Technological innovation is inseparable from two basic elements: one is the creative work of researchers and the other is capital investment. With regard to employment invention, employee innovators need to make creative efforts and the responsibility of the enterprises and institutions is providing money, equipment, materials, and technical conditions. The two sides share joint credit in the completion of the invention. In order to encourage scientific and technological innovation, the two sides that make intellectual and capital investment should share the benefits brought about by the invention. The laws and regulations on employment invention are a basic system to adjust ownership and distribution of benefits, to protect the legitimate rights and interests of both sides, and to mobilize the enthusiasm of innovation. This article will look into the views and comments from different parties on the draft of Employment Invention Regulation (Regulation), and analyze several basic issues of the Regulation.
I. Necessity of legislation
The first basic issue is whether legislation needs to be concerned with adjusting employment invention systems. In the process of opinion solicitation, most of the dissenting opinions come from enterprises, who believe that employment invention belongs to internal management affairs and that legal intervention is not necessary. The innovators, by contrast, consider it necessary to provide a legitimate basis in this field and hope the provisions to be as clear as possible.
These completely contrary views are determined by the different legal status of the two parties. From the perspective of the employer, the enterprises and institutions usually occupy the dominant position in labor relations, while employee innovators are generally in a weaker position. The so-called “strong capital, weak labor” situation determines that employers have a bigger voice in assigning the benefits from employment inventions. Since they can make decisions by themselves, employers do not want the law to intervene too much. Also, China’s Patent Law and Regulations on the Protection of New Varieties of Plants and other regulations have made it clear that the ownership of employment invention belongs to employer. Employers have control over the employment inventions, which further consolidates this inequality. From the legislative point of view, the legal basis on employment invention in different countries generally follows the three modes. In the U.S. and Japan, the ownership of employment invention belongs to the employee innovator. But according to the labor contract, the innovator is obliged to transfer the ownership or exclusive rights for exploitation to the employer. In France, Britain and China, the ownership of employment invention belongs to the employer. In Germany, Finland, Norway and Sweden, the ownership belongs to the innovator, but the employer, after completing certain declarative procedures, has the right to choose to hold the unlimited rights for the employment invention. Obviously, employers take priority for the ownership of employment invention in China. However, China’s law also provides that the employee innovator has the right of authorship and the right to receive incentives and remunerations.
From the perspective of employee innovator, since employees are in a weak position in the labor relations, coupled with the fact that the law adopted the “employer first” principle in ownership assignment, employees have to rely on the employers to exercise their legitimate rights and interests, which put them in a submissive position. Therefore, employees hope that the law can provide clear standards on authorship, incentives and remunerations. From the perspective of legal system designing, the original ownership for employment invention belongs to the employer and the employer bears the duties to protect the inventor’s authorship and the right for incentives and remunerations. The two parts constitute a complete and indivisible legal system. However, employers tend to separate the two parts. After they acquire the invention ownership, employers consider it unnecessary for the law to regulate the remunerations, because the two parties can solve the problem by themselves. Therefore, some business representatives express that even if the enterprise does not reward the innovator, the employee innovator may still be willing to work with the employer. The law should not interfere with the consensus of the two sides. As everyone knows, rights and obligations are interdependent. When entitled with the right to declare ownership, employers also bear the obligation to pay incentives and remunerations. This also confirms with the conclusion that the innovator’s lawful rights and interests could not be protected if there is no perfect legal system for employment invention.
Legislative investigation shows that the current legal system for employment invention still has some prominent problems in practice, mainly reflected in the following two aspects:
Firstly, the related laws and regulations provide general principles but lack practical feasibility. The law stipulates that employee innovator should enjoy authorship and remuneration, but does not specify the exact procedures, which makes it hard for the innovator to fully exercise their legitimate rights.
Also, some enterprises and institutions neglect or even infringe on the rights of employee innovators, which dampens the enthusiasm for innovation. There are occasional incidences in which employers infringe on inventors’ authorship, and do not pay rewards or remuneration.
In addition, because of the difficulty in finding proof, it costs too much for employees to protect their rights through legal channels. Coupled with the fact that enterprises and institutions still occupy an advantageous position in the current job market, many innovators do not dare or like to use legal intermediaries.
