Who Pays the Independent Inventor?

I. A Question for Society

Nobody is compelled to be an independent inventor. It is a free activity, like that of the artist, the writer, or the self-employed tradesman: whoever chooses it, chooses it, and whoever cannot sustain himself by it has not found his craft. That is systemically consistent, and it holds for every free activity without exception.

The question of who pays the independent inventor is therefore not a private one. It is not: what must the individual inventor do to survive? Whoever poses that question confuses a choice of vocation with an entitlement. It is: Does a society need independent inventors, and what does it lose if they die out?

This is not a rhetorical question. It has a factual answer, once one names the class of results that arises only from free activity — and that other paths cannot deliver. The answer may be „yes“ or „no“. Either is admissible. What is not admissible is to leave the question unasked and to give the answer daily.

II. The Six Answers That Exist

To see what the system produces today, one counts how the question is actually answered — for the various carriers of the activity.

The employee. Germany even has a law for this. Under the Employees' Inventions Act the employer must pay compensation; it is calculated as the value of the invention times a share factor. The value of the invention is typically formed by licence analogy — from an assumed turnover and a customary licence rate. The arbitration board at the Patent Office typically sets the share factor between ten and twenty-five per cent; the minimum score yields two per cent. A calculation example from the engineering press: with a value of the invention of 31,250 euros and a share factor of thirteen per cent, compensation comes to 4,062.50 euros. The comment attached is that many inventors are disappointed by such sums.

The employee thus has a payer. What the law does not do is another matter: it pays only those who are already paid. The employee receives a salary for his time; the invention is a supplement on top. The independent inventor falls outside the scope of the act because he has no employer.

The licensor. He is paid out of another party's revenue. For that he needs a bearer who will bring the matter to market, and the means to enforce his rights. Both cost before they yield. And experience teaches that licence agreements often end before the money begins.

The founder. He is paid through equity, but only once he has financed the proof that no one will finance for him. Whoever has no reference gets no contract; whoever has no contract acquires no reference. And if someone does give him money, it will usually be on terms made for a running business rather than for a development: interest from the third month, on a machine that takes years.

The consultant. He is paid by the hour, and that works. Only he sells, along the way, precisely the knowledge that gave the thing he wanted to keep its value. The better he advises, the less he is needed.

The seller. He transfers the rights, once, at a price fixed at a moment when no one yet knows what the matter is worth. The price is therefore systematically too low — not out of malice, but because it cannot be formed any other way.

No one. This is the most frequent answer and the statistically normal one.

III. Why There Is No Seventh

One might think that what is missing here is merely a market that someone should invent. It is not. The reason is harder.

What the inventor offers cannot be valued at the moment of offering — and once it can be valued, no one needs him any more. An invention whose worth could be reliably quantified would already be a product. The moment of payment and the moment of valuation fall apart in principle, and in this direction, not the other.

To this is added a second barrier, described by Kenneth Arrow in 1962 and since then known as the information paradox. The buyer of an idea cannot judge its worth before he knows it — and once he knows it, he no longer needs to buy it. That is why there is no functioning market for ideas, only substitute constructions: patents, non-disclosure agreements, trust. All three are expensive, and all three protect the inventor only as far as he has the means to enforce them.

The matter is thereby described: payment presupposes valuation, valuation presupposes existence, existence presupposes payment. It is the same circular reasoning as in market analysis, only one level deeper — here it strikes not the invention but the person.

IV. The Existence Proof

One could stop here and say: insoluble. That would be wrong, because there is a case in which it was solved.

Chester Carlson invented electrophotography in 1938. He showed it to more than twenty companies; all declined, as did the National Inventors Council. He later called it an almost enthusiastic degree of disinterest.

In 1944 the Battelle Memorial Institute in Columbus, Ohio, entered into a contract with him. Battelle was neither a company nor a public authority but a research institute financed from an endowment. It did not buy the invention, it did not sponsor it — it took a share. Carlson ceded sixty per cent of all future returns and kept forty. The institute's money did not quite suffice; he had to add 5,000 dollars of his own.

In 1947 Battelle passed a licence to the small Haloid Company. By 1956 xerography accounted for forty per cent of Haloid's revenue. Out of the share came, for Carlson, 21,200 shares and an annual profit participation of 1.2 per cent — the foundation of his later fortune.

Three things about this contract are decisive, and none of them is accidental.

Battelle needed no market forecast. It had its own capital and had to explain to no one how big the market for dry copies might be in 1944. That question was not answerable, and the institute did not have to answer it.

Battelle could wait. More than ten years lay between contract and return. No bank, no fund, no funding programme with a proof-of-use requirement can bear that.

