2 Issues faced by companies, etc. with regard to theoperation of the system specified in Article 35 of the Patent
Act and possible solutions thereto (*)
When Article 35 of the Patent Act was revised in 2004, the employee invention system was established forthe purpose of raising the predictability of the amount of consideration that the employer has to pay andincreasing the level of the employees' satisfaction with the fairness of the evaluation of their inventions.
However, even after this legal revision, some people request re-revision of Article 35 of the Patent Act, sayingthat the employees' right to receive "reasonable consideration" remains a managerial risk factor. On the other
hand, due to the absence of relevant court precedents after the legal revision, some people consider it unnecessary
to review the employee invention system, saying that it is necessary to observe the situation for the time being. In
this way, opinions are divided over the necessity of further revision.
Against this backdrop, we carried out this research by having our overseas information centers gather
information and conducting a questionnaire survey on companies, and revealed how the employee invention
systems in and outside Japan have actually been operated. Furthermore, we established a committee and had it
examine the information collected through these activities and had each committee member give us various
comments and referential information from the perspectives of the intellectual property laws, labor laws, theCivil Code, corporate IP activities, and the treatment and awareness of researchers, which we found very usefulfor further discussion on the roles of the employee invention system.

I

Introduction

1

Background of this research

On the premise that the right to obtain apatent for an employee invention is initiallyattributed to the employee who made theinvention (the main part of Article 29, paragraph(1) of the Patent Act), Article 35 of the Patent Act
specifies the details of the employee invention
system such as a non-exclusive license granted tothe employer, the reserved succession of theright to obtain a patent, and the employee's rightto demand "reasonable consideration" for the
succession of the right. Since many disputes
arose between companies and inventors over"reasonable consideration," Article 35 of the
Patent Act was revised in 2004 (effective from
April 1, 2005). The revised legal system raised
the predictability of the amount of considerationthat the employer has to pay and increased thelevel of the employees' satisfaction with thefairness of the evaluation of their inventions,while letting the parties concerned decide theamount of consideration at their own discretion inprinciple.
However, even after this legal revision,
especially in the industrial circles, some people
still call for re-revision of Article 35 of the Patent

Act, saying that the employees' right to receive"reasonable consideration" remains a managerial
risk factor and that companies are increasingly
diversified in terms of R&D activities,
employment management practices, etc. On theother hand, in view of the facts that Article 35,
paragraph (4) of the current Patent Act, which
was revised in 2004, has not been applied to any
court cases and that the operational practice andevaluation of the current legal system have notbeen established yet, some people consider it
unnecessary to review the employee invention
system, saying that it is necessary to observe thesituation for the time being. In this way, opinions
are divided over the necessity of further revision.
Againstthisbackground,
opinions
concerning revision of the employee invention
system were stated in some publications such as
the "Intellectual Property Strategic Program
2013"1 and "Japan Revitalization Strategy -- Japanis Back."2
2

Purpose of this research

Regarding the employee invention system,
the JPO previously conducted research titled "FY2002 Research on the Employee Invention
System," where discussions were conducted withregard to the system that had existed until the(*) This is an English summary by Institute of Intellectual Property based on the FY2013 JPO-commissioned researchstudy report on the issues related to the industrial property rights system.
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2004 legal revision. Therefore, this research did
not provide a sufficient basis for discussions
within the framework of the current Patent Act.
For this reason, we conducted this research
for the purpose of identifying the issues faced bycompanies, etc., with regard to the operation of
the employee invention system under the current
legal system and providing a basis for further
discussion on the necessity of revising Article 35of the Patent Act.
3

Method of this research(2) Information gathering activities at3overseas information centers
In order to obtain information about thesituations in other countries such as the details of
the employee invention systems and the court
precedents concerning the employee invention
systems, we conducted research covering a totalof eight countries and regions, namely, the U.S.,
Germany, France, the U.K., Switzerland, China,
South Korea, and Taiwan. More specifically, we
had the following law firms in these countries
conduct the research.

This research was conducted on thefollowing research topics.

Countries

Information centers

U.S.

Foley & Lardner(1) Discussions at a committee
In order to obtain support from theperspective of experts when examining andanalyzing the research findings or when in needof advice, we established a committee consistingof a total of 15 persons whose specialties are
related to this research, namely, eight persons
with relevant knowledge and experience, fivecorporate workers, one labor union member, andone attorney.
At the committee, discussions wereconducted from the following perspectives.

Germany

BOEHMERT & BOEHMERTFranceCabinet Beau de Lomenie

U.K.

