When a claim to a service invention is made, the employee is entitled to claim “reasonable compensation” from the employer. The claim for such payment falls due three months after the employer has started to use the invention, and no later than three months after the intellectual property rights to the invention have been granted.
The “Guidelines for the Remuneration of Employee’s Inventions in Private Employment” (Remuneration Guidelines) by the German Federal Ministry of Labour of 1959 have an immense practical relevance for determining the amount of compensation the inventor should be paid.
The following example illustrates how inventor compensation is calculated.
In her capacity as an employee of the company X & Co., Ms Müller suggests an improvement in an area of the company which is outside her actual area of responsibility. The suggestion increases the number of items of a particular product by 100% which leads to an annual rise in sales of EUR 800,000. Ms Müller has a degree in chemistry but she did not use the technical resources available to her in the company for her invention; she did not create her invention based on ideas she had hitherto had for her own work in the company, nor on any other ideas in common circulation. Were X & Co to purchase the licence for the same invention from an external patent holder, it would have to pay a licence fee of (on average) 3.5 %.
The compensation due to the inventor is based on the standard formula V = E x A, where V is the annual compensation, E is the so-called “invention value”, and A is the so-called employer’s “share factor” in the invention.
7.1 First step: Calculating the value E of the invention
First of all, the invention value E is calculated. Generally, this is assessed using the licence analogy. The invention value is therefore calculated as the additional sales volume which the invention made possible, multiplied by the licence fee.
Taking a licence fee of 3.5 % as in the above example and based on increased sales of EUR 800,000 the invention value E would be EUR 28,000 per year.
7. 2 Second step: Identifying the share factor A in points
Secondly, the so-called share factor A is decided on a points’ basis. Points are awarded according to the circumstances surrounding the task which led to the invention, how the problem was solved, and the employee’s tasks and position in the company. The following illustrates what this means in practice, based on our example:
The employee is assessed as having a proportionately greater share in the creation of the service invention the more he has used his own initiative to solve the problem and the greater his contribution to identifying the company’s deficiencies and needs.
If the company sets the employee a problem but also gives him specific instructions as to the method he needs to employ to solve it, he will only be awarded 1 point for solving the problem. On the other hand, if the invention lies outside or is far removed from his usual area of responsibilities, and he has undertaken to solve the problem completely independently, he gets 6 points. The Remuneration Guidelines contain a range of further definitions of the task which lie between these two points.
If the inventor creates the solution with ideas which are commonplace in his profession, and/ or by using company work or knowledge and/ or the company has supported the inventor with technical resources – if all these factors are present the inventor will only be awarded 1 point for solving the problem. If none of these factors were present, he gets 6 points. Again, a range of levels between these two points is possible.
7.2.3 The employee’s tasks and position in the company
The employee’s share factor is reduced the greater the insight his position in the company gives him into the manufacture and development of the company’s products, and the higher up his position in the company. The Remuneration Guidelines divide employees into eight categories for this purpose, whereby more points are awarded to employees who are expected to achieve less for the company.
Employees who essentially have no special qualification for the activities carried out by the company, e.g. unskilled workers or apprentices, are awarded the maximum number of 8 points. By contrast, the group at the top end of a company comprises the managers of the R&D department and the technical managers of large business enterprises who consequently only get 1 point for their invention.
The Remuneration Guidelines stipulate that in each case points be first of all awarded for the three criteria described above and then added together. In purely arithmetical terms, the resulting sum can range from 3 points (1 + 1 + 1) to 20 (6 + 6 + 8). The sum is then used to give a share factor A in the invention as a percentage according to the following table: