Innovation and Invention in America

Precious Little

In these days of waning American dominance in world trade, what is being done to hone America's competitive edge? Precious little, in the author's opinion. The government is giving large grants and research contracts to universities, where less than 5% of American innovation has historically occurred, and to Big Business, where even less has occurred. Well funded PR campaigns usually tout all of the alleged positive things that these infusions of funds will accomplish for the universities, businesses and communities to which they fall, in terms of prestige, jobs, etc., but the principal benefit is to the universities and businesses, who get larger and more self-serving, and better able to attract government grants and contracts. What few new inventions and innovations come from these sources, whether of real use or not, are played up in technical papers, journal articles and the media as progressive genius, real milestones on the path to great achievement. But, more money is always needed to complete the work, which will of course, continue as long as the funding source can be milked. In addition to the preferential treatment in awarding grants, big business gets tax credit for any of its own funds invested in research.

$25,000 or More

The private inventor, on the other hand, from whom genuine ingenuity and progress historically stems, receives no such support. It can cost the inventor as much as $25,000.00 to protect his or her invention, including legal fees, drafting, United States and foreign patent filing fees and issue fees. That is rather difficult to come by on an annual salary which may be less than that before taxes, and you won't find many bankers beating a path to your door to loan you money to patent or develop an idea. Venture capital firms (companies that lend money for business development and speculation), tend to shy away from individual inventors, preferring to gamble on less risky ventures, such as established businesses with highly-credentialed management teams in place. And, the uninitiated inventor seeking capital from venture financiers is usually shocked to learn what must be given up in return for financing, if it can be had at all. In addition, assuming that the inventor manages to acquire a patent, inventors must now pay maintenance fees on them. Prior to the Reagan administration, inventors were granted patent rights for seventeen (17) years, and paid a one-time issue fee. Nowadays, the inventor must, in addition to application and issue fees, pay an escalating maintenance fee every four years, or abandon the patent. It usually takes at least twice that long or longer, to promote an invention, obtain financing and bring it to market. All these costs drain funds from needed development and marketing efforts, creating even greater difficulties for people who may be just making ends meet, as it is.

SBIR

The Federal Government, bastion of the common man, has a program called the Small Business Innovation Research, or SBIR program. This program grants up to $50,000 for a Phase I feasibility study, and up to $500,000 for a Phase II development effort, if Phase I indicates potential benefits. The U.S. Department of Defense agencies, such as the Army, Navy, Air Force, Strategic Defense Command, etc., and civil agencies including the Department of Energy, National Science Foundation, NASA and others, all have annual SBIR announcements which list topics of interest to the government, and an outline for preparation of proposals. The government's definition of a small business is any business with less than 500 employees, which is not dominant in its field, and which has an annual income of less than $15 millions (depending on the type of business). The primary criteria for consideration for a grant are: the government's assessment of the firm's capability (resources/facilities) to carry out the research, the qualifications of the Principal Investigator (PI) and the technical quality of the proposal. The first two criteria are the killers, as far as independent inventors are concerned. The five- or ten-employee business, with few facilities, has a poor chance of obtaining funding, and the independent inventor less than none. Also, an advanced university degree is almost essential for consideration. If the PI does not have an M.S. or Ph.D., there are few agencies that will seriously look at a proposal. Too, one does not simply crank out a proposal. There are proposal writing skills that must be learned in order to secure a review. Technical knowledge of your invention or idea simply is not enough.

They Couldn't Get a job in Their Own Company

When we consider the fact that we have hundreds of thousands of very bright electronics and computer technicians, innovative workers in service and manufacturing industries, people in all crafts and professions who are just as intelligent as their university educated counterparts, and quite often, brilliant in their particular field of expertise, then we are eliminating and ignoring the majority of the real talent in this country. Having a university degree or working in a large company does not guarantee innovative ideas, or even increase the chances of successful development. Henry Ford and Thomas Edison could not qualify for a grant under the SBIR program, nor even get a job in the engineering department of Ford Motor Co. or Edison Electric Co., the companies they founded, today. They did not have university degrees, and they were independents. The same applies to Alexander Graham Bell, Goodyear, Marconi, Mercer, the Wright brothers, James Watt, Eli Whitney and thousands of other people whose ideas created the entire industrial base of this nation. The SBIR, by concept, is aimed at small business, but because of its predilection for $80,000 per annum Ph.D.s, it forces small businesses to go to universities for the credentialed people, then to make it more difficult, specifies that the PI cannot be a full-time employee of an academic institution. These restrictions have resulted, as usual, in the eruption of "fast-buck" front corporations which hire moonlighting Ph.D.s and spread them over several SBIR proposals submitted by lone inventors. The front pays the PI the bulk of the amount programmed for the direct costs (actual work) to perform a six-month study under the SBIR Phase I award, claims all the indirect or overhead costs, at a rate usually exceeding 100% of direct costs, and the inventor supplies all the background data and research (sometimes amounting to years of labor) necessary for the report, for a pittance; usually just enough to cover supplies and materials. The same scenario is played out again if this business menage a' trois succeeds in getting a Phase II award. The Ph.D. gets a large sum for the use of his credentials, the front firm gets rich and the inventor gets zip. There is little or no intent on the part of the front to successfully develop the invention. To do so would reduce the amount of funding charged to overhead, which is direct income to the front, and would require further costs to actually market the end product. It is far easier to simply take the grant money and go on to the next inventor.

