing disruptive technologies. Furthermore, 
the uncertainties of any particular research initiative and the 
continually changing competitive landscape have made it really 
difficult for U.S. corporations to operate on a long-time 
horizon. As the corporations close their industrial labs, the 
role of research in the United States is shifting to the 
universities.
    Dr. Goodall just told us about the semiconductor roadmap by 
which Moore's Law continues. Roadmaps are excellent but the 
problem with roadmaps is that they do not allow for the changes 
in direction, disruptive technologies. As an example, Moore's 
Law is based on a process called lithography. Lithography is 
based on light. All the improvements in lithography, therefore, 
focus on improvements to this process.
    What if instead of using light it was possible to build a 
mechanical device that could operate beyond the precision that 
we are currently operating at, at nanometer precision? At the 
University of Texas, with federal funding and industry 
collaboration, mechanical and chemical engineers came up with 
just that idea. They developed a new form of lithography based 
on mechanical processes, a nano-printing press, that eliminates 
the need to use light. UT has licensed the invention to a local 
startup, Molecular Imprints.
    The company has received over $60 million in investment 
capital, employs hundreds of people, and along with other 
industrial partners has received almost $45 million in Federal 
Government funding through ATP, DARPA, and other initiatives. 
They are now producing a machine that will revolutionize the 
fabrication of semiconductors. That is just the beginning.
    Just as Gutenberg's printing press changed the world by 
making books available to everyone, the nano-printing press 
will be able to mass produce nano devices. These devices will, 
in turn, spawn industries which are the stuff of today's 
science fiction.
    Federal funding builds a base from which innovations such 
as the Internet and the nano-printing press can emerge. But 
just as all Bluebonnet seeds do not immediately result in 
Bluebonnets, not all ideas germinate in all conditions. Markets 
are the ultimate definition of success, and market conditions 
vary.
    As a university commercialization office, we are match 
makers. We match university researchers with entrepreneurs and 
companies. We can take research prototypes and turn them into 
commercial products. Our goal is to systematically make the 
matching process between research ideas and commercialization 
partners more efficient, and to maximize the interactions so 
that new and existing relationships are more likely to result 
in serendipitous matches.
    Existing programs such as SBIR, STTR, and ATP all help move 
technologies from the University to industry. State and 
regional programs such as the Texas Emerging Technology fund 
also provide funding for ideas that are not yet ready for 
standard commercial capital.
    Backing up, in today's tech world it is easy to forget that 
the first computer was invented almost two centuries ago by 
Charles Babbage. His invention worked but the manufacturing 
precision of the 19th century was not sufficient to be able to 
build it. The 21st century is different. We can now build the 
things we can imagine.
    The IT revolution has flattened the economic playing field 
creating challenges and opportunities for the United States. We 
no longer have a monopoly on technology production, 
communication, or even programming. But we are the acknowledged 
leaders of innovation. We have the talent and the ability to 
continue to grow a sustainable government/university/industry 
ecosystem that increases the yield, the societal and industrial 
yield, from scientific research.
    What we do in the next decade is crucial. We must continue 
to pursue scientific research in university laboratories 
supported by government funding. The universities must work 
closely with entrepreneurs, investors, and established industry 
to move scientific discoveries into products that can be used 
by society.
    The U.S. leads the world in innovation. By focusing on the 
relationships between government, universities, and industry, 
we can stay that way. Thank you.
    [The prepared statement of Dr. Iscoe follows:]
                    Prepared Statement of Neil Iscoe
    Chairman Smith, Congressman McCaul, thank you for this opportunity 
to testify today to the Committee on Science. I work with Dr. Sanchez 
and direct the University of Texas at Austin's commercialization of 
technology.
    We live in a technological age in which inventions, that were 
previously the province of science fiction, are now commonplace. Cell 
phones, computers, and other information technologies shape our 
reality, and give us new ways to see what the future will bring. In 
retrospect, the multitude of new technologies and products are the 
logical consequence of known technology trends. But at the time a 
technology is introduced, its impact is rarely understood.
    Predicting the future, however, is a difficult and risky bet for 
companies with payroll to make and stockholders to satisfy. Even 
sophisticated market research cannot determine the needs of markets 
that do not yet exist. In 1943, Tom Watson, the CEO of IBM predicted 
that ``there is a world market for maybe five computers.'' In 1952, IBM 
revised its forecast to predict that the world market for computers 
would be ten times the original estimate. Corporations make market 
predictions based on the markets that they can see.
    How is it possible, then, to choose where to spend development 
dollars, when it is ultimately the market that determines success? How 
can the Federal Government work with Universities and Industry to 
maintain the United States lead in IT technology?
