19 International Jurisdiction and Governing Law
for International Conflicts over Employee Inventionsand Works Made for Hire（*）
Research Fellow: Ai Murakami
The report of this study reviews the treatment of international conflicts over employee inventions andworks made for hire under new rules concerning international jurisdiction and governing laws. Currently,
there are no provisions under statutory laws concerning international jurisdiction in Japan. Theinternational jurisdiction legislation has been reviewed by the legislative council of the Ministry of Justicesince October 2008 under the need to develop provisions on international jurisdiction. In February 2010, an
Outline on Development of the International Jurisdiction Act was announced. With regard to the governinglaw, the Act on General Rules for the Application of Laws came into effect on January 1, 2007 in lieu of theformer Horei (Act on application of law (Act No.10 of 1898)). Neither the Outline on Development of theInternational Jurisdiction Act nor the Act on General Rules for the Application of Laws have stipulated
special rules for employee inventions and works made for hire. Therefore, these issues are left to beconstrued as in the past. However, it is necessary to consider whether conventional understandings apply
directly under the new rules, because both the Outline on Development of the International Jurisdiction
Act and the Act on General Rules for the Application of Laws have adopted special provisions concerning
labor relationships so that they may have an impact on the treatment of conflicts over employee inventions
and works made for hire that arise between parties who are in a labor relationship or who were in a similar
relationship. In the report of this study, past settlements are reviewed in order, starting with employee
inventions and works made for hire and are compared with settlements under new rules. I would thereby
like to clarify what changes the Outline on Development of the International Jurisdiction Act and the Act onGeneral Rules for the Application of Laws will bring to the treatment of international conflicts over
employee inventions and works made for hire.

Ⅰ Introduction
This research aims to review thetreatment of international conflicts over
employee inventions and works made for hire
under new rules concerning international
jurisdiction and governing laws.
With regard to cases solely in Japan,
Japanese courts judge them by applying Japanese
laws. In contrast, with regard to the legal
treatment of international cases, a problem has
arisen over which country’s court has jurisdiction(international jurisdiction) and which country’s
laws will be applied by the court that has
jurisdiction (governing law).
Recently, movements to introduce new rules
have been seen with regard to both international
jurisdiction and governing law. Currently, there
are no provisions under statutory laws concerninginternational jurisdiction in Japan. In practice, thefirst step is to examine whether a forum can be(*)

found in Japan in light of the territorial
jurisdictions under the Code of Civil Procedure. If
a forum is found in Japan, then it must be
determined
whether
there
are“special
circumstances” to deny the international
jurisdiction. This is the way that international
jurisdiction is determined. Certain rules havebeen molded by the accumulation of judicial
precedents; however, depending only on the rulesof judicial precedents is unclear and cannot be
considered to have high level of predictability.
The international jurisdiction legislation has beenreviewed by the legislative council of the
Ministry of Justice since October 2008 under theneed to develop provisions on international
jurisdiction. In February 2010, an “Outline on
Development of the International Jurisdiction
Act” (hereinafter referred to as the “Outline” inthis report) was announced. With regard to thegoverning law, the “Act on General Rules for the
Application of Laws” (hereinafter referred to as

This is an English translation of the summary of the report published under the Industrial Property Research
Promotion Project FY2009 entrusted by the Japan Patent Office. IIP is entirely responsible for any errors in
expression or description of the translation. When any ambiguity is found in the English translation, the original
Japanese text shall be prevailing.
● 1 ●IIP Bulletin 2010

the “General Rules” in this report) came into
effect in place of the former Horei since January
2007.
Neither the Outline nor the General Rules
have stipulated special rules for employee
inventions and works made for hire. Therefore,
these issues are left to be construed as in the past.
However, it is necessary to consider whether
conventional understandings apply directly under
the new rules, because both the Outline and theGeneral Rules have adopted special provisions
concerning labor relationships so that they may
have an impact on the treatment of conflicts over
employee inventions and works made for hirethat arise between parties who are in a labor
relationship or who were in a similar relationship.
In the following sections, past settlements
are reviewed in order, starting with employee
inventions (Chapter II) and works made for hire
(Chapter III) and are compared with settlements
under new rules. I would thereby like to clarify
what changes the Outline and the General Rules
will bring to the treatment of international
conflicts over employee inventions and works
made for hire.

