7 ms·

Your Invention Assignment Clause Is Killing Your Company

15 points by acknickulous 15y ago

Joakal 15y ago
IBM's invention policy is: first patent: $1500 when it's filed, another $500 if the patent is awarded any patents after that: $750, +$500 if patent awarded. Every 4 patents you hit a "plateau" and get a bonus $1250 or so on top of everything else. - Random post in a thread where people apparently get $1 for developing patents for the company http://ask.slashdot.org/story/03/10/28/0055253/Employee-Patent-Compensations http://ask.slashdot.org/story/03/10/28/0055253/Employee-Pate... But I also saw that IBM even demands former employee's patents filed after employment: http://www.goodwinprocter.com/News/Press-Releases/2011/Court-Rules-IBM-Owns-Patents-Obtained-by-Former-Employee.aspx http://www.goodwinprocter.com/News/Press-Releases/2011/Court... Is the above good or bad for a company encouraging creativity? What's the right balance?
- psykotic 15y ago
  It's not encouraging creativity. It's encouraging employees to file for bullshit patents to make some extra money and get a bump in their next performance review.
  - wes-exp 15y ago
    Now it all makes sense how IBM is one of the most patent-producing companies and yet the patents don't seem to generate returns commensurate with their number (vaguely recall a study about this, could be wrong).
    - wisty 15y ago
      Business Method for Swinging Sideways on a Swing, anyone?
wmeredith 15y ago
This whole article is based on a line in the second to last paragraph: >>The fact is the smartest and most creative employees won’t offer up a single decent idea if they know it’s company property whether or not it’s used. It's an argument that I find pretty weak and it's presented with no backing at all. The smartest employees will kick ass for their employer and expect to be remunerated in kind. If I wasn't I would move on. And if I never offered up a single decent idea at my job I probably wouldn't be there very long.
- psykotic 15y ago
  Ralph is using hyperbole to make a valid point. A company shouldn't put its employees in a position where they squirrel away their best ideas for their own future use in an imagined startup. A company can help avoid that by properly rewarding their employees. That's basic. But suppose you give your company a great idea but it doesn't run with it for some reason. Do you think you're going to be rewarded? Not likely. And yet now your company owns that idea insofar as it qualifies as an invention if it has such a clause in its employment agreement. That's not even getting into the invention assignment agreements many companies ask you to sign where in principle you have to list all inventions you have ever conceived prior to joining the company. The reasoning is that if you reuse an older idea of yours at the company and it wasn't listed on that disclosure form, they can now lay claim to it. I'm not sure if that's enforceable, but it's an unfortunately commonplace piece of legal boilerplate.
  - gyardley 15y ago
    Because it doesn't want the distraction and/or doesn't have the resources to pursue them, your employer's unlikely to ask for or want ideas unrelated to its business. Because you're an ethical person and/or have a good appreciation of the legal risks, you're unlikely to try and implement ideas related to your employer's business. Because of the above, 'squirreling away ideas for a future startup' should only very rarely be an issue. Certainly not a company-breaker. Having to explain why you've abandon a standard and uncontroversial bit of IP protection to your potential investors - now there's a potential company-breaker.
danshapiro 15y ago
I admire the poster's idealism, but the advice is poor and the title is pure linkbait. The problem is this: it is difficult bordering on impossible to get a company funded or acquired without IP assignment in place. It's the first check in due diligence. That means you'd be a fool to work at a company like the one the poster describes, since it is clearly run by amateurs and has grave, self-inflicted problems in its future. There are always exceptions - maybe an idealistic consulting firm could pull this off - but this is very dangerous stuff. If you're dubious, ask your favorite startup attorney what the #1 killer in due diligence is - it's nearly always IP assignment. Someone wrote some code without having it in place, and you have to either excise the contribution (not always possible) or try to buy the IP retroactively - and since the entire company is likely on the line, you won't be paying market rates. It's more like extortion at that point than a purchase. Long story short: if you're not assigning your IP, then you're not working for the company; you're working at the company. Don't try this one at home.
- psykotic 15y ago
  I think you're misreading him. He's not saying the company shouldn't own inventions developed by the employee for the company on company time. He's talking about the all-encompassing agreements that make employees sign over all rights to anything conceived by them in their professional field for the duration of their employment.
- netaustin 15y ago
  As the owner of [what I believe to be] an idealistic consulting firm, I tend to agree with both the rule and the exception. IP ownership isn't really a good business practice for us because it comes with its own liabilities and could put us at odds with our clients. Our rule for our devs is that if you develop it for a client, it belongs to a client. If you develop it to serve a process we use for multiple clients, it belongs to us. If you develop it in your spare time, it's all yours.
- ghshephard 15y ago
  In reality, reasonable companies and people can come to an agreement regardless of what the template language in the employment contract states. I had a network engineer write some clever code that allowed us to write our firewall filtering in either OpenBSD PF or Cisco ASA format, and convert it back and forth seamlessly. It had absolutely nothing to do with what our company did, and he wanted to publish his work publicly so I simply asked our CTO if we could Open Source it - he had no problem with it as long as it didn't mention our company name anywhere. In general, reasonable people usually come to an agreement despite employment contract language, and if people aren't reasonable, no contract language will make it a good place to work.
qeorge 15y ago
Joel Spolsky's answer here is an excellent primer on why companies have IP assignment clauses: http://answers.onstartups.com/questions/19422/if-im-working-at-a-company-do-they-have-intellectual-property-rights-to-the-stu http://answers.onstartups.com/questions/19422/if-im-working-...
squirrel 15y ago
We spent some solid time (and lawyer fees) getting this right, after inheriting a draconian agreement from our long-ago corporate parent. Now you own anything you do on your own time, so long as isn't directly relevant to our business. By the way this didn't stand in the way of investment at all, as some commentators here suggest.
- buff-a 15y ago
  Define "directly relevant". Sometimes that is the extent of the clause. Jury: well its computer software, and your business states right there in the business code classification that your company is a software company, so we say its owned by the business. So, no, if I invent a new elephant feeder, it'll be pretty clear its not directly relevant to my employer. But since I spend all of my spare time coding, I'd need "directly relevant" spelled out pretty thoroughly.
  - squirrel 15y ago
    There's a disclosure process; if you're concerned someone might in future define your project as relevant, you submit a description of what you're doing and the company has a limited time to claim the project is indeed relevant - if it doesn't do so, then it gives up the right and the project is yours. (Disclaimer: I'm the CTO not a lawyer, so this is just my opinion and doesn't represent the official legal position of my company.)
buff-a 15y ago
Most companies will have (and should have) a clause saying that unless its totally unrelated to the company's business, then they own it. If you quit a job and start a company that is unrelated to your ex-employers business then you are in the clear provided you can demonstrate that you didn't start generating ideas until you after you left. If you quit a job and start something that competes, then you need to take at least 6 months off and go travel the world. Otherwise they can sue you, and probably win. Getting sued at this stage is probably enough to destroy your business. Getting sued by someone who is probably going to win is guaranteed to destroy your business. Unless you can demonstrate the 6 months off, very compellingly, you will get sued when you launch at the latest. Your source code and the equipment its on will be sought as evidence. IANAL, but this was the advice I was given by someone who would know. One thing you can do is have an attachment to the contract that lists all IP that you already own, and further, get it agreed that this IP is unrelated to the company's business so you can keep working on it.
LukeShu 15y ago
A certain company has an agreement that they own any invention you invent while at the company and 1 year after, whether it relates to their business or not. Now, it did say invention, not all IP. Also, it didn't define invention, which was weird because in another place it said, "invention, as defined in this document" or something to that effect.

