SONN Patentanwälte – IP Attorneys

Remuneration for employee inventions in a group of companies

The Austrian Supreme Court (8 ObA 45/12v of 24 Jan. 2013) has recently given us some enlightment on which basis the remuneration due to an employee for his invention is to be calculated. In an action for a declaratory judgment the question put to it was with regard to an employee inventor of a company 100% owned by a parent in a group of companies. The subsidiary company, the employer, has its own responsibilities in the group, namely for the economic area of Central Eastern Europe (CEE) and worldwide for certain products.

The parent company ordered the development of certain products at its subsidiary. During this development, the invention has been made. For this development the daughter company received a one-time payment which was set by experts according to the transfer pricing guidelines of the OECD and comprised all costs including the time spent by employees plus a market conform surcharge for profit of e.g. 5%. The results of this development including the invention were delivered to the parent company. The subsidiary calculated the remuneration for the invention on the basis of this one-time payment received. The plaintiff, however, was of the opinion that the remuneration should also be calculated on the basis of the group's use of the invention.

Austrian Patent Law stipulates in § 9 that this remuneration payable by the employer is to be calculated according to the circumstances of the case. These circumstances, however, are not clear here, namely especially the relationship between the mother company with the daughter company so that the question does not satisfy the requirements for a declaratory action. Accordingly, the action was dismissed.

Notwithstanding this the Supreme Court explained in general that the turnover of the parent company or other members of the group do not automatically also have to form the basis of the calculation over and above that of the employing subsidiary. This is a question of the intensity of the interconnection between the companies. The Supreme Court had already ruled in 2004 that in a case where the parent company was the employer and use of the invention was entrusted to a 100%-owned subsidiary, with agreement that all profits and losses are to be transferred, this group of companies is to be regarded as one economic unit so that the working of the invention by the subsidiary had to be seen as working of the parent company itself.

But in general many different constellations between the different members of a group are possible. When the subsidiary has a sufficient degree of independence this indicates that the turnover of the group will not count for the remuneration. That would also be the case if that turnover is due only to the activitiy of the parent company like end-development of the product, its production. marketing for it, etc.

The circumstances of the case can well dictate that the group turnover does not count towards remuneration of the employee inventor for his invention.

DI Helmut Sonn