Ⅱ Employee Inventions
1

International Jurisdiction
As an example, the decision overinternational jurisdiction comes into question in
the following case:[Example 1]
X (An English employee)
Y (A pharmaceutical company with its
headquarters in the United Kingdom)
Z (Y’s research institute in Japan)
X, a citizen of the U.K., has engaged inresearch and development on drugs at the
research institute located in Japan ofpharmaceutical company Y, which has its
headquarters in the U.K. In the employment
contract between X and Y, there was anagreement stating that the governing law was thelaws of the U.K. and that actions could only be
filed only at the court in the U.K. in cases where aconflict arose. X disclosed to Y technicalinformation about the ingredients of drugs thatwere developed by X and Y, who had thistechnical information, obtained patent rights inJapan, the U.K., and the United States of America
respectively. After X retired from Y, X claimed
100 million yen as a reasonable value for his
employee inventions based on Article 35 of the
Patent Act, at a court in Japan.

Does a Japanese court have jurisdiction overthis claim?
(1) Settlement by the rule of judicial
precedents
There are no judicial precedents that judged
international jurisdiction over an employee
invention conflict. A conflict over an employee
invention has two aspects, an intellectual
property rights conflict and a labor relationshipconflict. Each type of conflict has been settled inaccordance with the rules of judicial precedents
that find international jurisdiction in Japan unlessthere are “special circumstances” to denyinternational jurisdiction in cases where
territorial jurisdiction is found in Japan, in light ofthe provisions on territorial jurisdiction provided
for by the Code of Civil Procedure.
How is [Example 1] settled under the rulesof judicial precedents? When a worker
understands the content of the contract and thecontents of the agreement are not considerably
unreasonable, there is the possibility that theagreement on exclusive jurisdiction, which only
allows filing an action only in a U.K. court, will befound to be effective. If the agreement on
jurisdiction is found to be ineffective,
international jurisdiction is found in Japan if
grounds for jurisdiction exist in Japan. Since
research institute Z is in Japan, it is consideredthat the place of business or business office is inJapan (Article 5, item (v) of the Code of Civil
Procedure) and jurisdiction is found in Japan
unless there are “special circumstances” to denyinternational jurisdiction.
(2) Outline
on
DevelopmentoftheInternational Jurisdiction Act
The Outline on Development of theInternational Jurisdiction Act has no special rules
concerning international jurisdiction for conflicts
over employee inventions. Jurisdiction over anaction concerning the existence or effectivenessof intellectual property rights registered in Japan
shall be exclusive to Japanese courts (Article 3,(iii) of the Outline). In cases where jurisdiction is
not exclusive to a Japanese court, when the
grounds for jurisdiction exist in Japan, a court inJapan has jurisdiction.
The Outline finds that there is also
jurisdiction, which the Code of Civil Procedure
approves for cases in Japan, over international
cases and has established special provisions foractions on labor relationship for which there areno special provisions with respect to jurisdiction● 2 ●IIP Bulletin 2010

in Japan. According to Article 2-11, item (i) of theOutline, in cases where a worker sues his/her
employer, it is required that a court in Japan shallhave jurisdiction if the place where his/her work
is performed (if the place is not specified, theplace of business where the worker has been
employed) is in Japan. Article 5-1, item (vi) of theOutline restricts the effectiveness of agreements
on jurisdiction subject to civil conflicts overindividual labor relationships that may occur inthe future. Under the Outline, even if there is anagreement on exclusive jurisdiction that allows
the filing of an action only in the court of a
specified country, a worker may file an action in acourt in a country other than the specified
country. For workers, the agreement on
jurisdiction means an additional agreement.
(3) Summary
The following two points are listed as
differences between the rules of judicial
precedents and the Outline. First, when a worker
files an action against his/her employer,
jurisdiction is found when the place where his/herwork is performed (if the place is not specified,
the place of business where the worker has been
employed) is in Japan. Second, an agreement on
jurisdiction for civil conflicts over individual labor
relationships means an additional agreement forworkers. Workers can file an action in a court in acountry other than the one that has been agreed.
If [Example 1] is settled under the Outline,
workers may file an action in a country other thanin the U.K., even though there is an agreementon exclusive jurisdiction that only allows filing anaction in a U.K. court. Since the place where thework is performed, the place of business or thebusiness office is in Japan, jurisdiction will befound in Japan.
2

