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DEMYSTIFYING EMPLOYEE INVENTOR COMPENSATION UNDER PATENT LAW

INTRODUCTION

An invention developed during the period of employment may lead to conflicting interests between the employer and the employee regarding the vesting of patent rights of such an invention. This has led to the articulation of concepts such as Employee-Inventor Compensation. 

It is obvious for us to affirm that any person who invents a patentable technology shall be entitled to the patent rights of such technology as the invention was the result of the inventor’s intelligence and creativity. On the contrary, another perception is that the patent rights shall vest with the employer since the facilities and workspace for the making of such patentable technology were provided by the employer. Another fact taken into consideration is that the inventor, when appointed and paid to invent such a product, cannot claim patent rights over the employers.[1] 

The arguments show the complexity of inventors’ rights and how, if not handled properly, can adversely affect one’s intellectual property rights.[2] When addressing dilemmas such as whether patent rights vest with the employer or the employee? whether the aforementioned arguments constitute concerns about ownership rights? Certain factors must be taken into consideration, for example, the possible transfer of patent rights from employee to employer.[3] 

Unless the inventors have assigned their rights, they are assumed to be owners of their inventions.[4] The relationship between the invention and the nature of the employer’s business is of prime importance.

RELEVANT THEORIES

  1. A) The Incentive Theory
  2. B) The Labour Theory of Property
  3. C) The Reward Theory 

The framework of statutes demonstrates either of the theories. The Incentive Theory vocalizes the equitable allocation of profits from an invention to its inventor. However, this theory does not enunciate the fact that the facilities, funds, and workspace provided by the employer could have led to the invention. According to the Labour Theory of Property, the inventor has an inherent right to the product of his labour. The Reward Theory supports the idea of providing a reward to an inventor for his invention. However, this theory has drawn criticism on the basis that a reward may be unfair or insufficient as compared to the efforts of the inventor. Grant of a patent is considered the best incentive to invent. For employee inventions, additional compensation is considered the best incentive as it increases their general drive to create. This idea is incorporated into the incentive theory.[5]

One may ask why additional compensation is considered as an ‘incentive’ and not a ‘reward’, since it may seem synonymous on the face of it, well, because the amount of additional compensation is typically based on the invention’s capacity to contribute to the society rather than the efforts of the inventor’s itself. The compensation offered to employee inventors can be adequate; however, the reward may just be a mere inadequate cash prize.

THE STATUS QUO

There are specific laws regarding service inventions in several nations, such as China and Germany. According to China’s Patent Law, 2008, a company that secures a patent over an employee’s invention must pay the inventor a reasonable reward upon the exploitation of the patent. The employer should consider the extent of patent exploitation and the income earned from such exploitation.[6] In Germany, the Employee Inventions Act, of 1957 states that the employee-inventors who claim patent-able ‘service inventions’ must receive ‘reasonable compensation’ from their employers.[7] However, India does not have laws that particularly regulate service inventions.[8] The Indian Patents Act 1970 does not address employee compensation for inventions. Theoretically, when the inventor uses his intelligence and creativity to invent during his employment, the invention can be assigned to the employer.[9] Due to the lack of provisions, the development, administration, and adjudication of service inventions are governed by general contract law provisions and/or company-specific policies.[10]

Therefore, it is believed that the salary given to the inventor is sufficient compensation for the employer’s acquisition of the inventor’s ownership rights.[11] Understanding the phrase ‘in the course of employment’ for the assignment of the invention is essential. 

The scenarios listed below may help in determining when an employee has an implied assignment to the inventor:[12]

  • The inventor plays a managerial role or holds other important positions in an organization;
  • The organization provided facilities, workspace, and funds for the development of the invention utilizing which the inventor made a possible outcome;
  • The inventor worked on their invention during working hours;
  • and The inventor was hired specifically to invent that product.

However, if the following conditions are met, an inventor who is subject to an employment agreement may claim ownership of the invention:[13]

  • The inventor obtains a No Objection Certificate (NOC) from the employer;
  • The invention was already in its early stage before the inventor started working in the organization;
  • Outside of his working hours, the inventor used his funds and resources to develop their invention;
  • The inventor created or developed an invention in a field unrelated to their line of work. 

The Indian Institute of Technology (IIT) and the Indian Institute of Science (IISC), two of India’s top research and development institutions, have developed IP Rights policies that cover employee rights and provide them with additional advantages.[14]

THE LACUNA

A resident of India must obtain the Controller of Patents’ consent before applying for a patent outside of India, as per Section 39 of the Act. The Indian Patent Office has a history of rejecting the assumption that the rights assigned over an invention to an Indian subsidiary are inherently accessible by the parent company. This makes things even more difficult as it hinders the smooth working of foreign companies and discourages investment in R&D.[15] 

OPINIONS AND SUGGESTIONS

In Darius Rutton Kavasmaneck v Gharda Chemicals Ltd & Ors,[16] the Bombay High Court held that if the employee was not under any obligation to invent in the course of his employment or as part of his employment then the patents filed by employees can belong to such employee. The judgment emphasizes that the employee, who is the actual and original inventor of the invention, may be entitled to patents for inventions made by him or her.

