Inventor Compensation in the U.S.

1. Inventor Compensation in the U.S. JPO VISIT AIPLA DELEGATION April 2013 Soonhee Jang Vice President and Chief IP Counsel DuPont Industrial Biosciences, DuPont 1

2. Inventor Compensation Law • There is no statutory requirement to compensate inventors in the U.S. • Inventor compensation is “not” required in the U.S. • No Federal law • No State Law • Under U.S. law, a patent is owned initially by the inventor(s) 2

3. Employment Agreements • Employees of companies produce most of the inventions in the United States • Employment agreement controls inventions made by employees within the scope of work, and signing of an employment agreement is generally a condition for employment • “Employee agrees to and does hereby grant and assign to Company or its nominee his entire right, title and interest in and to ideas, inventions and improvements…” 3

4. Ownership of Invention • Most employment agreements state that when an employee makes an invention in the course of the employment that: • the invention belongs to the employer • employee must assign the rights to the invention to the employer • Many states limit reach of employment agreements for inventions made outside the scope of work (e.g., California, Delaware, Washington, North Carolina, Kansas, etc.) • A number of companies/institutions have allowed ownership in an invention to revert to employee inventor if the company itself is not interested 4

5. Compensation at the Employer Company’s Discretion • Employee compensation for an invention is set by the employer • Salary is the main consideration for any inventions made in the course of the employment • Some U.S. companies choose to compensate their inventors as a means of rewarding and fostering innovation • Typically for filed patent applications and/or issued patents • As a small percentage of the resulting revenue 5

6. Inventor Compensation in the U.S. • Compensation and recognition typically in consideration of: • Invention Disclosure • Patent application filed • Patent issuance • The number of inventions • Revenue stream from patents • Assessment of patent value 6

7. Inventor Compensation in the U.S. • Compensation and recognition typically involve: • Grant of stocks / stock options • Cash bonuses • Promotions • Awards and company-wide recognition • Awards and recognition from outside the company, e.g., IPO’s Inventor of the Year Award, Inventor hall of fame 7

8. Examples of Inventor Compensation • A major high tech company: • First patent: $1500 when the application is filed • Additional $500 if the patent is granted • Any subsequent patents: $750 for filing and $500 if patent is granted • Every 4 patents get an extra bonus of $1250 on top of other awards • Majority of companies tend not to provide any significant monetary compensation 8

9. Industry Examples • Employee inventor compensation varies by industry sectors • From IPO survey for Inventor Compensation; percentages based on those who responded 9

10. Company Recognition • Most companies also give some kind of recognition for patent filings and/or issuance: • Plaques / innovation inductee hall of fame (3M, IBM) • Banquets, luncheons, dinners • Promotions related to patenting effort • Stock grants / stock options / cash bonuses • Minor token gifts (Silver dollar, engraved mugs, pens) 10

11. Inventor Compensation Difficulties • Multiple inventors are involved and they had a lot of help from other employees who are not compensated • Equity, competition, envy, jealousy • Luck of the project assigned • e.g., the one compound among 1000’s that were screened becomes the next blockbuster drug • Difficulty in measuring an individual inventor’s contribution and patent’s worth • Patent’s value is often realized much later 11

12. Inventor Compensation in Academic Institutions / Universities • Universities compensate inventors through the receipt of licensing income generated from their patent(s); awards among: • Principal Investigator / Inventor • Principal Investigator’s department and/or school • General Research Funds • Administrating the tech transfer office • The Bayh-Dole Act greatly increased licensing activities of Research Institutions / Universities – many have Tech Transfer Offices • How each institution divides patent income varies widely 12

13. Inventor Compensation in Academic Institutions / Universities • 1/3 to inventor • 1/3 to inventor's department • 1/3 to inventor's school • 1/3 to inventor (after costs / admin) • 1/2 of total program contribution to departments proportional to their contribution • Remaining to general fund • Stanford • after costs and admin • MIT 13

14. Conclusions • United States law does not mandate inventor compensation for their inventive contribution and employment agreement takes care of inventions made by employee inventors • United States has one of most prolific inventive environments and have generated many breakthrough innovations and transformative technologies without inventor compensation law • Companies foster and encourage innovation by providing various form of incentives and recognitions • Some U.S. companies and universities provide monetary compensation; companies do not base compensation on value of the patents 14

15. Thanks for your attention. Questions? Soonhee Jang Vice President and Chief IP Counsel DuPont Industrial Biosciences, DuPont 925 Page Mill Road Palo Alto, California 94304 USA +1-650-846-7620 (office) +1-650-283-3632 (cell) Soonhee.jang@dupont.com Soonhee.jang@danisco.com 15