Author: Hiroki Horita, Attorney at Law

1. Price for an on the job invention

In regard to on the job inventions, about 20 years ago there was the case of the blue diode where the inventor sued his own company and was awarded JPY60,430,060,000 (on appeal the appeals court substantially reduced the amount and a settlement was reached). In this article we explain that on the job inventions can be risky if handling is mistaken.

2. An on the job invention does not belong to the company

First, as a large premise, a patent belongs to the person who invented. This also applies to a case where an employee in the company makes the invention.

However, the rights to an on the job invention, that is an invention that is due to the present or past work of an employee acting within the scope of the business of the company, are legally allowed to vest in the company in the case where an agreement, or work rules, etc., already provide that any rights to patents will be acquired by the company.

Therefore, the rights to an on the job invention can belong to the company, but in the case where there is no provision like the above, the rule is that any right to receive a patent for an on the job invention will belong to the employee.

3. Not free

In the case where the right to receive a patent for an on the job invention belongs to the company, the employee can demand “equivalent benefit” from the company.

Directors of the company are apt to make a mistake with this by thinking that salary is being paid to the employee and that is enough, but “equivalent benefit” means a separate payment from the salary as first noted above.

4. Establish a provision for on the job inventions

How much is “equivalent benefit”? Depending on the invention this will be different and cannot be a uniform standard, but in establishing a standard for “equivalent benefit” it is necessary to pass through the following steps: (i) discussion and decision for standard, (ii) disclosure of the standard, and (iii) gathering of opinions (including procedures for objections).

First, for (i) discussion of standard, it is desirable for all employees actually involved in development to have exhaustive discussions. As an example, a representative of the majority employees can show the discussed content to the minority employees and obtain their opinions this as evaluated as having a discussion.

Next, for (ii) disclosure of the standard, it is possible to publish the information in an easy to see location or on the internal intranet of the company.

Finally, for (iii) gathering of opinions, the company must sincerely seek the opinions of the employees.

5. In conclusion

By the above method for deciding the ownership of rights to patents for on the job inventions and determining the standard for “equivalent benefit” the risk of a dispute over ownership of rights with an employee and a demand for a large amount of compensation can be substantially reduced.

We hope that you will review whether there are any inadequacies in your present handling of the above.