German Employees Inventions Act – Interview with Martin Quodbach – EU Brexit Wishes – Changes to ...

Transcript

hi I'm Martin cotbar working as a Attorney at Law in Germany cologne I am working with invention matters and employees inventions and you're listening to IP Fridays hello and welcome to this episode of Ip Fridays our names are Ken Suzanne and Ralph clayon and this is the podcast dedicated to intellectual property it does not matter where you are from inhouse or private practice novice or expert we will help you stay up to date with current topics in the fields of trademarks patents design and copyright discover useful tools and much [Music] more welcome to episode 87 of Ip Fridays today's interview guest is Martin quodb one of the very few experts who really knows the employees inventions act in Germany the law defining the remuneration of employees for their inventions and this will be very interesting for all the patent professionals among the listeners but before we jump into the interview I have some news for you um first of all I want to tell you that the EU has published a position paper on their wishes post brexit so what they would like to see after a brexit and from the position paper you can see that the negotiations will be tough the EU demands that owners of existing eu-wide IP rights like European patents or like EU trademarks should post brexit automatically have a UK UK equivalent IP right for no additional Financial costs and with minimal administrative burdens and if such UK protection requires new UK legislation to create or recognize such a right in the UK that needs to be in place at the withdrawal date at the brexit date another point is that for eu-wide IP applications which are pending at the time of brexit the applicants should be able to seek protection in the UK from the same date as their pending EU application to ensure no rights are lost and as a last important important Point any IP rights which are exhausted meaning IP owners can not object to further commercial activities in the EU before the withdrawal date should remain exhausted in both the UK and other EU member states I took this information from a great article on lexology tocom dated September 7 the next thing is about the EU IPO the EU intellectual property office as many of you might know as from 1st of October 2007 there will be a lot of changes regarding trademarks EU trademarks and I want to Briefly summarize the main changes first of all the rules regarding graphical representation changed so graphical representation is no longer a requirement for uh trademarks so you can submit sound tradem marks motion trademarks multimedia trademarks or Holograms also with MP3 files or with MP4 files and shape marks uh can be submitted not only with JPEG files but also with obj files STL files and x3d files also a new trademark type will be introduced starting from first of October the certification Mark in essence a EU certification mark relates to the guarantee of specific characteristics of certain goods and services the certification Mark is defined as a Mark that is capable of distinguishing goods or services which are certified by the proprietor of the mark in respect of material mode of manufacturer of goods or performance of services quality accuracy or other characteristics with the exception of geographical origin from goods and services which are not so certified the regulation of use constitute the essence of the certification Mark these must be filed within two months of the application and need to contain in particular three things first the characteristics of the goods or services to be certified secondly the conditions governing the use of the certification Mark and thirdly the testing and supervision measures to be applied by the certification Mark owner one very important point is that the owner of a certification Mark is precluded from using the mark for the certified goods and services and then there are some procedural changes one of the most important changes is are the changes regarding priority the priority claims must be filed together with the eutm application and the documentation in support of the claim must be filed within 3 months of the filing date the priority claim is no longer examined in substance and it remains as a mere claim until it is relied upon and is it is necessary to validate it in proceedings then there is a change regarding the acquired distinctiveness as a subsidiary claim applicants will have the possibility of invoking article 73 as a subsidiary or alternative claim either at the start of the application process or later the advantage to of a subsidiary claim is that it only crystallizes if there is a negative final decision on inherent distinctiveness this allows the applicant to exhaust Its Right of appeal on inherent distinctiveness before it is required to prove acquired distinctiveness this will mean that the users do not need to incur the expense of gathering and presenting evidence of use unless it is necessary then there are some formal changes regarding opposition and cancellation proceedings they are basically brought in line with each other and the grounds have been reordered for clarity one other change that makes lives of T of trademark owners much easier is the online substantiation so you no longer have to file um copies of the Registries uh of the register details of trademarks that you for example in invoke in opposition proceedings but you can actually uh file a reference to these uh trademarks for example URL to a TM view um result in a search then there are changes regarding languages in Translation as of October 2017 most types of evidence can be can be continue to be filed in any official language of the EU but where the language used for evidence of substantiation is not the language of the proceedings a translation will now be required only where requested by the office on