Employee Inventions in Japan 9/20/2005 Ryoko Iseki

Seminar in Advanced Patent Law by Prof. Morris Fall 2005

Employee Inventions – Comparative Law between US &

Japan –

Ryoko Iseki
Associate Prof. of Faculty of Law
Doshisha Univ. Kyoto Japan
1. Nakamura Case (Nakamura v. Nichia Corp.) Points

(1) 3 judgments of courts

Court date citation issue result
Tokyo District Sep.19,20 1802 interlocutory control of company
(trial) 02 Hanrei judgment patent has the
jiho 30 patent
Tokyo District Jan.30,200 1852 final amount of $189
(trial) 4 Hanrei judgment remuneratio million
jiho 36 n payment
Tokyo High Jan.11,200 1879 court- amount of $8.1
(appeal) 5 Hanrei mediated remuneratio million
jiho 141 settlement n payment

(2) Background
・ The company’s president ordered to stop the Dr. Nakamura’s research. In
spite of that, he took a risk of dismissal and he hid and continued the work.
・Tokyo District court held in the interlocutory judgment that this fact effects
to estimate the contribution of the parties. (That means the company’s
contribution was very low.)
・It was a very rare case.
・ Dr. Nakamura was visibly incensed at the TV press conference after the
settlement and said, “Japan’s judicial system is corrupt”.
(3) Why such a big amount?
District court decision:
1) profit to be received by the company from the invention are $1.15 billion.
2) degree of contribution made by the inventor is 50%
Calculation is $1.15 billion × 50% = $560 million = appropriate remuneration
→ capped by the claim : $189 million (100% of claimed amount)

(4) Why so different between trial court decision and appeal

court’s one?
High court mediated settlement:
1) weigh heavy that possibility of substitute technology, and estimate the
invention’s license fee rate lower.(profit is $110 million)
2) degree of contribution by the inventor is 5%

The policy is that adequate remuneration should be an amount sufficient to act

as an incentive for employees, while at the same time should be a amount that
allows the employer to outperform its competitors in the fiercely contested
international market, and to promote its development in a tough economic
environment.
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Employee Inventions in Japan 9/20/2005 Ryoko Iseki

(5)Other similar cases:

Hitachi Tokyo Jan.29, 1848 final amount of $1.5
Co. case High 2004 Hanrei judgmen remuneratio million
jiho 25 t n payment

Ajinomot Tokyo Feb.24, 1853 final amount of $1.8

o Co. District 2004 Hanrei judgmen remuneratio million
case jiho 38 t n payment
☆In Hitachi case, Tokyo High court held that adequate remuneration to
employee inventors still should be required even if the assigned right are a
foreign patent.

(6)Amendment of the Employee Invention System in Patent

Law
These lawsuits led the amendment.

2. Employee Inventions Issue in Japan

・ Employee inventions result from efforts of both employee & employer.

・ That requires certain arrangement of rights to inventions between employee
& employer.
・ We also need to consider about the balance of power of these parties.
・ Especially in Japan, the labor environment: LIFETIME employment
system should be considered in particular – Japanese can seldom
change their job.
・ That means usually Japanese employees are much weaker than US
employees, so they can hardly negotiate with their employers about their
inventions.

3. US Law compared with Japanese Law

1) Current law
US Japan
no particular provision in the US statutes about employee Patent Law §35
inventions.1
governed by common law, and arranged by contracts between Not common law
employee & employer, mainly by employment agreements system

Restatement of Agency, 2nd § 397 When Agent Has Right Same to US

to Patents
Non-inventive work employee is entitled to patents
(Nevada State law stipulate contrary (2001)
Comment a. employee invention transferable to employer Same to US

Comment a. contract is not necessary specifically so provided.2 Certain explicit

stipulation required

1
Except of Executive Order 10096 (Jan.25,1950, 15 Federal Register No.16,
pp.389-391), amended by Executive Order 10930, 10695, for federal
employees.
2
Comment a. says “Such an agreement may be found in specific terms in a
contract of employment or from the circumstances surrounding the
employment, the nature of the work done, and the relations of the parties
during the employment.”
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Employee Inventions in Japan 9/20/2005 Ryoko Iseki