Parasites

Another form of parasite can be found in the classified ads of almost every technical magazine. This is the company which advertises that they will help the inventor patent and market an invention for a nominal sum. The inventor pays the company an up-front fee of $3000 or more, and the company supplies the inventor with an invention disclosure form which he can file with the U.S. Patent Office for a $6.00 fee. They may also provide a list of patent lawyers. Both the disclosure process and the list are readily available to any citizen, directly from the Patent Office, for a few dollars. The disclosure form is not a patent, and does not protect the invention. It is simply proof of conception in a later dispute over who conceived the invention first. The company can then keep the inventor at a distance for years, with an occasional letter stating that they are pursuing some avenue or other, which of course, ultimately turns out to be unsuccessful. The company spends a few dollars in postage for a return of $3000+, and the inventor has been suckered yet again.

A Pandering Government

If a mind is a "terrible thing to waste", why are we using elitism and special interest demagoguery to waste as many as possible? The end result of the foregoing, and the current state of affairs, is a government that panders to the wealthy businesses and universities, and allows our country to slide into economic ruin. A few years ago, there was a great deal being written about the Japanese practice called "quality circles", which simply means that the Japanese were involving labor, the shop foremen, production line workers, administrative types, office workers and shipping clerks, employees at all organizational levels, in round house discussions to find better ways of doing things. They offered incentives to those whose ideas were used, in the form of profit sharing, bonuses, royalties, etc. This is innovation. This is what privately owned companies once did in the United States, before the companies went public and hired Harvard MBA's to run things. Now, American businesses often require employees to sign an agreement upon employment, that any idea or invention that they come up with, automatically belongs to their employer. Our government does the same with civil service workers, in paragraph 100.6, 37 CFR. That is a real inducement to come up with ideas and inventions, isn't it? The results achieved by the Japanese ought to be obvious by now to the densest bureaucrat, but apparently ours are willing to sell our population into the dark ages in order to nourish a wealthy elite. We are a debtor nation, and we will soon become a foreign-owned nation, if we do not forget our petty greed and begin utilizing our human resources in the fashion that made America the greatest nation in the world to begin with. Most Americans, if given an opportunity to achieve success through independent thought and action, will work tirelessly to accomplish it, but they have to feel that there is an achievable reward, an attainable goal, before they will expend the effort. If they believe that they are going to be cheated out of the fruits of their labor through taxes, legal manipulation, and the failure of government to look after the interests of the people it works for, why should they strive to achieve anything?

Another Way

There is another way! If we want to encourage innovation, we have to tear down some of these barriers, so that the people with the ideas, regardless of their credentials or wealth, can get a fair review and support in developing and marketing useful ideas. A government program is the quickest avenue possible for making this happen, but we need real action, not just another smokescreen. We need local review boards in every major city, made up of five-member panels from industry, the universities and marketing firms. We need easy access and simple submission procedures which anyone can use, and we need low-cost patent assistance for the independent inventor, with no maintenance fees on patents. We also need an international agreement with all other nations, that all will honor the patent rights of all other countries without fees. Such an agreement is in the best interests of everyone. We also need a standardized agreement to protect the inventor, and assure him or her a fair share of any profits derived from an invention, and this agreement should be public law, honored by every employer.

At No Cost to the Taxpayer

Such a program, if run properly, would not cost the taxpayer a cent. Marketable inventions would pay a reasonable royalty to the inventor and to the government, and the government would realize far greater revenues than they now derive from patent maintenance fees and regulations that impede the inventor. Business and the universities would also benefit from a greater infusion of technological advancement and know-how for the buck than they have ever known in the past. There is nothing to prevent business from taking the initiative, and offering royalties on any inventions that the company decides to use. If the inventor/employee received five per cent of the profits realized from sale of an invention, the company would realize ninety-five percent, and that's a pretty good margin anywhere. Any company that has tried a suggestion program which rewards good ideas has been inundated with them, and bigger companies usually have had to hire someone just to process and screen suggestions. And it works. Literally millions of dollars have been saved by the government in those agencies that have a strong suggestion program. Think what a new product or process could mean. What company could not use another Apple computer, a substitute for strategic metals, a burglar-proof anything, a means to reduce shoplifting and stock shrinkage, a means to motivate workers such as a share-the-wealth policy? Look at the Japanese. In 1945, they were the lowest pockmark in the pit of oblivion. They were a conquered nation, totally dependent on the rest of the world for resources. They still import almost all their energy, raw materials, and food, but in 1990, they are the greatest economic power on earth. Are we so blind that we cannot see, or so greedy that we will not see? What do the universities and businesses do with their wealth and prestige after our economy collapses? Buy yen?

The Light of the World

Just as in our school system, it is not American intelligence or inventiveness that is decreasing, it is the method, the regulation, the system that inhibits learning and prosperity. If the government will do its duty and support the common citizen rather than the campaign contributor, everyone will benefit from the effort, and American innovation will be the light of the world, just as it once was. If industry and the universities will do their part and encourage innovation through incentives, no country on earth will be more prosperous, business will boom and America will again set the pace for financial achievement and the standard for quality of life for the rest of the world.

...Lee Fellows...

© Copyright 1990
Institute for domestic Tranquility