    It is appropriate that these questions be asked at the 2006 World 
Congress on Information Technology; for it is the Federal Government's 
investments in IT research that created the science, protocols, and 
alphabet soup of acronyms that are the Internet. In the interest of 
time, I will not give the history of the Internet, but note that as a 
case study, the development of the Internet illustrates the successful 
operation and future potential of the ecosystem shared by the Federal 
Government, U.S. Universities, and U.S. Industry.
    Ecosystems include their participants, the complex set of 
relationships between them, and the externalities that affect them. The 
relationships between Government agencies, Universities, Industry, and 
capital, are links that promote and sustain technological advancement 
even when buffeted by the cyclical flows of the market. Like a 
biological ecosystem, it is the robustness and complexity of the 
relationships--the links between the players--that makes the ecosystem 
work. If we can clearly and transparently understand, strengthen, and 
explain these relationships, we can accelerate our ability to maintain 
the United States' lead in innovation.
    Since this is a Texas field briefing, let's look at a local example 
of an ecosystem. We can see the success of Bluebonnets in the display 
of color that we are privileged to watch each Spring. Each season's 
output is determined by parameters that include the number of seeds 
from the previous Spring, and the conditions (e.g., temperature, 
drought, bulldozers, animals) of the previous Fall. Different seeds 
sprout under different circumstances so that there will always be a 
next season.
    Similarly, the ecosystem of Government, University, and Industry 
can be both robust and sustainable. While not all scientific paths 
produce a commercial product, the interplay of federal funding, 
university exploration, and industrial application has the potential to 
provide enough inventions (i.e., the seeds) that U.S. entrepreneurs and 
corporations can turn them into products even while facing the 
challenges of cyclical economies, changing technologies, and 
international competition.
    As industries mature, they become efficient at product improvement. 
However, as Clayton Christensen observed in ``The Innovator's 
Dilemma,'' mature industries have difficulty valuing disruptive 
technologies. Furthermore, the uncertainties of any particular research 
initiative and the continually changing technological and competitive 
landscape have made it increasingly more difficult for U.S. 
corporations to operate on a long time horizon. As the corporations 
close their industrial labs, the role of research in the United States 
is shifting to the Universities.
    This is where the Federal Government, Universities, startups, and 
early stage investment capital can keep the ecosystem healthy. As an 
example, let's look at the fundamental process, lithography, behind 
Moore's law and the twenty year semiconductor roadmap by which Moore's 
law continues. The problem is that roadmaps do not allow for the 
changes in direction (i.e., disruptive technologies).
    Lithography is a photographic process based on light. Improvements 
in lithography therefore focus on light. But what if, instead of using 
light, it was possible to build a mechanical device that could operate 
within the nanometers of precision previously achieved with light? At 
the University of Texas, with Federal Government funding and Industry 
collaboration, mechanical and chemical engineers came up with that 
idea. Systematically attacking obstacles, they developed a new form of 
lithography, based on mechanical processes--a nano-printing press--that 
has the potential to disruptively eliminate the need to use light, 
thereby extending Moore's law. The University of Texas has licensed the 
invention to a local startup, Molecular Imprints.
    The company, which was founded in 2001, has received over $60 
million in investment capital, and along with other Industrial 
partners, almost $45 million in Federal Government funding through ATP, 
DARPA, and other initiatives. The company is now producing a machine 
that has the potential to revolutionize the fabrication of 
semiconductors. But that is only the beginning. Just as Gutenberg's 
printing press changed the world by making books available to everyone, 
the nano-printing press has the potential of mass producing nano-
devices. These devices will, in turn, spawn industries which cannot yet 
be seen.
    Federal scientific funding builds a base from which innovations 
such as the Internet and the nano-printing press can emerge. But just 
as all Bluebonnet seeds do not immediately result in Bluebonnets, not 
all ideas germinate in all conditions. Markets are the ultimate 
definition of success, and market conditions vary.
    As a University commercialization office, our goal is to work with 
government and industry to systematically make the matching process 
between ideas and commercialization partners more efficient, and to 
maximize the interactions so that new and existing relationships are 
more likely to result in serendipitous matches. Existing programs such 
as SBIR, STTR, and ATP all help move technologies from the University 
to Industry. State and Regional programs such as the Texas Emerging 
Technology Fund fund ideas that are not yet ready for commercial 
capital.
    In today's high tech world, it is easy to forget that the first 
computer was invented almost two centuries ago by Charles Babbage. His 
invention worked, but the manufacturing precision of the 19th century 
was not, at the time, sufficiently advanced to build his machine. In 
the 21st century, we are living in an age in which innovations are 
being delivered at an exponentially increasing rate.
