German employee invention: Remuneration calculation

A year-long claim for remuneration was cancelled by a settlement before a German Labour Court. Against a subsequently applied new formula for calculating the employee inventor's remuneration the inventor brought an action.

The Frankfurt Higher Regional Court (OLG Frankfurt) handed down on this a leading decision with regard to remuneration calculation of a German employee invention. The inventor argued that he was entitled to continue to be remunerated according to the previous formula. The employer, in turn, argued that he was only entitled to remuneration - if at all - according to the new formula, which for the first time contained the share factor.
And in court, there was also the aspect of inequity according to § 23 (1) ArbnErfG with regard to the claims of the employee-inventor.

The facts

In this case, the employee-inventor was remunerated until 2016 according to an agreement that provided for x% of the net proceeds generated with the products according to the invention, graduated for high turnover. This agreement took into account the co-inventors share, but the share factor was not included in the calculation of the remuneration amount.
In 2017, the employment relationship was terminated for operational reasons. In this context, it was contractually stipulated that there were no longer any facts giving rise to claims of any kind arising from the employment relationship.
In April 2018, the employer sent the employee-inventor the statement of inventor's remuneration for 2017, which was determined according to a new accounting system that provided for a share factor xy and license rates differentiated according to patent families. The employee-inventor objected to this settlement immediately in April 2018.
Nevertheless, the employer also calculated the inventor's remuneration for 2018 using the same parameters that had already been objected to. The employee-inventor, therefore, sued for payment of outstanding inventor's compensation for the years 2017 and 2018 and for a declaration that the formula according to which the defendant had calculated the inventor's compensation until 2016 was valid until the end of the term of the IP rights.

The action was successful before the LG Frankfurt, the court of first instance. In a judgement of 9 September 2020 (LG Frankfurt, 2-6 O 306/19), the action was upheld and it was decided that the formula applied until 2016 remains binding and that this previous regulation in particular is not invalid despite the non-consideration of the share factor.
The employer appealed against this decision. The OLG Frankfurt ruled on this with the following interesting details (leading decision of 03.03.2022, OLG Frankfurt, 6 U 172/20).

Do agreements under labour law apply to employee inventor compensation?

First of all, the OLG Frankfurt stated that contracts or clauses under labour law only concern claims arising from the employment relationship.
Employee invention remuneration claims, however, are not employment contract claims. Therefore, the OLG explained, the employee inventor's remuneration claims were not covered by the contractual waiver of claims "of any kind".

Continuation to be remunerated according to the previous formula?

However, the OLG denied the employee inventor’s view that he had a claim to continue to be remunerated according to the previous formula.
In the case in dispute, the remuneration applied until 2016 was determined by a communication from the defendant’s managing director to the plaintiff dated 17.1.2012. The determination was binding for both parties pursuant to § 12 (2) ArbnErfG. However, the court explained that there was no indication that the earlier agreement could also be binding in the employer's relationship with other employees.

In particular, it was not an overall commitment, the OLG added. The agreement from 1993, notwithstanding the fact that the defendant apparently always adhered to the formula used there in subsequent years, also did not establish a so-called "company practice" that could exist under labour law.
In contrast, the calculation of remuneration, which has been carried out since 2017, is based on an earlier agreement concluded between the employer and the employees X and Y. The Higher Regional Court (OLG) of Frankfurt ruled that the new formula was not valid.

The OLG Frankfurt ruled that the plaintiff had no claim against the defendant to continue to be remunerated for his employee inventions according to the formula that was applied until 2016.

Inequity pursuant to § 23 ArbnErfG

Moreover, according to the OLG's decision, the previous remuneration agreement according to the formula applied until 2016 is no longer valid due to inequity pursuant. Because the agreed or fixed remuneration does not take into account the share factor, a remuneration agreement is considered inequity pursuant to § 23 (1) ArbnErfG.

The Court’s leading decision:
'Eine Vergütungsvereinbarung kann nach § 23 Abs. 1 ArbnErfG unbillig sein, wenn ein erhebliches Missverhältnis zwischen vereinbarter und gesetzlich geschuldeter Vergütung deshalb besteht, weil in der Vereinbarung kein Anteilsfaktor angesetzt ist.'
This is our translation in EN: 'A remuneration agreement can be inequitable under § 23(1) ArbnErfG if there is a significant disproportion between the agreed remuneration and the remuneration owed by law because no share factor is applied in the agreement.')

The OLG Frankfurt explained its decision. According to the Arbitration Board's decisions practice, a remuneration agreement is substantially inequitable if the employee's remuneration owed under the ArbnErfG and the Remuneration Guidelines has been exceeded by at least twice (Bartenbach/Volz § 23 ArbnErfG Rn 22.1, 22.2). Moreover, a substantial inequity only exists if there is an objectively unjustified substantial disproportion between the agreed or fixed remuneration and the remuneration owed by law from the beginning.

However, this applies if, as in the present case, no share factor has been set, explained the OLG Frankfurt. If one were to follow the parameters of the employee-inventor cited for the new calculation of the remuneration (in particular the value figure and the license rates), the remuneration set would only not be excessive if the share factor amounted to 0.5. However, this is by far too high for academically trained employees, the court explained and referred to the practice of some companies to assume a share factor of 0.13 for academically trained employees (Bartenbach/Volz, RL No. 30 marginal no. 27).

The plaintiff does not have a supplementary contractual claim to remuneration, as the remuneration provision made is invalid pursuant to § 23 ArbnErfG.

The appeal was therefore allowed by the OLG Frankfurt and as a result the judgement of the Regional Court of Frankfurt of 9.9.2020 is amended as follows: the action for a declaratory judgement against the employer is unfounded. The action of the employee inventor is dismissed.
However, this decision is still pending before the BGH (X ZR 37/22).

Once again, this decision shows how complex the field of inventor remuneration and its calculation is. Our law firm Köllner & Partner has a lot of experience in this area. We will be happy to calculate the inventor's remuneration for you, professionally and compliant.
Please get in touch with us by phone +49 (0)69 69 59 60-0 or by e-mail: info@kollner.eu.