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Newsletter | February 2014, Issue 1
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INTELLECTUAL PROPERTY |
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Amendments to Invention Promotion Act and Related Enforcement Decree |
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The Invention Promotion Act (“IPA”) has been amended primarily to reinforce employees’ procedural rights in connection with compensation for employee inventions. The amended IPA went into effect on January 31, 2014. The Enforcement Decree of the IPA was also revised, and went into effect on the same day.
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The purpose of the amendments is to enable employees to participate in the compensatory process by strengthening their bargaining power and procedural rights, and to establish a fair compensation culture by actively inducing large corporations to introduce an employee invention compensation system. Companies should now consider implementing a more structured system regarding employee invention compensation. The details of the key amendments are discussed below.
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Changes to Automatic Non-Exclusive License Granted to Employers |
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Under the previous IPA, the employee who created the invention holds ownership and title in the invention in the absence of a contractual provision or internal employment regulation holding the contrary. The employer is automatically entitled to a royalty-free nonexclusive license to use employee inventions.
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According to the amendment, employers other than small or medium-sized entity employers as defined under Article 2 of the Small or Medium Sized Entity Framework Act (i.e., a manufacturing entity that has not less than 300 regular employees or a company with 8 billion Korean Won or more in sales or capital) are no longer given an automatic non-exclusive license. These employers must have a contract or employment regulation in place where the employee agrees to assign or grant exclusive license to use the employee inventions to the employer in advance.
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Establishing Procedural Requirements for Employee Compensation of Inventions |
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The amended IPA requires the employer to adopt an internal compensation rule to specify the type of compensation, amount and payment method, etc., and must consult with employees before adopting or amending the compensation rule as well as obtain consent from more than half of the employees when amending the rule in a manner less favorable to the employees (Articles 15(1) – (4) of the IPA). If the employer complies with the foregoing requirements, compensation provided under such rules will be deemed reasonable, so long as the compensation is determined based on the profits that the employer gained or expects to gain from the employee invention and the degree of contribution by the employer and the employee in creating the said invention (Article 15(6)).
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Formation and Operation of Employee Invention Review Committee |
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The amendment also includes the establishment and operation of an Employee Invention Review Committee ("Review Committee") for conflicts between the employer and employee with regards to the compensation of the invention. If the employee demands that a Review Committee be formed, the employer must form a Review Committee and have the committee complete its review within 60 days. Companies should exercise due care with this particular amendment as the revised IPA imposes a fine of up to 10 million Korean Won in the event a Review Committee is not formed and review is not carried out despite an employee’s request (Article 60(1). 1).
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As the amendments to the IPA and revisions to the Enforcement Decree intend to further protect the employees’ rights to employee inventions, employers should also be mindful of the new changes and review their internal regulations regarding the compensation and assignment of employee inventions. This is particularly important for employers that are not small or medium sized entities, which require a more comprehensive and transparent internal regulation to be granted automatic royalty-free nonexclusive license to use employee inventions.
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