Governing Law

If a court in Japan has jurisdiction, whichcountry’s law should the court in Japan apply tojudge the case? As an example, the choice of thegoverning law comes into question in thefollowing case:[Example 2]
X (An English employee)
Y (A pharmaceutical company with its
headquarters in the U.K.)
Z (Y’s research institute in Japan)
X, a citizen of the U.K. has engaged in drug
research and development at a research institutein Japan for pharmaceutical company Y, which has

its headquarters in the U.K. In the employment
contract between X and Y, there was anagreement on exclusive jurisdiction that the
governing law was the laws of the U.K. and thatan action could only be filed only at a U.K. courtin cases where a conflict arose. X disclosed to Y
technical information about the ingredients ofdrugs that were developed by X and Y, who had
this technical information, obtained patent rights
in Japan, the U.K., and the U.S.A. respectively.
After X retired from Y, X made a claim before acourt in Japan to transfer registration of a part of
the Japanese patent rights (joint ownership) as
his main claim since the right to obtain a patent
for the invention in question initially belonged to
X who is the inventor and is not succeeded by thecompany. X also made a preliminary claim for 100
million yen as a reasonable value for employee
invention based on Article 35 of the Patent Act, if
the right to obtain the patent for the invention inquestion is succeeded by Y.
If international jurisdiction is found to be inJapan with respect to this claim, which country’s
law is applied to judge the main claim and thepreliminary claim respectively? When Japanese
law is applied to the preliminary claim, are therights subject to the succession to rights
prescribed in Article 35 of the Patent Act and thevalue of the claim limited to the rights in Japan, or
do the rights include rights in foreign countries tobe settled together?
In the following sections, after reviewing thesystem under the laws and regulations in (1), a
settlement by the Horei in (2), and a settlementby the General Rules are examined, and thenthe
impact of the modifications made from the Horei
to the General Rules for the method ofdetermining the governing law will be reviewed
in (3).
(1) System under the laws and regulations
The employee invention system can beviewed as comprising three elements: (i) initialownership, (ii) transfer of rights, and (iii)monetary compensation. (i) The right that arises
when an invention is completed is called the“right to obtain a patent,” and initially belongs to
the inventor, who is a natural person, underJapanese laws (Article 29 of the Patent Act,
inventor system). There are countries like Japanthat consider the right initially belongs to theemployee (Germany, Korea, the U.S.A., Canada,
Australia, etc.), and countries that consider theright initially belongs to the employer (the U.K.,
France, Italy, etc.). (ii) Even if the right initially● 3 ●IIP Bulletin 2010

belongs to the employee, the employer may
acquire the rights from the employee. Under
Japanese laws, in addition to statutory
non-exclusive licenses (without charge) (Article
35, paragraph (1) of the Patent Act), employers
may prescribe the succession of rights in advanceby an agreement, employment regulations, etc.
(Article 35, paragraph (2) of the Patent Act). In
countries where the right initially belongs to theemployee, there are systems to have an employer
to obtain the right without concluding an
individual agreement with the employee(Germany) or without clear indication of anagreement with the employee (the U.S.A.). (iii)
An employee who has actually made the invention
may obtain the right to claim monetarycompensation in return for the right that belongs
to his/her employer. In order to protect
employees who are in subordinate positions interms of information and bargaining power,
Japanese law stipulates that the value to bereceived by an employee must be reasonable(Article 35, paragraph (3) of the Patent Act), andthere are special rules concerning the way todetermine reasonable value (Article 35,
paragraphs (4) and (5) of the Patent Act). Among
foreign countries, there are some countries like
Japan that stipulate that an employee may claim
value for the invention (Italy), some countries
that stipulate that an employee may receive
additional rewards (France), and some countries
that provide for an employee only receiving
monetary compensation for special inventions,such as those that generate enormous profit(Austria, Spain, the U.K.).
As mentioned above, the content of theemployee invention system varies by country.
Therefore, the results of court judgments
may differ depending on which country’s law
is applied in international cases. With regard
to the way to determine the governing law for
employee inventions, I would first like toreview settlements based on the Horei.
(2) Settlements based on the Horei
The issues subject to the decision of thegoverning law under the Horei are the successionof the right to obtain foreign patents and its value.
It has been discussed whether the provisions ofJapanese laws, particularly former Article 35,
paragraphs (3) and (4) of the Patent Act, apply tothem, and, if these provisions are applied,
whether the “right to obtain a patent” prescribedin former Article 35, paragraphs (3) and (4) of the
Patent Act includes the right to obtain a foreign
patent. Under the Horei, theories and judicial
precedents are roughly categorized into two
standpoints: the standpoint based on lex
protectionis (the laws of the country where theright is required to be protected by law) and thestandpoint based on the governing law of anagreement in (i). This argument was supposedly
settled by the judgment of the Supreme Court in2006 in (ii).
(i)

