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. Rate This Message: http://www.cryonet.org/cgi-bin/rate.cgi?msg=6498