Arbitration Proceedings Regarding Determination of Reasonable Amount for Employee’s Invention

In 2020, an arbitration judgment was held in accordance with the ISTAC serial arbitration procedure regarding the compensation request for employee invention and, as far as it is known, this is the first and pilot file in which the Regulation on Employee Inventions, Inventions in Higher Education Institutions and Public Funded Projects, will determine the price tariff for employees’ inventions and the arbitration procedure to be followed in case of dispute.

Within the scope of the dispute in question, the employer company requested full right ownership for the patent of which the employee supporting the R&D studies within the company he works for was the inventor, and the employee duly requested that he be paid an equitable price for the patents he invented in accordance with Articles 22, 24, 25 of the abrogated Decree Law No. 551, which was in force on the date of the full right ownership request, along with Article 115 of Law No. 6769.

Verbal and written requests made by the employee for the payment of a reasonable amount and the warning letter sent were not taken into account by the employer and, eventually, the employee’s employment contract for an indefinite term was terminated.

Following these developments, an indefinite damage claim and declaratory action was filed by the employee for the determination and compensation of a reasonable amount. Although it is understood from Article 115/11 of the IPL regulating that “the price tariff for employee inventions and the arbitration procedure to be followed in case of dispute is determined by the regulation,” which is the basis of the employee’s case, that a legally compulsory arbitration is not stipulated, the Istanbul Civil Court of Intellectual and Industrial Property Rights dismissed the case on procedural grounds, taking into account the provisions of the Regulation that entered into force during the proceedings, and which regulates the compulsory arbitration procedure regarding employee inventions and the price tariff.

Upon the aforementioned decision of the Istanbul Civil Court of Intellectual and Industrial Property Rights, an arbitration process was initiated by the employee who had no other option but to apply for arbitration before the ISTAC. It was decided by the Arbitrator appointed for the resolution of the dispute to implement the Regulation, which includes the current Regulations, in determining the reasonable amount.

In the report prepared as a result of the expert examination made by the Arbitrator in the continuation of the process; it was determined that the employee was an inventor, was legally entitled to compensation, and that the employers’ product could not have been released to the market without the invention of the employee, the economic value of the patent was high, the employers sold the product with a very high profitability, and they earned a very high profit of… million TL from the invention. However, as a result of the application of extremely mixed price determination criteria in the Regulation prepared with a casuistic understanding, it was determined that the compensation to which the employee is entitled to is an amount that cannot even cover the expenses of the arbitration.

The arbitrator conducting the arbitration proceedings concluded that the amount determined in accordance with the Regulation is not in accordance with the letter and spirit of the provisions of Articles 115/5, and 6 and 7 of the IPL, considering all of the conditions of the concrete case, and that the completely formal calculation method, which does not comply with the expression and definition of the “reasonable amount” specified in the IPL of the Regulation, renders this reasonable amount meaningless. In this context, the arbitrator increased the amount that was determined by implementation of the Regulation by five times in accordance with the principle of equity, on the grounds that the determined amount is not only proportional to the profit obtained by the defendant employers from the patent, but also not proportional to the minimum level of labor and expense required in the process of applying to litigation to obtain the right.

In other words, the arbitrator realized that the provisions of the Regulation to be applied to the resolution of the current dispute caused very low compensation to the inventor against companies that earned high profits, thanks to the employee inventor, and did not find this application fair.

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