Korea’s updated employee invention system: a win-win for employers and employees
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Korea’s updated employee invention system: a win-win for employers and employees

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Min Son of Hanol IP & Law explains a substantial revision to South Korea’s Invention Promotion Act concerning how employers can acquire the rights to job-related inventions created by employees

On January 9 2024, the National Assembly of South Korea passed a bill to revise the Invention Promotion Act (IPA) to simplify the process by which an employer acquires the rights to job-related inventions created by its employees (employee inventions). The revision also introduced statutory provisions on production orders and confidentiality protective orders regarding the documents or information necessary for calculating the compensation for employee inventions.

The amendment to the IPA will come into effect on August 7 2024. This article introduces the details of the remarkable changes to the current employee invention rules.

Automatic succession system for the rights to employee inventions

According to the current IPA, an employee is obliged to report an employee invention in writing to their employer, without delay, once the invention is completed (invention disclosure).

In order to acquire the rights to the employee invention, the employer is required to notify the employee in writing that it intends to acquire such rights within four months from the date of receipt of the invention disclosure (employer’s notification). If there is an executed contract or an employment regulation that stipulates that the employer shall acquire the rights to future employee inventions, the rights to the employee invention are deemed to be transferred to the employer upon notification. If the employer’s notification is not made, the employer’s rights are deemed to be waived.

Due to this notification requirement, there is a concern over the transfer of rights to an invention to a third party by the employee during the period between the invention disclosure and the employer’s notification. Furthermore, there has been criticism that having this notification requirement for every employee invention increases the procedural burden on companies.

Now, under the amended IPA, if the employer is entitled to the rights to employee inventions in advance through an executed contract or an employment regulation established between the employer and the employee, the rights to the employee invention reported to the employer are automatically transferred to the employer upon ‘completion of the invention’. The employer’s notification, in accordance with the current IPA rule, is only required when the employer decides not to acquire the ownership of the employee’s invention (Article 13(1) of the amended IPA).

If there is no such contract or employment regulation in place, the employer’s notification is still required. In that case, the employer can acquire the rights to the invention by executing an assignment contract between the employer and the employee, if the employee consents to the transfer of the invention right (Article 13(2) of the amended IPA).

The amended IPA rules will apply to employee inventions that are completed on or after August 7 2024.

Production orders and confidentiality protective orders

Under the current legal regime, there have been difficulties for an employee to obtain evidential materials and documents from their employer (i.e., documents relevant to the profits of the employers attributable to the employee inventions, which are required to be considered when calculating the amount of compensation) during a lawsuit seeking compensation for employee inventions. The employer usually refuses to produce such materials on the basis that the materials contain confidential information (i.e., trade secrets).

The amended IPA introduces new provisions for production orders and confidentiality protective orders, such that in a lawsuit seeking compensation for an employee invention, the court can order a party to produce materials, including any documents necessary for calculating the compensation for the employee invention (Article 55-8 of the amended IPA), while the court can order relevant parties to maintain confidentiality of the disclosed information (articles 55-9 to 55-11 of the amended IPA).

Therefore, under the amended IPA, claiming that the materials constitute trade secrets will not be recognised as a justifiable reason for refusing to provide materials that are necessary for calculating the compensation (Article 55-8(3) of the amended IPA). Furthermore, when a party does not follow the court’s production order without any justifiable reason, the opposing party’s assertion of the facts sought to be proven by the documents may be admitted as true by the court (Article 55-8(5) of the amended IPA).

Meanwhile, the amended IPA also introduces a penalty provision to ensure compliance with a confidentiality protective order. A party violating the court’s confidentiality protective order is punishable by fines of up to KRW 50 million or imprisonment for up to five years (Article 58(1) of the amended IPA).

The amendments will apply to lawsuits seeking compensation for employee inventions that are filed on or after August 7 2024.

Final thoughts

In consideration of the recent changes to the IPA, companies should review and adjust their policies addressing employee inventions and compensation, if necessary. It is expected that the amendments to the IPA will be helpful in ensuring the ownership of employee inventions for employers in a more convenient way and reasonable just compensation awards for employees in a more effective manner.

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