Theories and judicial precedents
The theories and judicial precedents underthe Horei can be classified into two theories: (a)the theory of lex protectionis and (b) the theoryof the governing law of an agreement. According
to (a) the theory of lex protectionis, the laws of acountry where a right is required to be protectedin the respective territory, such as applying
Japanese laws to rights in Japan and the laws of
the U.S.A. to rights in the U.S.A. Therefore, theright subject to application of Article 35 of theJapanese Patent Act is limited to the right toobtain a Japanese patent (Judgment of Tokyo
District Court on November 29, 2002(*1), etc.). On
the contrary, (b) the theory of the governing lawof an agreement distinguishes legal relationships
like the requirements to make a succession ofrights effective, the requirement of its perfection,etc., from legal relationships like theestablishment and effectiveness of transfer
agreements, the existence of claims for value, etc.
This theory considers that lex protectionis
applies to the former legal relationships and thegoverning law of an agreement that is determined
by Article 7 of the Horei applies to the latter legal
relationships. The following opinions were also
compelling: an opinion that is not based on Article
7 of the Horei, but logic and considers thegoverning law to be the law of the country which
has the closest connection to the employment
relationship between employer and worker(judgment of the Tokyo High Court on January 29,
2004(*2)); or the opinion that the provisions offormer Article 35, paragraphs (3) and (4) of the
Patent Act shall be applied directly asinternationally mandatory provisions (judgment ofTokyo District Court on Feb. 24, 2004(*3)). With
regard to the theory of the governing law of an(*1) H10(wa)16832, Hanrei Jiho No.1807, p.33 [the Hitachi Case, the first Instance].
(*2) H14(ne)6451, Hanrei Jiho No.1848, p.25 [the Hitachi Case, the second Instance].
(*3) H14(wa)20521, Hanrei Jiho No.1853, p.38 [Ajinomoto Case].
● 4 ●IIP Bulletin 2010

agreement, opinions were divided on the issue of
whether the succession of rights, including theright to obtain a foreign patent, and their value
are treated uniformly by Article 35, paragraphs(3) and (4) of the former Patent Act.
(ii) Judgment of the Supreme Court in 2006
The judgment of the Supreme Court in2006(*4) is considered to have adopted the theoryof the governing law of an agreement withrespect to the governing law for the “transfer andvalue of the right to obtain a foreign patent.” With
regard to the issue of whether the rights,
including the right to obtain a foreign patent, aretreated uniformly by former Article 35,
paragraphs (3) and (4) of the Patent Act, theSupreme Court judged and affirmed that former
Article 35, paragraphs (3) and (4) of the Patent
Act are applied analogically to the right to obtaina foreign patent. Subsequent judicial precedents
follow the judgment of the Supreme Court in2006.
Given the decision made by the judgment of
the Supreme Court in 2006, how is [Example 2]settled? It is not clear from the gist of thejudgment whether ownership of the right toobtain a patent, which is a premise of the main
claim, the transfer of registration of the patentright, is decided by the governing law of anagreement or by lex protectionis. With regard to
the preliminary claim, the transfer of andmonetary compensation for the rights pertaining
to the employee’s invention, the governing law of
the agreement that is specified by Article 7 of the
Horei will apply. If U.K. laws are determined tobe the governing law by presuming the party’s
implied intention to select U.K. laws, Article 35of the Japanese Patent Act does not apply inprinciple. Under Article 40 of the Patent Act of
the U.K., the employee cannot receive monetarycompensation if he/she habitually works outside
the territory of the U.K. Therefore, the employee
cannot receive monetary compensation unlessthe result of application of U.K. law is contrary to
the public order or Article 35, paragraph (3) andthereafter of the Patent Act is applied directly as
an internationally mandatory provision.
Are the abovementioned settlements underthe Horei changed by the modification from theHorei to the General Rules? Next, settlements
under the General Rules will be examined.

