Employment agreements and compensation in multi-jurisdictional inventorship

26 October 2021

Employment agreements for multi-jurisdictional inventorship should be carefully thought through to avoid disputes, said Dan Altman, a partner at Knobbe Martens Olson & Bear in California.

It is increasingly common for joint inventors to be from multiple jurisdictions, such as the United States and China. Under this scenario, many issues are involved.

One of these is that requirements for compensation of inventors differ among jurisdictions.

“This could conceivably result in an inventor in a country like China receiving substantial compensation whereas the inventor in the US may receive nothing,” explained Altman during Panel Session No. 5 of the 2021 AIPPI World Congress on Oct. 19, 2021. The session delved on multi-jurisdictional inventorship.

Reward or remuneration for inventors is not required in most states in the US. However, most companies will have a remuneration clause in their employment agreement.

“Most companies will require some sort of compensation to inventors as either incentive to invent or as something to maintain their morale because inventors who don’t receive anything, who contribute to a very successful invention, may be resentful,” he said.

Some inventions are not made by employees, but by consultants and independent contractors. “Typically, consultants and independent contractors have much more bargaining power when they agreed to make an invention on behalf of a company. And so, the negotiation itself will determine what the compensation is,” Altman added.

“So these agreements of employment need to be thought through very carefully because not only do you need to address the requirements of each jurisdiction or inventions made, but you also need to consider the morale, the fact of the agreement of different compensation and different inventors,” Altman explained.

Mengmeng Yu, patent attorney at AFD China Intellectual Property in Beijing added that agreements or by-laws should provide forms and standards of reward and remuneration in multi-jurisdictional inventorship.

In China, reward and remuneration are mandatory for service inventions established in the country, not just Chinese patents.

“Without clear indication, courts tend to not accept arguments that it has been included in salaries, allowance, bonuses and benefits,” said Yu, also a panelist at the same session on multi-jurisdictional inventorship.

A record of issuance of such rewards and remuneration in detail should also be kept, she added.

“Rewards and remuneration have different coverage in China. A reward is a payment when a patent is granted while remuneration is usually paid in installments when a patent is exploited or licensed. A reasonable agreement can be reached between the employer and the inventor in terms of form and amount,” Yu explained.

Inventorship and ownership determinations in different countries may also be different. In the US, each of the 50 states has a law on ownership. Hence, parties should ensure that formalities are completed in all countries involved.

Another issue in multi-jurisdictional inventorship are the competing secrecy review requirements. These must also be addressed to avoid severe consequences.

“Employment agreements establishing ownership and compensation to inventors that address requirements in multiple jurisdictions are key to avoiding disputes with inventors,” said Altman.

AIPPI or Association Internationale pour la Protection de la Propriété Intellectuelle is a Switzerland-based organization dedicated to the development of IP protection laws with more than 8,000 members from 131 countries. Slated to run until October 22, 2021, the AIPPI World Congress is an annual gathering of IP practitioners and stakeholders around the world to discuss relevant and urgent topics on IP.

Espie Angelica A. de Leon

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