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Designing a Patent-Incentive Program? 221

SoulMaster writes "The company I work for (we are a one-year-old start-up) has recently started filing patents to protect some of its intellectual property. At the onset of the patent process, one of the executives drafted a very basic Patent Incentive Program (PIP) which is now under full review to ensure that it is both accurate and fair. The basics of our original PIP are that inventors receive (or co-inventors share): $500 for each provisional filing, $1500 for an actual patent filing (with full claim-sets defined), and $5000 for any patent that is granted by the USPTO. While the current program seems fair to our staff, we have been unable to find anything to compare it to. Moreover, the revamp of the program is likely to grant an equity stake in the company (via an Options grant) rather than cash payouts. I've scoured Google for information, but because internally documented PIPs aren't generally public knowledge, the results are limited. Thus, I have decided to ask Slashdot users: How does the company you work for handle Patent incentives? Do they have them at all? Are they cash or equity based?"
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Designing a Patent-Incentive Program?

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  • by wronskyMan ( 676763 ) on Saturday September 27, 2008 @05:49PM (#25179907)
    but I patented the idea so it looks like you're out of luck!
  • by Animats ( 122034 ) on Saturday September 27, 2008 @05:49PM (#25179909) Homepage

    Here's the patent policy of Stanford University [stanford.edu]. This has worked out very well for Stanford.

    • Re: (Score:3, Insightful)

      That is a good patent policy for a university, but I don't see how it could work for a company. For example, at Stanford (and most other universities), the inventors have the right to place inventions in the public domain. I don't see how ANY company could let individual employees make that important a decision on what is potentially a core technology for their business.

      Universities almost never want to implement the IP themselves - instead they are searching for licensees that will take the invention and m

  • Both (Score:4, Insightful)

    by eln ( 21727 ) on Saturday September 27, 2008 @05:50PM (#25179917)

    Give a cash bonus plus stock, but make sure you have some sort of review process to make sure the patents being filed are not clearly derivative or otherwise not likely to be granted a patent.

    The cash bonus gives people an immediate reward for their work. The stock bonus gives people a sense that they are working on something that will benefit them, and not just their employer, over the long term. The review board keeps people from abusing the system by flooding you with patent applications that are highly unlikely to be accepted.

    Just remember, if you make the rewards too small, no one will take the program seriously and no one will put forth any real effort to invent patentable stuff.

    • patent incentives (Score:4, Insightful)

      by falconwolf ( 725481 ) <falconsoaring_2000NO@SPAMyahoo.com> on Saturday September 27, 2008 @07:01PM (#25180385)

      The review board keeps people from abusing the system by flooding you with patent applications that are highly unlikely to be accepted.

      The way to help prevent abuse is to only give incentives for patents that are granted. A cash incentive can be given as soon as the application is approved, then stocks or stock options can be issues periodically. Say if it's 100 stocks after a year 25 stocks are given, after 2 years another 25 stocks are given, and so on. That way if a patent is contested after approval while the person will get something, the employer doesn't have to pay it all out.


      • Re: (Score:3, Interesting)

        The problem with that approach is that the potential payoff is too far into the future to be a real motivating factor. Patents take about 3 years to get through the system and be accepted. Especially for young startups, you can't even rely on the company still being around after that time, never mind being able to honor a long-term commitment after a merger or takeover.

        A good policy thus provides a small immediate payoff, combined with a more substantial long-term benefit. As the GP suggests, you of course

      • by conlaw ( 983784 )
        If your employer is, or has plans to be, a publicly traded company, I'd suggest talking to transactional attorney before setting up a program involving stock options. IIRC the federal securities laws have some fairly strict provisions as to which employees may be granted stock options, along with pricing issues, holding periods and other arcane issues.
      • Re: (Score:3, Informative)

        by Mr Z ( 6791 )

        At our company, all patent disclosures are reviewed by other technical experts to determine their suitability to file. After all, it isn't free to file patents. Thus, there's a scale: Small bonus for decision to file to encourage disclosures, larger bonus for the patent issuing, and a variable bonus some years later on review as I talk about here [slashdot.org].

        The technical guy isn't the one that would be flooding the patent office with bogus disclosures in an attempt to write himself an endless stream of bonus checks

  • I am pretty sure the discussing that would be a violation of NDA.

