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Patents - Law on Employees' Inventions - Germany

The German Act on Employees' Inventions ("AEI") and the related Remuneration Guidelines encompass a detailed scheme for ownership and remuneration issues in relation to employee inventions. The AEI also establishes certain statutory duties for employers and rights for employees. All companies with employee inventors based in Germany should therefore keep themselves updated with the German law on employees' inventions. In the following sections, we will set out some basic principles of this relatively complex area of German law.

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-When does the law on employees' inventions apply?

The AEI applies if the following requirements are met: 

  • The employment contract is governed by German law, i.e. the employee usually carries out his work in Germany, even if he works temporarily abroad;
  • German law qualifies the contractual relationship as an employment contract, i.e. a contract that establishes an employment relationship that requires the employee to comply with the employer's instructions (e.g. related to working time, working environment and tasks) as opposed to a freelancer;
  • The invention was made during the term of employment and either resulted from the employee's tasks in the company or was essentially based upon the experience or activities of the company (so-called service invention). 

The AEI does therefore not apply to legal representatives of a company, e.g. CEOs or Managing Directors. For inventions made during the term of employment but outside the employee's tasks in the company (so-called free invention) the AEI provides just a few rules including the employee's duty to notify the employer of such an invention. 



-Is the employee obliged to notify the employer of an invention?

All employees who have contributed to a service invention are required to notify the employer of the invention without undue delay and in writing (Art. 5 AEI). It is advisable that employers provide a standardized notification form. The employer must confirm receipt of the notification of the invention without undue delay in writing. If the notification does not meet the legal requirements, the employer may request further details. The notification will be deemed to be sufficient if the employer does not request additional information within two months upon receipt of the notification.


-Who becomes owner of employee inventions?

The ownership of service inventions initially vests in the employee. However, the invention rights are automatically transferred to the employer unless he/she releases the invention to the employee inventor within four months upon the notification of the invention (Art. 6, 7 AEI). Alternatively, the employer can explicitly claim the invention even before the expiry of the four-month period and thereby obtain the invention rights.


-Which duties do employers have in relation to employee inventions?

An employee's notification of an invention triggers the employer's obligation to file, without undue delay, a patent application for Germany (i.e. German national patent or European or international patent with Germany as designated member state; Art. 13 AEI). The employer is only allowed to refrain from filing such a patent application  

  • if he released the invention to the employee (who thereby became owner of the invention);
  • if the employee gives his consent that no patent application will be filed;
  • if the employer wishes to treat the invention as a trade secret and confirms with the employee that the invention is patentable (Sec. 17 AEI). 

The employer may file patent applications for foreign countries. If not, he must release the invention to the employee for countries in which it does not intend to file (Art. 14 AEI). 

If the employer intends to abandon a patent application or a granted patent before he has fully remunerated the employee, he must inform the employee accordingly and, at the employee's request and expense, assign the respective right to the employee (Art. 16 AEI). 

If the employer fails to comply with these duties, the employee may claim damages.



-Is the employee inventor entitled to additional remuneration?

The employee is entitled to a reasonable remuneration unless the employer releases the service invention. The remuneration is due as soon as the employer uses the invention (by making use of the invention or by licensing or selling the invention), regardless of whether or not a patent application has been filed or a patent has already been granted. 


-How is the remuneration calculated?

Type (lump sum or installments) and amount of the remuneration are determined by a mutual agreement between the employer and employee. The calculation of the remuneration is a very complex process under German law. As a general rule, the remuneration is calculated from the product of (a) the invention value, (b) the share of the employee's personal contribution to the invention and (c) the co-inventor share:

Remuneration = invention value x rate of share x co-inventor share

Invention value

The invention value is often determined by the product of the net turnover gained with the specific invention and a fictitious royalty rate to the invention:

Invention value = net turnover x fictitious royalty rate

Rate of share

The rate of share takes into account that service inventions do not only involve contributions by the employed inventor but also by the employer. The degree of the employee's contribution is determined by three aspects: 

  • The employee's role in identifying the problem solved by the invention;
  • The employee's contribution to the solution of the problem;
  • The employee's duties and position within the company. 

In practice, the rate of share is determined with the help of a table included in the Remuneration Guidelines giving standard figures for various situations. The rate of share normally lies between 15% and 20%.

Co-inventor share

The co-inventor share divides the remuneration between all employed inventors who have worked on the invention according to their individual contribution. In practice, inventors should mutually agree on their shares before notifying the employer.

Example

An employer has generated a net turnover of € 1m per year with an invention. On the free market, the license rate for the invention would amount to 2%. The invention value would thus be € 20,000. Considering the rate of share to be the average 18%, the remuneration for this invention would be annual installments of € 3,600. If there were two co-inventors with equal contribution, each inventor would be entitled to a remuneration of € 1,800 on top of their regular salary each year.

 


-Are contractual agreements possible?

The rules on employees' inventions are binding and may not easily be opted-out by individual agreements. Agreements as to the ownership and remuneration that are made prior to a notification of an invention (e.g. in the employment contract) and contain clauses to the employee's detriment are invalid (Sec. 22 AEI).

Agreements concluded after a notification of the invention are valid unless they are significantly disadvantageous to the employee (Art. 23 AEI).

Internal company guidelines that reflect the provisions of German law and provide for a lump sum payment for inventions are often useful to reduce the administrative burdens for handling employees' inventions.



-Procedural issues

The employee is usually obliged to bring his case before the Board of Arbitration located at the German Patent Office in Munich. The Board of Arbitration will suggest a non-binding settlement agreement.

If the parties do not accept the agreement, they may proceed by filing a lawsuit with a civil court.



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