3Modalities for the Employees’ Inventions System

The decision delivered by the Tokyo High Court on May 22, 2001 presented the interpretation that the“reasonable remuneration” in Section 35 of the Japanese Patent Law may not be unilaterally determined by an
employer through a “service regulation or other stipulation” and that the inventor employee can claim from theemployer the balance due for his invention. This has caused rapidly growing concern about the modalities for theemployees’ inventions system, the attribution of rights, and the “reasonable remuneration” to be paid toinventors. In ｔhe employees’ inventions system, it is now coming to be regarded as an important issue forstrengthening the industrial competitiveness of Japan that it will help reduce costs for intellectual property
management in a company by avoiding troubles that may arise between the employer and an employee, and at
the same time it encourages the creation of more ingenious inventions.
In this study, we conducted basic research aiming to contribute to the investigation on the modalities for theemployees’ inventions system required in the “Chitekizaisan Taiko” (Intellectual Property Policy Outline). Morespecifically, we surveyed the current situation of employees’ inventions systems of Japan, European countries
and the United States and then studied the results from the standpoints of patent law, civil law, labor law andeconomics. We also investigated the issue of inventorship.

Ⅰ Introduction
In recent years, lawsuits on employees’
inventions have attracted attention, and concerns
have increased about the attribution of right to an
employee’s invention and how an inventor should
be compensated. On May 22, 2001, the Tokyo High
Court delivered the decision that the “reasonable
remuneration” in Section 35 of the Japanese Patent
Law may not be unilaterally determined by an
employer through service regulations, etc. and thatthe inventor employee can claim from the employer
the balance due for his invention.(*1) This decision
prompted companies to review their rules on thetreatment of “remuneration” for employees’
inventions.
It is necessary to investigate the modalities forthe employees’ inventions system from theviewpoint of strengthening the industrial
competitiveness of Japan, by avoiding any troublethat may arise between an employer and an
employee, thus reducing the costs for intellectual
property management in individual companies, andat the same time encouraging the creation of moreingenious inventions.
In this study, as a basic research aiming tocontribute to the “reconsideration of theemployees’ inventions system” stipulated in the“Intellectual Property Policy Outline”, we
conducted a survey of the current situation of
employees’ inventions systems of Japan, European
countries and the United States and then studied
the results from the standpoints of the patent law,
civil law, labor law and economics. We also
investigated the issue of inventorship.

The committee set up for this study did notconsolidate the opinions on the direction of themodalities for the employees’ inventions systemand the report of this study carries each committee
member’s opinion as it is, based on the discussions
at the committee. This summary was written by
the secretariat summarizing the contents of eachchapter of the report. (Secretariat)

Ⅱ Current Status and Backgroundof the Employees’ Inventions
System in Japan
1

Significanceof
the
Employees’
Inventions System, History of the System,
and Overview of Current Law

The promotion of employees’ inventions is
indispensable from the standpoint of an industrial
policy that requires stimulating motivation for
inventions by employees and giving incentive toemployers for investment in inventions. Whenconsidering an employees’ inventions system, thequestion is how to share between an employer andan employee the rights and interests arising froman invention for the purpose of promoting
inventions most effectively and attaining fairness.
In the Japanese Patent Law of 1909, a service
invention by an employee belonged to the employer.
The Law of 1921 changed this to the right to aservice invention belonging to the inventor
employee and aimed to protect the employee by
providing that the employee should be entitled toreceive a reasonable remuneration when he had(*1) Tokyo High Court Decision, May 22, 2001, Hanrei Jihou No.1753, P. 23, H11 (“Ne”) 3208 (Original instance: Tokyo
District Court Decision, Apr. 16, 1999, Hanrei Jihou No. 1690, P. 145, H7 (“Wa”) 3841).