    The IT revolution has flattened the economic playing field, 
creating both challenges and opportunities for the United States. We no 
longer have a monopoly on technology production, communication, or even 
programming. But we are the acknowledged leaders of innovation. We have 
the talent and the ability to continue to grow a sustainable 
Government/University/Industry ecosystem that increases the yield from 
scientific research.
    The next decade is crucial. We must continue to produce scientific 
results in University laboratories supported by government funding. The 
Universities must work closely with entrepreneurs, investors, and 
established industry to move scientific discoveries into products that 
can be used by society.
    The United States leads the world in innovation. By focusing on the 
relationships between Government, Universities, and Industry, we can 
stay that way.

                        Biography for Neil Iscoe
    Neil Iscoe is Director of the Office of Technology 
Commercialization for The University of Texas at Austin. Dr. Iscoe is 
an experienced entrepreneur, having founded his first technology 
company, Statcom, in 1979. Formerly he was founder and CEO of eCertain, 
a company that sold secure transaction solutions for legal and 
financial markets.
    Prior to founding eCertain, he was the Division Manager of Advanced 
Technology for EDS. In this capacity, he established and managed an R&D 
laboratory, developed and deployed software technologies that reduced 
costs for the EDS business units, evaluated technology acquisitions, 
and built a Financial Trading and Technology Center at the University 
of Texas at Austin. Dr. Iscoe has also worked as a researcher at the 
Microcomputer and Electronics Consortium (MCC), where he focused on 
methods of improving software development practices and conducted field 
studies of large software projects that included telephony, defense, 
and enterprise applications.
    Dr. Iscoe has an engineering degree from the University of 
Wisconsin and an M.S. and Ph.D. in Computer Sciences from the 
University of Texas at Austin. He remains an Adjunct Professor at UT in 
the Computer Sciences Department. Appointed by Texas Governor Rick 
Perry, Dr. Iscoe serves on the Texas Product Development and Small 
Business Incubator Advisory Board and was a founding member of the 
Central Texas Regional Center of Innovation and Commercialization 
Executive Advisory Board. He has also served on the Texas State 
Strategy on Advanced Technology team and on the Texas Information and 
Computer Technology Industry Cluster team. Dr. Iscoe was a founding 
member of the Austin Technology Council and is a frequently requested 
speaker at international conferences and programs.



                               Discussion

    Chairman Smith. Thank you, Dr. Iscoe.
    Before we go to questions I just wanted to make a couple of 
brief comments. One is to emphasize just how important federal 
funding of research and development and information technology 
is. You all probably are aware of this but it never ceases to 
impress me that when we talk about getting support from R&D 
examples include the Internet, databases, data mining, speed 
recognition. Other examples would be Red Ralier's assertion and 
so forth, all examples of federal R&D.
    Also I am going to make a couple of quick comments about 
some of your testimony that I thought was particularly relevant 
and insightful and useful as well. Dr. Freeman, you mentioned, 
which I did not realize, that National Science Foundation 
research money went to two co-founders of Google back when they 
were students at Stanford University. I have a special interest 
in Google and didn't realize the National Science Foundation 
played a part.
    Pike, on your testimony, you actually emphasized as well in 
your answer to the fourth question where you came up with a 
suggestion that I also had not heard before. You said in regard 
to the question what are the barriers to use of university 
results in commercialization of new information technology 
products. To me the biggest barrier is the U.S. does not have 
sufficient investment funds to take the university research 
results that are typically theoretical or conceptual stage to a 
proof of concept in prototype product stage.
    My opinion from existing companies is it is easy to obtain 
the prototype stage. However, I think we are short on support 
of the middle stage where the theoretical conceptual ideas are 
turned into prototypes. This is often called the Valley of 
Death. That, to me, is a fine source of some additional funding 
from the government just as you suggested.
    Dr. Sanchez, you mentioned the creation of a long-term 
high-risk research program and simulation-based engineering 
that cuts across all directorates of the National Science 
Foundation and other federal agencies. Another example of a 
novel idea. Again, you give an example of where we can direct 
some of our funds.
    Dr. Goodall, you mentioned four of these examples but I am 
going to mention one example that you did not mention in your 
oral testimony but you mentioned in your written testimony, 
that is that a single 300mm wafer today contains as much memory 
as the entire world's production of DRAM from 1985. One gigabit 
of DRAM cost $32,000 in 1985 but is a mere $8 today. If that 
doesn't show how far we have come, I don't know what does. That 
actually makes Moore's Law look pretty small.
    Dr. Iscoe, how could we forget your Bluebonnet metaphor 
ecosystem. I think you are exactly right. The Bluebonnet 
ecosystem applies equally as well to what I described at the 
university and government level and how they all fit together 
so appreciate your comments there.
    Dr. Freeman, let me address my first question to you. What 
is the single most important thing that the government has done 
to help the information technology succeed?