15 points by acknickulous 15y ago

IBM's invention policy is: first patent: $1500 when it's filed, another $500 if the patent is awarded any patents after that: $750, +$500 if patent awarded. Every 4 patents you hit a "plateau" and get a bonus $1250 or so on top of everything else. - Random post in a thread where people apparently get $1 for developing patents for the company http://ask.slashdot.org/story/03/10/28/0055253/Employee-Patent-Compensations http://ask.slashdot.org/story/03/10/28/0055253/Employee-Pate... But I also saw that IBM even demands former employee's patents filed after employment: http://www.goodwinprocter.com/News/Press-Releases/2011/Court-Rules-IBM-Owns-Patents-Obtained-by-Former-Employee.aspx http://www.goodwinprocter.com/News/Press-Releases/2011/Court... Is the above good or bad for a company encouraging creativity? What's the right balance?

psykotic 15y ago
It's not encouraging creativity. It's encouraging employees to file for bullshit patents to make some extra money and get a bump in their next performance review.
- wes-exp 15y ago
  Now it all makes sense how IBM is one of the most patent-producing companies and yet the patents don't seem to generate returns commensurate with their number (vaguely recall a study about this, could be wrong).
  - wisty 15y ago
    Business Method for Swinging Sideways on a Swing, anyone?

wmeredith 15y ago

This whole article is based on a line in the second to last paragraph: >>The fact is the smartest and most creative employees won’t offer up a single decent idea if they know it’s company property whether or not it’s used. It's an argument that I find pretty weak and it's presented with no backing at all. The smartest employees will kick ass for their employer and expect to be remunerated in kind. If I wasn't I would move on. And if I never offered up a single decent idea at my job I probably wouldn't be there very long.

psykotic 15y ago
Ralph is using hyperbole to make a valid point. A company shouldn't put its employees in a position where they squirrel away their best ideas for their own future use in an imagined startup. A company can help avoid that by properly rewarding their employees. That's basic. But suppose you give your company a great idea but it doesn't run with it for some reason. Do you think you're going to be rewarded? Not likely. And yet now your company owns that idea insofar as it qualifies as an invention if it has such a clause in its employment agreement. That's not even getting into the invention assignment agreements many companies ask you to sign where in principle you have to list all inventions you have ever conceived prior to joining the company. The reasoning is that if you reuse an older idea of yours at the company and it wasn't listed on that disclosure form, they can now lay claim to it. I'm not sure if that's enforceable, but it's an unfortunately commonplace piece of legal boilerplate.
- gyardley 15y ago
  Because it doesn't want the distraction and/or doesn't have the resources to pursue them, your employer's unlikely to ask for or want ideas unrelated to its business. Because you're an ethical person and/or have a good appreciation of the legal risks, you're unlikely to try and implement ideas related to your employer's business. Because of the above, 'squirreling away ideas for a future startup' should only very rarely be an issue. Certainly not a company-breaker. Having to explain why you've abandon a standard and uncontroversial bit of IP protection to your potential investors - now there's a potential company-breaker.