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enabled the right to pass to the employer inaccordance with contracts or service regulations
that had been made in advance.
This provision has been carried over to thesame effect into Section 35 of the current law
through the 1965 revision of the Patent Law, which
provides that if an employee has obtained a patenton his service invention, the employer has the rightto a non-exclusive license without consideration,and if the employee has assigned the patent right orother right with respect to his service invention, he
is entitled to a “reasonable remuneration.”
Furthermore, the amount of such remuneration
shall be decided by reference to the profits that theemployer will make from the invention and to theamount of contribution that the employer made to
the making of the invention. (Secretariat)
2

Results of Research on the Situation ofCompanies and Inventors in Japan(1) Actual situation of the treatment of
employees’ inventions in companies
In this study, we conducted a survey on thetreatment of employees’ inventions by sending out
a questionnaire to 2,087 companies, and out of the
601 valid responses (valid response ratio 28.8%),
we analyzed the responses from 550 companies(363 large companies and 187 small and medium
enterprises) that had made patent applications inrecent years. As the results, many companies
answered that the incentive for researchers
regarding R&D activities is positional promotion
and improved treatment, and about 80% of the large
companies considered that reward (compensation)
money increases an incentive for researchers
regarding R&D activities; in the case of reward(compensation) money being raised significantly,
there were many companies which answered that
morale would be boosted, but there were also many
companies which answered that the sense of
unfairness among other employees would be
increased. Regarding the necessity of amendmentof Section 35 of the Patent Law, around 40% of thelarge companies consider no amendment necessary
if the interpretation of the law accepting a certain
level of reward (compensation) money systemcurrently provided by companies is established, andabout another 40% of the large companies consider
that the current Section 35 (3) and (4) should be
replaced by a new Section 35 (3). (Secretariat)(2) Researchers’ awareness concerning
employees’ inventions
In FY 2002, Hatsumei Kyokai (the Japan

Institute of Invention and Innovation) conducted
their own inventor-questionnaire survey directed to
93 recipients of the National Commendation forInvention (46 valid responses, valid response ratio
49.5%) and other 6,973 inventors (2,394 valid
responses, valid response ratio 34.3%). As theresults, many researchers answered that an
improvement of corporate performance or fairevaluation of researchers’ achievements is the
incentive for R&D activities, and as for theevaluation of R&D results, the answers said thatreward (compensation) money, bonuses orpositional promotion, etc. are preferable. About
60% of the researchers answered that reward(compensation) money was a great or someincentive; in the case of reward (compensation)
money being raised significantly, there were many
researchers who answered that morale would beboosted, but there were also many researchers who
answered that the sense of unfairness among other
employees would be increased.
Furthermore, about 50% of researchers werein favor of or conditionally in favor of thedetermination of a reasonable remuneration being
left to free negotiation between the employer andemployee (No.1 reason for approval is, “because itis preferable to determine through agreementtaking various factors into consideration”, No.1
condition for conditional approval is, “preparation of
the environment for the employer and employee tonegotiate on an equal basis”, and theoverwhelming objection was raised, “from thestandpoint of protecting employees considering thedifference in negotiating power”). (Secretariat)
3

Site of R&D Activities(1) Research Activities at Universities
In FY 2001, Meijo University conducted anawareness survey directed to full-time teachers ofscience related subjects.(*2) More than 30% of the
respondents had experienced a patent application,and cited, as the merits of obtaining patents,
economical benefits, advantages in conducting
research, clarification of the ownership of the rightand socio-industrial contribution, etc. The reasonsfor not filing a patent application were theunfamiliar and cumbersome procedure and costs,
etc. More than 70% of the respondents answeredthat they give preference to presentation inacademic society over filing patent applications.
As problems with industry-university joint
research, they raised the necessity of detailed
agreements, an insufficient support system,(*2) Meijo Daigaku Ni Okeru Chitekizaisanken Toriatsukai Ni Tsuite No Ishikichosa (Awareness survey regarding the treatment
of intellectual property at Meijo University) conducted by Copymart Meijo Institute of Meijo University (Director: Zentaro
Kitagawa, professor of law faculty, Meijo University) as a part of the study on “Comprehensive Administration ofIntellectual Property at Universities and Preferable Licensing Market”: Intellectual Property Study at Universities Project,
FY 2001, entrusted by the Japan Patent Office.

