Patents and Standardisation > Remuneration

Overview Slides Summary Questions Media Notes

Back to Lecture

Introductory example

A has been employed as a developer at the mechanical engineering company X for 10 years. Three years ago, as part of his job, he made an invention that was used by his employer X. The invention is an improvement to a worm gear. With this invention, A not only broke new technological ground on his own initiative and against the initial resistance of his superiors, as he had noticed disadvantages in the existing products; the invention has also been a great commercial success. It has since been installed in 20,000 worm gears, generating total sales of around €20 million. His superiors are so enthusiastic about the success that they are wondering whether it is really necessary to pay the inventor remuneration.

In return for transferring the service invention to the employer, the inventor is entitled to reasonable compensation according to the explicit wording of the law. However, the term “appropriate remuneration” remains vague and meaningless in the law, as everyone expects appropriate remuneration for their services. However, the law and case law specify this by establishing certain criteria that are used to calculate the remuneration.

As a rule, the inventor only receives remuneration if the invention is patentable. It is assumed that the invention must be patentable at the time of its disclosure, as delays on the part of the employer or interim publication by the employer must not be at the expense of the inventor. Paid inventor remuneration may never be reclaimed, even if the patent is later found to be invalid.

The value of the invention

The amount of remuneration is initially based on the economic significance of the invention for the company and its exploitation. Inventor remuneration is usually calculated on the basis of the turnover generated by the company with the products in question. The calculation of the value of the invention is typically based on the so-called “license analogy,” which estimates how much a licensee would pay for the invention on the free market. Depending on the industry, different percentages ranging from a few tenths of a percent to a few percent of the sales of the invention, i.e., the value of the invention, are allocated.

In the present case, the value of the invention must first be determined. Since the invention is not licensed, the question to be answered is what percentages of sales are typically paid in this economic area. The value of the invention also depends on how significant the specific invention is for the product in question, in this case approximately EUR 20,000,000.

In the case of very high sales in the multi-million range, further deductions are made because it is assumed that in this area the contribution of the invention to the financial success becomes less significant. Therefore, above certain value limits, it is assumed that not the entire sales revenue, but only a portion thereof contributes to the value of the invention. In this context, one speaks of graduation.

The higher the sales achieved, the lower the additional benefit attributed to the invention, i.e., for example, sales exceeding EUR 10,000,000 are only taken into account at around 50% of the invention value due to the scaling.

Discounts

However, the employee inventor does not receive compensation for the entire value of the invention. This invention value would be due to an independent inventor, i.e., a person who is not an employee and who would have incurred the expense for the invention at their own risk and then licensed the invention as a licensor. Therefore, in a second step, individual deductions are made to compensate for the difference between an independent inventor and an employee inventor.

First, it is important to consider how the applicant was prompted to make the invention, i.e., where the task leading to the invention originated; the more independently the invention was solved, the higher the share of the remuneration in the value of the invention.

The fact that A made the invention on his own initiative and broke new technological ground argues in favor of a high remuneration for A. Although he noticed disadvantages in the existing products, the employer had no motivation of its own to remedy these disadvantages.

It is also necessary to consider how complex the solution to the task was and what assistance the company provided. The more complex the solution and the less support provided, the higher the share of the remuneration in the value of the invention.

A high remuneration for A is justified by the fact that A solved the task independently and was unable to use the employer's work results or otherwise count on the employer's cooperation.

The inventor's position in the company also plays a role. Consideration is given to how likely it is in the normal course of business for a person with the inventor's employment profile to make an invention. The less likely this is in everyday working life, the higher the share of remuneration for the inventor. However, if someone is explicitly employed as an inventor, the remuneration may be low, especially if the employment contract considers inventive activity to be part of the remuneration. In such cases, additional remuneration is usually only paid for exceptional inventions.

There are greater reductions here, especially for people who, like A, are employed in development. The fact that A has broken new technological ground with the invention argues in favor of higher remuneration. As the sole inventor, A is also entitled to remuneration for the entire value of the invention.

The reduction is then calculated from the factors (task, solution, and position in the company). The amounts that can be argued for vary greatly. If A has set and solved the task alone and independently and has not been able to build on prior knowledge from the company, A is typically entitled to approximately 10% - 30% of the value of the invention as remuneration. V

Multiple co-inventors

Inventions are often made jointly by several co-inventors, so that the question of determining remuneration also arises in such constellations. Since the value of the invention is independent of the inventor and only the deductions for the specific inventor differ, the same invention value is initially assumed for each co-inventor.

Before determining the discounts, the value of the invention is then distributed among the individual inventors according to their share of the invention. The size of these shares is initially determined by the inventors themselves; in case of doubt, the shares of the co-inventors are equal. In a final step, the discount is then applied separately for each inventor, based on the share of the value of the invention assigned to them.

Lump sum

Typically, the share of remuneration remains well below the per mille limit of the sales achieved. A product must therefore generate sales in the millions for the inventor to receive a noticeable remuneration. In many cases, a lump sum payment is therefore agreed directly at the time of the invention in order to give the inventor a symbolic amount of recognition. This is generally permissible, but does not prevent the inventor from being entitled to additional remuneration if the invention later becomes unexpectedly valuable.

Payment and enforcement

As a rule, remuneration is paid annually, depending on the sales achieved in that year. The settlement period is determined in years. The inventor has the right to request an invoice in order to be able to quantify his or her claims.

A lump sum payment is often agreed between the employee and the employer. If the invention is subsequently successful, a supplementary payment may be due to the inventor despite the lump sum agreement if the lump sum payment is no longer appropriate in view of the success. However, if the invention is not successful, the employer cannot demand repayment of the lump sum already paid or offset it against salary claims.

Since employee inventors are employed by the employer after the invention, the incentive to enforce remuneration claims in court while the employment relationship is still in place is relatively low. Therefore, disputes over the amount of remuneration usually arise when the employment relationship has already ended. Such disputes are heard before the respective labor court, which decides exclusively on the amount of remuneration. Claims for inventor remuneration exist as long as the invention is used by the employer, i.e., even after leaving the company, e.g., when the inventor changes jobs or retires.

After A leaves the employer's company, the employer refuses to continue paying inventor remuneration. A can

Claims for remuneration expire after three years.

If A has not claimed inventor remuneration in the last five years, claims for remuneration resulting from uses that took place more than three years ago are time-barred. A can only claim remuneration for acts of use that took place less than three years ago. If the employer refuses, A can file a lawsuit with the labor court.

The question of ownership of the patent, on the other hand, is decided in revocation proceedings, for which the Patent Office is responsible in Austria.