  • by Halo1 ( 136547 ) on Saturday September 27, 2008 @05:59PM (#25179979)

    Because more patents are not necessarily better [cnet.com].

    Additionally, certain patent acquirement strategies significantly increasethe risk of being the target of patent lawsuits [m-cam.com], because they paint a bullseye on your company's strategic development, enabling patent trolls to predict it, patent "alongside" your development and sue you based on that.

    And then there's still this whole patent bubble [huffingtonpost.com] that's still forming, fairly similar to how the whole credit crisis came to be. In time, the value of patents is going to come crashing down just as spectacularly, regardless of how many times you repeat the holy yet hollow mantra "but our intellectual property must be protected!"

  • by whoever57 ( 658626 ) on Saturday September 27, 2008 @06:03PM (#25179999) Journal
    Some companies have made huge amounts of money off a single patent. Perhaps companies could offer employees the option to take some ownership stake in the patent (5%?), provided that they grant the company full rights to use the patent -- with the intent that, if the company makes a large sum of money by selling or licensing the patent, the employee will also benefit from this.
    • by Nursie ( 632944 )

      I know of a company that does this - employees get a very small percentage of licensing revenue for the patent, and every so often (annually?) get a payment from the company on those things.

  • Err? (Score:5, Insightful)

    by cartman ( 18204 ) on Saturday September 27, 2008 @06:25PM (#25180151)

    The entire idea of a "patent incentive program" seems preposterous to me. Why on earth would a company want to incentivize employees to churn out patents? Patents are usually worthless. The vast majority of patents (like 99%) have absolutely no value. Most patents will not yield enough money to recover the $5000 spent on incentivizing the employee, to say nothing about the many thousands spent on patent attorneys.

    Generating valuable intellectual property is enormously more difficult, and far more valuable, than patenting things. I could come up with 10 patentable ideas off the top of my head (and I have patents from various employers).

    I would also have grave concerns about any company that focused on patents. In almost every such company I've dealt with, they did not have any intellectual property worth patenting. It is an absurd presumption for any company that they will turn out discovery after discovery which warrants protection, or that they will turn out discovery after discovery if they institute an incentive to do so. Instead of worrying about patents, their concern should be having one discovery or one program that is worth anything at all. If they manage that, then they'll be ahead of 90% of startups. But if they concern themselves with protecting intellectual property rather than generating it then they're in big trouble.

    However, if the company is insistent on offering incentives for patents, then it should offer incentives based upon how much money others will pay to license the intellectual property and use the patent. If the amount others are willing to pay for a given patent is "$0" (most likely) then the incentive to employees should be nothing.

    In other words, if they offer a monetary incentive per patent, then the employee is paid to produce any kind of patent. The idea is absurd. Happily, the USPTO no longer accepts patents for perpetual motion machines, otherwise I as an employee would generate 20 patents just for that.

    • Re: (Score:3, Insightful)

      by cfulmer ( 3166 )

      These systems are not typically run to create an incentive for employees to churn out patents. The employee has already done the invention as part of his/her work and, generally, the company already has the right to patent it without the employee's further involvement. Often, though, the right folks at the company don't know about an invention. So, the program is there to create an incentive for those who know about the inventions to tell the appropriate people in the company.

      The incentive has to be larg

    • The vast majority of patents (like 99%) have absolutely no value

      A lot software patents end up being defensive, so that when Company A threatens Company B with patent violations, Company B can respond in kind. Case in point, from 2002:

      http://www.theregister.co.uk/2002/05/13/macromedia_wins_4_9m/ [theregister.co.uk]

      Macromedia Inc yesterday said that it won a patent infringement lawsuit it is fighting with rival Adobe Systems Inc, and has been awarded $4.9m damages by the jury, almost twice as much as Adobe was awarded in a relat

    • by QuantumG ( 50515 ) *

      The company won't pursue patents that are of little value. You'd have a pretty hard time convincing legal that they should waste their budget on filing stupid patents.

      • How the hell would legal know the value of a patent? Technical innovation isn't their field of expertise, otherwise the company could simply get rid of all their engineers and hire more lawyers.

        We've seen how that worked out for SCO.

        • by QuantumG ( 50515 ) *

          hint: stereotypes are not real.

