JIPYONG LLC

In the past, the debate on intellectual property rights centered on industrial property rights and copyrights such as patents, practical devices, trademarks, designs, etc. Recently, however, there has been a rise in the debate over so-called "new intellectual property rights," which includes trade secrets, rights on work-for-hire invention, and unfair competition practices.

In Korea, there has been an increase in attention to work-for-hire invention rights since the lawsuit against a cell phone manufacturer demanding compensation for work-for-hire inventions on "cheonjiin," a Korean character text message input system. The work-for-hire invention right covers employee's duties regarding patents on new devices and creations of invention designs within the scope of the employer's official role. Each country has different rules on whether this work-for-hire invention right belongs to the company (employer-centered approach) or the employee/inventor (inventor-centered approach). Korea, like Germany and Japan, takes the inventor-centered approach where the inventor acquires the right first.

In the past, the regulation on work-for-hire inventions was provided separately from the Patent Act, Utility Model Act, Design Protection Act, and Invention Promotion Act. After March 3, 2003, however, an amended Invention Promotion Act regulates the work-for-hire invention right in its entirety. According to the amended Invention Promotion Act, when an employee of a company completes a work-for-hire invention, he or she must promptly notify the company in writing and upon receiving such notice the company must notify the inventor within 4 months whether the company will acquire such work-for-hire invention right or not. The company may, through an employment contract or employment regulation, make a pre-agreement in advance with the employee to transfer and acquire the work-for-hire invention right. The required procedures and the work-for-hire invention right of the company will differ depending on the existence or absence of such an agreement. Generally, it is more advantageous for the company to enter into a pre-engagement succession agreement in advance.

In any event, when a company has obtained the work-for-hire invention right, the inventor has the right to ask the company for just compensation. There have been no regulations on what constitutes a just compensation, so the courts calculated it at its own discretion. Now, the amended Invention Promotion Act provides that if the employer has thoroughly collected opinions and discussed the compensation standards on the work-for-hire invention with its employees, then the law acknowledges such compensation as being just (Section 15.2 of Invention Promotion Act).

Since the amended Act provides an unprecedented standard on just compensation, an increase in disputes regarding the work-for-hire invention compensation is expected to arise, namely on whether the compensation standard provided by the company is established through sufficient discussion procedures between the employer and the employee. Therefore, even if an employer has established the rules for compensation, it should provide evidence proving that the rules have been established after full discussion with its employees.

The core issue in the dispute over work-for-hire invention compensation is the standard that courts will use to come up with just compensation. In cases where the user himself has created the work-for-hire invention, the issue becomes a matter of calculating compensation based on the user's benefit. This is because even if the user does not succeed in acquiring the work-for-hire invention right, it has been understood that he has the free and nonexclusive right to use what he has invented. Japan has already established the laws regarding this issue through a series of cases decided by its courts. Korean courts have rendered judgments based on similar standards.

On the other hand, in cases where the employer has succeeded in acquiring the work-for-hire invention right and does not apply for industrial property such as a patent, etc. and keeps it as business property, the employer is still responsible for compensation. An important aspect of business property is 'secrecy,' but when a certain technology has been publicized through patent registration it cannot be protected as a business property to the extent of that publicity. Therefore, the employer has to choose whether to acquire a patent for the work-for-hire invention technology or to keep it as business property. Even in cases where the employer seeks to keep it as a business property, the Act provides for compensation of work-for-hire inventions to protect the inventor's rights.

As can be seen, there are various problems that may arise from the conflict of interest between companies and their employees in relation to managing and compensating for work-for-hire inventions. Companies must therefore think strategically and establish a comprehensive system to manage work-for-hire inventions.