Japanese IP Practice Tips: Employer Rights to Employee Inventions
July 30, 2020
- Under the Japanese Patent Act, the right to an employee’s invention generally belongs to the employee. However, under the Amendment to the Japanese Patent Act of 2017, when an advance contract entered into between the employer and the employee specifies that the right to a patent shall belong to the employer, such right will belong to the employer from when the right comes into existence.
- The employer always has the right to a non-exclusive licence. No remuneration is to be paid in this case.
- Under the Japanese Patent Act, “employee’s invention” means (1) an invention which in essence belongs to the field of business of the employer and (2) arose from an activity which belongs to the present or past work duties, the definition of work duties under judicial precedent being broadly interpreted.
- Assignment of the right to grant of an employee’s invention by the employee to the employer may be an obligation regulated in advance contractually or on the basis of employment regulations or other agreements. In the event the employee’s invention is assigned to the employer or a right to exclusive use is awarded to the employer, the employee is entitled to reasonable remuneration. This remuneration constitutes payment of the additional value that goes beyond the non-exclusive licence that is normally due to the employer. Hence, the reasonable remuneration is generally limited to the “monopoly profit” from the exclusive right of use.
- Under the Amendment to the Japanese Patent Act of 2017, the wording of “reasonable remuneration” has been changed to “reasonable amount of money or other economic benefit” to include economic benefits that are not limited to monetary benefits. This protects the benefits of the inventor and allows an employer to offer flexible incentives that are in accordance with corporate strategies.
- Following a sensational series of rulings at the beginning of 2004, including the high-water “Blue Diode” ruling of the Tokyo District Court (Tokyo District Court judgment; Jan. 30, 2004, Hanrei Jiho 1852-36) that granted compensation payments of up to 20,000,000,000 yen to an employee (settled on appeal), Art. 35 of the Japanese Patents Act was amended the same year. The revised version is intended to prevent companies from relocating abroad and to create greater legal certainty regarding the amount of remuneration. Pursuant to Art. 35 para. 4 of the Patents Act, compensation set by a contractual agreement, official regulations, or in any other way, is generally deemed to be reasonable if at the time at which the criterion for compensation was set negotiations between employer and employee (or the representative of the employee) have taken place, the criterion has been disclosed and the views of the employee taken into consideration when setting the amount. Only if either no provision exists or this provision is deemed to be unreasonable in view of the prerequisites named above, is reasonable compensation to be paid by a court decision in accordance with the criteria provided for in the previous version of Art. 35 para. 4 of the Patents Act. The amount of compensation is based on the profit that the employer makes out of the invention, the extent to which the employer contributed to the invention, the treatment of the employee and any other relevant circumstances.
- Inventions which are not employee’s inventions are not subject to non-exclusive licences and cannot be assigned from the outset contractually by the employee to the employer; such contractual provisions are invalid.