## Facts

- Shuji Nakamura, an employee researcher at Nichia Kagaku Kogyo K.K. (Nichia), developed technology enabling high-brightness blue LEDs using GaN-based methods.
- A core invention was covered by Japanese Patent No. 2628404 (“404 patent”), titled “Method for Growing Semiconductor Crystal Films,” which was central to Nichia’s blue LED business.
- Nichia maintained employee-invention rules requiring employees to transfer patent rights (or the right to obtain a patent) to the company in exchange for fixed, small rewards.
- Nakamura executed assignment documents transferring the right to obtain patents to Nichia and received ¥20,000 for the 404 patent (¥10,000 at filing and ¥10,000 at registration).
- Nakamura sued seeking (i) an ownership/share interest in the patent rights or, alternatively, (ii) statutory “reasonable remuneration” for the transfer under former Article 35 of the Japanese Patent Act.
- An interlocutory ruling held the patent rights were validly assigned to Nichia; the remaining dispute concerned the amount of statutory remuneration.
- Nakamura’s damages demand in the action was capped at ¥20 billion.

## Issues

1. Whether the 404 invention qualified as an employee “service invention” under former Article 35.
2. Whether Nichia validly obtained the right to obtain a patent through its employee-invention rules and Nakamura’s assignment documents.
3. How to determine “reasonable remuneration” under former Article 35, including (a) the employer’s profits attributable to the invention and (b) the relative contributions of employer and employee.

## Decision

- The court held the 404 invention was a service invention made within Nakamura’s employment duties using company facilities.
- The court held Nakamura validly assigned the right to obtain a patent to Nichia under company rules and written assignments, defeating his ownership/share theory.
- Applying former Article 35, the court found Nichia’s profits attributable to the 404 patent were approximately ¥120.86 billion, calculated from blue-LED-related sales using a patent-protection share and a hypothetical royalty rate.
- The court set Nakamura’s contribution rate at 50%, yielding reasonable remuneration of approximately ¥60.43 billion for the 404 patent.
- Because Nakamura sought only ¥20 billion, the court awarded ¥20 billion plus interest.

## Legal Principles

- An invention made within an employee’s assigned duties using employer resources can constitute a statutory “service invention,” permitting employer acquisition of patent rights by rule-based transfer and assignment documentation.
- Even where an employee has transferred the right to obtain a patent and accepted an internal reward, former Article 35 requires payment of “reasonable remuneration” measured by employer-attributable profits and relative contributions.
- “Profits the employer should obtain” may be assessed as the patent’s exclusivity value using sales-based benchmarks and a license-analogue royalty rate, rather than limited marginal profit.
- Internal reward rules cannot, by nominal payments alone, conclusively satisfy statutory remuneration where the invention’s realized value and inventor contribution indicate the payment is not reasonable.

## Conclusion

The Tokyo District Court confirmed Nichia’s ownership through valid assignment of an employee service invention but awarded statutory remuneration far exceeding the internal reward, concluding that the 404 patent generated extraordinary employer-attributable profits and that Nakamura’s contribution justified a 50% share, capped at the ¥20 billion amount claimed.


Nakamura v. Nichia Kagaku Kogyo K.K., No. Heisei 13 (wa) 17772 (Tokyo Dist. Ct. 2004)