its own motion or upon recent request by the other party however evidence for substantiation for example certificates of filing registration and renewal or provisions of relevant law must still be submitted in the language of the proceedings or translated into this language within the time limit set for substantiation one other change in the eutm rules is about the assignment of eutm EU trademarks where an agent or a representative registers in eutm without the proprietor's authorization the proprietor is now entitled to demand the assignment of the UTM and previously the remedy for the proprietor under the utr was to invalidate the UTM so this must be much easier now then there are a lot of changes is regarding the communication with the office the EU IPO so you can no longer hand deliver um things or deposit things in a post box at the office but you can still use a CER to deliver any um paper as of 1 of October fax is defined as an electronic means so fax is no longer explicitly mentioned but this uh it is assumed that fox is electronic means as of 1st of January 2018 Fox will no longer be accepted for filing eotm applications or renewals and then there are some minor changes regarding the rules for the boards of appeal and some transitional rules so now let's jump into the interview with Martin cotbar about employees inventions in Germany I'm very excited to be joined by Martin cbak today if you don't know who Martin is he is one of the very few experts in the field of Germany employees invention act that is the act for remuneration of uh German employees for their inventions and he's also attorney at law for cbh Cornelius bbar hasman and partner in Cologne my own Hometown and his office is only a let's say uh not very far away from our office so thank you for very much for being on the show Martin yes thank you for your invitation I really appreciate what you're doing so most of our listeners are probably not familiar with the Germany's employes invention act uh can you Briefly summarize the the main goals and what is important for example for us companies most of our listeners are from the US so maybe you can focus on their issues let's say okay so um to understand the law I think it's good to take a view back in history because and our special law has a quite long history and up to now our 70 years now the first uh idea was to um create an ex an incentive for employees to make inventions um and the second motivation and and a very important motivation is um that the Constitutional Law requires a compensation for um the transfer of Rights from the employee to the employer so um the Constitutional law says that intellectual property is a part of the property that is um uh secured by the Constitutional law and um the German act wants to balance balance the mutal rights and obligations on the one hand that the employee loses its rights and on the other hand he gets an um consideration in form of the um remuneration uh claims um let me just say summarize the main elements um of the law um the law covers um so-called service inventions um and this service invention can either be an intervention in soall um um obligatory um invention meaning that the employe um Works in his field um of conjectural um field um for example an employee who works in the research and development um Department um and he owes um to seek for inventions and um in the other um um other on the other hand we have so-called experience inventions um that are invention that are based on experience or activities of the um employee um and to to give you an impression how these um terms are handled in the practice um in fact um there there's all there's only very little um invention that that are not service invention youas find a hint to um to Define um at least um experience invention so in practice free inventions are very seldom the law um in principle the law stays with the basic principle that um the owner of the of an invention is the inventor um and then um the the the law um becomes relevant saying that the employer can claim for service inventions um and um in principle that requires a formal claiming um via textual form um but we have since um October 29 we have we had a change in in the law that says as long as the employer does not release the invention in textual form um the um um the employer can still claim the invention um before 20 uh before 2009 and we had several problems with this transfer of right because the the old version of the law required um um written declaration um by the employer saying he wants to claim the invention and um there was in um in 2006 um a decision of the German federal court socalled um hft etiquette um case law meaning if you translate it sticker sticker case um and this case law says that um the due time for claiming the rights the four month period um has um become into Force by um applying for patent application When U naming the inventor as an inventor before the patent office um and in cases where both parties so the employee and the employer did not know about the law um there were the fact that the employ the the employee invention became free because the employer missed to claim uh the invention in due time and um actually U we still have to to to um to handle such old cases um because every invention and patent application filed before um October 20 for um october9 um let's say uh June 2009 because of the four months period is still relevant in the future certainly I think we work on this cases um at least 10 more years from now so that is the the basic um claiming and the the transfer of the right as as one issue of the law um and certainly I I mentioned um we have the claim for remuneration um and in section n of the law um we find this claim for um reasonable remuneration um but the law itself does not say what is reasonable and what what is not as an as an um second regulation we have these official remuneration