Corporate Invention Assignment Agreement Protocols for Hardware Ventures
Hardware ventures must execute localized invention assignment agreements with explicit power of attorney mechanisms before issuing equity or opening design repositories.
Taiwan Patent Act Article 7
Meaning
Statutory provisions under Taiwanese patent legislation govern the allocation of patent rights for inventions created during the course of employment. This specific article establishes that when an employee develops an invention in the performance of their job duties, the patent rights belong to the employer, unless the employment contract explicitly states otherwise. However, the employee is entitled to receive appropriate compensation for their contribution, which must be determined by taking into account the economic value of the invention and the employer’s contribution to its development.
The statute also addresses inventions developed outside the employee’s job duties but utilizing the employer’s resources, granting the employee ownership of the patent rights but giving the employer a non-exclusive license to use the technology. This balanced statutory framework represents a key legal requirement for technology companies and manufacturing startups operating in Taiwan.
Duty Inventions
Legal classification of inventions developed by employees is a critical aspect of compliance under the Taiwanese statute. Inventions developed “in the performance of job duties” are those that fall within the scope of the employee’s assigned work or are directly related to the projects they are hired to perform. For these inventions, the employer is the default owner of the patent rights, and the employee must cooperate in the filing and prosecution of the patent applications.
If the invention is developed outside the employee’s assigned duties but is still related to the employer’s business, it is classified as a non-duty invention, and different rules apply. The employer must be notified of these inventions and has a right of first refusal to acquire the patent rights or obtain a license to use the technology, ensuring that its business interests are protected while respecting the employee’s creative rights.
Venture Capital
Multinational venture capital firms and institutional investors conducting due diligence on Taiwanese technology startups must pay close attention to compliance with Article 7. The legal team reviews all employment contracts and IP assignment agreements to ensure that the allocation of patent rights is clearly documented and compliant with the statutory requirements. If the startup has failed to implement appropriate employment agreements or has not paid fair compensation to employee inventors, the validity and ownership of its Taiwanese patents may be compromised.
This can introduce significant transaction risk, as it suggests the startup’s core technologies could be subject to ownership disputes or litigation by former staff. To mitigate this risk, startups must implement clear and compliant employee invention and compensation policies from their inception.
Compensation Claims
Disputes under Article 7 frequently arise when a former employee asserts that they have not received fair compensation for a highly successful invention developed during their tenure. The statute does not define a specific compensation formula, leaving the amount to be negotiated between the parties or determined by a court based on the specific circumstances of each case. This lack of a fixed formula can lead to uncertainty and costly litigation if the startup’s internal compensation policies are not clear and well-documented.
To prevent these disputes, Taiwanese startups should implement structured incentive and compensation plans that define how employee inventors are rewarded for patented technologies. This provides both parties with a clear, predictable, and mutually agreed-upon framework for compensation, reducing the risk of post-termination claims.