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Employee/Employer Rights

Postby SoftOpening » Mon Jun 30, 2008 5:49 pm

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This one is a bit complicated, but I'll try to simplify it the best I can.

Say a guy, we'll call him Bob, comes up with an idea for a new invention and kicks it around a bit. He asks around, makes some notes, and just generally looks into the feasibility of his idea for several months. Bob's technical level is equivalent to that of a good helpdesk person, but he doesn't have the technical knowledge to design and build his idea himself.

Then Bob gets hired by a small company as an engineer and works for a few months. His idea is related to his employers line of work, so he approaches the owners to see if they would be interested in developing something.

The owners agree that it's a good idea and start developing a product with Bob on the design team. They also give Bob the task of working with a patent attorney to draw up the patent documentation. The utility patent includes Bob's name as an inventor as well as the names of the owners of the company.

Bob finds a small local company that specializes in electronic device prototyping and recommends them for the job. The design team meets with the prototyping company to sign an NDA and lay out the specifications for the device. A couple of months later, and the first prototype is ready for testing.

Everything has been funded by the company so far, the patent attorney fees, the prototyping company, and Bob's salary while he worked on the project. The other part of the company's business has taken a major shift and they are forced to downsize. Nearly everyone is let go, including Bob. The company still plans to continue with the product and offers Bob a percentage of the profits if it is successful.

The patent has not yet been assigned to the company and Bob thinks he deserves a larger cut than what the company is offering (since it was his idea before he was hired by the company). He refuses to assign the patent to the company. The company feels they have been more than generous with their offer and can't afford to meet Bob's demands.

There is no assignment agreement in place and the company has no employee handbook nor any other doctrine that covers intellectual property. It's a very small company of less than 10 people so they did not feel they needed it.

What should Bob's and the company's next move be?

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:?:

Postby SoftOpening » Wed Jul 02, 2008 7:46 am

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Wow, I guess it's more complicated than I thought! I figured someone would have an opinion of some kind though. I have talked to a patent attorney and of course he made everything sound pretty rosy (in my favor), but it's in his best interest to encourage me to hire him.

Just looking for some unbiased input here. I know it's a sticky situation and it's my own fault for being in it, but it is what it is. Lesson learned: No matter how well you think you know someone, when it comes to business get it in writing.

Postby rather-be-golfing » Wed Jul 02, 2008 8:46 am

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Can't offer advice but I certainly have an opinion since I was once ripped-off by a small company.
All negotiations must be in writing and completed ahead of time. It is all about greed. As an employee, your value is way less than if you had entered into a development partnership. Also, the patent should be in your name only and assigned to the company if they buy it from you.

I once considered going this route with an idea. It seems less intimidating to work with a team to develop a product but the price for that secure feeling is high as you can see. Your boss will never accept the fact that you are making more money than him!

I am negotiating a licensing deal right now. I get all the perks that you got as far as costs but they don't own me or my idea.

My guess is that neither party is going to want to pay the huge legal bills involved in this one. What kind of percentage are they offering? You may be better off taking the offer on the condition that it is written up as a proper license deal with ownership going to you and performance guarantees and all the usual legal stuff. The negotiations have most likely reached a 'personal' level and need mediation. A good agent or attorney may be able to get you a better deal.

Also, you may have a difficult time proving that you came up with this before working for the company.

It sucks but the system does not punish employers who take advantage of employees unless there is a lot of written documentation.

Good Luck

Postby makeworldbetter » Wed Jul 02, 2008 9:08 am

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If that's what company says and holds in court, it doesn't matter when did Bob come out the idea any more, before or after he jointed the company. It could be worse, if Bob came out the idea after he jointed, Bob doesn't get any percentage.

The judge will be interesting to find out what kind of agreement there was. If it's not written down, then must be in oral. No company would stupid enough to pay all develop fees if there isn't any interest goes to the company. Bob better start work on witness or evidence... In fact this post looks like a bad evidence to Bob since the wording
Bob thinks he deserves a larger cut than what the company is offering

Postby SoftOpening » Wed Jul 02, 2008 11:13 am

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rather-be-golfing wrote:What kind of percentage are they offering?


