Designing a Patent-Incentive Program?

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?"

Comments

I have a very effective program at my company...

[wronskyMan]

but I patented the idea so it looks like you're out of luck!

Stanford's patent policy.

[Animats]

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

Re:Stanford's patent policy.

[mad.frog]

It would be nice if there was a "-1, irrelevant" downmoderation possible for responses like this.

The poster didn't ask "should I help in filing patents?" or "what are the ethical questions involved in patents?" -- you're response is roughly as helpful as offering a good recipe for barbecue (ie, potentially interesting but ultimately irrelevant).

Re:Stanford's patent policy.

[arotenbe]

It would be nice if there was a "-1, irrelevant" downmoderation possible for responses like this.

It would be nice if there was a "-1, recursive" downmoderation possible for responses like this.

Re:Stanford's patent policy.

[Daniel Phillips]

The problem is that there should not be a patent at all. Because patents are just slack for the economy as every economist will tell you. The only leftover the free trade revolution failed to kill in the last century.

Patents for software are in particular dangerous. [stopsoftwarepatents.org]

The fact with patents is that registering a patent is like registering a trade mark. Hire more patent attorneys and you get more patents. And no one asks whether they will produce any return on investment.

An innovative company will bail the lawyers out, invest in real R&D and lobby for patent reform to overcome the madness. Research institutions should not patent at all.

I do not see why your post was moderated flamebait, it seems perfectly well reasoned.

Re:Stanford's patent policy.

[eggnoglatte]

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 make the additional investments necessary to turn an idea or prototype into a product. Companies clearly work differently, and thus need to treat their IP differently.

Re:Stanford's patent policy.

[macraig]

This is incorrect, to my knowledge. Universities and other institutions engaged in what is essentially publicly funded research do not keep control of the patents that result from research: rather it's the individual researchers themselves who retain control of such patents.

What do you suppose they do with those patents? They start an outside company not affiliated with the university to capitalize on the patent(s) and reap personal profit from it. The university basically doesn't get - or isn't legally entitled to - a dime of that profit. This has been happening for decades.

Frankly, such patentable innovations discovered by virtue of public funding should be registered to The Public Domain (or Public Trust), rather than to individual researchers or even universities. If it's bragging rights they want, they can still proclaim their involvement. If public resources, taxes or the equivalent, made the research possible in the first place, though, then no individual person or institution should be able to claim any exclusive legal ownership of that little piece of knowledge.

(Frankly no one should be able to claim exclusive legal ownership of any bit of knowledge, IMO, but I'm throwing the dissenters a bone here.)

Re:Stanford's patent policy.

[Hognoxious]

It doesn't follow that because wrong patents get granted, patents are wrong per se. The word "baby" and "bathwater" spring to mind.

Re:Stanford's patent policy.

[Teancum]

While I generally agree with you that patents are nearly useless and certainly don't perform the task that they are designed to encourage (aka... promote the development of useful ideas), the issue here is:

If an employer decides to give you some sort of compensation for developing patentable ideas, how much should you be getting for that idea?

Not everybody views the patent system to be as corrupt as you do. Even if it may be broken and a horrible idea on the whole, it is the way business is done today... and unfortunately we do have to work within the system even if we want to get rid of it eventually.

I look at the compensation of the employee in this case as peanuts... on the notion that successfully pushing through an idea to become a patent is going to be paying far more in legal fees than the paltry $5k that is being offered. Why not at least offer the same amount of money that will be going to the patent attorney + filing fees (unless it is an in-house corporate attorney with experience in patent law).

Most patents that are filed in current business practice are defensive patents anyway. They don't intend to actually make money off of them, but they do intend to use them if a lawsuit is dumped in their direction and they can burn their opponent first. What that says about American business practices and business tort law is something best deserved for a whole other thread/article.

Both

[eln]

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.

Re:What price your integrity?

[eln]

If you invent something on company time and/or using company resources, they likely own it anyway. You can either participate or just give them the idea for free, because if you try and go behind their backs and patent it on your own, you're going to be in a legal mess.

Sure, you can just invent things on your own time using your own equipment, but depending on the idea and your own personal resources, that may or may not be possible.

The basic premise of the policy is flawed

[Halo1]

Because more patents are not necessarily better.

