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The future of a unique British venture is in limbo this summer as the
parliamentarians who must decide its fate, relax on holiday. But the scene
is set for a fierce battle in October. This is when members of the House
of Lords meet again to debate the controversial privatisation of the British
Technology Group,the organisation that specialises in taking ideas and inventions
from universities, polytechnic and research councils and commercialising
them.

The group holds more than 8000 patents and last year returned royalties
worth £13 million to British academics who had forged licensing deals
through the BTG. The group’s most notable triumphs include marketing the
hovercraft and magnetic resonance imaging (MRI), a non-invasive way of ‘seeing’
inside the human body. Other successes include pyrethrin insecticides –
natural pesticides that kill insects but nothing else – and powerful antibiotics
called cephalo-sporins. The BTG has also bared its teeth in legal disputes.
In its most celebrated case, over infringement of the hovercraft patent,
the BTG took on and beat the Pentagon (This Week, 17 March 1990).

So the group, with net assets worth £60 million vested almost
entirely in intellectual property, has given excellent value to taxpayers
and academics alike. Over the years the BTG has won the trust of its patrons
in the scientific community in Britain.

But this profitable partnership looks destined to change as privatisation
looms closer. While government says the move to the private sector will
improve the BTG’s fortunes, opponents argue that both the group and academia
will suffer.

BTG board members had hoped that the privatisation bill would be passed
by parliament before the summer recess. But they missed the boat and must
now wait until 15 October when the Lords give the bill its third and final
reading. Protagonists from both sides of the debate agree that – barring
a change of government – the most likely outcome is that the bill will be
enacted. But opponents still hope to delay the process by persuading Conservative
peers – some of whom oppose the government’s plans – to break ranks and
vote for new amendments. The bill would then be forced back to the House
of Commons for MPs to debate the alterations.

The government could pre-empt this move by inserting new passages in
the billto satisfy the misgivings of dissenting Lords. But such a move is
unlikely because the government wants to avoid creating legal precedents.

The first hint of change at BTG can be traced to the mid-1980s and the
appointment as chief executive of Ian Harvey, an ambitious young businessman
who was brought in to guide the group towards privatisation.

‘I would not have joined BTG unless it was to be privatised. The logical
place to put a body acting as a private sector organisation is in the private
sector,’ he says. Harvey is so committed to privatisation that he has intimated
that he will leave if the privatisation fails. This would be a shame, say
even his sternest critics who, in private, acknowledge the energy with which
he has reshaped the organisation and made it more efficient.

He complains about having to deal with ‘a new minister every month’
at the Department of Trade and Industry, which is responsible for the group.
He also says ties to government create mistrust in potential overseas partners,
who fear possible ulterior motives and inefficiency.

Events have grown more fraught and complex since the turn of the year
when the government first announced to the public its intention to privatise
the BTG.

Gordon Brown, Labour’s industry spokesman, reacted fiercely: ‘The privatisation
is based on dogma and nothing else,’ he said in a debate on the group last
February. ‘The bill has not been pursued because the government believes
in British science, technology or industry but because they believe in privatisation.
It is the ultimate in short-term measures from a government dominated by
a short-term approach.’

Outside government, support for privatisation is confined to the BTG
boardroom. The group’s 175 staff – a mixture of administrators, technologists,
lawyers and patent agents – have made it clear through their union, the
Institution of Professionals, Managers and Specialists, that they oppose
privatisation. Their chief argument is that moving out of the public sector
will destroy the trust they have built up with academia.

The academic community has also voiced misgivings, fearing that a privatised
BTG will abandon its ‘impartiality’ when dealing with different projects.
They believe it will shun long-term schemes which are unlikely to make money
for years, in favour of projects that will yield the short-term profits
that are popular with shareholders. Several inventors, responsible for some
of the BTG’s most successful enterprises, have also criticised moves to
privatise the group.

Despite these fears, plans for privatisation have continued unabated.
As a result, the debate has shifted towards the pragmatists who have worked
to insert as many safeguards as possible into the bill to ensure that the
nature of the BTG does not change after privatisation.

All groups involved in the debate – even Harvey’s board – have tried
to persuade the government that the BTG will not succeed as a privatised
entity unless its ‘integrity, independence and impartiality’ are preserved
intact. Unless the BTG retains these attributes, inventors and academics
will not entrust the BTG with the stewardship of their ideas and inventions.
The other universally accepted prerequisite for success is that the group
retains the specialised talents of its staff and the breadth of its intellectual
assets.

Harvey also agrees with others over the biggest threats facing a new-look
BTG. The most feared outcome is that corporate predators will buy into the
group, wrest control of it and sell off the profitable activities while
closing down the unprofitable projects, or those which need time to nuture.
Equally threatening is a controlling bid by a big, single-business manufacturer
– a drugs company, for example. Such a ‘trade-deal’ would allow a manufacturer
to suppress inventions that compete with its own products and sell off potentially
profitable concerns in which it has no interest.

The government has been slow to respond to pleas to protect the BTG
from these hazards. It has moved some way but, according to opposition politicians,
it has resisted measures which would protect unequivocally the future of
the BTG (see box).