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difficulties with the practical application of theoutcome and others. About 50% of the respondents
answered that a Technology Licensing Organization(TLO) within the university is necessary as asystem for obtaining patents.
In order to increase the number of patentsfrom universities, it is necessary to have a clear
evaluation standard and a system to manage andmaintain patent applications. For the evaluation of
the contribution by students, faculty members’
awareness and fair evaluation by a third-party
institution will be necessary. An investigation on
the method of returning the revenue from patent
licenses to the inventors is also desirable.
(Hiroshi Amano)(2) R&D at companies
Suppose a researcher conducts an experimentin accordance with an order of a supervisor, and if
an abnormal phenomenon arises from an erroneous
operation, the supervisor could investigate thecause of the phenomenon and write a paper or get apatent on it as a new phenomenon.(*3) In such acase, it is often difficult to determine who should be
regarded as the inventor.
Many people can be involved in the process of
research, development and commercialization of a
product. The company will commend those who
were in charge of the development and production,and deal with all people involved by positional
promotion, wage raises and bonuses. In recent
years, compensation (reward) money for inventions
is becoming higher, but, from the standpoint ofbalancing with people other than inventors, it is notdesirable to allow only compensation (reward)
money for inventions to be prominent.
In order to reduce disputes over remuneration(compensation money) in the future, companies are
required to make clear the calculation method for
remuneration, and obtain inventors’ agreement on
the calculation method. When inventors are notsatisfiedwith
thecalculation
method,appropriateness of the method may be disputed
before the court. (Eiichi Maruyama)

4

Identifying the Inventor(1) Identifying the inventor in Japan
In the Japanese Patent Law, there is noprovision defining an “inventor”, but it provides
that an inventor shall have the right to obtain apatent, such right being transferable and that thename of the inventor shall be indicated in theapplication for patent, laid-open application
publication, patent publication and letters patent.
In the case of a joint invention, the right toobtain a patent shall be co-owned by the joint
inventors and none (except all) of the joint owners
can file an application and obtain a patent. None of
the joint owners of a patent right or a right to obtaina patent may either transfer his share or grant
licenses without the consent of all the other joint
owners, but any of them may work the patented
invention without the consent of the other joint
owners.
A person who is not the true inventor or has
not succeeded to the right to obtain a patent for an
invention is not allowed to file an application andobtain a patent (misappropriated application), and if
a patent has been granted on the patent application,
the patent is to be invalidated.
In academic theory, a (joint) inventor shall be
determined in light of the creation of technical ideas,
and a person who has not participated in thecreation itself (e.g. a mere manager, orderer, adviser,
assistant, investor or sponsor/entruster, etc.) will
not be recognized as an inventor.(*4)
Various court decisions(*5) judging (joint)
inventorship are introduced in the report of thisstudy. (Secretariat)
Reference: Identifying the inventor in the
United States
In the United States also, the Patent Law has
no provision defining an inventor. The status of an
applicant is not assignable and, in principle, theactual inventor (joint inventors) has to file theapplication for patent in his/her own name andwhen filing an application, the inventor has to turnin an oath or declaration that he/she believes thenamed inventor(s) to be the original and firstinventor(s) of the invention. Joint inventors must(*3) See on Esaki Diode, Sony Publicity Center Sony Jijoden (Sony Autobiography) p. 144-148 (WAC co. ltd., 2nd ed., 1999); on
Polyacetylene, Hideki Shirakawa Kagaku Ni Miserarete (Enchanted by Chemistry), Iwanami Shinsho (New red edition) 709
P.28-29, 68-71, 190-194 (Iwanami Shoten, 2001), on Yagi-Uda antenna, Hiroshi Matsuo Denshi Rikkoku Nippon Wo Sodateta
Otoko: Yagi Hidetsugu To Dokusosha Tachi (The men who developed Japan as a nation built on electronics: Hidetsugu Yagi andcreators) (Bungeishunju Ltd., 1992).
(*4) Nobuhiro Nakayama Kogyo Shoyuken Hou (Jo) Tokkyo Hou (Industrial Property Law (Book I) Patent Law), (Expanded
Second Edition) P.57-60 (Koubundou, 2000); Kousaku Fujiyoshi/Kenichi Kumagai-revised and enlarged Tokkyo Hou
Gaisetsu (Overview of Patent Law) (13th ed.) p.187-188 (Yuhikaku, 1998).
(*5) Osaka District Court Decision, May 23, 2002, H11 (“Wa”) 12699; Tokyo High Court Decision, Aug.15, 1985, S59 (“GyouKe”) 58; Tokyo District Court Decision, Apr. 16, 1979, S52 (“Wa”) 1107; Tokyo District Court Decision, Dec. 26, 2001, H12(“Wa”) 17124; Osaka District Court Decision, Mar. 26, 1992, S63 (“Wa”) 5570; Osaka High Court Decision, May 10, 2001,
H12 (“Ne”) 2914, 3404, Tokyo District Court Decision, Aug.27, 2002, H13 (“Wa”) 7196;Tokyo High Court Decision, Apr. 27,
1976, S47 (“Gyou Ke”) 25; Tokyo District Court Decision, Jan. 31, 2001, H11 (“Wa”) 20878; Tokyo District Court Decision,
Dec. 23, 1983, S54 (“Wa”) 11717.

