The Service Invention Saga Continues: Welcoming News to Employers

A new decision relating to employees’ entitlement to remuneration for service inventions was handed down recently by the Compensations and Royalties Committee, making a positive turn toward innovation-oriented companies as employers

Following our report of the Bayer v. Plurality Judgment¹, a new decision was issued by the Compensations and Royalties Committee on May 4th 2014² (“the Decision”), specifically ruling that the employee’s waiver of his rights to remuneration, in the case at hand, bars a claim for remuneration before the Committee.

This Decision, unless reversed by the Israeli Supreme Court³, may ultimately close the possibility raised in the matter of Actelis (albeit in dictum) and in the matter of Plurality, that employee waivers may be unenforceable.

The Decision concerns a situation whereby an employee signed a general waiver of any monetary entitlement (without expressly mentioning the right for remuneration for service inventions) at the end of his employment, in the framework of the “termination of employment” documents. The Committee dismissed the argument, based on a previous obiter dicta made by the Committee, that a non-express waiver of the right for remuneration for service invention is a-priori unenforceable. Furthermore, the Committee found that the general waiver at hand should be interpreted as to apply to remuneration for service inventions. Accordingly, it dismissed the employee’s claim thereto.

Legal comments and practical lessons

(1) The Decision refers to post invention waivers only. In particular, the Decision holds that where it can be shown that the employee waived his right to remuneration after a service invention was made, such a waiver is enforceable.

(2) The Decision did not address, and leaves open, the enforceability of pre-invention waivers, namely, waivers contained in agreements entered into with the employee upon employment and before the service invention is made.

(3) As a general rule, and in order to prevent disputes relating to the interpretation of documents, it remains advisable to expressly state that the employee’s waiver covers a claim for remuneration pursuant to Section 134 of the Patents Act.

(4) The Committee noted in its Decision that it is not the appropriate instance to resolve disputes concerning the validity of a waiver, or the adequacy of an agreed remuneration. The Decision does not resolve the question which instance has jurisdiction to resolve such disputes. It is clear, however, that the Committee is the appropriate instance to resolve a dispute which determines whether a waiver exists.

(5) All in all, the ratio decidendi of the Decision does not change our previous conclusions and recommendations, as set forth at the end of our last report, according to which employers should, in general, consider revisiting their employment agreements in order to include specific provision regarding waivers of, and entitlement to, remuneration for service inventions.

(5) Lastly, according to a recent news article, covering the case at hand, it transpires that the employee raised certain arguments regarding the conduct of his employer with respect to declarations made during the prosecution of patent applications abroad. Although this issue was not addressed in the published Decision, one could envisage that the arguments refer to erroneous inventorship claims. This, therefore, serves as an additional aspect of the collateral damage that may be suffered by employees as a result of remuneration disputes.

¹ Employee’s Right to Remuneration for Service Inventions: The Bayer -v- Plurality Judgment and its Implications on Employment Contracts

² The decision was published without identifying the parties’ names, as is required under Israeli Patents Law for the Committee’s decisions.

³ A petition for judicial review is pending before the Supreme Court, sitting as a High Court of Justice.