The company was offering Bob the same cut that the owners were going to get. Bob agreed at the time (all verbal), but now feels he deserves more than 30% since it was his idea in the first place. The company says that is too much so Bob made an offer to let them buy him out completely for an 8 figure price.

That's pretty much where the whole thing stands right now. The product itself hasn't even been marketed yet, so there's no telling if it will succeed or not. I don't see the company paying 8 figures to buy out one patent owner at this stage, especially since the owners of the company are on the patent themselves.

I'm just not sure I know how the "first to invent" rule stands up to the "employee/employer" relationship. I'm not even sure if the "first to invent" applies since it was only a rough concept without the technical knowledge to make a working product until the company developed it.

Postby makeworldbetter » Wed Jul 02, 2008 11:40 am

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SoftOpening wrote:
I'm just not sure I know how the "first to invent" rule stands up to the "employee/employer" relationship. I'm not even sure if the "first to invent" applies since it was only a rough concept without the technical knowledge to make a working product until the company developed it.


Inventorship and ownership can be two different things. I have two patents that I invented while working for a company but I have no ownership to those things at all. If I have a patent that I invented but sold out to others that means I sold my ownership but I still keep the inventorship.

The fact Bob invented before he jointed a company doesn't mean he always keep the ownership.

Postby rather-be-golfing » Wed Jul 02, 2008 12:59 pm

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Sorry I thought that Bob's employer was being greedy....it looks more like Bob is the greedy one.
A verbal agreement would not stand up in court but Bob should honor it anyway. If more people did that we wouldn't have so many things going to court.
And 8 figures for something that may or may not be successful is ridiculous and most likely impossible for a small company.
Nothing wrong with 30% depending on how the calculation is done. Bob should be careful or he will get 100% of nothing.

Just my opinion.

Postby makeworldbetter » Wed Jul 02, 2008 2:29 pm

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verbal agreement doesn't stand on court... firmly. But when judge is seeking for judgment, it would be considered. This case looks like a ownership case. Bob gave consent when filing patent application without objection that another name also on that application just make it impossible for Bob to walk away to have 100% ownership.

Postby rather-be-golfing » Wed Jul 02, 2008 2:44 pm

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Are you 'Bob' or 'the company'?

Postby SoftOpening » Wed Jul 02, 2008 5:11 pm

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rather-be-golfing wrote:Are you 'Bob' or 'the company'?


I hope this doesn't vilify me, but I am one of the owners. I left it somewhat ambiguous in my description of the situation so I could hopefully get some unbiased opinions. If I know what his best options are, I know what to expect.

Even though I represent "the company", I am not trying to rip anyone off. The truth is, I've put as much work into this product as anyone on the team. Bob had a rough concept in the beginning, but no knowledge of how to make it work. The team did all of the research and development, and I wrote the original software for the proof of concept myself. Bob was on the payroll the entire time being paid a hefty salary and of course all of the expense of developing the product was paid for by the company. The original concept is only a fraction of the final product we came up with. But all of that aside, we were all still equal partners.

Bob had said several times that he wanted a written agreement and I agreed. He was even given the latitude of having the agreement written up by his own attorney so we could all sign it. But whenever I asked him if it was done, he would start trying to negotiate a bigger share. At that time we were planning to simply sell the whole thing and split the profit equally. When that deal fell through, he decided he just wanted a big wad of cash (which we don't have anyway).

I know we could just go ahead with our plans of manufacturing and marketing the product ourselves, but that leaves Bob out there who is fully within his rights to license the patent to a competitor who could then design and manufacture their own device. It's a hole that needs to be closed, but his greed is making him impossible to negotiate with.

It has certainly been a learning experience and I'm sure there will be a lot more lessons before it's all over with. I'm a pretty mild mannered person, overly trusting of people and generally pretty generous, but I feel like all of that has been taken advantage of. I'm just frustrated and disappointed that it's turned into this conflict when it should have been a win-win situation for everyone.
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