guidelines and that in fact um did not pass the um the the federal uh pargament uh but was only published by the um by the ministry of labor and already in 1959 so the the the Act was um the formal Act was from um 1957 and these guidelines are published in 1959 and then this remuneration guidelines we have several Provisions ruling the calculation of the marination claim but I think we can come through this point later um and further the law comprises some formal rights of an inventor um section 13 13 um rules the the the right or the duty of the employer to file an patent application after after getting an invention report from an employee and um the employer is obliged to file it in in due time uh without any delay uh meaning um always an effort paying a patent attorney um to to draft such an application and sometimes it is um it is always a finan financial burden um because maybe there are some other thoughts and patent strategy to wait with such an imation but the law is quite clear in that point the um that the employer actually does not have the the the Liberty to to do what you want um and we have some further formal rights and obligations saying that the employer has to um release um patent applications in foreign countries if you don't want to to to seek for patent protection in um in such countries and also the employer has to release um and transfer applications that he does not want to uphold uphold um and last part last point in the the law is that it's very um strictly um in in favor uh to the employee because the parties are strictly bound to the law and section 22 says that there's no waiver to the detriment of the employer employee before an invention report and um section 23 uh protects the employee um for um against um agreements that might be detr for the employer and um section 20 23 requires that um Agreements are have to be um Equitable um and and as long as for example there's a thumb rule the the compensation claim um is less than 50% of the claim um that's covered by the law the um respective agreement um is unvalid so um uh now we have an overview of what the law encompasses really and what the law is all about but uh what would be the most crucial points in practice when handling the law by an employer so what what should an employer do to yeah to abide by the law basically um I can answer this um question against the background of our of our daily work um so to say about um 50% of our rers are disputes about the about the reasonable remuneration and so there there's litigation and there's also a possibility to go to the arbitration board at the German patent office um in order to find an amicable solution uh between employee and employer um that's one one big issue always um and then as already mentioned we have problems with the the transfer of Rights old cases before 2009 um and certainly there's also um there are a lot of matters where we advise clients um with regard to uh remuneration question and incentive systems I think maybe that's a point we can come to that later um and but all these the these um agreements on um on the right and duties um covered by the law um have to be um assigned after the invention report as already mentioned because the law is quite strict in this in this matter now we heard a lot about remuneration I mean the money that actually gets transferred from the employer to the employee um what would be a typical remuneration to be paid um it's quite hard uh to answer it um then in an abstract way because certainly it always depends on the single case um the the renovation guidelines are based on the principle um that the renovation has to follow the the principle of Monopoly saying um the employe employee um has to be compensated for benefits that the employer drives um on basis of the the patent protection so if if the patent can be exploited then the employee has um to to get a part of these benefits um the remuneration remuneration gu guidelines comprises a lot of quite mathematic formula and how the remuneration has to be calculated um and the the basic formula is that the economic value of the invention and has to be um multiplied with the so-called participation factor it's a little bit um hard it's it's not easy to translate these technical terms in the in the remuneration guidelines so economical values is a the technical term for for us and for for me and also this participation uh Factor um and certainly the remuneration also depends on the way of exploiting the invention for example making turnover with um with patented uh products one one possibility one way to exploit invention but we certainly can also have um benefits in form of Licensing contracts so licensing royaly incomes and invention cly also can be sold to a third party and the purchase price must be the base basis for calculating the remuneration um so the economical value as a technical term um ask what would be the market price for the invention um and we consider the view of a rational and reasonable parties that would be for example license The Invention to to the market and if we have come to such an economic value we have to uh ask what is the the personal uh participation factor of the in Inventor that term um must not be mixed with the inventor portion or inventor share um in the invention that certainly is is known factor for example if an inventor that only has contribution to the invention of 50% uh does not get the same as an whole inventure the personal part participation Factor um depends on three uh subf factors and the first factor is how close was the inventor um to research and development activities so was he hired for making inventions um the second Sub sub Factor asked um the history and solution of the invention um was the invention um uh derived from knowhow and technical assistance that was um um that he had access to and the the the third subfactor ask the position and in the hierarchy of