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apply for a patent jointly (except when the otherjoint inventor refuses to join in the application forpatent or cannot be found or reached).
If the inventor is incorrectly named in an
application for patent through error, the application
may be amended to name only the actual inventor.
If the incorrect inventor is named with a deceptive
intention, the patent shall be invalidated. For
identifying the inventor, reduction to practice itself
is irrelevant and an inventor must have contributed
to the conception of the invention.
judging(joint)Variousdecisions(*6)
inventorship are referred to in the report.
(Secretariat)(2) Cases of companies in the electrical/
machinery field
A questionnaire survey was conducted withseveral companies about the identification of
inventors in Japan. As a typical tendency, they
identify inventors in line with the general standard.
However, even if they have a guideline for
identifying inventors, such guideline is not so wellknown to inventors. Inventors are identified among
persons involved in the invention without any
special examination for the true inventorship. In
identifying joint inventors, the degree ofcontribution has come to be taken into
consideration.
The fact that the identification of a true
inventor has not been strictly examined may alsocome from Japanese people’s tendency toward alow sense of entitlement.
When the indication of the inventors isincorrect, the patent can be invalidated if theapplication is misappropriated, and it can bringdisadvantages in an overseas patent infringementcase of the corresponding patent. After filing anapplication for patent, depending on the amendment
made to the claims, inventors and their degree ofcontribution may change. To facilitate identificationof inventors, thorough laboratory-note keeping isdesirable. (Takeo Honjo)
5Characteristics of Japanese EmployerEmployee Relationship and Employment
Environment

In the Japanese traditional long-term
employment
system,employees’
careerdevelopment is led by the employer, and acompany-society has an organized labor form. Wageand promotion management is strongly tinged withthe seniority system and keeping employment of

employees is the principle of management or asocial consensus. Employees consider their service
inventions as just fulfilling their assigned duties anddo not assert their rights to the inventions without
any immediate monetary payments as long as they
are to be compensated by wages, bonuses,
retirement allowances and R&D expenses andothers.
However, in recent years, the long-term
employment system has been undergoing changes
such as personalized human resource management,
ability and performance-based pay system andselective/personalized employee education, etc.
With the progress of diversification in the mannerof work based on the qualification and ability of
individual employee, the ground is prepared forinventor employees to require compensationaccording to achievement based on the quality of
their jobs or their ability. In addition, in theenvironment of increasing job changes, there is apossibility that inventors may raise their voices andcall for their share of the profits from the service
inventions. (Fumiko Obata)
6

Clarification of Economics of Employees’
Inventions

From the standpoint of economic theory, in themethod of sharing the results of an R&D activity
which is a joint work of the company and employee,
there are the aspects of allocation of ownership andallocation of monetary achievements.
As to the allocation of monetary achievements,
there are two aspects. The first is the aspect of risk
sharing, in light of which it is desirable that thecompensation to the employee would not fluctuate
depending on the success or failure of the R&D
results. The other is the aspect of incentive, in lightof which the differences in compensation among
inventor employees are desirable to be greater.
The current provision on service invention in
the Japanese Patent Law seeks balancing by givinga “reasonable remuneration” to the inventor
employee when the patent is assigned to thecompany. However, in calculating a “reasonable
remuneration” in current practice, considerationfrom both aspects mentioned above cannot be said
to have been adequately given, and therefore, it isnecessary to conduct more detailed analysis orinvestigation on these points.
Further, the judgments by the courts on“reasonable remuneration” have become ex post
facto judgments, which tend to be more easily(*6) Monsanto Co. v. Kamp (1967), 269 F. Supp. 818, 154U.S.P.Q. 259 (D. D.C. 1967); Kimberly-Clark Corp. v. Proctor &Gamble Distributing Co., 973 F. 2d 911, 916-17, 23 U.S.P.Q. 2d 1921. 1925-26 (Fed. Cir. 1992); DeLaski & Thropp Circular
Woven Tire Co. v. William R. Thropp & Sons Co., 218 F. 458, 464 (D. NJ 1914), aff’d 226 F. 941 (3rd Cir. 1951); SAB
Industries AB v. Bendix Corp., 199 U.S.P.Q. 95 (E.D. Va. 1978); Garret Corp v. United States, 422 F. 2d 874, 881, 164
U.S.P.Q. 521, 526 (Ct. Cl. 1970); Maxwell v. K Mart Corp ., 880 F. Supp. 1323, 1334 (D. Minn. 1995); Bd. of Educ. ex rel. Bd.
of Trs. of Fla. State Univ. v. Am. Bioscience, Inc., 2001 U.S. Dist. LEXIS 19480 (2001); Intermountain Res. & Eng’g. Co. v.
Hercules, Inc., 171 U.S.P.Q. 557 (C.D. Cal. 1971).
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distorted than ex ante agreements. This could havean adverse effect on the incentive to engage in
R&D. Therefore, as for the sharing method, it isdesirable to work out a system that reflects anappropriate level agreed upon by both parties at aslightly more ex ante stage. (Noriyuki Yanagawa)

