Clearing the thicket of employee rights

Most inventions are made by employees during their work and in the execution of their usual duties. Consequently, it might be logical to consider that the product of labour belongs to the business owner, which would result in granting ownership of an invention to the employer, allowing the employer to exploit it in accordance with its own interests, without having to pay any compensation to the employee or seek an assignment from them.

In a decision in February 2016, the Brazilian Superior Labour Court brought the attention of the intellectual property community to the importance of outlining the innovation role carried out by an employee in their employment contract.

The case, between petroleum company Petrobras and one of its equipment engineers, was related to a “Method for installing an undersea catenary riser” (PCT/BR2000/000096), which was created by three equipment engineers working at Petrobras. The claimant considered that innovation was not part of his duties and as a result claimed co-ownership and extra remuneration, an argument that was accepted by the Brazilian Superior Labour Court.

This decision emphasises the importance of precisely determining the role of employees working on innovation projects in Brazil, as Petrobras was not able to justify that one of the employee’s functions at the company was to invent.

What the law says

In order to determine the ownership of an invention created under an employment relationship, Brazilian law takes into consideration the role attributed to the employee by the employer, as well as the conditions under which the employee made the invention (articles 88, 90, 91, 92 and 93 of Law No. 9.279/96 on industrial property).

Under Brazilian law, such inventions can be
(a) fully owned by the employee; (b) co-owned by the employee and employer; or (c) fully owned by the employer. These different situations produce different obligations and financial effects.

Inventions made by an employee which are neither related to the work performed under the employment contract nor the result of the use of resources, means, data, materials, installations or equipment belonging to the employer belong exclusively to the employee.

On the other hand, when an invention results from the personal contribution of the employee and use of resources, data, means, materials, installations or equipment belonging to the employer, the invention is owned equally by the employee and employer.

When more than one employee is the original inventor, the employer shall own 50% of the invention, with the other 50% divided equally between all employees having contributed to the invention. This co-ownership does not mean that employees will have the right to exploit the invention, as the law adopts an exclusive right for the employer to exploit the invention, requiring it to fairly remunerate the employees who made the invention.

Co-ownership of an invention can have a significant financial impact on the employer, as employees own 50% of the property rights related to the invention and are entitled to a fair remuneration. In the aforementioned case, the Brazilian Superior Labour Court granted to one of the inventors an additional remuneration of 16.66% of all profits made by Petrobras based on the invention. This figure includes royalties received under licensing agreements as well as any reduction in costs related to efficiency gains from the use of the invention.

Finally, inventions shall belong exclusively to an employer provided that certain conditions of article 88 of Law No. 9.279/96 are met. First, employees shall have no right to additional remuneration or co-ownership if the scope of the employment contract is to perform research and to invent. Second, no additional remuneration or co-ownership will be due if an employee’s usual duties can be considered an exercise of inventive activity.

"the law adopts an exclusive right for the employer to exploit the invention, requiring it to fairly remunerate the employees who made the invention."

In this sense, employers should be cautious when drafting employment contracts in Brazil in innovation-related departments so that they underline that an employee is hired to perform inventive activities. The Petrobras case stresses the importance of the IP clause in employment contracts, as a simple reference to the provisions of Law No. 9.279/96 will be of no help in disputes.

Usual duties

Another important clarification made by the Brazilian Superior Labour Court in the Petrobras case is related to the interpretation of ‘usual duties’, under which employees would have no rights to the performed invention. Indeed, article 88 of Law No. 9.279/96 highlights that no complementary remuneration would be due to the employee if the invention results from the nature of the services for which the employee was hired.

The usual duties of equipment engineers working for Petrobras are detailed in the company’s equipment engineers career plan, specifying that those professionals are in charge of technical assistance for ‘oil equipment’, industrial plant projects, planning and technical assistance relating to oil industry equipment, and projects in connection with oil production plants.

In the Petrobras case, the court confirmed the lower jurisdiction interpretation and said an inventive activity cannot be deduced from ‘the nature of the services for which the employee was hired’, as all activities included in the Petrobras career plan are related only to the execution of existing methods and techniques.

One might be tempted to insert in the employment contract an assignment of future inventions to the employer, hoping to avoid problems with interpreting the legal regime of employees’ inventions. However, it is clear that following the jurisprudence of the Brazilian Superior Labour Court, such provisions inserted in employment contracts or other agreements are null and void.

Therefore, assignments should be made for actual inventions, giving enormous bargaining power to employees whose employment contracts have no specific reference to inventive activities or where such activities cannot be deduced from the nature of the services for which the employee was hired.

Companies doing business in Brazil should be aware of the legal and financial consequences of the employees’ inventions regime and adapt their employment contracts and career plans to avoid complications with employees who work on research and development projects ‘accidentally’.

Karlo Fonseca Tinoco is a partner at Bhering Advogados. He specialises in trademarks, licensing, enforcement against unfair competition, counterfeiting, and IP litigation. He holds a master’s and PhD from the University of Strasbourg. He can be contacted at: karlo@bhering.adv.br