    Dr. Freeman. That is, of course, a hard question to answer 
but I believe that my friend and colleagues at the other end of 
the table, Neil Iscoe, has the answer and that is the 
investments of the Federal Government have created exactly that 
ecosystem that he was talking about. It started, as I 
mentioned, with research investments in the 1950s, largely 
militarily oriented in those days. That started to create a 
cohort of engineers, of scientists. It helped build up our 
universities. If you look at what federal funding has done 
since, over all I would have to say it is creating that 
ecosystem. If I might, I would just remark that I believe the 
Gathering Storm report that Mr. Powers mentioned and, indeed, 
we all believe it is an extremely important report, addresses 
exactly that issue. It is one that we considered at the 
National Science Foundation to be extremely important, as you 
know. We focused on the innovation research and education. 
Indeed, my directorate funded last year a study by the National 
Academy precisely on the subject of the ecosystem of IT 
innovations.
    Chairman Smith. Thank you, Dr. Freeman. You will understand 
why I'm letting everyone else answer this question except for 
you. Dr. Powers, I will start with you. The question is this. 
The National Science Foundation budget increased by eight 
percent, which is a pretty healthy increase. If you all will 
respond, if you could, and determine how you would use that 
extra eight percent. Where would you want that to go in the 
National Science Foundation this year?
    Dr. Powers.
    Mr. Powers. By the way, I will reiterate my personal, and I 
believe most of the people I know who agree with what they do 
every day, support the competitiveness initiative and these 
issues because I think they are terribly critical. Mr. 
Chairman, I think my bend, and you have probably heard it from 
the university perspective, of the seed that we developed in 
the Big 12 center would be to support and encourage the 
nurturing of collaborative efforts for universities and 
business and the private sector all have to come together in 
new and meaningful innovative ways to make a dramatic change. I 
mean, I think Dr. Goodall spoke to it in a SEMATECH context. It 
has been a very key ingredient in our Texas technology 
initiative to encourage disrupting technology, to encourage new 
things. We think we have got to bring the best minds and the 
best thinkers together. The bottom line and my answer would be 
collaborative, cooperative, multi-disciplinary, multi-
institution type approaches. When we put that much mass and 
that much horsepower we achieve a result that is dramatically 
different than what would otherwise be obtained.
    Chairman Smith. Thank you.
    Dr. Sanchez.
    Dr. Sanchez. Well, I totally agree that investments should 
go into multiple programs that are sufficient in scope for the 
21st century. The National Science Foundation has had a very 
successful program of science and technology centers, materials 
research centers that bring together different components of 
each university and industry to tackle challenges. The 
community at large is full of ideas. They know what are the 
problems that we need to solve long-range, long-term. I am sure 
the National Science Foundation once they put the program of 
this type into place, it is not short of good proposals and 
good ideas. Most of the events should go into collaborative 
work and specifically focusing on challenges.
    Chairman Smith. Thank you, Dr. Sanchez.
    Dr. Goodall.
    Dr. Goodall. I have to answer the question by elaborating 
about my second answer and that is I would probably recommend 
something to collaboration but specifically in convergent 
technologies, biotechnology and nano, the things that have 
verification and are potentially huge revolutionary.
    In fact, in the future the money doesn't have to go to 
industry but industry is where a lot of these nano fabrication 
infrastructure, research labs like our lab at SEMATECH, which 
is part of a partnership in Texas, sort of made that available 
for use by outside companies and they come to us. Since we have 
a specific mission and focus on semiconductors, what we have 
are hundreds and millions of dollars.
    There are no equivalents of that anywhere in the U.S. at 
the university. But we have that capability there. It is very 
directed to what we are doing. I would take some of that 
funding and not give it to industry but give it to the 
university research community in order to partner with industry 
to bring the additional small capability needed to turn that in 
a verification focus on semiconductor, into a focus that can 
support advanced energy and support nanotechnology.
    We are talking with these university researchers right now 
about doing that. The fact is that the funding is incremental 
but it would still be beyond their means so that is what I 
would do with the money.
    Chairman Smith. Thank you.
    Dr. Iscoe.
    Dr. Iscoe. Agreeing with the previous comments, multi-
disciplinary, big ideas. Disruptive technologies by their 
nature are technologies that basically create new industries 
and cause old industries to be replaced. Universities are 
unique in this country in that universities can handle long 
research and can with the help of the Federal Government be 
able to perform research. It doesn't have meaty commercial 
application short-term but has a phenomenal industry 
application longer-term.
    Chairman Smith. Thank you. Let me ask one more question. 
Dr. Iscoe, I will start with you. What do you think is the 
single most important current government program that helps the 
information technology industry?
    Dr. Iscoe. There are many programs that help the industry. 
