In the matter of Doe v. Corporation Ltd., the Compensation and Royalties Committee in the Ministry of Justice (hereinafter: "Committee") determined, on May 4th, 2014, that an employee's general and explicit waiver of the right to monetary compensation towards his employer after the termination of employment includes a waiver of the right to royalty payments for Service Inventions in the development of which the employee might have been involved. This is an important decision that brings to a close the uncertainty that has surrounded the matter of royalties for Service Inventions since 2010.
In the present case, the employee, during several employment periods and upon the termination of each such period, signed a document expressly waiving any monetary claims against his employer. As noted above, the Committee decided that such general waiver is sufficient to reject out of hand the employee's claim for royalties for Service Inventions in accordance with Section 134 of the Israeli Patents Law, 5727-1967 (hereinafter: "Patents Law")
The Committee held that the right to royalties for Service Inventions as set out in Section 134 of the Patents Law, is not a mandatory provision (although this issue remained open in the Actelis case referenced below) and it is therefore possible to waive this right in an agreement between an employer and an employee, regardless of the provisions of this Section.
This decision complements the Committee's previous decision in the case of Actelis Networks v. Illani of February 3, 2010 (see our previous updates of July 2010 and April 13, 2010 (sent via email)), and makes it clear that an employee's right to royalties for Service Inventions may be waived by contract, including by means of a general waiver, without an express reference to the right under Section 134.
It should be noted that this decision is final, since the Committee's decisions cannot be appealed. Accordingly, the decision brings closure to this matter, which has been of concern to the Israeli Hi-Tech industry (as well as traditional industries) for the last several years, due to the uncertainty regarding the right of inventors of Service Inventions to receive royalties for their inventions. This uncertainty was most evident in M&A and investment transactions. Nonetheless, on a practical level and for the avoidance of any future doubt or interpretation issues, we still recommend including an express waiver of the right to royalties for Service Inventions in the relevant agreements with employees and service providers (who might be re-classified as employees).