2012/5/8. 2. 1. Current provisions and amended provisions on employees' inventions. Subsection 1 An employer shall have a non-exclusive license on an employee's invention.Subsection 2 Reserved succession of an invention other than an employee's invention shall be null and void. ? Reserved success
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1. 2012/5/9 1 Compensation for Inventors in Japan Mamoru Takada, FICPI Japan
FICPI-Venice Forum, Session 3.3, October 7, 2004
1. Current provisions and amended provisions on employees’ inventions
2. Problem recognition and legislative proposals
3. Emphasis on inventions as a national measure in Japan
4. Amounts of “reasonable remuneration” awarded in recent decisions
6. Significant decisions
7. Opinions relating to the employee-invention system
8. What about future
9. Personal views
2. 2012/5/9 2 1. Current provisions and amended provisions on employees’ inventions Subsection 1 An employer shall have a non-exclusive license on an employee’s invention.
Subsection 2 Reserved succession of an invention other than an employee’s invention shall be null and void. ? Reserved succession of an employee’s invention can be stipulated.
Subsection 3 The employee, etc. shall have the right to a reasonable remuneration when he/she has enabled the right to obtain a patent or the patent right with respect to an employee’s invention to pass to the employer.
Subsection 4 The amount of such remuneration shall be decided by reference to the profits that the employer will make from the invention and to the degree of contribution the employer made to the making of the invention.
Subsection 4 The payment of such remuneration shall not be unreasonable, in view of the state of consultation between the employer and the employee in establishing a standard for fixing the remuneration, the state of disclosure of such standard as established, and the state of hearing opinions from the employee with regard to the computation of the remuneration.
Subsection 5 In case that the payment of such remuneration is deemed unreasonable, the amount shall be determined by reference to the amount of profits that an employer will make from the invention, the obligations and the contributions that the employer made with respect to the invention, the treatment of the employee, and other conditions.
3. 2012/5/9 3 2. Problem recognition and legislative proposals (Report1 of The Industrial Structure Council of December 18, 2003)
2.1 Reasonableness of the way of determining “reasonable remuneration” was emphasized.
2.1.1 Problem recognitions
(1) The obligation of an employer may not be finalized for a long period of time, since there remains the possibility for having to pay later the balance between the reasonable remuneration and the actually paid remuneration.
(2) The specific grounds for calculation of the reasonable remuneration are not necessarily clear to the parties involved, and the amount of any such reasonable remuneration is unpredictable.
(3) It is usually difficult for an employee to file a lawsuit to demand balance due which is less than the reasonable remuneration stipulated in Patent Law.
2.1.2 Direction of amendment for reasonableness of remuneration (Section 35 Subsection 4)
(1) The amount of remuneration should be left to an independent agreement between an employer and an employee/employees.
(2) The amount of remuneration might be determined by a contractual provision or an employment regulation, but the extent to which an employee’s intention is reflected in the entire process of determining the remuneration should be used as an important evaluation standard.
(3) If there is unreasonable determination of a remuneration caused by the difference in the positions between an employer and an employee, the employee should have the right to demand the “reasonable remuneration” same as at present.
(4) Regarding judgment of whether a remuneration stipulated in a contractual provision or an employment regulation is unreasonable or not, the state of involvement of an employee should be focused on.
4. 2012/5/9 4 2c. Problem recognition and legislative proposals (Continued) 2.2 Consideration should be extensively given to the circumstances of employer’s contributions in determining the amount of “reasonable remuneration”.(Section 35 Subsection 5)
2.2.1 Problem recognition
(1) The grounds for computation of the remuneration in court decisions are unclear, and that, in court decisions, while the remuneration is calculated based on the sales of the invention or the income from the license fee, there was a possibility that only the circumstance until the invention was created was considered.
2.2.2 Direction of amendment for employer’s contributions (Section 35 Subsection 5)
(2) Consideration should be given to the contributions not only before the creation of the invention but also those after the completion of the invention such as executing the patent application procedure, developing technologies for exploitation of the invention, conducting marketing and advertising campaigns, and negotiations for licensing. Further consideration should be given to employer’s risk of research and development, employer’s favorable treat of employee through raises, promotions and the like. All of these circumstances should be considered.