Additionally, certain patent acquirement strategies significantly increasethe risk of being the target of patent lawsuits, 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 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!"

Re:The basic premise of the policy is flawed

[Elektroschock]

"the fact remains that patents are what drives most research and technological progress in the world"

Which shows that you have no clue about the economic research on the patent system.

Sure, statistic research which measures 'innovation' of a nation by the number of patents granted (or "applied for" as we don't have good data on granting, it takes 4-5 years to examine a patent) will find that more patents mean more innovation but the fact is that the patent system is based on economic voodoo. It is a belief system with the assumption that you can create property.

As it is an incentive system we don't know if an economy is better off with a patent system than without. Therefore a patent system is not "justified". At least in the field of software and business methods and other service sectors the system is very damaging as it was not made for these markets.

Re:What price your integrity?

[lysergic.acid]

if it's a small company in which the employees get some say in the running of the company as some more progressive employers do, then you can offer the suggestion that all company patents be allowed to expire within a reasonable amount of time rather than being renewed indefinitely, or sold to another company who will continually renew it and prevent it from ever being released into public domain.

software patents are inherently stupid, but patents are real & innovative inventions can be beneficial to society if patents are enforced the way they were meant to (with a hard time limit). none of that disney crap where their stolen characters/stories remain copyrighted as long as the company exists, which is a lot longer than the human lifespan and not what the copyright & patent system was designed for.

And a percentage of ownership of any patent

[whoever57]

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.

Re:And a percentage of ownership of any patent

[whoever57]

At the company where I work, most of the patents are only used defensively

I think that what offends employees is when a company pays a pittance to an employee for filing the patent, but years later make a huge windfall profit out of suing others. Partial ownership of any such profits or partial ownership in any profits made through selling the patent to someone else would take away this issue. As long as there is no cash gain from the patent, the partial owner does not gain from it.

The scheme would take a couple of other provisions: a royalty free, perpetual license granted to the employer (for us of the patent in its products), valid unless there was a change of control of the company. This would also the company to use the patent, and would allow the employee to profit should the patent become so valuable that the company was bought to get control of the patent.
It the company does successfully use the patent defensively, the employee should get some kind of bonus out of it. The patent may have just saved the company from shutting down, so why not some kind of bonus?

Re:Ummm....

[russotto]

Why does asking this question on /. seem a lot like walking into a biker bar wearing a feather boa and asking for a virgin Tom Collins?

Son, you might be in the wrong bar...

Considering who has the power in the world, it's more like the other way around -- a biker in full leathers walking into a foofy juice bar asking for a straight Jack Daniels. He still ain't going to get it, but it isn't him in physical danger.

Anyway, if you're a startup, you'd better not make it all equity; your employees know there's a good chance that equity ain't worth squat. All cash or cash plus equity.

Err?

[cartman]

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:Err?

[cfulmer]

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 large enough to make it worth the employee's time to pick up the phone and do the legwork to describe it, but not so large that it motivates the employee to stop doing his/her job and start focusing on inventing.

Re:Err?

[tambo]

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) depends on how good the IP group is at identifying inventions worth pursuing. Yes, a company that tries to patent everything will get socked with a mountain of fees in exchange for very little valuable IP. But a good triage process can greatly extend the value of the IP dollar.

2) Most companies that produce products aren't trying to sell their patents - they're trying to protect the value of their R&D. It's practically impossible to put a dollar figure on that, but any MBA will tell you that these are incredibly important assets for any company that does research and develops products. Instead of worrying about patents, their concern should be having one discovery or one program that is worth anything at all.

How about drug companies that are simultaneously researching therapeutic agents for dozens or hundreds of diseases? I think they probably generate a steady stream of patentable remedies.

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.

I agree with you - IF the company wants to license its IP. If (like most product-producing companies) it's more interested in protecting its R&D, that's a whole different ballgame.

- David Stein

Re:Err?

[cartman]

[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-year old startup". My point is this: if a one-year-old startup thinks they're "churning out" inventions, then they're probably sadly deluded. The chances of them having even one invention worth patenting is probably close to zero. A one-year-old company should focus their scarce money on generating intellectual property and should have at most one or two patents; and those patents were probably created by the founders. But the businesspeople who run that company may just think they'll just hire some programmers, pay them $5000 per major invention, then suddenly have tons of breakthrough innovations. They're probably kidding themselves and wasting their money.

