Inventor remuneration and information provided by the employer

The information provided by the employer is essential in determining how much to pay an inventor for an employee's invention. This is because the amount of the inventor's compensation depends - among other things - on the economic usability of the employee's invention.

In practice, this occasionally leads to differing expectations between the employee inventor and the employer regarding the amount of the inventor's remuneration. This was the case in the Agreement proposal Arb.Erf. 04/22, in which the Arbitration Board of the German Patent and Trade Mark Office (DPMA) examined the binding effect of a remuneration agreement, the employer's duty to provide information and the calculation of turnover in the context of a fictitious licence agreement.

The facts

The subject matter of the arbitration proceedings are the six service inventions in which the claimant was co-inventor under his employment contract with the defendant, which was to run until 2021. The parties had entered into detailed remuneration agreements for each of the employee's inventions, including details of the co-inventor's share, the share factor, the value of the invention and the scale. In addition, the parties agreed on the compensation of a possible share remuneration - depending on the respective co-inventor's share.

Specifically, the plaintiff received sums between 180 and 660 Euros, and an additional 300 Euros each for waiving his rights under § 14 of the German Patent Act (filing a patent application abroad) and § 16 of the German Patent Act (abandoning the patent application or the patent).

In the arbitration proceedings, the claimant demanded remuneration based on new and significantly higher remuneration factors.
Was this reasonable? And under what circumstances is one bound by the previously concluded remuneration agreement?

Binding effect of a remuneration agreement

The remuneration agreements concluded are contracts within the meaning of § 311 BGB and § 12 ArbnErfG. The Arbitration Board found that the principle of contractual fidelity applied, according to which contracts must be observed ("pacta sunt servanda"). This is because the parties did not withdraw from the agreements by mutual consent and, in the opinion of the Arbitration Board, there is no relevant legal basis that would allow the applicant to unilaterally withdraw from the remuneration agreements.

The Arbitration Council is of the opinion that the agreed remuneration factors are not objectionable from a factual point of view, whereas it considers the remuneration factors claimed by the plaintiff in the arbitration proceedings to be "completely excessive".

The claimant disagreed, arguing that the employer had only reported an inventive turnover for one of the six employee inventions (patent "A"); the other five, according to the employer, were merely held as reserve patents without any inventive turnover. According to the employer, 70,000 modules based on the invention that led to patent "A" had been produced by the end of 2021, in different overall products and at a total manufacturing cost of €10,000,000.

Was the employer's information unreliable because it retained unused property rights? And was the turnover based on the employee's invention correctly calculated?

Information provided by the employer

The information provided by the employer is a declaration of knowledge, the Arbitration Board stated citing the BGH decision of 23.1.2003 - Ref.: I ZR 18/01 - Cartier-Ring. This is a decision on trademark law (duty to provide information pursuant to German § 19 MarkenG and § 242 BGB). However, the Arbitration Board cited this because the BGH stated that § 242 BGB ("in good faith") is a declaration of knowledge that does not only refer to the present knowledge of the obligated party. Rather, the obligor is required to use all information available to him from his area of business for his information.

Only if the information provided by the employer is implausible or at least incomplete would the obligation to provide information not be fulfilled, according to the Arbitration Board. However, this was not the case here.

The mere fact that an employer maintains a property right position for a long time as a reserve patent is not suitable to make the employer's information that it has not exploited the employee's invention ("negative information") appear incomplete or implausible, the Arbitration Board stated as an unofficial leading principle.

There are many business reasons for not exploiting an existing property right position, for example to maintain the company's reputation as an innovative company. The Arbitration Council stated that the employer is obliged to provide information by stating that it has made use of one employee's invention (positive information) and has not made use of the other employee's invention (negative information).

Thus, in this arbitration, it was only necessary to clarify how to calculate the turnover for patent "A" in order to determine the reference value.
Please read the second part of this article, which deals with the calculation of turnover based on the invention and the production-related mark-up factor, in our blog post Inventor remuneration with production-related mark-up factor.

How should the information provided by the employer be assessed in this case?

Turnover and information provided by the employer

When modules based on the invention are used in products of varying complexity and for other purposes, the turnover based on the invention must be estimated using a mark-up factor. According to the Arbitration Council, the employer was right to use a fictitious, production-related reference value and to apply the mark-up factor above the Arbitration Council's empirical value, which regularly applies a flat mark-up factor in a range of approximately 1.3 to 1.6.

Even if the expectations of an employee inventor are understandable from a human point of view, the Arbitration Board added that the submission of the employee inventor represented by a lawyer did not provide a logical and therefore sustainable justification for his remuneration expectations.

We are patent attorneys with expertise in employee inventor rights and calculating inventor remuneration. We would like to help you.
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