Employee Invention Compensation in South Korea

A researcher files patent applications in the company’s name, then leaves. Ten years pass since the resignation, eighteen years since the filing. In the meantime the company sells a family of twelve patents, including that invention, to another company. When the former researcher finally learns of the sale and claims compensation, the trial court and the Patent Court give the same answer: more than ten years have passed since the company acquired the rights, so the claim is time-barred.

The question is narrow. When does the ten-year limitation period on an employee invention compensation claim begin to run? If it runs from the day the employee assigned the invention to the company, most claims are dead before the complaint is even drafted, because the gap between a filing and the moment the patent actually produces revenue routinely exceeds a decade. On June 24 and 25, 2026, the Supreme Court of Korea decided four cases raising this question, and its First, Second, and Third Divisions all reached the same conclusion. Every lower-court judgment was reversed. This article explains the reasoning and what companies and inventors in South Korea should do about it.

1. What qualifies as an employee invention under Korean law?

The Invention Promotion Act of South Korea recognizes an “employee invention” (jikmu balmyeong) only where three conditions are met: the invention was made by an employee, executive, or public official; it falls by its nature within the scope of the employer’s business; and the act of making it belongs to the employee’s present or past duties (Invention Promotion Act, Article 2, Subparagraph 2).

Even then, the inventor is the individual. The company secures the benefit in one of two ways. First, if the employee obtains the patent, the company holds a royalty-free non-exclusive license (Article 10, Paragraph 1). Note the proviso: a company that is not a small or medium-sized enterprise under the Framework Act on Small and Medium Enterprises loses even that license unless it has consulted with employees in advance and put a pre-assignment contract or internal rule in place. Second, the company may take the right to obtain the patent itself through a pre-assignment clause. In practice this second route is the norm.

A common drafting error follows. Companies write that “all inventions made by employees belong to the company,” but a clause that pre-assigns inventions which are not employee inventions is void (Article 10, Paragraph 3). Inventions outside the employer’s business scope, or unrelated to the employee’s duties, cannot be captured in advance. Section 9 below sets out how the clause should actually read.

2. What is the employee entitled to once the company takes the rights?

Reasonable compensation (Article 15, Paragraph 1). In the June 2026 judgments the Supreme Court characterized this entitlement in a single sentence, and that characterization drives everything else.

The Court held that the employee’s compensation claim is “a statutory claim recognized as a matter of policy in order to encourage employee inventions by guaranteeing reasonable compensation for them” (Supreme Court of Korea, June 24, 2026, 2025Da219742).

Because the claim is statutory, it exists whether or not the company has internal compensation rules and regardless of the amount those rules specify. Drafting compensation rules merely gives concrete shape to, or supplements, a right that comes from the statute.

The Act imposes four procedural duties on the employer.

• Prepare and disclose rules — compensation rules specifying the form of compensation, the criteria for determining the amount, and the payment method must be prepared and disclosed to employees in writing (Article 15(2)).
• Consult and obtain consent — the employer must consult employees when adopting or amending the rules, and must obtain the consent of a majority of the affected employees for any change unfavorable to them (Article 15(3)).
• Give written notice of the amount — the specific compensation determined under the rules must be notified in writing (Article 15(4)).
• Presumption of reasonableness — an employer that complies with the three duties above is deemed to have paid reasonable compensation. The proviso matters: the presumption does not apply where the amount disregards the profit the employer stands to gain from the invention and the parties’ respective contributions (Article 15(6)).

That proviso is the reason paying “by the book” does not end the dispute. If the amount fixed by internal rules bears no relation to what the company actually gained, the employee may still litigate the statutory claim.

3. How is the compensation amount calculated in South Korea?

Korean courts build the calculation around “the profit the employer stands to gain.” This is not accounting profit. It is the additional benefit the employer derives from holding an exclusive position.

Because the employer holds a royalty-free non-exclusive license even without taking the invention, the Supreme Court held that “the profit the employer stands to gain” means “the profit obtained by acquiring a position to exploit the employee invention exclusively, beyond the non-exclusive license” (Supreme Court of Korea, July 28, 2011, 2009Da75178).

