CONTENTS
- 1. Employee Invention Compensation | Concept and Significance
- - Legal Basis and Rights Relationships of Employee Invention Compensation
- 2. Employee Invention Compensation | Types of Compensation
- - Principles for Calculating Employee Invention Compensation
- - Procedures for Introducing Employee Invention Compensation Regulations
- 3. Employee Invention Compensation | Benefits of Using the Employee Invention Compensation System
- - Necessity of Advance Preparation and Strategic Operation of the Employee Invention Compensation System
1. Employee Invention Compensation | Concept and Significance
Employee invention compensation is the payment that a company makes to an employee when the employee makes an invention, such as a patent, in the course of their work and the company succeeds to the rights related to it, in return for those rights.
Here, an employee invention is not limited to inventions but also includes devices, creations, and the like.
To meet the requirements for an employee invention, the invention must be that of a worker engaged in another person’s business under an employment contract, the worker’s invention must by its nature fall within the scope of the employer’s business, and the act leading to the invention must fall within the worker’s present or past duties.
Today, most technical inventions are completed not by an individual’s idea alone but with the company’s support, including its research environment, equipment, personnel, and funding.
Accordingly, a reasonable adjustment of interests became necessary between the employee who created the invention and the employer who supported it, and the “employee invention compensation system” is what legally codified this.
The Invention Promotion Act requires that, when an employee makes an invention in the course of their duties, the employer succeed to the relevant rights and pay fair compensation to the employee.
This is an important legal mechanism that achieves both the securing of a company’s technological competitiveness and the motivation of employees.
Legal Basis and Rights Relationships of Employee Invention Compensation
Under Article 15 of the Invention Promotion Act, an employee invention is subject to succession by the company, and a company that has succeeded to the rights must pay reasonable compensation to the inventor.
The obligation to compensate exists even where the company, after succeeding to the rights, does not file an application or abandons or withdraws it. The method and standards for compensation should be made clear through work rules or separate compensation regulations to prevent disputes.
A company should establish employee invention compensation regulations in advance and announce them to employees, and any change unfavorable to employees requires the consent of a majority of the employees.
② The employer, etc. shall prepare compensation regulations specifying the standards for determining the form and amount of compensation under paragraph (1), the method of payment, and similar matters, and shall notify the employee, etc. thereof in writing.
2. Employee Invention Compensation | Types of Compensation
Employee invention compensation applies various methods of compensation by stage of the invention, according to the compensation rules set by the company.
It is generally divided into invention proposal compensation, filing compensation, registration compensation, working (performance) compensation, disposal compensation, and filing-deferral compensation.
In addition, examination request compensation and patent defense compensation may also be operated.
A company may consider its industry, the type of invention, and employees' compensation preferences, and, beyond monetary compensation, may also offer non-monetary compensation such as overseas training, sabbaticals, and support for degree programs to encourage motivation for employee inventions.
▶Types of employee invention compensation
Category | Description |
|---|---|
Invention (proposal) compensation | Compensation in the nature of an incentive paid for the idea and inventive effort, regardless of whether a patent is filed, when an employee conceives and proposes an invention |
Filing compensation | Compensation paid when the employer succeeds to the employee's invention and files it with the Korean Intellectual Property Office |
Registration compensation | Compensation paid when an employee invention to which the employer has succeeded completes patent registration |
Working (performance) compensation | Compensation paid to the employee on a differentiated basis, as a certain percentage or amount of the profit, when the employer actually works a filed or registered invention and generates revenue |
Disposal compensation | Compensation paid as a certain percentage of the disposal amount when the employer assigns an employee invention patent to a third party or grants a license and thereby obtains a monetary benefit |
Filing-deferral compensation | Compensation paid when an invention is preserved as undisclosed know-how, or when filing is deferred due to concern over significant harm upon disclosure |
Examination request compensation | Compensation paid when the employer proceeds with a request for examination of a filed invention |
Defense compensation | Compensation paid when an opposition, trial, or invalidation trial is filed against a filed invention of another party related to the company's industry, or when infringement of the company's patent is detected |
Performance (results) compensation | Performance-based compensation paid when an employee invention achieves substantial results such as increased sales, cost reduction, or the opening of new markets for the company |
Non-monetary compensation | Non-monetary incentives other than money, such as overseas training, study abroad, sabbaticals, support for degree programs, and the grant of a preferred-position option |
Principles for Calculating Employee Invention Compensation
When calculating compensation, the profit that the invention contributed to the company and the inventor's degree of contribution should both be considered.
