Seemingly Simple Things that Are Often Done Wrong: Patent Assignments and the German Act on Employee Inventions

02.02.2021

The vast majority of patent litigation involves a patent or a patent portfolio that has been assigned at least once during its life. Yet seemingly simple and ubiquitous patent assignment documents are blundered by even experienced counsel. Failed patent assignments present a conspicuous procedural trap for unwary patent owners and creates an opportunity for a Federal Rule of Civil Procedure 12(b)(1) “lack of standing” challenge.[1] To name a few potential pitfalls, U.S. patent law is clear that patent assignments must be in “present tense” language (“assigns” not “will assign” or “shall assign”),[2] and if assigned after a patent’s issuance, must include an express provision conveying the right to sue for past infringement.[3]

What is the German Act on Employee Invention (GAEI)?

When assigning a global patent portfolio, the potential pitfalls increase exponentially and doing thorough due diligence is critical to transfer patent rights correctly. For example, the German Act on Employee Invention, or GAEI (Gesetz über Arbeitnehmererfindungen), has significant impact on the assignment of German patents. The GAEI regulates the rights and obligations of both employees and employers in Germany. Failure to properly comply with the GAEI may result in ineffective transfers of inventions from employee to employer causing all invention rights to remain with the employee.[4]

For example, in Auvesy GmbH & Co v. Rockwell Automation, Inc., Case No. 14-cv-1258 (E.D. Wis. June 30, 2015), the plaintiff Auvesy, a German corporation, sought a declaration of non-infringement of Rockwell’s patents. Auvesy’s principal, a man named Werner Schnaebele, had worked for a German corporation that was later acquired by defendant Rockwell. Mr. Schnaebele has signed an employment contract with Rockwell’s German predecessor, but Auvesy argued that the GAEI applied such that Schnaebele retained ownership of his invention and the patents thereon. The district court agreed that there was at least a 12(b)(6) basis for Auvesy’s allegations.

Under the GAEI, the Employee Inventor Initially Owns the Rights in an Invention

Under the GAEI, the employee inventor initially owns the rights in an invention, and there is a formal process to transfer the employee’s right to said invention to their employer. Because of the GAEI, standard patent assignment clauses in employment agreements commonly found in the US, which are designed to capture all intellectual property created in the course of employment, are inadequate. In fact, the GAEI prohibits all contractual agreements which deviate from the Act in favor of the employer, if these agreements are related to future employee inventions. Future employee inventions cannot be pre-assigned via the employment contract.

How does the GAEI work?

Let’s say Employee invents an Invention in the course of their employment for Employer. Once the Invention is completed, Employee must immediately report the Invention to Employer in writing. The Employer must confirm to Employee that the report of the Invention is received in writing. Email is sufficient to comply with the writing requirement. Employer has the right to claim the Invention within a period of four months. Following the 2009 amendments, the transfer of the Invention from Employee to Employer occurs automatically unless Employer expressly rejects the Invention within the four month period.

Once Employee notifies Employer of the Invention in writing, Employer has an obligation to claim the Invention and file for patent rights, protect the Invention as trade secret, or expressly reject the Invention. If an Employer claims the Invention, Employer is also obligated to pay Employee some type of remuneration for the Invention. Employer and Employee can mutually agree to an appropriate remuneration such as lump sum or payment installments. If no agreement exists, remuneration can be determined by a legal framework that provides a calculation based on the invention value.

If Employer chooses to abandon a patent application related to Employee’s Invention, Employee must be informed so that Employee may pursue protection of the Invention at Employee’s own cost.

Employer may also pursue patent protection for the Invention abroad in Employer’s choice of countries, including the U.S. If Employer does not intend to file for patent protection in certain countries, Employer must release the Invention to Employee as to those countries to pursue protection of the Invention at Employee’s own cost.

Patent Families with U.S. and German Patents

Ownership of any U.S. patents that are related to German patents obtained under the GAEI can also be impacted by the application of the GAEI. For example, Minebea Co., Ltd. v. Papst, 444 F. Supp.2d 68 (D.D.C. Aug. 17, 2006), involved a dispute over patent ownership of five U.S. patents following the conclusion of a German joint venture. Papst argued that inventions developed by the German employees of Papst Motoren during the period of the joint venture were properly assigned to Papst Motoren under Section 6 of the German Employee Invention Act. Minebea, however, argued that Papst was obligated to assign the patents to a joint venture entity (“PMDM”) pursuant to a related “Agreement for the Sale of Intangible Assets” and that Papst’s actions breached the Agreement. Ultimately, the Court concluded that Minebea’s claims to patent rights in the U.S. patents failed because “Papst Motoren’s acquisition of inventions developed by its employees and the subsequent registration of patents on those inventions was authorized by Section 6 of the German Employee Invention Act, even if it was in contravention of the terms of the Agreement for the Sale of Intangible Assets.”

Things to Watch Out For When Acquiring German Patents

Ultimately, if patents originating in Germany are part of a patent portfolio that you seek to acquire and/or enforce, it is critical to confirm:

  • a complete listing of any German patents and applications as well as any related foreign patents and applications;
  • whether said intellectual property assets were claimed in writing;
  • whether the invention was created in the course of a German employee’s duties;
  • whether assignment documents exist with any such German employee(s);
  • whether the German employee was provided proper remuneration for the invention(s);
  • whether the German employee was informed of the patent filings; and
  • whether the German employee was offered an opportunity to pursue additional foreign patents or pay patent maintenance fees/taxes themselves, and did so.

Failure to confirm compliance with the GAEI can jeopardize a patent assignment.

[1] See, e.g., Schwendimann v. Arkwright Advanced Coating, Inc., 959 F.3d 1065 (Fed. Cir. 2020); Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925 F.3d 1225 (Fed. Cir. 2019); Abraxis Bioscience, Inc. v. Navinta LLC, 625 F.3d 1359 (Fed. Cir. 2010) (the Federal Circuit found that the plaintiff, Abraxis Bioscience, did not have standing to file a lawsuit for patent infringement because the language used in an asset purchase agreement did not transfer legal title in the patents-in-suit before Abraxis filed the initial complaint).

[2] Advanced Video Tech. LLC v. HTC Corp., Case No. 2016-2309 (Fed. Cir. Jan. 11, 2018); Windy City Innovations, LLC v. Facebook, Inc., No. 16-cv-1730 YGR, 2019 WL 4645414, at *3 (N.D. Cal. Sept. 24, 2019); Omni MedSci, Inc. v. Apple Inc., Case No. 19-cv-05673 (ND Cal. Nov. 25, 2019).

[3] See, e.g., Total Rebuild v. PHC Fluid Power, LLC, Case No. 15-cv-01855 (M.D. La. Aug. 14, 2018) (“Courts have repeatedly held that absent explicit language conveying the right to sue for past infringement, the assignee lacks standing to sue for past infringement”) citing Minco, Inc. v. Combustion Eng’g, Inc., 95 F.3d 1109, 1117 (Fed. Cir. 1996).

[4] The German legislature addressed this potential issue with an amendment of the GAEI. A 2009 amendment to the GAEI states that the employer’s claim to the invention is automatic if the employer has not expressly released the invention to the employee within a period of 4 months after receiving the invention report. In other words, if the employer does not explicitly waive its claim to the invention within 4 months of receiving the report, the invention and all the rights and obligations associated with it belong to the employer. This is the opposite of the principle which applied hitherto, whereby the employer was required to explicitly claim the invention, and replaces it with the fiction that a claim is made if the invention has not been explicitly released.

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