(3) Settlements under the Act on General
Rules for the Application of Laws
The General Rules have no special rules
concerning employee inventions so that thedecision of the governing law is still left to beconstrued. What impact will be given by the
newly established provisions for infringement,
which favor protecting workers, to the treatmentof conflicts over employee inventions? In thefollowing paragraphs, the provisions of Article 12
are analyzed from the perspective of legal
relationships and laws subject to the provision in(i) and then, the way in which the scope of thejudgment of the Supreme Court in 2006 isconstrued in the framework of the General Rules
will be examined in (ii).
(i) Changes by the modification of the law(a) Legal relationships subject to Article 12
The “labor contract” that is subject to theapplication of Article 12 of the General Rules is
considered to mean a concept including both labor
contacts and employment contracts under the
Civil Code. The component for “the provision ofwork under instruction or order of an employer”
that is considered to be common to labor
contracts and employment contracts is a corecomponent of the “labor contract” subject to theapplication of Article 12 of the General Rules.
The “labor contract” that is subject to theapplication of Article 12 of the General Rules canbe defined as a “contract to provide work under
instruction or order of an employer” because
there are disparities in information and bargaining
power between the parties in said relationshipand the freedom of parties to select the governing
law actually means the freedom of an employer toselect the governing law.
(b) Mandatory provisions subject to Article 12
The “mandatory provisions” prescribed in
Article 12 should be distinguished frominternationally mandatory provisions. The“mandatory provisions” set forth in Article 12 areapplied only after a worker’s invocation, whileinternationally mandatory provisions are appliedby the authority of judges. Therefore their legal
effects under the conflict-of-laws are different.
They are basically distinguished by theprovision’s nature and purpose. In addition, two
perspectives, that is to say, legal effects under
the conflict-of-laws, in other words, the way toapply said provisions, and the scope of theterritorial applications inherent in the provisions(*4) Judgment of the Supreme Court on October 17, 2006, H16(Ju)781, Minshu Vol.60, No.8, p.2853.
● 5 ●

IIP Bulletin 2010

are important for the distinction.
(ii) Evaluation of the judgment of the Supreme
Court in 2006(a) The way to determine the governing law
under the General Rules
The judgment of the Supreme Court in 2006
regarded the succession of the right to obtain apatent and its value as an issue of a “transfer
contract” and decided that the governing law thatis determined by Article 7 of the Horei applies.
However, it is not considered that thecharacterization of a “transfer contract” also
applies in the framework of the General Rules.
Under the General Rules, it is construed that
Article 12 applies as a labor contract issue.
An employee invention is characterized as
the succession of the patent right; however, it has
different characteristics from a simple transfer.
This is because an employee invention intends tosecure a certain amount of compensation for an
employee with respect to the invention
performed in the course of his/her duty in returnfor which the employer acquires the right, in lightof the difficulties of balancing negotiations
between employee and employer. This should be
regarded as an issue of the adjustment ofinterests between parties who are in a labor
relationship and should be treated as a labor
relationship. From the perspective of comparativelaw, there are many opinions mainly in Europethat support the characterization as a labor
contract. In addition, Article 35, paragraph (3) andthereafter of the Patent Act cannot be regarded asinternationally mandatory provisions. It isconstrued that they apply only in the frameworkof Article 12 of the General Rules.
(b) Scope of the governing law of an agreement
According to the judgment of the Supreme
Court in 2006, it is not clear from the gist of thejudgment whether the scope of the governing lawof an agreement affects the decision of initialownership of the right to obtain a patent. The
opinion that the governing law of an agreement
applies to this issue is also popular. However,considering that the right to obtain a patent has
two aspects: the aspect of a private right that is
the substantive right to enable licensing,profit-making, transfer, etc.; and the aspect of apublic right that is the right to request an
administrative disposition from the national
government to grant a patent, it is consideredthat the initial ownership related to the latteraspect should be governed by lex protectionis.

