Employee’s invention in research and development

The compensation of an Employee’s invention in Germany in the field of research and development is a special topic, because there are compensation-free and compensation-relevant actions. The Arbitration Board has made relevant decisions on this issue on several occasions.

In principle, the type and amount of the compensation according to § 12 ArbEG (German Employee Invention Act (ArbEG)) must be determined by agreement between the employer and the employee within a reasonable period of time after claiming the service invention. In the field of research and development, this is a special issue, because there are acts which are free of compensation and acts which are relevant to compensation – and at the same time, there are particularly many service inventions. A claim for remuneration of the employee, on the other hand, already arises with the claim, but only on the merits, in fact initially in the amount of EUR 0 – until the employer exploits the invention economically (§ 9 ArbEG).

In the case of a service invention in the field of research and development, the Arbitration Board has made several relevant decisions which provide a good orientation for the remuneration of a Employee’s invention in the field of research and development.

Research and development activities without remuneration

In principle, there are acts in research and development which are free of compensation, i.e. where there is no entitlement to compensation for the Employee’s invention. This is due to the claim that inventions should serve the progress of technology. And every invention, however, first of all requires time and testing.

Test acts to bring about technical and economic marketability are free of remuneration. In principle, the economic exploitability in the sense of § 9 (2) ArbEG is not yet determined as long as the employer examines and tests the invention (§ 11 ArbEG in connection with Directive No. 23).

Accordingly, the testing acts free of compensation include, on the one hand, the research on the object of the invention itself, but also the research of further complexes within the scope of a comprehensive research project with the object of the invention.

In practice, however, this is often not easy to specify, especially if a project consists of several individual components. In this respect, the Arbitration Board has decided (Arb.Erf. 36/07) that the partial use of individual components cannot be understood as use on a commercial scale in a project which can only be commercially exploited when all individual components are coordinated.

In other words: The invention is only commercially exploitable in the sense of § 9 (2) ArbEG if the entire system functions as such.

Remuneration-relevant actions in research and development

However, the employee is entitled to compensation for his or her service invention if the invention is no longer the subject of research to obtain knowledge, but the employer uses the invention as a means of research.

Even if the teaching of an Employee’s invention patent has not been used in the performance of a research and/or development order, but the Employee’s invention was causal for the award of such an order, then the advantage of the order acquisition causally based on the invention must be compensated. A prerequisite for this, however, is that the research and/or development order causally based on the service invention has also yielded actual profit for the employer.

In such a case, the Arbitration Board usually sets an invention value for the calculation of the inventor’s remuneration at about 20% of the profit made.

Purchase price for an Employee’s invention transferred to the employer

Companies often also have agreements (“Contract Research and Devolopment Agreement”) that an Employee’s invention that arises in the course of a research or development contract is to be transferred to the employer.

The purchase price cannot be arbitrarily determined for this purpose, as the Arbitration Board has also made concrete specifications on this issue. As a rule, an empirical value of 1 % of the order sum is to be applied, therefore a gross purchase price for a service invention which was created within the scope of a research or development order and transferred to the employer in the amount of 8 % of the order sum is appropriate, the arbitration board determined in the decision Arb.Erf. 57/11.

Provision of the development object relevant for remuneration?

Research and development often begins with a feasibility study followed by the construction and provision of the development object. Is the provision of the development object relevant for remuneration?

Such a case was also decided by the arbitration board (Arb.Erf. 25/13). The employer invoked RL No. 23 (1), according to which testing activities to bring about technical and economic marketability are regularly free of remuneration. In the trial, no distribution had taken place and thus no economic usability of the service invention.

However, it was clear from the corresponding contract for the research and development task that “development, construction, (…) qualification and delivery of a (…) for (…) demonstration at (…)” had been agreed. The requirement of delivery was decisive here and led to a claim for remuneration from the Employee’s invention.

The Arbitration Panel explained that a research and development agreement on the development, construction, qualification and delivery can also include the provision of the object of development without this having sales-like features and being characterized as sales of inventive step goods.

However, if the contract also includes the delivery of a specific system that has been designed ready for installation, then this part of the contract appears as a sales transaction and thus as relevant for compensation, the Arbitration Board ruled.

Financing of research and development not relevant

According to the constant practice of the arbitration board, it is basically irrelevant whether the employer finances the test itself or, for example, receives public funding to make the test possible.

Do you have questions about an Employee’s invention in Germany?

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