Inventions created during employment – can they give us a headache?

In Slovenia, there are quite a few companies having their own research and development departments, and on daily basis, these sections create new technical solutions protected by a patent, if fulfilling the requirements for patent protection of course. A patent gives a holder an option to effectively prohibit a third party to use – either to manufacture or to sale - a certain technical solution. This practically gives the company a monopoly in the market, until such a patent invalid.

A protection, ensured for creation and disclosure of inventions by granting patents based on patent systems, is vital for a company’s own research and development. All technical solutions not protected by a patent and disclosed to the public become a public good and may be used by everyone. The company, which is aware of this also knows it can’t continue to invest into research and development without a patent protection or that’s at least considerably more difficult. The company’s value is much bigger if it scrupulously protects its intellectual work. It’s also true that some patent holders make their patents available to third parties in the spirit of the open source movement, as Tesla Motors for example, but it seems that the patent holder decides to make such a step where the market is still open. Where the market is already saturated and competition high, the patent protection stays very important.

When creating technical solutions, we shouldn’t forget the workers who create them in the course of their employment. A little or nothing at all is discussed about this in public. Yet the question is important not only to workers, but also to employers.

In Slovenia, the area of inventions under the employment relationship was first regulated by the Act on Employees’ Inventions in 1995, as last amended in 2007, and is about the inventions that meet the patent protection requirements. The law initially defines the invention takeover from the workers who had created it in the course of their employment. In short, the employer has three months to take over such an invention from the workers or not. If taking over in full, meaning that the invention is transferred as a whole, the employer must report a patent or a short-term patent to the Republic of Slovenia without any delay; an application for a patent or other relevant industrial property filed abroad is also considered an appropriate report.

At the time of filing the application, the employer must keep such an invention in secret, which in practice for example means that he must take a special care and all drawings of the technical solution that may already be sent to a possible buyer must be labelled as confidential. Otherwise the invention may be considered disclosed to the public prior to the filing of a patent application, and therefore such an invention would no longer be eligible for patent protection; that is, the invention would no longer be considered new.

If the employer doesn’t inform the worker in three months whether taking over the invention or not, the worker can freely use it. If the invention created during employment hasn’t been properly taken over by the employer while reported or protected in his name anyway, it can raise a question of eligibility of ownership of such patent by the employer, which may have adverse consequences for the company already doing marketing of such invention. Therefore, knowing the scope and the regulation is crucial for the company for this reason alone.

Another important issue regulated by the Act on Employees’ Inventions is a question about appropriate prize for a worker in case of taking over his invention. The Act stipulates that the prize amount is based mainly on the economic usefulness of his invention, the employee’s duties with the employer and the employer’s share in the creation of the invention, while the calculation of the appropriate reward can be a challenge.

We do have the Regulations of prizes for inventions arising from employment, adopted in 1997 and based on the Act on Employees Inventions, but it seems that the person calculating the prize according to these rules must be a real mathematical genius and has to have some special knowledge to calculate the expected profit of the employer, knowing how to deduct the value of the employee’s tasks and the employer’s share, or must be skilled in using the license analogy. But there’s still hope and might be possible to determine an appropriate reward due to the provision in the Regulations that the award can be a lump sum, while the Regulations contain the text about two to five pure wages and the employer is to decide what a pure wage actually is since our legislation isn’t familiar with this term.

It therefore appears that specifying the appropriate reward can be quite tough for an employer. But the problem is not unsolvable; it’s just that the employer must pay special attention to this calculation. He must in particularly take into account the real invention value for the company and prepare as realistic projections as possible concerning the use of this invention in the future. Act on Employees Inventions also stipulates that both the employee and the employer at any time can propose a change of the prize amount, if the circumstances based on which the prize had been calculated or determined changed significantly.

Perhaps a word on the patent protection. For Slovenian companies, it currently represents a significant cost as a holder of a European patent must file the translation of it or the translation of the claim in each member state of the European Patent Convention, and also maintain a granted patent in each country. The solution will be delivered by the unitary patent with a unitary effect in all countries joined in this system, that is in 25 EU member states. This will significantly cheapen the procedure of granting and maintaining a patent, and the patent protection will become more accessible to Slovenian companies.

The inventions during the employment and patent protection are very important for companies with their own research and development so they could safely take advantage of the rich knowledge that brings them a competitive advantage. Last but not least – only a successful company and a happy and properly rewarded worker can hand in hand march into (even) better tomorrow.