Employee inventions – the employee's right to reasonable remuneration
Pursuant to the Norwegian Employees' Inventions Act § 7, an employee is entitled to "reasonable remuneration" if the employer acquires rights to an invention made by the employee. If the value of the right acquired by the employer exceeds what the employee was reasonably expected to perform in return for the salary and other benefits the employee has received, the employee is entitled to such "reasonable remuneration" even though the parties may have agreed otherwise prior to the invention being made. Thus, if an employer does not reasonably compensate an employee in return for rights to an invention made by the employee, the employee may claim remuneration from the employer at the courts.
By Knut Sverre Skurdal Andresen, Jenny Nondal and Sondre Arora Aaserud
As of today, eleven Norwegian court decisions regarding § 7 are publicly available. In five of the cases, the courts order the employer to pay remuneration to the employee. The level of the remuneration awarded by the courts seems to be increasing. Previously, an employee could not expect more than approximately an amount equal to one year's salary of that employee. In the latest decision on this area of law from earlier this year, an employer was ordered by the Court of Appeal to pay NOK 3 million as remunerationto an employee. To our knowledge, this is the highest amount a Norwegian court has ordered an employer to pay an employee as remuneration for rights to an invention. The case illustrates the importance of properly evaluating the level of remuneration to be paid to an employee in return for rights to an invention made by the employee.
In this article, we set out how employers can ensure that employees receive "reasonable remuneration" in return for rights to an invention made by the employee.
Govern the rights to an invention in the employment agreement
Employers should regulate the rights to inventions in the employment agreement.
The employment agreement should grant the employer all rights and title to any invention made by the employee under the term of the employment. The employment agreement should explicitly state that:
- the employer shall own all rights and title in and to all patentable and non-patentable inventions, wholly or partly arising out of the employee's efforts in connection with the employment relationship;
- the employer's right to the employee's inventions also applies to inventions made outside of the working time and for up to one year after the expiry or termination of the employment;
- the rights and title to the inventions shall automatically be transferred free of charge and in its entirety to the employer, unless otherwise provided by mandatory rules of law;
- the employee shall contribute to all necessary steps to be taken in order for the employer to acquire the respective rights, including signing of any assignment documentation and contributing to the patent documentation to be filed etc.; and
- that the employee's duties under an employment of an innovative nature cover development of inventions and the like, and that the terms and conditions of the employment, including the salary and other benefits, reflects the employee's obligation to transfer all rights and title to the employee's inventions to the employer.
The employee and the employer may agree on a borader scope, for the rights to inventions to be transferred to the employer, than what is provided under the Norwegian Employees' Inventions Act. Additionally, if the employer and the employee have not agreed on automatic transfer, the Norwegian Employees' Inventions Act requires the employer to issue a claim for such rights to be transferred to the employer, in order to obtain the rights.
Further, in order to establish an expectation that the employee will develop inventions as part of his/her employment, the job description in the employment agreement should include making inventions in the relevant field.
Lastly, the employer should carefully consider the employee's salary and other benefits, in light of the presumed value of the inventions the employee is expected to make as part of his/her work in employment.
Procedures to ensure individual assessments of remuneration
If an employee claims remuneration in return for the employer's acquisition of rights to an invention, the employer must carefully consider the following three questions for the invention in question.
- Firstly, the employer must clarify the scope of the rights the employer has acquired. Although the employment agreement may state that all rights to inventions made under the term of the employment shall automatically be transferred to the employer, the employer may waive certain rights to inventions or select not to acquire certain inventions. As the Norwegian Employees' Inventions Act § 7 entitles the employee to "reasonable remuneration" on the basis of the value of the right the employer acquires from that employee, the scope of the right the employer actually acquires is decisive for the level of remuneration the employee is entitled to.
- Secondly, the employer must clarify whether the invention in question falls within the employee's job description. The Norwegian Employees' Inventions Act § 7 only entitles an employee to remuneration if the value of the right exceeds what the employee was reasonably expected to perform in return for the salary and other benefits the employee has received. Consequently, if the invention was made in the course of the employee's work, the employee may have been reasonably expected to create the invention in question. In this regard, it is beneficial if the employment agreement states that the employee's duties under the employment include the development of inventions, and that the terms and conditions of the employment, including the salary and other benefits, reflect this duty.
- Thirdly, the employer must consider whether the employee has received reasonable remuneration, in the light of the scope of the rights the employer has acquired from that employee. In this assessment, whether the invention was made as part of the employee's job description is of relevance, as set out above. The income the invention has or is expected to generate for the employer may also be of relevance. Further, any efforts by the employer to defend a patent or patent application in the event of an opposition may indicate that the invention is valuable.
Consequently, employers should have procedures in place to ensure that the three questions set out above are addressed and considered for new inventions. Employers may in some cases be obliged to provide additional remuneration to an employee, even though the employee is not entitled to such remuneration under the employment agreement. Although the assessments must be conducted specifically for each invention, invention incentive programs with pre-agreed amounts of remuneration per invention may prevent claims for further rremuneration by employees.
We regularly advise our clients on how to compensate employees for the transfer of rights to inventions to the employer.