Research on the ownership of patents for inventions made in the course of employment

Patent ownership disputes are common for inventions made in the course of employment. These disputes are particularly typical, arising from the conflict between former employees and their former employers, or even their new employers, each asserting their rights. There are also numerous cases of malicious circumvention of the employee invention system to seek illicit gains. This article analyzes the elements for determining patent ownership related to employee inventions, aiming to help both employees and companies correctly understand the employee invention system and avoid related legal risks. It also provides a reference for the analysis of similar cases based on case studies and judicial opinions.

Author | Yu Chunbo

Editor | Moker

In 2022, a US intellectual property fraud case attracted widespread media attention. An executive at Qualcomm developed a method for quickly evaluating chips and knew that if he applied for a patent, it would belong to the company. He applied for the patent in his sister’s name and registered a new company based on it. Qualcomm fully recognized the value of the patent and acquired the company for $150 million, approximately 1 billion RMB. To circumvent relevant laws, the executive deliberately committed the aforementioned fraud, and he and three accomplices were ultimately arrested.

Similar cases are not uncommon in my country. In recent years, disputes over patent ownership between employees and employers have been on the rise, with disputes over the ownership of inventions made by employees after leaving their jobs being the most typical. A comprehensive study of the requirements for determining patent ownership of inventions made by employees, based on both theory and practice, is beneficial for advocating honesty and trustworthiness in the patent application process and for helping employees and employers avoid legal risks in the patent application, confirmation, and enforcement processes.

Disputes over patent ownership between employees and employers can generally be divided into three categories based on the types of related facts: those involving infringement of trade secrets, those involving contract disputes, and those involving service inventions. In some special cases, these three types may overlap. This article mainly focuses on the patent ownership of inventions that may involve service inventions.

01

Comparative Study of Service Invention Systems

Although the direct source of inventions is the intellectual activity of the inventor or designer, in social life practice, the generation of most inventions also depends on a variety of other factors. Employers pay salaries to employees, provide comprehensive benefits, and even provide technical and material conditions. Based on the principle of fairness, both parties should obviously have the right to claim their interests. Therefore, in major countries that implement patent systems, each has considered the balance of interests between employers, employees, and the general public, and corresponding institutional designs exist.

For example, since the first half of the 20th century, the United States, based on a series of case law cases involving disputes over patent ownership between employees and employers, has established two criteria for judgment: The first is that the invention was made by the employee using the employer’s resources during the employment period, and there is no explicit agreement between the employee and the employer. In this case, the patent ownership belongs to the employee, while the employer has the right to implement the patent free of charge. The second is that if the employee’s job task is to engage in specific invention activities, this specific employment relationship itself means that the employee transfers the invention results to the employer in exchange for corresponding remuneration. In this case, the employer owns the patent [1].

In civil law countries, Germany adopts a legislative model that prioritizes employees, and Germany divides inventions into two categories: service inventions and free inventions. Whether it’s a service invention or a free invention, the inventor owns the patent. For service inventions, the employer only has the right to use the patent and the right of first refusal. Furthermore, the employer’s right to use the patent usually does not have exclusive or monopolistic effect; it is merely equivalent to obtaining a general license to the patent. The employee can still implement the patent themselves or grant a general license to a third party to implement the patent [2]. If the employer wishes to purchase the patent, the employer only has the right to purchase it under the same conditions before a third party. That is, when the employer exercises the right of first refusal, they also need to pay a market price.

France, like Germany, is a major country in the civil law system, and its legislative model prioritizes the employer. France classifies service inventions into two categories: inventions made under the job and inventions that can be attributed to the employer outside of the job. For inventions made under the job, the employer owns the patent. For inventions that can be attributed to the employer outside of the job, the decision is based on factors such as the employee’s work experience, work convenience, and use of the employer’s resources. For inventions that can be attributed to the employer outside of the job, the employer has the right to request the employee to transfer all or part of the patent rights or patent application rights [3]. my country’s Patent Law stipulates that inventions created in the course of performing duties for one’s employer or primarily using the employer’s material and technical resources are considered service inventions. The right to apply for a patent for a service invention belongs to the employer, and upon approval, the employer becomes the patentee. The employer can legally dispose of its right to apply for a patent and the patent right for its service invention, promoting the implementation and application of the relevant invention. The above provisions clearly state that the patent application right and patent right for service inventions belong to the employer, and the employer can legally dispose of these rights.

