An employee helps develop an invention during employment, and years later the company derives significant value from the resulting technology. Is the employee entitled to additional compensation or patent royalties beyond salary and bonuses? In Israel, the answer depends on the contracts, the circumstances of the invention and the special procedure in Section 134 of the Patents Law, 5727-1967.
When no agreement determines whether the employee is entitled to remuneration for a service invention, or its amount and conditions, the matter can fall before Israel’s Compensation and Royalties Committee. The employee’s right to be named as an inventor, the employer’s ownership of a service invention and a claim for additional remuneration are distinct legal questions. Neither commercial success nor inventor status automatically establishes an entitlement to a fixed share of profits.
When Does Section 134 Permit an Employee to Apply to the Committee?
Section 134 empowers the Committee to determine the employee’s entitlement, amount and terms of remuneration where there is no agreement settling those matters. An express contractual provision dealing with compensation, or a valid waiver of the right to additional compensation, can therefore be central to the Committee’s jurisdiction and the merits of the request.
The Committee is not a general forum for enforcing every bonus or severance agreement. If the claim is properly one for payment of a contractual amount, the appropriate judicial forum may be different.
Nor should Section 134 be confused with Section 133, which authorizes the Registrar of Patents to decide whether a disputed invention is a service invention in the first place. A company may own a service invention while the employee still raises a distinct claim about remuneration.
Assignment of Patent Ownership Is Not Necessarily a Waiver of Royalties
An employment agreement may state that all inventions and related patent rights developed in the course of employment belong to the company. That provision primarily addresses ownership. It should not automatically be treated as a definitive answer to whether the employee has given up an additional personal claim under Section 134.
In the Committee’s decision in Actelis Networks v. Ilani, a distinction was drawn between transferring proprietary patent rights and an employee’s potential separate right to remuneration. A patent assignment is not necessarily the same as a release of a monetary claim.
In a Committee decision of 4 May 2014 concerning service-invention royalties, the employee had signed confidentiality statements, patent assignments and employment-termination documents. The Committee distinguished their purposes: the assignments did not themselves waive the personal remuneration claim, but the termination papers were found to contain an effective waiver on the facts.
This does not mean that only an agreement expressly mentioning “Section 134” can ever settle the matter. What was agreed, and how the document is properly interpreted, remain central.
Is the Employee’s Right to Compensation Waivable?
In Barzani v. Iscar, Israeli Supreme Court, High Court of Justice Case 4353/14, the Court rejected a petition challenging the Committee’s refusal to award remuneration in light of the relevant consent and waiver documents. Israeli case law has treated the entitlement contemplated by Section 134 as dispositive, meaning capable of being regulated by agreement, rather than absolutely incapable of waiver.
The decision does not make every standard intellectual-property clause an effective waiver of all employee remuneration. Contract wording, the context in which the agreement was made and later settlement or termination documents still matter.
In Beier v. Plurality, Israeli Supreme Court, Civil Leave to Appeal 3564/12, the Court set aside a summary dismissal of a former employee’s claim in company liquidation proceedings and required further consideration. That procedural decision did not award royalties or decide that a waiver was invalid; it illustrates why disputes over interpretation should not be resolved by assuming that an agreement automatically answers every statutory issue.
The Ruth Levy v. Teva Decision: Limitation Can Defeat a Royalty Claim
In Dr. Ruth Levy v. Compensation and Royalties Committee, Israeli High Court of Justice, Case 8672/17 (1 December 2019), a former Teva employee sought compensation for contributions to pharmaceutical inventions. The Committee dismissed her application as time-barred, and the Supreme Court rejected the petition.
The fact that an invention’s commercial value becomes evident years after its development does not, without more, defer the start of limitation until the company earns substantial revenue or the patent is granted. The Court referred to Section 131, which requires an employee to notify the employer of an invention as soon as possible after it is made, as an important point for determining when a claim could arise.
The dispute also considered whether an earlier voluntary award from Teva amounted to an acknowledgment of an additional legal obligation capable of affecting limitation under Section 9 of Israel’s Limitation Law. On the facts, that position was rejected. Payment of a bonus does not necessarily acknowledge a separate right to continuing patent royalties.
The Court recognized that circumstances may differ where a genuine preliminary dispute over service-invention status must first be decided under Section 133. The timing of a specific claim therefore requires analysis of the full factual sequence and cannot be resolved through a universal rule based only on patent grant or first sale.
How Is Remuneration Assessed Under Section 135?
