INDUSTRY fi BUSINESS
Industry patent holders seek greater payoff Bill now before Congress would create patent compensation system for employed inventors; industry cool to proposal ". . . the rights and interests of the laboring man will be protected and cared for by the Christian men to whom God in His infinite wisdom has given control of the property interests of this country." Reading Railroad president George F. Baer probably didn't have patents in mind when he uttered his classic remark back in 1902, but he may as well have. Substitute "employed inventor" for "laboring man" and read "corporate management" for "Christian men" and you get a pretty good feel for the attitude of the chemical industry toward patent compensation for the employed inventor. As for the attitude of the employed inventor, it is more often than not that he is not being adequately compensated for his inventions. Now there are indications that he may expect increasing support of his contention from the Government. Congress is considering a bill which would require that the employed inventor benefit directly from profit made on his invention—a prospect not much to the liking of industry—and
the Patent Office is looking at ways to maximize incentive for the employed inventor without decreasing incentive for business to invest. Patents have been around in one form or another since 1474 and the statutory law regulating employer-employee relationships began to take a modern form as early as 1349 when the Statute of Labourers was enacted in England by Edward III. In the U.S., the Constitution adopted in 1789 established in Article I, Section 8, clause 8, that "The Congress shall have the power . . . to promote the progress of science and the useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." While independent inventors still make important contributions to "the useful arts," only Brobdingnagian business and government are capable of supplying the enormous amounts of capital necessary to advance modern technology. By and large, the question of how much reward an employed inventor should realize from his invention is a matter of contract between the employee and his employer. There are no legal provisions—as there are in West Germany (see box, page 15) — which stipulate that the inventor must participate directly in the profits a corporation makes from his inven-
Commissioner Schuyler Maximize incentive Rep. Moss Patent bill of rights
Du Pont's Dawson Fair and reasonable
14 C&EN MARCH 30, 1970
Employee files patent copies in Patent Office public search room
tion. Typically, an individual working for a company, whether he is employed as an inventor or not, must preassign to the company all rights to patents he might receive while he is a company employee and, frequently, for two years thereafter. While such agreements differ from company to company, virtually all U.S. corporations involved in R&D require such an agreement as a condition of employment. Not infrequently, the transfer of patent rights from the inventor to the corporation is accompanied by a token payment of one dollar. The method of providing greater incentive, however, remains less than obvious. One suggestion has been to provide a fixed per cent compensation for the inventor from corporate sales or profits. Early this year, Rep. John E. Moss (D.-Calif.) introduced a bill, H.R.
15512, "to create a comprehensive federal system for determining the ownership of and amount of compensation to be paid for inventions and proposals for technical improvement made by employed persons." The Moss bill would distinguish between "service inventions"—inventions by an employee during his employment which are outgrowths of the type of work performed by the employee or which can be shown to be based on experience "gained during his employment or on operations carried out by the employer'*—and socalled "free inventions" or any invention that does not qualify as service invention. An employee must notify his employer when he has made a service invention and the employer must respond within a specific period of time if the employer intends to claim the invention. Such a service invention would become a free invention if the employer released it in writing, if the employer failed to claim the invention in the specified time interval, or if the employer failed to comply with his obligation (described in another section of the bill) to apply for a patent in the name of the employee inventor. The bill further states that an employee is entitled to "adequate compensation for his service invention" representing "the fair market value of the employer's right to the invention adjusted to reflect the following factors: the position and duties of the employee; and the degree to which the operations of the employer contributed to the making of the invention." Guidelines. The employer and employee would determine what amount of compensation was to be paid according to guidelines to be issued by the Secretary of Labor. The bill provides for arbitration and judicial review in the event that the employer and employee fail to reach agreement on what constitutes "adequate compensation." In the case of free inventions, the bill would require the employee to disclose any information the employer might need to determine whether or not the invention falls within the present or proposed scope of his business, "unless, in the judgment of the employee, the invention is obviously of no use in the activities of his employer." If the free invention falls within the field of interest of the employer, provisions are made by the bill to grant the employer an exclusive license. Compensation for the inventor would then be determined by an arbitration board. Spokesmen for Rep. Moss say the bill is patterned after the West Ger-
Some foreign countries protect employee patent rights
