Japan’s Courts Recognizing Intellectual Property Right of Employees

October 22, 2006

Japan’s Supreme Court recognized the intellectual property rights of employees who invent products in a landmark ruling last week, ordering Hitachi to pay 163 million yen ($1.4 million) to a former worker.

The court backed a January 2004 high court decision that awarded the payment to Seiji Yonezawa who invented technology for reading compact discs and digital video discs while working for the electronics maker, a court official said.

“This is a historic ruling, a first for Japan. It’s simply fantastic,” said Hidetoshi Masunaga, Yonezawa’s lawyer, noting that the compensation was much more than the 118,000 yen ($1,000) Hitachi initially gave his client for the invention.

In Japan — a nation that once embraced a tradition of worker loyalty under which employees were guaranteed a job for life but were not rewarded on performance — there has been a rise in intellectual property lawsuits by employees in recent years.

Some companies do not spell out terms of patent royalty payments in employment contracts, and their scientists have started to complain that they are not adequately compensated for their lucrative inventions.

Hitachi said in a statement that it found the Supreme Court ruling “regrettable.”

“We fear that this decision may greatly hinder the research development and business efforts of Japanese companies,” it said.

Yonezawa’s lawyers say he was paid only 118,000 yen for one of three patents he filed between 1973 and 1977, providing technology to read CDs and DVDs.

In the 2004 High Court case, Yonezawa, who retired from Hitachi in 1996, had demanded 250 million yen in royalties. Hitachi argued it had already paid him for the patents.

Another high-profile courtroom battle over patents was settled last year for 840 million yen.

In that case, inventor Shuji Nakamura demanded compensation from Japan’s Nichia Corp. over patents he filed for the blue light-emitting diode, or LED, widely used in traffic lights and cell phones.

In 2004, Nakamura, a former Nichia employee, won a landmark Tokyo court ruling that awarded him 20 billion yen in compensation — the largest compensation award in a patent lawsuit in Japan.

Nichia appealed to the higher court. Nakamura wanted to take his case to the Supreme Court but reluctantly settled following his lawyers’ advice.

In another case earlier this year, Tokyo-based Toshiba Corp. settled a lawsuit over a flash memory chip patent claimed by a former employee, agreeing to pay him 87 million yen.

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