(4) Summary
Under the General Rules, it is consideredthat a contract, which are grounds for a transfer,and other legal acts related to credit obligations
among the transfer of the right to obtain a foreign
patent and its value are regarded as a “labor
contract” and the provisions of Article 12 areapplied. It is construed that Article 35, paragraph(3) and thereafter of the Patent Act are applied in
the framework of Article 12 of the General Rules.
Consequently, even if a foreign law is selected asa governing law, an employee may request theapplication of Article 35, paragraph (3) andthereafter of the Patent Act as long as Japan isthe place most closely connected to the contract.
It is considered that initial ownership of the rightto obtain a patent is not included in the scope ofthe governing law of an agreement.
How, then, is [Example 2] settled under the
General Rules? First, initial ownership of theright to obtain a patent, which is a premise of themain claim, the transfer of registration, etc. of apart of the Japanese patent right (joint ownership),will be determined by lex protectionis. Therefore,
it is judged that the right to obtain a Japanese
patent initially belongs to an employee pursuant
to Japanese law, the right to obtain a U.K. patent
initially belongs to an employer pursuant to U.K.
law, and the right to obtain a U.S.A. patent
initially belongs to an employee pursuant to
U.S.A. law. The transfer of the rights pertaining
to an employee invention and monetarycompensation, which are the preliminary claims,
should be under the governing law of anagreement. With regard to [Example 2], since
U.K. law is the governing law of the labor
contract, if the law of Japan where the work is
performed is the law of the place most closely
connected to the contract, it is considered thatthe employee can request the application of
Article 35, paragraph (3) and thereafter of the
Patent Act of Japan under Article 12 of theGeneral Rules.

Ⅲ Works Made for Hire
1

International jurisdiction

As an example, international jurisdiction
over works made for hire comes into question in
the following case:[Example 3]
X (A person of nationality of the U.S.A.)
Y (A Japanese company)
A U.S.A. citizen X concluded an employment● 6 ●IIP Bulletin 2010

contract with a Japanese company Y and createddrawings as characters for an animation movie
that was planned by Y. Y produced the movie
using the drawings in question and distributed it
to American companies. The movie was also
screened in Japan; however, the name of X was
not displayed in said movie as the author of thedrawings in question. In the employment contract
between X and Y, there was an agreement thatthe governing law was the law of California Statein the U.S.A. and an action can be filed only in acourt in California State in the U.S.A. in case of
conflict.
X sought an injunction against distribution of
the animation movie that was produced by using
the drawings in question and claimed
compensation for damages against Y, based on the
copyright and moral rights of the author, since X
claimed that the author of the drawings was X. In
response to this, Y alleged that the drawings inquestion were created based on the employment
contract and therefore fell under works made forhire as prescribed in Article 15 of the CopyrightAct.
Does the Japanese court have jurisdiction
over the claim in this case?
(1) Settlement by rules based on judicial
precedents
International jurisdiction for conflicts overlabor relationships and conflicts over intellectual
property rights has been determined inaccordance with rules based on judicial
precedents. International jurisdiction overinjunctions and compensation for damages basedon the infringement of intellectual property rights
is determined to consider that these claims fallunder claims concerning torts as prescribed in
Article 9, item (v) of the Code of Civil Procedure.
With regard to [Example 2], since the placeof the torts is Japan, international jurisdiction isfound with a court in Japan unless there are“special circumstances” to deny the jurisdictionof Japan.
(2) Outline
on
DevelopmentoftheInternational Jurisdiction Act
With regard to an action for infringement ofintellectual property rights, the Outline has no
special rules. The injunction on the grounds of an
infringement of intellectual property rights is also
regarded as an “action for torts,” and Article 2-6of the Outline applies. In cases where a worker isthe plaintiff, rules concerning claims over labor
relationships are also applied with other grounds