          • What stereotypes? Nontechnical people make up their views on the value of an invention based on talking with technical people. Perhaps you live in a different world?
            • Nontechnical people generally make up their minds on the potential value of a patent based on information from multiple sources.

              • Of course, yet when an invention claims to be something entirely new, what other comparable sources on the subject are there? Don't forget that the difference between new and merely trivial modifications of prior art are often very small.
                • That does not prevent an economic and market evaluation of the potential for the idea. Of course the accuracy of those evaluations may be poor but that is where businesses either fail or succeed in earning their pay.

        • Where I have worked the decision to proceed with a patent application has been made by a review committee including legal, business and scientific representatives. And the cost was borne by the business requesting the application.

          • Where I have worked the decision to proceed with a patent application has been made by a review committee including legal, business and scientific representatives. And the cost was borne by the business requesting the application.

            With the crucial point being that the scientific representatives are trusted to explain the potential value of the invention, yes? If so, then a positive decision to pursue a patent hinges not on the actual value of it, but rather on the communication skills of the scient

            • Nope, not at all. The value of the invention should be and usually is determined by market studies and financial analysis. Quite often there is a cost engineer involved who will translate lab results into operational cost and manufacturing estimates. Some times a professional economist will help by providing information on things like projected costs of the commodities that go into the product, and the growth potential of the market during the life of the product.

              The sales skill of the scientific staff come

              • I wonder if we are talking about the same thing here?

                The company won't pursue patents that are of little value. You'd have a pretty hard time convincing legal that they should waste their budget on filing stupid patents.

                Unless you're arguing for things like business method patents, the value of the patent is in the technical innovation, surely? A new drilling head, a new chemical process, etc. The manufacturing costs and market projections are certainly important to the business as well, but have no

                • The patent office doesn't take market projections into account when evaluating a patent, but the company sure does when it decides to apply or not.

                  The value of a patent is in the innovation for sure. But quantifying that value requires a market and economic analysis. This analysis has a technical component, but mostly it is profit and cost calculation, and perhaps a strategic assessment as well. That analysis is part of what a company takes in when it decides to proceed with a patent. Few if any companies w

      • by cartman ( 18204 )

        You'd have a pretty hard time convincing legal that they should waste their budget on filing stupid patents.

        Were I have worked, the legal department of a company is not involved in the patent process. That's because the legal department only has attorneys that specialize in corporate law, not patent law.

        Where I have worked, the company trying to acquire a patent will bypass its legal department and will hire an outside law firm with attorneys who specialize in patent law. The patent attorneys charge som

    • Re: (Score:3, Interesting)

      by tambo ( 310170 )
      Why on earth would a company want to incentivize employees to churn out patents?

      Err... they don't. They churn out inventions. The incentive is to get them to talk to the IP group at the company before publication. What the company decides to patent is its own business.

      Most patents will not yield enough money to recover the $5000 spent on incentivizing the employee, to say nothing about the many thousands spent on patent attorneys.

      1) The utility ratio ("useful" patent out of the total number of patents

      • Re: (Score:3, Insightful)

        by cartman ( 18204 )

        [Companies] churn out inventions. The incentive is to get them to talk to the IP group at the company before publication. What the company decides to patent is its own business.

        Thus far I have never encountered a single company that "churns out" significant inventions. Even companies that invest massively in R&D, like IBM and google, only come up with meaningful inventions once in awhile. However, the original poster did not claim that he works for google or IBM. He claimed that he works for a "one-ye

    • One of my ex-CEO's was an ex-quarterback. He summed it up thusly:

      How many patents did the competition file last year? 30? How many did we file? 2? You know what that means, Tim? (Tim is the patent attorney) We're 28 behind. Now get on it!

      He then left the room and went off to appear on CNN and do some semi-pro race car driving. I'm sure the details would have been more than he could handle, anyway.

  • by jhines ( 82154 ) <john@jhines.org> on Saturday September 27, 2008 @06:26PM (#25180165) Homepage

    Hold a fancy formal dinner each year. So that the wife/so can get dressed up and party. Have previous years winners also attend.

    The company I did some work for, does this, and it is looked forward to all year by the engineering crowd, the usual recepients. Of course, being a large fortune 500 firm, they had lots of patents and people involved.

    It was like another mark of achievement, making it into the patent ball.