Dr. Freeman had mentioned SBIR and ATP. There are a variety 
of--let me back up for a second. It is not so much about 
individual programs. It is the sets of all programs that make 
up this overall ecosystem. If you look at the development of 
the Internet, it started with three universities connected to 
computers. There were a variety of nets that got together, 
protocols, TCP/IP, and all sort of acronyms we developed.
    Those all came about through various programs. Together 
they all resulted in this thing. The Internet existed before 
the World Wide Web existed. It is just that most of the public 
didn't know it. It is difficult to pin one particular thing 
down.
    Chairman Smith. Dr. Goodall.
    Dr. Goodall. I guess I will cheat. One of them is DARPA. 
Although DARPA, in the Department of Defense, is not quite a 
program, it is an agency, but I think many of the things you 
listed actually came through them in things like global 
positioning system and all these things. I think the federal 
need for advanced technology through the military needs and 
university and industrial environment so I would say DARPA is 
the place where that sort of thing happens.
    The other one I would probably note is the National 
Nanotechnology Initiative which actually falls under several 
agencies in terms of how it is authorized because it drives the 
very far out long-term convergent technology research. NIH and 
DARPA are the two places that I think are very valuable.
    Chairman Smith. Okay.
    Dr. Sanchez.
    Dr. Sanchez. It is always difficult to single out just one 
program. It is clear the----
    Chairman Smith. You can always say the National Science 
Foundation.
    Dr. Sanchez. National Science Foundation has several 
supports for the IT community. I agree with Dr. Goodall that 
the nanotechnology initiative is a good model for finding other 
components of IT because it crosses different agencies, all 
directorates of NSF. One of the big problems that NSF is 
funding right now is an outbreak of cyberinfrastructure of this 
country relative to international so that is very important. It 
is not sufficient but I think that if this commitment to 
increase the funding in the physical sciences came to pass, I 
would hope that more programs such as nanotechnology within the 
technology initiative will be undertaken.
    Chairman Smith. And nanotechnology kind of fits that 
definition of where products maybe are not being realized as 
much as they might be right now. That would be more of a role 
for government. Although I don't think we will have to wait two 
years.
    Dr. Sanchez. Nanotechnology is beginning to pay off. I 
think that similar initiatives in the information technology 
area will have potentially a bigger impact and will come to 
pass faster.
    Chairman Smith. Thank you, Dr. Sanchez.
    Dr. Powers.
    Mr. Powers. Thank you, Mr. Chairman. In a rash of political 
correctness I agree with all of the previous speakers but a 
couple of salient points. One, if you want to produce an impact 
and make a result, you can cook $4 billion up for the National 
Nanotechnology Initiative. It changed the face of the planet 
when you make that kind of commitment with that kind of 
leadership.
    Secondly, I would agree with Randy that the military 
applications in DARPA, and I know the jurisdiction of your 
committee does not extend across that bridge at that point but 
you have the other federal granting agencies. The military 
applications are truly significant in information technology 
and commercialization and a lot of other things that wouldn't 
otherwise be commercialized but for the military application.
    I guess I will close with a plea. Congress being the 
institution that it is, I guess that is with my tongue lodged 
firmly in my cheek. I would have a concluding request that 
maybe there could be more collaboration between congressional 
committees and congressional research, if you will, so you tie 
together the defense applications and the DARPA applications 
with the work of your committee's jurisdiction which is more 
effective.
    Chairman Smith. Dr. Freeman.
    Dr. Freeman. I will observe what I think almost all of my 
colleagues have said, and that is when you step back from it, 
it is the programs that support the fundamental research, basic 
research, that in the long run have the greatest impact on 
industry. I would point to the example that I mentioned and 
that you elaborated on of Google. That was a basic research 
project. We had no idea when that was funded back in '92, '93 
that it would produce a Google.
    That wasn't the objective of it. It was a funding of a 
basic research proposal by some well-known Stanford professors. 
There was a big program at NSF at the time to fund basic 
research on digital libraries. Indeed, that program has been 
very seminal in a lot of ways. That created a part of an 
ecosystem in which two young graduate students were exploring 
algorithms.
    The surrounding ecosystem of Stanford of Silicon Valley 
permitted them to say, ``Um, that is an interesting idea. I 
wonder what we could do with it.'' In classic Silicon Valley 
fashion they went out and turns out it wasn't a garage. I 
believe it was an extra room in the home of one of, I think, 
Larry Page's girlfriend's parent's house when they decided that 
this had commercial possibilities.
    Chairman Smith. Thank you.
    I yield to the gentleman from Texas, Mr. McCaul. I 
recognize him for any questions.
