International Employee Invention: Software Module

Digital networking of companies make it possible to make a reported employee invention public worldwide, even though it was only reported to the U.S. parent company, for example. Is it considered released due to the alleged failure to file a claim?

An interesting case about international employee inventions: the computer-implemented invention software module was reported to the U.S. parent company, the German employer only years later. Is it considered released due to the alleged failure to file a claim? And can a successful software module lead to license rates of 100%?

The facts

A leading development engineer in an international corporation asserted the allegedly omitted claim of the German subsidiary for a service invention developed in Germany, which he reported to the U.S. parent company via the EDP system (the latter then applied for U.S. patents), but to the German employer only a few years later. The German employer subsequently assumed that he effectively claimed the service inventions after the invention disclosure had expired (fiction) with the expiry of the four-month period of § 6 (2) German ArbnEG.

The inventor, however, referred to the well-known BGH judgement Haftetikett of 2006 (X ZR 155/03), according to which a written invention disclosure may be dispensable by way of exception. He argued that the internal EDP system had enabled a group-wide access to the inventions and therefore, in his opinion, his employee invention had become free due to the alleged failure of the German subsidiary to file a claim.

The Arbitration Board contradicted this argumentation in its decision Arb.Erf. 61/10 and dealt there with the interpretation of the BGH decision Haftetikett. A written invention disclosure could be dispensable in exceptional cases according to the decision, but only as “absolute exceptional case law”, the arbitration board decided. This is expressly only the case if the employer documents that an invention disclosure is no longer required because he already has the necessary knowledge regarding the Employee invention.

The Arbitration Board emphasized that even if the notification of an employee invention was made to the American parent company, it is not considered knowledge of the employee invention on the part of the German employer if the notification of an employee invention was made to the American parent company using an internal group IT system that possibly allows group-wide access to the entries.

Computer-implemented invention: software module

The invention itself, a computer-implemented invention for processes which control controllers on the software side, was also digital and software-related. The explanations of the Arbitration Board are all the more interesting, because such an employee invention can theoretically quickly make a very high remuneration theoretically possible when used worldwide in the Group, which, by adding several license rates, can lead to license rates of 100% and more.

In the case of a computer-implemented invention, the smallest technical-economic functional unit, which is significantly influenced by the invention or which is influenced in its function, can also be smaller than the “hardware” addressed, explained the Arbitration Board. In short, the pure software module can thus represent a sufficient reference value for the compensation of the invention, but remains an individual case consideration.

No unlimited addition of license fees

However, an unlimited addition of several license sets is not possible, the arbitration board ruled. The maximum royalty rate thus defines the load limit of the product by its competitiveness, a calculatory overloading of the products by the royalty burden should be avoided. It is therefore not possible to add up unlimited license rates.

The Arbitration Board therefore derives the maximum royalty rate in a simplified way from a doubling of the average royalty rate. What does this mean in concrete terms? In industrial measurement and control technology, an average royalty rate of 3 % is common, for the electrical industry between 1.5 and 2 % and for the machine and tool industry between 2 % and 4 %.

Graduation for sales in group structures

The staggering of sales was also a point of contention between the parties. The employer was of the opinion that the application of the graduated turnover scale should take into account turnover accumulated over the years and converted to turnover for Germany. The inventor rejected a graduation completely, since he considered his employee invention as having become free – which however turned out to be incorrect.

The Arbitration Board explained that a gradation for a turnover in corporate structures must always be carried out, since a shift in causality away from the service invention to other important factors such as distribution network, market leadership, quality and brand can be assumed.

As a reference value for the sales of an international company, one uses the group’s external sales according to the so-called “reasonable license agreement parties”. The external group sales or the sales of the using group company can be the relevant basis of calculation, especially in the case of economic unity and division of labour within the group.

Are you an employer or employee inventor affected?

Our patent attorney firm has extensive expertise in the field of patent law and the law governing employee inventions. We will be pleased to represent your interests both before the arbitration board and in any court proceedings that may become necessary. Please contact us if you are interested – we look forward to your call!