Comparing the legal systems related to service inventions in the aforementioned countries, the details of the corresponding system designs vary from country to country, and the principles and specific conditions for allocating related rights also differ significantly. However, some commonalities remain: First, under certain conditions, employers (employers) possess certain rights to patents. Second, the design of the systems reflects a balance and interplay of interests among employers, employees, and the general public. Third, all systems pursue social value.

02

Requirements for Recognizing an Invention as a Service Invention

Based on the provisions of the Patent Law and the analysis of cases involving ownership disputes related to service inventions, an invention must meet at least three requirements to be recognized as a service invention: First, the actual inventor or designer of the invention must be identified, and a legally defined labor or personnel relationship must exist between them and their employer. Second, the type of service invention must be determined, whether it is part of the employee’s job duties or a task assigned by the employer, or whether it primarily utilizes the employer’s material and technical resources. Third, the labor or personnel relationship of the inventor or designer at the patent application date must be determined, and whether it meets the legal requirements.

(I) Inventor or Designer Requirements

Identifying the inventor or designer of the patent or patent application is a fundamental requirement for determining the ownership of patent rights and patent application rights. The Patent Law stipulates that the entity implementing the invention must be the inventor or designer, as it involves “performing tasks for the employer or primarily utilizing the employer’s material and technical resources.” For non-service inventions, the patent right and patent application right belong to the inventor or designer. In cases where the Patent Law stipulates a contractual agreement, the inventor or designer is also a party to the contract. Therefore, regardless of the above circumstances, before confirming the patent right and patent application right, it is necessary to first confirm the actual inventor or designer of the patent or patent application.

According to the Implementing Regulations of the Patent Law, the determination of the inventor or designer is based on their creative contribution to the substantive features of the invention. In any other case, such as those who make other contributions, those who are aware of the invention, or those with a specific identity or relationship, they are not the inventor.

The Patent Law stipulates that the inventor or designer enjoys the right of attribution, which is an important right. Regardless of whether it is a service invention or not, the inventor or designer has the right to be named in the patent documents. The inventor’s or designer’s right of attribution is a personal right, which does not require the approval of anyone, including the patentee, and does not change with the transfer of the patent right or patent application right. The patent right or patent application right is the property right of the patentee, and it is one of two independent civil rights [4]. Although independent, the two rights are closely related because the determination of both rights is based on the requirement to identify the inventor or designer of the patent or patent application. In judicial practice, when a former employee has a dispute with their former employer regarding the ownership of a patent or patent application, there are also cases where the right of authorship of the inventor or designer is also brought up [5]. The requirements for determining the right of authorship of an inventor or designer are relatively simple. Usually, it is only necessary to identify the actual inventor or designer, and that inventor or designer can legally enjoy the right of authorship. However, the requirements for determining the right of authorship of patents and patent applications are relatively complex, and other statutory requirements must be met simultaneously. Therefore, in complex patent ownership disputes, the actual inventor or designer can also file a lawsuit first, claiming that the right of authorship has been infringed, and determine the actual inventor or designer through judicial adjudication. Then, the relevant unit can then claim that the ownership of the patent and patent application rights has been infringed based on the system of service inventions.

There are also cases in my country where employees collude with third parties or apply for patents in the name of third parties in order to circumvent the legal provisions on service inventions and achieve the purpose of seeking personal gain. In this case, determining the actual inventor or designer of the invention becomes the focus of the dispute. In my country’s patent examination procedure, the inventors recorded in the application documents are not subject to substantive examination. Therefore, the inventors or designers recorded in the patent application documents and the patent certificate after authorization have not been examined and are merely the unilateral claims of the patent applicant. When there is a dispute over the actual inventor or designer, it is necessary to prove, based on relevant evidence, who made the creative contribution to the invention, and thereby determine the actual inventor or designer [6].

(II) Type Requirements

my country’s Patent Law stipulates that service inventions can be divided into two categories: one is inventions completed in the course of performing the work tasks of the employer, and the other is inventions mainly completed using the material and technical conditions of the employer. Therefore, it is necessary to analyze whether the invention is related to the above two categories and to analyze what type it belongs to.

