How does ownership of innovations work in companies?

Question

I have heard about web consultant firms converting to saas businesses. There is also companies that claim that they got their idea when working at FAANG for instance and then started their own thing. How does this work? How can a company encourage innovations and at the same time let the employees own a part of the innovations. I would imagine that if an innovation pops up at a company, the company owns it. But that is not very attractive for the employees I assume. How does companies usually handle this?

nivertech · Accepted Answer

For freelancers and small consulting shops the general advise is to do consulting in a different field than their own product/startup. That's because a freelancer can't dictates the contract terms to the customer, which is usually a larger company, and also the legal expenses would be too large relative to the contract size.
You should incorporate a new company anyways for lots of other reasons.
Large consulting shops may have a better protection since they can afford lawyers and can negotiate better contracts.
Employees usually protected much better than freelancers/consultants, b/c they don't have much negotiating power over the small letters of the contract. So many NDA/non-competes might be non-enforceable in practice.

PaulHoule · Answer

This is not legal advice but violations of non-compete agreements and similar IP contracts happen all the time. Frequently if you have an idea rejected by your employer or want to pick up something the company abandoned you couldn&rsquo;t find anybody on Earth who is less interested in using this IP than your employer.One principle is that few people will sue you over $0.00 so if you get no traction you will not get a lawsuit. If you make a billion dollar company and they want 200 million you might be mad about it but really you shouldn&rsquo;t be.

aurizon · Answer

You get into the 'work for hire' concept. Say you hire a girl to go gathering nuts in your field in May(a bit early, I agree). So you pay her for the day's work and she says she also wants the nuts. I say, I saw you eating some = that enough - and so on. As you can see, there are nuances as well as extremes. What if you ask workers to wear muzzles = zero nuts eaten? So if you create a 'new thing' while employed, the creation came from your accumulated wisdom coupled with the employees machine shop etc - yet you are usually required to release all rights to the employer = you got paid = done. Germany has a twist on this, as per this:- https://www.lexology.com/library/detail.aspx?g=1cece599-efd4...The USA and others should follow this - do not bind the mouths of the kine that tread the grain. https://taanstafl.blogspot.com/2005/02/bind-not-mouths.html

michepriest · Answer

I used to work at a venture studio where we could negotiate giving up a portion of our salary for equity

CM30 · Answer

Depends on the company. I've worked for plenty of companies (especially smaller and non technical ones) that didn't ask for everything you created there (or in your free time). Non competes aren't some universal thing that all companies have.