Therefore, it is necessary to improve legislation on employment invention and further refine the system. New procedural requirements should be supplemented to enhance feasibility, and specific relief measures and means should be provided to ensure the legitimate rights and interests of employee innovators. In the interim, enterprises and institutions should also be guided to establish management system for employment invention, clarify the rights and obligations and improve relevant procedures to prevent patent disputes, protect the legitimate rights and interests of both sides and to stimulate innovation.
II. Feasibility of legislation
1. Operational autonomy of employers
The operational autonomy of enterprises and institutions should be fully respected, but can not be free to exercise without boundaries or restrictions. The relationship between employee innovators and employers is a kind of labor relation, which leads to inevitable conflicts of interests between the two parties. Since the law provides that ownership of the employment inventions belong to employers, employees have to depend on their employers to exercise the rights for authorship and remuneration. The situation of the labor market determines that employees are in a weaker position. In this case, it is difficult to achieve a win-win situation between employers and employees if we only rely on the employers’ self-consciousness. In this specific field, laws should provide norms and guidelines to safeguard the legitimate rights and interests of the inventors.
Meanwhile, the Employment Invention Regulation show respects to the operational autonomy to the maximum extent. The Regulation provides that, in the context of protecting the basic rights of employee innovators, employers can negotiate with innovators on the ownership, report, remunerations and other substantial matters, or make specific rules according to corporate by-laws. In the absence of such an agreement or rule, the proposed standards by law are applicable. Enterprises can take advantage of this provision and reach an agreement with innovators on the ownership, report, remuneration, etc., to achieve a mutually beneficial outcome.
2. Burden for SMEs on implementing the Regulation
Some experts and business representatives held that the draft Regulation imposes a number of new obligations on the basis of existing laws and regulations. Many SMEs may not be able to bear the burden. It may cause disputes, which are not conducive to the establishment of harmonious labor relations or the mobilization of enthusiasm for innovation. In response to these comments, legislative investigation made a special assessment on the impact on SMEs. The research results show that the majority of companies have established their own management system for employment invention. However, some of the rules are not standardized and can not provide full protection for innovators’ rights. In the investigation, SMEs also said that establishing a sound system of employment invention is consistent with their long-term interests. They will continue to improve the IP management system to meet the provisions of the Regulation. In the process of legislative investigation and comment solicitation, the legislators also publicized relevant contents of the Regulation, and helped enterprises understand the provisions of the draft. SMEs are advised to learn from companies with outstanding IP management expertise and gradually establish a standardized management system. We will continue to publicize and popularize the Regulation in the future, help SMEs to establish standardized employment invention management systems and reduce the adverse effects caused to SMEs.
III. Employee innovator’s right for obtaining remuneration
When soliciting opinions from enterprises, some business representatives believe that enterprises or institutions have paid wages to the employee innovators, which corresponds to their R&D work. Therefore, innovators are not entitled to receive extra remuneration for their invention. It sounds plausible, but it should be noted that R&D is different from ordinary labor. R&D plays a decisive role in the invention, and it is one of the basic conditions for invention. Based on this consideration, the U.S., Japan and some other countries assign the ownership of employment invention to the innovator. If the employer obtains all the benefits of an employment invention while the innovator is not entitled to get returns from his invention, it will disrupt the innovator’s creative initiatives. The legislative purpose for encouraging innovation could not be achieved. In fact, all of the factors of production, including labor, capital, technology and management, should be considered in profit distribution according to the respective contributions. However, it seems that people are more accustomed to the fact capital and management should obtain returns from the profits of production, such as dividends to shareholders, CEO commission from the operations and so on. People may think it is unreasonable for intellectual labor to receive additional remunerations. This idea may be generated by the status quo of “strong capital, weak labor.”
IV. Agreement prevailing principle
Some companies hold the view that a product may contain a number of inventions while an invention may also be used for several products, therefore it is difficult to calculate contribution rate of each invention in a certain product. First of all, the relationship between employer and innovator falls into the jurisdiction of civil law, which should follow the basic civil principles of equality, voluntariness and fairness. Meanwhile, in different regions and industries, the economic contributions of different inventions are diversified, making it difficult to make a unified standard. In order to establish more harmonious labor relations, the Regulation provides that mutual agreement on incentives and remunerations shall prevail, showing full respect to the autonomy of will. If the interested parties reach an agreement on ownership and remuneration, the agreement will prevail. In absence of such agreement, the law provides a standard. When providing legal standards, legislators take into account the income gap between different regions and enterprises. The Regulation takes the average monthly salary of employees as a base line to calculate the minimum amount of incentives. Since the calculation of remuneration is more complicated, the Regulation provides four methods. If there is not a specific rule or mutual agreement, enterprises and institutions should select one method according to the practical situation and pay remunerations to the innovators. The Regulation also provides a relatively simple calculation methods. For example, the inventor’s estimated monthly salary can be used for estimation, or the method of a onetime remuneration can be adopted.
