Compensation package for an inventor working for a non-profit

April 10, 2008 10:38 AM

I'm an engineer/inventor who is in salary negotiations with a non-profit and I hold the patent for a mission critical technology. I have some questions about how to secure the best offer.

I am dealing with some rather unconventional compensation negotiations. Here is the story:

I am working with a group of folks at a non-profit that, according to the business plan, will be able to produce its own capital. The revenue stream for this organization is generated by multiple installations of an engineering technology that I have patented, developed, and have extensive, unique experience implementing on a small scale. The revenue is directly related to the number of installations. The proceeds will then be used to fund other, less profitable projects thus the non profit status.

The patented technology is the only revenue stream for this venture. however, the patent itself is only enforcible in the US, so they don't really need to license it from me. At the same time, the technology that is needed for this project is far enough from the one in the patent that they can't just get rid of me and deploy the technology. It will require at least another year of development under my supervision before it is ready. Because I am so familiar with the technology it would likely take someone else quite a bit longer than that.

My job in this venture will be to direct R&D to improve the technology to the point that it can be deployed on the proposed scale (hundreds). My responsibility will be to continue the R&D, and develop the construction management and maintenance operations. Essentially everything except for the finances, legal and regulatory matters.

I am now engaged in compensation negotiations and am looking for ways to present my case in a logical fashion that relies on existing precedents.

About the work

-The job will require me to spend more than half the year living in a decidedly third world country.

-This will be an incredibly high stress job due to the headaches that come with working in the third world and with developing a new technology.

-External factors are forcing us to do this in an accelerated fashion. The milestones are very ambitious and they border on unrealistic. Trying to meet them is going to be a major struggle.

-This single project should have annual proceeds on the order of a few million for a period of 10 years.

-The job will have me managing a work force of a few hundred people

About me
-In the context of these negotiations, I consider myself an inventor, in addition to being an engineer. I do have a BS and MS in the field. Beyond the patent, I have received a couple of national awards for my inventions including the one in question.

-I have 5 years of experience working in the country where the project will take place. Essentially doing the same work on a smaller scale

-After doing this job for about 3 years, the protocols should be advanced enough that they can be managed by someone less qualified than myself. These protocols can be used to duplicate the project elsewhere without my assistance. Ideally, I would work this job for 3 years and be done.

-Due to my experience, I would be very hard to replace. Any suitable replacement would require quite a bit of training.

-At present, this venture has little money and I have been working for them for free with the understanding that I would be paid in the future for that time. There will likely not be any money for at least another few months. If the business doesn't pan out, I stand to loose the value of that time.

-I am not a philanthropist, however, many of the people I'm negotiating with are. This may complicate things.

My questions
1. As I understand, people at nonprofits typically get paid less than their counterparts in other sectors for the same job. Is this because nonprofits usually rely on donations, and donors prefer to see relatively low employee salaries? Am I correct in reasoning that this shouldn't apply in my case, since the org will fund itself through it's business activities?

2. My work will play a crucial role in making the org hundreds of millions of dollars if all goes well and they replicate the project. I think it is reasonable that they give me some percentage of the gross revenue generated by the first project. Is this reasonable? Does anyone have any idea of what this percentage should be?

I know this is a somewhat unconventional situation, but if someone has any numbers from a related situation, I'd love to hear them. Any info on what kinds of percentages inventors get when they help start a for-profit company using venture capital would be helpful. I realize that this is not a question that has an easy answer, I'm just looking for some data points so I can try to triangulate.

3. I will have to live and work on the other side of the planet, in a developing nation, and when I'm there, the work will pretty much be non-stop. I am trying to negotiate a schedule that is similar to that of someone who works on an offshore oil rig. IE a a few weeks at sea, a few weeks off. Does any one have ideas on how to go about drawing an equivalence between normal working schedules/salaries and "oil-rig" schedules/salaries?

