The lot of the British inventor seems rarely to have been a happy one. Think of some of the key inventors of our age and the chances are that they will have struggled for years to get their bright ideas off the drawing board.
The inventor of the television, John Logie Baird, spent 10 years touting his prototype cathode ray tube and was driven to display it at Selfridges in Oxford Street before anyone was willing to back him. The cavity magnetron, the first compact and powerful source of microwaves, was derided by all potential backers before its inventors, Birmingham physicists John Randall and Henry Boot saw their technology lost to the US in 1940.
Latter-day inventors such as Trevor Baylis, of clockwork radio fame, Sir Clive Sinclair and James Dyson are among the many who think that the go-it-alone British inventor is today getting just as much of a raw deal as their predecessors.
It used to be the case that employees who came up with inventions in the course of their work were not much better off either. Stories are legion of people whose ideas make money for their employers, but who do not get a share in the rewards. Before he invented the hovercraft, Sir Christopher Cockerell worked for Marconi, where he was paid a paltry £10 for each of 36 patents he developed in the 1950s.
These days, however, a growing number of corporate inventors are finding themselves working for the employers who have found ways to back promising employee innovation.
Paul Ambridge, chairman of the Institute of Patentees & Inventors, says: ‘There is no doubt today if you work for a company that values employee inventiveness and is willing to champion your cause, your invention stands a lot greater chance of making it to the market and you of making some money out of it than if you wanted to go it alone.’
Software-to-control automation company Invensys, for example, has a patent award programme that provides cash awards for the successful filing of a patent. Patent applications are rewarded with $200 and, should the patent be issued, the inventor receives a further $1,000. Additional money is found for those patents that the company chooses to develop and bring to market.
Meanwhile, GKN has had an innovation programme in place for two years. It categorises its employees’ inventions in one of three ways: those in an area where the company is already conducting business; those in an area that is close to its existing specialism; and those in new business areas. Employees who come up with the best ideas can find themselves working on the team that takes them forward, provided they have the right skills.
If an idea is considered worth further investigation the person who suggested it receives a prize, such as a digital TV or a palmtop computer. Over the past two years 150 ideas out of 500 submitted have been rewarded with a prize. No spin-offs are currently envisaged, though a GKN spokesman says the company is still feeling its way about how best to take ideas forward.
The problem that will always bedevil such schemes is, however, that even if the idea is patentable, it is impossible to predict whether it will prove a mould-breaking innovation that will transform the market, or just lie on a shelf gathering dust. This means that working out what is a fair level of reward for the idea will always be an intractable problem.Partly because of this, a new model for rewarding employees is gaining favour: starting a spin-off company in which the inventor has an equity stake.
Many blue chip multinationals, such as BT, ICI, Siemens, IBM and Marconi, have well-funded schemes in place which provide the venture capital backing and expertise for their employees’ most promising ideas.
The concept is believed to have originated in California in the 1980s when companies in Silicon Valley found that the only way to prevent key computer programmers from leaving to start up spin-off companies was to make it more attractive for them to develop their ideas in-house.Businesses working in so-called knowledge-intensive industries are particularly likely to have such funds. In sectors such as telecommunications and software development, companies view such schemes as agents for developing their patent portfolios, to use internally or sell to other companies.
Last month telecoms giant BT established its multi-million pound standalone incubation enterprise, Brightstar, to exploit technologies, patents and ideas generated by BT employees. For those with the best ideas — in industries not necessarily related to telecoms — the company is willing to provide as much money as it takes to patent the concept and take it to market.
Consulting firm Generics, which is this week launching on the London Stock Exchange, has an innovation exploitation board that reviews new business proposals from 200 engineer and scientist employees. Those that appear to have the most potential are either licensed, or form the basis for a full-scale spin-off where employees are provided with the necessary expertise and time to develop the business.
Generics has enjoyed spectacular success with its invention incubation scheme and has subsequently launched eight spin-offs. At any one time it has three or four companies in incubation.
Dr Peter Hyde, managing director of Gentech Investment Management, the incubation company set up by Generics, explains: ‘Few organisations are going down this route because they believe it will take away their talented people. But if you take the broad view, the potential for creating value is massive, and dwarfs any costs. Just one of our ventures, Quantum Beam, is now worth $45m.’
