Japan's Employee Invention Case Update: Inventor of blue LED to get 843 million yen ($8.43 million)

An inventor of blue LED and his former employer Nichia Chemical reached an 843 million yen ($8.43 million) court-mediated settlement on January 11 in a high-profile dispute over the patent for the blue light-emitting diode.

The amount of the settlement, mediated by the Tokyo High Court, is the largest ever in Japan as compensation for an invention by a corporate employee, although it has been sharply reduced from the 20 billion yen ($200 million) the Tokyo District Court ordered Nichia Corp. to pay Mr. Shuji Nakamura last year.

Mr. Nakamura, who left Nichia in 1999, released a statement that he is "totally dissatisfied" with the deal but that he accepted it upon his lawyer's recommendation.  According to Nichia's lawyer, the firm opted to settle because a long legal dispute would be a burden.

Last January, Mr. Nakamura won a landmark case in which the district court ordered Nichia to pay him 20 billion yen for developing technology for the blue light-emitting diode, or LED, widely used in traffic signals, mobile phones, illumination and other products. The patents have earned the company billions of yen a year, but Nakamura was paid only 20,000 yen ($200). The company has argued that his work was part of a team effort, and that Nakamura's invention was possible only because of support from the company and other workers.

Last year's district court ruling found that Nakamura's sole contribution to the invention was worth 60 billion yen based on company sales and licensing fees. Nakamura demanded 20 billion yen in the initial lawsuit, filed in 2001.

The 843 million yen settlement included 600 million yen for transfer of the patent, and the remaining 243 million yen was assessed for delayed payment, according to sources.

In order to increase the predictability of compensation in companies without causing employees to lose their motivation to invent, Japanese Patent Law Article 35 regarding Japan's employees' invention system was amended and will take effect in April 2005.

Under the new employee invention system, as long as the process of reaching an agreement between employers and employees, which shall be stipulated in such forms as employment regulations or other stipulations provided in advance by the employers, is not unreasonable, the content of the agreement shall be respected (new Japanese Patent Law Section 35(4)). That is, the remuneration stipulated in such contracts shall be the "appropriate remuneration" unless it is considered unreasonable to pay remuneration in accordance with the said stipulation.

However, how would it be determined whether the process is reasonable? Until this fundamental part is clarified, there will still be a possibility of lawsuits demanding a high amount of compensation as was conventionally done.
(Posted January 13, 2005)