CRC-Predict A Case Study in Managing Multiple Objectives

1. CRC-Predict A Case Study in Managing Multiple Objectives In a federal laboratory license to Industry Presentation to the Federal Partners in Technology Transfer Ottawa, Ontario June 2, 2008 Kevin Shackell Manager, CRC Technology Commercialization Communications Research Centre Canada

2. A Brief CRC Overview • Primary federal government laboratory for advanced communications R&D, with approximately 240 research staff • Technical advice to Industry Canada to assist in development of telecom standards, regulations and policy • Government R&D clients include National Defence, Canadian Space Agency, Public Safety and Emergency Preparedness Canada • CRC collaborates with industry, universities and research centres nationally and internationally • CRC Innovation Centre helps small high tech start ups to develop their commercial potential through on-site incubation

3. CRC Mission • To be the federal government’s centre of excellence for communications R&D, ensuring an independent source of advice for public policy purposes • To help identify and close the innovations gaps in Canada’s communications sector by: • engaging in industry partnerships through collaborative R&D; • building technical intelligence; and • supporting small and medium-sized high technology enterprises through technology transfer.

4. CRC Campus

5. Research Branches • Terrestrial Wireless • Broadcast Technology (radio and television) • Satellite Communications and Radio Propagation • Optical and Broadband Network Technologies

6. CRC Technology Transfer 2007/08 Active Agreements: License Agreements 335 Collaborative Agreements 50 MOU’s, MOA’s, NDA’s 119 Total active agreements 504 Typical Agreement Volume Over a Year: Licenses 45 Collaborative R&D 40 MOU, MOA 10 NDA’s 20 CRC Innovation Centre Agreements 5 Total new agreements 120

7. CRC – A History of Radio Science Research • Radio Propagation Research – an original core competency of CRC dating back to the early 1950s • Development of manual calculation techniques to predict signal strength and fading of radio waves • Growth in new radio, TV, and mobile radio services in the 1970s

8. Computer-based Modeling & Calculations • New and more accurate computer-based prediction methodologies required • CRC took the lead and initiated research in the field of propagation measurement in the 1970’s • algorithms developed by CRC to more accurately model underlying physical phenomena such as diffraction, topographic scatter and terrain irregularities • CRC-Predict – considerably more accurate and robust computer-based prediction program

9. CRC-Predict Features • Wireless service planning tool for cellular, mobile wireless, and broadcasting • Estimates radio signal strengths on terrestrial paths at VHF and UHF • Works with topographic database • Accurate prediction capability • Internationally acclaimed as one of the most accurate models compared to other similar models

10. Technology Transfer • Software originally developed to help Department of Communications with radio spectrum allocation across Canada • Fortran version was widely commercialized through mostly single-user license providing software in executive code form to radio engineers and broadcast network planners for radio and TV transmission planning • Over 100 licenses issued in early 1990’s in Canada and abroad

11. Commercialization Opportunity • Growth of cellular services; limited spectrum availability and interference issues brought to the forefront • Ottawa-based Northwood Technologies recognized the robustness of CRC-Predict and entered into a collaborative agreement with CRC in 1997 • Integration of CRC-Predict into Northwood’s DeciBel Planner wireless network planning software • Non-exclusive license granted to Northwood

12. Leading technology in its field • By 2001 marketability of Northwood’s cellular network planning tool greatly enhanced by addition of CRC-Predict • Northwood initiated negotiations for exclusive license to secure competitive advantage • sales of enhanced product with “Government” technology inside exceeded expectations • CRC regularly approached by competitors for CRC-Predict license

13. Securing a deal • Intensive negotiation both internally at CRC and with Licensee for exclusive field of use license • Due diligence review of existing licenses to minimize competitive impact (a number of older Fortran source-code licenses were issued which were cause for concern) • Minimum annual royalty requirements to ensure revenue stream for CRC • Northwood wanted an exclusive license, while CRC only willing to give a sole license in a field of use specific to telecom applications

14. Assignment Rights in Licensing • Assignment rights became a deal breaking issue • Standard template response was “no assignment without prior written consent of CRC • No de facto assignment through a reorganization, merger, consolidation, acquisition or other reorganization…. • Northwood not prepared to sign a license agreement that did not offer rights of assignment to a third party • A Notwithstanding clause was demanded by licensee

15. Benefits to Canada “Notwithstanding” • Notwithstanding a) above, consent to assignment of this Agreement shall not be unreasonably withheld where: • i) the assignee undertakes in writing to be bound by all of the obligations of this Agreement; and • ii) the assignee maintains an active business presence in Canada.

16. Benefits to Canadian Economy • Inclusion of tight assignment provisions to ensure continued exploitation of the technology in Canada • In 2001 less than 3 months after the Northwood deal closed, tight assignment provisions proved beneficial when multinational Marconi PLC purchased Northwood for $42 Million in cash • Kanata was designated the new Marconi business unit for wireless network planning worldwide, pulling in former UK-operations for R&D in telecom network planning tools • In 2006 Ericsson Canada Inc. purchased Marconi Wireless, business unit moves to Gatineau to maximize R&D tax credits.

17. Outcome of Technology Transfer • June 2007 Another Changing of Guard • French-based CTS purchases assets of Ericsson’s Canadian-based wireless network planning unit • CTS creates a new Canadian entity -- Mentum • Mentum affirms Gatineau as the world product development centre for its wireless network planning software • 47 person years of employment at Gatineau office • 4 licensee holders over 10 years – technology remains exploited in Canada for the benefit of Canadians

18. CRC Exploits Broadcast Market With CRC-COVLAB and COVLITE • CRC retention of “sole” provision proved beneficial • Licensed to more than 50 broadcasting planners in Canada, Australia, Taiwan, Korea, Japan, Portugal, Germany, Switzerland, and Mexico • Over $750,000 in licensing revenues from 2001 to 2008 • CRC-COVLAB Designated as CBC’s central broadcast planning tool • Field of use license allowed CRC to continue to exploit in its primary area of broadcasting interest while industry got telecom

19. Lessons Learned • Pressure to close a deal quickly indicates external third-party forces at play (Northwood acquisition by Marconi) • Field of Use licensing provides a range of options for licensor during negotiations • Internal hurdles in licensing can be just as formidable as external (identify opposition early and plan to deal with it) • Companies prepared to pay for technology if value proposition and sales potential can be demonstrated • Continuing R&D support critical to the tech transfer success

20. Conclusion • In Summary • Innovative technology development took a decade before successful commercialization • Originally developed to assist regulatory requirements • Licensed to a Canadian company, with ownership transferring to three foreign companies • CRC has received over $1 Million in royalties over 10 years and the companies have created and maintained approximately 50 Canadian jobs over the decade • License fees and royalties helped further CRC R&D program • Significant taxes collected by various levels of government based on the high tech job creation

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