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.
Where was it invented? The answer is clear! According to an estimate of the Arbitration Board more than 90% of the inventions filed for the grant of a patent at the DPMA in 2021 were made by employees within the scope of their employment relationship.
This scenario constitutes what initially appears to be an insoluble legal situation. According to section 6 of the Patent Act (Patentgesetz), the inventor has the right to the patent. However, the invention is also a work product and work products belong to the company according to section 611 a of the German Civil Code (Bürgerliches Gesetzbuch). Thus, two opposing concepts of assigning ownership conflict with each other in the person of the inventor.
In Germany this legal problem is resolved in the Employee Inventions Act (Gesetz über Arbeitnehmererfindungen). While the Act provides that the right to the patent is encumbered from the outset with a right of the employer to claim the invention, the inventor is not left without rights. Because if the company makes use of the right to claim the invention, it does get the patent rights, but the original inventor’s right to the patent is not completely lost, but is transformed into a right of the employee to participate. The inventor has the right to receive reasonable compensation from the economic benefits that the company derives from the right to the patent. In terms of economic policy, this philosophy of employee inventions law, which has consistently been practised in Germany since the beginning of the 20th century, has thus relied for nearly 120 years on the innovative power of the workforce — a German recipe for success!!
The exact amount of the compensation depends on the commercial applicability of the invention, the duties and position of the employee in the enterprise, and the enterprise’s contribution to the invention. In order to be able to take into account the ever-changing economic framework conditions and business models, the Act thus relies on vague legal terms for determining the amount of compensation. The advantage is a timeless regulatory system, the disadvantage is that opinions of employees on the one side and companies on the other sometimes differ on how great the economic benefits gained by the company were in the individual case.
Since disputes about innovations tend to militate against a profitable and beneficial employment relationship, the legislature has established the Arbitration Board under the Employee Inventions Act as a mediator in disputes and equipped it with legal and technical expertise. Its chairperson is a lawyer qualified to hold judicial office and the two assessors are specifically chosen from among the patent examiners according to their particular technical expertise for the respective arbitration proceedings.
First, the Arbitration Board gives the parties involved in the dispute the opportunity to present their respective views and then submits a proposal for an amicable settlement to them. If the parties involved accept the settlement proposal, they conclude a private-law contract, thereby settling the dispute. In 2021, the Arbitration Board concluded 68 such proceedings, with two thirds of its proposals being accepted.
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.
In 2021, the Arbitration Board dealt with the following questions, among others:
- “Ideas tracker” and reporting of inventions — Arb.Erf. 03/20
- Typical start-up problems — Arb.Erf. 13/19
- Invention values for confectionery — Arb.Erf. 54/16
- Only one detail of the invention is eligible for protection — Arb.Erf. 60/18
- Invention provides protection against warranty for defects — Arb.Erf. 21/19
- Switch to trade secret — Arb.Erf. 66/18
- Operation of large industrial plants — Arb.Erf. 67/18
- Company remuneration schemes — Arb.Erf. 70/18
- Quality of a suggestion for improvement and Act against Unfair Competition — Arb.Erf. 56/18
For more detailed information about these and other selected decisions of the Arbitration Board (in German) and on employee inventions law please visit our website.
| Requests | 2017 | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|---|
| Receipt of requests | 54 | 71 | 61 | 66 | 53 |
| Arbitration proceedings concluded by | |||||
| Settlement proposals and compromises | 55 | 47 | 43 | 44 | 44 |
| Proposals accepted (%) 1 | 60.0 | 68.0 | 76.7 | 50.0 | 65.9 |
| Refusals to participate in arbitration proceedings | 16 | 15 | 9 | 19 | 16 |
| Other cases concluded, in particular, by withdrawal of request, order, provisional proposals, etc. | 8 | 5 | 6 | 9 | 8 |
| Total of cases concluded | 79 | 67 | 58 | 72 | 68 |
| Arbitration proceedings pending at the end of the year | 87 | 91 | 94 | 88 | 73 |
The Arbitration Board under the Act on Collective Management Organisations
Those who want to make use of musical, literary, artistic or similar works have the obligation to pay royalties to the authors. However, it is not always possible for authors to track all uses of their works. For this reason, authors and holders of related rights are usually represented by collective management organisations, which enforce these rights on their behalf. The Arbitration Board under the Act on Collective Management Organisations mainly mediates disputes between collective management organisations and users about the amount of royalties. These include also disputes about what are referred to as “inclusive contracts”. Inclusive contracts are concluded between a collective management organisation or collection agency and users of works who have joined up to form an association.
