What to consider as you encourage and monitor innovation in your company

I won’t belabor why you should create an invention incentive (“patent bounty”) program. Let’s assume you’ve already made that decision. Now what?

What Might the Company Be Entitled to Receive?

The rights to an invention automatically vest in the inventor except in the following circumstances: (1) she signs an invention assignment agreement before inventing; or (2) she was specifically hired to invent. Even in the latter case, the absence of a “pre-invention assignment” agreement can lead to costly disputes over ownership. Assignment language can vary tremendously in scope, but one of the main buzz-phrase in these provisions is “hereby assign.”

If you want an employee to sign an invention assignment provision later, you may have to provide a new benefit on top of that person’s salary (legalese warning: “consideration”). Nevertheless, even with a “pre-invention” assignment agreement in place, it’s good practice to have the inventor sign an additional assignment agreement at the time of the invention that more fully describes what is being disclosed. This “belt and suspenders” approach will help negate any potential ambiguity or unenforceability of the first agreement.

Who Should Be Included in the Program?

  • The “wide net” approach

    • Predicting the source of your company’s next invention is tough, so it may behoove you to get everyone involved in the process. You may get a lot of submissions that don’t ultimately become patented. However, even if one idea on its own may not be patentable, it could help other innovators modify their ideas. Also, let’s remember that a good idea doesn’t need to be patentable to help make your company more successful, and that even minor improvements on a process or product can be valuable inventions. As a result, a “wide net “ approach is generally preferred.

    • The potential downside of a wide net approach is the cost of administration. If you manage a large number of potential inventors, someone will need to sift through possible inventions to assess what might warrant passing on to a patent attorney for review. If you don’t have the resources for this approach, you should consider limiting your pool of potential disclosures.

  • The “selected team(s)” approach

    • If you are certain that only one or two departments in your company would release potentially valuable inventions, you could save administrative costs by limiting the pool of submissions. This allows you to dedicate more resources to certain departments.

    • The potential downside with this approach is that you may disenfranchise or upset other people in your organization.

    The important takeaway is that you may need to try different approaches based on your company’s size, culture, and propensity for innovation across different departments.

How Should You Collect Potential Inventions?

  • Establish a Written (and Consistent) Policy and Procedure

    • Whatever approach you take, make sure you establish a policy and procedure, and write it down. This does not need to be complicated if you manage a small company, but you should make the policy and procedure apparent and understandable. You want to encourage buy-in from your employees, and nothing discourages participation in such a program quite like a thicket of complex processes and legal jargon. (This is a creative process, after all!)

    • Why establish a policy? If you end up in a dispute over invention ownership, it is extremely helpful to be able to point to (a) the “pre-invention” assignment (see above); and (b) the policy for reporting inventions.

    • Keep key definitions consistent across all of your contracts and forms. Most definitions of “Intellectual Property” or “Inventions” in employment agreements and the like are hilariously broad. (Absent outlying circumstances, they normally cover every sneeze of an inventive expression.) Nevertheless, you want these definitions to be consistent across all agreements to remove any ambiguity from your employees (or heaven-forbid, a judge). In drafting your policy, pull together all related employment, confidentiality, assignment, and invention-related contracts; and make sure they all speak the same language.

  • Lab Books

    • Lab books are less important than they once were before the America Invents Act changed the United States patent system from a “first to invent” system to a “first to file” system. Nevertheless, they are still important to help resolve any inventorship disputes that may arise. Develop and maintain a culture where your potential inventors regularly keep written records of their inventive exploits. Ideally, the records are kept every day, signed by the potential inventor and witness, and securely stored. The witness should be a person who has no potential claim to the invention itself.

  • Invention Disclosure Forms

    • In addition to regularly kept lab books, your company ideally should have an invention disclosure form (“IDF”). An IDF does not need to be overly complicated, but it should include as much detail about the “who, what, when, where, how, and why” of the invention as possible, including missteps along the way, and alternative means of effectuating its results. Completion of the IDF should also be viewed and signed be a non-inventor colleague.

    • If you develop an invention incentive program that gives different incentives to different types of creations, staying organized with IDFs on the front-end will save you headaches down the road.

  • Tips from Litigation: Lab books and IDFs can end up in litigation, so check in with your patent counsel before your team writes down something unfortunate that cannot be unsaid! Ideally your patent counsel can visit your team and give a “Patent Law 101” course of sorts.

What Kind(s) of Incentives Should You Use?

  • There’s no “wrong” answer here, but most programs use a multi-tiered approach:

    • First incentive for disclosing an invention that ultimately gets filed in a patent office

    • Second incentive for disclosing an invention that ultimately issues as patent

    • Third incentive for disclosing an invention that either brings in X amount in revenue, or results in a certain percentage in cost saving – regardless of whether a patent ultimately issues.

  • Figure out what will motivate your workers:

    • Cash is great, but what about vacation time? Or company stock? Or a combination?

    • Or … you can poll your employees and ask for feedback. This approach not only gets your employees involved in the process, but also eliminates some of the guesswork out of figuring out a proper incentive that fits your company culture.

    • Finally, give credit where it is due! Even if inventing is a part of someone’s job, you should make a special point to recognize that person’s contributions across the company.

      • Go beyond a half-hearted email or slack message. Throw an awkward office party! Put out a press release! Get creative!

      • Don’t forget to recognize the primary inventor’s team as well. Contributors who do not ultimately get named on a patent are still extremely important, and you do not want to create resentment within the ranks by failing to celebrate everyone who helped.

As always, feel free to contact me if you have questions about intellectual property, including developing an invention incentive program.

Cheers,

Tim