Recent Decision(s) relating to Employee Inventions 2015 AIPLA Mid-Winter Institute IP Practice in Japan Committee Pre-Meeting Seminar Recent Decision(s) relating to Employee Inventions January 27–28, 2015 Orlando, Florida JPAA International Activities Center Kaoru KURODA

Table of contents History of Invention Act Amounts of value awarded by the Court in 2014 Nomura Case (Tokyo Dist. Ct., Oct 30, 2014) 2

Invention Act Previous Act (Since 1959） Present Act (2004 revision） ? (Article 35 of Japanese Patent Law) Previous Act (Since 1959） Present Act (2004 revision） ? 3

Previous Act (before 2004 revision） Invention Act Previous Act (before 2004 revision） An employee (=inventor) originally obtain a right to obtain a patent. An employer has a non-exclusive license on the patent for free (Art. 35(1)). If the employee transfers the right to obtain a patent to the employer, the employee has the right to receive reasonable value from the employer (Art. 35(3)). 4

April 22, 2003, Supreme Court Decision Invention Act April 22, 2003, Supreme Court Decision “Even though an employment regulation has a provision dealing with the value for the employee invention to be paid to the employee, if such value is less than ‘reasonable value’ determined under Article 35(4), the employee can seek payment of the shortfall under Article 35(3).” 5

Invention Act Present Act (2004 revision） The same If an employment regulation etc. provides for the reasonable value, the payment of such value in accordance with the provision shall not be considered unreasonable in light of the following circumstances: 6

Invention Act Present Act (2004 revision） (cont’d) where a negotiation between employer and employees had taken place in order to set standards for the determination of the said value, where the set standards had been disclosed, whether the employee’s opinion on the calculation of the amount of the value had been heard, and any other relevant circumstances. 7

Invention Act Previous Act Present Act If a right to obtain a patent was transferred before Apr. 1, 2005. Previous Act Present Act If a right to obtain a patent was transferred on and after Apr. 1, 2005. 8

Amount of reasonable value determined by the Court in 2014 Defendant Technology Payment (yen) Claimed Amount (yen) Awarded Amount (yen) Date Decos Corporation insulation 267 M (1,235 M) Apr. 18 Sakura enterprise optical imaging 14 M 20 M Apr. 22 Ricoh signal setting 5 M 500 M (31,133 M) 7.4 M Jun. 20 Conglo Engineering foundation engineering 30 M (290 M) 9.8 M Jun. 26 HOYA Corporation optical element 24 K 100 M Sep. 25 Oki Electric Industry resin seal mold 163 K 6,738 M 0.5 M Oct. 29 Nomura Securities data transfer 200 M (28,691 M) Oct. 30 9

Nomura case (Tokyo Dist. Ct., Oct 30, 2014) The first case reviewed under the Present Act. Defendant “Nomura Securities” is a securities firm in Japan. Amount claimed by Plaintiff is 200 million yen (the total amount is 28,691 million yen). Amount awarded by Court is zero. 10

Nomura case: Facts (Tokyo Dist. Ct., Oct 30, 2014) The invention was filed only in the U.S. However, patent is not granted due to lack of novelty. Defendant has two employment regulations (Regs. 1 & 2) which deal with employee invention. Nomura did not pay “incentive fee” to the employee. 11

Nomura case: Facts (cont’d) (Tokyo Dist. Ct., Oct 30, 2014) Nomura’s Employment Regulations: Reg. 1: Nomura will pay incentive fee to the employee who transferred a right to obtain a patent, when (i) the patent is filed; (ii) the patent is granted; and (iii) Nomura receives monetary benefit by exercising the invention. Reg. 2: (i) 　　 30,000 yen (ii) 　 100,000 yen (iii) only if the patent is granted, “Patent Conference Board” will determine. 12

Nomura case (Tokyo Dist. Ct., Oct 30, 2014) How to deal with the case under the present act Is the provision in the regulations regarding the value for the employee invention is reasonable? The payment of such value is considered reasonable Yes No Determine the amount of the reasonable value 13

Nomura case (Tokyo Dist. Ct., Oct 30, 2014) Court found … Negotiation between employer and employee? ⇒ No. Disclosure? ⇒ Reg. 1, yes. Reg. 2, no. Employee’s opinion had been heard? ⇒ No. Any other relevant circumstances? ⇒ No circumstance as alternatives to i-iii. v. Is the incentive fee higher than average ⇒ No The provisions are unreasonable 14

Nomura case (Tokyo Dist. Ct., Oct 30, 2014) How to deal with the case under the present act Is the provision in the regulations regarding the value for the employee invention is reasonable? The payment of such value is considered reasonable Yes No Determine the amount of the reasonable value 15

Nomura case (Tokyo Dist. Ct., Oct 30, 2014) Conclusion Because the patent is not granted, the employer’s profit for exclusivity presumably does not occur. The plaintiff did not prove otherwise. The study results related to the patent have been published. Thus, the Court found that the employer’s profit for exclusivity has not occurred. Therefore, the value is zero. 16

Comments Contrary to people’s expectation, the Court found the provisions unreasonable and determined the case in the same old way. This is not a typical employee invention case. Although the present act may be revised in the near future, it continues to be active for a while. 17

Abe, Ikubo & Katayama Kaoru Kuroda kaoru.kuroda@aiklaw.co.jp Thank you! Abe, Ikubo & Katayama Kaoru Kuroda kaoru.kuroda@aiklaw.co.jp