French IP Law Update – The Delicate Balance between Employers and Inventors: A French Revolution?

K&L Gates LLP

K&L Gates LLP

Counsel from jurisdictions where payments to employee-inventors only arise from contracts or employee incentive programs are sometimes surprised when they first become involved with jurisdictions that have statutory payment schemes for employee-inventors. Intellectual property (IP) management policies not written and designed with these jurisdictions in mind can lead to issues that may come to light only when a problem arises or in diligence. Even if a company has a process in place for making inventor payments, they also, in some circumstances, need to provide locally required notice and information to the inventor. Attorneys outside these jurisdictions need to be aware of these rules when conducting IP diligence, and when they are involved in managing patent prosecution dockets where the priority case originates in jurisdictions that have these requirements. One example of such a notice requirement is in France. 

A Swing to the Left: Employers Must Keep their Employee Inventors Informed

French inventors have a longstanding entitlement to compensation for their inventions by their employer, which, by law, the inventions can belong either to their employer from inception or are mandated for assignment to their employer. The rules on this compensation and the related notification requirements between the employee and employer, however, have been evolving over recent years. In view of this evolution, a company that complies with the French inventor compensation requirements, but fails to “dot the i’s and cross the t’s” required by France’s notice requirement to employed inventors, may be taking on unnecessary risk that can be easily mitigated. For example, a global employer that pays inventor compensation in the amounts required by French industry specific collective bargaining agreements, and which are in line with their own company policy, might still be exposed to unnecessary risks that an employee will bring a payment action in France if their general company policy fails to satisfy the notice requirement to their employed inventors in France.

The French Trinity of Employee Inventions

Under Article L. 611-7 of the French Intellectual Property Code (FIPC), employees are required by law to notify their employers of any invention, in order for both parties to agree (or not) on the invention’s status as:

  • “Within mission,” i.e., the invention was part of the employee’s job description and thus belongs to the employers; or
  • “Out of mission,” in which case the invention can be considered either:
    • “Attributable” and giving rise to a first refusal for assignment to the benefit of the employers; or
    • “Non-attributable” and therefore, freely negotiated by the employees. 

An employee that notifies his or her employer of an invention is entitled to compensation depending upon the above determination and in accordance with collective bargaining agreements, company agreements, individual employment contracts, and the specific circumstances relating to the value of the invention. The employee can bring a payment action for additional compensation under Article L.3245-1 of the French Labor Code if the employee believes he or she did not receive suitable compensation from their employer that took ownership of their invention. Payment actions brought by employed inventors against their employers, however, are subject to a statute of limitations from the date the employee either knew or should have known of the facts that would have enabled such employee to introduce a claim for additional compensation. Whether the employee knew or should have known of the facts has left substantial room for interpretation of whether the statute of limitations has started to run.

A Novel Requirement: Keep Inventors Informed of an Invention’s Evolution

The Macron Act no.2015-990 dated 6 August 2015, which aimed at improving economic growth, activity, and equal opportunities, introduced a new undertaking for employers relating to employee inventions while also providing some additional predictability to employers. Specifically, under the newly completed Article L.611-7 FIPC, employers shall “inform the employee who made such an invention whenever such invention is subject to an application for an industrial property right, and also, where applicable, at the time of grant of such a right.” In effect, the law creates an obligation for the employer to notify the employee, who made an invention belonging to the employer, of the filing of a patent application (or a utility model) and the grant thereof.

While Article L. 611-7 FIPC does not specify any direct sanction for an employer breach for failure to inform an employee of the status of a patent registration, any breach of this new obligation may nevertheless have an impact on the computation of the timeline of application of the relevant statute of limitations for a payment action for additional compensation. Under Article L.3245-1 of the French Labor Code, payment actions by employed inventors are barred three years from the date the employee either knew or should have known of the facts that would have enabled such employee to introduce a claim for additional compensation. 

A New Undertaking Providing for Foreseeability on All Sides

Caselaw had been conflicting on how such a timeline should be computed, but a recent tendency has been heading toward considering that, absent notifying the employee of all the details necessary for the computation of the additional compensation (e.g., effective commercial use of the invention by the employer), the statute of limitations was not applicable. This provision under Article L. 611-7 FIPC, specifying the timing of the employer obligation to notify the inventor when an application is filed and at the time of grant, aims at streamlining the process of providing information to the inventing employee and providing for a certain date as to when the statute of limitations will run out.

An employer that fails to timely notify any French inventor employee of the filing and grant of his or her patent application as required by Article L. 611-7 FIPC may delay the three-year statute of limitations clock from starting to run, thereby extending the time that the employer is exposed to a risk that a payment action will be initiated.

A Swing Back to the Right: Extension of the Automatic Assignment Regime to Certain Non-Employees

While the notice requirement detailed above could be seen as yet another hindrance to doing business in France, a new Ordinance n°2021-1658 dated 15 December 2021 can be perceived as one of the most important favorable changes toward employers in France.

This new provision replicated the employer-friendly employee invention regime to encompass inventions created by natural persons accommodated by private or public law entities carrying out research. That extension applies to non-employees who would be “accommodated within the framework of an agreement, by a private or public legal entity carrying out research - e.g. trainees, doctoral students and directors (Article 611-7-1 FIPC).

Therefore, any legal entities under private or public law “carrying out research activities” would benefit from the assignment of the intellectual property rights, with regard to both employee and non-employee inventions, subject to the same notice requirement described above. In addition, this new employer-friendly framework also extend the automatic assignment of software creation performed in similar conditions, i.e. by non-employee personnel of research entities. 

While not explicit, the affected personnel is expected to encompass post-doc, interns and other non-employee researchers, thereby providing a much welcome simplification of IP management, at least for inventions and software created since this new provision has taken effect.

Attorneys managing patent prosecution or conducting IP diligence should be aware of the local jurisdictional rules applicable to each inventor in a foreign jurisdiction, such as the notice requirements in France and the protection regime under which employees and non-employees fall -- as well as the timeline of the recent changes with respect to past inventions and software.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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