Employee Inventions

The most important source of “raw material” for any Patent Department is the inventor community and so, improving the quantity and quality of ideas that are coming from this community should be a role of the highest priority for any such department.  Someone needs to invent.  Traditionally inventions come from within research and development but the inventor community is much broader than this and increasingly, it includes people spread throughout the company.

Today, companies cannot survive in isolation.  They need to cooperate and collaborate with other companies, universities and external individuals.  All these different people must also be recognized as potentially belonging to your inventor community.

The Patent Department must know and understand the inventor community, must understand how they see patenting and their views on the subject as this enables activities to be initiated or amended in order to reach the desired end result of obtaining inventions.  If you are aware of factors which work against your patenting goals and targets, then there is a need to develop ways of dealing with and controlling these issues.

Benchmark data

Most innovative businesses provide rewards and some form of recognition to inventors and yes, there are legal requirements in certain jurisdictions to take into consideration.  More importantly however, a good comprehensive reward and recognition program encourages and motivates innovation and creativity.  The elements of such a program may include such elements as financial awards but it needs to go beyond this.  The recognition element is also important and serious consideration needs to be given to this part of the program.

Statutory provisions

More than 80% of inventions are made by employees and it is therefore important that the company knows its own rights with regard to an invention, as well as the rights of his employees.  The general rule is that where an employee creates an invention in the course of his employment, this invention and any patent will belong to his employer.  However, there are statutory provisions in place to ensure that the employee does not go unrewarded. Japan and Germany are two examples of jurisdictions where employee compensation is common, but there are others.

German law

German law regulates matters of employee ownership of inventions and the compensation to which they are entitled by statute.  Where inventions are made in the course of the employee’s duties, they may be claimed by the employer.  The employee must give notice to the employer of the making of an invention and allow them the choice to make either a limited or unlimited claim to the invention.  In the case of the latter the employer is entitled to an assignment but must pay ‘reasonable compensation’ for this.  Similar compensation is due where the employer makes a limited claim, the only difference being that he derives his rights to the invention from a non-exclusive license.  The German Government has published guidelines to be used when calculating compensation.  In essence, inventions which produce high turnover will attract high compensation payments.

Japanese law

In Japan, employees are the owners of all inventions they make including those in the course of their duties.  Employment contracts are often used by employers in order to entitle them to ownership over the invention or at the very least an exclusive license.  Where an employee assigns his invention or grants an exclusive license to the employer, Japanese Patent Law entitles the employee to reasonable remuneration.  This is calculated on the basis of the resulting profits made by the employer from the invention and the contribution to the invention made by the employee.  Large Japanese companies often have preset scales of remuneration for employee’s inventions.

Recent UK court case

The UK Patents Act which came into force in 1978 contained radical provisions on the remuneration of employee inventors who are now under certain conditions entitled to a share of the benefits flowing from any outstanding inventions they may make. In 2009, two researchers were awarded £1.5 million under this little-used section of patent law which allows employees extra compensation for inventions which are of “outstanding benefit” to employers. Companies which hire employees to invent things for them generally retain the patents and other intellectual property for those inventions. By owning those rights the companies in turn control the earnings that result from the inventions. But a clause of the Patents Act allows for extra payments to be made in exceptional circumstances. The High Court made the first public award of such a payment to two scientists from Amersham International, now a subsidiary of GE Healthcare.

From push to pull

Switching from a passive mode to an active mode, or in other words, actively seeking out new sources of inventions and new patent ideas, also deserves some consideration.  How should the Patent Department approach this task and how should it be decided whether the efforts needed for this mode of operation will produce adequate results?  How frequently should this task be performed? In recent times there clearly is a trend taking place whereby Patent Departments are switching from the passive ‘PUSH’ mode, where you wait for inventions to be submitted, to the more active ‘PULL’ mode, where you seek out inventions in key technology areas and from leading edge research and technology and product programs, but at the same time remain ready and willing to handle ‘out of the box’ ideas from left field.  There is also a trend taking place whereby Intellectual Property experts are working together with the general legal community, as well as the sourcing and purchasing experts within companies, in order to ensure that intellectual property terms and conditions are properly incorporated into contracts with suppliers, vendors and university ‘partners’.  This includes areas such as idea generation and invention harvesting.

PULL mode activities may include such things as conducting invention workshops on specific areas of interest, actively working with lead technology projects to harvest inventions, working closely with the top inventors and establishing invention targets together with business and technology management.

Reward & recognition

Most innovative businesses provide rewards and some form of recognition to inventors.  There are two main reasons for having a reward and recognition program in place for inventors.  The first is that there are legal requirements in certain jurisdictions to take into consideration and secondly and more importantly, a good comprehensive reward and recognition program encourages and motivates innovation and creativity.

The components of a program may include such elements as financial awards, plaques, patent festivals or celebrations and recognition of the inventor by Senior Management.  Other small but simple and effective ways to indicate top inventors are top inventor get-togethers and published league tables of the top inventors within the organization.  The value of a simple ‘thank you’ or ‘well done’ should also not be overlooked.

Reward programs

You may grant a financial award for a patent committee approved invention disclosure, and define exactly how much you will award per inventor. You may wish to grant an award when a patent application is filed, but also consider granting an award for a design patent application and a utility patent application. You may decide to grant an award when a patent is issued. You may go further and grant a “milestone” award which recognizes an inventor who has received a specific number of patents, say ten or more. You may also grant a ‘patent-of-the-year’ type award for an invention which has had a significant or financial impact within the company.

At a number of companies, there are lifetime achievement award which recognize members of the research and development community whose cumulative technical contributions have had a significant impact on their company’s financial growth. The recipient receives some financial awards, sometimes in the form of stock options. These award programs are basically where good patents are identified and recognized, based on the significance of the invention, and the award is sometimes defined based on the turnover of those products where the invention is implemented.

A few companies grant awards for defensive publications, innovations that are not patented but, instead, are published to ensure the right of the company to use the technical development.

A few grant an award for a substantial innovation that is not patented but, instead, is maintained as a trade secret or a confidential process. Some grant awards for the filing and/or issuance of any other types of intellectual property, such as   copyrights, service marks, and trademarks.

Recognition programs

Your inventor reward and recognition program should ideally include other forms of employee recognition and not just financial payments. These recognition program may include such things as pins, plaques, luncheons, and annual award dinners. A number of companies hold annual inventor award dinners at each of their major research and development location. One company at least provides special colored employee security badges for recipients of their top inventor milestone awards. Many companies operate inventor newsletters and patent award wall plaques.

The scope of the reward and recognition program

One key issue to consider for any multi-national company in particular is whether your inventor reward and recognition program will be global in scope, and implemented consistently across the organization. Alternatively you may decide that the award amounts will be adjusted by country based on geographical pay differences or perhaps only implemented in those countries where there is specific inventor award legislation. At first glance it may seem more cost effective to only operate the award program in those countries with such legal requirements, but this can increased award administration workload and also friction within the inventor community, especially if research and development projects are spread across multiple sites.

Some final thoughts

Some will argue that financial reward programs should not be considered at all, as it is the role of research and development engineers to invent. However, benchmark data suggests that a number of companies are rewarding their inventors well. Financial awards as well as annual patent ceremonies and such items as plaques for inventors are good well established practices in many companies. Increasingly company wide recognition of the top inventors, for example based on exceeding some threshold for the number of granted patents, is becoming the norm.

Donal O’Connell, IPEG Consultancy B.V


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