8 states3 laws limit the extent of transfer of employee Almost same to

invention these state laws
Comment a in case of inventive work employee, inventions are Certain explicit
to be owned by employer although not so specifically agreed stipulation required

Comment b license for employer: “Shop Right” Almost same to US

Consideration for the contract of convey right to patent Employee has right
to employer: to appropriate
the employment itself or the continuation of remuneration
employment. 4

2) Proposed revisions of law

Brown bill (1963)(88th H.R.4932), Moss bill (1970)(91st H.R.15512),
…..Kastenmeier bill(1982)(97th H.R. 6635) etc.
The bills were primarily concerned with the allocation of ownership rights and
with assuring employed inventors "adequate" compensation for certain
inventions. These bills followed West Germany law or Japanese law.
4. Japanese Patent Law
1) Overview
<Purpose>
・ The employee-invention system in Japanese Patent Law aims to coordinate
the interests of the employees who made the invention and of the
employers who supported the employees, under industrial policy to
encourage research and development activities and to increase investment
in them in Japan.
<Structure>
・ The right to obtain a patent originally belongs to the inventor (the
Employee). (same as US)
・ The Employer has the right of legal non-exclusive license. (§35(1))
・ The Employer can reserve succession of the right to obtain a patent or the
right to a patent granted, or the establishment of an exclusive license.
(ONLY in the case of the Employee Invention) (§35(2))
・ The Employee has the right to demand payment of ADEQUATE
REMUNERATION in return for allowing the Employer to succeed to the right
to obtain a patent of the right to patent granted or the establishment of an
exclusive license for the Employer. (§35(3))
<Problem>
・ Difficult problem is arisen: How is “the adequate remuneration” calculated?
- Because the value of a patent is very difficult to estimate; it varies
depend on many factors.
- Also difficult to evaluate the contribution of both parties to development
of the invention

3
California, Washington, Minnesota, North Carolina, Illinois, Delaware, Kansas,
Utah.
4
Thibodeau v. Hildreth 124 F. 892 (1st Cir. 1903), Conway v. White 9 F.2d 863 (2nd
Cir. 1925), Cubic Corp. v. Marty 185 Cal.App.3d 438, 1 USPQ2d(BNA) 1709,
Hebbard v. American Zinc, Lead & Smelting Co. 161 F.2d 339 (8th Cir. 1947),
Harsco Corp. v. Zlotnicki 779 F. 2d 906, 228 USPQ(BNA) 439 ( 3rd Cir. 1985) cert.
denied 476 US 1171 (1986).
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Employee Inventions in Japan 9/20/2005 Ryoko Iseki

2) Problems in the Previous Provision

・ The previous §35(4) stipulated that the amount of the remuneration shall be
determined in light of the profit to be received by the Employer from the
invention and the degree of contribution made by the Employer to the
making of the invention.
・ The Supreme Court decided that even where the employment regulation
includes the provision on remuneration to be paid by the employer to the
employees, when the amount of remuneration is less than the amount
decided by the §35(4), the employees can demand payment of the
remuneration corresponding to the deficit. (The case of Olympus Co.,
Sup. Ct. April 22, 2003., 57 Minshu 477)
・ Based on this decision, many suits in which inventors file against their
former-employer demanding the deficit of remuneration have occurred.
・ Employers worried that they couldn’t foresee how much should they pay to
the employee-inventors.

3) Purport of the new system

・ The determination of remuneration shall be regulated by the contract,
employment regulation or other stipulations, which are voluntary
agreements between both parties concerned.
・ In order to avoid cases in which unreasonable determinations are decided
due to difference in positions of the employers and the employees, where it
is recognized unreasonable to pay remuneration in accordance with the
stipulations, the remuneration calculated by reference to certain elements
as the previous provision provided, shall be the appropriate remuneration.
・ Focus of argument is shifted to how “unreasonableness” could
be judged.
Elements considered are:
　A: PROCESS to the payment
B: AMOUNT of the payment
＊process weighs heavier.
A: 1) situation of discussion between the parties when formulating the
standards for determining the remuneration
2) situation of the disclosure of such standard
3) situation of listening to opinions from the employee on the
calculation

www-personal.umich.edu/~rjmorris/fall05/iseki/bkgrnd.doc