Inventor remuneration in cyber security and IT

Inventions made in the field of cyber security and IT are sometimes not patentable or not fully patentable. It may then be appropriate to declare employee inventions a trade secret.
What does then apply to the inventor remuneration according to the German Employee Invention Act? We summarise the legal situation using a case study from the field of cyber security.

Employee Invention Act - options for employer

In principle, the Employee Invention Act must be considered for every employee invention. Accordingly, the inventor informs his employer with a proper invention disclosure. The employer then has the following options to react to such an invention disclosure:
- He can register the invention for an IP right and in return pay for it
- He can waive his rights to the invention
- Release the invention
- He can challenge or deny the protectability of the invention; however, the employer cannot decide this on his own, he must appeal to the Arbitration Board of the German DPMA.
- And he can declare the invention a trade secret.

If an employee invention is declared a trade secret, it will of course never be registered for protection. However, this in no way ends the validity of the Employee Invention Act! An employee invention may only be declared a trade secret if the employer simultaneously recognises the invention and its basic protectability (§ 17 (1) and (2) ArbnErfG).

Basicly patentable - and inventor's remuneration?

And what does this acknowledgement mean with regard to inventor's remuneration?

For an employee invention to be declared a trade secret, employers must formally acknowledge the protectability of the invention or contest it before the arbitration board immediately after the invention disclosure.
And according to § 2 ArbnErfG, the Employee Invention Act (ArbnErfG) applies to all inventions made by employees that are basicly patentable, and not only after an application for protection has been filed. Therefore, the employer is obliged to pay inventor's remuneration for an invention that has been declared a trade secret.

This also implies that the remuneration regulation for an invention declared a trade secret does not contain a risk premium. Rather, an appropriate inventor's remuneration is to be paid according to the licence analogy.

Recognition of protectability revisable?

Please notice, an employer cannot withdraw from the recognition of protectability once it has been declared, neither according to § 313 BGB due to disturbance of the basis of the contract nor due to a fundamental lack of protectability.

Even if an employee invention declared to be a trade secret is subject to the exclusion of patentability under § 1 (3) No. 3, (4) German Patent Act, the employer is generally not entitled to later invoke the inability to protect the employee invention kept secret after its protectability has been recognised. This was stated in 2016 in the proposal 73/13 of the Arbitration Board of the German patent and trademark office.

Invention in the field of cyber security

In the proposal 73/13 in the field of cyber security, the Arbitration Board could even understand the employer's doubts about the protectability of the inventions declared as trade secrets. However, since the employer had already acknowledged the inventions in order to be able to make them a trade secret, this doubt could no longer be made the subject of proceedings before the Arbitration Board. This would only have been possible directly after the invention disclosure.

In this context, the Arbitration Board pointed out that the decision on the patentability of an invention is exclusively taken by the Patent Office (in patent grant proceedings, § 35 German Patent Act), the Federal Patent Court (in appeal proceedings and nullity proceedings § 73 and § 81, § 22 German Patent Act) and the Federal Court of Justice (§ 100 and § 110 German Patent Act).

Cyber security - how high is an appropriate inventor remuneration?

In 2016, the Arbitration Board confirmed the increasing relevance of Cyber security, stating that this field "...will certainly develop into a significant purchasing argument...", especially on the way to the second phase of digitalisation ("Industry 4.0").

The Arbitration Board therefore proposed a share of 5% of product turnover as appropriate at the time. For this product market "of electrotechnical solutions for industry", the Arbitration Board assumed a licence rate framework that probably finds its upper limit in the range of 2.5% to a maximum of 3%. In doing so, it referred e.g. to Hellebrand/Himmelmann, Lizenzsätze für technische Erfindungen, 4th edition, p. 710. Indeed, this was the 2011 edition of this book!
The fact that the world has turned rapidly in the meantime is made clear not least by the Arbitration Board's recent recommendation on a - hitherto always inconceivable - inflation compensation for staggered employee inventions. – we reported on.

Considering today's high relevance of cyber security and also of compliance, employers in the field of cyber security and IT in Germany should inform themselves well about licence rates currently considered “appropriate".
You are welcome to ask us about this without any obligation, please contact us by phone +49 69 69 59 60-0 or send us an email info@kollner.eu.