Blue LED patent dispute epoch-making
Foreign Press Center
Nichia Corp, the Japanese manufacturer of the blue light emitting diode (LED), this month agreed to pay 840 million yen ($8 million) to a former employee in compensation for his invention of the technology to make the blue LED, which has turned a once minor chemical company in rural Japan into a virtual world monopoly in the production of the blue LED.
The court-mediated settlement of the dispute over the inventor's demand for a huge amount of compensation drew wide public attention not just as industrial news but as an event of major social impact prompting a rethinking of individuals' position in organizations in Japan in general, and engineers' in business corporations in particular.
It also has prompted businesses to consider a system to adequately compensate for employee inventions, something that has been left in the dark in the past but has assumed crucial importance in this age of growing importance attached to intellectual property rights.
Shuji Nakamura filed a suit with the Tokyo District Court in 2002 demanding from his former employer Nichia Corp, an Anan City, Tokushima-based firm, 20 billion yen in compensation for his invention of the technology in 1990 when he was employed by the company which he quit in 1999.
Nakamura, a Japanese national who is currently a professor at the University of California at Santa Barbara, claimed that the company has earned, and will earn, huge profits thanks to his invention, which is rated as a major breakthrough in the field.
The blue LED is a semiconductor which glows blue when electricity is passed through it. While the red and the green LEDs were invented more than 20 years ago, the blue LED proved more difficult and was expected to take a long time to develop. With Nakamura's invention, it was put on the market by Nichia in 1993, much sooner than expected, for a wide range of applications from large-scale video displays and signal lights to the light source for display panels of cellular phones.
In January 2004, the Tokyo District Court ruled that the company should pay Nakamura the full amount he sought, on the basis of an estimated 120.8 billion yen the company will have earned from the exclusive rights it holds on the technology up to October 2010, when the patent expires. In the ruling, Nakamura's contribution to the earnings was determined to be 50%, or 60 billion yen, far above what he claimed.
Astounded by that amount, the company appealed the ruling to the Tokyo High Court. The court tried hard to mediate in the dispute rather than hand down a ruling, and succeeded in having the two parties agree to mediated terms. In the mediation, the Tokyo High Court estimated Nichia's earnings from the blue LED technology at a drastically smaller but unspecified sum as it was put together with possible earnings attributable to 159 other minor patents Nakamura was responsible for.
Nakamura's contribution was estimated at 5% of the earnings attributable to the patents concerned. Nichia agreed to pay him 608 million yen as the value of his invention plus 230 million yen for the delayed payment.
Although the dispute is settled, it appears to have raised more questions than it answered about the system of compensation for what is called "employee inventions," and only has made clear that the Japanese corporate world is unprepared for the changing environment in the field.
What was quite baffling for the general public first of all was the vast difference in the two courts' estimated earnings attributable to Nakamura's invention and his contribution to it. Also surprising was the extremely tiny amount Nakamura initially was given as an award for his invention by the employer, a mere 20,000 yen as "fair compensation." The Asahi Shimbun commented in its editorial on Jan 12 that those numbers only "made us utterly puzzled as to the norm of the fair value of an invention. That must be how people feel about this."
The Tokyo High Court's mediation obviously brought a sigh of relief for corporate executives who had been watching the matter nervously after the shock they felt at the Tokyo District Court's decision calling for payment of an amount on a scale which they said would threaten the health of corporate management. Hiroshi Okuda, chairman of the Nippon Keidanren, said that he thought the mediated terms to be "in line with the accepted norms."
But why didn't the court clarify how it reached the estimation of the profits attributable to the invention and the inventor's 5% share in it. In past court rulings in similar disputes over employee inventions, 5% appears to have been cited more or less as a norm, but the process of calculation has never been fully explained, leading some critics to wonder whether the judiciaries have the capability to accurately assess the compensation to be paid.
In a stark contrast with Nichia's "victory statement" over the settlement, Nakamura did not hide his strong dissatisfaction and anger at the result, which he is thought to have accepted because of the prospect that a further court battle would not guarantee a better result.
Nevertheless, 840 million yen is a monumental figure to be paid to an individual in compensation for an employee invention in Japan. His move to sue the employer was also taken as a breakthrough of historic significance, triggering a string of lawsuits of a similar nature.
His action was even viewed as a heroic fight by an individual against an organization, which tends to bury even highly talented persons, running the risk of being treated as a "traitor."
The Nihon Keizai Shimbun, in an editorial, praised the litigation, recognizing "its significance in challenging the prevailing low valuation of employee inventions and bringing the issue out in the open." The newspaper credited Nakamura's lawsuit and the Tokyo District Court's decision for "triggering moves in industry to improve compensation for and treatment of inventors."
For business corporations too, it means a lot, especially at this time when they are increasingly concerned with the strategic value of intellectual property rights and the ability to strengthen them. While executives are generally worried about the likelihood of excessive demand for compensation by employees for inventions, some see the importance of providing them with sufficient incentives to keep them.
Whichever is the case, many corporations are moving to set up an internal system to determine the mutually agreed "fair compensation" in a precise and transparent manner beforehand. The government is also helping by enacting from April 1 an amended Patent Law with stipulations for such an arbitration mechanism.
Appraising the Tokyo High Court's recognition of the need to consider development of the firm as well, the Sankei Shimbun said in its January 12 editorial that "it is an urgent task to make a system for rational evaluation of inventions and inventors' contribution."
January 19, 2005 |