  • Patent Programs-- (Score:5, Interesting)

    by sillivalley ( 411349 ) <{ten.tsacmoc} {ta} {yellavillis}> on Saturday September 27, 2008 @06:28PM (#25180177)
    I'm a patent attorney in Silicon Valley, and have worked with, under, and around a number of different schemes.

    This isn't legal advice -- these are my opinions -- if you want legal advice, go buy some.

    It is common to condition payment of filing awards on the signing of the declaration, oath, and assignment by the inventor -- the company doesn't pay until the inventor has signed.

    Some also condition payment on being an employee at the time of the event -- filing the patent, issue date of the patent. That way you don't have the obligation to pay departed employees. But having said that, whoever is running the scheme should have the discretion to pay out equal amounts to ex- and non- employees when named on filed and/or issued patents. You get more interest and attention that way.

    Another common approach is to pay $N per inventor for up to 4 named inventors, and for N>4 to pay each inventor $4N/k where k is the number of inventors.

    Some places pay on disclosure submission. If you decide to do that, pay on *accepted* disclosures, not everything that gets thrown over the wall. While you want lots of disclosures, you don't want a lot of crap.

    Decide at the outset *when* you're going to pay inventors -- some pay and present quarterly with great fanfare. My opinion is that significantly decouples the desired behaviour from reward. I much prefer having a system where things get filed, I send a note to payroll, and the $$ automagically appears in people's next paychecks. That system also minimizes the chances of people dropping through the cracks over a quarter. Yeah, have quarterly or annual beer bashes where you honor inventors as well, but don't hold up the money!

    Oh, as part of that whole deal, work out with your finance types which department pays for awards -- my feeling is that it should follow who pays for filing, prosecution, issuance, and maintenance costs. If the division/group (hardware, let's say) pays for filing and prosecution, they should pay for awards. On the other hand, if filing and prosecution gets billed to G&A (corporate overhead) then awards should follow. Doing it that way puts awards costs into the entire life-cycle costs of a patent filing.
    • Re: (Score:3, Insightful)

      by UncleFluffy ( 164860 )

      (IANAL, but I've been involved in this stuff a good few times...)

      Some also condition payment on being an employee at the time of the event -- filing the patent, issue date of the patent. That way you don't have the obligation to pay departed employees.

      Be careful when considering this. Given the time taken for a patent to work its way through the system, making payment conditional on continued employment can be regarded badly by employees - after all, you got the work and the patent, why are you using the

      • Re: (Score:3, Informative)

        by sillivalley ( 411349 )
        ...And that's why in the next breath I said the administrator of the program should have the discretionary ability to pay out awards to non- or ex- employees!
  • by eison ( 56778 ) <pkteison.hotmail@com> on Saturday September 27, 2008 @06:34PM (#25180221) Homepage

    Cash patent bonus programs appear to be common. Public companies will mention them in their 10-K filings as it is often part of executive compensation (generally not limited to just executives, it just gets mentioned with executive compensation because they have to report on executive compensation.) Just google '"annual report" "patent bonus"' and '10-k "patent bonus"' and '"executive compensation" "patent bonus"'.

  • Hard to imagine a more anti-patent site than Slashdot. Most of your answers are likely to be "Patents are evil."

    But since you asked...

    Cash bonuses are nice. Equity is good too if likely to be comparable.

    But don't stop at money -- make a big deal of it, make sure they get recognition among their peers. The current software patent system in the US may be... suboptimal, in terms of bad patents that get thru, but it *shouldn't* be -- in theory, getting a patent granted should be a Big Deal and something that so

  • Common info (Score:3, Interesting)

    by tambo ( 310170 ) on Saturday September 27, 2008 @07:02PM (#25180391)
    I spent several years as in-house patent counsel for a hospital with a large research institute. We had a very interesting population of potential inventors - basic researchers, doctors of all stripes, and the entire range of healthcare workers.

    We developed a disclosure program with a more practical twist: financial rewards were based on the successful commercialization of the technology, with a 40% share of royalties going to the inventors (to be split among them.) We also ran many non-financial recognition programs - plaques for implemented ideas, annual recognition dinners for anyone with a submitted idea, etc.

    This arrangement had several advantages over the bonus-upon-filing/issuance arrangement:

    • We didn't get hit with a flood of bad disclosures from employees who were just trying to cash in.
    • Our inventors were encouraged (both literally and through the fee structure) to remain actively involved in the technology - not just the patent process, but also the marketing and licensing deals.

