Patent Policy - ACS Publications - American Chemical Society

16 Experiences with Industrial Patent Policy A Constructive Approach to Long Term Corporate Growth ARTHUR NOBILE

Downloaded by UNIV OF NORTH CAROLINA on July 14, 2016 | http://pubs.acs.org Publication Date: June 1, 1978 | doi: 10.1021/bk-1978-0081.ch016

Organon, Inc., 375 Mt. Pleasant Ave., West Orange, NJ 07052

The subject of this paper, namely industrial patent policy as perceived by inventors, should concern all scientists, engineers, and patent representatives. In recent times we have been experiencing the emergence of new economic restraints such as raw material shortages, i n f l a t i o n , and international trade imbalances. We find ourselves unable to deal with the problems of this "new economics" with any measure of success, and it becomes self-evident that the adverse effects of these negative factors w i l l be most damaging to the national and international v i a b i l i t y of our economy. It should, therefore, become increasingly imperative for us to encourage invention through use of an appropriate patent policy. The foundation of a patent policy i s invention. Therefore, invention well deserves special organizational consideration, such as use of workable procedures which encourage productivity in i n vention. It i s suggested that the corporate patent department be assigned sole responsibility for formulating and executing effective incentive programs, with f u l l authority to recognize inventions through appropriate and meaningful awards. One important f i r s t step i n establishing such a formula must be to separate i n vention into two separate categories, basic and developmental. These categories should be stated in the employee job descriptions. Scope and performance of the invention should be specified for each category. In addition to merit recognition, provision for adequate compensation should be specified in each job description to assure inventors and other employees that incentive contributions are essential for corporate growth. With reference to young scientists and engineers with novel ideas, the patent department could arrange for these embryo inventors to be assigned temporally to a "special services group", where they w i l l be encouraged to pursue their ideas. Since the inventor engaged in basic research has an i n d i v i dualistic attitude, he should be assigned to an informal work area. The developmental inventor, on the other hand, must plan and organize in an established area of research, and his approach 0-8412-0454-3/78/47-081-156$05.00/0 © 1978 American Chemical Society Marcy; Patent Policy ACS Symposium Series; American Chemical Society: Washington, DC, 1978.


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to problem s o l v i n g r e q u i r e s team e f f o r t . Thus the inventor i n b a s i c research should be assigned t o a " s p e c i a l s e r v i c e s group" under the d i r e c t r e s p o n s i b i l i t y o f a v i c e p r e s i d e n t i n a l a r g e company o r the p r e s i d e n t i n a small t o medium-size company. To provide an h i s t o r i c a l p e r s p e c t i v e , l e t us examine b r i e f l y some o f our past i n d u s t r i a l experiences as r e l a t e d t o p r o d u c t i v i t y i n i n v e n t i o n . In t h i s context we might ask how t o encourage prod u c t i v i t y i n i n v e n t i o n f o r the b e n e f i t o f the i n v e n t o r , the i n dustry and the economy. Some i n d i c a t i o n o f p a s t performance o f i n d u s t r i a l p r o d u c t i v i t y has been p u b l i s h e d i n an a r t i c l e , "Techn o l o g i c a l Innovation: I t s Environment and Management" (1_) . Seve r a l s t u d i e s by academic economists are reported i n " i n v e n t i o n sources i n the 20th century". P r o f e s s o r John Jewkes showed t h a t , out o f 61 important i n ventions o f the 20th century, over h a l f stemmed from independent i n v e n t o r s o r small firms (2). P r o f e s s o r D a n i e l Hamberg o f the U n i v e r s i t y o f Maryland s t u d i e d major i n v e n t i o n s made during the decade 1946-55 and found that over two t h i r d s r e s u l t e d from the work o f independent invent o r s and small companies (3). He a l s o studied 13 major innovat i o n s i n the American s t e e l i n d u s t r y ; four came from i n v e n t i o n s made a t European companies, seven from independent inventors and none from i n v e n t i o n s made a t American s t e e l companies (4). P r o f e s s o r Merton Peck o f Harvard U n i v e r s i t y s t u d i e d 149 i n ventions i n aluminum welding, aluminum f a b r i c a t i n g techniques and aluminum f i n i s h i n g . Major producers accounted f o r only one o f seven important i n v e n t i o n s (_5) . P r o f e s s o r John Enos o f the Massachusetts I n s t i t u t e o f Technology s t u d i e d seven major i n v e n t i o n s i n r e f i n i n g and c r a c k i n g o f petroleum and a l l seven were made by independent i n v e n t o r s . The c o n t r i b u t i o n s o f l a r g e companies were l a r g e l y i n the area o f improvement i n v e n t i o n s (6). These s t u d i e s are c o n s i s t e n t i n i n d i c a t i n g t h a t independent i n v e n t o r s and small firms are r e s p o n s i b l e f o r a remarkable percentage o f the important i n v e n t i o n s and innovations o f the 20th century, a much l a r g e r percentage than the investment made by these sources would suggest. An u n d e r l y i n g thought i n these s t u d i e s prompts one t o ask: Why should not the l a r g e r o r g a n i z a t i o n encourage i n v e n t i o n through p r o v i d i n g the i d e n t i c a l e n v i r o n ments and freedoms which prove so p r o d u c t i v e t o i n d i v i d u a l s and small o r g a n i z a t i o n s ? S t i l l another aspect o f the demonstrated i n d i v i d u a l (and small firm) i n v e n t i v e p r o d u c t i v i t y warrants n o t i c e : Are not the l a r g e o r g a n i z a t i o n s " l o s i n g some good bets" by i g n o r i n g , o r del i b e r a t e l y s h u t t i n g themselves o f f from v a l u a b l e pools o f invent i v e t a l e n t ? The t y p i c a l "not invented here" corporate p h i l o s o phy i s c l e a r l y retrograde, and the t y p i c a l corporate "Submission of Invention" agreement i s so h e a v i l y encrusted i n one-sided cond i t i o n s t h a t most submissions a r e summarily s t i f l e d . A simple standard form with a minumum o f redundant " l e g a l e s e " which p r o -

