Inventors rise up to claim their rights
Managing IP is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

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

more from across site and ros bottom lb

More from across our site

External counsel for automotive companies explain how trends such as AI and vehicle connectivity are affecting their practices and reveal what their clients are prioritising
We provide a rundown of Managing IP’s news and analysis coverage from the week, and review what’s been happening elsewhere in IP
The winners of the awards will be revealed at a gala dinner in New York City on April 25
Counsel debate the potential outcome of SCOTUS’s latest copyright case after justices questioned whether they should dismiss it
Each week Managing IP speaks to a different IP lawyer about their life and career
The small Düsseldorf firm is making a big impact in the UPC. Founding partner Christof Augenstein explains why
The court criticised Oppo’s attempts to delay proceedings and imposed a penalty, adding that the Chinese company may need to pay more if the trial isn’t concluded this year
Miguel Hernandez explains how he secured victory for baby care company Naterra in his first oral argument before the Federal Circuit
The UPC judges are wrong – restricting access to court documents, and making parties appoint a lawyer only to have a chance of seeing them, is madness
The group, which includes the Volkswagen, Seat and Audi brands, is now licensed to use SEPs owned by more than 60 patent owners
Gift this article