    Some other thoughts:

    • Intra-organization advertising was key. The biggest reason why inventors weren't participating was simply that they didn't know our group existed. And due to employee turnover and short memory spans, the population needed frequent notices of our program, so this was just an ongoing mission.
    • One step up the line from education is a triage process. Be sure to have a solid team of broadly trained individuals who can review disclosures, do some market and patentability research, and thresh the wheat from the chaff.
    • On the whole, our inventors were excellent: creative, eager to explain and show, willing to learn about the IP process and to devote time to doing their part. Best of all, very few of them were motivated by money - most just wanted to see their inventions turned into products.
    • As for distribution of royalties among inventors - the easiest and fairest way to handle this is to have the inventors agree, UP FRONT (i.e., on the disclosure form), as to their respective contributions to the invention. Let them work it out among themselves, and get it documented ASAP. Waiting until royalties actually materialize is a recipe for disaster.
    • As a last observation - I think the reward strategy you've set out is a little unusual in two aspects: (1) The rewards are comparatively VERY large. $5k for an issued patent? Seriously? I don't think such high fees are going to promote innovation - they'll probably promote get-rich-quick thinking among the employees. (2) It's a little odd to have several inventor rewards for various stops along the patenting process. Usually, the inventor only participates in the *patent* process through filing... seems odd to reward them further based on work by your IP counsel.

    Good luck! - David Stein

  • IIRC, Apple pays $5K to anyone listed on a patent. They also get a plaque when the patent issues.


  • Why does your company feel the need to protect its alleged intellectual property?

    First of all, how many collective shoulders has your company stood upon in order to "invent" this intellectual property in the first place? How much of what went into it is actually original innovation, and how much is directly due to the collective ingenuity of the heads on all those other shoulders upon which you have been standing?

    Second, exactly how long do you suppose it will be before the patent is granted? Is it possib

  • ... is that the values of patents are in contention with one another, the idea of patents is to:

    1) Incentivize people to invent
    2) Protect the inventor's investment/hardwork in said ideas so he (potentially/does) see some renumeration for adding value to society
    2) Expire patents to give that knowledge back to society so it can be freely used without royalty.

    Unfortunately most patents are useless, like patenting language or air. The less a person knows about new or emerging industries the more useless patent

    • by daeg ( 828071 )

      It's also bad, in my opinion, to incentivize something that requires brand new ideas. I would prefer to give incentive for producing more with existing products and equipment or even producing more with less.

      I am planning on doing something similar with the staff I'm bringing on over the next year. The company is approximately doubling each year and our web user base is growing at about 140% per year. I want to keep the same number of servers (or less). I have the hardware budget set to double each year. An

  • In an ideal world, I'd look for something on the order of:

    • $1K for submitting an invention disclosure that is later developed into a patent submission, paid at time of filing
    • $1K for significantly contributing toward a patent submission, either as a named inventor, or any other person who puts forth significant effort outside their "normal duties", also paid at time of filing
    • $3K to each named inventor upon patent grant, paid at time of grant, and
    • Some sort of downstream recognition such as breaking company r
  • Putting aside questions about the patent system...

    I worked for a company which had a similar system for several years. But eventually reformed it.

    1) Waiting until patent issuance for the biggest payoff will short change many (it can be years before issuance, people move on. Ex-employees typically don't get bonuses).

    2) The bulk of the extra curricular work takes place putting together the patent application.

    So I'd suggest a system where:

    a) Thumbnail sketch of the idea to be filed internally and reviewed befo

  • by marhar ( 66825 ) on Sunday September 28, 2008 @04:51AM (#25183003) Homepage

    old employer:

    - cash bonus when your invention is accepted into the program
    - cash bonus when your application is filed
    - cash bonus and shiny plaque when your patent is granted

    current employer:

    - cash bonus and shiny plaque when your patent is granted

    all employers, as far as I know

    - general policy is cash payment, no royalty sharing
    - if you have a big-deal patent, they may work out a deal with you
    - you assign all rights to them
    - if you leave the company during the process, you don't get any more payments

    Here's [uspto.gov]
    one of my patents so you can know I'm not making this up.

"Pull the wool over your own eyes!" -- J.R. "Bob" Dobbs