In the comments-soliciting process, some enterprises suggest that the agreement prevailing principle should be written into the chapter of General Principles, making it clear that employers and employee innovators can reach an agreement on all related matters, including ownership, patent reports, authorship, incentive, remuneration, etc. Obviously, since enterprises and institutions keep the dominant position, companies always want more independence in decision making rather than be prescribed by law.
Inventors and some scholars are opposed to this view. They believe if the law allows the two parties to negotiate on all related matters, employers may deny innovators their basic rights, and ultimately leave the innovators’ legitimate interests unguaranteed. Some inventors and scholars even believe that the law should provide a unified standard or formula as a minimum standard, and the amount of mutual agreement should not be lower than this standard. Since the practices of patent exploitation are quite different, this “one size fits all” standard is difficult to develop and will be difficult to enforce. The law can only draw a basic bottom line to guide the interested parties to determine the remuneration according to the specific circumstances and ensuring that enterprises and institutions would not abuse their dominant position to deprive the legitimate interests of the employee innovators. With regard to the fairness of agreement or the respect to innovators, it should be determined by market competition. Market competition will encourage enterprises to innovate, and talent competition will force enterprises to respect innovators. Some business representatives think that remuneration standards should also be determined by market competition. If an innovator is not satisfied with the amount, he can quit the job. This article has responded to this view earlier. The original design of China’s employment invention system is that the ownership belongs to employers while innovators are entitled to obtain authorship and remuneration. It is a complete and indivisible legal system. If all the related matters are left to the market, it is probable that we would need to redesign the whole system. For example, the original rights for employment invention shall belong to the inventor or, like in the U.S. and Japan, employment invention should belong to the innovator and remuneration should be decided by negotiation.
With comprehensive consideration of views from all parties, the Regulation stipulates the agreement prevailing principle and provides a minimum remuneration standard. It makes it clear that the mutual agreement on ownership, patent report and remuneration standard shall prevail, but the agreement can not deny the innovator’s basic rights for authorship, remuneration and the right to know. The Regulation also clearly states that any agreement or provision that denies the innovator’s legitimate rights or unreasonable conditions added to restrict the ownership or exercise of the rights should be deemed as invalid.
V. Summary
From the description of different views, we can find that the employers’ opinions go against the employee innovators on many issues. With regard to such legal relationship, the legal norms are designed to consider the views of both sides and to find a balance of interests. Therefore, it is unlikely that the views of either party could be fully adopted. To help interested parties fully understand all of the views, State Intellectual Property Office set up a special column for the Regulation (URL: http: //www.sipo.gov.cn/ztzl/ywzt/zwfmtlzl/) on its official website. Important legislative materials for developing the Regulation are published on the website, including the drafts and descriptions at important time nodes, preliminary research report, records for opinion solicitation, investigation report, disputes, and argumentation. It is hoped that all the interested parties will fully understand the legislative design and narrowing of differences, so that they can be more deeply involved in the subsequent legislative process.
Of course, employers and employee innovators do not oppose each other completely. From a long-term view, their interests are concordant. As the saying has said, “When the river rises, the boat floats high.” When the business achieves success, the innovator can get more benefits. The law regulates the employment invention system and guides enterprises to improve management. Employers show respect to innovators and innovation work and build harmonious labor relation, which is in line with the long-term interests of enterprises and institutions. This is the reason why we believe that the Regulation can find balance in the opposing views of employers and employee innovators.
Law is not a panacea, it can only draw a bottom line to ensure that enterprises and institutions can not deprive the innovators’ legitimate interests. The motive force for respecting innovation and the inventor comes from fair and adequate competition in the market. These two elements are indispensable. Without a bottom line of the law, the legitimate interests of employee inventors will not be guaranteed; without market competition, the employer will be satisfied with “cut-off scores” in employment invention management and would not try for “higher scores.”
This article represents author’s personal views. It does not represent the standpoint of SIPO.
(Translated by Li Yu)