There is no clause about employer-employee ownership of a patent in the United States Patent Act. But to help employers, the courts have established several precedents. In Goodyear Tyres and Rubber Company v. Miller (United States),[17] the court observed that “it is feared that if a company will be denied the fruits of its success, then it will cease to subsidize and experiments will go.” The Indian courts might take note of this in subsequent rulings and establish better precedents that help close loopholes in the patent law.[18]

Keeping in mind the interests of both the employer and the employee, a scale of compensation depending on the designation of the employee, the success and effectiveness of the invention, and certain other factors shall be considered.[19]

CONCLUSION

To promote growth in invention and development, patent law jurisprudence must improve. The validity of pre-invention assignments must be established by the Indian legal system.[20] Appreciating employee inventors can lead to advancement and development which can spur the growth of the country and encourage individuals to further contribute their intelligence and innovation. Employee inventor compensation, in my opinion, is a good first step in encouraging innovators to focus on their discoveries while feeling more secure financially.[21] This would satisfy both parties.

Author(s) Name: Anushka Rao (Vivekananda Institute of Professional Studies, New Delhi)

Reference(s):

[1] Shruti Patekar, Shivang Khandelwal, ‘Inventor Or Employer – Who Owns The Patent?’ (Mondaq, 22 June 2022) <https://www.mondaq.com/india/patent/1204764/inventor-or-employer-who-owns-the-patent> accessed 27 July 2023

[2] ABG Intellectual Property, ‘Employee Inventions’ (ABG Intellectual Property) <https://abg-ip.com/employee-inventions/> accessed 27 July 2023

[3] Dr. Jürgen Meier and others, ‘Employees’ Invention Remuneration—Money (f)or Nothing?’ (Vossius & Partner, 29 January 2013) <https://www.vossiusandpartner.com/pdf/pdf_58.pdf> accessed 28 July 2023

[4] Fred Carbone, ‘Employee Inventors and Patent Ownership: Whose Rights Are They Anyway?’ (ABA, 31 March 2021) <https://www.americanbar.org/groups/intellectual_property_law/publications/landslide/2020-21/march-april/employee-inventors-patent-ownership-whose-rights-are-they-anyway/> accessed 28 July 2023

[5] Kazuhide Odaki, The Right to Employee Inventions in Patent Law Debunking the Myth of Incentive Theory, (HART 2018)

[6] Zhongfa Ma, ‘Current Legal Regime of Employee Invention Patents in China’ (World Trade Organization, 2016), <https://www.wto.org/english/tratop_e/trips_e/colloquium_papers_e/2016/chapter_1_2016_e.pdf> accessed 28 July 2023

[7] Employees Invention Act 1957, s 4

[8] KPMG, ‘Need for Inventor Remuneration Law in India’ (KPMG, September 2021) <https://assets.kpmg/content/dam/kpmg/in/pdf/2021/09/remuneration-law-intellectual-property-rights-patent-filings.pdf>  accessed 27 July 2023

[9]  Patekar (n 1)

[10] KPMG (n 8)

[11] Balwant Rawat, Anshuman Awasthi, ‘Why India needs an inventor remuneration law’ (IAM, 08 June 2020) <https://www.iam-media.com/article/why-india-needs-inventor-remuneration-law#:~:text=Article%2016%20of%20the%20Patent,salary%20paid%20to%20the%20inventor.> accessed 28 July 2023

[12] cf Patekar (n 1)

[13] Ibid

[14] Khurana & Khurana, ‘Employee Vs. Employer Country Wise Ownership Rights on IP’ (Khurana & Khurana) <https://www.khuranaandkhurana.com/2016/05/31/employee-vs-employer-country-wise-ownership-rrights-on-ip/> accessed 27 July 2023

[15] Shohom Roy, ‘What is employer-employee patent ownership in India’ (Ipleaders, 15 October 2021) <https://blog.ipleaders.in/what-employee-employer-patent-ownership-india/> accessed 27 July 2023

[16] (2014) SCC Online Bom 1851

[17] 22 F.2d 353 (9th Cir. 1927)

[18] Kartikeya Prakash, ‘The Dilemma of Employer-Employee Patent Ownership in India’ (SpicyIP, 22 May 2021) <https://spicyip.com/2021/05/the-dilemma-of-employer-employee-patent-ownership-in-india.html> accessed 28 July 2023

[19] R. O. P. Gerntholtz, ‘Inventions of Employees’(1968) 1(2) CILSA 248 <https://www.jstor.org/stable/23240736> accessed 27 July 2023

[20] Karan Singh, ‘Employer – Employee Patent Ownership in India – An Overview’ (SWARIT Advisors, 21 February 2022) <https://swaritadvisors.com/blog/employer-employee-patent-ownership-in-india/> accessed 28 July 2023

[21]  KPMG (n 8)