Quantum Beam has used its patents and expertise in broadband internet telecoms to build a sizeable business. Another spin-off is Absolute Sensors, which was developed from its invention of sensor technology to judge distances inside an elevator shaft. The technology was adapted for other applications in areas as diverse as the automotive and toy industries, and Absolute developed into a multi-million dollar business, since sold to a US company.
At Marconi, things have changed considerably since the days of Sir Christopher Cockerell. The company has set up Marconi Ventures, a $100m fund to back good ideas from inside or outside the company, or the universities with which it has formed research ties. ‘Some of our R&D will be developed in start-ups using this fund,’ says technology and strategy director Jack Fryer. He adds that this is ‘really good news’ for engineers and technologists.
‘Over the years engineers have seen finance or marketing guys making a packet. People are realising now that engineers are key people in the company, and they will now have the chance to become rich,’ says Fryer.
Marconi Ventures managing partner Mark Aslet says: ‘Where we’ve got people with intellectual property or an idea they wish to pursue independently, but are maintaining a relationship with Marconi, we can facilitate that.’
The spin-off company benefits from access to Marconi’s resources, while the technology gets commercialised much faster than it otherwise would, and both parties benefit from having a stake in the company.
The first internal spin-off, backing a Marconi team developing a next-generation integrated circuit for telecoms routing and switching, is in the process of being finalised. Aslet says that the company will be looking to invest in very early stage technology, ‘way ahead of the time horizon of our business units’. The stake the company will take, and the amount it will invest — typically $1.5m–2m, but possibly up to $10m — will vary from case to case, but will be higher in technology at an early stage than at a later stage.
According to the British Venture Capital Association, in most employer-backed venture capital schemes the employees’ equity stake is rarely more than 20%. The employer will typically demand at least a 40% stake and will probably look for a 40% investment from another venture capital source, as well as owning all the intellectual property rights.
All in all, though, getting your employer to champion your invention is a far more secure option than going it alone. If the venture is deemed unworkable, after the likes of BT or IBM have paid you to spend six to nine months patenting and then building the business case, you can always return to your old job. And if it does work you could find yourself incomparably better off.
Sidebar: The measure of successful innovation
Back in the 1970s, long before the phrase ‘high-tech start-up’ had even been invented, one of the most prominent spin-off success stories took shape. The company that emerged has become global metrology group Renishaw, but was originally set up to manufacture an invention by David McMurtry while he was assistant chief of engine design at Rolls-Royce’s Filton works.
Renishaw is now worth around £500m, and with McMurtry holding 36% of the shares, that makes his stake worth £180m. For once, a case of innovation reaping handsome rewards.
Back in 1972 McMurtry came up against a problem in checking the dimensions of some runs of 0.25in pipework for Concorde’s Olympus engines. Accurately measuring the pipe dimensions to make sure they would fit was impossible using the coordinate measuring machines of the day, because the pipe deflected under the pressure of the measuring probe. McMurtry mulled over the problem and over a weekend built a prototype of the first touch-trigger probe — which automatically detects when it makes contact with the pipe and freezes the measuring machine read-out at that point, allowing repeatable measurements to be taken. It soon became clear there would be a market for such probes.
The idea had been patented with McMurtry named as inventor, but with Rolls-Royce owning the rights. Because Rolls-Royce would assign rights to the patent only to a firm, not an individual, McMurtry and colleague John Deer set up Renishaw in 1973 to make the probes under licence from Rolls-Royce, which owned the patent.
Rolls-Royce was paid a royalty, but did not take a stake in the business. In the mid-1970s, joint ownership of the patents was agreed, and eventually Renishaw bought out Rolls-Royce’s stake completely. Since then, Renishaw has continued to develop innovative measurement devices, and now has a £100m turnover and 1,400 employees worldwide.
Sidebar: BT’s Truth is first spin-off
Truth Consulting & Technology is the first employee-generated spin-off BT has launched, but is a pattern the telecoms company hopes to repeat with its Brightstar initiative.
Truth, which was unveiled in April, develops and markets network testing, monitoring and emulation tools. The company originated from BT’s Adastral Park research and development centre, where software engineers Michael Skingsley, Kevin Smith and Tony Dann initially came up with the concept in early 1998. Skingsley is now working as chief technology officer at Truth.
During November, Truth won a contract with Motorola that involves developing a downloadable internet protocol emulator for Motorola to enable it to develop, test and tune how new applications are likely to work on the next-generation general packet radio service phones.