Patent Japan

Wednesday, October 18, 2006

Employee's Invention

On October 17, 2006, the Supreme Court dismissed the appeal from the decision of the Tokyo High Court on the employee's invention case ("Hitachi Case").

On January 29, 2004, the Tokyo High Court had ruled in the decision that
(i) regarding the patent transfer contract at issue, Japanese law should be the applicable, irrespective of the implied intentions of the parties, because it was made between a Japanese company and its employee;
(ii) "the appropriate compensation" under the section 35 of the Patent Law should encompass the rights to foreign patents, because it should be decided based upon the national industrial policy in which the company and its employee reside, not upon that of other countries where patents are registered; and,
(iii) in case of a comprehensive cross license contract, it would be reasonable to include the royalty which would have been received in "the amount of the profit that an employer would make" under the section 35.

The Supreme Court upheld this decision by ruling as follows on the first two points.
(i) The issues whether an assignee has the right to compensation as a result of the transfer of foreign patents, and how much its compensation amounts to, are regarded to be the issue of legal effects arising from a contract, and, therefore the applicable law for these issues should be decided based on the intention of both parties.
In this case, because an implied intention was found to exist between both parties, Japanese law is to be applicable.
(ii) Since it is difficult, by literal interpretation, to include foreign patents in "a right to a patent" under the section 35 of the Patent Law, the section could not be directly applicable for the claim to the compensation based on foreign patents.
However, while this section is provided considering the difficulty for an employee to make a patent transfer contract with its employer on an equal footing, it makes no difference for this difficulty in case of foreign patents.
Also, corresponding patents in various countries have resulted from a single inventive activity and from a single employment relationship.
Therefore, the sections 35 (3) and (4) should apply mutatis mutandis for the claim to the compensation as a result of the transfer of foreign patents.

By the Patent Law revision of 2004, the provisions regarding the compensation (section 35) have been changed.
New provisions shall be applicable ONLY to cases where patent rights are TRANSFERED on and after April 1, 2005.


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