Budding Inventors Be-(A) WARE!!!

Kuek Pei Yee explains four things an employee inventor should know about Malaysian patent laws

 

 

Many a time, we encounter the situation where employees create some form of intellectual property which may be of benefit to their employers. One such creation, which could turn out to be of great value, is a patentable invention.

Often, employees (and employers alike) place their entire focus on the creation of the invention and do not give consideration to the “legal issues”, which to their minds could be addressed later, AFTER the invention is born. This practice is a grossly erroneous one, and in certain circumstances, could prove to be extremely costly to the employee inventors and their employers.

 

This article highlights some of the “legal issues” which the employee inventors should take cognisance of as they embark on the journey to invent new products or processes.

 

 

1. ASCERTAINING THE OWNERSHIP STATUS

 

Inventor’s rights to a patent

Prima facie, the law provides that the rights to a patent shall belong to the inventor.1 This means that you, the inventor, have the right to apply for a patent for your invention.

 

Where the invention was jointly invented by two or more persons, then the rights to the patent shall belong to them jointly.2 In this situation, you would be required to apply for a patent together with the other inventors.

 

 

Employee inventors

There is a presumption in law that the rights to inventions that were created by employees, in the course of performing their duties under their contact of employment, vests in the employer.3 In other words, if your scope of employment included a duty to invent products or processes within your employer’s field of activities, your employer would have the benefit of your invention and will have the right to apply for a patent in its name.

 

Even if your contract of employment does not require you to engage in inventive activities, your employer would be deemed to have the rights to the patent for your invention if you had used data or means placed at your disposal by your employer.4

 

The law allows the presumption of the employer’s ownership to be displaced with the inclusion of provisions to the contrary in the contract of employment.

 

Hence, in order to preserve your ownership over the invention and any eventual patent, it is imperative that your contract of employment should incorporate provisions by which you assert your ownership over your invention(s) and your employer relinquishes its right to claim ownership over your invention.

 

 

2. ENSURING PRE-FILING CONFIDENTIALITY

Whilst you may be inclined to run out into the street shouting “Eureka!” and telling the world about your invention immediately, you should quash any such urge as you could be jeopardising the patentability of your invention.

 

One of the criteria of a patentable invention is world-wide novelty.5 This means that at the time of application, it is not only new in Malaysia but is also new in other parts of the world. An invention is new only if it is not anticipated by prior art. What then is prior art?

 

It consists of the contents of an earlier domestic patent application and everything disclosed to the public, anywhere in the world, by written publication, by oral disclosure, by use or in any other way, prior to the priority date of the patent application claiming the invention.

 

In order to preserve the novelty of the invention, the employer would typically impose an obligation of confidentiality or non-disclosure on the employees through the operation of the terms and conditions of the employment contract between them. As the employee inventor, you should ensure that this obligation of confidentiality or non-disclosure is observed, if such a term exists in the employment contract. Non-compliance could be costly, in that the value of the invention may be greatly reduced if it is rendered unpatentable and the employee inventor may be vulnerable to a claim brought by the employer for breach of the employment contract.

 

 

3. FIRST PATENT FILING IN MALAYSIA

A patent for an invention made by a person resident in Malaysia must first be filed for registration in Malaysia.6 Thereafter, the patent application for the invention may only be submitted for registration in foreign countries after two months have lapsed from the date of the Malaysian application. The rationale for this provision is to ensure that any invention that is potentially a threat to the nation could be identified.

 

If a first foreign application is desired, then the inventor must obtain the written authority of the Registrar of Patents prior to making the first filing overseas. The importance of this provision should not be underestimated as any person or company which does not comply with this requirement commits an offence under the Patents Act 1983 ("the Act"). If convicted, the person or company is liable to a fine not exceeding RM15,000 or to imprisonment for a term not exceeding two years or to both.7

 

 

4. EQUITABLE REMUNERATION

Section 20(1) of the Act, which confers the ownership of the rights to a patent for an invention made by an employee to the employer, contains the following proviso:

 

“… where the invention acquires an economic value much greater than the parties could reasonably have foreseen at the time of concluding the contract of employment … the inventor shall be entitled to equitable remuneration which may be fixed by the Court in the absence of agreement between the parties.”

 

Whilst this provision, on the face of it, provides the employee inventor with an avenue for claiming a reward from his employer for having made an invention which is a success commercially, the employee inventor bears the burden of demonstrating that the invention has “acquired an economic value much greater than the parties could reasonably have foreseen”. Further, it is also incumbent on the employee inventor to persuade the Court as to the amount that would be considered “equitable remuneration”.

 

In Malaysia, there has yet to be a judgment handed down in respect of a claim brought by an employee against his employer for equitable remuneration under Section 20(1).

 

Looking outside of Malaysia, it is noteworthy that employee inventors have succeeded in claiming for “just compensation” if the invention resulted in “outstanding benefits” for the employers in the UK8 and “reasonable remuneration” for passing the benefit of a patent to the employers in Japan and Korea9. In deciding what is “just” or “reasonable”, some of the common factors which the Courts in different jurisdictions have taken into account include:

 

  • The nature of the employee’s duties, his remuneration and other benefits provided by the employer during his tenure
  • The effort and skill of the employee involved in creating the invention
  • The employer’s contribution, whether financial or otherwise, in the creation of the invention
  • The employer’s expected profits from exploiting the invention
  • The employer’s financial position had the patent for the invention not been granted compared to the benefit of the patent to the employer

 

It could be expected that in making out a case for “equitable remuneration” for the employee inventor, some reliance could be placed on these factors that appear to be common across jurisdictional borders.

 

Whilst it is possible for the employee inventor and his employer to come to some agreement between them as to the amount of “equitable remuneration” that is due, section 20(3) of the Act prohibits the restriction of the employee inventor’s right to claim such remuneration from his employer by contract.

 

 

CONCLUSION

 

In the vast majority of cases, substantial time and costs would have had to be expended in order to nurture an idea into an invention. The patent protection regime is intended to reward the inventor and/or his employer by granting to them exclusivity and monopoly over the exploitation of the invention. Hence, it is in the interest of the inventor and his employer to ensure that they are apprised of the intricacies of the law and to bear that in mind in the course of their inventive journey.

 

 

KUEK PEI YEE ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

 

 

End Notes:

 

Section 18(2), Patents Act 1983.

2 Section 18(3), Patents Act 1983.

3 Section 20(1), Patents Act 1983.

4 Section 20(2), Patents Act 1983.

5 Section 11, Patents Act 1983.

6 Section 23A, Patents Act 1983.

7 Section 62A, Patents Act 1983.

8 Kelly & Anor v GE Healthcare Ltd [2009] EWHC 181 (Pat).

9 Olympus Optical Co., Ltd v Shumpei Tanaka; Syuji Nakamura v Nichia Corporation; Hitachi Ltd v Seiji Yonezawa and Others; Jung v Hanlim Pharm Co.

 

 
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