Korean courts reviewing compensation claims made by employees in connection with in-service inventions have recently begun applying a heightened level of scrutiny as to what level of compensation is “reasonable.” In particular, in recent cases related to compensations for employee inventions that Kim & Chang has handled on behalf of employers, the courts have conducted a thorough review on the issue of whether the employer obtained profits directly attributable to the exclusive use of the in-service invention in question, and either rejected the plaintiff/employee’s claim because the plaintiff failed to prove such profits, or because the employee was not the true inventor of the invention.
Employees’ claims for compensation in return for in-service inventions have been on the rise. In principle, in order to receive compensation for an in-service invention, the plaintiff must prove all of the following in court: (i) the plaintiff was the true inventor of the in-service invention, (ii) little or no compensation was paid for the assignment of the invention to the employer, and (iii) the employer obtained profits directly attributable to the exclusive use of the in-service invention.
Although in the past, courts tended to rule in favor of employees, in some recent cases the courts have more readily accepted the employers’ arguments on the grounds that the plaintiff/employee presented insufficient evidence to satisfy the relevant requirements, and rejected the employees’ claims for compensation.
An employee/inventor who is required to assign an in-service invention to an employer is entitled to reasonable compensation under the Invention Promotion Act of Korea (the “IPA”). In principle, an employee who makes a legal claim that he or she has not received reasonable compensation in return for such an assignment bears the burden of proving each element of the claim. However, in many employee compensation cases, instead of requiring employees to present detailed evidence to prove that the employer’s profits were directly linked to the invention at issue, Korean courts often have simply assumed that the employer’s profits were attributable to the invention. Despite of the above, in several recent cases, our firm has successfully argued on behalf of employers that the courts must rigorously review each element of employees’ compensation claims in view of specific factual contentions from the employers, resulting in decisions in the employers’ favor.
1. Medical Device Case
In this case, a former employee of a medical device manufacturer filed a claim seeking compensation for the assignment of an in-service invention that resulted in an issued patent. However, the Seoul Central District Court ruled in favor of the employer and dismissed the former employee’s claim in its entirety (Seoul Central District Court Decision 2019Gahap563099, May 27, 2022).
As noted above, under the IPA, an employee who is required to assign an in-service invention to an employer is entitled to reasonable compensation, and such reasonable compensation must take into account the profits to be gained by the employer from the invention and the degree to which the employer and the employee respectively contributed to the completion of the invention (Articles 15 (1) and 15 (6) of the IPA). Even if the employer does not acquire ownership of the in-service invention, it receives a non-exclusive license to the in-service invention (Article 10 (1) of the IPA). As a result, the employee has a right to claim compensation for an in-service invention only when the employer gains profits from the sole and exclusive use of the in-service invention (beyond profits gained from non-exclusive use).
Despite Korean courts’ tendency in employee invention compensation cases to accept that employers’ profits are related to the employee’s invention without detailed proof, we successfully challenged the existence of profits obtained from to the sole/exclusive use of the invention, and presented various facts supporting that no such profits were obtained. The Court confirmed that the employee bore the burden of proving the existence of such profits, and ruled in the employer’s favor on the grounds that the employee failed to fulfill this obligation.
2. Automotive Engine Case
In this case, an employee researcher at an automobile manufacturer filed a claim seeking compensation for the assignment of an in-service invention allegedly used in automotive engines. After due consideration, the Patent Court of Korea (the “Patent Court) ruled in favor of the employer, arguing that the concept of the invention was already being used in the employer’s automotive engines prior to the employee’s alleged invention, and that the invention was not actually developed by the employee. The Supreme Court also affirmed the Patent Court’s decision (Supreme Court Decision 2021Da302469, March 17, 2022).
According to Article 15 (1) of the IPA, a basic requirement for receiving compensation for the assignment of an in-service invention is that the employee qualifies as the inventor for the invention. A person is qualified as an inventor if the he or she makes a substantial contribution to the creation of the technical conception of the invention (Supreme Court Decision 2011Da67705, 67712, December 27, 2012, among others).
In this case, we successfully argued that the employee could not be deemed an inventor on the grounds that (i) the employer had already embodied the technical idea of the in-service invention in other engines before the employee had completed the claimed invention, (ii) the technical idea of the invention was already publicly known, and (iii) the employee’s contribution to the invention was limited to ancillary work. The Patent Court ruled in favor of the employer, stating that the employee did not substantively contribute to the creation of the in-service invention at issue. Moreover, the Supreme Court upheld the Patent Court’s decision by dismissing the employee’s appeal.
More and more lawsuits seeking compensation for in-service inventions are being filed, and in some cases, have resulted in significant compensation awards to employees. Employers facing such lawsuits are well advised to carefully investigate the history and facts related to the in-service invention, including whether the invention is actually being used by the company, and develop rebuttal arguments supported by specific evidence. Additionally, employers should review the recent precedents regarding compensation claims for in-service inventions.