Employers No Longer Required to Notify Employee-Inventors to Acquire Previously-Assigned Invention Rights

The National Assembly of Korea passed a bill to amend the Invention Promotion Act (the “IPA”) on January 9, 2024, which relaxes the requirements for employers to succeed to rights in work-for-hire inventions, and introduces grounds for courts to issue orders to submit materials and to maintain the confidentiality of submitted materials in lawsuits seeking compensation for work-for-hire inventions. The amendment to the IPA will come into effect on August 7, 2024.

Under the current IPA, the employer is required to notify the employee in writing if it intends to claim ownership of an employee’s invention, regardless of the presence of a contract or employment regulation granting it such rights. This notification must be provided within four months of being notified that the employee invention has been completed. Until the employer provides notice of its succession to the rights, the ownership of the in-service invention remains uncertain. As such, there has been a risk of double transfer by the employee of the rights to an in-service invention (to a third party as well as the employer) under the current legal regime.

Another issue with the current law is that it is difficult for courts to evaluate the compensation amount calculated for an in-service invention. This is because the current IPA lacks any procedural mechanisms to provide for evidentiary materials necessary for such calculation to be presented to the court, such as orders to submit materials and to maintain the confidentiality of submitted materials.

The above issues are addressed in the amended IPA (the “Amended IPA”) as follows:

Relaxed Requirements for Employer’s Succession to Rights to Employee Inventions

The Amended IPA now provides that if there is a contract or employment rule that entitles the employer to succeed to the rights to an employee invention that has been executed or adopted in advance after consultation between the employer and the employee, the ownership rights to the employee invention are automatically acquired by the employer as soon as the invention is completed. The provision of the separate notification within four months by the employer to the employee is only required if the employer decides not to acquire ownership of the employee’s invention.

On the other hand, if there is no such pre-existing contract or employment rule, the employer must enter into a separate agreement with the employee regarding the transfer of the invention rights and notify the employee in writing of its intention to acquire the ownership rights within four months of receiving notice of the invention’s completion (similar to the current IPA requirements).

New Court Powers to Order Submission of Materials Necessary for the Calculation of Compensation for Employee Inventions

The Amended IPA introduces new provisions that permit parties to request document or material production orders, which allow the court to order the other party to submit materials necessary to calculate the appropriate amount of invention compensation. The Amended IPA also provides for protective orders to protect the confidentiality of submitted information. These provisions reflect similar provisions that have been added to other Korean intellectual property statutes in recent years, such as the Patent Act, the Trademark Act, the Design Protection Act, the Copyright Act and the Unfair Competition Prevention and Trade Secret Protection Act.

The amended provisions apply to all lawsuits filed on or after August 7, 2024 and the key terms of the amended provisions are as follows:

At a party’s request, the court may order the other party to submit the necessary materials to calculate the amount of compensation in a lawsuit regarding compensation for an in-service invention, unless there is a justifiable reason to refuse the submission. Even if such information is considered a trade secret, it cannot be deemed a justifiable reason to refuse submission if it is essential for calculating the amount of compensation for the in-service invention.
At a party’s request in a lawsuit on compensation for an in-service invention, the court may order either party (i) not to use submitted trade secret materials for any purpose other than to continue the litigation, and/or (ii) not to disclose trade secrets to a third party.

By relaxing certain requirements related to employers’ succession of the rights to in-service inventions by their employees, the Amended IPA significantly reduces employers’ inconvenience relating to in-service inventions and clarifies the ownership of such inventions. Companies that have contracts or employment regulations on in-service inventions based on the current IPA are advised to check whether such contracts and regulations may need to be reviewed in line with the Amended IPA.

As a result of this amendment, the number of lawsuits seeking compensation may increase, now that courts can order the submission of materials necessary to calculate compensation for in-service inventions. Companies where many in-service inventions are developed may need to review whether their compensation policies are appropriate and properly supported to be prepared to respond to such lawsuits.

[Korean Version]

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