Open access peer-reviewed chapter
Abstract
The remuneration of employee inventions in corporations is a relatively controversial topic in the field of intellectual property. In many countries, there are ongoing lawsuits over the amount of remuneration between the inventor and the employer. The available scholarly literature and professional sources suggest that there are many ways in which countries approach remuneration legislation and practice. However, the evidence is fragmented, and there needs to be more knowledge of whether there are recognizable typical approaches. To fill this gap, this chapter aims to find and define several recognizable types of compensation that exist in the world and their underlying principles and theories. We use Eisenhardt’s comparative template for qualitative theory-building research (multiple case study) and formulate four recognizable types of approaches to the remuneration of employee inventions. The results of this chapter can serve, for example, innovative corporations in the correct setting of the reward mechanism for employee inventions when entering various foreign markets.
Keywords
- employee invention
- patent
- remuneration
- reward
- case study
1. Introduction
Intangible assets have become a source of significant competitive advantages in today’s market economies [1, 2, 3], and many authors and studies suggest a strong relationship between intangible assets’ value and companies’ market value [4, 5, 6, 7]. The creators of these intangible assets are people (often employees), so one of the popular research areas is the remuneration of creative employed individuals, especially creators of technical innovations like inventions [8, 9, 10]. In many countries, there are disputes and even official court litigation over the amount of these rewards [11, 12, 13, 14, 15].
These disputes stem from the fact that many countries remunerate employed inventors by law [16], so the remuneration is then reviewable by an independent court. When and how are these rewards paid out? What are the critical conditions, and how do these conditions differ across countries? These are questions answered to some extent by analyses of the remuneration systems of different countries [17, 18, 19, 20, 21]. To some extent, there is also a more in-depth comparison of a particular sample of European countries [16, 22].
However, the literature lacks a deeper theoretical-empirical synthesis of the extent to which these approaches are similar or what are the deeper conceptual differences between them. This study aims to fill this space in the literature and offer, based on an empirical analysis of available approaches, a condensed typology of existing systems for rewarding employee inventions.
The text of the study is divided into the following sections: the second section outlines the issue of employee inventions and the current state of knowledge in relation to the aim of the study, the third section describes the research approach used, the data used and the selection of cases, the fourth section presents the results of the analysis of the investigated cases, followed by a discussion and conclusions.
2. Employee inventions: overview of literature
2.1 Remuneration and controversies around employee inventions
According to the latest statistics from the World Intellectual Property Organization (WIPO), in developed countries more than 90% of patent applicants are filed by organizations [23]. And, as shown in Figure 1, the (growing) majority of these patent applications are filed by the business sector. This number shows that most inventions are very often the result of the creative activity of individual persons employed in various (private or public) organizations.
Figure 1.
Business sector share of all PCT applications. Source: Compiled from WIPO PCT Yearly Review ([
Thus, new knowledge is mainly created as a direct or indirect result of employee tasks and are thus “employee inventions.” However, modern intellectual property law allows for ownership rights to these intangible results to be exercised by employers for several understandable reasons [24].
The topic of employee inventions is considered quite controversial. The main reason is that it is situated at the intersection of patent, labor, and contract law [25, 26]. The labor law allows the employer to generally use the results of his employee’s work. However, the ownership and use of intangible results in the form of inventions are governed by the patent law, because only a specific person may be designated as the creator (originator) of the invention. In addition, the contractual arrangement between the employee and the employer can further specify the relationship in this area. The law of employee inventions therefore constitutes a certain “bridging” between the principles of labor and patent law in particular [27]. This “bridging” is made possible by defining the rights and obligations of the employee and the employer, whereby the employer’s main property right is to exercise the rights to the given invention and to deal with it (within the patent law) without restrictions, and his main obligation is to pay the employee a certain reasonable remuneration.
The statutory regulation of employee inventions is purposefully not harmonized internationally, so each country regulates this area on its own [16]. In this regard, Germany is a relatively often cited country in the literature; it was one of the first countries to adopt a special law on employee inventions in 1957 [17, 28]. Like Germany, some other countries have taken the path of detailed legal regulation of employee inventions in special laws (Sweden, Denmark, Norway, Finland). Other countries, including Italy, Spain, Austria, Japan, France or Czechia, leave a relatively broad regulation within their patent laws [16, 18, 19, 29, 30]. Anglo-Saxon countries have a disproportionately different approach to employee inventions. There is often no legal regulation at all; these matters are usually regulated in the employment contract between the employee and the employer [24, 31, 32, 33].
