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04 May 2010
In an August 4 2009 decision (9 Ob A 39/08p) the Supreme Court confirmed its view on the validity of flat-rate compensation agreements for employee inventions.
The claimant, a retired employee of the respondent, invented during his employment a compressor to be used within the respondent's business. The respondent obtained patent protection for the compressor. At the respondent's insistence, the parties agreed to a flat rate of compensation, whereby the claimant waived his right to claim further compensation for his patented invention. In his lawsuit the claimant requested adequate remuneration, arguing among other things that (i) a change in circumstances entitled him to additional compensation, and (ii) the waiver was invalid according to Austrian law.
The Patent Act provides for regulations with respect to employee inventions. Thus, employees (if they are not specifically employed for the purpose of making inventions) are entitled to adequate compensation if the invention or any right to use the invention is transferred to the employer. The agreed amount of compensation can be adjusted (both in advance and retrospectively) if the compensation is rendered inadequate due to a change in circumstances. The adjustment must not lead to an obligation of the employee to repay any compensation received.
The appellate court stated that any flat-fee arrangement entered into during the employment relationship was null and void. The Supreme Court clarified that such agreements are valid and enforceable, but are subject to later adjustment by the courts. The Supreme Court reasoned that the payment of a flat rate can in fact be advantageous for the employee, since he or she immediately has greater financial funds to dispose of and need not suffer any diminution if the invention drops in value later on. Thus, compensation for employee inventions may be effected either by periodic payment (licence fees) or by a single lump-sum payment.
Furthermore, the Supreme Court clarified that even though the claimant waived his right to claim further compensation, this waiver was invalid and did not affect a retrospective adjustment of the compensation. The court referred to Section 17 of the Patent Act, whereby any rights to which an employee is entitled according to the relevant provisions on employee inventions cannot be restricted or rescinded by agreement to the employee's detriment. Thus, an adjustment of the amount of compensation is also permissible if the employee knew of the true value of the invention when concluding a flat-rate agreement or accepting a waiver, but could not provide sufficient evidence for that assumption. The amount of compensation will reflect the value of the invention and is to be computed on the basis of the economic significance and other relevant aspects of the invention. If the invention is at least of some internal economic relevance for the employer, compensation in the amount of what is proper in the individual case must be paid (cost benefit analysis).
The Supreme Court's ruling is in accordance with its former decisions; therefore, flat-rate compensation agreements are permissible and - regardless of a declared waiver - are subject to adjustment if circumstances change. From the employer's perspective, there is no incentive to enter into a flat-rate agreement, as it is only the (former) employee who can benefit from a later adjustment. In addition, the employer is at risk of extensively using an invention (based on a reasonable flat-fee arrangement), only to find out later that, by way of a retroactive adjustment to the employee's benefit, the use turned out to be more expensive. Such a circumstance is particularly troubling for the employer if - as in the present case - other non-patented technical alternatives were available for use.
For further information on this topic please contact Ferdinand Graf at Graf & Pitkowitz Rechtsanwälte GmbH by telephone (+43 1 401 17 0), fax (+43 1 401 17 40) or email (firstname.lastname@example.org). The Graf & Pitkowitz Rechtsanwälte GmbH website can be accessed at www.gpp.at.
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