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t e c t s both p a r t i e s i s long overdue. Such a m o d i f i c a t i o n t o c o r porate philosophy would b e n e f i t both the independent o u t s i d e i n ventor and any o r g a n i z a t i o n r e q u i r i n g an i n f l o w o f p o t e n t i a l l y p r o f i t a b l e new product l i n e s . What c o n c l u s i o n s can we draw about the present l e v e l o f i n v e n t i v e p r o d u c t i v i t y i n i n d u s t r y ? In an a r t i c l e i n the Wall S t r e e t J o u r n a l , October 17, 1977, a continued d i v e r s i o n o f funding away from b a s i c and a p p l i e d research toward product development was r e p o r t e d . In t h i s a r t i c l e , headlined "Many Concerns S t r e s s Product Development and Reduce Research", i t was noted t h a t , "The R i s s l i p p i n g away from R&D and many s c i e n t i s t s and f o r e i g n trade s p e c i a l i s t s f i g u r e t h a t s p e l l s t r o u b l e . They d i s c e r n an ominous change i n the nation's s c i e n t i f i c posture. Industry i s curbing slow p a y - o f f b a s i c r e s e a r c h aimed a t f i n d i n g new products and i n stead i s f a v o r i n g hard nosed, quick pay-off development o f e x i s t i n g technology. I f t h i s trend continues, the United States could e v e n t u a l l y l o s e i t s standing as both the world's most i n n o v a t i v e country and b i g g e s t exporter o f high technology goods." Comments expressed i n t h i s a r t i c l e by l e a d i n g d i r e c t o r s o f r e s e a r c h and economists g i v e some i n d i c a t i o n o f the present gene r a l a t t i t u d e about r e s e a r c h and p o i n t up the need t o encourage p r o d u c t i v i t y i n i n v e n t i o n . For example, N.B. Hannay o f B e l l T e l e phone L a b o r a t o r i e s commented, " I don't hear many o f my i n d u s t r i a l contemporaries t a l k i n g about e x c i t i n g new major d i s c o v e r i e s they t h i n k w i l l shake the world"; and T.A. V a n d e r s l i c e o f General E l e c t r i c s t a t e d , "There are trends that> unless c o r r e c t e d , could l e a d to a maturing c r i s i s " . R.E. Heckert o f Du Pont commented, "Who i s going t o develop expensive c o a l p r o c e s s i n g when n a t u r a l gas i s s e l l i n g a t h a l f i t s r e a l market p r i c e ? " With gas p r i c e s h e l d down by F e d e r a l r e g u l a t i o n s , Mr. Heckert s t a t e d t h a t i n d u s t r y i s concerned about "whethe r i t could even get a buyer f o r any h i g h e r - p r i c e d s y n t h e t i c f u e l s . " Du Pont has deemphasized making s u b s t a n t i a l investment i n what i t considers "new adventures", and i s c h a n n e l l i n g a v a i l a b l e funds i n t o "improvements t o e x i s t i n g businesses". According t o Heckert, " t h i s new p o l i c y means much lower r i s k s and much higher rewards. In a way, the company has given up l o o k i n g f o r another nylon o r dacron. Du Pont i s n ' t searching f o r more extensions o f p l a s t i c s and s y n t h e t i c s because there aren't any simple combinations l e f t . There are only so many ways you can mix around b a s i c molecules." A Raytheon spokesman was b l u n t about i t with the comment: "Very d e f i n i t e l y we have gotten away from long-term general r e search; a l l the research we are doing now i s a p p l i e d research with w e l l - d e f i n e d g o a l s , b e t t e r focus on business o b j e c t i v e s , and a promise o f pay-back w i t h i n a reasonable p e r i o d o f time." Alan Greenspan, former chairman o f the P r e s i d e n t ' s C o u n c i l of Economic Advisors s t a t e d : "During p e r i o d s o f u n c e r t a i n t y , companies aren't i n any mood f o r h i g h r i s k s . U n c e r t a i n t y i s p l a g u i n g the investment community and i s more p e r v a s i v e than i t was a



