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Right to Employee Invention Fee

April 16, 2021

As it is known, any invention, utility model or industrial design has an author or a group of authors, whose creativity generated the corresponding intellectual property.

Creation of such an intellectual property may take place either on the personal initiative of the author, or by order or in connection with performance of their work commitments.

An invention, utility model or industrial design created in connection with the performance of their work commitments or on the specific assignment of the employer shall be recognized as an official invention, an official utility model or an official industrial design, respectively.

Wherein not every author who created an intellectual property during the performance of his or her work commitments s knows that in addition to the monthly salary, which is received regularly, he or she is also entitled to a fee.

In this regard, I hereby propose to consider issues related to the obligation of the employer who uses the service invention to pay remuneration to the employee who generated such an invention as part of the work commitments.

According to paragraph 4 of Article 1370 of the Civil Code of the Russian Federation[i] (hereinafter - the Civil Code, the Code): “If the employer obtains a patent for the service invention, service utility model or service industrial design or decides to keep information about the invention, utility model or industrial design secret and notify the employee accordingly or assigns the right of obtaining a patent to another person or does not receive a patent on an application filed by the employer for reasons under the employer's control, the employee shall be entitled to a fee.”

Thus, the right to reasonable remuneration, where remuneration is a general term that describes all the different forms of compensation for employees. It arises for an employee, who created a service invention, not by virtue of the very fact of creation of a potentially protectable technical solution, but only if the employer performs one of the actions specified in the above rule in respect of this result of intellectual activity, namely, if the employer:

  • Acquires a patent for a service invention;
  • Decides to keep the information on such invention secret and informs the employee about it;
  • Transfers the right to a patent to another person;
  • Does not acquire a patent on an application filed by him or her for reasons within his or her control.

At the same time, in the explanations contained in paragraph 132 of the Resolution of the Plenum of the Supreme Court of the Russian Federation of April 23, 2019 No 10 On application of Part Four of the Civil Code of the Russian Federation[ii] (hereinafter the Resolution No.10), it is stated: the obligation to pay remuneration by the employer to the employee (author) does not depend on the actual use or non-use of the service invention, service utility model or service industrial design. However, the actual use due to the nature of the work may depend on the amount of remuneration agreed by the employee (author) and the employer.”

In addition, the fifth paragraph of paragraph 131 of Resolution No.10 states: where the creation of an invention, utility model or industrial design by several employees in collaboration, the amount of remuneration is determined separately for each co-author, including based on individual contribution to the result.”

In this connection, a reasonable question arises: “What is the amount of this remuneration? A one-month salary? A quarterly bonus? An extra day off? Or perhaps an incentive trip?” 

As stated in the above paragraph 4 of Art. 1370 of the Civil Code: “The amount of the fee, the terms and procedure for the employer to pay it shall be defined by a contract between the employer and the employee, or by a court in the case of a dispute.”

With regard to this rule of law, the highest judicial authority provided clarification in paragraph five of paragraph 131 of Resolution No. 10, according to which in the event of a dispute, the amount of remuneration has to be determined by the court under the rules of paragraph 4 of Article 445 of the Civil Code (paragraph 1 of Article 6 of the Civil Code).

It should be noted that according to the said paragraph 4 of Article 445 of the Civil Code, if the party for which in accordance with this Code or other laws of the conclusion of the contract is obligatory, evades its conclusion, the other party shall be entitled to apply to court to compel the conclusion of the contract. In this case the contract is considered to be concluded on the conditions specified in the court decision from the moment the relevant court decision becomes effective.

Meanwhile, the above rules of law still do not clearly answer to the question: “How much is due to the author for the invention used by the employer?”

In my opinion, in a situation where the amount of remuneration is determined by the parties, i.e., the employer and the employee, the freedom-of-contract doctrine applies, and in this case, the conditions and procedure for payment of remuneration are determined by agreement of the parties.

This point of view is confirmed by the explanations given in the Decree of the Government of the Russian Federation dated November 16, 2020 No. 1848 On Approval of the Rules for Payment of Remuneration for Official Inventions, Official Utility Models and Service Industrial Designs[iii] (hereinafter - the Rules), which defines the procedure for payment of the respective remuneration. Thus, the second sub-paragraph of paragraph 1 of the said Rules states that they do not apply in cases where the employer and employee conclude a contract establishing the amount, conditions and procedure for payment of remuneration.

Thus, I believe that if the amount and manner of payment of remuneration is determined voluntarily by the parties to the contract, the remuneration may be determined as a lump sum payment, or as fixed payments made at certain intervals. Moreover, the amount of the remuneration may depend on the number of products produced and sold using the invention, or may be tied as a percentage to the profits obtained from the use of this invention. At the same time, the above list of procedures for payment of remuneration is not exhaustive.

From the above, it follows that the Rules are primarily aimed at facilitating the courts in calculating the remuneration due to the author in case of his or her dispute with the employer.

It is also worth noting that the payment of remuneration to the employee (author) is made during the term of validity of the patent. In case of early termination of the patent for invention, utility model or industrial design (Article 1399 of the Civil Code) the payment of remuneration shall be terminated. At the same time, if the patent for invention, utility model or industrial design is restored (Article 1400 of the Civil Code), the obligation to pay the remuneration shall be restored (paragraph 133 of the Resolution No. 10).

In addition, the same paragraph 133 of the Resolution No. 10 states: “If the early termination of the patent for invention, utility model or industrial design is carried out for the purpose of termination of remuneration payment (for example, the invention continues to be used in production), the employee (author) has the right to claim damages from the employer (paragraphs 1 and 4 of Article 10 of the Civil Code).

This legal approach is designed to protect the employed author as obviously the weaker party suffering from the unfair actions of the employer.

This is probably all that we would like to briefly describe with regard to the right to employee invention fee.

 

[i] Civil Code of the Russian Federation (Part Four), adopted on December 18, 2006, Federal Law No. 230-FZ (revised on July 26, 2019, amended on July 24, 2020)

[ii] Resolution of the Plenum of the Supreme Court of the Russian Federation of April 23, 2019 No. 10 On the Application of Part Four of the Civil Code of the Russian Federation

[iii] Decree of the Government of the Russian Federation of November 16, 2020 No. 1848 On Approval of the Rules for Payment of Remuneration for Service Inventions, Service Utility Models and Service Industrial Designs

 

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Author of article

Roman Larshin

Roman Larshin

Lawyer