Maybe something like "a person with X qualifications could be employed on an oil rig for Y or in a US office for Z"? (It doesn't have to be an off shore oil-rig, that was just the first thing that popped into my head)

Somewhat related, I've heard hearsay that the engineers who work for companies like Haliburton in places like Iraq make pretty large salaries (250k) due to the location and associated risks. Is there any truth to this?

4. Based on what I've said, what would you consider to be appropriate compensation for this work?

5. Any ideas on how to state my case in my counter offer? I'm planning on writing a 3-5 page document that explains my reasoning as to why I believe my counter offer is fair. I'd like to populate this document with some numbers and citations.


Any other relevant advice would be greatly appreciated.

Sorry for the length, and thanks in advance for your help!

posted by Cardboardbox to work & money (9 comments total)

Wow, this is really amazing. I can't address much of it, but would like to comment on these two aspects:

-I am not a philanthropist, however, many of the people I'm negotiating with are. This may complicate things.
-As I understand, people at nonprofits typically get paid less than their counterparts in other sectors for the same job. Is this because nonprofits usually rely on donations, and donors prefer to see relatively low employee salaries? Am I correct in reasoning that this shouldn't apply in my case, since the org will fund itself through its business activities?

For many people, working in a non-profit is a way of combining work and personal passion, and they're willing to give up some salary for this benefit. For many non-profits, paying less is the only way to function, due to cash flow issues, or it's important for getting donations to have a low overhead. But it doesn't have to be this way, and if you don't want to purchase the opportunity to combine work and passion, you don't have to. And if the organization can pay you full market value, it doesn't have to offer you less just because it's a non-profit. So, put these together, and you should get full market value for your work, and the fact that the organization is a non-profit shouldn't change that.

Determining market value is a whole other story, and I can't help you with that. But good luck, and be safe.
posted by Capri at 11:27 AM on April 10

I think you really need to speak to a lawyer well-versed in patent licensing, but my main takeaway from your question is that it is actually two separate issues. Your salary and scheduling and everyday particulars (including your misgivings about the milestones) should be approached as if the patent came from somewhere else, as if it was just a regular job and salary negotiation. The second question is how to license the patent from them, whether it's a flat fee, a periodic payment, equity in the nonprofit, and/or as a percentage of revenues. This negotiation should be completely separate and done under legal advice where the normal job details can be negotiated by you (though you'd probably want to clear this with your lawyer as well).
posted by rhizome at 12:01 PM on April 10

Rhizome is right. You need to seek the advice of an attorney. My experience is that in dangerous areas (i.e. any place the state department recommends not visiting) research engineers usually receive about three times normal salary in the states plus all expenses are covered (housing, travel, utilities, shipping). For short term work in all other countries pay is between fifty to one hundred percent over your regular salary plus expenses. Seeing as this will be a two to three year deal your contract should mention specifically the periods you will work and for how long (e.g. three months there one month back).
posted by kscottz at 4:47 PM on April 10

Thanks for all the responses so far!

Rhizome, I'm not sure there will be any licensing for the patent, as the patent is not enforcible in the place in question. Then again, not all the information is in the patent itself, a lot of the information is in my head. Is there any precedent for a company buying licensing rights for a non enforceable patent? Regarding the lawyer, I agree, I will look for one.

KScottz, that is exactly the kind of stuff I'm looking for! Thanks! Do you have any ideas where I can find references to numbers like that to back up my case? Also If you have time, I'd love to hear a bit more about your experience, I'm curious about the general lifestyle of somone with this kind of gig.
posted by Cardboardbox at 5:51 PM on April 10

Domain knowledge (what's "in your head") is (or should be) part of your salary.

A question though, if you think the patent is unenforceable because of where you'll be working or what the company does, why is it a part of your negotiations? Can't they just use it anyway? Does the company do any business in the US or in any country that has an IP treaty with the US (or whatever country issued your patent)?
posted by rhizome at 6:01 PM on April 10

Cool, I'd never heard of domain knowledge before. I'll definitely so some research on that.