Different surveys and case analyses also offer an insight into the level of the remuneration is in different countries, such as France [19, 34, 35], Japan [36], Germany [17], Sweden [21], USA [37, 38, 39], or European countries as a whole [40, 41].
2.2 Available theoretical frameworks in employee inventions literature
The theoretical framework of the theory of motivation prevails in the scientific literature regarding the remuneration of employee inventions. Within this framework, many authors examine the relationship between the amount of remuneration (as an incentive) and the number and quality of inventions produced by employees, in the private [36, 42, 43, 44, 45] or public [46, 47] sector. The same framework also includes the examination of the relationship between the amount of remuneration and the number of inventions disclosed by employees to employers [48, 49].
An interesting but not very explained theoretical view is offered by Trimborn [17]. He distinguishes between rewarding employee inventions on the so-called monopoly principle and on the so-called extra-service principle. The monopoly principle is described as a system in which each employee must receive a reward, regardless of his/her job position, because the employed inventor is considered a quasi-license provider to his/her employer. However, this approach does not prevent the differentiation of remuneration due to the type of his/her work position. The second, the principle of extra-service, is based on the idea that an employee should receive extra compensation beyond his/her salary when he/she creates a benefit for his/her employer that is beyond what is expected.
Another way of looking at the issue of ownership of employee inventions (including related remuneration) is offered by Wolk [50]. She distinguishes the approach of countries with a civil law tradition from the approach of countries with a case-law tradition. Civil tradition countries generally attribute the rights to the created invention to the employee and only then are they transferred to the employer. Conversely, case-law countries grant property rights to the created invention directly to the employer. The concept of different legal traditions is followed in a certain sense by the concept of dividing countries into liberal market economies (LME—mainly case-law countries) and coordinated market economies (CME—mainly civil-law countries) [51]. The typology of LME and CME economies is put by the authors of this concept in connection with the creation of a different type of innovation—while the CME countries are mainly adapted to the creation of small/incremental innovations, the LME countries are much better adapted to the creation of radical innovations.
The last, well-generalizable concept in the field of rewarding employee inventions is the concept of economic benefit (or value) of the invention. As some authors summarize through various country comparisons [16, 22], in countries that apply the legal right to this remuneration, the unifying concept for determining the amount of the remuneration is precisely the economic benefit (or value) of the invention created by the employee. In this context, rewarding employee inventions can therefore be considered meritocratic, as explicitly mentioned by Harhoff and Hoisl [28].
3. Methodology, data, and research design
The aim of this study is to give a certain answer to the research question “How and why countries organize their remuneration systems for employee inventors?” by creating a typology of well-recognizable approaches. Since this study needs a deeper investigation of individual countries, we apply a qualitative, mostly inductive approach—multiple case study [52, 53, 54]. Although the study is primarily based on the inductive approach formulated by K. Eisenhardt [52], we use selected theoretical constructs for the organization of evidence, described at the end of Section 2.2. The overall research procedure is illustrated in Figure 2.
Figure 2.
Overview of the research process.
For the purposes of this study, we used primary and secondary data—specific laws of individual countries, their legal interpretations, but also other descriptions of these systems and their comparison in various individual aspects [16, 22, 31, 55, 56]. The selection of countries for the analysis was made purposefully [57], using certain differences already indicated by earlier literature. At the same time, the selection is made in such a way that it is varied in terms of the size of the countries (we used GDP data from World bank), in terms of different legal systems, etc., so that several recognizable types can subsequently be identified in such a sample (cf. a similar strategy in [58]. We excluded from the study countries with strong authoritarian political leadership as they may have various specifics not comparable across analyzed market-economy countries.
The analysis is focused only on the remuneration rules for employee inventions in the private sector. The collected evidence is presented in Appendix 1.
4. Results
In accordance with the defined literature [52], we performed within-case and cross-case analysis. The coded dataset is presented in Appendix 2. Four relatively well distinguishable types of remuneration systems for employee inventions emerged by systematic iterative comparison of the attributes of analyzed countries. An overview of the identified types is shown in Figure 3. A description of the four identified types is given in the following text.
Figure 3.
Typology of employee inventors’ remuneration systems.
