German Highest Court Rules on Employee Invention

The German Federal Supreme Court (Bundesgerichtshof, or “BGH”) ruled on a complex issue: employee’s inventions (German Employees’ Invention Act) in what is now known as the “Haftetikett”-decision. The BGH held that an employer can be liable for damages if an employee cannot register his invention as a patent or utility model in a country because the employer has used (but not registered) the invention there. A former employee of a manufacturer of adhesive labels had, during his employment, invented an adhesive made of natural rubber. The employer registered patents for the invention in Germany and a number of other countries, and subsequently started using the invention to make labels in some of those countries, and also in Australia but without registering a patent there. The employer later stopped production. The inventor was unable to register a patent in Australia, as his former employer had used the invention there. He successfully claimed compensation for the loss of this right. The court said that an employer was not obliged to register a patent or utility model for an employee’s invention that it had claimed (under employment law). However, it must inform the employee that it was not applying to register and in which countries. This obligation is based on an employer’s general duty to act in the interest of its employees, including former employees.

In essence, the BGH confirmed the ruling of the Düsseldorf Regional and Düsseldorf Appeal court that the 4-month deadline during which an employer has to claim ownership vis-à-vis its employee with regard to any invention - is a conclusive deadline and, more important, that such 4-month deadline does not only start running with a notification by the employee but also if the employer has sufficient knowledge about the potential invention.

The BGH ruled that this normally is the case if the employer files for a patent. This means that in practice the 4-month deadline starts running at the date the patent application was filed. If the 4-month deadline expires and the employer has not claimed ownership, ownership rests with the employee. This conclusion is quite in contrast with the practice of the arbitration chamber who has competence on disputes relating to the calculation of the compensation. The arbitration chamber took the view that the 4-month deadline cannot start as long as the employee has not properly notified the invention to the employer with the detailed description. The practice could work with the arbitration chamber's rulings as employees quite often did not properly notify their invention so that the deadline did not start. This practice now has to change with the ruling of the Federal Supreme Court as the 4-month deadline regularly at the latest starts with the patent application.

The consequences for the practice in Germany are significant:

** Patent attorneys operating in Germany have to inform their clients about the beginning of the 4-month deadline (some may have advised according to the practice of the arbitration chamber).

** Companies operating in Germany, in particular mid-sized companies, have to take the obligations under the German Employees' Invention Act more seriously as they may risk losing ownership of inventions made by their employees.

** Companies have to adopt and implement internal rules and systems in order to comply with the German Employees' Invention Act.

** For a transitory period it may be an attractive defense strategy for a (potential) patent infringer to approach current or former employees who have been co-inventors in order to obtain ownership to this invention from them by direct transfer.

Peter Meyer, Simmons & Simmons, Düsseldorf