- Solution or Expansion - The Supreme Court Sets Another Rule on Employee's invention
- 掲載紙: Winds from Japan No.30
- 掲載日: 2007年1月
- On October 17, 2006, the Supreme Court of Japan handed down a long-awaited decision in a case in which an ex-employee claimed compensation for an invention he had made during his employment with his former employer, Hitachi. In the decision, the Supreme Court upheld the conclusion of the Tokyo High Court, which stated that foreign counterpart patents could inclusively be a basis for calculation of compensation under Article 35 of the Japanese Patent Law.
In this case, the initial decision handed by the Tokyo District Court had been overturned on appeal. The Tokyo District Court ruled that Hitachi's foreign counterpart patents, which were granted claiming priority of the Japanese patent application for the employee's invention at issue, should not be taken into consideration when calculating an amount of compensation to be awarded to the inventor under Article 35. Based on the doctrine of patent independence and territoriality, the Tokyo District Court reasoned that a payment of compensation with respect to foreign counterpart patents could not be justified under Japanese patent law, and that any issues related to compensation should come under the purview of the local law of respective countries.
The plaintiffs filed an appeal with the Tokyo High Court against the decision made by the Tokyo District Court. On appeal, the Tokyo High Court reversed the District Court's decision and ruled that foreign counterpart patents could also be taken into consideration when calculating an amount of compensation to be paid to an employee for an invention made during his/her employment. The case was further appealed to the Supreme Court and the Supreme Court made its decision in favor of the petitioner (plaintiff) without conducting a hearing from the parties concerned. It appears that the Supreme Court decided to take this case up solely for the purpose of resolving the inconsistencies in judicial interpretation among the lower courts.
The Japanese Patent Law provides that an employer has a non-exclusive license on a patent right when the employee has obtained a patent for the employee's invention or when a successor in title to the right to obtain a patent for the employee's invention has obtained a patent therefore (Art. 35, Para. 1). The law further states that the employee has a right to claim reasonable compensation for his invention in a case that the employee has assigned to the employer the right to obtain a patent or patent right with respect to the employee's invention (Art. 35, Para. 3). To qualify as an employee's invention under the Patent Law, Art. 35, the invention has to meet three requirements: (1) it must be made by an employee, (2) it must be related to his present or past job, and (3) it must be within his employer's line of business.
Readers may recall that in April 2003, the Supreme Court of Japan issued a ruling in the Olympus case, in which the Supreme Court ruled that a contract between an employer and an employee would be invalid when and if it one-sidedly provided for an amount of compensation for the employee's invention. At that juncture, it was recognized that many companies substantially handled the issues of employee's inventions through internal contracts drafted by the employer. Payments of the amounts listed in the internal contracts at least satisfied the completion of the employer's statutory duty. In general, it was considered by corporate intellectual property departments that the amounts paid under their programs satisfied the statutory compensation requirement. Thus, for many corporations, the Supreme Court decision in the Olympus case appeared to outlaw the long-held industrial practice.
Since then, lower courts have ruled in other employee's invention cases in favor of employees. In fact, lower courts had no other way to treat such issues in light of the Olympus ruling. Their role was simply to decide the amount of compensation, which became higher as the number of rulings increased. Most significant was the District Court decision in the Nichia case. The Court awarded 20 billion yen as compensation for the inventor of the blue light-emission diode, although the award was eventually cancelled and the parties agreed to settle their dispute with the much reduced amount of approximately 850 million yen in total. We have reported on these decisions in detail in past issues of this newsletter. In the Toshiba case, the Tokyo District Court recommended that the parties should seek a settlement and in July 2006, an ex-employee as an inventor of a flash memory invention agreed to accept 87 million yen in settlement.
A flood of suits against companies and a gradual increase in the amount of compensation caused serious concern in business circles, since they were considered to hinder the revitalization of competitiveness of Japanese industry that was taking place at the time. Such concern moved bureaucrats and lawmakers to enact an amendment of Article 35 of Patent Law. In 2005, the amended Article 35 became effective. In order to improve uncertainties caused by the Supreme Court's decision in the Olympus case, one paragraph was newly added to allow internal agreements which reflect good-faith negotiations between an employee and an employer as a reasonable basis for the calculation of compensation. Many companies have revised their internal contracts so as to avoid automatic invalidation under the statutory law.
Despite the amendment of the statutory provision, however, it seems that a number of inventors still believe that the court is a good venue for seeking compensation for their old inventions. A week after the Supreme Court decision in the Hitachi case, another ex-employee of Hitachi brought a suit against his former employer claiming payment of 200 million yen as compensation for an invention he made during his employment.