In-house remuneration arrangements in Germany

In-house remuneration arrangements for employees' inventions are common practice in many companies. In principle, this is also permissible, but only in compliance with certain provisions of the Employee Inventions Act.

In-house remuneration regulations for employee inventions

According to § 22 ArbErfG, the provisions of the ArbErfG (Employee Invention Act) cannot be deviated from to the disadvantage of the employee. Whether a remuneration agreement would be to the disadvantage of the inventor, cannot be assessed at all without the specific invention disclosure.

Therefore, remuneration agreements and in-house remuneration rules are generally only permissible after the invention has been duly disclosed. A share factor may also not be applied as a lump sum with reference to an in-house remuneration guideline. This would only be permissible if the flat-rate share factor is justified in the remuneration guideline - or if the employer complies with this obligation to justify in the remuneration agreement (according to § 12 (3) ArbErfG).

If this does not happen, a remuneration determination with in-house remuneration regulations is invalid "ex tunc", i.e. void from the beginning (according to § 134 BGB (German Civil Law). This would only be permissible if the prior determination of the remuneration had resulted in an advantage for the employee-inventor.

And what about in-house remuneration arrangements and agreements if they are correctly entered into after the invention disclosure but they turn out to be to the disadvantage of the employee-inventor? Are they valid or void?

The facts

This was the issue in a specific case recently decided by the Arbitration Board of the German Patent and Trademark Office (DPMA, proposal Arb.Erf. 27/19). The employer had concluded several individual agreements with the employee inventor, who was employed as a development engineer, on, inter alia, the remuneration of specific individual service inventions, in each case after the invention had been disclosed.

The question was whether this was permissible under § 22 p. 2 of the ArbEG, even if the agreements of the in-house remuneration regulations deviated from the law on employee inventions to the disadvantage of the employee?

This was because the employee-inventor had agreed to the determination by the in-house remuneration regulations, which turned out to be disadvantageous for him.

Determination of the inventor's remuneration

In this context, the Arbitration Board explained the rules for determining the type and amount of the remuneration to be paid under § 9 ArbEG. It is important to note: This is only a provisional determination and not the possibility to unilaterally determine the type and amount of inventor remuneration in a binding manner in the exercise of entrepreneurial freedom of decision.

In practice, this is not always clear to all parties involved. This is because there is also the rule that it is deemed to be the consent of the employee-inventor if he or she doesn’t response to the declared determination. We show this clearly here:

Proper determination of the inventor's remuneration

a) The employee-inventor objects within 2 months => Then no agreement is concluded.
b) The employee-inventor does not react => then the agreement applies.
c) The employee-inventor agrees => then the agreement is valid, even if it is to the disadvantage of the inventor.

If case a) occurs and the employee-inventor objects in due time, no binding agreement is concluded. The amount and type of the inventor's remuneration thus remains open for the time being.

If payment of the inventor's remuneration has already been made in accordance with the provisional determination of the remuneration, the employer may still not demand repayment of the determined remuneration (pursuant to § 12 ArbErfG.

In the case at hand, the employee-inventor had personally signed the addendum "I agree to the above-mentioned remuneration" on the remuneration offer submitted to him after his invention disclosure - case c) in our overview, a clear agreement.
According to the principle of contractual loyalty ("pacta sunt servanda"), he is therefore fundamentally bound by these agreements, the Arbitration Board explained, even if their content was disadvantageous to him.

In-house remuneration arrangements - inequitable?

If the in-house remuneration regulations or agreements are very disadvantageous for the employee-inventor, he may be able to claim inequity, but only under certain conditions. The decisive factor for determining inequity is a fact "from the beginning". Even very high increases in use, which, however, were not to be expected from the beginning, do not justify the allegation of inequity.

If you have any questions or you are unsure about the amount or the determination of an inventor's remuneration, please contact us.
We have years of expertise in the calculation and interpretation of employee remuneration and can advise you competently and in compliance with the German Employee Inventions Act.

You will reach us by phone at +49 69 69 59 60-0 or info@kollner.eu. We are looking forward to you!