> If the government demands 100% equity in return for investment, it just becomes the least competitive VC on the market, doomed to fund the least compelling projects.
If the government demands 100% equity then research that can support itself will be funded by the private sector and the government will be left funding research the private sector won't because the benefits are diffuse and the transaction costs of licensing would be prohibitive, and foundational research that won't bear fruit for several years, and high-cost high-risk high-reward research that the private sector won't fund because individual private sector entities don't have the requisite scale to survive the failure of a high-cost high-risk investment.
Which is as it should be. Why does the government need to be wasting tax dollars on research the private sector would do on its own?
Even for research the private sector might fund anyway, all it means is that the government to be competitive would have to pay the researchers more up front rather than after the fact with a patent, which could still bring about an efficiency improvement by eliminating the patent prosecution and licensing overhead.
> One of the reasons the U.S. has hands-down the best engineering universities in the world is because of the fluid boundary between academia and the private sector.
There is a difference between not patenting something and preventing the original researchers from benefiting from it. Not having a patent doesn't prevent them from commercializing the research, it just doesn't give them a monopoly -- they still have the knowhow and first to market advantage if they want it.
They could even patent the commercialization itself if that wasn't funded by the government, provided it's enough of an improvement over the now-prior-art government-funded research to be awarded a patent. And if it isn't then why should they have one?