    Mr. McCaul. Thank you, Mr. Chairman. I had one round so I 
am going to cover four areas. We have so much expertise here 
and I don't want to limit it. Feel free to jump in if you want 
to answer. I was not a math or science major. I was a history 
major.
    In 1957 the Soviets launched Sputnik. We had a decision to 
make within the government at that time, to either shrink from 
that responsibility and that challenge, or lead that challenge. 
We all know what happened. We met the challenge not only in 
1957 but in the '60s in the space race and President Kenney's 
call to land a man on the moon, which we did achieve by the end 
of the decade.
    I believe in federal investment and it is a tough budgetary 
time. There is no question about it. It might be too high but 
if there is ever a federal investment to make, it is in 
research and development. We have seen the success from the 
space race but we also saw success and see it today, not only 
at the federal level but at the state level with the enterprise 
found in emerging technology.
    In fact, CEO Keith McGavin told me the reason why he 
decided to take a stand in Texas in the Austin area was because 
he couldn't say no. I think the governor through his work 
certainly helped with the expansion of $3 to $5 million 
potential, we should say, investment in this area is due to the 
fact we are ready to invest at the federal and state level in 
these companies and in these technologies.
    I am always fascinated with the ecosystem, as you call it, 
the relationship, the synergy between the universities and 
private sector. The Federal Government plays a role as well. 
The National Academy of Sciences has said that Austin ranks at 
the very top of the list of cities. Because we have this unique 
relationship, we have the best minds in the world here. We have 
some of the best high tech companies also here. I know Lamar 
and I want to do everything we can to make that grow.
    My question to the panel, and I agree with Dr. Sanchez this 
is a national security issue as well because we have global 
competition, as we had the space race, with China and India. We 
are losing our talent, and yet we are not able to educate K 
through 12 and instill this interest, if you will, to the point 
we are having to import scientists and engineers and outsource. 
I think it is a gathering storm that needs to be addressed.
    The President's initiative ACI calls for: One, it doubles 
the combined budgets of NSF and the National Institute of 
Standards and Technology and the Department of Energy. Number 
two, it provides a place for education. Number three, those in 
the private sector, the R&D tax credit, which I think is 
fundamentally important to move forward.
    The President made recommendations to us but we appropriate 
in Congress. We made decisions on how best to spend the 
taxpayer's money. I heard from your testimony everybody is very 
supportive of ACI but can you perhaps look at how you would 
tweak that if you were a member of the Congress sitting in the 
position that Congressman Smith and I are sitting in?
    Dr. Goodall. Excuse me.
    Dr. Goodall. So I will tell you one thing specifically, 
having read the reports, both the Gathering Storm report for 
the National Academy and the ACI documentation itself, in the 
realm of education, in particular high school education, 
because I agree with doubling the physical science budgets, R&D 
tax credit straight down the line. I think in the area of 
education one of the things that I would like to see is more 
dollars applied to bringing industry people back into the 
educational system.
    There is what I consider to be a small almost trivial 
amount of money applied to that. We can argue the philosophy of 
how much teachers should be paid but the fact is it will not 
bring reasonable scientific and engineering leadership 
examples, leadership for kids, back into the educational system 
without the appropriate amount of subsidy for them to really 
engage in that system. I think the tens of thousands of them 
engage within the educational system. If you want to make a 
lifetime commitment to doing something like that, changing 
kids' lives, I think it is going to be--it is not going to be 
getting jobs.
    It is not going to be a philantrophic principle that needs 
to be a lifestyle degree and so I would like to see more money 
applied to the subsidizing program in education K through 12, 
especially high school. In particular with the challenged 
portion of school districts where kids just don't have that 
kind of leadership.
    Chairman Smith. Anybody else?
    Dr. Sanchez. Well, in the scientific and research 
community, I am going back to the word prioritize but I think 
we should and we must find a way of prioritizing the 
investments and in a way that will maximize the economic impact 
on the Nation. A factor of two, doubling the budget, is great 
but you need to ask yourself why a factor of two. I think there 
is the cause and the recommendation that there is a shortfall 
in the funding of physical sciences.
    It is direct and clear. We ought to correct that problem. 
The challenge is how to do that. What is the key? I think the 
agencies that have been chosen to implement or manage that 
investment are the right ones. The challenge for those agencies 
will be how to implement that significant investment. I am sure 
it is in good hands and I am sure it will be properly managed.
    Chairman Smith. Dr. Freeman.
    Dr. Freeman. I would certainly agree that the ACI is a 
great start. As my colleagues have already pointed out, there 
are additional things that can be done. One was mentioned in 
education. Mr. Powers, I think, in his testimony mentioned the 
funding of technology transfer, although I think we need to 
think more creatively than just the scientists who are creating 
it and we have to somehow transfer it but the whole idea of 
getting new ideas into practice sooner. I would simply note 
that the Gathering Storm report has, I think, 22 
recommendations in it so there is clearly a lot more that can 
be done as we go forward.
