An article in Haaretz today reports on a recent Supreme Court decision suggesting that the inventor listed on a patent application may be entitled to compensation for a service invention even where he signed an agreement assigning the invention to his employer and waiving his rights to compensation. A service invention, described in Section 132 of the Patent Law, is an invention created during the employees' term of service for the employer and as part of his work which, unless agreed otherwise, belongs to the employer. It is similar to a work for hire in the US copyright context.
Justices Esther Hayut, Isaac Amit and Zvi Zylbertal determined that employees have the right to such payments even if their contract specifically states otherwise and the employee has forgone all intellectual property rights on behalf of the employer.
My reading of the decision is not that they decided the employee is certainly entitled to compensation, rather they said it is a possibility and something that may be within the purview of the Compensation and Royalty Committee created under Section 109 of the Patent Law. The court sent the case back to the district court to determine whether in fact the case should be heard by the Committee.
Furthermore, the article states that "The justices ruled that the lower court decision violated Bayer's basic rights laid out in the Basic Law on Human Dignity and Freedom." I did not see that in the decision. While the Court did mention the Basic Law, it was not in reference to this part of the decision.
It seems to me that this decision does not break any new ground. Already in 2010, the Compensation and Royalty Committee ruled that absent an explicit waiver of royalties, an employee may be entitled to such royalties even where he assigned the invention to the employer. The Committee also said that the right to compensation may be a personal right that is inalienable and not assignable to others. A good article on that decision can be found here. For information regarding service inventions and compensation in Europe, see here and here.
Perhaps, the doomsday scenario of paying an employee royalties on a service invention can be avoided with the following language in the employment or intellectual property assignment agreement:
For the removal of any doubt, all Proprietary Developments shall be deemed, to the extent applicable, “Service Inventions” as defined in the Israeli Patent Law, 1967 (the “Patent Law”), it being clarified that under no circumstances will Assignor be deemed to have any proprietary right in any such Service Invention, notwithstanding the provision or non-provision of any notice of an invention and/or Assignee response to any such notice, under Section 132(b) of the Patent Law. As such, Assignor acknowledges and agrees that the Assignee (or its successors and assigns) has and will forever have the sole and exclusive legal ownership and interest in all Proprietary Developments, and that the Assignor shall not be entitled to any additional compensation for same. The Assignor confirms and agrees that the Consideration constitutes appropriate remuneration for Service Inventions, and confirms that this arrangement is expressly intended to be an agreement with regard to the terms and conditions of consideration for Service Inventions in accordance with Section 134 of the Patent Law. Assignor confirms and agrees that it shall not be entitled to any additional remuneration of any nature for Proprietary Developments and/or Service Inventions, including in accordance with Section 134 of the Patent Law, and further expressly acknowledges and agrees that it will not be entitled to royalties, consideration or other payments with regard to any Service Inventions or any of the intellectual property rights set forth above, including any commercialization thereof, and does hereby expressly, irrevocably and unconditionally waive the right to receive any such additional royalties, consideration or other payments.
***UPDATE- Aug. 9, 2012***
In this Hebrew opinion piece from The Marker, Barry Levenfeld, a senior partner at Yigal Arnon & Co., writes that this Supreme Court decision is very dangerous for Israel's high tech industry which is a very important part of Israel's economy. Generally high tech company compensate their employees for their inventions in the way of options in the company in signed and binding agreements. Levenfeld thinks it is very troubling for the court to inject uncertainty in what up until now were very clear contractual arrangements between employees and their employers. The Court has just thrown the validity of all of those contracts into doubt and diminished the value of companies' core asset, their intellectual property. No acquiring company will want to buy technology some of whose rights belong to someone else and for which it needs to make payments of an unknown sum to the inventor. If this decision is allowed to stand, companies will have to think twice before deciding to maintain their headquarters in Israel. Levenfeld urges lawmakers to legislate a very clear and authoritative scheme to insure that this decision does not scare technology firms out of Israel and harm, companies, employees and the Israeli economy.
I wonder if the Knesset can legislate around this Court decision. If, according to the Court, the right to compensation for inventions is an inalienable right on the level of a "constitutional" right, the Supreme Court can always just nullify any law that purports to diminish that right. But if Mr. Levenfeld's points are taken seriously, the Knesset and the Court will have to find a way.
Judah, you're correct about the decision.
ReplyDeleteAs I represent the inventor in this case, I don't feel comfortable freely commenting on the decision. I did, however, provide some brief explanations to what makes it important in my blog post.
As for your suggested wording - I seriously doubt that this would work if the right is unwaivable. Though you're not calling it a waiver, that's exactly what it is...