And Battelle took a share, not a debt. Sixty per cent is a great deal; Carlson paid dearly. But sixty per cent of something is more than a hundred per cent of nothing, and above all: a share grows with success and vanishes with failure. A silent loan that demands rising interest from the third month does the opposite. It grows with failure.

V. What Stands in Its Place in Germany

Little, and nothing of this design.

The Fraunhofer institutes are paid for contract research; the customer brings the question. The Steinbeis centres broker consulting services for a fee. The funding programmes require a proof of use and, above all, a statement about the market. The equity investors require the same statement and collateral on top. SPRIND is the only attempt to depart from this, and even there a panel decides on a project, not on a person.

What is missing is an institution that has its own capital, takes a share instead of a fee, and can wait. This is not an exotic demand. It is a description of Battelle, and Battelle has existed since 1929.

In its place there is a pattern we have described elsewhere. An equity investor, founded in 1985 on the American model precisely to close this gap, today manages over three billion euros and invests exclusively in established mid-size companies. It has corrected its course without ever explaining why early-stage financing did not work for it. A correction without a finding is not, however, self-examination but an evasion that looks like learning.

VI. The Logical Consequence

From the foregoing, the question of who pays the independent inventor in Germany can be answered clearly: no one. The market does not, because it cannot value what does not yet exist. The state does not, because it demands a market statement that is not available here. The licensee does not, because he pays out of returns that come later or not at all. The buyer does not, because his price is formed before the valuation.

From the perspective of free vocational choice, there is nothing to object to in this. Whoever chooses the activity chooses the conditions. Whoever cannot sustain himself has chosen wrongly, or is not good enough. Up to this point, the rule that holds for every free activity applies.

The selection mechanism, however, engages at a point it does not depict. It does not select out bad independent inventors, but the craft itself.

The reason stands in section III. What an independent inventor offers cannot, at the moment of offering, be structurally valued. Whoever wants the ability to sustain himself must therefore offer something other than the invention — consulting, analysis, contract development, teaching. That is payable. Only it is the same as what an employee does, and it brings forth no results that an employee could not equally have brought forth. The selective pressure runs not toward good independent inventors, but toward none.

Whoever wants to keep the class must change the conditions of selection. Whoever does not change the conditions has decided in favour of the selection against the class.

VII. What Society Loses in the Process

The question of what is lost has a factual answer. It lies in a class of results that no one could have ordered — because the category to which they belong did not yet exist at the moment of their coming into being.

The Carlson case is one such, and it is not for that reason exceptional but typical. The American National Inventors Council rejected in 1938 because it held the question „where is the market for dry copies?“ to be unanswerable. It was unanswerable. The market arose only through the invention itself. Any selection procedure that makes a market statement a condition of entry reliably filters out this entire class of results.

The class consists of results that share three features: no existing principal could have commissioned them; no existing competitor had them on his roadmap; and their value was not quantifiable at the moment of their emergence. These are not many results. But they are the ones that shift the categories themselves — and without which none of the categories one now takes for granted would be present.

This class does not disappear because the people who could produce it are missing. It disappears because the conditions under which it comes into being are systematically withdrawn: access to capital that does not demand a market forecast; time that knows no milestones; a contractual framework that grants a share and does not enter a debt. Whoever does not have these conditions does something else. He does it no worse, but he no longer does this.

VIII. What Follows — for Society

No advice for individuals. Just two options between which one would have to choose.

First: to do without the class. This is a legitimate choice. All results that have an existing principal, a quantifiable market, and a plannable time-span continue to arise — in Fraunhofer institutes, in companies, in programmes with proofs of use. The class that does not fulfil these criteria then arises elsewhere, or not at all. Both are to be accepted if the decision was taken thus.

It is not currently being taken thus. It is being taken without being named — through the absence of the one institution that would carry the class, and through the simultaneous talk of innovation, which remains empty without this class.

Second: to build the institution. Its form is known and described in section IV. It has three properties and no more: capital instead of budget (so that it is not accountable to a market forecast that does not exist), share instead of fee (so that it grows with success and vanishes with failure, not the reverse), patience instead of milestone (so that it can bear the timeframe in which valuability itself first takes shape). Whether one calls it a foundation, an institute, or a co-operative is secondary; what matters are the three properties.

What does not work is the third option, which is the one practically chosen: to want to claim the new and to refuse the one form of construction that can produce it. The claim is refuted by the refusal.

IX. Conclusion

The question of whether Germany needs independent inventors is not one that independent inventors answer. It is one that society answers.

The answer is currently being given without the question being asked. Whoever poses the question and answers it with „no“ has an honest position. Whoever poses it and answers with „yes“ must name the form of construction in which a yes-answer carries. Whoever continues not to pose the question has, without saying so, decided for „no“.