Regarding the performance of the employer’s tasks, the Implementing Regulations of the Patent Law further stipulate that it is divided into two situations: completing the job duties and completing tasks outside the job duties assigned by the employer. Based on the concept of balanced protection of intellectual property rights, the actual work content of the inventor’s job position should be comprehensively determined based on the actual situation. Instead of mechanically interpreting the invention based on the inventor’s job title, employment contract, or job description, etc., a literal interpretation is not appropriate. In scientific and technological activities, collaborative work is often required to complete inventions, and the actual participants are characterized by mobility and diversity. In judicial practice, a comprehensive judgment is usually needed based on the specific circumstances of the case.

In the guiding case published in the Supreme People’s Court Gazette, the case of Li Jianyi v. Shenzhen Remote Intelligent Equipment Co., Ltd. regarding a patent ownership dispute, the Supreme People’s Court held that when determining whether an invention is related to the original employer’s job duties or assigned tasks, the following should be considered comprehensively: first, the specific content of the job duties or assigned tasks; second, the specific circumstances of the patent in question, mainly judging from the technical field, technical problems, technical solutions, technical effects, and substantive characteristics, and the relationship between the patent in question and the original employer; third, whether the original employer has carried out related technical research and development activities, or whether there is evidence to prove that the relevant technology has a legitimate source; and fourth, whether the relevant parties can provide a reasonable explanation for the research and development process and the source of the technology [7]. For inventions that mainly utilize the material and technical conditions of the unit, the Patent Law respects the autonomy of the inventor or designer and their unit. The inventor or designer and their unit can sign a contract to agree on the right to apply for a patent and the ownership of the patent right. The material and technical conditions of the unit specifically refer to the unit’s funds, equipment, parts, raw materials, or technical information that is not publicly disclosed. In related ownership disputes, there is a certain degree of discretion in the specific scope of both “mainly” and “material and technical conditions”, which leads to widespread controversy. Some argue that the scope should not be unduly expanded, and that any invention related to scientific research tasks should be considered a service invention. Furthermore, it should not be limited to the use of experimental equipment for testing or database search to determine whether it is a service invention [8]. Others argue that the system should be restructured, and if the ownership of inventions made using the material and technical conditions of the unit is not agreed upon by the unit and the inventor, the inventor is the right holder of the patent right and the patent application right, and the unit enjoys the corresponding compensation or free implementation right [9]. In response, the Supreme People’s Court held that although such service inventions are unrelated to the inventor’s work tasks in their unit, the inventor must rely on the unit’s funds, equipment, parts, and other material and technical conditions during the research and development process. To protect the unit’s economic interests, the law stipulates that the right to apply for a patent and the patent right for such service inventions also belong to the unit. However, since the unit’s material and technical conditions are mainly utilized, the unit’s economic interests can be protected in various ways. Therefore, to encourage inventors to make inventions outside of their work tasks, the law stipulates that for such service inventions, the unit and the inventor can determine the ownership of rights through a contractual agreement [10].

Regarding whether an invention is mainly completed using the unit’s material and technical conditions, the Supreme People’s Court believes that it should be analyzed specifically based on the research and development characteristics of the technical field to which the invention belongs, specifically analyzing the type, scope, and characteristics of the material and technical conditions required to form the invention. For example, for inventions in the mechanical field, if the unit’s material and technical conditions are only used to verify and test the equipment after the invention has been completed, it usually does not fall under the category of mainly utilizing the unit’s material and technical conditions. As for inventions of traditional Chinese medicine compound products, due to the complex proportions of traditional Chinese medicine, clinical data and other efficacy data are usually very important resources for completing the invention, and can be considered as a case of mainly utilizing the material and technical conditions of the unit [11].

(III) Time Requirements

For inventions completed “in the performance of the unit’s work tasks”, there are two situations for recognizing them as service inventions. One is during the period when the employee is employed by the unit; the other is within one year after the employee retires, is transferred from the original unit, or the labor or personnel relationship is terminated. Inventions completed in the above two time periods are service inventions if other requirements are met simultaneously.