5. 2012/5/9 5 3. Emphasis on inventions as a national measure in Japan (1) February 25, 2002, the Intellectual Property Strategy Council was established with the Prime Minister as chairman.
(2) On July 3, 2002, the outline of the intellectual property strategy was decided. In this outline, it was decided to review the employee-invention system as a part of the national intellectual property strategy.
(3) It was decided to conduct a search of the employee-invention system during the FY 2002 and to review the system from the perspective of strengthening industrial competitiveness so as to draw a conclusion during the FY 2003.
(4) In December 2002, the Basic Law on Intellectual Property was enacted.
Along with placing emphasis on an employee’s invention, it was set up as a goal to clarify the treatment of an employee’s invention.
(5) In December 2003, the report of the Industrial Structure Council regarding the employee-invention system was issued. The amendment of Section 35 of Japanese Patent Law regarding the employee invention was enacted on May 28, 2004 and come to be effective as of April 1, 2005.
6. 2012/5/9 6 4. Amounts for “reasonable remuneration” awarded in recent decisions (1) Hitachi Metals case
(The amount demanded 89.749 million yen ? awarded 12.32 million yen)
August 29, 2003 Tokyo District Court decision
Method of calculation:
License fee from third party’s license (123.24 million yen)
× the degree of contributions of the inventor (10%)
(2) Hitachi case
Lawsuit filed in 1998
November 19, 2002 Tokyo District Court decision
(The amount demanded in the first trial 970.6 million yen ? awarded 34.94 million yen)
Method of calculation:
Profits received by the employer under the blanket license agreement (250 million yen)
× the degree of contributions of all inventors (20%)
× the degree of contributions of the plaintiff among joint inventors (70%)
January 29, 2004 Tokyo High Court decision (The amount demanded in the second trial is the awarded amount in the first trial + 250 million yen ? awarded 128.1million yen)
Method of calculation:
Profits based on foreign patents were also included.
7. 2012/5/9 7 4c. Amounts for “reasonable remuneration” in recent decisions (Continued) (3) Ajinomoto case
(The amount demanded 2 billion yen ? awarded 189.35 million yen
February 24, 2004 Tokyo District Court decision
Method of calculation:
Profits such as license fee received by the employer from licensing agreements and the like (7.974 billion yen)
× the degree of contributions of the inventor (5%)
× the contribution rate of the plaintiff among the multiple inventors (1/2)
(4) Nichia Corporation case
(The amount demanded 2 billion yen ? 20 billion yen ? awarded 20 billion yen)
2001 lawsuit filed
September 19, 2002 interim decision of the Tokyo District Court
January 30, 2004 Tokyo District Court decision
Method of calculation:
1,108.6 billion yen which was the estimated amount of sales by the employer until the expiration of the patent right period
× the proportion of estimated sales by the third party (50%) on the assumption of the third party’s license,
× the rate of estimated license fee (20%) on the assumption of the third party’s license,
× the degree of contributions of the inventor (50%)
8. 2012/5/9 8 5. Method of calculating reasonable remuneration in the decisions (1) If there is licensing revenue, the amount of the licensing revenue is deemed profits that an employer will make. Based on this amount, a reasonable remuneration is calculated in view of the employer’s contributions and the inventor’s contributions.
licensing revenue × inventor’s contributions
(2) In case of in-house implementation, the following method is used.
If there were licenses made with other companies, how much relevant other companies would have sold is calculated based on the sales amount of the in-house patented product. The sales amount is multiplied by the rate of license fee so as to calculate the virtual licensing revenue.
the virtual sales amount of virtual licensee × the virtual rate of the license× inventor’s contributions
In the abovementioned computation method, it is not known what kind of measures are specifically used to recognize the values such as:
(1) the virtual sales amount in case of licensing with a third party,
(2) the rate of virtual license fee,
(3) the proportion of the contributions between the company and the employee, and,
(4) the proportion of contributions among joint inventors.
9. 2012/5/9 9 6. Significant decisions Olympus case
May 22, 2001 Tokyo High Court decision
“If it is provided that an employer can unilaterally determine the remuneration for assignment of the patent right, and an employee should be bound by this stipulation, then it will overemphasize the profits of the employer and will violate the purpose of legislation. In light of the purpose of legislation of Section 35 of Patent Law, it is natural that the provisions under Section 35, Subsections 3 and 4 of Patent Law should be understood as forcible provisions.”
