In view of today’s knowledge-based economies and accelerating technological developments, intellectual property (“IP”) is increasingly often the most valuable asset of a company. Accordingly, most savvy companies pay particular attention to their IP assets and ensure that their rights are properly protected under local laws. Among commonly available IP protections, patent protection most often provides the strongest protection for a company’s innovations. In fact, patent protection may be viewed as an important tool for achieving specific business goals, especially for tech-based companies.
However, sometimes questions arise over the ownership of patents for inventions created by employees and whether the company needs to share the profits from an invention with the employee-inventor. In addition, due to the COVID-19 pandemic, many companies began to allow employees to work remotely, while some companies found it necessary to lay off some if their workforce. From the company’s perspective, it is important not only to motivate and support employees to be innovative, whether they are working on the premises or remotely, but to also ensure the company’s proper ownership of the employee’s invention and provide appropriate remuneration for legal compliance purposes. Furthermore, in view of remote working and employee layoffs, companies need to be remain vigilant in securing legal assignment and confidentiality obligations from employees with regard to their inventions.
In this article, we examine how the relevant laws and regulations in Thailand and Vietnam treat an employee’s invention and remuneration, and analyze what prudent employers should do to be mindful of the local laws with regard to patent ownership and employee remuneration.
Thai patent law clearly states that the right to apply for a patent for an invention made under an employment contract or a contract for performing certain work shall belong to the employer or the person who commissioned the work, unless otherwise provided in the contract. This means that the patent rights to an invention created during the course of employment belong to the company, unless the company and the employee-inventor have agreed otherwise in a contract. Thus, companies operating in Thailand should make sure that this point is clearly communicated to all employees to prevent any misunderstanding, as employees sometimes think that they own the invention they created.
Even so, companies need to be aware that Thai patent law also stipulates that, in order to promote innovation and invention and to give a fair share to employees who create patentable inventions, employee-inventors must be given the right to remuneration other than their regular salary if the employer benefits from their invention. This right to extra remuneration applies to inventions protected by patents, petty patents, and design patents, and notably cannot be prevented by any contractual provision. Consequently, even though a company owns an invention’s patent rights, the employee-inventor is entitled to receive extra remuneration, provided that the company benefits from the patented invention created by the employee.
The law does not expressly specify the amount or value of “extra remuneration” that the employee-inventor is entitled to receive. When considering whether remuneration should be paid, and the amount thereof, the following factors should be taken into account:
- The responsibilities of the employee;
- The industriousness and experience that the employee and other persons have used in the creation of the invention or in the design of a particular product, including any advice or assistance given by other individuals who are not considered the inventors;
- Any assistance given by the employer to facilitate the invention or design of a product, for example, the provision of finance, advice, recommendations, facilities and the preparation or procurement of factors or services for the testing, development or making of the invention or design to make it usable;
- The benefit that the employer has received or will receive from permitting the use of the invention/design (including benefits derived from the disposal of the patent);
- The number of employees who participated in the creation of the invention or design of the product.
In light of the foregoing legal obligations under Thai patent law, companies operating in Thailand may consider putting a well-designed reward system in place, which not only serves legal compliance purposes, but also creates appropriate incentives for employees to develop innovative ideas and inventions that would benefit the company’s business growth and development.
Additionally, if key employees have been or will likely be working remotely going forward, or if some employees leave the company, it is always advisable for the company to obtain written assignment of their inventions and ensure ongoing confidentiality obligations from employees during their employment and after they leave the company.
Like most other jurisdictions, in most circumstances, inventions created by Vietnamese employees may belong to the employer. Although Vietnamese law does not provide a clear wording of the right to apply for a patent for inventions made under an employment contract, the spirit of the law regarding ownership of inventions made during the course of employment seems to be similar to Thailand’s laws. In particular, the IP Law of Vietnam (Article 86.1.b) states that organizations or individuals, who have invested funds and material facilities for authors to create an invention in the form of job assignment or hiring, have the right to register such inventions. This regulation, however, might trigger different interpretations due to its vagueness. On one hand, most practitioners are of the opinion that the language of Article 86.1.b is sufficient for employers to enjoy ownership over inventions made in the course of their employee’s normal duties, provided that an employment contract exists. On the other hand, some may argue that Article 86.1.b requires a specific assignment, which clearly indicates the specific invention(s) covered. In other words, general employment contracts may not be sufficient for the employer to automatically own inventions created by its employees. This latter understanding and interpretation can be quite cumbersome for companies. Although we support the former interpretation, as it is in line with international practice, unfortunately there have been no precedent cases in Vietnam regarding the ownership of inventions made during the course of employment at the time of writing this article. Thus, none of the interpretations have been tested in practice.
Despite the ambiguity of the regulations on the ownership of inventions, Vietnam’s laws clearly provide that authors of employee inventions are entitled to remuneration. Article 132.2(a) of the IP law reiterates this right by requiring the owner of an employee’s invention to pay remuneration to the author or authors of that invention, while Article 135 provides further guidelines on remuneration, stating that the minimum level of remuneration that the owner (employer) must to pay to an author (employee) is calculated based on:
- 10 percent of the profits gained by the owner from the use of the invention, industrial design, or layout design; and,
- 15 percent of the total amount received by the owner for each royalty payment for licensing the invention, industrial design, or layout design.
It is noteworthy that the above regulations prescribe the remuneration during the use of the invention (when registered) and when licensing the granted patents, but not when filing an application for a patent or upon the successful registration or grant of a patent.
However, unlike Thailand’s laws, it is not mandatory for employers to pay remuneration to inventor-employees, and Vietnam’s laws allow the employer’s obligation to be waived by mutual consent of the employers and the employees.
In light of the foregoing, companies operating in Vietnam should clearly indicate in their employment contracts and company rules and policies:
- whether inventions made by a company’s employee during the course of their employment will automatically be owned by the company; and
- the circumstances when remuneration to an employee for their invention is granted or waived.