danshapiro 15y ago

I admire the poster's idealism, but the advice is poor and the title is pure linkbait. The problem is this: it is difficult bordering on impossible to get a company funded or acquired without IP assignment in place. It's the first check in due diligence. That means you'd be a fool to work at a company like the one the poster describes, since it is clearly run by amateurs and has grave, self-inflicted problems in its future. There are always exceptions - maybe an idealistic consulting firm could pull this off - but this is very dangerous stuff. If you're dubious, ask your favorite startup attorney what the #1 killer in due diligence is - it's nearly always IP assignment. Someone wrote some code without having it in place, and you have to either excise the contribution (not always possible) or try to buy the IP retroactively - and since the entire company is likely on the line, you won't be paying market rates. It's more like extortion at that point than a purchase. Long story short: if you're not assigning your IP, then you're not working for the company; you're working at the company. Don't try this one at home.

psykotic 15y ago
I think you're misreading him. He's not saying the company shouldn't own inventions developed by the employee for the company on company time. He's talking about the all-encompassing agreements that make employees sign over all rights to anything conceived by them in their professional field for the duration of their employment.
netaustin 15y ago
As the owner of [what I believe to be] an idealistic consulting firm, I tend to agree with both the rule and the exception. IP ownership isn't really a good business practice for us because it comes with its own liabilities and could put us at odds with our clients. Our rule for our devs is that if you develop it for a client, it belongs to a client. If you develop it to serve a process we use for multiple clients, it belongs to us. If you develop it in your spare time, it's all yours.
ghshephard 15y ago
In reality, reasonable companies and people can come to an agreement regardless of what the template language in the employment contract states. I had a network engineer write some clever code that allowed us to write our firewall filtering in either OpenBSD PF or Cisco ASA format, and convert it back and forth seamlessly. It had absolutely nothing to do with what our company did, and he wanted to publish his work publicly so I simply asked our CTO if we could Open Source it - he had no problem with it as long as it didn't mention our company name anywhere. In general, reasonable people usually come to an agreement despite employment contract language, and if people aren't reasonable, no contract language will make it a good place to work.

qeorge 15y ago

Joel Spolsky's answer here is an excellent primer on why companies have IP assignment clauses: http://answers.onstartups.com/questions/19422/if-im-working-at-a-company-do-they-have-intellectual-property-rights-to-the-stu http://answers.onstartups.com/questions/19422/if-im-working-...

squirrel 15y ago

We spent some solid time (and lawyer fees) getting this right, after inheriting a draconian agreement from our long-ago corporate parent. Now you own anything you do on your own time, so long as isn't directly relevant to our business. By the way this didn't stand in the way of investment at all, as some commentators here suggest.

buff-a 15y ago
Define "directly relevant". Sometimes that is the extent of the clause. Jury: well its computer software, and your business states right there in the business code classification that your company is a software company, so we say its owned by the business. So, no, if I invent a new elephant feeder, it'll be pretty clear its not directly relevant to my employer. But since I spend all of my spare time coding, I'd need "directly relevant" spelled out pretty thoroughly.
- squirrel 15y ago
  There's a disclosure process; if you're concerned someone might in future define your project as relevant, you submit a description of what you're doing and the company has a limited time to claim the project is indeed relevant - if it doesn't do so, then it gives up the right and the project is yours. (Disclaimer: I'm the CTO not a lawyer, so this is just my opinion and doesn't represent the official legal position of my company.)

buff-a 15y ago

Most companies will have (and should have) a clause saying that unless its totally unrelated to the company's business, then they own it. If you quit a job and start a company that is unrelated to your ex-employers business then you are in the clear provided you can demonstrate that you didn't start generating ideas until you after you left. If you quit a job and start something that competes, then you need to take at least 6 months off and go travel the world. Otherwise they can sue you, and probably win. Getting sued at this stage is probably enough to destroy your business. Getting sued by someone who is probably going to win is guaranteed to destroy your business. Unless you can demonstrate the 6 months off, very compellingly, you will get sued when you launch at the latest. Your source code and the equipment its on will be sought as evidence. IANAL, but this was the advice I was given by someone who would know. One thing you can do is have an attachment to the contract that lists all IP that you already own, and further, get it agreed that this IP is unrelated to the company's business so you can keep working on it.

LukeShu 15y ago

A certain company has an agreement that they own any invention you invent while at the company and 1 year after, whether it relates to their business or not. Now, it did say invention, not all IP. Also, it didn't define invention, which was weird because in another place it said, "invention, as defined in this document" or something to that effect.