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Newsletters and Bulletins / May 2005 / Korea (South) - Case Law on Employee Invention Compensation

Korea (South) - Case Law on Employee Invention Compensation

Employers usually enjoy exclusive and transferable right of exploitation of patents resulting from employee inventions. Customarily, the level of compensation for employee inventions in Korea has been determined according to employers' set policies or agreements made between the parties. In almost all instances prior to 2002, employee invention compensation is not a significant portion of the economic benefit the employer received by exploiting the employee invention. Prior to 2002, disputes in the Korean courts between employee inventors and their employers centered around the ownership interest of the employee invention patents, and in every case the employee plaintiff lost the dispute in the Korean court.

This has changed since 2002. In that year, the Korean courts rendered two notable decisions on the issue of what would be a fair compensation to an employee inventor in relation to the profit the employer gained by the exploitation of the employee invention. Donga Pharmaceutical was a defendant in one case litigated in 2002 when the employee inventor of an antifungal medicine for treating athlete's foot sought compensation for his invention. At the time of the lawsuit, the patent application of the employee invention was still pending in the Korean Patent Office, but Donga was already profiting from the employee's invention by collecting licensing royalties on the invention. Nevertheless, Donga denied any obligation to compensate the inventor on grounds that employee invention compensation was not warranted since the company policy did not allow compensation unless a patent were granted on the invention.

The Korean court rejected the Donga argument and rendered a decision to award the employee inventor a certain percentage of the profit Donga made from his invention. According to the court, a direct violation of the Korean Patent Law 40(1), which requires fair employee compensation to inventors for their inventive contributions to their employers, is a ground for invalidating any employer compensation policy deemed by the court as being unfair. The court determined that Donga's refusal to compensate the employee inventor, despite the fact that Donga had profited significantly by licensing the employee invention was a direct violation of the statute. This decision made a significant impact on the employee invention compensation rules in Korea, because (1) the Korean court for the first time intervened to invalidate company compensation policies or rules where such rules were unfair to employee inventors in comparison to the profits gained by the employer, and (2) the court indicated that, in such a case, it would determine the fair amount of employee compensation as an award. In the end, the Korean court awarded the employee inventor about 10% of the total profit Donga gained by licensing the employee invention.

Also in 2002, following the Donga case, a case was filed against Samsung Electronics by an employee inventor claiming compensation in the amount of $26 million for his breakthrough invention known as “Chun-Ji-In”, a method of efficiently inputting Korean alphabet letters using a limited number of input keys. It was a known fact that Samsung had made a huge profit on this invention, for which Samsung paid the inventor about $200, which was in accordance with the company's employee invention compensation policies.

In the end, this case was settled out of court with Samsung's agreement to pay the inventor an undisclosed sum of money (presumably millions of US dollars) as compensation for his invention. The significance of this case is that the employer voluntarily recognized that the fair employee invention compensation could be based on the total profit of the employer and that the Korean court would have the power to determine what it considers to be a fair employee invention compensation based on the total profit made by the employer.

In summary, since 2002 the Korean courts are more likely to invalidate company policies of employee invention compensation if such policies are unfair to the employee inventors.

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© Copyright 2006 Ladas & Parry - Posted 5/23/2006
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Date & time viewed: Tuesday, 27-Apr-2010 06:58:10 PDT

Observations.

La jurisprudence coréenne récente - postérieure à 2002 -  estime que les inventeurs salariés doivent être rémunérés proportionnellement à la valeur économique c'est à dire au profit tiré de l'exploitation de leurs inventions, et ce en conformité avec la loi coréenne de brevets qui exige le paiement à l'inventeur d' une "compensation loyale" (fair remuneration).

Dans l'affaire DONGA commenée ci-dessus le tribunal a accordé au salarié inventeur 10% de la totalité des profits tirés par l'entreprise de l'exploitation de l'invention par concessions de licences.

Dans l'affaire SAMSUNG le montant de la rémunération supplémentaire n'est pas connu mais il ets présumé s'élever à plusieurs millions de dollars.