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Inventors rise up to claim their rights

The subject of inventors' rights has recently generated much debate in Japan, with developments indicating the possibility of a shift of power favouring inventors. The story, in its most basic form, may sound familiar. The workhorse engineer, employed by a faceless corporation, makes an important invention. The corporation files an application in its own name and when the patent issues, garners huge profits. The inventor is rewarded with a mere pat on the back and a pittance. Not exactly Upton Sinclair, but the sense of exploitation is there. Yet, in the heyday of the Japanese economic boom, the days of feudalistic worker loyalty and guaranteed lifetime employment, this practice was accepted without question.

The bad news for our corporation is that those halcyon days are long gone, and the inventors have come collecting. There has been a dramatic rise in the number of cases in which inventors have sued their employers on the grounds that they were unjustly forced to assign the rights to their inventions or did not receive adequate remuneration (consideration).

The Japanese Patent Law states that when an employee makes an invention in the course of working for the employer (referred to below as a work-related invention), the invention belongs to the actual inventor, but the employing company is to be allowed a gratuitous, non-exclusive licence on the invention. The idea is to provide both parties with their fair share of consideration for their respective contributions to the invention. The law also states that when an inventor assigns an invention to an employer, the inventor has the right to receive remuneration in such an amount as is befitting in consideration of the profits gained by the employer on the basis of the invention and the level of contribution of the employer to the invention. In other words, the Japanese Patent Law makes it quite clear that the inventor has the right to decide whether or not to assign an invention to the employer, and in the case of an assignment, the remuneration to the inventor must take the into account the factors mentioned above.

This creates a problem for many companies which have hitherto operated on the assumption that they could simply take the invention and leave a carrot, especially in these days when their disgruntled (ex-)employees are immune to such appeasements. Here are a few examples.

Employer's payment ruled out

In the Olympus case (Tokyo High Court, May 22 2001), an inventor of an optical pickup device for CDs had assigned the right to receive a patent on the invention to Olympus, his employer, for which he received ¥210,000. Olympus then licensed a group of patents among which the relevant patent was included, and in return received about ¥13 billion. The inventor later sued Olympus on the grounds that he was owed about ¥200 million as fair consideration for assignment of the invention. The court ruled that the clause in the employment contract requiring employees to assign work-related inventions to the company was in itself valid, but because under the Japanese Patent Law the amount of consideration is required to take into consideration both the profits to the employer and the contribution of the employer to the invention, the company's one-sided determination of the amount of consideration to be paid out was invalid. The company was required to pay an additional 2 million yen to the inventor.

In the famous blue LED case (Tokyo District Court, Intermediary Decision, September 19 2002), Shuji Nakamura, inventor of the blue LED (light-emitting diode) and now a professor at the University of California at Santa Barbara, sued Nichia, the company under which he developed the blue LED and the owner of the patent on the blue LED, on the grounds that the patent for the blue LED rightfully belonged to him. He demanded that the patent be returned, or if not returned, that he be paid ¥2 billion as a fraction of the consideration due to him. The court ruled that the patent did not need to be returned, as it had been legally assigned from Nakamura to Nichia. However, there was no indication concerning the consideration for the assignment, and the final decision, which presumably would include a decision as to what would constitute a fair consideration in this case, is being awaited with much anticipation.

Court comes up with payment formula

In the Hitachi case (Tokyo District Court, November 29 2002), a former researcher at Hitachi who had made an invention which was very basic to the development of optical disks sued his former employer Hitachi for ¥900 million, as fair consideration for assignment of the rights to obtain a patent on his invention. In the decision, the court provided specific rules of thumb for calculating the amount of profits to a company and the degree of contribution of the company, which are required for determining a fair remuneration for an invention, such as that the amount of profits to a company are based on specific profits such as from licensing fees, that a company is considered to profit even in the case where there is no actual licensing income due to cross-licensing, and that licensing revenues gained in a foreign country are not to be considered. Hitachi was ordered to pay the inventor about ¥35 million as adequate remuneration.

The increase in the number of lawsuits of this nature strongly suggest that a rift has developed between current legal standards and the standards of modern society as regards work-related inventions. Japanese society is clearly undergoing a shift in ways of thinking, especially concerning the balance of power between employees and employers, and the current laws, the product of a different era, now seem hopelessly outmoded. Indeed, the portion of the Japanese Patent Law concerned with work-related inventions was introduced more than a half-century ago. The cracks are beginning to show and the talk today is increasingly directed toward the need for a fix.


Yoshitaka Sonoda

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