The same judgment added two points that frequently decide cases. First, an unprofitable company still owes compensation: “regardless of the outcome of the settlement of revenues and costs, if there is profit from the employee invention itself, the employer has a profit to gain.” Second, even where the company’s product falls outside the scope of the patent, if that product can substitute for demand for products embodying the invention, and sales rose because competitors were barred from practicing the invention, the increase may be treated as the employer’s profit.

In the 2009Da75178 case the lower court applied a 3 percent royalty rate drawn from the agrochemical industry and inventor shares of 10 percent and 20 percent for the two patents, and the Supreme Court upheld those findings. The figures differ case by case, but these five variables are always the battleground.

4. When does the claim arise, and when does the ten-year clock start?

The claim arises when the company acquires the right to obtain the patent or the patent itself. As a statutory claim it is extinguished after ten years (Korean Civil Act, Article 162(1)). The contested issue is the starting point.

Article 166(1) of the Korean Civil Act provides that prescription runs from the time the right can be exercised. Fifteen years ago the Supreme Court already recognized an exception: “where the employment rules of the company specify the time for payment of employee invention compensation, there is a legal impediment to exercising the claim until that time arrives, so the payment time specified in the employment rules becomes the starting point of the limitation period” (Supreme Court of Korea, July 28, 2011, 2009Da75178).

A 2024 judgment refined the rule. Where internal rules fix a payment time, the employee “may exercise the claim at the payment time so fixed,” and separately, rules amended after an employee has left do not apply to that former employee absent an agreement to the contrary (Supreme Court of Korea, May 30, 2024, 2021Da258463). That holding blocked an employer’s attempt to advance the starting point by pointing to a later amendment.

Lower courts nonetheless developed a workaround: internal rules that specify triggering conditions and procedures but no express payment date were held not to fix a payment time at all. All four of the reversed judgments took that position.

5. What did the Supreme Court of Korea correct in June 2026?

It held that specifying the triggering conditions and the payment procedure is specifying the payment time, and that such a time is an uncertain time limit — a date certain to arrive eventually, though not knowable in advance.

The compensation rules at issue were essentially identical across the four cases. They classified the profit the company would obtain from working, licensing, or assigning inventions into categories such as “registered-right product application compensation,” “strategic patent compensation,” “royalty income compensation,” and “royalty savings compensation.” Once a category-specific triggering condition arose — for example, “where a patent registered in the company’s name has been assigned for value or licensed, or where a tangible benefit has been obtained through the exercise of the right” — compensation was payable after deliberation and resolution by the employee invention compensation review committee.

The Court’s holding: “This falls within the case where the defendant’s compensation rules fix a payment time subject to an uncertain time limit for employee invention compensation. Absent special circumstances, the plaintiff may exercise the compensation claim when that payment time arrives” (Supreme Court of Korea, June 24, 2026, 2025Da219742).

How did the Court treat the starting point in each case?

One point must be stated plainly. In none of the four cases did the Supreme Court fix a calendar date on which the limitation period began. It did three things: it held that triggering conditions plus a payment procedure amount to a fixed payment time; it classified that time as an uncertain time limit; and it held that treating the claim as one with no fixed time for performance was an error of law. The actual starting date will be determined on remand, when the Patent Court examines when the triggering conditions were in fact satisfied.

Three observations follow.

• The lower courts picked different dates but shared one premise. Some used the filing date, others the succession date, yet all reasoned that compensation rules setting out the form, criteria, method, and procedure of payment still do not fix a payment time. That premise is what the Supreme Court dismantled.
• The governing statute did not change the result. In 2025Da219873 and 2025Da219506 the rights were acquired between 2003 and 2005, so the former Patent Act, Articles 39 and 40, applied. The Court applied the same reasoning, describing the claim as a “statutory claim provided for by the former Patent Act.” Inventions dating back to the early 2000s therefore remain within reach.
• How the claims were pleaded changed what the Court addressed. In 2025Da219742 and 2025Da217407 the statutory claim was pleaded as primary and the rules-based claim as alternative, so the Court also addressed the alternative claim and the scope of reversal. In the other two only the primary claim was at issue.

So these judgments should not be read as holding that the limitation period runs from the date the patents were sold. They hold that using the succession or filing date was wrong, and that the court below must examine when the payment time arrived. If that examination shows the triggering condition was satisfied long ago, the claim may still be time-barred.