When the Committee has jurisdiction and determines that remuneration is appropriate, Section 135 sets out non-exhaustive considerations. These include the employee’s duties, the relationship between the invention and the employment, the employee’s initiative in devising it, the invention’s possibilities for exploitation and actual exploitation, and reasonable expenses incurred by the employee to protect the invention in Israel.
The Law does not prescribe a fixed royalty percentage of turnover, profit or patent value. A researcher hired specifically to develop the relevant technology may be in a different position from an employee who independently devises an invention outside ordinary assigned development tasks.
Development by a broader team, the employer’s research budget, commercial risk, required regulatory work and the extent to which the invention contributes to a marketed product can all be important factual considerations, without becoming an automatic mathematical formula.
The difference between technical importance and recoverable economic value matters. A commercially promising invention may not have generated sales, and a successful product may depend on numerous technologies beyond the contribution of one employee.
What Evidence Should an Employee or Employer Prepare?
Contract documents ordinarily form one group of evidence: employment agreements, intellectual-property schedules, assignments, releases, termination arrangements, incentive schemes, correspondence about bonuses and employee invention notifications.
The other group concerns the technology: laboratory notebooks, technical drawings, source-code revisions, dated invention disclosures, patent specifications and claims, research reports and contemporaneous correspondence identifying the employee’s contribution.
If the claim concerns a particular royalty amount, materials on actual or anticipated exploitation may be needed, including licences, product sales, development costs and expert economic assessment. Patent inventorship alone is not a calculation of financial contribution.
For international groups with Israeli research facilities, foreign parent-company ownership and intra-group assignments should be examined together with the employee’s actual contractual relationship and the entity that employed the inventor.
The Composition and Authority of Israel’s Compensation and Royalties Committee
Section 109 establishes a specialized Committee comprising a Justice of the Israeli Supreme Court, the Registrar of Patents and an academic member from an institution of higher education. Under Section 111 the Committee has exclusive authority over matters allocated to it and its decisions are designated final.
The same Committee addresses other statutory matters, including claims for remuneration relating to authorized government exploitation and compensation for national-security restrictions under Sections 107–108. Those are different causes of action from an employee’s claim under Section 134, notwithstanding the common forum.
Section 113 permits the Committee to determine its procedures where they have not been prescribed by law or regulations. Under Section 114, its hearings are generally not public unless it orders otherwise; publication of proceedings conducted in private is restricted. These rules can be important for highly confidential research and proprietary technical information.
Section 115 grants powers relating to evidence, witness attendance and production of documents, including specified flexibility in receiving evidence. The Committee may also order payment of an undisputed sum before its final determination, which is a power rather than an automatic entitlement to interim royalties.
Can a Committee Decision Be Appealed?
Section 111 states that the Committee’s decisions are final. Israeli decisions, including Ruth Levy, emphasize that there is no ordinary appeal as of right from its factual and monetary determinations. Judicial review by the High Court of Justice is limited and does not provide a routine second hearing of the evidence.
Exceptional review may be available in circumstances involving a material legal error or compelling considerations of justice. Precisely because ordinary appellate review is restricted, both employee and employer should place the necessary contracts, technical records, dates and valuation material before the Committee at the initial stage.
Reconsideration When Circumstances Change: Section 136
Section 136 allows the Committee, on request, to reconsider a determination under Section 134 if it considers that relevant circumstances existing when the determination was made have changed. This is separate from an appeal.
For example, a substantial later change in the invention’s potential or actual exploitation may be relevant to whether reconsideration is justified. It does not mean the employee automatically receives additional royalties whenever the company’s revenues increase. A party seeking reopening must identify a concrete post-decision change and its relationship to the earlier determination.
The Committee may order costs against a party who seeks reconsideration without justification. This mechanism does not replace the need to bring an original remuneration claim within the applicable limitation period.
Remuneration, Inventorship and Patent Ownership Are Separate Disputes
Sections 131–133 govern employee notification, ownership of service inventions and disputes about classification before the Registrar. Section 134 deals with potential remuneration where the parties have not settled the issue by agreement. Sections 39–43 deal with the right to be named as inventor.
A company can own the patent while an employee is properly named as inventor. An employee can be named without thereby establishing a right to royalties. A remuneration application cannot simply transfer patent ownership to an employee.
Related guides explain ownership disputes over service inventions, inventor-name corrections, and compensation for authorized government use.
The principal statutory provisions are Sections 109, 111, 113–115 and 131–136 of the Patents Law. For extended commentary see Yonatan Drori, Patent Law (Hebrew, 2023), Section 13.1.4.8. For coordination of proceedings in Israel, see Patent Litigation in Israel.
