Hearing a lot of people lost all of their 401ks

[Cyrus]

Of the revenue?

With all due respect, you're so far out of the ballpark as to not even be on the same continent. 50% of the revenue means that the price of the item has to double to pay your share.

Typically established companies have profits of around 10% of revenues. So you're asking for five times as much money on your product as the shareholders get.

Of course, you can get whatever you manage to negotiate. The other side of this coin is that the company is free to decline your services and look elsewhere.

Thanks for the info. So, 10-15% of revenues on anything I come up with in terms of a patent, is more reasonable?

I'm not sure what else you can get a percentage of on a patent, other than the revenue it generates. You seem to be implying there is something different one could get?

Looking online here
http://legal.uncc.edu/policies/ps-7.html
and here
http://www.ott.nih.gov/policy/policy_protect_text.aspx

it seems 25-30% of revenues seems reasonable.

 

[russ_watters]

Vanadium, I assumed Cyrus was talking about profit sharing, not revenue sharing. In essence, there is no such thing as "revenue sharing" - unless Cyrus is just using the terms interchangeably.

Cyrus, if you got 30% of the profit, that leaves 70% to split between the two owners (is it a 3 person firm or are there more people? What should they get?). Do you really think the two owners would be willing to take a 35% share and give you almost as much as they get?

it seems 25-30% of revenues seems reasonable.

Those links contain a lot of text - could you cite a quote that you think says it is?

Cyrus, it would be *highly* unusual for an employee of a company - any company - to get a much, if any, fraction of the profit/revenue a patent of theirs generates.

What you are shooting for here is wildly unreasonable. You're going to need to get more reasonable expectations or you'll never be able to hold a job!

 

[russ_watters]

Going back to something you said earlier:

It really boils down to this: when you're talking about a 3 -man operation, you better have some form of an incentive for me to want to work for you. I'm not going to make you rich out of the goodness of my heart.

I work for an 80 man company which has partnership in some limited form for about 20 of them, with 10 or so getting around 1-2% and the others getting much more. The junior partners start at about age 40 and the senior partners start at about age 50. Some employees will never get partnership. The other 60 employees, some of which have 30 years experience, don't see a dime of profit unless, out of the goodness of their hearts, the partners decide to issue a companywide bonus. Otherwise, the higher-ups in the company are getting very rich. The employees do no not work out of the goodness of their hearts to make the owners rich or (for the vast majority) on the hope of ownership someday, they work because they get paid every other week.

Whether you think this is fair or not (it is), is largely irrelevant to the more important issue: If you don't get onboard with how the world works, you will have difficulty holding a job and you'll find yourself behind the curve instead of ahead of it, as you are trying to get now.

[edit] Something else from earlier, regarding the risk/reward for different people in the company. The owners of the company do have another source of risk that you aren't considering: they are older than you.

 

[Cyrus]

Vanadium, I assumed Cyrus was talking about profit sharing, not revenue sharing. In essence, there is no such thing as "revenue sharing" - unless Cyrus is just using the terms interchangeably.

Cyrus, if you got 30% of the profit, that leaves 70% to split between the two owners (is it a 3 person firm or are there more people? What should they get?). Do you really think the two owners would be willing to take a 35% share and give you almost as much as they get? Those links contain a lot of text - could you cite a quote that you think says it is?

Cyrus, it would be *highly* unusual for an employee of a company - any company - to get a much, if any, fraction of the profit/revenue a patent of theirs generates.

What you are shooting for here is wildly unreasonable. You're going to need to get more reasonable expectations or you'll never be able to hold a job!

The chart on this link (http://legal.uncc.edu/policies/ps-7.html ), that is under the section: "E. Revenue Sharing"

I'm not sure how you are differentiating profit from revenue, can you expand on that.

 

[Cyrus]

Going back to something you said earlier: I work for an 80 man company which has partnership in some limited form for about 20 of them, with 10 or so getting around 1-2% and the others getting much more. The junior partners start at about age 40 and the senior partners start at about age 50. Some employees will never get partnership. The other 60 employees, some of which have 30 years experience, don't see a dime of profit unless, out of the goodness of their hearts, the partners decide to issue a companywide bonus. Otherwise, the higher-ups in the company are getting very rich. The employees do no not work out of the goodness of their hearts to make the owners rich or (for the vast majority) on the hope of ownership someday, they work because they get paid every other week.