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decade ago. Under these circumstances, i t i s no wonder t h i s count r y hasn't done much r e s e a r c h i n t o s y n t h e t i c f u e l s , the p a y - o f f i s too f a r down the road." George Gols o f Arthur D. L i t t l e , Inc., suggests there i s a deeper problem: "Industry i n the long run does not r e a l l y b e l i e v e t h a t f u e l i s going t o be much more expensive o r s c a r c e . " Conclusions drawn by l e a d i n g executives and economists are t h a t the new f a s t p a y - o f f approach t o R&D can be a t t r i b u t e d t o the high r a t e o f i n f l a t i o n , shortage o f c a p i t a l , sharp competition here and abroad f o r e x i s t i n g high technology and u n c e r t a i n t y about f e d e r a l r e g u l a t i o n s and p o l i c i e s . In the judgment o f t h i s author, i t appears t h a t the product i v i t y o f i n v e n t i o n sources has been overlooked s i n c e b a s i c and a p p l i e d r e s e a r c h today has been reduced t o "improvements f o r exi s t i n g businesses". A commonly accepted d e f i n i t i o n o f a b a s i c i n v e n t i o n , w e l l expressed by Edwin Land, i s t h a t " i t must be s t a r t l i n g , unexpected, and come t o a world t h a t i s n ' t prepared f o r i t " . T h i s d e f i n i t i o n i s i n sharp c o n t r a s t t o a developmental i n v e n t i o n wherein i n v e n t i o n r e s u l t s from a planned and organized e f f o r t . I t i s suggested t h a t i n d u s t r i a l patent p o l i c i e s recognize and establ i s h i n v e n t i o n c a t e g o r i e s u s i n g these d e f i n i t i o n s f o r the encouragement o f p r o d u c t i v i t y i n i n v e n t i o n . Some years ago, while working i n a l a b o r a t o r y , I became i n t e r e s t e d i n the incomplete enzymatic o x i d a t i o n o f s t e r o i d s . T h i s was an i n t r i g u i n g i d e a , s i n c e , up t o t h a t time, s t e r o i d o x i d a t i o n s had been, f o r the most p a r t , chemical o x i d a t i o n s . I began t o search f o r a s u i t a b l e enzyme system; the f i r s t compound I succeeded i n o x i d i z i n g by t h i s method was an androstene compound. The s t r u c t u r e o f the o x i d a t i o n product was confirmed by chromat o g r a p h i c , c o l o r i m e t r i c and s i m i l a r t e s t procedures. Sometime d u r i n g the m i d - f o r t i e s , p r i o r t o my i n i t i a l observ a t i o n s on incomplete o x i d a t i o n s , s e v e r a l workers a t Merck d e v e l oped a chemical method f o r manufacture o f c o r t i s o n e from desoxyc h o l i c a c i d . T h e i r work was supported by K e n d a l l , c o - d i s c o v e r e r of c o r t i s o n e , and h i s co-workers. I n the l a t e f o r t i e s , very much aware o f the cumbersome and c o s t l y chemical method developed a t Merck, Murray and Peterson o f Upjohn d i s c o v e r e d and developed an enzymatic method f o r 11-oxygenation o f s t e r o i d s . T h i s method s i g n i f i c a n t l y c o n t r i b u t e d t o a s u b s t a n t i a l r e d u c t i o n i n process c o s t over Merck's chemical method. In the e a r l y f i f t i e s , having succeeded i n the incomplete enzymatic o x i d a t i o n o f androstenes, chromatographic evidence was found i n the product mixture o f two novel o x i d a t i o n products o f c o r t i s o n e and h y d r o c o r t i s o n e . Bulk q u a n t i t i e s o f these novel compounds were prepared and t e s t e d s u c c e s s f u l l y f o r animal and human response as anti-inflammatory agents. These compounds were l a t e r i d e n t i f i e d as d e l t a - 1 , 4-pregnadienes and were f i n a l l y marketed i n 1955 as prednisolone and prednisone. In a d d i t i o n t o patent claims covering the products themselves, claims t o a method f o r enzyme


