Employee Inventions Under the ArbnErfG

Employee inventions in Germany: the basic rule

German law does not simply give employers the inventions their employees make. Under the Employee Inventions Act (Gesetz über Arbeitnehmererfindungen, ArbnErfG), employee inventions follow a statutory procedure: the employee must report a service invention, the employer acquires it by claiming it — expressly or, since 2009, by letting four months pass — and the employee is then entitled to reasonable compensation. The Act is mandatory: it cannot be waived to the employee's detriment in advance (§ 22 ArbnErfG). For research-intensive companies, managing employee inventions correctly is therefore both a question of securing ownership and of controlling a long-term cost.

The rules apply to all employees in the private and public sector, including managers who are employees, and they cover inventions capable of patent or utility model protection. Managing directors of a GmbH and board members of an AG are generally not employees and are outside the Act, so their inventions must be dealt with in their service contracts. Technical improvement proposals that are not patentable are subject to a separate, lighter regime (§ 20).

Service inventions and free inventions

The Act distinguishes two categories (§ 4 ArbnErfG):

• Service inventions (Diensterfindungen) are inventions made during the employment that arise from the employee's duties in the business or are based to a significant extent on the business's experience or work.
• Free inventions are all other inventions by employees. They belong to the employee, but the employee must notify the employer and, if the invention falls within the employer's field of business, offer a non-exclusive licence on reasonable terms before using it elsewhere during the employment (§§ 18, 19).

Most inventions made by engineers and scientists in industry are service inventions. Disputes about classification typically arise with inventions made outside working hours, after a change of role or shortly after leaving the company. Where in doubt, employees should report, and employers should decide on claim or release within the statutory period.

Reporting, claiming and releasing employee inventions

The process runs in clear steps:

1. Report: the employee must report a service invention to the employer without delay, separately and in text form, identifying it as an invention report (§ 5(1) ArbnErfG). The report describes the technical problem, the solution and how the invention came about, together with the contributions of co-inventors. The employer must confirm receipt in text form.
2. Claim: the employer acquires all rights by claiming the invention. Since the 2009 reform, the claim is deemed made unless the employer releases the invention in text form within four months of receiving a proper report (§ 6(2) ArbnErfG).
3. Release: if the employer does not want the invention, it must release it expressly within the four months; the invention then becomes free.
4. Filing: the employer is obliged and solely entitled to file a German patent application (or a utility model, where more appropriate) for a claimed service invention without delay (§ 13). It may file abroad and must release foreign countries where it does not want protection.

Compensation for employee inventions

Once the employer has claimed a service invention, the employee has a claim to reasonable compensation (§ 9 ArbnErfG). The key factors are the invention's economic exploitability, the employee's tasks and position, and the company's share in making the invention (§ 9(2)). In practice, compensation is calculated using the Federal Ministry of Labour's guidelines for remuneration of employee inventions, which typically multiply an invention value — often derived from a notional licence fee on sales attributable to the invention — by a share factor reflecting the employee's role.

Compensation should be agreed within a reasonable time after the claim. If no agreement is reached, the employer must fix the compensation by a reasoned statement in text form and pay accordingly, at the latest within three months after grant of the protective right (§ 12(3)). The employee can object; agreements and fixings that are grossly unfair can be invalidated if this is asserted in text form within six months after the employment ends (§ 23). Because compensation follows exploitation, claims may continue for many years — including after the employee has left.

Lump-sum and incentive schemes

Many companies replace individual calculations with incentive schemes: fixed payments on filing and grant, plus an exploitation bonus or a lump sum. These are agreements about service inventions, which are permitted only after the invention has been reported (§ 22 sentence 2). A scheme in the employment contract or a works agreement cannot therefore deprive employees of statutory compensation in advance; it works when employees accept the lump sum for a specific invention after reporting it. Where a works council exists, it has co-determination rights over general principles of remuneration; see our page on works councils.

Abandoning applications and patents

If the employer wants to drop a patent application or let a patent lapse before the employee's compensation claim has been satisfied, it must notify the employee and, on request, transfer the right to the employee at the employee's cost (§ 16 ArbnErfG). The employer may abandon the right only if the employee does not request transfer within three months of the notice. The employer can reserve a non-exclusive licence against reasonable compensation. Ignoring § 16 exposes the company to damages claims.

