Under French law, an employer is the owner of the rights in inventions made by employees having inventive functions. The employer may also request either the assignment of or a license to inventions made by an employee, who does not have inventive functions, when the invention (i) is made in the performance of an employment contract, (ii) is based on knowledge, specific technical information or tools owned by the employer, or (iii) relates to the employer's business activity.

In such a situation, it is mandatory for the employer, who decides to request the ownership or a license on the invention made by its employee, to pay a “fair price” (“juste prix”) as a compensation for such assignment / license.

The determination of such a “fair price” is left at the discretion of the parties. According to Article L.611-7 of the French Intellectual Property Code, the calculation of the “fair price” should be based on the contributions of the inventor and the employer and on the industrial and commercial utility or interest of the invention.

The determination of the amount to be paid by the employer and the corresponding payment is made usually at a very early stage after the performance of the invention. It is indeed determined and paid shortly after the information given by the employee to its employer that he / she has made an invention and the employer’s decision to request the ownership or a license on the invention. It is possible at this stage to assess the respective contributions of the inventor and of the employer in the performance of the invention. However, at this time, the industrial and commercial utility or interest of the invention is usually difficult to assess, since it has not yet been exploited or even implemented. The assessment of such an industrial and commercial utility of the invention is therefore based on the parties’ assumptions and expectations.

On July 9, 20132 the French Supreme Court ruled that the assessment of the “fair price” should be made at the date when the employer decides to request the ownership or a license on the invention at issue but also that such “fair price” should be determined on the basis of all elements having occurred after this date, in particular those which have confirmed the assessment of the industrial and commercial utility of the invention made by the inventor and its employer.

In this particular case, Mr. Francis Audibert was arguing against his former employer Sollac, now Arcelor Mittal France, that he had been the inventor of a process covering the preparation of a cooling agent containing iron for a steel making converter intended to assist to the treatment of fatty slurries.

Arcelor Mittal France did not seriously argue that Mr. Audibert was not the inventor of the invention but challenged the amount of the fair price to be paid to Mr. Audibert. This dispute, initiated in April 1993 finally resulted in the above-mentioned decision of the French Supreme Court - twenty years later !

One may discuss the merits of such a decision and the rationale for the same. It is clear that both the French Supreme Court and the Aix-en-Provence Court of Appeal, ruled in favor of Mr. Audibert in view of the facts of this specific case. According to the provisions of the Aix-en-Provence Court of Appeal’s decision, it is indeed obvious that Mr. Audibert had developed his invention without any support of his management. One could also argue that it was done against the instructions of his management. Moreover, the invention was profitable to the employer. However, one may wonder how it is possible to take into consideration the industrial and commercial utility or interest of the invention when the latter has not been exploited.

This decision creates serious uncertainties. The French Supreme Court has expressly ruled that the elements / events which occurred after the employer’s decision of requesting the rights in the invention should be taken into consideration. The question is whether this decision may lead inventors or employers to renegotiate the amount already paid as a “fair price” on the basis of the exploitation of a past invention whereas the latter was paid on the sole assumption / expectation of the future exploitation of the same. Such a situation could of course lead to anticipated disputes between employers and inventors and / or former inventors in the absence of any specific agreement duly signed by the employer and the inventor or in cases where such specific agreements were signed.

In any case, this decision of the French Supreme Court should lead employers to be extremely cautious and to formalize their agreement with regard to the payment of a “fair price” due to inventions made outside the scope of inventive functions in a specific agreement so as to attempt to avoid future challenges of such transfer of ownership and the fairness of the price paid for such transfer.