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manufacture and use also were issued (7) . After pregnadiene research became known, the pathway that corticoid research pursued changed considerably. Basically, i n dustrial research was diverted from natural corticoids to the unnatural pregnadiene structures. Thus, in 1957, Upjohn began marketing 6-methyl-pregnadienes (8); in 1958, E.R. Squibb & Sons and Lederle Laboratories both brought 9-fluoro-16-hydroxy-pregnadienes to the market (9) ; and Merck followed with the introduction of 9f luoro-16-methyl-pregnadienes (10) . Later Syntex and several European companies marketed modified pregnadienes. The discovery of cortisone and the invention of the pregnadienes were followed by the development of corticoid processes and pregnadiene modifications, respectively. Developmental i n vention was essential to optimize the c l i n i c a l efficacy, enhance the a v a i l a b i l i t y and reduce the cost of these new materials. On the other hand, basic steroid research was ignored. The demise of basic steroid research shows the need for a patent policy to establish organizational responsibilities including workable procedures in order to maintain both basic and developmental research to support long-term corporate growth. As indicated by the history of invention sources, "the prepared mind" is most productive when functioning in an atmosphere of freedom from established thought and with freedom to communicate with others. Abstract To improve long-term corporate growth, a distinction should be made between the basic and the developmental inventor. The basic inventor must be provided with an informal research work area, whereas the developmental inventor should be provided with a "team" environment. Both types of inventors should receive compensation commensurate with their contributions. The establishment of these two inventor categories could give more balanced stimulation to different research attitudes, and, in return, an understanding of these two basic approaches would encourage both types of inventors to contribute towards long-term corporate growth. Examples are presented indicating that many inventions come from outside major companies, particularly from independent inventors and small firms, thus showing a need to improve the output of inventors i n industry. Literature Cited 1. 2. 3.

"Technological Innovation: Its Environment and Management", U.S. Department of Commerce, January 1967, p. 16-18. Jewkes, J., Sawers, D . , Stillerman, R., The Sources of Invention, St. Martin's Press, 1958, p. 72-88 and Part 11. Hamberg, D . , "Invention in the Industrial Research Laboratory", Journal of P o l i t i c a l Economy, A p r i l 1963, p. 96.


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4. 5.

Hamberg, D . , op. cit., p. 98. Peck, M . J . , "Inventions in the Post-War American Aluminum Industry, The Rate and Direction of Inventive Activity: Economic and Social Factors", National Bureau of Economic Research, Princeton, New Jersey, 1962, p 279-292. 6. Enos, J.L., "Invention and Innovation in the Petroleum and Refining Industry, the Rate and Direction of Inventive A c t i vity", op. cit., p.299-304. 7. U.S. 2 837 464: "Process for Production of Dienes by Corynebacteria". 2 955 118: "9 alpha Halo-11, 17-Dioxygenated-1,4-Androstadienes-3-ones". 3 010 957: "Ethinyl Androstadienes". 3 060 092: "17 alpha Alky-1-Dehydro-Testosterone". 3 084 103: "11-Oxygenated 9 alpha Halogeno-1, 4-pregnadienes". 3 105 795: "9 alpha-Fluoro-15 Beta-Hydroxy-1: 4-Pregnadienes and Pharmaceutical Preparations". 3 134 718: "Pregnedienes & Compositions". 3 198 813: "1:4-Pregnadiene-11 alpha, 17 alpha, 21-Triol-3, 20-Dione & Esters". 8. Spero, et al., Journal of American Chemical Society, 78, 6213 (1956). 9. Berstein, et al., Journal of American Chemical Society, 78, 5693 (1956). 10. Arth, et al., Journal of American Chemical Society, 80, 3161 (1958). Biographic Notes Arthur Nobile has written a large number of publications and holds several patents, covering commercially successful steroid products. He is associated currently with Organon, Inc., where he serves as Director of Technical Services. Dr. Nobile obtained his degrees from the University of California, Washington State University and San Diego State University. RECEIVED June 20, 1978.



