Employee inventions are subject to the Act on the Right in Employee Inventions(1) in Finland. The Act is partly compulsory and governs:
- rights to an invention;
- invention remunerations;
- employee inventors' rights and obligations;
- employers' rights and obligations; and
- claims and disputes relating to employee inventions.
This article, the fourth in a series on employee invention issues,(2) focuses on invention remuneration in Finland.
Right to reasonable remuneration
An employee inventor's right to receive remuneration for their invention depends on two main conditions:
- The invention must be an employee invention under the Employee Inventions Act.
- The employer must acquire rights to the invention.
According to article 4 of the Act, the rights to an invention belong to the inventor, even when the invention arises during the inventor's employment relationship. However, the employer is entitled to acquire the rights to the invention in whole or in part if the invention results from an employee's activity in the performance of their duties or is essentially a result of an employee's experience in the enterprise or institution of their employer or an enterprise or an institution belonging to the same consolidated corporation. This also applies when the invention is a result of a task assigned to the inventor employee more specifically (for further details, see "Employee inventions in Finland – ensuring proper transfer and assignment of IP rights to employers").
If the employer decides to acquire the rights to an invention made by their employee, the employer is obliged to pay reasonable remuneration for the invention. Such right of remuneration of the employee inventor cannot be waived based any prior agreement and properly executed waivers are uncommon in practice. It should also be kept in mind that an underlying assumption exists in the Act such that if the employer acquires rights to an invention, a patentability assumption is made. This means that unless proven otherwise, the invention is considered patentable even if the employer chooses not to apply for a patent. Thus, payment of reasonable compensation is not directly tied to the granting of a patent but this can influence the amount of remuneration to be paid (for further details, see "Employee inventions in Finland – employer's rights and obligations").
Determining reasonable remuneration
The Act provides little guidance for determining reasonable remuneration. Article 7 of the Act stipulates that when determining the amount of remuneration to be paid, particular attention must be paid to:
- the value of the invention;
- the scope of the right that the employer acquires;
- the terms and conditions of the employment contract; and
- the contribution that other circumstances connected with the employment made to the conception of the invention.
Further guidance is provided by the related Employee Inventions Regulation. This regulation focuses on the value of the invention and instructs that the full economic impact should be considered even if the invention contributes only to a part of a wider beneficial result. Also, the value obtained through acquiring the rights by the employer (and the possible same consolidated corporation) must be considered as well as the potential value obtained through licensing, for example. The economic gain and benefit obtained by the employer must be measurable and a deduction of costs (eg, product development, investment, patenting and marketing costs) can be made if such costs were necessary to bring a product covered by the invention to market. Applying a licence analogy to the calculation of economic gain and benefit is also possible.
Due to the complexity of valuation, a common practice is to agree on the use of standard remuneration that is often paid in two or three phases. Employee invention guidelines and instructions are often used to define such standard remuneration. In most cases, this standard remuneration will be the entire remuneration for an invention, but naturally the circumstances may change over the lifetime of a patented invention and the Act takes this possibility into consideration.
Changing circumstances and special remuneration
The Act stipulates that regardless of a court decision or a contract concerning invention remuneration, a competent court may order otherwise if a substantial change in circumstances has taken place. An employee inventor is never obliged to refund any remuneration already paid. Thus, the Act only enables a higher remuneration to be paid to an employee inventor if the invention turns out have a greater value over time.
To avoid court proceedings and to ensure transparency on invention remuneration matters, companies often define a scheme for special remuneration and set basic rules and requirements for circumstances that must be met before a higher remuneration will be considered and paid.
Finally, it should be noted that an employee inventor is also entitled to bring a court action in a remuneration matter up to 10 years from the date on which the employer notified the inventor that it will acquire the rights to the invention. However, if a patent application related to the invention has been filed, the court action may be raised within one year from the grant date, which means that the time period for a court action in a remuneration matter could possibly occur beyond the standard 10-year limit.
Comment
Employers must pay particular attention to managing invention processes to secure their rights under the Finnish Employee Inventions Act as the Act by nature can be seen as quite pro-inventor. As the concept of reasonable remuneration is somewhat vague under the Act and the Employee Inventions Regulation, it is important to establish remuneration policies applicable to all employees to avoid court proceedings and to ensure transparency and equal treatment of employees on invention remuneration matters.
This blog is also published in Lexology.