    Mr. Powers. Just a quick comment, Congressman McCaul. One 
part of the President's ACI program, as I understand it, would 
emphasize his pro-growth economic agenda by stimulating a 
business environment where innovators and entrepreneurs are 
rewarded. Let me put in a plug or a note for entrepreneurial 
training education programs and that sort of fundamental 
approach. Taking people in the science and scientific community 
and science disciplines and according them a proper 
entrepreneurial education. I think the new professors and new 
hires at colleges ought to be interviewed or reviewed in part 
for new hires based on their entrepreneurial intent. In other 
words, is this professor going to ultimately help commercialize 
technology or not? That ought to be part of the employment 
decision. I think we ought to encourage entrepreneurial 
training.
    Mr. McCaul. That is a nice segue. In the interest of time I 
want to move on to the next topic and that is the tech transfer 
of intellectual property and venture capital for 
commercialization. SEMATECH takes good ideas to the 
marketplace, I believe.
    The most important tech transfer is the students that get 
transferred from the universities to the private sector. That 
is the next generation of technology. When I got a tour of the 
research and development in the university I saw really a two 
part deal. I saw a lot of students who we had invested in in 
terms of money and training but they were probably 80 and 90 
percent not from this country, primarily from Asia.
    I asked if they were going to stay here as we need 
engineers. The answer I got was no, they are going to return 
and go back to China or where ever they came from. That 
troubled me because we were spending so much time and money to 
invest in them and then losing them. They were going back and 
investing in places like China. I don't know what the answer is 
in terms of that.
    The second question is that partnership between the 
university and the private sector can be hiring. We have, for 
instance, Samsung expanding, Hewlett Packard. Yet, our own 
students here being provided these highly skilled jobs or they 
won't make that jump into the marketplace.
    Dr. Sanchez. Well, my view is that science and engineering 
is a global enterprise. Those students do contribute during the 
time they are here. Those that go back we lose. It is 
critically important for the health of research activities in 
this country that we continue to work openly with the colleges. 
I don't have clear statistics but I would guess that a good 
number of Nobel prize winners over the last several years have 
been born overseas.
    There is a significant return on the investment. It is 
diminished. We don't have the same involvement in research and 
development as we used to but that seems to be the nature of 
the new global economy where not only are those students 
returning to their place of origin but we do have native 
American companies that are moving their research and 
development activities overseas. That is a serious challenge. 
The only answer to that is for us to create the environment in 
this country. That will be our challenge.
    Mr. Powers. Congressman, the Rising Above the Gathering 
Storm report has a comparative economic statement. When asked 
in the spring of 2005 which is the most attractive place in the 
world to lead a good life, whatever that means, respondents in 
only one country out of 16 countries polled indicated the 
United States.
    I would submit it is equally important beyond money and 
policy programs that we build cultural relationships that 
communicate and connect like we have in Austin emphasizing why 
this World Congress on Information Technology is a world event 
with 2,100 delegates from 80 countries being at Austin is a 
deliberate attempt for us to showcase what makes a difference. 
I think we have a unique relationship and collaboration with 
others. I would close by saying we need to bring that to the 
national stage as part of your policy, part of what you guys 
do.
    Mr. McCaul. That is a great point. Anybody else care to 
comment?
    Dr. Iscoe. Let me just add on to that. So this WCIT in 
Austin, Texas, come move your company here because it is a good 
place to be. It really is a situation where it is a country 
providing an environment where people want to stay as opposed 
to going back to their country. Most of my life has been in 
industry and I have been, as director, sponsor of many, many 
H1B visas all throughout the citizenship chain. There are many 
people who are staying. I think it is possible, as Pike said, 
to make the environment in which we can make a place that 
people will remain and keep our competitiveness.
    Dr. Goodall. Maybe I will just reiterate my previous point 
is that we need to grow our own. The kids that you maybe were 
hoping to see populate the university would come from American 
high schools and they are not coming from American high 
schools. I think there is a profound failure somewhere in our 
education system, maybe even our social system, that is leading 
to that and I think we need to find a way to overcome it and to 
rekindle the imagination of kids, specially those who don't 
have--in Austin your dad might work in a high-tech company. If 
you are in Nacogdoches maybe he doesn't and so we need to find 
ways to bring the world of technology to kids who live in areas 
where technology isn't there. The future of technology is going 
to be quite distributed. The centralization era is probably 
over for technology and it is going to be possible as we see in 
a lot countries who are bootstrapping kind of for nothing 
rather than the industrial basis that we have.