General Discussion

COMMENT; In i n d u s t r y , ideas are numerous, b u t t o my mind the r e a l inventor i s the promoter - the person who d r i v e s and sells. While t h i s person does not get h i s name on a patent, h i s c r e a t i v i t y i s r e a l l y greater than the person who dreams up a concept. I f we reward the i n v e n t o r , as under the German law, we should a l s o reward the promoter. RESPONSE BY MR. SUTTON: The man who s e l l s i s very, very important, b u t he does have t o have something t o s e l l . I n add i t i o n , ownership o f a p r o p r i e t a r y r i g h t i s a l s o necessary t o o b t a i n success. Therefore, i t seems necessary t o me t h a t the value o f i n v e n t i o n s which l e a d t o p r o p r i e t a r y r i g h t s , such as a patent, should be shared with the creators o f such i n v e n t i o n s . The s h a r i n g should not be on an a r b i t r a r i l y f i x e d percentage b a s i s , b u t should be determined only a f t e r e v a l u a t i n g a l l o f the f a c t o r s t h a t ought t o be considered. In my o p i n i o n , t h i s i s not now being done i n an adequate f a s h i o n . COMMENT: I f i n d i t hard t o understand what Mr. Sutton means by compensation. I n the past research managements have been preoccupied with dual - t r a c k award systems - a d m i n i s t r a t i v e and s c i e n t i f i c . I n my experience, very few i n v e n t o r s who have made major i n v e n t i v e c o n t r i b u t i o n s have not been rewarded i n terms o f upgraded s t a t u s , s a l a r y increases and r e c o g n i t i o n as s e n i o r s c i e n t i s t s . These are rewards based on the value o f the inventors contributions. 1

RESPONSE : I agree t h a t these means f o r rewarding c r e a t i v e people e x i s t , but, i n my experience, many inventors are not so rewarded. While i t i s i n h i s enlightened s e l f - i n t e r e s t f o r an employer t o reward such employees, and t h i s i s the way American b u s i n e s s i s u s u a l l y run, there are s t i l l many employers who not only do not recognize t h e i r c r e a t i v e employees, but a c t u a l l y g i v e them a hard time and a run-around. The r e a l i t y i s t h a t most i n v e n t o r s do not get any kind o f d i r e c t r e c o g n i t i o n f o r

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i n v e n t i o n s . The majority get a token payment o r nothing a t a l l . I t i s the l a r g e , well-run corporations t h a t are the exceptions, t h a t do reward t h e i r inventors, mostly i n the i n d i r e c t ways you mention. COMMENT: You seem t o me t o have too narrow a view o f the c r e a t i v e process and who the c r e a t i v e people are. C r e a t i v i t y can be dampened, but a t r u l y c r e a t i v e person w i l l c r e a t e one way o r another. I f not permitted t o do so on the job, he w i l l f i n d an o u t l e t o u t s i d e . I t i s not so much a matter o f money as i t i s a matter o f being s t i f l e d by other people o r by management r e f u s i n g t o l e t a person be c r e a t i v e by demanding t h a t t h i n g s be done i n t r a d i t i o n a l ways. RESPONSE : I agree that s t i f l i n g o f c r e a t i v i t y occurs becasue o f management f a i l u r e , but t h i s would not f o r e c l o s e r e warding those people who are c r e a t i v e i n accordance w i t h the value o f the r e s u l t s o f t h e i r c r e a t i v i t y . COMMENT: The value o f a patent i s r e l a t i v e l y small when compared t o the a d d i t i o n a l input t h a t must go i n t o the developmetn o f t h a t patent t o the marketable stage. This i s p a r t i c u l a r l y marked i n the pharmaceutical i n d u s t r y . I f i n d i t d i f f i c u l t to understand why the inventor o f one s u c c e s s f u l l y marketed p r o duct t h a t d i d n ' t q u i t e make i t t o the market should not be compensated. RESPONSE : D i f f i c u l t judgemental d e c i s i o n s are c e r t a i n l y necessary. In my opinion, i t i s not unreasonable f o r the i n ventor o f the marketable product t o be rewarded simply because he i s the c r e a t o r o f the product which happens t o make the company a profit. COMMENT : Representing the p o i n t o f view o f the i n d u s t r i a l research o r g a n i z a t i o n , I think one o f i t s problems i s t h a t n o t as many h i g h l y c r e a t i v e people e x i s t as has been suggested i n the papers given. C r e a t i v e people cannot be created by promising a p r i z e . But when they do e x i s t , they have t o be nurtured and there are v a r i o u s ways o f showing a p p r e c i a t i o n . C r e a t i v e people do not create because o f the p r i z e , but because they are d r i v e n t o win. By s i n g l i n g out people who happen t o have t h e i r names on patents which happen t o become b i g commercial successes, we would be d e s t r o y i n g w i t h i n the o r g a n i z a t i o n what has been done to compensate f o r the lack o f a l a r g e number o f h i g h l y c r e a t i v e people. We t r y t o compensate f o r t h i s l a c k by assembling teams o f researchers who work c o o p e r a t i v e l y together t o f i n d and develop i d e a s . I think we have t o work t h a t way and we don't want t o d i s t u r b i t , because I don't think we have any a l t e r n a t i v e . X do n o t think there i s any evidence t h a t e x t r a compensation w i l l i n c r e a s e c r e a t i v i t y , nor i s there any evidence t h a t our present