4.1 Type 1
It is a remuneration system dominated by the principle of monopoly. In this type each employed inventor is entitled to a certain remuneration in addition to his salary, regardless of his job position, although the type of job position affects the amount of this remuneration. This type is dominated by the principle of civil law—the inventor is considered the originator (original owner) and the employer claims and subsequently acquires ownership rights for a certain quasi-license fee (remuneration).
4.2 Type 2
This is a system similar to the first type, however, with one significant difference—inventors, whose job tasks include inventing, are usually not entitled to special remuneration beyond their salary. The monopoly principle is therefore to a certain extent replaced by the principle of extra service, that is, for a specific reward, the employee’s performance needs to be beyond the performance expected in his job position.
4.3 Type 3
In this type (in contrast to type two) there is a fairly noticeable application of the principle of extra service. Countries in this type have a system that covers most invented innovations with a negotiated wage. The discussion about a specific remuneration over and above the wage occurs only rarely and in very exceptional cases. For example, the United Kingdom defines these cases as inventions that bring an extraordinary benefit to the employer.
4.4 Type 4
The last type identified is the type that prevails in Anglo-Saxon countries, such as the United States. It is a system in which the payment of various rewards is entirely voluntary and contractual. These rewards, often defined by internal company regulations, are tied to a certain extra performance of the employee, so they are also philosophically constructed on the principle of extra service.
Created types can also be viewed from additional perspective views. For example, from the perspective of the dominant type of rights (patent (civil)-labor-contractual), one can see from the first type toward the fourth type a certain degree of erosion of the principles of patent law (i.e., the rights of the inventor/citizen) toward the principles of labor law, in which the fruits of the employee’s work are primarily by the ownership of the employer, or contractual law, in which what the employee and the employer agreed upon in the contract primarily applies.
The identified types also well reflect the overall way the economy is organized (CME-LME). In the CME system of economies in which emphasis is placed on specific education at the expense of limited employee flexibility, it makes sense to grant inventors a certain specific remuneration through patent law, which is more difficult for them to negotiate on a relatively inflexible labor market. And conversely, in a situation where in the LME system the innovative employee is relatively flexibly educated, it seems reasonable to leave the reward system in the flexible labour market and perceive the whole process through motivation theories.
5. Discussion
Previous literature indicated the existence of a relatively large number of different remuneration systems for employed inventors, with the German approach being mainly discussed. The typology developed in this text suggests that, at a certain level of abstraction, several distinguishable types can be observed across countries. The main underlying principle for differentiating the created types is the principle of monopoly and extra services [17], while additional interpretation of the differences is helped by legal and market concepts applied to some extent differently in countries with different legal and economic traditions [50, 51].
However, it should be mentioned that the German approach, although it is often criticized for its uniformity [28, 42], may be used in disputes in other countries as well, as shows the evidence from, for example, Austria [29] or Italy [59]. This use of the German model in other countries is useful since uniform rules may be too rigid to grasp employee motivation at the firm level, however, in a situation where there is a legal dispute between an employee and an employer, some robust estimation model must be available which would verify that the reward was reasonable. Thus, countries that do not have detailed rules can be inspired by the German approach when solving court disputes. In this context, the German approach also remains a sui generis type.
Although four types can be well distinguished at a given level of abstraction, some variability remains even within the defined four types. From the empirical evidence (listed in Appendix 1), we can see, for example, relatively substantial differences between Germany and Japan. Japan, unlike Germany, does not have a uniform methodology for calculating the remuneration, has no arbitration board for dispute resolution, and has recently emphasized the binding nature of clearly described internal company remuneration rules [18]. However, the inclusion of Japan in the group with Germany is done because the amount of remuneration remains reviewable by the court and also because Japan does not deny the right to remuneration even to employees with R&D contracts. Similarly, we can see differences within the third type between the UK and the Dutch systems. While the terms of an “extraordinary situation” are defined within the UK [55], the Netherlands seems to be awaiting this definition [20].
The long-term existence of these different types indicates the fact that there is no one best system applicable across the globe. Rather, it appears to be the case that the systems applied in individual countries are the result of many different legal and market principles and their interactions, and one cannot simply transfer a particular system to another country. The given results can also be explained by the concept of equifinality, often observed in typologies [53], meaning that an equivalent result (adequate remuneration system) can be reached in several ways. Research carried out at the level of individual organizations of one country [58] also suggests the same—the variability of ways how to comply with one given statutory rules.