Baker & McKenzie London

Switzerland

Baker & McKenzie Zurich

China

East Associates Law Firm

South Korea

Kim & Chang

TaiwanFormosa Transnational Attorneys
At Law

Issues faced by Japanese companies, etc.
with regard to the employee invention
system With regard to the amount ofconsideration that must be paid to an
inventor who made an employee
invention, is the level of predictability
sufficiently high?
 Should the payment to an inventor be
regarded as a consideration for theassignment of the invention or as anadditional incentive?
 The employee invention system has alabor law-related aspect such as an
adjustment of interests between theemployer and employees. What kind of
employee invention system is desirablefrom the perspective of the labor laws?
 Is it possible to harmonize employee
invention systems on a global scale?
 Do inventors find the current system andenvironment attractive?

 Solutions to the aforementioned issues

IIP Bulletin 2014 Vol.23(3) Questionnaire survey on companies
In order to obtain information about theemployee invention system in Japan, we
conducted a questionnaire survey mainly on thefollowing topics.
 Rules concerning employee inventions
 Incentives(bothmonetary
andnon-monetary) for inventors, etc.
 Issues related to the operational practiceconcerning employee inventions
 Opinions, etc. about the employee invention
systemⅡ Current

situation and thebackground of the Japaneseemployee invention system

In Japan, the employee invention system wasinitially introduced by the Patent Act of 1909.
This Act adopted the "employer principle," underwhich the right to obtain a patent for an employee
invention is attributed to the employer.
The subsequently established Patent Act of1921 abolished the "employer principle" from theemployee invention system and introduced asystem that grants a license to the employer for

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free on the premise that the rights to an
employee invention are initially attributed to theemployee. If the employee allows the employer tosucceed to the rights to the employee invention,
the system guarantees the employee's right toreceive "reasonable compensation." The same
system with minor modifications was adopted by
the Patent Act established in 1959.
Since many disputes subsequently arose
between companies and inventors over"reasonable consideration," Article 35 of the
Patent Act was revised in 2004 (effective from
April 1, 2005). The revised legal system isdesigned to let the parties concerned decide theamount of consideration at their own discretion inprinciple.

Ⅲ Employee invention systems inother countries
We conducted research on the employee
invention systems in a total of eight countries andregions, namely, the U.S., Germany, France, theU.K., Switzerland, China, South Korea, andTaiwan. The research has revealed that eachcountry and region has its own unique employee
inventionsystem.
The
legalprovisions
concerning the systems of classification,
attribution and compensation for employee
inventions are shown in the following table as an
example.

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U.S.
- Inventions areclassified according to
the case law.
a. Invention that theemployee is obliged toassign to his/her
employer (employee
invention)- The invention shallbe attributed to theemployee. (35 U.S.C.
101)
b. Invention for which
the employer isgranted a
non-exclusive license
for free- The invention shallbe attributed to theemployee. (35 U.S.C.
101)
Systems ofclassification,
attribution andcompensationfor employee
inventions

c. Free invention (anyinventions other thana. and b. above)- The invention shallbe attributed to theemployee. (35 U.S.C.
101)
In the case of any typeof invention,compensation shall be
provided based on theagreement concluded
between the employer
and the employee.

Germany
a. Employee
invention (service
invention) (Article 4,paragraph (2) of the
Law on Employee
Inventions)- The invention shallbe attributed to theemployee. (Article 6of the Patent Law)
However, theemployer may claim aservice invention bymeans of anunlimited or a limited
claim. (Article 6,paragraph (1) of the
Law on Employee
Inventions)- The employee shallhave the right toreasonable
compensation as
against his/her
employer, as soon as
the employer has
made an unlimited
claim to a service
invention.
(Article 9, paragraph(1) of the Law on
Employee
Inventions)b. Free invention(Article 4, paragraph(3) of the Law on
Employee
Inventions)- The invention shallbe attributed to theemployee. (Article 6of the Patent Law)

Francea. Employee
invention (Article
L611-7 (1) of theIntellectual Property
Code)- The invention shallbe attributed to theemployer. (Article
L611-7 (1) of theIntellectual Property
Code)- The salaried person
who is the author ofsuch an invention
shall enjoy "additional
remuneration."b. Inventions(excluding employee
inventions) that theemployer may
succeed to (Article
L611-7 (2) of theIntellectual Property
Code)- The invention is
attributed to thesalaried person,
provided, however,that the employer
shall be entitled tohave assigned tohim/her theattribution or
enjoyment of all orsome of the rights inthe patent protecting
his/her employee’s
invention. (Article
L611-7 (2) of theIntellectual Property
Code)- If rights are
assigned, the salaried
person shall beentitled to obtain a"fair price." (Article
L611-7 (2) of theIntellectual Property
Code)c. Free invention (thefirst sentence ofArticle L611-7 (2) of