Ⅲ Employees’ Inventions Systems
in Foreign Countries
1

Employees’ Inventions in the UnitedStatesAlthough the Regulation of the Economic
Agency, Department of Commerce provides for thehandling of inventions made by government
employees (37CFR501), there is no provision on
employees’ inventions in the Patent Law.
The question of the attribution of patent rightin the employment relationship is under regulation
by State law and State case law precedes Federalcase law.(*7) Under the case law, an employee’s
invention belongs to the employee in principle,(*8)
but an invention made by an employee employed
for the purpose of making inventions and related tothe job of such employee transfers to the employer
without a specific agreement.(*9) When an employee
makes an invention that relates to his job or falls
within the scope of the employer’s business using
facilities that belong to the employer, the employer
shall be entitled to a non-exclusive license (Shop
Right) to implement the invention without any
extra consideration. As theoretical grounds for theshop right, implied license theory, estoppel theory,and equity theory are advocated.(*10)
An employer can obtain a patent on an
employee’s invention based on the agreement withthe employee.(*11) While, under the principle offreedom of contract, employees’ pre-assignment of

inventions to the employer can be arranged, somestates have regulations on the scope of invention
that can be assigned.(*12)
As for the consideration for the assignment ofan employee’s invention, employment itself or acontinuing employment is considered to suffice.
According to a survey conducted in 1990,(*13)
U.S. companies generally have employees’
inventions assignment contracts and half of thecompanies give monetary rewards in addition tosalary. However, they are mostly fixed amounts.
In the United States, bills for the amendmentof the system taking after Japan or Germany havebeen submit to the Congress, but they have notpassed the Congress.(*14) (Ryoko Iseki)
2