1) The utility ratio ("useful" patent out of the total number of patents) depends on how good the IP group is at identifying inventions worth pursuing. Yes, a company that tries to patent everything will get socked with a mountain of fees in exchange for very little valuable IP. But a good triage process can greatly extend the value of the IP dollar.

I recently spent a long time reviewing the hundreds of patents related to compression. Compression is one of the areas of software which has significant patent activity. Nevertheless, almost all the patents were farcical, absurd, or provably wrong. In fact, there was exactly one company (IBM) that had generated any patents in the last 20 years of any value at all. The other patents were from small companies who believed that their 3-4 silly programmers were churning out brilliant ideas worth millions.

How about drug companies that are simultaneously researching therapeutic agents for dozens or hundreds of diseases? I think they probably generate a steady stream of patentable remedies.

Drug patents are not analogous to software patents. Drug patents cost hundreds of millions of dollars to develop and bring to market, so they are worth protecting. The amount of money invested per drug patent is immense, so a patent is reasonable.

Drugs are generated by professional scientists who spend years or decades on one drug or condition, plus thousands of employees that run clinical trials. Drugs are not generated by lone drug scientists who cavalierly spit out major drug discoveries rapidly by themselves at 1-year-old startups because they're paid $5000 every time they do so.

2) Most companies that produce products aren't trying to sell their patents - they're trying to protect the value of their R&D. It's practically impossible to put a dollar figure on that,

I agree with you that most companies don't try to sell their patents. I also agree that it's difficult to put a dollar value on their R&D. However, it has been my experience that almost all one-year-old startups vastly exaggerate the value of their intellectual portfolio. Many founders of small companies have the conceit that any idea of theirs or their programmers will be important or even revolutionary. As a result, many of them end up wasting lots of money on patent attorneys.

When you get more/biigger

[jhines]

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--

[sillivalley]

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:Patent Programs--

[UncleFluffy]

(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 slowness of the process as an excuse for not paying for value received? Aside from that, there's often additional paperwork to be done later on. People who feel ripped off might just not feel like signing assignment forms, which has the potential to cost you a whole lot more than the cash bonus would have.

Re:Patent Programs--

[sillivalley]

...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!

Re:What price your integrity?

[harlows_monkeys]

Companies cannot be inventors, as far as the patent system is concerned. If the company wants a patent, it has to have the inventors apply, and have the inventors assign the patent to the company.

Re:What price your integrity?

[timholman]

You should quietly smile at whatever they come up with and fail to participate in it. Patents, and particularly software patents, are a huge drain on tech industry and a net drain on society. Be part of the solution, not the problem.

This is not a helpful response. Regardless of how you personally feel about patents, you can't opt out of the game when the rules are made by Congress and the USPTO. A strong patent portfolio is a necessary legal defense in the modern business world. Without one, you're nothing but fresh meat to every sleazy lawyer looking to make a quick buck. If you don't bother to patent your own IP, you can rest assured that some patent troll will do it for you.

Your "solution" will do nothing but drag your employer through needless litigation, and quite possibly cost you your job if a multimillion dollar judgment is issued against the company. If you really want to be part of the solution, lobby Congress to reform the patent process itself. But until that happens, play the game the way it needs to be played.

Seems common based on annual reports

[eison]

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"'.

Re:you've got it backwards

[the eric conspiracy]

I've been employed in 3 companies that have had varying patent incentive programs over the years. During that time I applied for and was granted 38 patents, in the US and in other nations. None of these were software or business process patents.

The various incentives amounted to an attaboy on the low end up to a hundred shares of stock (worth about $100 per share) per granted patent.

The money was nice, and in some cases there was a reception or dinner involved with a famous speaker which was generally fun. Other times there were plaques, or little trophies inscribed with "Excelsior!" or some such.

Did any of it affect my behavior, or make it more likely I would try to patent something? Not really. Did any of it materially affect my company's business? A little, because it made them feel more comfortable about the security of entering a certain area of business. But none of it really provided the company with a monopoly - there were always alternate technologies that could be used to get the same result, but maybe not as efficiently or cleanly.

