Summary of the Provisions of the Law on Employee Inventions

The Law on Employee Inventions (LEI) regulates the rights to service inventions. The LEI is not only concerned with inventions which are subject of a patent or of protection as a utility model but also with trade secrets (Sec. 17 LEI) and so-called qualified technical improvement proposals (Sec. 20 LEI).

• A service invention is one that is made during a period of employment, irrespective of whether it was made during working hours, in leisure time or on vacation. The invention must have resulted from the employee's tasks in the private company or be essentially based on experiences or activities of the company (Section 4, subsection 2).

1. The employee must report a service invention to the employer immediately in a separate written notice (Sec. 5) in text form (Sec. 126b of the Civil Code). The contents of the invention report are laid down in detail in Section 5, subsection 2. The invention report must be recognizable as such.

   The employer must immediately give the employee written confirmation in text form of receipt of the invention report. The employer has two months in which to require amendments to an invention report that is incomplete.

2. The employer can lay claim to a service invention by a declaration transmitted to the employee (Sec. 6, subsection 1). A declaration laying claim is deemed to be made unless the employer releases the invention within four months of receipt of the report (Sec. 6, subsection 2).

   If an invention report is incomplete, and the employer requires it to be amended within two months, the four-month period does not commence until the employer has received the amended report.

   The employer can also claim a service invention without invention report, e.g. when he was notified of the service invention by a third party.

   In practice, difficulties frequently arise because the employer and employee disagree as to the protectability of the service invention. However, it should be noted that doubts as to the protectability of the invention do not affect the applicability of the LEI. Laying claim to an invention does not constitute an acknowledgement by the employer of protectability of the invention, but gives the employee a right to compensation. If the employer wants to avoid this right to compensation, he can treat the reported alleged invention as a simple technical improvement proposal. If the employee is nevertheless successful in acquiring a protective right for his invention, the employer will have to obtain a license from his employee in return for a corresponding royalty. Therefore, in case of doubt, claim should be laid to a potential invention.

   Another possibility is that employer and employee agree to treat the reported invention as a simple technical improvement proposal. In this case, attention should be paid to Sections 22 and 23 according to which such an agreement is admissible only after the service invention has been reported and must not be manifestly inequitable. Otherwise, the agreement is null and void.

• All rights to the service invention pass to the employer in case of claim being layed to the invention (Sec. 7, subsection 1).

• The service invention will become free if the employer releases it by declaration in text form. The employee can have available a released service invention without the restrictions of Sections 18 and 19.

1. The Employee's Compensation

   To assess the compensation, in particular the commercial exploitability of the service invention, the duties and position of the employee in the company as well as the company's contribution to the service invention are decisive (Section 9, subsection 2). The compensation is generally assessed in accordance with the directives issued by the Federal Minister of Labor for the compensation of inventions made by employees in private employment.

   A right to reasonable compensation exists as soon as the employer has made claim to the service invention (Section 9, subsection 1). The right to compensation is not dependent on whether the invention is actually used. As long as the patent is not granted, generally only preliminary compensation is agreed upon, e.g. 50% of the final compensation. The final compensation is to be fixed at the latest within three months of the grant of the patent. According to case law, compensation has to be paid at the latest when the invention is used.

   If employer and employee cannot agree on the amount of compensation, the employer must fix the compensation unilaterally and make payment according to the amount fixed. The employee has two months in which to contest the fixed amount. Failing that, the fixed amount becomes binding. If the circumstances change substantially, both the employer and the employee can, however, require the other to consent to a new compensation arrangement.

   It is generally applicable that once compensation has been paid, it cannot be claimed back.

2. The employer is obliged to file a reported service invention without delay for patent or utility model protection (Section 13, subsection 1). This obligation exists irrespective of whether the employer wants to claim the service invention or not. Of course, this obligation no longer exists when the employer has released the invention.

   If the employer has laid claim to the invention, he is also entitled to file the invention for protection abroad. The employer must release the service invention to the employee for the countries in which the employer himself does not want to acquire a protective right and the release must be in good time before expiration of the priority year. Upon release of the invention, the employer can reserve a non-exclusive right for himself to use it in the country concerned (Section 14).

• If the employer wants to abandon a protective right, he must offer the protective right to the employee for assignment. Three months after such an offer, the employer can abandon the protective right if the employee has not declared his willingness for assignment in the meantime. Here, too, the employer can reserve a non-exclusive right for himself to use the service invention (Section 16).

1. If an employee makes a free invention, i.e. an invention that has nothing to do with his tasks in the company, he is obliged to notify the employer. The notification must contain all necessary statements for the employer to be able to evaluate whether a free invention is actually involved. If the employer does not contest the fact that the invention reported to him is a free invention within three months, it is no longer possible to claim the invention as a service invention (Section 18).

   The employee's obligation to notify is, however, not applicable if the free invention obviously cannot be used within the activities of the company.

   With regard to the exploitation of a free invention, the employee must initially offer the employer at least non-exclusive right of use (Section 19). A three-month term then exists for acceptance of the offer.

• A distinction is drawn between simple technical improvement proposals and qualified technical improvement proposals. Simple technical improvement proposals are regulated in collective agreements or single-plant bargaining. Qualified technical improvement proposals are meant when the improvement affords the employer an advantageous position similar to that obtained from an industrial protective right, e.g. know-how. In respect of qualified improvement proposals, the same provisions apply for compensation as with an claim.

• If the employer wishes to treat a reported invention as a trade secret, Section 17 is to be noted.

1. There is an Arbitration Board at the German Patent Office and its function is to seek an amicable settlement in cases of dispute between employer and employee. The Arbitration Board can be petitioned by simple written request. The proceedings are free of charge. After clarification of the situation, the Arbitration Board will make a settlement proposal to the parties. The settlement proposal is deemed to have been accepted if neither of the parties raises an objection to the settlement proposal within one month. In any event, the arbitration proceedings are concluded with the settlement proposal. If one of the parties raises an objection to the settlement proposal, the proposal will not become binding and the parties can assert their rights by taking legal action before the ordinary courts or the Labor Court. Petitioning the Arbitration Board is as a rule a prerequisite for taking legal action.