Employer’s Duty to Compensate Employee Is Not Released After the Patent Is Invalidated

As reported in another article published in this column, under Article 7 of Taiwan’s Patent Law, when an invention, utility model or design is made by an employee in the course of performing his or her duties, the right to apply for a patent and the patent right thereof shall be vested in the employer, while the employee has a claim for “appropriate remuneration,” unless there is an agreement providing otherwise. 

But what if the invention or design has been proved to lack patentability by, for example, a third party through an invalidation action?  In this circumstance, can an employer who happens to not pay the remuneration yet release itself from the Article 7 duty?  This issue was touched upon in a decision by a second-instance panel of the IP Court recently, and the panel’s answer is “no.” Liao v. Mohist Web Technology Co.,Ltd., 108 Min Zhuan Shang 16, Taiwan IP Court (December 2019).

In Liao v. Mohist, a company was sued by an ex-employee who asserted that he contributively, if not solely, conceived an invention on a credit certification method for e-commerce when he worked with the company, and that the company being the applicant of the patent failed to name him as an inventor.  Among other arguments, the company contended that this patent had been revoked by the TIPO in an invalidation proceeding initiated by a third party. As the Patent Law says a patent being revoked is deemed to be invalid ab initio (from the beginning), the company argued that it was not bound by the Article 7 duty.

However, the panel pointed out that:

Employment is a contractual relationship formed for the purpose of providing services. The employee bears the duty to provide the agreed services to the employer, but it is irrelevant what goal the services are wished to fulfill. On the other hand, after the employee has provided the agreed services, the employer shall be subject to the obligation to pay remuneration, even if the services provided do not produce the expected results.

… a literal reading of Article 7.1 of the Patent Law shows that the employer’s obligation to remunerate does not apply merely to cases where the patent of concern has not been revoked. In fact, this obligation has occurred even before a patent is granted. … Otherwise, the employee’s right to claim remuneration … will be placed in a state of constant instability, conditioned upon the status and duration of the patent, and such a result should not be in line with the legislative intent of the Patent Law. As such, the respondent’s obligation to compensate the petitioner (the employee) with appropriate remuneration shall not be released or reduced after the patent of concern has been invalidated.

Another point worth noting is that neither party made a clear assertion on how much remuneration the company should pay, let alone proved the appropriateness of the amount.  This situation was somewhat risky for the ex-employee, because an employee inventor may lose an Article 7 lawsuit due to failure to meet this burden of proof.   See Yang v. Epistar Corp

However, in Liao v. Mohist, judges of the first-instance and the second-instance both determined to cut the ex-employee some slack.  Per Article 222 of the Code of Civil Procedures, “where a party has proved injury but is unable to or is under great difficulty to prove the exact amount, the court shall, taking into consideration all circumstances, determine the amount by its assessment.”  By invoking this rule, the court awarded the plaintiff remuneration at NT$200,000, or 5 times his monthly salary the company paid him at the turn of the century.  In passing, the disputed method invention was actually filed as a divisional application of another invention application; both of them had been invalidated by the TIPO, and both of them were held by the court as having the plaintiff as one of the two or three inventors.  These facts, which might somewhat weaken the ex-employee’s position, had all been considered by the court before rendering the judgment. 

According to the court decisions, there was no agreement between the parties as to how the plaintiff should be remunerated for an invention made for hire.  Further, it seems that before the dispute occurred the company never issued any work rule on how to assess the patentability or economic value of an invention made for hire.