Results of Overseas Research(1) Employee’ s Inventions in Germany
In Germany, the Employees’ Inventions Law
was legislated in 1957, and in 1959, the Guidelines
for Remuneration prepared by the Federal Ministerof Labor was published.
Under the current law, among inventions madeduring the period of employment, those that result
from the obligatory activity of the employee or are
based on the experiences or activities of thecompany are called service inventions, and others,
free inventions. The employer can, by limited claimof right, acquire a non-exclusive right to theutilization of the service invention, and byunlimited claim of right, can succeed to all therights to the service invention with the obligation of
filing an application for domestic protective rightand remunerating the inventor. If there is a dispute
over an employee’s invention, either party can ask
for a settlement before the Board of Arbitration set
up at the Patent and Trademark Office.
There are opinions(*15) on the current law that
it is complicated and cumbersome with(*7) Erie Rr. V. Tompkins, 304 U.S. 64, cert. denied, 305 U.S. 637 (1938).
(*8) Hapgood v. Hewitt, 119 U.S. 226 (1886).
(*9) Solomons v. U.S., 137 U.S. 342 (1890); Standard Parts Co. v. Peck, 264 U.S. 52 (1924); U.S. v. Dubilier Condenser Corp.,
289 U.S. 178 (1933), amended, 289 U.S. 706 (1933).
(*10) McClurg v. Kingsland, 42 U.S. (1 How.) 202 (1843); Gill v. U.S., 160 U.S. 426 (1896); cited above 9 U.S. v. Dubilier.
(*11) Thibodeau v. Hildreth (1903) 124 F. 892 (1st Cir. 1903); Conway v. White, 9 F. 2d 863 (2nd Cir. 1925); Cubic Corp v. Marty,
185 Cal. App. 3d 438, 1 USPQ2d (BNA) 1709; Hebbard v. American Zinc, Lead & Smelting Co., 161 F. 2d 339 (8th Cir.
1947); Hewett v. Samsonite Corp., 32 Colo. App. 150, 507 P. 2d 1119 (1973); Harsco Corp. v. Zlotnicki, 779 F. 2d 906, 228
USPQ (BNA) 439 (3rd Cir, 1985) cert. denied 476 US 1171 (1986); Osborn v. Boeing Airplane Co., 309 F. 2d 99, 135 USPQ
(BNA) 145.
(*12) Minnesota, California, Washington, North Carolina, Illinois, Delaware, Kansas, Utah.
(*13) Thomas R. Savitsky, Compensation for Employee Inventions 73 JPTOS 645 (1991).
(*14) Brown bill 1963, (88th H.R. 4932) (Resubmitted in 1965 as 89th H.R. 5918); Moss bill 1970, (9th H.R. 15512)(Resubmitted in 1971 as 92th H.R.1483, 93rd H.R.2370 Jan. 18, 1973, 94th H.R.5605 Mar. 26, 1975, 95th H.R.2101 Jan.
19, 1977); Hart bill Mar. 22, 1973 (93rd S.1321); Kastenmeier bill Oct. 13, 1981 (97th H.R.4732); Katenmeier bill June 17,1982 (97th H.R.6636)(Resubmitted as June 13, 1983 98th H.R.3285).
(*15) Deutsche Vereinigung für gewerblichen Rechtsschutz u. Urheberrecht e.V., “Stellungnahme zu einer Revision desGesetzes über Arbeitnehmererfinfungen”, GRUR 2000, 385 (German Association for Industrial Right Protection and
Copyright (GRUR) “Opinion on the Revision of Employees’ Inventions Law”(Feb. 18, 2002) See GRUR website(http://www.grur.de/Seiten/Themen/Stellungnahmen/StN23_2.html).

IIP Bulletin 2003

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considerable administrative burden and that thelimited claim of right has been of little use, andtherefore, in the 2001 draft revision by the Federal
Ministry of Justice simplifications of the procedure
for rights assignment and the method of calculationof remuneration are proposed.(*16) Industry ismostly in favor of the draft, but the employees’ sideis unsatisfied with the amount of primary
remuneration. (Secretariat)(2) Employees’ Inventions in France
In the Patent Law of 1978, the employees’
inventions
systemwasintroduced,
but
remuneration for an employee’s invention was notcompulsory under the law. The revision of Patent
Law in 1990 made remuneration payment
obligatory.
Under the current Intellectual Property Code,an invention arising from a work contract
comprising an inventive mission or from studies
and research explicitly entrusted is categorized as aservice invention, inventions made, during theemployee’s functions, in the field of activities of theemployer or using resources of the employer, arecategorized as “inventions outside mission andassignable to the employer,” and all others areclassified as free inventions.
A service invention primarily belongs to theemployer, and the employee has the rights to be
remunerated as determined by the collective
agreements, company agreements and individual
employment contracts. An invention outside
mission and assignable to the employer belongs tothe employee, and if the employer succeeds to therights, the employee shall be entitled to obtain afair price based on the agreement between theparties. Any dispute as to the classification of an
invention or the amount of remuneration can bebrought up by either party to the conciliation board,and if the conciliation is unsuccessful, they can go
to court.
Although amendments to the current law havebeen discussed,(*17) a specific draft amendment has
yet to be presented. (Secretariat)(3) Employees’ Inventions in the United
Kingdom
The principle of employees’ inventions has
been developed through case laws. The Patents
Act of 1949 had provisions for dispute settlement
concerning employees’ inventions but had noprovisions for attribution of the right or the
obligation of compensation.
Under the current act, an employee’s

invention shall primarily belong to the employer
only when the invention was made in the course of
the normal duties of the employee or specificallyassigned to him and an invention might be expected
to result from the carrying out of his duties, orwhen the invention was made in the course of theduties and the inventor has a special obligation tofurther the interests of the employer’s undertaking.
When the invention primarily belonging to theemployer is patented and is of outstanding benefit
to the employer, on an application, the court or thecomptroller of the Patent Office may award him anamount of compensation. When there is a collective
agreement, the court or the comptroller of the
Patent Office shall not make such a ruling. Although
there have been various cases disputing attributionof the right or compensation, no decision has beenreported that admitted a claim of compensation.
Some companies are positive about
employees’ inventions, but most companies are notpositive enough to have an incentive scheme.
There were discussions in the past on theamendments of the current act and recently theConsultation Paper(*18) has indicated the points foramendments and public opinions are called forabout them. (Secretariat)