    The Internet puts people wherever they need to be. Wherever 
they want to live they can be but you have got to understand 
that science and technology can allow you to live in your 
hometown and still be an entrepreneur in the technology area if 
you have the right activities and the right connections to 
regional infrastructure. I talked to a guy who is from Red 
River, a little town of 3,000, trying to understand how do I 
get the kids in our high school to just not leave town and 
never come back.
    We were talking about some old system where you could just 
pack some technology into a van and take it to high schools 
around that region and show kids what is really going on. I 
think if we don't figure out how to do that, that we will only 
be able to retain the rest of the world's people as best we can 
or we won't be able to populate our universities and eventually 
our companies with our own people.
    Mr. McCaul. I agree that it is a problem. The advanced 
placement program is a good idea but it is a very, very 
difficult challenge we have. Again, in technology we face real 
crisis with our energy policy. We have had one for a decade. 
Congressman Smith and I voted for the Energy Bill that provides 
money to ramp up production and $5 million for all-target 
technology.
    I see Austin is a great sort of opportunity probably in the 
alternative, particularly at the university where we do have 
research being done on hydrogen fuel cells and we are working 
hard to make sure in the future that DOE will fund that. We 
have in the science community the H-Prize which was awarding 
prize money to somebody who can develop hydrogen storage 
facilities, a hydrogen vehicle that is cost effective. It is a 
challenge for the private sector as well. I think this is 
probably one of the biggest national security issues of the 
day. This is the future.
    Dr. Sanchez. The set of conditions that are currently 
evolving around the energy situation, people refer to this as 
the Perfect Storm. There is no issue more critical to the 
Nation. Texas for historical reasons is in a position to make 
major contributions to that. The solution is not really a 
solution to energy.
    It is not just enhance automobile production but it is 
extremely important that we have technologies and use 
everything we know about technologies and nanotechnology to 
increase production in Texas and elsewhere. The problem, as I 
see it right now, we are not moving fast enough in finding 
those alternative technologies that will transition us to a new 
one.
    I live in western Texas and I think we do cover the entire 
range of technologies that relate to it. We have developed a 
strategic plan for an institutional approach to answer those 
questions rather than typical departmental approach and we will 
implement that plan. That plan has been to the table. Congress 
has a stake in the future so we are absolutely working on it.
    Mr. McCaul. Anyone else care to comment? I know the time is 
brief.
    The last issue, security. We had a recent intrusion here. I 
remember testifying before Lamar Smith when he was Chairman of 
the Subcommittee. I am very honored to sit with him now as a 
colleague.
    Security is an issue that I studied and it is always a 
concern to a great deal, the idea of a foreign power. Our 
military has the capability to shut down foreign powers. It is 
a matter of time before they get through to us. We saw a recent 
intrusion at the university and I just wanted to ask how secure 
are we on this issue?
    Dr. Sanchez. Well, I don't think anyone is entirely secure 
or anyone that wants to be connected to the Internet is 100 
percent secure. It is a moving target but we are making 
progress in this area. It is not just the University of Texas. 
It is every university in the country which is challenged by 
these two competing needs. One is to be secure, to protect 
data, to protect research data, to protect financially on the 
one hand. But on the other it is to provide an environment that 
will allow researchers to communicate and transfer data. It is 
really a major challenge.
    The answer, I'm sure, is somewhere. We have the tools to be 
100 percent secure. I am not an expert in the subject but I do 
see two competing interests. Be open so that we can create this 
data system that we are talking about and will we benefit from 
access to the information. And, on the other hand, to protect 
the information.
    Mr. McCaul. Thank you, Mr. Chairman.
    Chairman Smith. Congressman McCaul, thank you for those 
great questions. I do want to say something you and I are both 
interested in. Elizabeth Grossman just reminded me that the 
Science Committee is developing legislation--I am sure we will 
both co-sponsor--on K through 12 and undergraduate education.
    These are some of the provisions in that legislation which 
may come out as soon as next week. K through 12 teacher 
training and professional development, scholarships for math 
and science majors who become teachers, curriculum development 
at the undergraduate level, improved math and science courses 
for teaching, interdisciplinary programs. Dr. Freeman, you will 
be hearing from us once again.
    We thank you all again for your participation today and for 
your expert testimony. It is valuable to us. I just have to 
tell you I learn day after day that there is simply no 
substitute for person-to-person communication and person-to-
person communication of knowledge that we otherwise might not 
have, so this is all very, very important to us.
    As I say, we have records of everything. We will take the 
testimony back to Washington and use that to I hope follow up 
on your suggestions. We share your concerns about what we need 
to do. We certainly share an interest in making sure that we 
have a healthy commercial economy. I thank you all again. We 
stand adjourned.
    [Whereupon, at 4:10 p.m., the Committee adjourned.]
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