the employer um so for example an unskilled worker in a workyard um solving a problem which is not which is complete out outside of his background gets um um an part personal partici participation factor maybe up to 100% um and on the other hand we have a a head of a research and development department that at the end just can claim for a personal participation factor of five or 7% mhm but uh now we know how the remuneration is calculated and you uh quickly avoided my original question right so how much money actually is transferred from the employer to the employee um let's say we have an examp in an example we have uh a product has a turnover of 1 million EUR Revenue per year um and there would be a sole inventor just only one inventor uh what what do you think what would be a typical um remuneration for such in such a case M okay in in in that case the we would would base the remuneration on the um royalty consideration so the license energy energy would be the predominant calculation method um and then at first we have to ask if the invention was already U subject to a license contract in this in that case this license contracts sets the measure also for the calculation if we don't have a a concrete license contract we ask um license contracts in the technical field and what royalty rates are um are common in this field for example um if we we can assume an Roy rate for for of 2% um and then we have to ask um is if the the product is completely covered by the invention or if maybe it's it's only a part of the product so we call it the the determining the correct technical reference value um of the invention but when we really assume um the the whole part is protected and then we can calculate as said we we take the 1 million turnover and multiply it with an license royalty rate of that's said 2% then we have the invention value um would mean um 20,000 uh Euro and then we have the next step in the calculation um the personal contribution Factor um certainly we would need details of the the single case but for example if we um if you consider um um member of a research and development group so engineer um then I would assume in his personal contribution Factor about 10% and that would lead to to remuneration um to of of €2,000 based on a turnover with 1 million euro a great example so now we know how much money they earn so it's uh typically uh not so much um and the employers will not go broke by paying the employees inventions their remuneration and I think it's a good incentive to incentivize the employees to be creative and inventive what do you think um are the most uh important recent developments in the case law in Germany we are let's say we are we're dealing with with the law um for 70 years now so there are typical problems that are the same and in the whole time and will keep the same I think because there's there's no there's only very little chances of amend Amendment of the law so we expect the law to to stay the same as it is for also the next uh 10 or 20 years um but one um one topic um that is quite discussed oftenly discussed in the in the last years is a problem that the employer is not a really self standing business in Germany for example but he is an part of an international group of companies um and the German law has only a very um restricted view un limited view um when um forming this regulation and the the law just is is focused on an on economical advantages of the employer and only the the the the the company of the employer but um we can imagine um if the if the employer is only part of a group International Group um then it may be um not really helpful to just look at uh the benefits of the of this concrete company U for example the the company only does resurgent um development services for a parent or sister company and um the maybe the parent company really exploits The Invention then the law the the German law um is really um at at the end of its possibilities and for that um reason there are certainly attempts um driven by employees to get access to this to the benefit of the whole group um and we have case law um to that related to that questions saying um there is a possibility that the remuneration claim has to be based on the um on the benefit of the whole group if um either the groups the group um the companies of the group work in a division of labor um and or if um they form an econom iCal entity and and second question can be asked what what how would reasonable parties of a license contract would react and what would would be the outcome of such negotiations between these rational and reasonable parties and what would be for for example the basis for a royalty agreement and that could would also um um form a measure for our remuneration considerations but you don't uh mean the license between the the the group uh company and let's say the holding or something and a small research and development company but uh apart from that let's say uh that was like a different problem now or does that play into um the the problem with the group and the small research and development company um we would consider the the pathetical situation that an free inventor um gets in contact with a employer with with a with a German company and they would negotiate a license contract um um comprising also um a right to use the invention in the whole group and if this um licensing would have um um forced the um the employer to uh to pay for for all uh companies and for the the benefits and for the turnover of the whole company then the German ration um consideration would be equal to that so that is very employee friendly yes and we can go back to to the beginning saying that the um employee has to be con comp compensated for his loss of his IP rights that is protected by the um by the Constitution and um yeah that just has to be equal and at least reasonable again always deals with the question of of if if the reation