for jurisdiction. When an injunction orcompensation for damages based on infringementof a copyright is brought to a court between an
employer and employee, it is regarded as a claim
for torts and jurisdiction is found to be with theplace of the torts and it is also regarded as a claim
concerning the labor relationship and jurisdiction
is found to be with the place where the work is
performed.
(3) Summary
The Outline has no provisions on lawsuits
over the infringement of intellectual property
rights. As well as rules based on judicial
precedents, the lawsuit is regarded as a “claim for
torts” and if the place of the torts is Japan, aJapanese court has jurisdiction. New provisions
concerning cases on labor relationships will also
have an impact on the treatment of conflict overworks made for hire, which is a conflict between
an employee and employer.
Under the Outline, how is [Example 3]settled? In [Example 3], an employee may file anaction with a court other than the court ofCalifornia State in the U.S.A., which was agreed
in advance. Since both the place where the work
was performed and the place of the torts are in
Japan, it is considered that a Japanese court has
jurisdiction.
2

The General Rules have no special
provisions concerning the governing law for
works made for hire and left this issue to beconstrued. For instance, the decision of thegoverning law comes into question in thefollowing case:[Example 4]
A (A person with German nationality)
X (A Japanese company)
Y (A Japanese company)
A Japanese company X obtained from a
German A, who works for a Japanese company,
publishing company Y, the copyrights of works
related to characters created by A. Y copied andused illustrations of the characters in Y’s
publications, and sold goods concerning thecharacters.
X filed an action with a Japanese court
seeking an injunction for the copying andcompensation for damages, etc. against Y since
Y’s copying of illustrations, etc. of characters fallunder the infringement of copyright. In response● 7 ●IIP Bulletin 2010

Governing law

to this action, Y alleged that the characters
created by A fall under works made for hire andthat all rights, including the moral rights of theauthor, belong to Y. In addition, there was anagreement that the governing law is German law
in the employment agreement between Y and A.
If a court in Japan has international
jurisdiction, which country’s law should theJapanese court apply in order to judge whether
the works created by A, which are the premise of
the injunction and compensation for damages, fallunder the category of works made for hire?
In the following paragraphs, first, the system
under laws and regulations is reviewed in (1).
Next, settlement by the Horei is reviewed in (2),followed by an examination of settlement by theGeneral Rules; and I would therefore like toclarify the impact of changes from the “Horei” tothe “General Rules” on the treatment of conflicts
over works made for hire in (3).
(1) System under the laws and regulations
Like the employee invention system, if thesystem for works made for hire is classified into
three elements: (i) initial ownership, (ii) transfer
of rights, and (iii) monetary compensation, there
are only rules concerning (i) initial ownership
under Japanese laws (Article 15 of the CopyrightAct). Unlike employee inventions, there are noprovisions to order payment of monetarycompensation to an employee. There arecountries like Japan that have a system for works
made for hire (the U.S.A., the U.K., Holland, etc.),
and countries that maintain principle of thecreator (Germany, France, Austria, etc.).
(2) Settlements under the Horei
With regard to works made for hire, theappropriateness as works made for hire, or the
initial ownership of the right, is subject to thedecision of the governing law. Compared with
employee inventions, there has been lessdiscussion of theories over the governing law for
works made for hire. There is only one judicial
precedent that has been made about the issue ofthe governing law. The arguments over thegoverning law for works made for hire can beroughly categorized into two standpoints (i) astandpoint based on lex protectionis, and (ii) a
standpoint based on the governing law of thelabor contact (judgment of the Tokyo High Court