Inventions in the sense of patent law do not belong to prior art and prior design, so there are very large differences in individual cases. It cannot be guaranteed that inventions made within one year after the termination of the employee’s labor or personnel relationship that are related to the original unit’s tasks are based on the original unit’s work tasks. Similarly, it cannot be guaranteed that inventions made more than one year after the termination of the employee’s labor or personnel relationship are completely unrelated to the original unit’s tasks. However, if every case required determining the relationship between a departing employee’s invention and their former employer’s duties based on specific circumstances, a series of problems would arise in judicial practice, such as the inability of the parties to provide sufficient evidence and excessive consumption of judicial resources. For such cases, specifying a one-year timeframe as the standard for judgment strikes a reasonable balance between legal fairness and operability.

Regarding inventions primarily made using the employer’s material and technical resources, a special case exists: the use of undisclosed technical information from the former employer. This undisclosed technical information may constitute trade secrets; therefore, service inventions are related to trade secret infringement. In this case, the former employer’s claim to patent rights does not necessarily strictly adhere to the “termination of labor/personnel relationship” rule.

The condition of “within one year after retirement” applies. For example, in the case of Dalian Bomai Technology Development Co., Ltd. and He Kejiang’s dispute over infringement of trade secrets and patent ownership, the application date of the disputed patent was one year after the retired employee’s retirement. The original unit filed a lawsuit for infringement of trade secrets and a lawsuit for confirmation of patent ownership. The Supreme People’s Court held that the lawsuit for infringement of trade secrets and the lawsuit for confirmation of patent ownership could be tried together [12].

03

Total In conclusion, the service invention system needs to balance the interests of employees, employers, and the general public. In some special circumstances, it also needs to consider the interests of departing employees, former employers, and new employers. Whether in the establishment of the system or in judicial practice, it is necessary to seek a balance among multiple parties. It is an important, complex, and difficult issue. Under our current service invention system, to analyze and determine whether an invention is a service invention and who should own the patent application right or patent right, at least the following conditions need to be considered: First, the actual inventor or designer should be identified to determine the relationship between the employee and the employer. This is especially important in cases where there may be malicious circumvention of the relevant legal provisions on service inventions. Second, it should be analyzed whether the invention is completed in the course of performing the work tasks of the employer or mainly using the material and technical conditions of the employer, and what type it is. Third, it is necessary to analyze the labor and personnel relationship of the inventor or designer at the time of the patent application and whether it meets the time requirements stipulated by law. References [1] Wang Chongyuan. The Evolution of the Service Invention System in the United States and Its Implications for my country, [J]. Journal of Anhui University ( [1] Philosophy and Social Sciences Edition), 2012, No. 1: 135-140.

[2] Robert P. Merges, “The Law and Economics of Employee Inventions”, 13 Harv. J. L. & Tech.1 (1999-2000), pp. 14-15.

[3] The provisions of Articles 611-7, paragraphs 1 and 2 of the French Intellectual Property Code.

[4] Jiang Liwei. How to determine joint infringement of inventor’s right of attribution—A review of the case of Lei Guang and Li Naiqiang v. Huang Li and seven other defendants and the third party Shandong Hanlin Company for infringement of inventor’s right of attribution, [N]. China Intellectual Property News, September 4, 2013, p. 009.

[5] Beijing Higher People’s Court. (2016) Jingminzhong No. 315 Civil Judgment.

[6] Jiangsu Higher People’s Court. (2016) Suminzhong No. 722 Civil Judgment.

[7] Supreme People’s Court. (2019) Supreme Court Civil Appeal No. 6342.

[8] Shi Chunhui. A Brief Discussion on the System of Service Inventions—Taking the Patent Ownership Dispute between Luo Moumou and the Institute of Mechanics, Chinese Academy of Sciences as an Example [J]. Legal System and Society, May 2020 (Part II), 33, 41.

[9] Chen Lizhao, A Study on the Patent Ownership Configuration of “Utilizing the Material and Technical Conditions of the Unit” [D]. Xiangtan University, Master’s Thesis, June 2020.

[10] Supreme People’s Court. (2021) Supreme Court Intellectual Property Civil Final Judgment No. 244.

[11] Supreme People’s Court. (2021) Supreme Court Intellectual Property Civil Final Judgment No. 403.

[12] Supreme People’s Court. (2019) Supreme Court Intellectual Property Civil Final Judgment No. 671.