For the sake of anonymity, I can't really get more specific on the patent enforceability, I can say that the org does do business in countries that have IP treaties with the us. The reason that I'm using it as a negotiating point is to highlight the fact that I am the inventor of the technology and they are going to need alot more innovation if the venture is going to be a success. It's basically to show them that they cant just go out and hire another engineer with the same degrees.
posted by Cardboardbox at 6:16 PM on April 10

You've mentioned your uncertainty about whether licensing the patent is possible, but I wonder whether that's relevent to your ability to structure your compensation in a way that deals with three discrete roles you will play for the company: a) the upfront development time; b) some sort of per-use fee since the non-profit's earned income is directly proportional to how often their clients use your invention, and c) whatever ongoing maintenance/program management you provide once it's working and in use. a) might be a salary, b) might be a per unit fee, and c) might be an hourly consulting rate or a salary, depending.

At some balance of risk/time value of money, you should theoretically be neutral about several alternative compensation plans. You and they could negotiate adaptations to the three elements of your compensation, adjusting whether you received more upfront or over the long term based on your cost of living needs, risk toleration, their cash on hand vs desire to postpone paying you until the revenue stream is in place, etc.

If you're doing the negotiations in person, I strongly recommend that you keep track of issues, points of agreement, etc. on newsprint or white board: big, where both can see it. Also, the more complex the negotiation (and your's involves both lifestyle and monetary considerations, as well as deadlines), the better off you are going first, contrary to conventional wisdom stemming from fear of leaving money on the table, because you get to define the factors that are important to you and cause the conversation to continue using those terms. Try to anticipate what some of their's will be (e.g., the timeline) so that you're perceived as being fair. For all of your factors, know (but do not reveal) your least acceptably good alternative and try to anticipate the other side's.

Will you be negotiating with staff or board people? Try to have the right people involved, and preferably in the room. If you're going to be making more than staff, they may resent you and subtly derail the negotiations. If the board president (or others) is a lawyer or in business, they will be much more comfortable with the distress that negotiations bring the unpracticed. And another thing, if the real decisionmakers aren't in the room, then it will take forever and you'll be tempted to settle: remember how car salesmen do it, e.g., "I'm not authorized to go any lower than X, Mr. Box. Wait here while I consult with my manager."

Last, keep your interests separate from your negotiation factors. For example, if your interest in this third world country is living hassle free you may think it's a good idea to negotiate for a driver, housekeeper, etc. The not-for-profit may think that looks like profligate spending to donors but would be happy to give you the money. If you remember your interest (hassle free living) as opposed to your deal points (driver, maid), you'll be fine with this. Good luck!
posted by carmicha at 6:41 PM on April 10

Thanks Carmicha! You bring up a lot of good points.

As far as the negotiations go, they will be conducted over the phone, using email for any documents that need to be exchanged. I am nominally negotiating with the CEO, but the board makes the final decision. At present the organization is very small and things are quite cozy so I know everyone involved. Some I've worked with for years, others are just acquaintances. I should note that at present, I am nominally an Executive Officer with the organization.

A lot of my business decisions dealing with them up till now have been based on my goodwill (possibly foolishly) with the expectation that when we got down to negotiations, that my goodwill would be reciprocated. Now, I'm a bit worried that they expect me to continue to be charitable during the negotiations as this is philanthropically inclined group. Or maybe they genuinely don't understand the value of my services. Probably a combination of both.

One of the things I'm really trying to get across in the negotiations that I am not in the financial position to be an altruist, and since the org is not relying on charity for financial solvency, I don't think I have any duty to be altruistic beyond taking a risk by working for free, without any type of contract, when things are still up in the air. That's why I'm looking for parallels in the for profit sector, so I can say "if this were a traditional business, I would be getting X, you are offering me Y. Since Y
Does that sound like a fair line of reasoning?
posted by Cardboardbox at 7:25 PM on April 10

oops,the end of that last paragraph got cutoff because I tried to use a "less than" symbol. Must have messed with the html stripping. It should read:

Since Y (lessthan) X, I see the the difference (X-Y) as an amount that I am essentially being asked to donate to the org.
posted by Cardboardbox at 7:28 PM on April 10