Whether you think this is fair or not (it is), is largely irrelevant to the more important issue: If you don't get onboard with how the world works, you will have difficulty holding a job and you'll find yourself behind the curve instead of ahead of it, as you are trying to get now.

[edit] Something else from earlier, regarding the risk/reward for different people in the company. The owners of the company do have another source of risk that you aren't considering: they are older than you.

There is a huge difference between an 80 man, and 3 man company. In an 80 man company, I don't disagree with what you're saying. An 80 man company is worth several million dollars, and 1-2% of that is a fair amount of money (Assume each person makes 65k at that 80 man company. The net worth is at least 5.2 million. That means 1-2% is roughly their salary/company net worth - exactly what I said at the beginning). 3% of a 3 man company that has low net worth, is not equivalent (assume for the sake of the argument this company is worth 3-500k. Then 3% share is 15k.

 

[russ_watters]

There's a lot of confused-sounding statements in all of that, Cyrus. Backing-up, there may be a definition problem here, but I'm not so sure - it looks more like you understand the words but think you are entitled to something you are not. Earlier you said this:

% of all revenue generated from patent ideas I come up with, which I think is a very good alternative.

Which implies to me that you do know the difference between revenue and profit. But just to make sure:

Revenue is the money receieved from the sale of goods and services.
Profit is revenue minus expenses.

Googling, it looks like the terms are sometimes used interchangeably, but if you look up the definitions in the dictionary, those are them and if you google "revenue sharing", you get "profit sharing".

The quote from you above implies you want revenue sharing. As Vanadium and I said, true "revenue sharing" does not exist, as it would put companies in a position where they could be giving their employees bonuses while going out of business because they are losing money. The company's interests always come first - and rightfully so.

Profit sharing is what you'd really want to ask for.

Figuring on Vanadium's exmple: if your company grosses a million dollars in sales next year at a 10% profit margin, that means it has $900,000 in expenses and leaves $100,000 at the end of the year in profit. Typically a partnership would have the partners getting together at the end of the year to decide what to do with that money. Ie, you might keep it in the bank to save for a rainy day, use it to buy new equipment or as a way to hire another person and expand...or you might split it among the owners/partners as a fraction of their equity stake in the company. Ie, a 20% equity stake would get you a $20,000 bonus. Or another non-equity based profit sharing agreement might exist or the owners could simply decide to allocate a fraction of it for bonuses out of the goodness of their hearts.

The chart on this link (http://legal.uncc.edu/policies/ps-7.html ), that is under the section: "E. Revenue Sharing"

I'll have to come back to this - I'm having an internet problem that is preventing me from accessing a bunch of websites right now.

There is a huge difference between an 80 man, and 3 man company. In an 80 man company, I don't disagree with what you're saying. An 80 man company is worth several million dollars, and 1-2% of that is a fair amount of money (Assume each person makes 65k at that 80 man company. The net worth is at least 5.2 million. That means 1-2% is roughly their salary/company net worth - exactly what I said at the beginning).

No. By that math, you're talking about revenue, not profit. Year-end bonuses are calulated on the profit in any sized company. Here's how the analysis really looks (and this is somewhat speculative, but based on what I know about my current firm):

-An 80 man engineering company with 60 production workers and 20 administrative staff operating at an average billing rate of $100 an hour and 80% billable takes-in just under $10 million a year.
-The average administrative worker makes about $40k and the average production worker makes about $80k. Company expenses directly tied to the workers may be another 30%. That's $7.3 million in salaries.
-Other overhead in the rent, utilities and insurance might be another $1.7 million (trying to keep the calculations round).
-That leaves, at the end of the year, $1 million in profit, or a 10% profit margin.

So at the end of the year, the 45-year-old junior partner or "shareholder" with a 2% equity stake and profit sharing gets a bonus of $20,000, assuming none of the profit is reinvested in the company.

3% of a 3 man company that has low net worth, is not equivalent (assume for the sake of the argument this company is worth 3-500k. Then 3% share is 15k.

If a company has only 3 employees, obviously you wouldn't give out 3% shares. Perhaps a junior partnership would be 10% or 20%, but recognize what I said previously: most employees of most companies do not get equity shares and for a young employee to be given one would be highly unusual.

