Several countries in the world have specific laws dealing with service inventions such as for instance, the laws in Israel, China and Germany. However, India does not specifically have laws that deal with service inventions and other Intellectual Property Rights created by employees and employers; and employees therefore have to rely on the general contract laws for the creation, administration and adjudication of service inventions.
Service inventions can broadly be defined as inventions that have been created as a consequence of employment or that are made in connection with the employer-employee relationship which includes public service related activities or tasks that an employee must perform or based on expertise and resources which an employer provides to an employee as a part of the employer-employee relationship. It is generally accepted that all inventions created by an employee during his/her tenure of employment and sometimes within a fixed date thereafter would be considered service inventions that belong to the employer.
The parties may, however, by written agreement agree otherwise. In some countries, employee inventions are classified into two or three different categories: service inventions, free inventions and mixed inventions.
In countries which recognize free invention of an employee, i.e. inventions not covered by the service invention condition, such free inventions belong to the employee and not to the employer and generally relate to inventions that have been created by the inventor unrelated to his assigned tasks and beyond his own duty. In India, there is no provision for free inventions and therefore all inventions created during the tenure of employment even if they were created beyond office hours and without using any resources or knowledge of the employer generally automatically vest in favor of the employer.
In India, as in most other jurisdictions, the salary alone is considered to be sufficient compensation for transfer of an invention to the employer and no additional compensation is liable to be paid. However, employers in India are increasingly including some form of compensation for the employee. This generally takes the form of an honorarium if an invention disclosure is accepted for the patenting process and further reward for the employee if a patent pursuant to this process is granted.
Complex questions of conflict of laws arise particularly in the case of employees of multinational organizations where inventions are created across countries by inventors having residentship in one country and citizenship in another. The questions to be asked at this point of time are: should the service invention be governed by the law of the country of the employer, the law of the country where the employee is performing his task or still further the law of the country in which the employee is resident or enjoys citizenship?
Many of these questions are left unanswered in employment contracts and cause complications when the inventions are actually created. Under the Indian Contact Act, it is also doubtful whether inventions that have not yet been created can be considered as already transferred and belonging to the employer. One solution around this problem is to assign an invention as it is created in favor of the employer.
Another administrative complication that arises in India in respect of service inventions is that by law, agreements to be enforced in a court of law need to be stamped. In my experience, most employment contracts in India are not made on stamp paper and are, therefore, prima-facie unenforceable.
In this day and age, most companies rely on their employee’s inventive ability to fuel their research and development activities. Studies that have been carried out across countries have shown that almost 80% of patent applications filed today are in the category of service inventions. It is, therefore, important that employers, employees and practitioners alike should deal with this subject very carefully and arrive at a consensus on an international basis.