Is it impossible to resolve a dispute? Then, independent arbitrators are often helpful. Two arbitration boards are located at the DPMA: the Arbitration Board under the Employee Inventions Act (Gesetz über Arbeitnehmererfindungen) and the Arbitration Board under the Act on Collective Management Organisations (Verwertungsgesellschaftengesetz). Their task is to mediate an out-of-court settlement. There is a large variety of contentious issues in practice.
Arbitration Board under the Employee Inventions Act
Provisions under the Employee Inventions Act
Employees have the obligation to report an invention made during the employment relationship to the employer.
Employers have the obligation to apply for a patent for a reported invention and are entitled to transfer the right to the patent to themselves.
THEN the employee receives a remuneration claim for it.
Did you know that more than 90% of the patent and utility model applications at the DPMA are based on inventions made by employees and that it is not the company but the inventor that is initially entitled to the right to the patent?
Even though labour law provides that work results are always the property of the employer, the inventor principle applies. This means that, pursuant to section 6 of the Patent Act (Patentgesetz), the inventor has the right to the patent, regardless of whether or not the invention has been made within the scope of an employment relationship.
Consequently, rights in employee inventions are conferred in two opposing directions. This situation is resolved in the Employee Inventions Act (Gesetz über Arbeitnehmererfindungen).
Employees are required to notify their employer of inventions made within the scope of the employment relationship, whereas the employer is basically required to obtain patent protection for such an invention in Germany but also entitled to become the proprietor of the patent. In return, the employee’s right to the patent is changed to a claim to remuneration against the employer.
Pursuant to section 9 of the Employee Inventions Act, the amount of the claim to remuneration is based on “the commercial applicability of the invention, the duties and position of the employee in the enterprise and the enterprise’s contribution to making the invention”. It is intended to have the employee get a fair share in the financial benefits (share factor) accruing to the employer from the right to the patent (value of the invention).
The amount of the claim to remuneration is determined by these vague legal terms: this can easily lead to different assessments between companies and inventors that should preferably not harm the employment relationship.
For this reason, the legislator has set up the Arbitration Board under the Employee Inventions Act at the German Patent and Trade Mark Office. The Arbitration Board usually consists of a chairperson, namely a lawyer qualified to hold the office of a judge, and two patent examiners. While the chairperson exercises the activity permanently, the patent examiners are appointed according to their particular technical expertise for the respective arbitration proceedings. This ensures that the Arbitration Board is always equipped with the best possible legal and technical expertise.
First, the Arbitration Board gives employees and employers involved in the dispute the opportunity to present their views and then submits a settlement proposal to them. If the parties involved accept this proposal, they enter into a private-law contract, thereby resolving the dispute. If they object to the settlement proposal, the arbitration proceedings are legally considered failed; the parties involved can then decide whether to otherwise resolve their dispute, be it in court or out of court. Despite the objection, they often reach a resolution on the basis of the settlement proposal, whereas court proceedings are rare.
Consequently, the Arbitration Board is where to go first if, due to the dynamic technical and economic development, new issues under employee inventions law arise. Therefore, the Arbitration Board regularly publishes selected settlement proposals in an anonymised form.
Course of arbitration proceedings
Employees and employers
are given the opportunity to present their respective views
Arbitration Board
submits a settlement proposal
acceptance of the settlement proposal
amicable settlement = the parties conclude a private-law contract, thereby settling the dispute.
Objection to the proposal
arbitration proceedings are deemed to have failed. The parties are free to resolve their dispute elsewhere — in or out of court.
The following is a selection of issues dealt with by the Arbitration Board in 2022:
- Adjustment of the scale of licence fees, which had not been changed since 1983 — Arb.Erf. 64/20
- Proposal for operational improvement and claim to remuneration under employee inventions law — Arb.Erf. 16/21
- Involvement of the inventor in the application procedure — Arb.Erf. 32/19
- The use of an invention is not reflected in the sale of products — Arb.Erf. 13/21
- Patent licence agreement in force when the patent has been transferred to the inventor and scope of a right of use reserved by the employer when the IP right has been transferred — Arb.Erf. 42/20
For details on these and other selected decisions of the Arbitration Board (in German) and for additional information on the Arbitration Board and on employee inventions law, please visit our website.