Ⅳ Industry Opinion on Section 35 of
the Patent Law
1Modalities of the Employees’ Inventions
System in the Age of Global Competition

The standpoint for considering the employees’
inventions system is to strengthen the industrial
competitiveness of Japan in the global market.
From this standpoint, a desirable system would be
one that facilitates the formation of independent
patent strategies by creating highly ingenious
inventions in addition to and without affecting thecreation of inventions at the stage of developmentin which Japan has shown great strength.
The process of creating intellectual property incompanies has diversified: e.g. even in the case ofcreating an invention that can be completed within
a company, the inventors carrying it out may beunder various patterns of employment. Cases ofcreating intellectual property outside a company byresearch contract or joint research have increased.
This diversification should be taken into accountwhen considering the modalities of the incentive(*16) BMJ-Referentenentwurf Arbeitnehmererfindungsgesetz 25 Oktober 2001, for the draft text, see BMJ website(http://www.bmj.bund.de/images/10333.pdf).
(*17) Rapport d’information No.377 (2000-2001), M. Francis GRIGNON, STRATEGIE DU BREVET D’ INVENTION-Commission des Affaires Economiques.
See France Senat website (http://www.senat.fr/rap/r00-377/r00-377.html).
(*18) Consultation Paper on Proposed Patents Act (Amendment) Bill is on the website of the UK Patent Office. See(http://www.patent.gov.uk/about/consultations/patact/index.htm).
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system for inventors.
Devising an incentive scheme should take into
consideration the relation between an invention anda patent, a patent and a product, a patent and profits,etc., and the form of incentive could be salary,commendation, promotion, improvement ofresearch environment, monetary award and avariety of others.
The current provision for employees’
inventions has adverse effects on industrial
competitiveness, and particularly the negative
effects that are not to be overlooked would be on
the predictability of corporate profits, the burden ofrisk in R&D investments, R&D activity by teamwork, securing right on and commercializing an
invention and the diversification of corporate
business.
The amendment of Section 35 of the Patent
Law is necessary so that contracts and the
incentive system in a company, which have been
established through a reasonable process, aiming toenable the company to give an appropriate
incentive to inventors at the development stage andthose with higher creativity, in line with its
management policy, financial conditions and thesalary system, are respected while avoiding anintervention by law or courts regarding theircontents. (Giichi Marushima)
2

Proposal by Japan Intellectual Property
Association
regarding
Employees’
Inventions System and Background
Problems

Looking through the judicial precedents, thecalculation
methodforthe“reasonable
remuneration” stipulated in Section 35(3) and (4) of
the Japanese Patent Law is ambiguous andunreasonable. One idea that has been raised is toestablish an evaluation guideline for remuneration,
but judging from the current situation in Germany
where they have set up such guidelines but have
many disputes and companies are suffering
tremendous costs, such an idea cannot be said to be
desirable.
Considering the changes in social situation, as
for the method of giving incentive to inventors, it
should not be regulated by law in a single uniform
way but is desirable to be left to companies’ latitude
as part of a management strategy to survive inglobal competition.
Under the current system, while disputes may
increase in number along with the diversification ofbusiness activities, if a company seeks to avoid
legal risks, it will be forced to incur additional costs,
which is undesirable from the standpoint ofstrengthening
competitiveness.
Additionally,measures to avoid legal risks may not necessarily
work to give incentive to inventors.
Many companies have developed various

IIP Bulletin 2003

incentive systems, operating them flexibly andappropriately depending on the contents ofinventions, and continuously trying to improvethose systems. Further, the level of remuneration
paid by Japanese companies is never lower thanthose in other countries.
As radical deregulation is being promoted,
interventions by law to individual company
activities should be confined to mattersindispensable in terms of public order and morality,
etc. (Kazumasa Abe)Ⅴ Consideration
fromtheStandpoint of Legal Interpretation
1