The problem is that the government refuses to write the safeguards into
the bill itself. Instead, clauses have been inserted in the ‘articles of
association’. These lay down the constitution and regulations of a registered
company, and no company can legally exist without them. But opposition politicians
and academics alike argue such safeguards are worthless because shareholders
can vote to change them. Opponents want government to retain control over
the company even after privatisation so that it can veto any deals or activities
that might jeopardise the BTG.

Even Harvey’s board would prefer the protection to be written into the
statute book, but has resigned itself to the government’s wishes. The government
itself argues that it has never retained control over a company it has privatised
and that to do so would defeat the point of the exercise. In the most recent
debate on the BTG, on 22 July, Lord Reay, the government’s industry spokesman,
was assailed from all sides with pleas for the government to make an exception
and enshrine the safeguards in the bill.

But he refused to acknowledge that the BTG was unique because of the
long-term nature of its business and the intellectual basis of its assets.
‘BTG cannot be considered privatised if Parliament retains the power indefinitely
to intervene in the company’s business,’ he said.

Lord Flowers, an independent peer, and chairman of the House of Lords
Select Committee on Science and Technology, said that despite the best efforts
of the bill’s opponents inside and outside Parliament, ‘ministers have been
unbending’. ‘It seems that the government wishes to legislate by article
(of association) and not by bill, and that, they cannot do.’

Flowers warned that unless the government took heed and put the safeguards
‘on the face of the bill’, academics would lose faith with the BTG and make
technology transfer arrangements of their own. ‘A rival BTG will develop
within the research community itself, probably in a university, and since
that will have the confidence of its potential customers it will attract
away not only the business but also the staff of the existing BTG. That
would be a shameful waste.’

Other Lords said that it was unacceptable for the government to have
published the articles of association after the bill had negotiated its
passage through the Commons, and so deny elected MPs the opportunity to
debate whether the safeguards were adequate.

Lord Williams, the Opposition industry spokesman, hopes the government
will relent and include the most important safeguards in the bill before
the third reading takes place. That way, he says, the Opposition would not
press its amendments but allow privatisation to proceed without furtherfuss.
Otherwise, he and other peers, including Flowers, have vowed to ‘fight very
hard’on 15 October to force their amendments through.

Meanwhile, the BTG is continuing its preliminary negotiations with potential
shareholders, including large pension funds, foundations and institutes.
The difficulty, says the group’s management, is that the government has
not yet produced a prospectus, so potential buyers do not know what is on
offer. Moreover, uncertainty over the sale of the BTG is creating business
difficulties; a problem compounded by falling profits and growing awareness
that the group’s highest-earning patents have, or are about to, run out
(This Week, last issue).

Also, the Committee of Vice-Chancellors and Principals has been busy
assembling a consortium that would bid for a university-controlled stake
in the BTG, though a spokesman for the committee expressed fears about whether
universities can spare the money in the current financial climate.

But perhaps the final word should go to an inventor who has benefited
from BTG’s enterprise and is deeply mistrustful of the proposed changes.
Peter Mansfield, at the University of Nottingham, who developed MRI, says
he is angry that inventors have been ignored. ‘Unless we, the inventors
are involved in the process, and our opinions sought, then that’s the end
of it.’

He fears that even a respectable medical charity which owned a large
slice of the BTG, might be enticed into bartering the group’s assets in
return for services, such as cheap scanners. This type of deal could cheat
inventors of their royalties.

He adds: ‘I’m concerned that young inventors have a safe and trustworthy
place to put their ideas and not have to lodge them with a fly-by-night
organisation that might be gone tomorrow.’

* * *

Measures aim to keep the BTG safe in private hands

The government has offered safeguards to the BTG, not in the bill itself
but in the proposed constitution of the company – the articles of association.
These include:

*A limit on individual shareholding of 15 per cent, so that no single
shareholder can gain control over the BTG

*A limit ensuring that no more than 25 per cent of the company’s material
assets can be sold in one go

*A right for the Committee of Vice-Chancellors and Principals to appoint
one director to the board of the new company, plus a requirement for at
least one other director to have experience of the exploitation of science
and technology

*A special, so-called ‘Golden Share’ held by government, saleable within
five years, which will allow it to veto activities that could jeopardise
the group.

Pragmatists say that there is nothing to prevent the government selling
its share immediately after privatisation. Also, the articles can be
changed – without the consent of Parliament – before privatisation actually
takes place. And the 15 per cent limit on shareholding can be revoked at
any time provided 75 per cent of shareholders agree to revoke it.

Lord Reay gave verbal assurances in the Lords’ debate on 22 July that
the government would not sell off its share immediately, but the BTG’s managers
say that they would prefer this in writing.

Opposition Lords are hoping that by 15 October, the government will
have accepted the arguments for enshrining at last some of the safeguards
in the bill. Among the amendments that will otherwise be tabled for inclusion
in the bill itself are:

*That the government maintains a golden share indefinitely which can
only be sold or revoked with the approval of Parliament

*That the BTG’s pension fund is kept for the beneficiaries and cannot
be ‘plundered’ by asset strippers

*That the government can block any disposals of assets or any voluntary
winding up of the BTG.