Engineer refusing to file/disclose patents

Question

We have a senior engineer on our team that routinely excels at his work. In addition to his regular work, our company has a patent program where engineers can write up a patent for a novel idea, and submit it to our patent team. Within about 6 months, the engineer will get anything in the range of $300 to $5000, depending on the value of the patent from the perspective of the patent team. This engineer has filed over 30 successful patents over the past 2 years, and all of these inventions are used in our products (and he's made about $110,000.00 from the patent disclosures alone).

The company has recently decided to dial back the benefits for this program, to a simple $100 "finder's fee" for a patent submission, and an additional $900 for a "good" patent. Since employees write these in their spare time, it doesn't surprise me that the number of applications has dropped from 2 per week to maybe 3 per quarter.

Our senior engineer has expressed concern with the company, as he can only make more money by being promoted (our bonus structure is based on length of stay, so employees have to be on board for at least 7 years to earn a decent bonus), and the only offices with openings for higher-level engineering positions would require him and his family to relocate (moving across the country). He's also noted that the decrease in patent-related bonuses hits him hard.

My problem: our senior engineer recently (before the change in benefits) demonstrated some very impressive technology that would speed up a certain process of ours. He also claimed to have written 5 patents associated with it. He's delivered impressive results in the past, so I doubt he was blowing smoke. After the reduction in benefits, he can't seem to recall the patents or find any of the code he used to create his demo. Since he did this all in spare time, it's not in violation of our data retention policies if he just did it all on his home laptop, provided he didn't copy company data to it.

I think he's getting ready to switch jobs, and we need the technical information/code he used to create the demo. His employment agreement states that any and all intellectual property he generates while employed with us, even during weekends/free-time, is the property of the company. IT has searched his OneDrive, laptop, etc., and we can't find a single shred of code/documentation on these ideas. I've tried offering a one-off bonus for him to just anonymously leave a thumb drive with the data on my desk after hours, but he just claims he "doesn't know what I'm talking about".

How can I resolve this?

I can offer a one-off bonus, and I can offer him a significant promotion (but it requires he move to a less desirable part of the country). I can't give him a raise in his current position, and members of senior management no longer trust him due to his "funny" behavior as of late (well has been poisoned a bit). He doesn't want to move at all, and even an offer of $25,000.00 for the IP didn't work, which would have been according to the "old rules". I think he's worried that by agreeing to such a deal, he's opening himself up to legal liability (it would involve indirectly admitting he was being dicey/dishonest about "not knowing what I'm talking about").

Answer 1

I find it interesting that your company has devalued patents significantly, and then seemed surprised when some of your engineers have decided it's not worth their time.

You talk about trust, but it's evident that the engineer does not trust you, as he opted to lie about forgetting, rather than saying "No thank you. I do not wish to share this work.".

I wonder, did he say "no", and was he then forced into saying he forgot because he was threatened either explicitly or implicitly by you or the company?

The very fact you have IT going through everything he has touched at work, presumably for a scrap of proof that will allow you to force him to produce work that he did in his free time suggests to me that he is right to lie, play stupid, and refuse your advances.

The business has made a decision to significantly reduce the benefit for patents. They would have factored in scenarios such as this, as the cost of doing business. There is a chance that you'll lose not just a stream of patents, but engineers. Probably starting with your best ones.

It sounds like you've committed to lose him. Because you wouldn't be treating him like this if you wanted to keep him. Clearly you've put a significant value on some of his work, at the expense of all future work of his, and you'll get neither.

I'd just chalk this off as a learning exercise for the company.

Answer 2

30 patents in two years is roughly $75k a year that's been changed to $15k. So he's been given a $60k a year in pay reduction.

So, yeah, he's probably going to quit and go work for someone else. Further everyone is acting like that's the case. The company's relationship with him is broken, it can't be fixed.

How can I resolve this?

In terms of getting the current code, which he developed on his own time and not on company computers or using company resources:

Wait until he quits, then offer to hire him as a consultant to develop the code you know darn well he has. Let's make some WAGs here. 1000 hours to make this code at $250/hour. So if it's worth $250k to you, offer him that and wait a few months for him to do it so everyone can say with a straight face that he developed it while not under that clause which says the company owns everything in his head while he works for you.

Answer 3

Your best alternative really sounds like it is for you to walk away; You are throwing good time after bad trying to entice/squeeze your employee for the new patent. Giving it to you now is an admission that he was lying and opens up his legal exposure.