on May 30, 2001(*5)).
With regard to [Example 4], the decision on
the applicable law differs depending on whether
lex protectionis or the governing law of the labor
contract is applied. According to the theory of lex
protectionis, Japanese laws will be applied. If therequirements prescribed in Article 15 of the
Copyright Act are satisfied, works that fall under
the category of works made for hire and all of therights pertaining to the works including the moral
rights of the author belong to the company. On
the contrary, German law would be applied inaccordance with the theory of the governing lawof the labor contract. Since German law does nothave a system for works made for hire, Japanese
copyrights pertaining to works initially belong to
the creator X.
(3) Settlement under the Act on General
Rules for the Application of Laws
The General Rules have no special
provisions on works made for hire. Therefore, thedecision of the governing law is left to beconstrued. If the governing law for works madefor hire is the governing law of the labor contract,the introduction of special provisions concerning
labor contracts will give changes to the method ofdetermining the governing laws for works madefor hire. In order to clarify the impact of themodifications from the Horei to the General
Rules on the decision of the governing law of theworks made for hire, it is necessary to determine
whether this issue should be settled by thegoverning law of the labor contract or lex
protectionis.
Since ownership of the copyright cannot be
separated from the perspective not only of theexistence, but also of the content, the theory oflex protectionis has been supported traditionally.
However, from three perspectives: (i) plurality ofworks; (ii) absence of publishing and registration,and (iii) form of use of the copyright, it is difficult
to agree with the theory of lex protectionis that
determines the ownership of copyrights inindividual countries. The ownership of copyrights
in countries should be determined uniformly
pursuant to the governing law of the labor
contract.
If the governing law for works made for hireis determined to be the governing law of the labor
contract, the provisions of Article 12 will beapplied in the framework of the General Rules.
The protection by mandatory provisions in the(*5) Judgment of the Supreme Court on October 17, 2006, H16(Ju)781, Minshu Vol.60, No.8, p.2853.

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IIP Bulletin 2010

laws of the place that is most closely connected tothe contract is guaranteed for workers.
(4) Summary
The initial ownership of copyrights
pertaining to works created in the course of
employment is construed to be determined
pursuant to the governing law of the labor
contract. The governing law is determined
pursuant to the provisions of Article 12 in theframework of the General Rules. Consequently,
the rules to determine the governing law change
from Article 7 of the Horei to Article 12 of theGeneral Rules by the modification of the law.
How, then, is [Example 4] settled under the
General Rules? If German law, which is thegoverning law of the labor contract, is applied,creator A has initial ownership of the right.
However, the most popular opinion is that an
employee grants an exclusive agreement on all of
the economic rights concerning works to an
employer explicitly or implicitly under German
law. German law, including these rules, will beapplied. When Y acquires the exclusive right touse economic rights, X can make a claim forreasonable value for a license under German law(Article 32a of the Copyright Act). Therefore, Y
can receive monetary compensation.

Ⅳ Conclusionof the defendant etc. is in Japan, Japan has
international jurisdiction and the rules concerning
labor contracts are also applied.
Next, with regard to the governing law, theGeneral Rules do not have provisions concerning
intellectual property rights. In cases of conflicts
over employee inventions and works made forhire, it is important to decide whether the conflictshould be under the governing law of the labor
contract that regulates the relationship between
parties of the conflict, or whether the conflictshould be under lex protectionis, which regulates
the subject of the conflict. The General Rules
established new special provisions on labor
contracts and allow parties to select the
governing law, while they guarantee workers
protection pursuant to the laws of the place thathas the closest connection. The governing law of
employee inventions and works made for hire isdetermined by Article 12 of the General Rules
under the General Rules. However, it should be
noted that initial ownership of employee
inventions is determined by lex protectionis,
while initial ownership of works made for hire isdetermined by the governing law of the labor
contract.
The analysis of the Outline and arguments
over international jurisdiction in Japan andoverseas are not reviewed sufficiently withrespect in this study due to time limitations.
These points will be reviewed in the future.

In this study, the treatment of international
conflicts over employee inventions and works
made for hire was reviewed from the perspectiveof international jurisdiction and governing law.
Since conflicts over employee inventions andworks made for hire presume that there is (orwas) a labor contract relationship between parties,
it is considered that the establishment of new
special provisions concerning labor contracts in
the Outline and the General Rules also has an
impact on the treatment of these two conflicts.
First,
withregardtointernational
jurisdiction, the Outline has provisions thatdecisions on the existence and effectiveness ofintellectual property rights requiring registration
shall be the exclusive jurisdiction of the countryof registration. Therefore, when the transfer ofregistration of a patent right is claimed in a
conflict over an employee invention, exclusive
jurisdiction belongs to the country of registration.
The Outline does not have provisions concerning
contracts for intellectual property rights or the
infringement of intellectual property rights.
Consequently, as in the past, when the domicile● 9 ●IIP Bulletin 2010