| Requests | 2018 | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|---|
| Receipt of requests | 71 | 61 | 66 | 53 | 60 |
| Arbitration proceedings concluded by | |||||
| Settlement proposals and compromises | 47 | 43 | 44 | 44 | 43 |
| Proposals accepted (%) | 68.0 | 76.7 | 50.0 | 65.9 | 67.4 |
| Refusals to participate in arbitration proceedings | 15 | 9 | 19 | 16 | 6 |
| Other cases concluded, in particular, by withdrawal of request, order, provisional proposals, etc. | 5 | 6 | 9 | 8 | 2 |
| Total of cases concluded | 67 | 58 | 72 | 68 | 51 |
| Arbitration proceedings pending at the end of the year | 91 | 94 | 88 | 73 | 82 |
Arbitration Board under the Act on Collective Management Organisations
Those who want to make use of works protected by copyright must obtain permission from the rightholders. As it would take considerable effort for users on the one hand and authors on the other hand to enter into an agreement in each individual case, the rights are managed in many areas by collective management organisations. Users can thus acquire the rights from these “one-stop shops”. For example, owners of public houses and discotheques as well as radio stations or streaming providers can centrally acquire the required copyright for playing music from GEMA. Even though this facilitates the acquisition of rights for both sides, there are risks as with any other monopoly. For this reason, collective management organisations are required to grant rights on fair terms. The parties can apply to the Arbitration Board especially in disputes over the amount of the appropriate remuneration or to determine an inclusive contract under which an association of users agrees the licensing framework with the collective management organisation.
In 2022, as in previous years, the Arbitration Board was able to reduce the number of pending proceedings. There were 61 new requests – including, for the first time, a request for the carrying out of an independent empirical study pursuant to section 93 of the Act on Collective Management Organisations (Verwertungsgesellschaftengesetz) and a request for the determination of an inclusive contract – as against 111 concluded proceedings, including two inclusive contract proceedings.
For example, in the period under review, the Arbitration Board proposed in a case (Sch-Urh 5/22) concerning the use of the related right for press publishers, newly introduced in June 2021, a provisional settlement that facilitated a legally secure use against payment of remuneration until the decision on the merits.
In another case (Sch-Urh 15/19), the Arbitration Board proposed an inclusive contract for advertising-funded on-demand music streaming such as offered by YouTube. It did not agree with the argument presented by the collective management organisation that entering into such an inclusive contract could not be expected from it because it was likely that only few member companies of the association would join the contract. As regards content, the Arbitration Board referred to an inclusive contract entered into by the parties in the past and – depending on the specification of the service – proposed remuneration rates between 8.25% and 10.25% of the revenues generated by the use of music, however at least between 0.00025 euros and 0.00375 euros per stream.
In case Sch-Urh 129/18, the disputed question as to whether collective management organisations can demand remuneration even if university libraries make copies of articles in response to individual orders and the university sends them exclusively to students enrolled at that university was affirmed by the Arbitration Board. However, with respect to the net remuneration provided in the proposed inclusive contract, the Arbitration Board reduced the amount to 0.35 euros per article taking into account that the articles are not provided to students of other universities but to the students enrolled at the university concerned who usually have physical access to copies of the required works anyway and can also make copies thereof themselves.
In case Sch-Urh 23/19, the Arbitration Board dealt with the fair remuneration for the streaming of music in movies via what are known as on-board entertainment systems in coaches.
The settlement proposals mentioned above, as well as additional ones, are provided in an anonymised manner on our website.
| Requests / Cases concluded | 2018 | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|---|
| Requests | |||||
| Total requests received | 159 | 143 | 96 | 58 | 61 |
| including inclusive contracts under Sec. 92(1), no. 3 CMO Act | 5 | 2 | 5 | 1 | 1 |
| Cases concluded by | |||||
| Settlement proposals of the Arbitration Board | 69 | 67 | 81 | 95 | 56 |
| Partial settlement proposal of the Arbitration Board 1 | 2 | 0 | 20 | 13 | 0 |
| Order | 107 | 135 | 126 | 111 | 55 |
| Total (without partial settlement proposals) | 176 | 202 | 207 | 206 | 111 |
| Requests pending at the end of the year | 566 | 507 | 396 | 248 | 198 |
| Payment of security / provisional settlement | |||||
| Requests | 19 | 25 | 3 | 4 | 12 |
| Orders | 7 | 5 | 32 | 37 | 6 |