CANADA. Rights of employed inventors who are not crown servants are governed only by contracts between employer and employee. The Public Servants Invention Act of 1954 guarantees the government's right to inventions made by a public servant while acting within the scope of his duties or using government facilities, equipment, or financial aid. Inventions which result from or are connected with employment are also covered. JAPAN. Under the patents act of 1959, an employer has the right of a nonexclusive license on any invention within the scope of the business functions of the employer and by its nature and origin embraced within the duty of the employee. Except in such a case, acquisition of patent rights or exclusive rights by contract or terms of service concluded in advance is null and void. Acquisition of exclusive rights or patent by the employer requires compensation for the employee based on the profit obtained by the employee and the extent to which the employer contributed to the invention. SOVIET UNION. Under the ordinance of 1959, the U.S.S.R. recognizes three distinct categories—inventions, discoveries, and suggestions for rationalization. Each category is carefully defined and a certificate of authorship or a patent is issued for inventions, a diploma is issued for a discovery, and a certificate of authorship is issued for suggestions for rationalization. A lump sum payment is awarded to recipients of certificates of authorship or diplomas for discovery. Compensation for certificates of authorship granted for inventions or suggestions of rationalization is determined, considering many factors, according to a schedule. UNITED KINGDOM. No statutory regulation of patent compensation for the employed inventor exists in the United Kingdom. Precedents exist, however, arising from the laws governing the relationship between master and servant and the law of contracts. Prior to 1949, the courts found either master or servant entitled to all the rights of a particular patent. There was no provision for shared benefits. The insertion of section 56 into the Patents Act in 1949 rectified the situation by creating authority for the ComptrollerGeneral of the Patents Office to adjudicate disputes arising between employer and employee over apportionment of benefits. Questions concerning patent compensation for crown servants were dealt with by temporary commissions in 1920, 1946, and 1947. A Central Award Committee was established in 1956 which eliminated the temporary commissions. Although the opinions of these bodies may not be legally binding, as are court precedents, the entire body of English patent law apparently provides reasonable compensation for the employed inventor. WEST GERMANY. Compensation of employed inventors in Germany began in 1920 with an agreement that an inventor should receive 5% of the profit from his invention. After 1930, however, court rulings began to recognize the concept of "company inventions" in cases where the invention was a result of "substantial cooperation of a number of employees" and depended upon company material. German law held that the employee had no rights to "company inventions." With the advent of Nazism, compensation for employed inventors gained new momentum. "We know that all we see around us of material invention is the result of the creative power and capacity of the individual personality," said Hitler in Mein Kampf. Thus, in 1942, a law was passed stipulating that the employee must place his invention at the disposal of his employer, but that he was entitled to reasonable compensation. Additional provisions added in 1943 and 1944 provided, respectively, the definition of "service invention" and the machinery for determining compensation. In 1957 West Germany adopted its present system. Sales are the key. An employee may be awarded as much as 1% of the sales of a product based upon his patent, although the typical amount is closer to 0.5%. As sales reach an arbitrary mark, the percentage rate drops even further—a practice justified by the fact that sales are as much the result of promotion as the value of the invention. The law also takes into account the position of the employee in the company. Compensation for an employee who was not paid to invent would presumably be higher than for an employee whose assigned task it was to produce the invention. Reactions to the German system are mixed, but generally Germans have found it possible to live with the administrative difficulties of the act. —Senate Subcommittee on Patents, Trademarks, and Copyrights MARCH 30, 1970 C&EN 15
Gatorade snarl involves university "employed inventor"
The problem of compensating employed inventors is especially difficult when the inventor is employed by an educational institution. A case in point involves the now five-year-old scuffle at the University of Florida among Dr. J. Robert Cade, the Department of Health, Education, and Welfare, and the university's board of regents over the patent rights to Gatorade (C&EN, Nov. 25, 1968, page 14). Gatorade is a lemon-lime-flavored aqueous solution of electrolytes and glucose. Since the brew is isotonic, it enters the bloodstream about 12 times faster than water. Dr. Cade, an associate professor of renal medicine at Florida, developed the thirst quencher that had been used by university athletic squads since 1965. At the time of his invention, Dr. Cade held two NIH grants to study the physiological regulation of aldosterone—an electrolyte-controlling hormone. Dr. Cade maintains that he developed Gatorade in his home with his own funds. He denies that his work on aldosterone—which was done on rats—contributed in any way to the invention of Gatorade. He admits that he spent $14 of NIH money on radioactive sodium sulfate used to measure extracellular fluid volumes in some