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Employee Inventions: Who Owns, and Who Owes?
Legal Examination
Employee Inventions: Who Owns, and Who Owes?
  • By matthew
  • July 24, 2014, 08:45
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Imagine that you are a computer programmer or software engineer at a leading technology company who dreams of breaking free from your cubicle of solitude and inventing the next “killer app.” Or maybe you are a paid journalist or blogger, working on the next great American, or Korean, novel. If you are one of the lucky and talented few to turn such dreams into a reality, a foreseeable question will arise: does your invention or creation belong to you or to your employer? If all or a portion of it is deemed to belong to your employer, can you at least claim compensation, and if so, how much? As the Korean “creative economy” continues to grow in importance, these questions are likely to become increasingly complicated and the subject of controversy unless current laws and regulations are better understood and, as needed, further clarified.

Korean law does provide some guidance about the rights reserved for each party with respect to employee inventions. Under the Invention Promotion Act (IPA), an invention which results from the present or past duties of an employee that is within the scope of the business of the employer is defined as an “in-service” invention, while any invention other than an “in-service” invention is deemed a “free” invention, to which the employer does not hold any rights.

But how does an employer obtain the right to receive an “in-service” invention assignment from its employees? Following the National Assembly’s passage of an important amendment to the IPA last year, only small to medium-sized employers are automatically entitled to a non-exclusive, royalty-free license from the employee. In order for an employer who does not qualify as an SME to obtain a non-exclusive license, the employer must have a contract or employment regulation where the employee agrees to assign in-service inventions to the employee in advance. An effective agreement between the employer and its employees is therefore essential if an employer is to secure either a non-exclusive license or ownership of the invention. In the absence of such an agreement or policy, the employer would have to ask the employee for a license upon notification of the invention. The employee would have the freedom to reject such a request.

Just as important is the timing of notifications by employees and employers alike regarding inventions under the IPA; failure to make notifications in a timely manner can result in a forfeiture of rights by both parties. Under the IPA, an employee is required to notify his employer in writing of any in-service inventions as soon as possible. The employer is then required to notify the employee in writing, within four months from receipt of the invention disclosure, of its intention to either acquire the ownership rights or exclusive rights to the invention, or to return the right to obtain a patent regarding the invention to the employee.

Creating an employee invention compensation system which complies with Korean law is also mandatory under the IPA. An employee is entitled to receive “reasonable compensation” for the assignment of invention rights to an employer, and guidelines for compensation are set forth in the law itself. An internal compensation system that takes into account the employer’s expected profits, commercial precedents, and the relative contributions of each party to the invention will withstand scrutiny or challenges in court, and provide both parties with reasonable security and transparency. Companies should explain the terms and conditions of the compensation system at an employee town hall, publish a description of the system in the rules of employment, and give employees ample opportunity to raise questions or objections in advance, particularly in the case of any adverse changes to the compensation terms.

While the IPA amendments have helped resolve a number of questions regarding the process and timing of assigning invention rights, significant questions, problems and risks remain. Employers and employees may have legitimate disagreements about what is or is not an in-service invention. Is a mobile gaming app coded on a semiconductor company’s computer an in-service invention, even when it has little to do with the employer’s business? For employees that work remotely or via a mobile office, how can an employer reasonably verify the creative source of an invention? It is likely that Korean law and policy will continue to evolve and adapt to the entrepreneurial economy. To minimize risk and maximize their own advantages, companies must keep abreast of policy changes as they occur, and design their internal policies with these changes in mind. Thoughtful planning, preparation and close consultation with your attorney can make a big difference in ensuring a fair and reasonable outcome.

By Patrick Monaghan, senior foreign legal consultant at Kim and Chang, one of Korea’s largest law firms.