What stands out factually is the assignment of September 30, 2015. In two of the cases the company transferred a family of twelve patents, including the invention at issue, to another company on that date. That is precisely the “assignment for value” condition in the compensation rules. Measured from the succession date the claims were long dead; measured from the triggering event, ten years had not yet run.

6. Why does the phrase “uncertain time limit” change the outcome?

Because the classification of the obligation determines the starting point. The courts below and the Supreme Court sorted the same compensation rules into different categories of obligation.

There is a further reason the wording matters. The 2011 judgment spoke of a legal impediment to exercising the claim before the payment time arrived. The 2026 judgments instead treat the obligation as one whose time limit has simply not yet arrived. The inquiry shifts from whether something blocked the claim to whether the time has come.

An open question remains for the remand: whether the time limit can be said to have arrived where the company never convened the review committee. If the answer is no, prescription never starts; if the trigger alone suffices, the procedural requirement loses meaning. The Patent Court’s answer will matter to every Korean employer with rules of this design.

7. Do internal rules convert the statutory claim into a contractual one?

No. The plaintiffs also pleaded, in the alternative, a contractual claim founded on the compensation rules themselves. That claim failed in the Supreme Court as well.

The Court held that where a contract or internal rule specifies the form of compensation, the criteria for the amount, and the payment method for the purpose of the “reasonable compensation” required by the Invention Promotion Act, such provisions are, absent special circumstances, “properly construed as giving concrete shape to or supplementing the employee’s statutory compensation claim, and the legal character of the claim does not change as a result” (Supreme Court of Korea, June 24, 2026, 2025Da219742). Accordingly, the Court upheld the finding that the rules do not create a separate new monetary claim for the employee (Supreme Court of Korea, June 25, 2026, 2025Da217407).

• For employees — receiving the amount stated in the rules does not extinguish the statutory claim. If the amount ignores the employer’s profit and the parties’ contributions, the proviso to Article 15(6) keeps the door open.
• For employers — conversely, the rules do not manufacture a new debt. Litigation converges on a single statutory claim and the question of what reasonable compensation amounts to.

8. Why were both the primary and the alternative claims reversed?

Because the two claims were selective in nature. Even where a plaintiff assigns them an order of priority, reversing one requires reversing the other.

The rule dates to an en banc judgment: where an appellate court has dismissed all selectively joined claims and the plaintiff appeals, “if the court of final appeal finds the appeal on any one of the selective claims to be well founded, it must reverse the judgment below in its entirety” (Supreme Court of Korea en banc, December 21, 1993, 92Da46226). The same applies to what Korean practice calls quasi-alternative joinder, where claims that are selective in nature are pleaded in an order of priority (Supreme Court of Korea, December 24, 2014, 2012Da35675), a point the Court restated as a holding in Supreme Court of Korea, May 15, 2025, 2023Da306014.

Here the statutory claim and the rules-based claim “serve the same purpose,” so they were selective in nature, and reversal of the primary claim carried the alternative claim with it. For litigants in South Korea the practical lesson is that how parallel legal theories are joined directly determines the scope of reversal.

9. How should the clause be drafted in contracts and internal rules?

Broader is not stronger. Korean law voids clauses that overreach and rewards employers that follow the statutory procedure with a presumption of reasonableness. A well-drafted clause tracks the statute rather than expanding on it.

The assignment clause

Keep the employment contract to the basis for succession and the notice mechanics, and leave the detail to internal invention management rules. If the contract incorporates the rules by reference, amending the rules does not require re-papering every employment agreement.

Paragraph (2) is the operative one. Writing “all inventions” does not capture more; it merely renders the excess void and undermines confidence in the clause as a whole. Matching the statutory scope is the stronger position.

The compensation clause — always state the payment time

This is the most practical burden the 2026 judgments place on employers. If the rules stop at triggering conditions and a committee procedure, they create an uncertain time limit, and years later the parties will litigate when that limit arrived. Fixing a period — “within X months of the triggering event” — is what makes the starting point ascertainable.

Paragraphs (5) and (6) look employee-friendly but are not concessions. They restate what Korean law already requires, and putting them in writing narrows the dispute from whether a right exists to how much it is worth. Paragraph (4) additionally fixes the limitation starting point.