If I was going to do it I'd choose the recognition ceremony / famous speaker approach. It meant more to me that the senior management of the company took some time out of their schedule and spent it with the R&D people than than the money or stock did. And think this kind of approach is less likely to distort the inventor's decisions as to what is worth pursuing and what is not. And besides meeting a real live astronaut or Nobel Laureate is way cool.

Re:What price your integrity?

[mad.frog]

Poster didn't say anything about the patents in question being software patents. Do you really think that the very concept of patents is hopelessly flawed?

patent incentives

[falconwolf]

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.

Falcon

Re:patent incentives

[eggnoglatte]

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 have to guard against abuse.

Re:patent incentives

[Mr Z]

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.

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. There's always at least one layer that could catch the bogons: the patent attorney that drafts the patent and works all the procedural issues. I suggest an additional layer of technical review to sort good from bad and to prioritize among the good so the most important ones get filed first.

Common info

[tambo]

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

Re:What price your integrity?

[timholman]

You can release an invention into the public domain. While patent trolls can still sue, they have to prove they came up with the invention first.

Unfortunately, it doesn't work that way. If the patent troll sues, you have to countersue to get their patent declared invalid on the basis of prior art. Why should the troll have to validate his patent? The USPTO has already validated it by issuing the patent in the first place. It's up to you to overturn that validation in court. Don't think that making your product open source will protect you from litigation - quite the contrary.

On the other hand having a patent portfolio can be used as a weapon against others threat to sue. "You using our patent so unless you license this patent of yours we'll sue."

Exactly. One strategy is make a competitor back off is to threaten to countersue with your own portfolio. Or, if a patent troll threatens you, you can point to your own patent and say "We're not violating your patent. This is an implementation of our own patent." Then the shoe is on the other foot, and the patent troll must invalidate your patent. Hopefully, the added cost of litigation will make the troll back off.

A better solution to all this BS is to get rid of patents.

As far as business method patents and software patents are concerned, I'm in complete agreement. However, I realize that my wishes and desires do not change the reality that such patents exist, are granted weekly by the USPTO, and must be dealt with rather than ignored in the business world.

Re:Royalties are better.

[Mr Z]

Then, the employee feels they are being treated a bit more fairly as apposed to some little bonus. And why not? If a company makes millions of dollars off of an employees creativity why shouldn't they partake.

Where I work, we do regular reviews of our issued patents to determine which were valuable and which were not. The valuable ones win the inventors an incentive award. And, since it's a company full of engineers, yes, we do have fancy schmancy formulas that drive the process, and determine the amount of the award. (There are also fixed awards for "decision to file" and "patent issued.")

Assigning specific patent royalty amounts rarely makes sense. Sometimes you can point to specific licensing actions that generate revenue associated with a specific patent, but most often you can't. Many patents are cross licensed to other companies through bulk cross licensing agreements. Others just form a "mutually assured destruction" sort of bulwark against other companies. (This latter property doesn't work so well against patent trolls, since trolls don't make anything--they just have their patent(s) that they chase people with.) Thus, we tend to look at how much revenue was associated with products that use the patent (whether the revenue was ours or someone else's) and go from there.

As for my background: I'm a member of one of our internal committees that reviews disclosures to determine what to file. At the very least, that acts as a quality filter internally. I've also filed several patent disclosures of my own, and have even had a few patents issue. Some have even gotten incentive awards in those periodic reviews. :-) I'm not a big fan of the patent system, but as long as it's there, I figure I may as well use it and let it die under its own weight.

Here's how two of my employers have done it...

[marhar]

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
one of my patents so you can know I'm not making this up.

Re:Yes, it does not follow, but it's still correct

[Hognoxious]

litigation costs for the average public firm actually exceed profits from their patent portfolio by a wide margin

I haven't read the study, but even if it's valid, it doesn't mean that the total absence of patents is the best overall solution - just that it's better than a specific (albeit real) bad one.

Patents are bad for the economy because they destroy competition,

Is that patents as implemented now, or as a general principle? And if you mean the latter - on what evidence?

and throwing out the baby would - in this particular case - improve the situation tremendously for almost everyone involved.

Excluded middle - there are options other than total abolition or the status quo.

Why not throw out the bathwater but keep the baby - reform the system? We can start with requiring a prototype/model/formula and that it has to be an invention not an idea. Then enforce the rule that it has to be useful and non-obvious.