Florida athletes. In 1967, Dr. Cade set up the Gatorade Trust to exploit his invention. Subsequently, he sold Gatorade rights to Stokely-Van Camp, for a cut of Stokely's profits on the beverage. HEW OBJECTS. Sometime later HEW Assistant Secretary Roger 0. Egeberg authorized the university to recover royalties previously deposited with the Gatorade Trust and to hold those royalties until such time as HEW could make a further decision on the Government's right to Gatorade. Dr. Cade wasn't buying the Government's arguments. Last January, the Gatorade Trust filed a suit in U.S. District Court in Indianapolis seeking a declaratory decree to determine just who owns Gatorade. The defendants of the suit, HEW, the U.S. Government, HEW Secretary Robert H. Finch, and Dr. Egeberg, have asked for an extension "to take discovery" before submitting their case. The incredible aspect of the Gatorade tale is that Dr. Cade had no contract with the University of Florida until three months ago. . "The university didn't bother to send one around," said Dr. Cade. When he finally signed a contract, there was no stipulation that he preassign patent rights to inventions made while in the service of the university. "I only promised to abide by the rules of the board of regents," notes Dr. Cade. The board of regents is exercising its full elastic option to define the scope of Dr. Cade's responsibility to the university. The regents say his area of responsibility is "the care and health of the people of Florida," according to Dr. Cade. Thus, when Dr. Cade, an avid gardener and plant enthusiast, revealed the development of a white hybrid tea rose, there was serious talk in some university circles concerning whether or not—since roses are often used in sick rooms—the university could claim royalties. In a letter to the board of regents, the appropriate university committee on sponsored research opined that, while the white hybrid tea rose was unrelated to Dr. Cade's field of endeavor, Gatorade was probably subject io claim from the university. Still another product—a lemon-lime lager called Hop'N Gator—may be the subject of further action by university officials. The mildly alcoholic decoction embodies the same electrolyte replenishing properties of the parent Gatorade. ASKS HELP. Early in the development of Gatorade, Dr. Cade informed the university of his invention and asked for help in perfecting the product. Dr. Cade says the university would not give him money, but gave him the green light to develop the invention at his own expense. Dr. Cade interpreted this as permission to dispose of his rights to the product. But that's where the board of regents came into the picture. The regents had not given formal permission to dispose of the rights to Gatorade. They were incensed when they learned that the university was realizing no profits. Dr. Cade has petitioned the regents to release those inventions which the committee on sponsored research says are not within the university's bailiwick, but the board is dragging its feet. Meanwhile, Dr. Cade announced early last month that he would leave the University of Florida in June to look for greener pastures. "Because of Gatorade," says Dr. Cade, "I have become fair game for anyone about anything. Every time the board of regents meets they discuss Gatorade, and editorials about 'Greedy Dr. Cade' appear all over the state of Florida." 16 C&EN MARCH 30, 1970
man patent law "about inventions of employees" of 1957 (C&EN, April 13, 1967, page 4 4 ) . The bill is the result of a five-year study conducted by the California Society of Professional Engineers, according to CSPE president-elect Robert Kuntz. It represents the first legislation of its type, says Mr. Kuntz, although in 1963 Congressman George E. Brown, Jr., of California introduced a bill in which he attempted to make preassignment of patent rights to a company as a condition of employment an unfair labor practice. Rep. Brown's bill died in committee. "Our approach," says Mr. Kuntz, "is to come up with a comprehensive approach to the problem." The problem, as he sees it, is that the original intent of providing incentive to the inventor has been subverted by agreements which assign all patent rights of employed inventors to companies. "Engineers have experienced this situation so consistently that they have become accustomed and reluctantly resigned to it. Many engineers have been sufficiently conditioned that they even support the employer's position that preassignment of all invention rights is moral and just as consideration for salary paid," according to Mr. Kuntz. Incentive key. The problem of providing adequate incentive for the employed inventor has not escaped the attention of the Patent Office. "Incentive for the employed inventor is, perhaps, not as great as it could be," says Patent Commissioner William E. Schuyler, Jr. "I'm not suggesting that the employed inventor has been mistreated, but I would suggest that the problem might be approached from the direction of whether or not we are providing the maximum incentive we can for the inventor," he adds. Mr. Schuyler cautions that incentive for business to invest must also remain high. He emphasizes that the right of the employee to contract with the employer must be maintained. Critics of Rep. Moss' position fall into two categories—those who think his bill is inadequate and those who believe adequate compensation is already being provided for the employed inventor. Most patent lawyers and industry chiefs are critical of the Moss bill. They feel it would provide insurmountable administrative problems. They also fear massive snarling of the already overburdened patent search system. "The bill looks to the material reward of the inventor rather than to maximizing incentive for both inventor and investor," says Mr. Schuyler.
