January 17, 2014
Hi my name is Frank Scruggs and I'm an inventor and would be entrepreneur. I have invented a way to remove radioactive carbon from the food you eat, and in working on a way to store summers heat for use in winter. I have ideas on how to greatly slow aging and even another idea on how to reverse aging. But you will probably never benefit from these ideas because the road to innovation in this country is not only unpaved and full of pitfalls, but there are actually intentional landmines. One such landmine was "idea harvesting" for me it worked like this. Having little money I opted for a provisional patent with the traditional pie eyed optimism of the inventor I assumed I would be able to raise money within the year for a real patent. After failing to raise the money by provisional patent expired and I lost the rights to my idea. It seems to me my actions would fall within the normal assumptions that an inventor would make and therefore this particular patent system whether intentionally or accidentally is set up to separate inventors from their ideas. Which brings me to the reason I'm writing you. I have only read the first 60 pages of this. Exchange commission crowd funding proposed rules but feel I must speak up. My deepest concern is from page 60 and reads like this the proposed rules would require disclosure of material factors that make an investment in the issuer speculative or risky. I believe this constitutes a fraud trap. I believe most entrepreneursdon't fully understand the risks of their endeavors and requiring them to disclose these factors leaves them open to allegations of fraud. Such fraud traps have been used by unscrupulous companies to stifle their competition my main case in point is the Tucker automobile. In the case of Tucker they were accused of fraud in the middle of their fundraising efforts these unprovable allegations were enough to end Tucker.
Somewhere in the first 60 pages you asked for a better understanding of the idea only venture and the risks associated with that. It is my belief that if the investors for inventors realized the risks they would not participate for purely financial reasons. But the social benefits outweigh the losses of a few. For example Edison probably would not have pursued the lightbulb if he realized that he would spend more money defending his pattens then he would make from his invention. But since the purpose of the jobs act is to create jobs allowing the liberty of inventors and investors to take extraordinary risks, will serve that end. If money is raised for a failed invention the economy benefits in several ways you immediately create one new job and hardware sales go up. Stimulating the economy with no federal funds. If the idea succeeds that may create thousands of jobs and change the world. It seems a third party disclaimer might be in order for idea only companies. I heard someplace to the average business America was started on $20,000 with that in mind I would be in favor of setting up a special class of offering for idea only investments with generic third-party disclaimers limited to $100,000 total offering and $500 per person investment limits for rich and poor alike and thus requiring very little disclosure by anyone. Indeed the idea itself need not be disclosed in a manner that would constitute public disclosure to preserve future patent rights. And in him and him thank you for the privilege of commenting on this matter sincerely Frank Scruggs