The call for a fighting fund for inventors highlights a fundamental flaw.
In December 2003, the Minister for Science and Innovation, Lord Sainsbury, announced a new, radical plan that the Government were considering, which would allow British inventors to draw on a central fund to fight companies that steal their ideas. He said that a lot of the big companies have deep pockets, which means that they can fight for a long time against smaller firms or individuals. That call for a fighting fund for inventors highlights a much deeper problem; It defines a fundamental flaw in the capital structure of the nation. We need to analyse the question; why would inventors need a fighting fund?
Patents were devised as a way to permit someone with a new idea to be able to protect that idea for long enough to be able to establish a stable long term business. The patent was thus able to carry the idea from the inventor into general use through the mechanism of investment of capital to pay for the development of the new process or product. By issuing the patent, the governments intention was to provide enough protection to an inventor so that the new idea had a firm footing from which to grow into a strong business. I must emphasise the bit about growing into a strong business, for this is a long term process that can take decades to achieve. By this mechanism, the inventor creates a new competitive business that in large part serves to control the existing large companies or groups by making it impossible for them to interfere with these developments. This is fundamental to the competitive marketplace. It is this point which begins to bring this debate into focus. For, without any mechanism to capitalise the inventor, the patent will be useless and the competitive process totally breaks down.
So, if the Minister of State no less, backed by the full support of all the power of knowledge of the state says we need a fighting fund for inventors, what does that say about the environment within which the inventor operates? It tells us much more than that we need a fighting fund. For a start, let us assume there are adequate capital markets for the inventor to tap into so that they can develop their ideas; in that case, the inventor has access to all the funding they need to develop their ideas and as such, there will of course be a reserve to pay for the defence of the patent. The fact is there is no capital market place from which the inventor can raise the capital they need to develop their invention. Please, do not come back to me and cite the likes of the British Venture Capital market. Venture Capital is the last bastion of feudalism, the feudal lord that demands to own the whole thing. Free enterprise is founded upon the rock of the manager of the business owns the business, so forget the venture capitalist. The VC insists on owning the business and the inventor is immediately demeaned and marginalized. Worse still, if the inventor takes the VC shilling, his idea is on track to be sold to the largest company or group as the way of making the most profit from the sale at the earliest opportunity so that the VC can get out of their investment ASAP with a fat profit. Thus the whole idea of making the invention a mechanism as a way to promote competition is totally negated at the first hurdle.. So in this case feudalism wins hands down. Competition? forget it! Long term growth of a new business owned by the inventor? You can forget that too.
But if taking the VC shilling is the only way forward, still the question remains; why is there a need for a fighting fund for inventors? This makes a fascinating debate. The City of London will say there is always adequate funding available for any good idea; yet the minister says there is a need for a fighting fund........let alone he does not mention that a fighting fund is just a small part of the ongoing long term investment commitment needed to nurture a fully competitive world class business. The truth is, there is no capital marketplace for new inventions on free enterprise terms and, the truth is, those of us with new ideas are not prepared to sell out our free enterprise principles to feudalism. Why should we? We live in a free market, free enterprise economy. Further, Feudalism has been shown to be a complete dead end for centuries now. Yet it still hangs on when it comes to financing new business.
Ah! and now we get to the nub of the matter; for we do not live in a free market economy when it comes to capital for investment. You can visit any major town in the country and buy a tonne of potatoes or carrots from a fruit and vegetable market. Same for steel, timber, you name it... except for capital for the inventor, for the holder of a new business or product idea that might, in time, compete with existing products or processes. The fundamental foundation stone of a free market economy is free access to a market for whatever we need. For without that marketplace, there is no competition, no free enterprise.
Thus that simple statement is an admission that the city of London has lost its free market credentials, if it ever had them in the first place. Moreover, there has been no leadership on this subject for decades from any quarter. The Bank of England has an industrial department; why have they not put in place free markets for capital? The Department of Trade and Industry? forget it. The record is clear, like any government department, their commitment is to as long a debate as possible, not to action. The result is we have a desperately unbalanced economy with all investment going into either house prices or large businesses.
The government must immediately implement a program to create free marketplaces throughout the country for capital for investment in industry on free enterprise terms. We do not need a fighting fund, or insignificant grants from disinterested bureaucrats. We need free enterprise market places for capital for investment; and we have every right to expect that a free enterprise nation should provide them.