Language to avoid

The last row is the lesson of these judgments. Leaving the payment time blank looks favorable to the employer but in fact produces claims that survive well beyond ten years.

These clauses do not apply retroactively to inventions already succeeded to. The rules in force at the time of succession govern, so exposure on older inventions is managed not by amending the clause but by auditing whether triggering conditions have in fact occurred.

10. What should companies operating in South Korea do now?

These judgments cut both ways for employers. The more precise the compensation rules, the later the limitation period starts, and the longer old inventions remain actionable. Management therefore means causing the time limit to arrive and documenting that it did.

• Inventory the events that satisfy triggering conditions — assignments for value, licenses, cross-licenses, patent pool contributions, litigation settlements, and product implementation. In these cases the trigger was a patent portfolio sale. Any company that has closed a large patent transaction should start by identifying the inventors behind the transferred families.
• Actually convene the review committee. Deferring deliberation after a trigger occurs leaves the time limit unarrived and the limitation period not running. Completing the procedure and giving written notice serves the employer’s interest.
• Document compliance with Article 15(2) through (4) — written disclosure of the rules, consultation and consent, and written notice of the amount. Those three unlock the presumption of reasonable compensation under Article 15(6).
• Preserve the amendment history. Rules amended after an employee leaves do not apply to that person (2021Da258463), so identifying the applicable version requires the text in force at the time of succession.
• Review transfers to overseas affiliates. As 2025Da219506 shows, routing the right to obtain a patent through a foreign group company and filing there does not extinguish the Korean employee’s compensation claim.

This is a live issue for foreign-invested companies with research and development operations in South Korea, including those in the Incheon Free Economic Zone (IFEZ) — Songdo International Business District, Cheongna International City, and Yeongjong International City. Group-wide IP policies drafted under United States or European practice frequently assume that invention assignment agreements and a discretionary award program settle the matter. Under Korean law they do not: the statutory claim survives, the four procedural duties are mandatory, and a Korean-language set of compensation rules disclosed in writing is the baseline. Global patent transactions executed at headquarters can also trigger payment obligations toward researchers employed by the Korean subsidiary.

11. What should employees and former employees prepare?

Start with the text of the compensation rules in force while you were employed — not the current version, but the one applicable when the rights were taken.

• Obtain the compensation rules and the review committee regulations. How triggering conditions are categorized and how the committee procedure is framed determines the limitation starting point. If the company refuses to produce them, a document production order in litigation is available.
• Find the event that satisfied a triggering condition. Assignments and transfers appear in the patent register; licensing and portfolio sales often surface in disclosures, press reports, or foreign litigation records.
• Confirm whether you are a co-inventor. Supplying only the general problem or idea, or generally supervising researchers, is not enough; a substantial contribution to the creation of the technical idea is required (2009Da75178). Conversely, absence from the named inventors is not decisive where a substantial contribution exists.
• Use the internal review mechanism. An employee who disputes the notified amount may request that the review committee be convened within 30 days of the notice, and the employer must constitute the committee within 60 days (Article 18(1), (2), (3)). A party dissatisfied with the outcome may apply to the Industrial Property Dispute Mediation Committee (Article 18(6)).
• Recalculate the ten years. Where the employer has no compensation rules, the period runs from succession. Where the rules set triggering conditions and a committee procedure, the mere fact that ten years have passed since filing is not a reason to give up.

Leaving the company is irrelevant to the claim. Employee invention compensation is not remuneration for labor but a statutory consideration for the invention, so the passage of time since resignation is not in itself a bar.

Frequently asked questions

This article is general information based on published judgments and the law of South Korea in force at the time of writing; outcomes in individual matters depend on their facts. Because the limitation analysis turns on when a triggering condition occurred, companies and inventors who learn that patents have been assigned or licensed should review the position at that point rather than later.

About the Author

Taejin Kim | Managing Partner

Corporate Counseling, Corporate Disputes, White-Collar Crime

Former Public Prosecutor | Judicial Research and Training Institute, 33rd Class

Korea University LL.B. & LL.M. (Criminal Law), University of California, Davis LL.M.

Atlas Legal | Incheon Songdo, South Korea

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