Inventive value of employee invention: Software in plants

Erfindungswert einer Indstrie Software

If an invention is implemented in the software of a production plant, it is appropriate to distinguish between new plants and existing plants. This is because the Inventive value for the inventor's remuneration is usually calculated based on the proportionate turnover generated by the invention. This is also the case if an employee's invention is installed in new plants as operating software.
However, if the invention is retrofitted in existing plants, the operational benefit of this retrofitting may have to be taken into account.

Such a case was submitted to the German Arbitration Board of the DPMA (Deutsches Patent- und Markenamt; Engl.: German patent and trademark office) for decision (decision Arb. Erf. 21/19).

The facts of the case

This case before the Arbitration Board of the DPMA concerned an invention that was implemented in the operating software to intervene in the operation of the plant depending on demand or temperature. According to the employer, this implementation had only been carried out in a total of 6 plants, four new plants, and two existing plants. The existing plants had been retrofitted according to the invention to ensure the full contractually guaranteed operating performance even at high ambient temperatures.

Accordingly, property right positions existed for this implementation only during the PCT phase. The process according to the invention has become the subject of a patent family, to which, inter alia, a European patent also belongs, which, however, has only been validated in Italy.

During the previous PCT phase, the teaching according to the invention was filed for the grant of a patent, inter alia, also with effect for heat-relevant countries. However, the application was not nationalized in any of these countries. All abandoned IP positions were offered to the applicants for adoption, but they did not make use of them.
The dispute arose because the applicants (two co-inventors) did not agree with the inventor's remuneration paid by the employer. The sharing factor for calculating the inventor's remuneration was undisputed, but the value of the invention was disputed.

Determining the inventive value

The starting point for determining the invention value is always the scope of the monopoly position resulting from a patent. Only the significance that competitors presumably attach to the invention is decisive for the amount of remuneration.
These principles also apply to internally perceived successes of the technical solution.

For the complex calculation of the inventor's remuneration, (fictitious) license agreements are assumed on this basis, which multiplies the contribution to sales by the invention with a royalty rate. It is appropriate to consider, also in the fictitious reproduction of the license agreement, which net sales would have taken as a basis in a real license agreement and which license rate they would have applied to this.

In principle, two different approaches are conceivable:
(i) multiplication of contribution to turnover determined by features of the patent claims
ii) using the monopoly owed economic advantage as a reference and considering a maximum of 1/3 to 1/8, on average 1/5 of this as the royalty rate.

The latter approach is rarely used. In its decision Arb. Erf. 21/19, however, the German Arbitration Board also relied on this approach.

Inventive value of software invention in production plants

In the present case, the employer makes turnover transactions with the invention-related installations and production plants.

In the Arbitration Board's view, it appeared realistic that licensing parties would have agreed to a royalty rate based on the turnover concerning the four new plants (according to approach i)).

About the two existing plants, on the other hand, it was possible that they would have used the operational benefit (according to approach ii)). This was because it was necessary to implement a subsequent solution at short notice, which was not included in the actual product turnover and could not be invoiced separately due to warranty claims. Therefore, this did not generate any turnover according to the invention.

However, savings had been achieved in the existing plants through the conversion according to the invention; the concrete value of the savings was estimated at € 32,200 per plant, i.e. € 64,000 for both plants. According to the Arbitration Board's assessment, 1/5 of this was to be made the subject of the license fee, resulting in an invention value of € 12,880. To this was added an invention value of € 1,280 from the use of the invention in the four new plants.
In addition, a risk deduction had been calculated by the employer. The Arbitration Board stated that this was legal, but nevertheless recommended that the risk deduction be waived. Since a European patent had been granted, a very high probability of a grant could be assumed for the unrealized national PCT applications.

Incidentally, the inventive value is not the same as the inventor's remuneration. The inventive value is multiplied by the sharing factor, the result is the amount of the inventor's remuneration.

Inventor's remuneration in relation to high turnover

The principle of inventor remuneration in compensation for the employer's monopoly right resulting from the invention is based on the idea of competition and the real market situation. The amount of the inventor's compensation does not increase simultaneously with the amount of turnover that the employer can achieve with the invention. Because a high turnover is not only achieved by the inventive teaching, but rather by the market position of the employer.
Therefore, companies are not obliged to provide information on the concrete profit achieved with the individual product according to the invention. In addition, royalty rates can be staggered, if necessary, in the case of high unit numbers or turnover.

The calculation of inventor remuneration is a complex issue.
We are an experienced patent law firm with special expertise in national and international patent law and employee invention law. We offer calculation of inventor remuneration - in compliance with German law and with a fixed price guarantee: You pay a fixed amount per patent, inventor and year.

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