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system has caused us t o l a g i n c r e a t i v i t y . COMMENT: Superimposing the reward concept on s u b j e c t i v e emotional, s o c i a l and p o l i t i c a l aspects o f ownership, which are themselves overpowering f a c t o r s , c o n s i d e r a b l y complicates the problem o f i n v e n t o r compensation.


COMMENT AND QUESTION: The r o l e o f the marketing man i s sometimes c r u c i a l t o the commercial success o f a product. Shouldn't he be compensated as well? RESPONSE : Marketing men u s u a l l y make more money than research people; i t appears t h a t , i n the chain from c r e a t i o n t o marketplace, other people know how t o take care o f themselves b e t t e r than do chemists. COMMENT AND QUESTION: There are many f a c t o r s which cont r i b u t e t o the commercial success o f a product. Sometimes comm e r c i a l success i s due overwhelmingly t o f a c t o r s other than the i n v e n t i o n i t s e l f , such as marketing, o r s a l e s s k i l l s , t o say nothing o f the c o n t r i b u t i o n o f the patent lawyer. I f we assume that the poeple who are i n these other areas w i l l seek the same r e a l t i v e degree o f compensation as i n v e n t o r s , i s i t e q u i t a b l e t o the other people on the team who c o n t r i b u t e a m a t e r i a l , i n separable p a r t o f the success o f the product, and would i t not act as some d i s i n c e n t i v e t o the other members o f the team who aren't compensated, i f we were to s i n g l e out the i n v e n t o r s f o r f u r t h e r compensation o r rewards? RESPONSE : A l l you are t e l l i n g me i s that i n determining the amount and d i s t r i b u t i o n o f compensation one has t o c o n s i d e r a l l these t h i n g s . I f the c r e a t o r ' s i n p u t i s n ' t worth anything and an i n v e n t i o n was s u c c e s s f u l l y marketed because o f the s k i l l of a draftsman o f patent claims then o b v i o u s l y the i n v e n t o r i s not deserving o f a great d e a l . I suggest that a l l o f the f a c t o r s have t o be considered i n determining what's f a i r and e q u i t a b l e i n the circumstances. QUESTION : Then, would you reward the other members who c o n t r i b u t e d a m a t e r i a l and i n s e p a r a b l e p a r t t o the commercial success under the same e q u i t a b l e p r i n c i p l e ? ANSWER: Yes, I t h i n k t h a t ' s wise* I concur e n t i r e l y t h a t there are many t h i n g s t h a t go i n t o personnel management. The care and feeding o f a l l employees i s a worthwhile endeavor. I s u r e l y am not t r y i n g t o say t h a t you d i s r e g a r d everybody e l s e i n the e n t i r e o r g a n i z a t i o n except the i n v e n t o r . There are bonuses f o r e x e c u t i v e s , and patent attorneys are p a i d adequately i n i n d u s t r i a l o r g a n i z a t i o n s , but there j u s t i s n ' t anybody l o o k i n g out f o r the i n v e n t o r ' s i n t e r e s t s . And he i s d i f f e r e n t . The i n v e n t o r


