Warning signal to employers regarding service inventions

01.09.2011

A recent decision rendered by the Tel-Aviv District Court related to patent ownership held that the burden of proof is on the employer to demonstrate that the invention is a “service invention” and thus belonging under the law to the employer.

 

The court also stated that an oral agreement between the employer and employee is sufficient to release the employee from providing notice of the invention under Section 131 of the Patents Law.

 

According to Section 132 of the Patents Law, an invention by an employee arrived at in consequence of his service and during the period of his service shall, in the absence of an agreement to the contrary between him and his employer, become the employer’s property, unless the employer relinquishes the invention within six months after the day on which notification under Section 131 was delivered to him.

 

Facts

 

Orian Ltd. (www.orian.com) is an Israeli public company specialized in Air & Ocean freight forwarding and logistics services. Ms. Yael Bonneh started working at Orian in 2006 as a project manager. In 2008 during her employment at Orian, Yael developed an invention, involving the use of thermal insulation sheets for transportation of goods, which allows keeping the temperature and humidity of the goods without an external energy source. In order to protect the invention, Yael filed in her own name a provisional patent application titled BREATHABLE INSULATION DEVICE. A year after, while still working for Orian, Yael filed a PCT application, also in her name, claiming priority from her US provisional application. Subsequent to the filing of the PCT application in Yael’s name, the parties disagreed about the ownership of the invention. Orian asked Yael to assign the entire rights of the invention to Orian – Yael argued that this is not what was agreed beforehand, she refused to sign the assignment and resigned from Orian. Soon thereafter, Orian filed a lawsuit against Yael requesting that the patent invention be transferred from Yael to Orian.

 

Decision

 

Orian argued that Yael was employed at Orian and therefore the invention was a service invention belonging under the law to the employer (Section 132 of the Patents Law). Orian also argued that no agreement existed between the parties with respect to the ownership of the patent. Orian further argued that all the filing costs of the PCT application were paid by Orian and therefore it is illogic to conclude that Yael will own the applications. Orian claimed that Yael acted in bad faith hiding crucial information from Orian.

 

In response, Yael argued that she and Orian intended to establish a joint venture to monetize her invention. Yael claimed that the parties agreed that the invention was hers but that it was agreed to set up a mutual business and share future revenues of the commercialization of the invention. Yael showed pertinent e-mails to the court demonstrating that Orian knew about the filing of the applications and that Orian even agreed verbally that the patent applications will be filed in her name. Yael argued that if she had really acted in a fraudulent way as claimed by Orian, then why she had not been fired on the spot?

 

 

The Court found that the language of Section 132 contains four cumulative conditions required to determine that the invention belongs to the employer. The four conditions enumerated by the Court are as follows: (1) there is an invention; (2) employer-employee relationship exists between the parties; (3) the employee reached the invention within the framework of his employment; (4) the employee reached the invention during the term of employment.

 

According to the decision, the burden of proof that all the four conditions are met is placed on the employer. The court stated that Section 132 provides that the employer must prove that the invention is his. This result is consistent with the presumption of ownership stated in Section 76 of the Patents Law which states that a person who submitted a patent application deemed the owner of the invention, as long as the contrary has not been proven.

 

Section 132 also provides for three exemptions under which the invention shall be the property of the employee: (1) an agreement stipulating that the invention shall be the property of the employee; (2) the employer released the invention to the employee within six months after the employee provided notice to the employer of the invention; (3) the employer failed to protest within the 6 months from the date the employee provided such notice.

 

With respect to the above exemptions, the burden of proof that the parties reached “a different agreement” is rested on the person claiming this argument – Yael. The burden of proof that Orian gave up its rights for the invention was also placed on Yael.

 

The court stated that an agreement specifying that the invention shall be the property of the employee – is like any other agreements and may be concluded in writing, orally or implied by conduct.

 

In the case at hand, Orian gave several different versions on whether or not there was an agreement with respect to the ownership of the patent. On the other hand, Yael was always consistent with her version of the facts that Orian agreed verbally that the applications will be filed in Yael’s name (this based on various conversations and e-mails exchanged between the parties). In view of important contradictions within Orian’s versions, the court preferred Yael’s testimony, and concluded that Orian knew of the filing of the applications in the name of Yael, and that between Orian and Yael existed an agreement as to ownership in the invention.

 

Orian also argued that Yael did not notify about the invention, contrary to Section 131 of the Patents Law. The court rejected this argument and stated that Orian knew and agreed that the inventions would be filed on Yael’s name. The court therefore provides that if an employer knows of the employee’s invention and of his intent to file a patent application in his name, the requirements under Section 131 to provide notice are fulfilled.

 

The Court dismissed Orian’s claim and decided that Yael will remain the sole owner of the invention. The court awarded NIS 60,000 in costs to Yael.

 

 

Comment

 

 

The Court analyzed carefully the factual circumstances surrounding the case and specifically the relationship between the parties – the court then concluded that Yael was more than a simple employee and in fact Yael should be considered as a kind of business partner with respect to the invention she developed while working for Orian.

 

At first, the decision seems surprising and somehow disturbing for employers, but when reviewing the actual facts and specific details of this case, we believe that the conclusion of the decision is correct. According to the specific evidences adduced by the parties, it seems that Orian did clearly let Yael file the applications in her own name. The court also indicated that Orian was greedy by claiming that 100% of the rights on the invention belonged to him – had Orian requested only 50% of the invention rights, it may have had an impact on the outcome of the decision.

 

Recommendation

 

Based on the conclusion of the Court, employers should pay attention to immediately have the employees sign specific assignment agreements before filing of the patent application. Employers should also be aware that notification under Section 131 can be given orally by employees – employers should immediately react and protest as soon as they are aware that an employee is about to file an application in his own name.

 

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