Employee invention: Who is entitled to it?
Anyone who develops an invention at their workplace often finds themselves in a dilemma: Should I report the invention to my employer or use it myself? And who actually has the rights to an employee invention? There are clear legal regulations for such cases in Germany.
To ensure that employees and employers are protected and on the safe side legally, the Employee Inventions Act (ArbnErfG) not only provides regulations on how to deal with inventions, but also how employees are to be treated in such cases. You can find out more about this in this article.
Service invention vs. free invention
First of all, a distinction must be made between service inventions on the one hand and free inventions on the other. This is important because this distinction has considerable legal consequences.
Service invention or bound employee invention
A service invention is deemed to exist if an employee develops an invention within the scope of his professional activity or with reference to his employer's experience or field of work.
Inventions made during the term of employment and/or with company resources or know-how are generally considered employee inventions (Section 4 ArbNErfG).
Free invention by employee
A free invention by an employee arises outside the employee's professional area of responsibility and without the use of company resources.
As a rule, the employer has no right to the invention. However, the employee must:
- Inform the employer about the development.
- Offer the employer at least a non-exclusive right to use the invention on reasonable terms (Section 19 ArbNErfG).
The decisive factor for the distinction between a free invention and a service invention is therefore whether the invention was made in connection with the employment relationship or independently of it.
What do employees have to consider when making an invention?
Employees should pay attention to several important points when making an invention in order to safeguard their rights and obligations:
- Obligation to report: According to the law, employee inventors are obliged to report an invention to their employer immediately and in writing if it has arisen in connection with their professional activity. Notification is also the first step in securing an inventor's entitlement to remuneration (Section 5 ArbNErfG).
- Confidentiality: Until the rights to the invention have been clarified, employees should under no circumstances make the invention public or exploit it without the employer's consent. This applies in particular to patents, as premature publication can jeopardize patent protection.
- Differentiation between bound employee invention and free invention: Employees should check whether their invention is directly related to their professional activity ("bound employee invention") or whether it was developed outside the employment relationship and without company know-how ("free invention"). Although free inventions must be reported, the employer is not entitled to them.
- Remuneration claim: If the employer claims the invention, the employee inventor is entitled to appropriate remuneration. This is based on the economic benefit of the invention and the employee's individual contribution to its development. Companies often already have established remuneration models for employee inventors.
- Documentation: It is advisable to document the development process of the invention precisely in order to have clear evidence in the event of disputes about the inventor's rights or remuneration.
- Legal advice: It can often be useful to consult an experienced patent attorney to ensure that appropriate remuneration is guaranteed and legal regulations are complied with. We would be happy to advise you in a non-binding initial consultation.
By observing these points, employees can ensure that their rights to an invention are protected and that they are remunerated accordingly.
Employee invention: When does a claim exist?
An invention is claimed if an employee reports his employee invention to the employer and the employer claims the invention for himself. According to the Employee Inventions Act (ArbNErfG), employees are obliged to notify their employer immediately and in text form of any invention they make in connection with their professional activities. This notification is the first step towards transfer.
The employer then has the option of actively claiming the invention by also informing the employee of this in text form. As a result of this claim, the invention is transferred to the employer, who receives the full exploitation rights.
If the employer does not expressly release the invention within 4 months of the notification, the invention is deemed by law to have been claimed by the employer - the right to the invention is therefore automatically transferred to the employer. This assumption that the employer claims the rights to the invention is the so-called fictitious claim. The employer must therefore expressly release the invention so that the employee can use it themselves.
A claim is therefore made if:
- The employee reports the invention in text form and
- The employer claims the invention in text form within 4 months or
- The employer does not expressly release the invention (fictitious claim)
Good to know: This regulation has only been in effect since October 1, 2009. Prior to this, the so-called fictitious release rule applied: If the employer did not declare the claim within 4 months, the invention was automatically released for the employee.
When do employees and inventors receive remuneration?
Remuneration for employee inventions is based on the economic value of the invention. The employee is entitled to appropriate remuneration if the employer uses and exploits the invention.
Remuneration is generally based on two key factors:
- The economic benefit of the invention for the employer, i.e. the profits generated by the exploitation (e.g. through patents, licenses or the use of the invention in the employer's own business).
- Employee's share: This depends on the employee's contribution to the invention, his area of responsibility, his inventive performance and the degree of support provided by the employer (e.g. through know-how or the provision of a specific task).
How high is the remuneration for employee inventions?
To determine the remuneration, the so-called license analogy is usually used, which considers what license fees the employer would pay a third party for the use of the invention. Industry standards and company agreements also play a role.
The actual calculation is often based on the remuneration guidelines provided by the German Patent and Trade Mark Office. In the event of disputes about the amount of remuneration, an arbitration board can be called in.
If the invention generates several million euros in sales, several thousand or a few tens of thousands of euros in remuneration can be expected. It is important to emphasize that this rule of thumb is only a rough estimate. The actual remuneration can vary considerably depending on individual circumstances. For binding information, please contact us directly.
Court rulings on the remuneration of an employee invention
The case before the Higher Regional Court (OLG) of Frankfurt am Main on March 3, 2016 (Ref.: 6 U 29/15) concerned the remuneration of a freelancer who had made an invention while working for a company. The court ruled that a freelancer is generally entitled to remuneration for extraordinary services that go beyond the contractual scope of the collaboration, even without an express contractual provision.
The freelancer was therefore entitled to claim appropriate remuneration. The amount of the remuneration depended on the extent of the use of his invention, and the employee could request information about the acts of use.
In another ruling from June 28, 1962 (the so-called Cromegal case), the Federal Court of Justice (BGH) determined that the remuneration becomes due as soon as the employer begins to commercially exploit the invention. This use marks the moment at which the economic advantage occurs and not just the time of filing the patent application.
Upon exploitation of the invention, a remuneration claim of EUR 4,062.50 was due, based on a turnover of EUR 1,250,000 with a license rate of 2.75%. Today, this rate would probably be higher.
Conclusion
Employee invention law is complex and requires careful attention from both employees and employers. In order to ensure that appropriate compensation is paid and that the rights of both employer and employee are protected, the support of an experienced patent attorney can be useful. Please contact us at any time for an initial consultation.