His employment agreement states that any and all intellectual property he generates while employed with us, even during weekends/free-time, is the property of the company.

Invention-rights assignments for off-hours are unenforceable depending on the state. (See, for example, https://law.justia.com/codes/california/2005/lab/2870-2872.html) It really is a signal that your company has a fairly predatory legal culture, or at least an outdated one.

Answer 4

This engineer has filed over 30 successful patents over the past 2 years, and all of these inventions are used in our products.

This was indication enough for your senior management to not call off the patent encouragement program. The management was somehow unwise enough to change that and put a new policy in place which reduces the benefits of investing time and effort in getting the work done. So, it's no surprise that the people who were "inspired" by the previous program are not interested in continuing with your organization anymore.

His employment agreement states that any and all intellectual property he generates while employed with us, even during weekends/free-time, is the property of the company. IT has searched his OneDrive, laptop, etc., and we can't find a single shred of code/documentation on these ideas.

I don't know why some organization would choose to underestimate the capability of their workforce! If you believe that person to be smart enough to deliver the results you described, do you believe he will be fool enough to carry around the pieces of evidence in case he does not want to reveal something? This incident might have just made him more determined to leave the organization, for good.

The situation is tough: the only way this ends with a positive outcome for you and your organization is, ensure the engineer gets treated with the "respect" he deserves. If you think he (and his ideas) is as valuable as you describe, talk to your higher management, and create an exception. Make the old rule part of his contract (as an exception) and mention that now and in future also, he would get benefits as he was getting before the introduction of the change.

Also, ensure that you do not pressure him to reveal this particular patent. As you mentioned, he might already have a concern about the legal liabilities. If you can make him comfortable enough, in time, he will come out with patent ideas which will help your organization, but allow him the time he needs to "regain" the confidence.

To add a touch of reality: After trying all this damage control and more, if he chooses to stay, I'd consider you and your organization incredibly lucky. He added value to your organization, and he was paid off by change in policy which basically invalidates all his effort and talent. Try hard to retain him, but don't get your hopes high.

TL;DR Do not give him the feeling that any of the actions you take to try to retain him is a one-off activity. Show him that the company values him and his contribution, and he is safeguarded against any possible devaluation of his efforts / contribution. His interests will be taken care of this time and in future, also.

Answer 5

This is a negotiation. Your senior engineer was doing this work in his spare time in exchange for financial compensation. Your company suddenly changed the price they were willing to pay. Your senior is Not offering the product at that price.

Any attempt to compel him to provide the patents will likely cause him to dig in his heels and also find work elsewhere.

You are raving up and down throughout your entire post about how awesome he is. Find a way to get him his money. He is clearly worth it. Upper management may not be happy with his current stance. It sounds like they are digging in their heels. Negotiation will partly need to be with them. You will need to convince them that smoothing things over with him and his ego are worth it (that's assuming it is, not every brilliant worker is worth the entitlement that pursues them.)

As for him balking at the offer at the previous price, you need to find a way to smooth things over. To assure him that things will be better. Probably now and moving forward. His ego is probably a little (understandably) bruised. So factor that into your attempts to smooth things over. After all the company just drastically devalued the work he was doing. It had to feel like a slap in the face and the wallet. It may also take getting legal reassurances from a lawyer to mitigate his concern for legal liabilities.

(If the promotion with the move is unappealing to him then take it off the table. It has no negotiable value.)

Answer 6

You solve it by figuring out how to offer this stellar engineer a very large sum of money in terms of a salary to stay on board. If he earned $110k on patents through your company patent program then this guy knows what he is talking about and basically needs to be paid tenure. You then grin and bear it with his recent memory loss.

Answer 7

I think he's worried that by agreeing to such a deal, he's opening himself up to legal liability (it would involve indirectly admitting he was being dicey/dishonest about "not knowing what I'm talking about").

If he is concerned about liability, then why don't you offer him a release or waiver of liability? A lawyer should be able to help you with this.

Answer 8

Its a perfect example of how a company who gets greedy can run it into the ground. Fire whoever came up with the idea of reducing the patent fees and sincerely apologize to this talented engineer and pray he accepts your apology. Or prepare to have your competition (with your engineer in their team) eventually overtake your business.

Answer 9

His employment agreement states that any and all intellectual property he generates while employed with us, even during weekends/free-time, is the property of the company. IT has searched his OneDrive, laptop, etc., and we can't find a single shred of code/documentation on these ideas.

