Compensation for Employee Inventions and Employment of High-Level Researchers in SMEs

Regulation regarding compensation for employee inventions can reduce disputes between employer and any employee inventor by making transparent the legal rights. Although many such patents do not recover their costs, some make immense profits for the company. Therefore, introduction of a system that offers substantial rewards for such innovation can motivate employee inventors to develop new technologies.Reasonable compensation for employee inventions is an important part of the patent policy and should be a key part of any national infrastructure for intellectual property. From this perspective, government must make an effort to create an appropriate infrastructure and an environment that will provide fair compensation for employee inventions.Although 5 years have passed since the scattered provisions relating to employee invention compensation were organized under The Invention Promotion Act, introduction of the plan for compensation for employee inventions has been delayed among SMEs. The proportion of the SMEs that complied with the plan was still stuck at 38.2%, while that of large firms was 74.2% in 2010. This study tries to answer the following two questions by analyzing the existing literature and the current state of corporate compensation for employee inventions. First, what conditions should the employee inventions compensation system develop in order to promote invention and innovation, and, in addition, to attract high quality researchers to small businesses? Second, what policies do we need in order to encourage the adoption of the employee invention compensation system?To this end, section II analyzes the trend towards employment of high-level researchers in small businesses. Section III reviews the existing literature to elaborate on the economic implications of compensation for employee inventions. Chapter IV analyzes the current state of compensation for employee inventions in private companies using data from The Korean Intellectual Property Office(KIPO), and survey data from The Korean Institute for Industrial Economics & Trade(KIET). Section V draws conclusions and suggests policies to promote the introduction of compensation for employee inventions, especially among small businesses