As in previous years, the Arbitration Board again substantially reduced the number of pending cases in the second year of the pandemic. There were 206 concluded proceedings, including 13 (inclusive) contract proceedings, as against 58 requests submitted. This means that as of 1 January 2022, only 119 proceedings are older than one year, calculated from the date of service, and still awaiting a decision.
In 2021, one focus of the proceedings handled by the Arbitration Board was on inclusive contracts and contracts of use in the field of rights of communication to the public and of cable retransmission. All decisions can be viewed in an anonymised format on the Internet (https://www.dpma.de/english/our_office/about_us/further_duties/cmos_copyright/arbitration_board_under_the_cmo_act/ssss/index.html).
For example, the Arbitration Board proposed a remuneration rate of a maximum of 3.75% of the turnover, a rate that is based on the extent of the respective use, to the parties involved in proceedings on communication of music to the public in music hall performances (Sch-Urh 15/18) and in circus performances (Sch-Urh 94/20) in order to sufficiently distinguish this type of use of music from concerts.
In another case (Sch-Urh 13/18) concerning the communication of television broadcasts for entertainment having no event character and without dancing, the Arbitration Board proposed that the tariff rate of the FS tariff should remain unchanged but that it should only be applied if the user concerned had not already obtained a licence from GEMA for another background music for which royalties had to be paid. In this way, the Arbitration Board takes into account the fact that it is not possible to manage more than one type of music use at a time.
The arbitration proceedings Sch-Urh 08/18 concerned the granting of reproduction rights by GVL (German Organisation for the Management of Neighbouring Rights) for the purpose of communication to the public by the reproducer. In this case, the Arbitration Board decided to leave the surcharge at 20% of the relevant rate of the GEMA tariff VR-Ö subject to the proviso that the tariff feature “per event” of the tariff VR-Ö was not taken into account.
In the period under review, the Arbitration Board also decided several cases on the licensing of online video recorders. The Munich Higher Regional Court (Oberlandesgericht München) (29th division) expressly found the objection regarding compulsory licensing to be justified and thus confirmed the settlement practice of the Arbitration Board, according to which online video recorders constituted a case group of (cable) retransmission within the meaning of section 20b of the Copyright Act (Urheberrechtsgesetz). Previously, the Munich Higher Regional Court (6th division) had always denied this assumption. For the assessment of the appropriate remuneration, the Arbitration Board took into account the fact that cable retransmission involved data collection by the operator and that these data had an economic value.
| Requests / Cases concluded | 2017 | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|---|
| Requests | |||||
| Total requests received | 164 | 159 | 143 | 96 | 58 |
| including inclusive contracts under Sec. 92(1), no. 3 CMO Act | 5 | 5 | 2 | 5 | 1 |
| Cases concluded by | |||||
| Settlement proposals of the Arbitration Board | 15 | 69 | 67 | 81 | 95 |
| Partial settlement proposal of the Arbitration Board 1 | 2 | 0 | 20 | 13 | |
| Order | 21 | 107 | 135 | 126 | 111 |
| Total (without partial settlement proposals) | 36 | 176 | 202 | 207 | 206 |
| Requests pending at the end of the year | 583 | 566 | 507 | 396 | 248 |
| Payment of security / provisional settlement | |||||
| Requests | 16 | 19 | 25 | 3 | 4 |
| Orders | 3 | 7 | 5 | 32 | 37 |