Edward E. McKie, Jr., chairman of the National Council of Patent Law Associations, is "in sympathy with what the bill tries to do because in many cases the employed inventor is not fairly compensated." Like Mr. Schuyler, however, he is skeptical about the possibility of administering the bill. The overwhelming opinion of industry, however, is that no additional incentive for the employed inventor is necessary. Most U.S. corporations reward inventors indirectly for outstanding performance by special bonuses or rapid advancement within the company. Du Pont, for example, has a special bonus system to reward members of a team who make the company a large profit. One former du Pont employee commented, "I had 20 to 30 patents assigned to my former employer, many as coinventor. All but one were worthless. I was rewarded with one of the largest bonuses ever paid out by that company—but not specifically for that patent; that patent was a byproduct/' Du Pont vice president David H. Dawson thinks the bonus system is "a fair and reasonable approach/' Some companies have more structured patent compensation systems, however. General Electric, for example, awards a fixed sum for each patent filed—typically $125. In addition, the company awards medallions—bronze for up to nine patent awards, silver for ten to 19 awards, and gold for 20 or more patents. IBM awards points—three points when a patent application is filed and one point for various other patent-type publications in the company's Technical Disclosures Bulletin. Twelve points are worth $1600 to an IBM employee, then he can start over again. In addition, IBM makes Significant Invention Awards of $1000 or more and provides various fellowships for outstanding inventors. Several major aircraft makers provide cash awards of varying size upon filing of patent applications. The American Chemical Society Committee on Patent Matters and Related Legislation has not considered the question of patent compensation for employed inventors. Dr. Stephen T. Quigley, director of ACS's Office of Chemistry and Public Affairs, told C&EN that ACS was aware of the Moss bill, but in view of the absence of evident member interest, the patents committee had not considered the topic. Committee chairman John T. Maynard echoed Dr. Quigley's impression. "If it's evident that there's membership interest in the topic, we will certainly consider it," he said.
INDUSTRY THIS WEEK IN BRIEF
New
construction
SunOlin Chemical Co., Claymont, Del., reveals plans for major expansion of its hydrogen production facilities from 12 million to 21.5 million cu. ft. per day. Hydrocarbon Research, Inc., is contractor for new $1.5 million plant, already under construction and scheduled to go on stream this fall. PPG Industries, Inc., has completed expansion of 1,1,1-trichloroethane production facilities at its Lake Charles, La., chemical complex. Project, begun early in 1969, boosts PPG's capacity for compound to 175 million pounds per year, is third expansion since PPG's original 15 million pound-per-year facility went on stream at Lake Charles six years ago. Contract for engineering and constructing 50 million pound-per-year expansion of Dart Industries' polypropylene plant at Odessa, Tex., has been awarded to Ortloff Corp., subsidiary of Elcor Chemical Corp., Midland, Tex. New facility will increase Dart's polypropylene capacity at Odessa to 130 million pounds per year.
Corporate Control Data Corp., Minneapolis, Minn., will sell its subsidiary GoslinBirmingham Corp. to Envirotech Corp., Palo Alto, Calif., for an undisclosed amount of cash. GoslinBirmingham, Birmingham, Ala., makes and markets filters, evaporators, dryers, other industrial process and control equipment. Its sales in 1969 amounted to about $8 million. G. D. Searle & Co., Chicago, III., has acquired Buchler Instruments, Inc., Fort Lee, N.J. Buchler, which makes biomedical and chemical laboratory equipment including fraction collectors and other apparatus for purification and analysis of complex materials, will become division of Searle's Nuclear-Chicago subsidiary. Northern Petrochemical Co., Des Plaines, III., wholly owned subsidiary of Northern Natural Gas Co., Omaha, Neb., has reached agreement for ac-
quiring Marine Plastics, Inc., Clinton, Mass. Marine Plastics processes and color-compounds plastic materials, principally for toy and houseware molding industries. Expansion and diversification of product line is planned.
International Dow Chemical Europe, S.A., has sold its 5 0 % interest in French polystyrene producer Plastichimie to Pechiney-Saint-Gobain, Dow's former partner in the venture. Plastichimie's polystyrene capacity is 35,000 metric tons per year, with a boost to 50,000 metric tons slated for 1971. Sales last year were about $12 million. Dow is expanding its own polystyrene facilities in the Netherlands, U.K., Greece, and Italy. Corning Glass Works has acquired more than 9 9 % of outstanding shares in Evans Electroselenium, Ltd., Halstead, U.K. The U.K. firm makes special optical analytical instruments for scientific laboratories. Wibarco, GmbH (joint venture of Wintershall, A.G., Electro-Chemie Ibbenbuehren, GmbH, and Atlantic Richfield Co.), will build 27,000 metricton-per-year alkylbenzene plant at Ibbenbuehren, West Germany. Plant will use Atlantic Richfield's process. Startup is scheduled for end of 1970. Construction is under way on a $20 million gas processing plant at Strachan, Alta. Gulf Oil Canada will operate the plant, scheduled to go on stream in November, for itself and its partners Amerada Hess Corp., United Bata Resources, Ltd., and Canadian Export Gas and Oil, Ltd. Design capacity calls for daily production of 200 million cu. ft. of residue gas, 830 long tons of sulfur, and 5340 barrels of condensate. West Germany's Farbwerke Hoechst, A.G., will build a $3.5 million pharmaceuticals plant at Erytraea, Greece. Plant will be operated by HoechstHellas, A.G. Hoechst is also increasing polyvinyl acetate capacity at its Vathy, Greece, plant from 2400 to 3600 metric tons per year. MARCH 30, 1970 C&EN
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