Does an employee have the right to compensation for inventions made at work and, if so, what is reasonable compensation?

If an employee invents something as part of his/hers ordinary work, the employer own the rights to it – is it not that simple? Well yes, unless the parties have agreed on to the contrary. This is the basic premise under Swedish law but what many might not know is that the employee also has the right to be reasonably compensated, and this cannot be agreed upon beforehand. Since December last year there are new guidelines to consider for what is considered to be “reasonable”.

In Sweden, employees’ rights to inventions are regulated by Right to the Inventions of Employees Act, (SFS 1949:345). The legislation came into force in 1949 with the aim of eliminating the risk of conflict between employers and employee-inventors. Even though many years have passed since then, only a few of its provisions have been amended. What many people might not know, is that most provisions in the legislation are non-mandatory and can be deviated from – with the exception of the employee’s right to compensation.

In short, the law states that the employer automatically acquires the right to utilise patentable inventions made by employees. The employee’s right to compensation should be reasonable and cover costs incurred in connection with the invention. The only guidance given is that reasonable depends on the value of the invention, the extent to which the employer has acquired rights to the invention and the significance of the position might have had in terms of the development of the invention.

Since last year, the definition of reasonable compensation has however been clarified in the new agreement entered into between Svenskt Näringsliv (the Confederation of Swedish Enterprise, which represents the employers) and PTK (the Council for Negotiation and Co-operation – representing salaried employees in the private sector). Not only is this clarification longed for, the agreement itself is important since it includes many parties in the labour market.

To summarise, the agreement divides inventions into three groups, depending on how closely the invention is linked with the employer’s business:

• A type A invention is a result of work performed as part of the position and will automatically belong to the employer;
• A type B invention is not so closely connected to the  position but will be reserved for the employer, which means that the employer may, within 8 months, choose whether or not they wish to acquire the rights; and
• A type C invention has no connection to the employer’s business, meaning that the employer receives no rights to the invention.

Under the agreement an employee is obliged, without delay, to inform their employer when he/she suspects that he/she has come up with an invention of type A or B. The compensation for these inventions will, depend on the nature of the invention and be based on a standard flat rate, i.e. a more or less predetermined amount. For patentable inventions, the standard flat rate should be half a Swedish price basic amount (i.e. SEK 22,150 in 2016) or a higher amount as decided at the company level (for inventions of substantial value for the business, the agreement indicates a full price basic amount). In comparison, the previous standard rate  according to the agreement was SEK 1,700 when the  employer was informed of the invention and an additional SEK 2,800–14,000 if a patent was applied for and granted. Thus, the amount for what is reasonable compensation has been increased significantly.

Not only has reasonable compensation been set at a higher amount, the agreement also mentions that royalties may be an appropriate form of remuneration in some cases, for example if the patent is licensed and the licensing has a direct link to the employee’s invention. The previous agreement between the parties did not mention royaty or continuous remuneration at all.

The new agreement is expected to clarify what is reasonable compensation by setting a standard flat rate and will most likely contribute to avoiding long, costly and time-consuming disputes – but this remains to be seen.