Patent It Yourself - PDF Archive

ChaPter 16 | OWNERSHIP, ASSIGNMENT, and LICENSING of INVENTIONS | 449
each patented and manufactured LCD screen, 25¢ for each
patented chrominance demodulation circuit used, etc.
If your licensee doesn’t want to pay the rate you ask, a
good technique is to accept the lower rate they’re willing
to pay. However, add a proviso stating that the rate will be
increased to the rate you want if “x” number of units are
sold.
Instead of a negotiated percentage, some experts
advocate getting a royalty equivalent to “one-third of the
manufacturer’s profit.” This means that the company will
take its selling price for your invention, say $10, subtract
its cost of manufacture, including overhead, say $7, and
give you one-third of the difference—that is, $1 = ⅓ of its
$3 profit. This type of royalty is often enticing to a manufacturer
since the company only contemplates parting with
a portion of its profit, not paying a fixed sum per item,
whether the particular product turns out to be profitable or
not. If your licensee is willing to accept this type of royalty,
you can substitute this language in the Universal Agreement.
But, if you do so, be sure you include an auditing
right (such as Clause 8) to ensure that you can verify its cost
of manufacture.
J. Summary
All actual inventors must be named in the patent application,
provided each contributed something to at least one claim.
Financiers, advisors, model makers, or others that did not
contribute any inventive concepts should not be named as
inventors. If the claims of a patent application are changed,
inventorship should be reviewed and changed if necessary.
Use Form 16-1 in Appendix 7 to preserve each inventor’s
contribution.
Under patent law statute, any joint owner of a patent can
practice the invention without paying any other inventor.
To guarantee that all inventors receive compensation if
the invention is commercialized, use the Joint Owners’
Agreement—Form 16-2.
An employed inventor’s rights are usually governed by
an Employment Agreement, which mainly requires the
employee to assign to the employer all inventions that are
made in the course of the employer’s business, use the
employer’s, time, facilities, or materials, or are within the
scope of the employee’s duties. Employees who are hired to
invent have a common law obligation to assign inventions
made in the scope of their duties. Other inventions are the
property of the employee, but the employment agreement
may require the employee to notify the employer about them.
A patent application and a patent are intangible personal
property and part or full ownership must be transferred
by an assignment, which should be recorded in the PTO to
prevent a subsequent, fraudulent assignment.
To collect royalties for use of an invention, an inventor
(licensor) should make a licensing agreement with the
manufacturer (licensee). The main considerations are the
amount of any up-front payment, whether the license
is exclusive or nonexclusive, and the royalty rate. It’s
advantageous to license know-how as well as patent rights.
The Universal License Agreement (Form 16-5) covers
most situations, but the terms must be negotiated. Factors
affecting the royalty rate are the strength of the patent, the
amount of design work already done, the anticipated sales
volume, the profit margin, the field of the invention, etc.
Never assign a patent or application for a series of payments;
always get full payment at the time of assignment.
K. Desiderata for PTO
As this edition goes to press several patent bills are pending
that would make various minor changes in the patent
system. However I and many other persons concerned with
helping independent inventors would like Congress to make
major changes in the patent laws to make the patent system
accessible to independent inventors and small businesses.
The change I would most like to see is a way to make
it worthwhile for a contingent-fee litigator to take a case
for those patentees who have an infringement where the
damages aren’t great enough to sue for, or the infringer
isn’t flush enough. As it is now, such patentees have in
effect a worthless patent and thus it rarely makes sense to
file for a patent unless the invention will be big enough for
a contingent-fee litigator to take an infringement case. If
we could have the PTO or some other agency adjudicate
infringements in a cheap manner that doesn’t require a
skilled litigator or a patentee with the persistence and legal
ability of Dr. Robert Kearns (see the movie Flash of Genius),
this would immensely increase the value and incentive of
patents. As it is now it doesn’t make sense to file a patent
application unless the invention is (a) so valuable that there
are millions of dollars in damages, (b) very innovative so
that the patent is strong enough to survive litigation, and (3)
the infringer has very deep pockets so that they can afford
to pay damages.
Another area where I favor major changes is to
legislatively reverse many recent CAFC decisions that
have invalidated patents for minor reasons, thereby
providing many traps for those who may not have written
the application in accordance with all of their picayune
rules. Most of the CAFC judges have no experience in
the real world of patents and have never written a patent