You're in your mid 20s, right? Again, I will freely acknowledge that I don't know what your company does or what you do, but what you describe is *highly* unusual, both in your position in the company and what you are thinking about asking for. Perhaps you are a talent of extrordinary rarity, but I'm just playing the odds here in betting that you are not. More to the point, it is highly likely that you have a higher opinion of yourself than your bosses do of you. Again, I'm just playing the odds: that is nearly universal among young workers. The idea that an engineer in his mid-20s, with only ~5 years of experience could be so critical to an operation that he is irreplaceable and needs a high fraction of no-risk profit sharing to keep him, at a time when unemployment is 10% is, to put it midly, very difficult to accept.

 

[russ_watters]

The chart on this link (http://legal.uncc.edu/policies/ps-7.html ), that is under the section: "E. Revenue Sharing"

I'm not sure how you are differentiating profit from revenue, can you expand on that.

Ok, internet is working properly now. The quote:

E. Revenue Sharing

1. The University shall share technology transfer revenue that it receives from patents or inventions with the inventors. As noted in Section A.4., specific provisions of grants or contracts may govern rights and revenue distribution regarding inventions made in connection with sponsored research; consequently, revenues the University receives from such inventions may be exclusive of payments of royalty shares to sponsors or contractors. Moreover, the University may contract with outside persons or organizations for the obtaining, managing and defending of patents. Any expenses incurred for the services of such persons or organizations, as well as any and all incremental expenses incurred by the University in obtaining and maintaining patents and/or in marketing, licensing and defending patents or licenseable inventions, shall be deducted before the University distributes revenues as provided in Section E.2 below.

This quote looks to me to really does mean revenue, not profit. But recognize that a university is not a typical business. The university's revenue is primarily in the form of tuition from the students. Anything that the scientists can generate through patents is just gravy and can't adequatly be weighed against the university's total profit because it is such a small fraction of the total. A college like Penn State takes in several hundred million dollars in tuition a year. A $10 million idea from a scientist would get lost in that. So a true revenue sharing is necessary to adequatly compensate for that. Note, though, that the university still does deduct expenses associated with the patent/discovery before calculating net revenue. So it is somewhat related to a profit calculation. Consider it like a self-contained business inside the univeristy. And as this revenue for the university is just gravy, the university doesn't risk the type of situation I described before: where they could be going out of business while still handing out huge bonuses.

Bottom line: the quote is not applicable to a normal business.

 

[Cyrus]

So I talked with him over the phone. We hammered out some concerns. I talked to a few more folks (patent attorneys, etc). Overall, I'm ok with the contract. I got him to increase the company share to 4%, and were going to discuss the some percentage of patent sharing in the future.

On a side note: I talked with my contacts in San Diego, who are still interested. I also got a random call from the director of the wind tunnel to work on a project designing a boat airplane. Really cool project that would be partnered with GE for a DARPA proposal, and it would be working with a VERY well known Aircraft designer in the industry - DAMN! My good friend is having a hell of a time in this market finding a job, so I'm going to push them hard to hire him. I hope it gets it - it's a hell of an opportunity.

 

[dlgoff]

So I talked with him over the phone. We hammered out some concerns. I talked to a few more folks (patent attorneys, etc). Overall, I'm ok with the contract. I got him to increase the company share to 4%, and were going to discuss the some percentage of patent sharing in the future.

On a side note: I talked with my contacts in San Diego, who are still interested. I also got a random call from the director of the wind tunnel to work on a project designing a boat airplane. Really cool project that would be partnered with GE for a DARPA proposal, and it would be working with a VERY well known Aircraft designer in the industry - DAMN! My good friend is having a hell of a time in this market finding a job, so I'm going to push them hard to hire him. I hope it gets it - it's a hell of an opportunity.

Congratulations Cyrus. I like how you have been approaching all of this. But then you are Cyrus.

 

[turbo]

But then you are Cyrus.

Get a room, you two!

 

[dlgoff]

Get a room, you two!

Are you coming too?

 

[turbo]

Are you coming too?

Certainly not in the Biblical sense!

 

[dlgoff]

Certainly not in the Biblical sense!