Technical improvement proposals

Not every innovation is patentable. Technical improvement proposals (technische Verbesserungsvorschläge) that give the employer a de facto monopoly comparable to a protective right — for example because the improvement can be kept secret — entitle the employee to reasonable compensation once the employer uses them (§ 20(1) ArbnErfG). Other improvement proposals can be governed by collective agreements or works agreements, typically as part of an idea management system. Companies should define in their idea management rules how proposals are assessed and rewarded, and coordinate the scheme with the invention reporting process so that patentable inventions are not handled as mere suggestions.

Departing employees and inventions made after leaving

Inventions made during the employment remain subject to the Act after the employee leaves: reporting duties, claims and compensation continue. Disputes often concern inventions reported only after departure, or filed by the former employee or a new employer shortly after the move. Companies should hold exit interviews that ask expressly about unreported inventions, remind departing employees of confidentiality duties under the employment contract and the Trade Secrets Act, and monitor filings by competitors that name former employees as inventors. Where an employee files a service invention in their own name, the employer can claim transfer of the application or patent. Our insight on trade secrets protection covers the confidentiality side.

Employee inventions in AI-assisted research

AI tools increasingly support R&D. An AI system cannot be an inventor, so the question is which employees made the inventive contribution. Invention reports should describe how AI tools were used and what the human contributions were — framing the problem, selecting and evaluating outputs, and implementing the solution. This matters for inventorship, for the allocation of compensation among co-inventors and for the employer's ability to prove ownership. It also affects compensation: where the company's tools and data contribute substantially, the company's share in the invention may be higher, which reduces the share factor in the compensation calculation.

Disputes: the arbitration board at the DPMA

Disputes under the Act — typically about compensation — must first be brought before the arbitration board (Schiedsstelle) at the German Patent and Trade Mark Office before court action (§ 37(1)). Exceptions apply, for example where a claim is based on an agreement, where six months have passed since the board was called, where the employee has left the company, or where the parties agree after the dispute arises to skip the board (§ 37(2)). The board's settlement proposals are widely used as benchmarks. Court proceedings take place before the regional courts with patent chambers.

Universities, contractors and cross-border R&D

Special rules apply to university staff (§ 42 ArbnErfG), who may publish inventions in teaching and research after notice and who receive a fixed share of the university's exploitation income. Contractors, freelancers and employees of partner companies are outside the Act; their inventions must be assigned by contract. In cross-border R&D, the applicable law depends on the employment relationship; German subsidiaries of foreign groups must apply the Act to German employees, regardless of group IP policies. Our insight on technology transfer and patent licensing covers collaboration agreements.

Employee inventions in transactions

In M&A and IP licensing, employee inventions are a standard due diligence topic. Buyers should check that inventions were properly reported and claimed (or deemed claimed), that filings were made, that compensation has been fixed and paid, and that no § 16 issues exist. Unpaid compensation is a liability that stays with the employer and can be material for successful products. Our insight on IP due diligence in transactions includes a checklist, and our occupational pensions page covers other long-tail employee liabilities.

Practical checklist for employers

1. Publish an invention reporting policy with a standard report form in text form.
2. Confirm receipt of each report and diarise the four-month deadline.
3. Decide on claim or release for each invention before the deadline expires.
4. File German applications without delay and decide on foreign filings and releases.
5. Agree or fix compensation, at the latest three months after grant.
6. Follow the § 16 procedure before abandoning any application or patent.
7. Keep records for the full exploitation period, which can exceed twenty years.

How TRW & Co helps with employee inventions

We advise employers on all aspects of employee inventions under the ArbnErfG: invention reporting procedures, claims and releases, filing obligations, compensation calculations, incentive and lump-sum schemes, works council involvement, abandonment under § 16 and disputes before the arbitration board and courts. For investors and acquirers, we review employee-invention compliance in due diligence and draft protective warranties. We also advise on R&D collaboration and contractor agreements to secure ownership outside the Act. To discuss your invention management, contact us or see our IP and patents overview.