X-Message-Number: 6498
Date: Thu, 11 Jul 1996 14:24:01 -0600
From: Stephen Bogner <>
Subject: Royalties from Prometheus


I think that Ken Stone is entirely correct.  Granting royalty free status to 
anyone, even an "inventing" 

participant, is an abuse of the rights of the shareholders to a fair return.  
After all, the only 

tangible financial output of the research enterprise is the intellectual 
property which it generates.  If 

this is not preserved, then the whole venture is philanthropy rather than 
investment.  This also means 

that shareholders ought to be opposed to any research arrangements which propose
to vest the IP in the 

researchers (or their corporations).  Human nature being what it is, I would not
be surprised to see such 

arrangements proposed.  The only entity which ought to own the resulting IP 
(which it will be paying for 
after all) is the Prometheus Corporation itself.


In practice, research contracts which are expected to generate IP (and it is a 
very questionable bit of 

research that doesn't) generally set out the "background" IP that is being 
brought into the venture at the 

front end, and vest any "foreground" IP created during the activity in the 
sponsoring entity, with 

arrangements to compensate the inventors with a reasonable percentage of the 
royalties which are 

ultimately received, if any.  If the inventors are not compensated reasonably 
for their efforts, then 

there is the very common phenomenon of key researchers leaving their employment 
at a critical time (always 

prior to the breakthrough), inevitably to find that their creative capacity is 
considerably enhanced by 
the freedom that they suddenly find within their own newly formed corporations.


I would propose that any and all corporate entities (profit or non-profit) which
participate in Prometheus 

at a minimum value, say $250K over the 10 years of the project, should earn an 
option to obtain a 

non-exclusive, non-sole, non-assignable license to the entire unseperated bundle
of IP (patents, 

copyrights, trade secrets, industrial designs, etc.) created by the project, at 
the best price at which 

this property is offered to anyone by the Prometheus Corporation.  Other 
entities would also be entitled 

to negotiate licenses, but would not be entitled to expect the same deal as 
active participants.


This arrangement would be fair to the shareholders (including the participating 
corporate entities 

themselves), and would allow the value of the property to be set by market 
forces at the time that its 

value can be determined (which is obviously not at the outset).  It would also 
allow fair access to all 

of the technology for those organizations with the foresight to participate, and
on the flip-side, provide 

some measure of potential commercial consequences for those organizations which 
do not.


Also, the concept of an unbounded option for unlimited numbers of shares at the 
initial offering price, to 

be exercised at any time within the 10 years of the project is simply unsound, 
as Greg Stock correctly 

points out.  One of the key mechanisms to compensate investors is capital 
appreciation of stock (the fact 

that it needs to have a good mechanism for liquidity is a seperate issue), and 
an option like that being 

proposed (an unbounded supply) would entirely erode the supply-demand 
relationship that is needed for 
appreciation.


As an investment, Prometheus Corporation looks like an extreamly speculative, 
high risk venture.  High 

risk must be compensated by high potential rewards.  Most people reading this 
will be very familiar with 

the concept of accepting long odds in the face of limited options.  However, 
there are many options for 

investments, and we must not erode the basic business logic of the venture by 
creating naive structural 

disincentives.  There is room in every investment portfolio for a limited amount
of "high risk" stock, but 
only because the potential high rewards balance the risk.


I respect the passion of many of those participating in this discussion.  As 
someone who has not yet made 

cryonics arrangements for myself, I recognize that I am perhaps stepping over 
some line or another with my 
next comment,  and so I apologize in advance to those who might be offended.


I think that it is important to not allow one's judgement to be clouded by 
emotion or wishful thinking at 

the onset of a great enterprise.  Certainly, many great ventures would never 
have been attempted if people 

we not moved to extend themselves beyond their capacity because of their aroused
emotions; however it is 

instructive to consider how often such voyages break up upon the rocks of 
reality, or end in acrimony when 

unrealistic expectations assert themselves, as they inevitably must.  Far 
better, in my view, to set 

ambitious, inspiring goals, but at the same time set hard, objective benchmarks 
based upon conservative 

assumptions about what can really be achieved by imperfect people in an 
uncertain and obstinant world.  I 

try to adhere to Robert Heinlein's advice:  "What are the facts, to how many 
decimal places, who says so, 

and how do they know?"  It is one thing to commit to support in principle, based
upon emotion and a 

desire to believe in someones say-so.  It is quite another thing to commit to 
hard tangible support over 

the long haul, based upon "what the facts are".  I am afraid that when it is 
time to move from "support in 

principle" to "support in fact", that the project will suffer a substantial 
erosion in committed support. 

 I think that the only real antidote to this is for the committments to be based
 upon cold hard reason 

from the beginning.  In my case, the facts must include the calculated value of 
my financial investment, 
including its potential value as a "dead loss" (pun intended).

I will be watching carefully for the "facts".

Regards, and long life;

Steve.


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