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i s d i f f e r e n t because he i s the s i n e qua non. There i s n ' t anyt h i n g without him. And i f you don't have something created i n the f i r s t p l a c e , a l l o f t h i s g i a n t s t r u c t u r e i s nothing but a house o f cards. COMMENT; The problem I f i n d with Mr. Sutton's argument i s t h a t t h i s concept o f e q u i t y i s d i f f i c u l t t o d e f i n e o r t o sustain. I make the e f f o r t t o teach my c h i l d r e n t h a t as moral i n d i v i d u a l s they ought t o provide e q u i t y t o others b u t as r e a l i s t i c i n d i v i d u a l s , they ought not t o expect i t f o r themselves, because the world simply i s not constructed t h a t way. I f one c a r r i e s Mr. Sutton's argument t o i t s l o g i c a l c o n c l u s i o n , e q u i t y must be d e f i n e d i n a s o c i a l sense as what i s good f o r the world. By t h i s d e f i n i t i o n , an i n v e n t o r who invents a h u l a hoop which s e l l s l i k e crazy, i n my o p i n i o n , has produced something with no s o c i a l v a l u e . On the other hand an inventor who invents an e s t h e t i c d e n t a l f i l l i n g , i n my o p i n i o n , has produced something with enormous s o c i a l value but with l i t t l e chance t o make much money. Now I can say one r e q u i r e s e q u i t a b l e s h a r i n g o f rewards and the other does not, and award one o f the inventors a c c o r d i n g l y . U n f o r t u n a t e l y , other people may not agree with me. Therefore, I p r e f e r the f r e e market. RESPONSE : I t h i n k t h a t the f r e e market should be used to determine the value o f an i n n o v a t i o n . Whether the h u l a hoop turns out t o be economically v a l u a b l e even though i t has no s o c i a l l y redeeming q u a l i t i e s , o r whether a drug o r enormous value has no economic b e n e f i t , what happens i n the marketplace should be used t o determine f a i r l y and e q u i t a b l y the s h a r i n g o f any economic advantage. Moreover, I t h i n k t h a t i s what the founders o f t h i s country f e l t and what i s c a l l e d f o r i n the Constitution. I would suggest we should r e t u r n t o t h i s concept. COMMENT ; One hears f r e q u e n t l y today t h a t the United States may not be g e t t i n g as much f o r the d o l l a r s t h a t i t spends as i t should, and t h a t the United States i s being out-invented or out-created by some f o r e i g n c o u n t r i e s . Are there some add i t i o n a l i n c e n t i v e s t h a t c o u l d provide us with a b e t t e r p e r formance than we have a t the present time? Among other c o u n t r i e s , i n c l u d i n g i n d u s t r i a l i z e d c o u n t r i e s , there has been a r a t h e r uniform trend i n the d i r e c t i o n o f more r a t h e r than l e s s l e g i s l a t i o n designed t o compensate f o r i n v e n t i o n s . In a d d i t i o n , from d i s c u s s i o n s with many people I f e e l t h a t some o f the s t r o n g e s t supporters f o r rewarding inventors more have been r e search d i r e c t o r s , o f t e n those who have r e t i r e d and are f r e e r t o express t h e i r o p i n i o n s . These people have f e l t t h a t more e f f o r t should be used t o t r y t o get more out o f t h e i r employees. Commissions and bonuses are commonly used i n i n d u s t r y t o reward the person who has done an e x t r a job i n order t o persuade him and others t o do a b e t t e r job next year. Perhaps the c h i e f