The results must also be seen within the accepted limitations. The first such limitation is the fact that only a limited number of countries were analyzed, and additional research may identify another well-differentiated type of reward system. Such other types may (but may not) be current systems used in countries with strong control over political and market events, which were not the subject of this analysis. The system used in socialist countries without private property [31] can also be recognized as another separate type.
6. Conclusions
This chapter dealt with the topic of rewarding employee inventions in private sector. Unlike the principles of patent law, this is a topic that is not harmonized across countries (not even in the EU) and represents a potential risk for innovative organizations entering foreign markets. This risk lies in potential conflicts between organizations and their local innovative employees. Although each country takes a somewhat different approach in this area, this chapter identifies four distinguishable types of remuneration systems for employed inventors. The analysis works with empirical evidence based on knowledge of the remuneration systems in many countries. The main key to differentiating the four defined types of remuneration systems seems to be the degree to which individual countries apply either the so-called monopoly principle or the so-called extra service principle.
Acknowledgments
The preparation of this chapter was funded by the Prague University of Economics and Business research project—VSE IP 100040.
| Germany | France | Japan | Sweden | |
|---|---|---|---|---|
| 3,554,676 | 2,577,596 | 4,435,431 | 565,187 | |
| Yes | No | No | Yes | |
| Yes | Partly | No | Partly | |
| Yes | Yes | No | Yes | |
| 1) | 1) | 1) | 1) | |
| 2) | 2) | 2) | 2) | |
| 3) F | 3) | |||
| Reasonable compensation for 1) | Additional remuneration for 1). Fair price for 2 (or for 3). | Reasonable remuneration for 1). Fair price for 2) | Reward for disclosure; additional remuneration after patent grant. |
| Czechia | Austria | Italy | Spain | |
|---|---|---|---|---|
| 210,996 | 405,146 | 1,862,306 | 1,238,778 | |
| No | No | No | No | |
| No | No | No | No | |
| No | No | Yes | Yes | |
| 1) | 1) | 1) | 1) | |
| 2) | 2) | 2) | 2) | |
| 3) | 3) | |||
| Reasonable reward, additional remuneration for employee inventions | No specific reward for 1)—only wage for research contracts; when situation changes, then additional compensation | No specific reward for 1)—only wage | Wage sufficinet; supplementary remuneration only beyond reasonable situations for 1). Additional remunerations for 2). |
| UK | Netherland | USA | |
|---|---|---|---|
| 3,036,532 | 846,873 | 20,529,460 | |
| No | No | No | |
| No | No | No | |
| Partly | No | No | |
| 1) | 1) | 1) | |
| 2) | 2) | 2) | |
| 3) | |||
| Remuneration only in case of outstanding benefit to employer | Yes, but very restrictive interpretation of courts. Remuneration only in exceptional circumstances | Only wage, usual pre-emptive agreements. Internal remuneration rules |
| Germany | France | Japan | Sweden | Czechia | |
|---|---|---|---|---|---|
| Specific law | Yes | No | No | Yes | No |
| General rules/details on remuneration | Yes | Partly | No | Partly | No |
| Specific arbitration board | Yes | Yes | No | Yes | No |
| Law tradition | Civil law | Civil law | Civil law | Civil law | Civil law |
| Typ of economy | CME | CME | CME | CME | CME |
| Overall arrangement | Institutional | Institutional | Institutional | Institutional | Institutional |
| Overall principle | Monopoly | Monopoly | Monopoly | Monopoly | Monopoly |
| Type evaluation | 1 | 1 | 1 | 1 | 1 |
| Austria | Italy | Spain | UK | Netherland | USA | |
|---|---|---|---|---|---|---|
| Specific law | No | No | No | No | No | No |
| General rules/details on remuneration | No | No | No | No | No | No |
| Specific arbitration board | No | Yes | Yes | Partly | No | No |
| Law tradition | Civil law | Civil law | Civil law | Case law | Civil law | Case law |
| Typ of economy | CME | CME | CME | LME | CME | LME |
| Overall arrangement | Institutional | Institutional | Institutional | Institutional/motivation | Institutional/motivation | Motivation |
| Overall principle | Extra service (weak) | Extra service (weak) | Extra service (weak) | Extra service (strong) | Extra service (strong) | Extra service (strong) |
| Type evaluation | 2 | 2 | 2 | 3 | 3 | 4 |
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