Cons dominate pros when companies consider awarding inventors a residual share of income

At first glance, it seems fair to reward inventors who are granted a patent a share of the later income from that patent. But at a recent conference, the panelists rejected that incentive. The administrative difficulties of tracking and apportioning income plague such an incentive. Additionally, the arrangement practically invites disputes and even litigation. Then too, it is often very hard to tell for years whether a patent has value, let alone how much value.

Cash awards at various milestones – submission of an invention disclosure, completion of the patent application, receipt of the patent award – are far more common. The amounts can be in the four digits but what an individual inventor receives may depend how many inventors are listed as contributors (See my post of Oct. 10, 2006: Dial Corp. and its awards; Jan. 27, 2006: incentives to researchers at H-P; July 25, 2007: Halliburton Energy’s policy; and Feb. 6, 2009: higher ROI for R&D with inventor rewards.). Sometimes other employees are involved in the process. For example, AT&T has “patent developers” who interface with business groups to foster patentable innovations.

In addition to cash payouts, one of the companies on the conference panel holds an annual awards ceremony, modeled after the Oscars, where the CEO attends and honors inventors, such as those who have reached milestones like 50 patents or more.