An idea is not intellectual property. The code, documentation and other tangible results of those ideas are. If you have not found anything, you have nothing.

Since he did this all in spare time, it's not in violation of our data retention policies if he just did it all on his home laptop, provided he didn't copy company data to it.

Regardless of the legality of such a clause (I have my doubts, but that's for the lawyers to decide), you say that everything he does in his free time is owned by you, but then again he doesn't have to keep anything that could actually be considered intellectual property. That doesn't make much sense.

I can offer a one-off bonus, and I can offer him a significant promotion (but it requires he move to a less desirable part of the country). I can't give him a raise in his current position, and members of senior management no longer trust him due to his "funny" behavior as of late (well has been poisoned a bit).

You are talking about technicalities. See it from your engineer's perspective: You are finding a lot of bureaucratic reasons why he can't get the compensation he thinks he deserves. On the other hand, your desperate measures to obtain what you think he has (but you can't prove he has) show how valuable this guy is to you.

Your employee's behavior is questionable, but given the situation you are in, I would doubt the wisdom of the series of decisions that you as a company have made in this matter.

I only see two possible outcomes if this situation, which depends on the question on how important this enigneer is to you (also considering if you can - and want - to find a way to continue working together):

1. You decide that your employee is too valuable to lose and offer him a better package, regardless of any policies you have in place in your company. It is probably be too late for that, but maybe you find a way to un-poison the well.
2. You face the fact that you will have to do without your engineer (he is looking for another job already) and you assess the situation you are in, namely how you replace him and how you deal with the code and documentation you think he has somewehre. You have to be aware that this might involve a long and costly legal battle - unless you can agree on a deal both sides can live with (it seems offering $25,000 wasn't it). How you handle this issue will also send a message to all current and future employees (for better or worse).

Answer 10

Your going to have to offer him a way out without repercussions.

We "company" will not peruse and legal actions or hold the past against you. ...etc

We wish to negotiate a higher level of patent applications of the same or better quality as previously demonstrated. Contact "name" to pursue this matter.

signed all relevant managers/people

Then he can re-introduce whatever ideas he had as brand new ideas and both parties can again benefit.

Clearly he is interested in more money. Your company then needs to negotiate an equitable contract. If his ideas are that good they pay for themselves. If its a money issue negotiate a money over time. He can still have $2000 for his idea, but it will be spread out over 5 months or etc. Maybe you need to offer some kind of percentage 50% of the benefit for 6 months or something.

Answer 11

If you are genuinely interested in restoring your engineer's commitment to the company, and vice versa, offering him a stake in the company seems like at least an avenue to explore. I'm sure you don't have the authorization to proceed with this on your own, but perhaps you could propose something along these lines to upper management.

Forget old grudges. Offer this as a "no strings attached" other than perhaps a commitment to stay with the company for another 6-12 months.

The immediate value of these shares can by no means be seen as adequate compensation. Let's say you can offer him $10k worth of shares -- and this would probably be quite a lot more than you can actually offer him. The value over time might optimistically double or triple if the company is successful, and on top, there are some scraps from dividends. Do the math and see if you can find a valuation which makes sense to offer him.

An important caveat is that you are probably not allowed to just give him a bunch of company shares. An arrangement where some of the current owners pitch in and agree to sell to him, and him alone, at a discounted price might work, though he will probably have to pay a sum which is larger than you would like (otherwise it will be seen as tax evasion and/or illegal for other reasons in many jurisdictions).

Options used to be another popular mechanism -- reserve a bunch of shares at today's price, and offer them to him for that price in something like 2-5 years if he is still at the company. This is a bet on rising stock prices, which of course doesn't make a lot of sense if your company isn't publicly traded.

I'm no expert on this, but I hope you get the idea -- offering him a slice of the success he is hopefully helping to build is a way to attach him to the company and align his attitude with the company's goals, and communicates that you appreciate his contributions, even though the company is (apparently) no longer able to maintain the previous compensation level.

Answer 12

I seriously doubt such a skilled and seasoned person would really be so dumb as to literally say that he would refuse to share actual inventions he came up with while working for company. It would make much more sense if he said something along the lines of

"I have some things/ideas I think could result in patents, but I need the time to develop those, and with current incentives that seems unlikely to happen".

So firstly make sure you are actually right on refusing to share stance...