April 22, 2003 Supreme Court decision
The demand for the balance was allowed.
“If the amount of remuneration according to the Provisions of the Company is less than the amount of remuneration stipulated under the provisions of Section 35, Subsection 4 of Patent Law, it is appropriate to understand that the payment of remuneration equivalent to the balance due can be demanded based on the provision under Subsection 3 of the said Section.”
An amount of compensation that exceeded the amount stipulated in the employment regulation on an employee’s invention was recognized.
It was ruled that if there were provisions relating to the payment period of the reasonable remuneration in the employment regulation, the payment period would become the commencement of the extinctive prescription of the right to receive the payment of reasonable remuneration.
10. 2012/5/9 10 6c. Significant decisions (Continued) Hitachi case
January 29, 2004 Tokyo High Court decision
The governing law of assigning the right to obtain a foreign patent relating to an employee’s invention is the Japanese law, and Section 35 of Patent Law is applied.
The amount given by multiplying the licensing revenue according to the blanket license agreement by the rate of contributions to the relevant patent can be deemed profits that the employer will make.
In case of the blanket cross-license in which there is no transfer of money, the amount given by multiplying either the amount to be received as the license fee of the relevant patent or the license fee to be paid by the rate of contributions to the relevant patent can be deemed profits that the employer will make.
Hitachi Metals case
August 29, 2003 Tokyo District Court Decision
When calculating a reasonable remuneration, it is necessary to consider not only the degree of contributions of the employer with respect to the creation of the invention but also the degree of contributions of the employer in receiving profits, specifically contributions of obtaining the right, commercially working the invention and concluding the license agreement thereof, and other various factors.
11. 2012/5/9 11 7. Opinions relating to the employee-invention system (1) Support or basically support but with some opinions
?Japan Intellectual Property Association
Basically, the provisions on the remuneration should be abolished and that the remuneration should be left to the parties concerned. With respect to the report, the amount of remuneration in itself should not be a standard for the judgment of reasonableness.
?American Intellectual Property Law Association
It supports the suggestion of further respecting the agreement between an employer and an employee. However, unless it is clearly unreasonable, the determined remuneration should be respected.
(2) The provisions on employees’ inventions should be abolished
? Intellectual Property National Strategy Forum (Private Research Group)
As with other labor contracts, employees’ inventions should be left to the contract between an employer and an employee, and the provisions on employees’ inventions should be abolished.
?Pharmaceutical Research and Manufacturers of America
?European Federation for Medical Chemistry
(3) The right to obtain a patent should be vested in an employer
?Licensing Executives Society Japan, Mr. M. Oba, Mr. S. Nagano, Attorney at law
As a general principle, an employee’s invention should be owned by an employer.
(4) Systematic revision of the treatment of employees’ inventions is unnecessary
?Mr. Takashi Chosa, Patent Attorney
The remuneration should just be determined between an employer and an employee based on the past court decisions. The draft report, which tries to circumvent judicial rulings, will lead to a decline in the motivation to create inventions.
12. 2012/5/9 12 8. What about future? (1) Will the original issues about the treatment of employees’ inventions be resolved by these amendments (to come into effect in April 2005)?
Will the due process in preparing the standard for determining remuneration be respected, and as a result, will the standard in companies be valued at trial?
(2) Generally, it is expected that lawsuits may be curbed for the remuneration for the right to obtain a patent succeeded after the amendments. Procedure was emphasized during the legislative process in order to secure that the payment for remuneration should not be deemed unreasonable, if the standard for determining remuneration was established in accordance with the orderly procedure. However, under the amended provisions, the court will determine the reasonableness of remuneration paid as a result at the time of the lawsuit .
(3) On the other hand, changes of stipulations in companies for employees’ inventions are proceeding, and there has been a tendency that the amount of compensation has become larger. If it is not a large invention, employee’s feeling of satisfaction may increase. However, for large inventions like those that have been litigated in the past, the employee will seek judgment of the court. Therefore, the number of lawsuits is not considered to decrease. In addition, with regard to the succession of a right under the existing law (valid until the end of March 2005), the possibility of litigation will not essentially change in the future.