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U.K.
a. Employee
invention (Section
39(1) of the Patents
Act)- The invention shallbe attributed to theemployer. (Section
39(1) of the Patents
Act)- If the invention is of"outstanding benefit"
to the employer, andif it is appropriate forthe employee to beawardedcompensation, theemployee may file anapplication with acourt or thecomptroller for anaward ofcompensation.
(Section 40(1) of the
Patents Act)b. Inventions otherthan employees'
inventions (Section
39(2) of the Patents
Act)- The invention shallbe attributed to theemployee. (Section
39(2) of the Patents
Act)- The employee may
file an application
with a court or thecomptroller for anaward ofcompensation, if thebenefit derived by theemployee from thecontract ofassignment, etc. isinadequate in relation
to the benefit derived
by the employer andif the employee
should be awarded
compensation.
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the Intellectual
Property Code)- The invention shallbe attributed to thesalaried person. (thefirst sentence ofArticle L611-7 (2) of
the Intellectual
Property Code)

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Switzerlanda. Employee invention(Article 332 of theCode of Obligations)- The invention shallbe attributed to theemployer. (Article 332,
paragraph (1) of theCode of Obligations)

Systems ofclassification,
attribution andcompensationfor employee
inventions

China
a. Employee
invention (Article 6,paragraph (1) of the
Patent Law)
- The invention shallbe attributed to theemployer. (Article 6,paragraph (1) of the
Patent Law)b. Occasional- If a patent right isinvention (Article 332, granted, theemployer shallparagraph (2) of the"reward" theCode of Obligations)employee.
- The invention shallIf the invention is
be attributed to the
exploited, theemployee. However,
employer shall pay
the employer may"remuneration " toreserve the right tothe employee (Article
acquire inventions.
(Article 332, paragraph 16 of the Patent Law)
(2) of the Code ofb. Inventions otherObligations)- Where the occasional than employee
invention is notinventions (Article 6,
released to theparagraph (2) of theemployee, thePatent Law)
employer must pay- The invention shall
him a separate,
be attributed to the"appropriate
employee. (Article 6,
remuneration ."paragraph (2) of the(Article 332, paragraph Patent Law)
(4) of the Code ofObligations)c. Free invention(Article 3, paragraph(1) of the Patent Act)- The invention shallbe attributed to theemployee. (Article 3,
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South Korea
a. Employee
invention (Article 2,paragraph (2) of theInvention Promotion
Act)- The invention shallbe attributed to theemployee. (Article
33, paragraph (1) of
the Patent Act)
- An employee shallhave a right to obtain"fair compensation"
when he/she agrees
with his/her employer
to have the employer
succeed to his/herrights to the patent,
etc. for an employee
invention. (Article 15,
paragraph (1) of theInvention Promotion
Act)b. Inventions otherthan employee
inventions (Article
10, paragraph (3) of
the Invention
Promotion Act)- The invention shallbe attributed to theemployee. (Article
33, paragraph (1) of
the Patent Act)

Taiwana. Employee
invention (Article 7,paragraph (1) of the
Patent Law)
- The invention shallbe attributed to theemployer. (Article 7,paragraph (1) of the
Patent Law)
- The employer shall
pay the employee areasonable
remuneration .
(Article 7, paragraph(1) of the Patent Law)b. Inventions that theemployer may exploit(Article 8, paragraph(1) of the Patent Act)- The invention shallbe attributed to theemployee. However,
the employer may
exploit the invention
after paying theemployee areasonable
remuneration .
(Article 8, paragraph(1) of the Patent Act)
c. Free invention(Article 8, paragraph(1) of the Patent Act)- The invention shallbe attributed to theemployee. (Article 8,paragraph (1) of the
Patent Act)IIP Bulletin 2014 Vol.23

Ⅳ Results of the questionnaire
survey on companies

A questionnaire survey was conducted on a
total of 2,485 companies consisting of 1,233 large

companies and 1,252 small & midsize companies,of which 1,086 companies responded (response
rate: 43.7%). The breakdown of the respondents
is shown below.

Breakdown by industry
No response
Number of
respondents
1. Agriculture, forestry and fisheries
2. Mining
3. Engineering, construction
4. Foods
5. Textile
6. Pulp, paper
7. Publishing, printing
8. Chemistry (excluding medicines)
9. Pharmaceuticals
10. Petroleum products, coal products
11. Plastics
12. Rubber products
13. Ceramics
14. Iron and steel
15. Non-ferrous metals
16. Metal products
17. Machinery
18. Electric appliances, home electronics, heavy electrical machinery
19. Telecommunications, electronics, electric measurement
20. Automobiles
21. Transport equipment (excluding automobiles)
22. Precision equipment
23. Manufacturing other than those listed from 4 to 22 above
24. Transportation, public utilities
25. Software, information, telecommunication services
26. Basic research not specialized in the specified industrial fields
27. Others
Total number of respondents

