By a judgment of 8 February 2022, the Danish Maritime and Commercial High Court held that an employee was not entitled to receive compensation in excess of DKK 50,000 as originally agreed in a transfer agreement with the enterprise in which the employee was on the payroll.

The enterprise operates in the market for industrial cleaning solutions. A held a position in the enterprise as a sales engineer, and part of A's job was to pass on customer requests for customised or new products to the development department for the purpose of potential product development.

On 30 August 2016, A received a request from a customer in Mexico for a cleaning solution to avoid contaminated hoses in a slaughterhouse. Consequently, A emailed a colleague (B) in the development department and included his proposed solution to this request – a so-called 'hose cleaner'.

B replied by email on the same day, giving a price estimate for the product's development costs.

One week later, A informed B in writing that the Mexican customer had expressed its interest in the hose cleaner, as had a customer in Italy. B responded that he would develop a prototype.

In April the following year, A wrote to the then general manager of the enterprise, stating that he had been in contact with a patent agency. A indicated that he had a keen interest in taking out a patent for the product should the enterprise have no desire to do so itself. A never received a status update on the hose cleaner project.

On 23 January 2020, A formed a company in which he was registered as the general manager. Through this company, A filed a patent application and, on 4 March 2020, the patent was issued designating A's company as the patent holder and A as the inventor. On top of that, a global patent for the product was issued on 23 September 2020.

By an agreement signed 8 July 2020, A's company transferred the patent to the enterprise. According to the transfer agreement, an amount of DKK 50,000 was to be paid for the transferred patent. The transfer agreement  – pursuant to the Danish Employees' Inventions Act – entitled A to contest the valuation of the compensation payable as A had originally come up with the invention.

A contested the valuation and commenced proceedings before the Maritime and Commercial High Court, claiming that the enterprise, based on an expert's opinion among other things, pay an amount of DKK 1,804,840 plus statutory interest to A. In response to this, the enterprise pleaded dismissal of the claim, submitting a counterclaim demanding that A transfer all prototypes and technical drawings produced for the invention to the enterprise.

Accordingly, the issue of the case was whether a basis existed for assessing a compensation payable to A for the transfer of the patent in excess of DKK 50,000.

Decision by the Maritime and Commercial High Court
Initially, the Court stressed that, under s. 8(2) of the Employees' Inventions Act, the assessment of compensation must provide in particular for 1) the value of the invention and its importance to the enterprise, 2) the employee's employment terms and 3) the impact of the employee's service on the invention.

As for number 1) above, the Court based its reasoning on the information that, in the development department, efforts were devoted to developing a hose cleaner based on the original idea introduced by A, who had been inspired by a customer request from Mexico. As a result, at least six prototypes found their way to the drawing board including two physical prototypes in the period from December 2016 to December 2018. Furthermore, the Court considered that the enterprise had abandoned the hose cleaner project in June 2019 and, although a patent was acquired, had opted not to carry on the commercialisation of a product under said patent, just as the enterprise opted not to pursue the international patent application further.

As for number 2), the Court reasoned that A was employed as a sales engineer and, as such, his duty was to forward customer requests for customised or new products to the development department.

As for number 3), the Court found that A's service in the enterprise had to be deemed significant in relation to the development of the product. The Court considered that the original idea had been introduced by A, just as, technically speaking, the hose cleaner fell within one of the enterprise's core areas.

Accordingly, the Court was not satisfied that A was entitled to compensation in excess of DKK 50,000. With respect to the enterprise's counterclaim, the Court found that, neither in its terms nor otherwise did the agreement offer grounds for ordering A to transfer the prototypes or technical drawings to the enterprise, which is why the enterprise did not succeed in its counterclaim.

Comments by Bech-Bruun
The judgment rendered by the Maritime and Commercial High Court seems to be in line with existing practice, see for instance the Danish weekly law reports UfR 2004.1018 H (compensation of DKK 50,000) and UfR 1977.600 Ø (compensation of DKK 10.000).

For more information
If you have any questions about this newsletter please contact our specialists in labour and employment law Lise Lauridsen, Sandro Ratkovic or Sofie Bisgaard-Frantzen. You are also welcome to get in touch with your Bech-Bruun contact.