Further Review of Employee Invention Compensation Claims

Under the Promotion of Inventions Act, an employee is entitled to receive reasonable remuneration in exchange for the transfer to his employer of inventions in use. In determining reasonable compensation, an employer must take into account the benefits he has obtained or expects to obtain from the exclusive use of the invention, as well as the contribution of the employee to the realization of the invention. compared to contributions from the employer or other employees. (see Article 15(6) of the Invention Promotion Act and Supreme Court Decision No. 2014Da220347 issued on January 25, 2017). Korean courts have often required little evidence to recognize that the employee is entitled to additional compensation, for example, that a patent issued on its own provides some degree of advantage to the employer when determining reasonable compensation for employee inventions. However, recent rulings, as noted below, show that Korean courts are beginning to review employee invention compensation cases with an increased level of scrutiny, requiring employees to provide clear evidence linking profits companies and the contribution to the invention.

Case for medical device

A former employee of a medical device company has sought compensation for an in-service invention based on an issued patent. In the past, courts have often assumed that the employer’s profits were attributable to the invention without requiring detailed evidence linking the employer’s profits directly to the invention. Criticizing this trend, the medical device company argued that the employee had to demonstrate that the employer’s profits were directly attributable to the exclusive use of the invention. The district court held that the employee was not entitled to reasonable compensation because the medical device company did not appear to have benefited from the exclusive use of the invention in service. The Court considered several factors, including: how much of the product is attributable to the invention, whether the invention is a major factor for customers who purchase the product, whether the invention can be considered a major cause of increase sales or market share, if the invention makes the product technically superior to competitors’ products and if there is an alternative technology to the invention (see Seoul Central District Court Decision No. 2019Gahap563099 issued on May 27, 2022). In short, the employee was not entitled to compensation because he had not directly tied the benefits to the employee’s contribution.

Automotive engine crankcase

An employee of an automobile manufacturing company sought compensation for a patented invention used in mass-produced automobile engines. The case was appealed all the way to the Supreme Court of Korea. After a detailed review, the Court of Appeals and the Supreme Court concluded that the employee had not established that he had made a significant contribution to the invention that could be linked to the profits of the company.

We will continue to monitor whether this trend of holding employees accountable for directly linking their contribution level to employer benefits continues. If so, employers may consider reassessing your employee compensation programs and policies.

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