The standard for calculating the compensation amount must comprehensively reflect the following factors for its legitimacy to be recognized.
② Non-financial effects such as improvement in technological capability and brand value
③ The inventor's individual contribution and contribution rate
To prevent legal disputes, it is advisable to set out the calculation method, payment timing, and payment method in regulations and to establish a procedure for notifying employees of the compensation details in writing.
Procedures for Introducing Employee Invention Compensation Regulations
When introducing an employee invention compensation system, the following procedure should be followed.
The compensation rules should clearly set out the scope of the transfer of rights, the compensation standards, the method of paying compensation, the calculation method, the procedure for raising objections, and similar matters.
The Korea Invention Promotion Association provides ‘customized employee invention compensation rule consulting’ at no charge, and using this service may be a useful approach.
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3. Employee Invention Compensation | Benefits of Using the Employee Invention Compensation System
The employee invention compensation system can be used as a managerial and strategic mechanism beyond merely fulfilling a legal obligation.
Where a company introduces and operates it effectively, the company can expect the following specific benefits.
1. Stable Securing of Core Patent Rights
Employee inventions are often directly connected to a company's core technology.
By lawfully succeeding to the rights to employees' inventions through the system and securing those rights stably, a company can secure patent rights and technological exclusivity amid competition with other companies.
In particular, for startups and small and medium-sized enterprises, this is very important because key IP accounts for most of the company's value.
2. Prevention of the Loss of Talented Personnel and Provision of Motivation
Providing fair compensation and incentives for employee inventions can increase the motivation of research and development personnel and encourage the will to develop technology.
Compensation for performance can prevent the loss of talented personnel and enable continuous technological innovation, allowing an organization to maintain its technological competitiveness over the long term.
3. Securing Government Support Programs and Tax Benefits
A company that has established an employee invention compensation system may receive preferential additional points in government support programs of the Korean Intellectual Property Office, the Ministry of SMEs and Startups, and the Ministry of Science and ICT.
In addition, a company can receive benefits in reducing corporate tax through the tax credit for research and human resource development expenses applied to employee invention compensation, which can reduce financial burdens.
Compensation paid to inventors is granted a tax exemption up to a limit of 7 million won, which can also raise employee satisfaction.
4. Reduction of Registration Costs for Intellectual Property Rights Such as Patents, Designs, and Utility Models
A company operating an employee invention compensation system is granted eligibility for expedited examination by the Korean Intellectual Property Office, which shortens the period for obtaining rights, and it may also receive an additional 20% reduction in registration fees for years 4 through 9, thereby reducing the long-term cost of maintaining and managing intellectual property rights.
5. Establishing an Intellectual Property Management System and Preventing Legal Risks
By clearly setting out the attribution of rights and the compensation method between employees and the employer through employee invention compensation rules, a company can prevent in advance disputes over the attribution of rights, claims of unfair distribution of profits, and IP disputes with former employees.
Through this, a company can reduce unnecessary legal costs and build an intellectual property management system that manages corporate risk.
6. Enhancing Corporate Image and External Credibility
The mere fact of operating an employee invention compensation system can build a corporate image of a corporate culture that respects talent, investment in technological innovation, and the practice of ethical management, which can have a positive effect on external reputation and the securing of investor trust.
Necessity of Advance Preparation and Strategic Operation of the Employee Invention Compensation System
The Invention Promotion Act treats an employer as having provided "reasonable compensation" when the employer pays compensation in accordance with its compensation rules.
However, formal rules alone are not sufficient, so the employer must secure reasonable compensation standards, prior consultation with employees, public disclosure, and clarity in the criteria for calculating compensation.
Neglecting these matters requires caution, as an inventor may later file an additional claim for damages or a lawsuit seeking to invalidate the assignment of rights.
The employee invention compensation system is not a simple personnel or welfare program but a strategic management tool that connects to a company's securing of core intellectual property rights, dispute prevention, motivation for research and development, and even eligibility for government support.
The more technology-intensive their business model, the more startups and SMEs need to establish clear employee invention compensation rules in advance and operate them effectively, which can prevent unnecessary legal disputes, prevent the loss of key talent, and secure government support and tax credit benefits.
Seeking the assistance of an attorney specializing in intellectual property rights from the early stages to systematize the introduction and operation of the employee invention system is, in practice, the most efficient approach.
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