is reasonable or not and um g s this backgrounds coming back to your question um what is what are the recent developments or what are kind of Evergreens in in our daily work um we have this idea of remuneration and incentive systems um proposed by the employer um but as said as already said such systems can or such license such agreements remigration agreements um can um be um agreed upon after the invention was report the the employer cannot Implement such a system for instance in Employment contract but from case to Case and every single case after uh filing of the invention report and um then we we also advise companies in such ration and incentive systems that has um to to fullfill the requirements of the law and regarding especially regarding the um section 23 of of the law saying that um Agreements are un valid if they're not Equitable okay so um we talked about the in incentive systems and um things to make the life of employees easier so employers basically um so what are the best ways to simplify the handling of uh employees inventions with uh such uh inventive incentive systems M that's quite a um a big range of possibilities and um models with different depth of regulations um first one idea is um often uh to agree upon lump sums um in order um to to get a waiver from the employee um with regard to his um remuneration claims in the future but um this is um quite um complicate uh because of section 23 of the law uh protecting uh the the employee from himself at the end um then but one um established element of such assistance is a a waiver of the employ employee of formal rights as says uh section um uh 13 um uh 14 and 16 um which mean uh a great burden for the employer um the employer always has to to um to transfer rights that he doesn't want to to continue yes and um we can you can try to uh to minimize this administrative burdens that are connected with this this formal rights and one further point in such uh remuneration systems is that are Lums as really incentive um incentives for example um incentives and lamoms in case of filing a patent application or um payment in case of granting of the first patent um or payment um connected to the release of the predict product covering the invention um but mostly such payments um hardly can replace an individual elevation or they also can can't replace a final remuneration according to the law so mostly uh such payments in advance are only deductible against the remuneration claim provided by the law um one one further Point um to be mentioned is that the employee has a quite detailed claim for uh information for formation um on the making use of the invention uh so um and there this also uh can mean a burden for the employer and within such uh incentive systems um one can can ease these claims and to make it um more um uh comfortable for the employer MH um we have this uh employees inventions uh system in Germany um and it's not very common in the rest of the world do you think that um such uh incentive systems for incentivizing um inventions with employees is a model for multinational systems like big large corporations um do you think they should in general or uh Implement such rules um we know know such um attempts but it's always quite difficult certainly we have a a common basis um for example paying incentives for um inventions I think that's um a point um that can also be um greed on for multi multinational systems but the problem is that the that Germany has a quite high and mandatory level um based on the law So based on the the German inventors remuneration and if you try to um to adapt this um this level to all countries um then there is a danger of of exporting German special German problems um for example with regard to claims for information and rendering account um so we advise client clients um not to to lift the the German level on on on the international level um at the end um mostly the German system will will play a special role also in the future so there's always incentives for the for the for the whole um group for for companies and special Provisions for handling uh German employees inventions MH so uh Martin that was a very interesting uh interview um you we have learned a lot about the Germany employees invention act uh what would be the best way to uh get in touch with you if our listeners would have questions for you um you're you're invited to go on our website um www. cb. de all right and people find you on the website of course so thank you very much for being on the show Martin you're [Music] welcome that's it for this episode if you liked what you heard please show us your love by visiting IP fridays.com love and tweet a link to this show we would be so grateful if you would do that it would help us out to get the word out also please subscribe to our podcast at IP fridays.com or or on iTunes or stitcher.com if you have a question or want to be featured in one of the upcoming episodes please send us your feedback at IP fridays.com feedback also please leave us a review on iTunes you can go to IP fridays.com iTunes and it will take you right to the correct page on iTunes if you want to get mentioned on this podcast or even have comments within the next episode please leave us your voicemail at IP fridays.com voicemail you have been listening to an episode of Ip Fridays the views expressed by the participants of this program are their own and do not represent the views of nor are they endorsed by their respective law firms none of the content should be considered legal advice the IP Friday's podcast should not be construed as legal advice or legal opinion on any specific facts or circumstances the contents of this podcast are intended for General informational purposes only and you are urged to consult your own lawyer on any specific legal questions as always consult a lawyer or patent or trademark attorney copyright 2014 All rights reserved [Music]