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concern about e x t r a compensation rewards i s the obvious adm i n i s t r a t i v e d i f f i c u l t y o f handling such a system, but I'm not sure t h a t t h a t should stand i n the way i f rewards o f t h i s nature conceivably might accomplish something worthwhile. COMMENT; While there are d i f f e r e n c e s o f o p i n i o n as t o what c o n s t i t u t e s f a i r compensation t o i n v e n t o r s , I don't t h i n k there are any o u t r i g h t opponents o f the concept. In order t o administer any rewards i n a f a i r and e q u i t a b l e manner, we cannot reward j u s t the person who has h i s name on a patent without a l s o rewarding a l l other people i n v o l v e d i n h e l p i n g t o make a succ e s s f u l i n v e n t i o n a commercial r e a l i t y . We should not take the p o s i t i o n t h a t the inventor o f a s u c c e s s f u l product should be rewarded and the inventor o f an unsuccessful product should not. COMMENT; I t h i n k we a l l agree t h a t there should be some e q u i t a b l e reward f o r the input t o a product t h a t becomes a r e sounding commercial success. However, the inventor i s only one p i n i n t h i s whole b i t o f machinery t h a t leads t o s u c c e s s f u l commercialization. I t i s argued t h a t a l l people who make some input should be e q u i t a b l y rewarded, but the f a c t i s t h a t we are not yet smart enough t o i d e n t i t y and reward e q u i t a b l y every b i t o f input i n t o a commercial success. To reward only the inventor o r t o attempt t o do i t i n a manner t h a t i s i n e v i t a b l y i n e q u i t a b l e can do more than anything t h a t I c o u l d imagine t o stifle creativity. COMMENT: Echoing the comment t h a t there may be a l t e r n a t e s o l u t i o n s f o r compensating employed i n v e n t o r s , I might p o i n t out t h a t , i n my company, inventors whether they are bench chemists or i n management, have a management stock o p t i o n p l a n , and quart e r l y e x t r a compensation based on p r o f i t s , i n a d d i t i o n t o t h e i r s a l a r i e s . One o f our most p r o l i f i c i n v e n t o r s , who has about 20 patents, when asked s p e c i f i c a l l y i f he would l i k e t o be compensated on the b a s i s o f the amount o f earnings on h i s patents and give up h i s s p e c i f i c p r o f i t i n c e n t i v e o r p r o f i t payment, s a i d he would r a t h e r take the compensation as he has i t now. RESPONSE : Of course he would. Nobody wants t o give up anything. I suggest t h a t you posed a f a l s e premise t o him* The f a c t o f the matter i s t h a t there i s p l e n t y o f money t o go around t o provide f a i r compensation t o inventors and s t i l l do business. C e r t a i n l y i t i s an increased c o s t o f doing business, but i f such compensation induces f u r t h e r i n v e n t i o n s and i f i t b r i n g s new products t o market under the patent system, then p r o f i t s w i l l increase and the whole c y c l e should be s e l f - p e r p e t u a t i n g . To induce f u r t h e r i n v e n t i o n s i s a d e s i r a b l e goal f o r the f u t u r e t h a t ought t o be continued. With regard t o r e f e r r i n g t o the inventor as only one p i n i n the whole i n n o v a t i v e process, I would suggest t h a t he i s the l i n c h p i n .


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COMMENT: The compensation p l a n Mr. Sutton has been outl i n i n g sounds very much l i k e t h a t s p e c i f i e d i n the German compensation law. As I understand i t , the German law i s not f e l t by people who have been o p e r a t i n g under i t t o be a good law. A l s o , under the German law, agreements are made w i t h the i n ventors a f t e r the i n v e n t i o n s have been made and patent app l i c a t i o n s have been f i l e d i n the patent o f f i c e . Under the terms of the agreements the i n v e n t o r s s e t t l e f o r a f i x e d amount of reward, but, while u s u a l l y more than $100, these are not b i g amounts. RESPONSE : The a d m i n i s t r a t i v e d i f f i c u l t y i s conceded; i t i s the o n l y r e a l o b j e c t i o n t o the whole program. The way to get around t h i s problem i s t c d e a l o n l y with the very few i n ventions which are commercially s u c c e s s f u l , i g n o r i n g the many i n v e n t i o n s which are not. RESPONSE FROM A GERMAN PATENT PRACTIONER: I t i s true t h a t the a d m i n i s t r a t i o n o f the law i s d i f f i c u l t , but a d m i n i s t r a t i v e problems can be s o l v e d . The formula i n the German law i s q u i t e complicated. The formula i s r a r e l y us^d by the companies i n the f i r s t i n s t a n c e because i t i s so complicated, but i t i s used i n those cases not e a s i l y r e s o l v e d which may be headed f o r a r b i t r a t i o n c o u r t . Then the formula i s used, because i t takes care o f the many aspects which have t o be considered. One cannot say t h a t the German law i s unworkable. For day-to-day app l i c a t i o n companies use a s i m p l i f i e d formula which can be handled more e a s i l y . But one should not f o r g e t t h a t there are two kinds o f i n v e n t o r s , those who r e a l l y c o n t r i b u t e d something v a l u a b l e , and those who t h i n k they d i d , but d i d not. In t h i s aspect, the law i s very v a l u a b l e because i t p r o v i d e s a formula to b r i n g r e a l i t y i n t o the p i c t u r e so t h a t rewards can be given o n l y t o those who deserve them. COMMENT : To compensate the l a r g e number o f people i n a research o r g a n i z a t i o n who might be i n v o l v e d i n making an i n v e n t i o n s u c c e s s f u l , a c e r t a i n amount o f money must be s e t a s i d e as a reserve f o r payment a t a l a t e r date when success has been e s t a b l i s h e d . The l a t e r date may be 15 o r 20 years from the date the i n v e n t i o n was made. By t h a t time some of the people i n v o l v e d may be long gone o r even dead. So who gets the r e wards? I j u s t don't see how t h i s c o u l s work - c e r t a i n l y not i n the type o f business my company i s i n . RECEIVED

June

20,

1978.


Patent Policy - ACS Publications - American Chemical Society

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