Current Jurisprudence on Service Inventions by Managing Directors and Executive Boards

Innovations arise not only in laboratories and development departments, but increasingly in the management levels of companies. Especially with service inventions by managing directors and boards, creative creation and complex legal issues intersect. Who belongs to the group of „employee-like inventors“? What claims for compensation and rights to the invention exist?
In times of rapid technological transformation, financial institutions, companies, and start-ups should establish strategic invention management at the C-level. This is the only way to sustainably secure innovation power and legal security.

Managing directors of a GmbH and board members of an AG are in a special legal position regarding technical inventions they make in the course of their activity.

Unlike employees, they do not fall under the provisions of the Act on Employee Inventions (ArbEG). This results in specific regulations and challenges regarding the transfer and remuneration of their inventions.

In principle, the ArbEG only regulates the inventions of employees (§ 1 ArbEG). This expressly includes employees in private and public service, as well as civil servants and soldiers. However, managing directors and boards occupy a special role:

• Managing directors and boards are not regularly considered employees, as they usually act as members of a company’s governing body and do not work under dependency as defined by labor law.
• This eliminates the direct applicability of the ArbEG for this group of people.

Individual Contract Design

Since managing directors and boards are not subject to the protection of the ArbEG, clear and individual contract design is particularly crucial for them. Service or corporate contracts often include detailed regulations regarding inventions that arise during the term of office. Typical clauses include:

• Transfer Obligation: Here, the managing director or board commits to transferring future inventions to the company. However, such a transfer requires an additional transfer act.
• Advance Disposal (Advance Assignment): The rights to future inventions automatically transfer to the company as soon as the invention is made. This clause is widespread and creates legal clarity as no separate transfer is necessary.

Especially in technical fields of activity, an explicit agreement in the contract is strongly recommended to create legal clarity and transparency.

Remuneration for Service Inventions by Managing Directors and Boards

Even if the ArbEG is not directly applicable, managing directors and boards can claim remuneration for their inventions if this has been explicitly agreed. Due to the lack of statutory regulations, a contractual agreement on remuneration is advisable. In this context, the principles of the Guidelines for the Remuneration of Employee Inventions in Private Service can be applied by analogy. Typical remuneration models include:

• License Analogy: Determination of remuneration based on customary license rates.
• Company-Based Method: Consideration of the economic advantage derived by the company from the invention.
• Flat-Rate Remuneration: Establishment of a fixed remuneration, particularly for smaller or less significant inventions.

Relevant Judgments and Current Case Law

Case law provides important guidance for the treatment of inventions by managing directors and boards. In particular, the following judgments are of central importance:

OLG Frankfurt, Judgment of 13.04.2017 – Az. 6 U 69/16

• Facts: A CTO privately registered patents and utility models, although he used company resources for this and developed them within the scope of his contractually obligated activities.
• Decision: The court found that the inventions belonged to the company due to the use of company resources and the contractually defined area of activity. The CTO had to transfer the rights.
• Significance: This judgment highlights how crucial clear contractual regulation and the use of company resources are. Managing directors and boards are subject to a comprehensive duty of loyalty to the company.

BGH, Decision of 04.12.2012 („Doctrine of Business Opportunities“)

• Facts and Decision: The Federal Court of Justice clarified that managing directors of a GmbH are obliged to use business opportunities that fall within the business area of the company not privately, but only for the benefit of the company.
• Significance: The decision confirms an extensive duty of loyalty for managing directors and boards and reinforces the principle that opportunities and inventions arising in the professional environment essentially belong to the company.

OLG Munich, Judgment of 27.02.2020 – Az. 6 U 1607/19

• Facts: In an individual case, it was examined whether a managing director was employed in an employee-like manner despite having a managerial position.
• Decision: The court confirmed that under certain circumstances (close operational integration, dependency), a managing director can be considered an employee within the meaning of the ArbEG.
• Significance: This judgment shows that a different assessment is possible in individual cases. Therefore, the specific contractual design and actual working method must always be considered.

Recommended Approach

To avoid disputes and create legal security, the following measures should be taken:

• Clear Contract Design: Service or corporate contracts should explicitly include regulations on inventions, especially in technically-oriented management positions.
• Early Notification: Inventions should be reported in writing without delay to clearly regulate the assignment and future use.
• Careful Documentation: The development process of inventions should be well documented to provide evidence in the event of disputes.
• Clarification of Remuneration: Appropriate remuneration should be regulated and established from the outset.

Summary of Key Points

• Managing directors and boards do not fall under the ArbEG, as they are not employees in the legal sense.
• Obligations to transfer inventions are based on individual contractual agreements.
• Clear pre-dispositions in contracts help to avoid later disputes.
• Case law emphasizes the importance of contractual regulations, loyalty duty, and the use of company resources.
• Transparency, early clarification, and careful documentation ensure an innovative and conflict-free environment in the long term.

Further Sources and Judgments (with Links)

• Act on Employee Inventions (ArbEG)
• Guidelines for the Remuneration of Employee Inventions in Private Service
• OLG Frankfurt, Judgment of 13.04.2017 – 6 U 69/16
• BGH Decision on the Doctrine of Business Opportunities (04.12.2012)
• OLG Munich, Judgment of 27.02.2020 – 6 U 1607/19

This article provides comprehensive guidance for managing directors and boards regarding their legal obligations and opportunities in dealing with service inventions.

The Essentials – Briefly Summarized

The Act on Employee Inventions (ArbEG) does not apply to managing directors and boards as they are not considered employees as defined in the law. Instead, individual contracts and case law govern the allocation of invention rights. This summary explains the legal basics, key court decisions, and provides practical recommendations.

According to § 1 ArbEG, the law applies exclusively to employees, civil servants, and soldiers. Managing directors of a GmbH or board members of an AG are explicitly excluded as members of the body of legal entities.

• Distinction from Employee Status: Members of the body do not perform activities bound by instructions but manage the company independently. This position establishes their special role in the legal system.
• Absence of Legal Regulation: Since the ArbEG does not apply, service or corporate contracts decide on the rights to inventions. If such clauses are missing, principles of supplementary contractual interpretation or duties of loyalty come into play.

Contractual Design Options

To avoid legal uncertainties, contracts should contain clear regulations:

Sample formulation for employment contracts:
„The managing director undertakes to transfer all inventions arising in connection with his activity to the company without charge.“

👉 For an in-depth analysis of current judgments and recommendations, we recommend our Working Paper: „Service Inventions by Managing Directors and Boards – Legal Basics and Practical Tips“ . Request now for free at S+P Seminars.