In response to the question "Do you have any
rules concerning employee inventions?," many
respondents answered “Yes” (Yes 91.6% (986companies), with “No” accounting for 8.4% (90companies)). A breakdown by company size
revealed that small & midsize companies are
more likely to say "No" in comparison with large
companies.
In response to the question "Do you have any
problems related to the operation of the employee
invention system?," 59.1% (598 companies)
answered "Yes," while 40.9% (413 companies)
responded "No particular problems."
The results of this questionnaire survey
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2
57
33
19
7
8
149
36
5
32
14
25
10
28
51
121
102
61
42
27
42
96
13
23
4
48
1,056

30
Ratio
0.1%
0.2%
5.4%
3.1%
1.8%
0.7%
0.8%
14.1%
3.4%
0.5%
3.0%
1.3%
2.4%
0.9%
2.7%
4.8%
11.5%
9.7%
5.8%
4.0%
2.6%
4.0%
9.1%
1.2%
2.2%
0.4%
4.5%
100.0%

enabled us to understand how companies haveactually been operating their employee invention
systems and whether they have faced any
problems.

Ⅴ Analysis by the committee
From July 2013 to January 2014, the researchcommittee held a total of 14 meetings to discuss
the issues related to the employee invention
system. In those meetings, discussions were heldfrom various perspectives such as the problems
faced by companies within the framework of thecurrent employee invention system, the

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relationships between the employee invention
system and such laws as the Copyright Act, thelabor laws and the Civil Code, the initialattribution of employee inventions (to which party,
the inventor or the company, should the invention
be attributed?), the nature of incentives (aconsideration for the assignment or an incentive
for the labor), the inventors' motive for making
inventions, the work ethic of researchers, etc.,

the opinions from the viewpoints ofworkers and researchers, and the actual
operation of the employee invention systemby small & midsize companies.
In the discussions, the committee memberspresented specific drafts and discussed a draft bill
specifying that any employee invention shall be
initially attributed to the inventor, as is the casewith the current Act, and a draft bill specifyingthat any employee invention shall be initiallyattributed to the employer.

Ⅵ Conclusion
In this research, we used our overseas
information centers to carry out detailed researchon the actual operational practice of the employee
invention systems in other countries, namely, theU.S., Germany, France, the U.K., Switzerland,
China, South Korea, and Taiwan. We also
conducted a questionnaire survey on companies
and obtained information as to how the employee
invention system has been operated by Japanesecompanies (large companies as well as small &midsize companies). We established a committee
consisting of representatives from industrial
circles and labor circles and persons with relevant
knowledge and experience and asked thecommittee to analyze the information collected
through the aforementioned activities. Eachcommittee member provided us with various
comments and referential information fromvarious perspectives such as the perspectives of
the Intellectual Property Act, the labor laws, theCivil Code, the IP-related practices at companies,
and the treatment and attitude of researchers.
Their comments and information helped us
deepen our discussion on employee inventions.
In addition to this research, anotherquestionnaire survey was conducted on
researchers4. This survey was briefly explained
to the committee established for this research.
When it comes to the employee invention system,
it is important to determine the necessity anddirection of a future revision of the system inconsideration of the actual operational practice ofthe system by employers as well as their opinions
and requests and also of the actual practices at
the R&D departments as well as the opinions andrequests of employees (researchers andengineers).
It would be beneficial if the results of thisresearch and the results of the questionnaire
survey on researchers are both analyzed
comprehensively and used as a basis to accelerate
future discussion on how to improve theemployee invention system.
(Seniror Researcher : Hideki TAKAHASHI)(Researcher : Shinji KAWAMURA)
1Intellectual Property Strategic Program 2013 (June 25,
2013, Intellectual Property Strategy Headquarters)[the latest date of access: January 17, 2014]
http://www.kantei.go.jp/jp/singi/titeki2/kettei/chizaikei
kaku2013.pdf* In this paper, the latest date of access to any and all
URLs stated hereunder is January 17, 2014. Therefore,
the latest date of access will be omitted from thefollowing statements regarding the sources ofreferential information.
2
Japan Revitalization Strategy -- Japan is Back (endorsedby the Cabinet on June 14, 2013)
http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/saikou_
jpn.pdf
3
Based on the results of the discussions at thecommittee, we sent overseas information centers arequest for research two times.
4
FY2013 JPO projects such as a comparative study on
overseas IP systems, "Research on the Leakage of
Human Resources such as Researchers and Engineersfrom the Perspective of Overseas Employee Invention
Systems and the Operational Practices for the
Systems" (conducted by Nomura Research Institute,Ltd.)● 19 ●IIP Bulletin 2014 Vol.23