Recently, our firm won the first instance of an administrative litigation case for invalidation of an invention patent, in which it is ruled that the invention patent should be comp...
Introduction In the chemical field, it is difficult to seek invalidation of a patent claiming to have achieved unexpected technical effect. This case provides a strategy for success...
Dispute Caused by Non-payment of Remuneration to the Employee Inventor
Linda Liu & Partners
This case was initiated because an enterprise did not pay reasonable remuneration to the employee inventor. The analysis of this case outlines the rules for the determination of employee inventor, the standard for the implementation of patent inventions, and the proper award to the inventor. Simultaneously, it illustrates the need to proceed with caution to avoid such disputes.
1. Summary of the case
Zhu Ruizhen (the plaintiff of first instance and the appellee of second instance) was originally an employee of Viper Industrial Products Co., Ltd. (the defendant of first instance and the appellant of second instance; hereinafter referred to as “Viper Company”). Zhu Ruizhen resigned from employment at Viper Company. Zhu Ruizhen brought a lawsuit against Viper Company and pleaded remuneration on the grounds that he was the inventor and designer of sixteen utility models and designs conferred by the State Patent Office. Guangdong Dongguan Intermediate Court supported the pleading in the civil judgment of first instance. The Viper Company refused to accept the first instance judgment and instituted an appeal. The court of second instance upheld the original judgment and rejected the appeal in the civil judgment of second instance.
2. Issues in the case
(1) Whether the plaintiff is the co-inventor and designer of the involved employee inventions;
(2) Whether the involved patents have been implemented by the Viper Company;
(3) Whether the Viper Company paid the remuneration; and
(4) How much remuneration should the Viper Company pay.
3. Court Decisions
Court of first instance:
(1) With respect to whether Zhu Ruizhen is the co-inventor and designer of the involved employee inventions, the court decision is based on the patent search report that shows he is the co-inventor and designer of the 16 utility models and designs.
(2) With respect to whether the sixteen utility models and designs involved were implemented by the Viper Company, the court was unable to determine whether Viper Company implemented the eight utility models involved since there is no physical evidence apart from the patent request, specification, abstract and pictures of products from Viper Company. The similarity between the eight involved designs and the design patents was determined through comparing the pictures of products of the Viper Company and the design patents since the protection to the patents is according to the Request. Therefore, the court ascertained that seven of them are similar to those specified in the pictures of design patent.
(3) With respect to the extra economic compensation of 100,000 yuan, the court ascertained that the Viper Company did not pay remuneration to Zhu Ruizhen as the inventor and designer of the employee inventions since the company could not prove it through the evidence submitted.
(4) With respect to how much remuneration the Viper Company should pay to Zhu Ruizhen, “the State-owned enterprises or public institutions which have been conferred patent right shall pay remuneration not less than 2% of the profit after tax gained from the implementation of such invention or 0.2% the same gained from the implementation of such design to the inventor or designer during the period of validity” set forth in the Article 75 of Implementing Regulations of the Patent Law. As a reference, the court calculated the amount of remuneration that should be paid to the designer. Additionally, the Viper Company could not prove the gross profit after tax. Therefore, the court accepted the amount recorded in the financial report in 2004 of the Viper Company and determined that the Viper Company must pay remuneration 100,000 yuan to Zhu Ruizhen.
Court of second instance:
(1) Trial in combination of the sixteen involved patents.
This case is about a dispute of the remuneration paid to the designer of the employee inventions. There is no express provision for filing and hearing a case in terms of the number of patents involved. In practice, the court usually files and hears a case according to the actual circumstance of the involved patents. The combination of utility models and designs in this case made by the court of first instance is convenient for the involved parties and did not harm their procedural rights. Therefore, the procedure applied by the lower court is proper.
(2) Whether the appellant has implemented the involved patents.
This case is to determine whether the Viper Company has implemented the involved patents instead of a patent infringement dispute. The court of first instance determined that Viper Company has implemented the involved designs over the comparison of the product pictures from the Website of Viper Company with the pictures of the design patents. This decision is reasonable and does not break the rules of Patent Law.
(3) The amount of remuneration the appellant should pay.
Though the judgment of paying remuneration of 100,000 yuan made by the court of first instance does not comply with the relevant provisions, it is reasonable according to the principle of justice and equity set forth in the Article 4 of General Provisions Of The Civil Law of People’s Republic of China since there is no other reference for hearing the case, the court had to make a judgment and the Viper Company could not prove the gross profit after tax gained from the implementation of the seven involved designs.
4. How to avoid the similar disputes
The dispute in this case was caused since the Viper Company has no relevant award system for service inventions, did not make an agreement with the inventor about the award, and did not expressly make the extra economic compensation paid to the departing employees. To avoid such disputes, the following points should be addressed:
(1) Establishment of an award system to employee inventors.
It is important to establish an award system to employee inventors in order to encourage inventions-creations, inspire the employees in creating inventions and reduce the disputes between the employees and the enterprises. It may also include the boundary between the service inventions and non-service inventions, the report system, the time for awarding the inventors, and the standard of the award.
(2) Draft an agreement about the award for employee inventions and the specific amount of remuneration.
After the enforcement of the amended Patent Law, the amended Implementing Regulations of the Patent Law has been opened to the public for discussion, in which expressly stipulates that “an institution conferred by patent right may prescribe in its lawfully established rules and regulations or reach an agreement about the award and remuneration set forth in the Article 16 of the Patent Law. Therefore, an enterprise may reach an agreement with the individual employee inventor to make clear the amount of award and the form of payment to avoid similar disputes after the Implementing Regulations of the Patent Law take effect.
(3) Clarify the relationship with the departing employees.
An enterprise may reach an agreement on the award with the departing or retired employee inventors. Apart from this, they may also sign a Letter of Confirmation about the settlement of the related award or remuneration, such as the payment of economic compensation that should be expressly prescribed.