Consideration of Section 35 of theJapanese Patent Law from the standpointof Legal Interpretation Theory

The purport of legislation for Section 35 of theJapanese Patent Law can be said to be thereconciliation of interests between the employer,
etc. and the inventor, i.e. the employee, etc. Here,the employee, etc. includes contractual employees
and executive officers of a legal entity, and for thehandling of employees temporarily transferred, itshould be judged by the fact which company
directed or ordered for the creation of theinvention.
An employer can succeed to the right to an
employee’s invention by a unilateral manifestationof intent such as service regulations, etc. As for areasonable remuneration for the succession, in
recent court precedents, the courts have judged theamount of “reasonable remuneration” in their own
way based on evidence without any judgment on
the reasonableness of the service regulations, etc.
A “reasonable remuneration” should be
decided within a reasonable scope of certain range
since it is not of the nature that would allow a
uniform and objective determination. Therefore, it
is a difficult question for the courts to decide
properly, and even if they try to judge reasonable
remuneration based on limited evidence, it cannot
be denied that the judgment would tend to be
distorted easily. The principle for the courts toadopt may be to pay attention for securing therights of the employee, etc. while respecting the
remuneration rules set by companies.
If the Supreme Court is only to confirm thetheory in those court precedents, it will benecessary to keep the possibility of amendment to
the law also in perspective. (Minoru Takeda)
2

Consideration on Remuneration
Employees’ Inventionsfor

The reason that Section 35 of the Japanese
Patent Law takes it as desirable for a patent to● 24 ●

belong to the employer as its final place isconsidered to be based on the policy judgment thatin this modern society with highly advanced
technological innovations, without providing
companies with an incentive to invest in inventions,
it is difficult to realize the promotion of invention.
On the other hand, the reason the law gives theemployee the right to “a reasonable remuneration”
may be explained as that if the rule making is fully
left with the employer’s unrestricted discretion,
there may be a possibility that the remuneration
given to the employee would become so small thatit may bring about a situation that runs also counterto the incentive to invent.
As for “the profits the employer, etc. willmake” provided in Section 35 (4) of the Japanese
Patent Law, judicial precedents(*19) regard them as
profits from the position that enables the employer
to exclusively carry out an invention, and more
specifically, taking into consideration the license feethat may be received if the employer grants a third
party a license on the invention for consideration.
On the other hand, “the amount of contribution theemployer, etc. made to the making of the invention”
is determined by taking into consideration thecircumstances in which the invention was madewhile the employee was on duty and employer’s
facilities or staff were utilized. (Yoshiyuki Tamura)
3

Consideration on Employees’ Inventions
System from the Standpoint of Labor Law

Section 35 of the Japanese Patent Law
regulates the relation between the employer, etc.
and the employee, etc. concerning the rights to an
employee’s invention. Since the basic law
regulating the relation between the employer, etc.
and the employee, etc. is the Labor Law, aconsideration on Section 35 of the Patent Law fromthe standpoint of the Labor Law is necessary.
As for “the contract, service regulations orother stipulations” in Section 35 of the Japanese
Patent Law which are regarded as the grounds forrights of a service invention to pass to the employer,
etc., majority theory interprets the language to also
include stipulations other than employment
contracts and working rules. Also, court precedents
have judged that an implied agreement amounts toa contract, and it is also understood from thestandpoint of the Labor Law, that, if a treatment
concerning a work condition has been continuously
and repeatedly adopted without any objection fromeither of the parties, such treatment will amount toan implied agreement, and comprises the content of
the employment contract.

It is questionable that a recent court
decision(*20) conducted an all-out judicial review
concerning “a reasonable remuneration” for an
assignment of an employee’s invention. Even if
Section 35 (3) of the Japanese Patent Law is a
forcible provision, the judgment whether
remuneration is reasonable or not should be madethrough the judgment on the reasonableness of theinvention rules of the company.
As for the legislative idea, while the current
subsections (1) to (4) of Section 35 of the Japanese
Patent Law should be maintained unchanged
including the forcibility of subsections (3) and (4),one idea is, in light of the importance of procedural
regulations, to add a provision imposing an
obligation on an employer to give information or
explain about the employees’ inventions system
including reasonable remuneration, accompanied byanother provision that a remuneration determinedthrough such a substantial negotiation shall be
regarded as a “reasonable remuneration.”(Michio Tsuchida)4

Consideration on Employees’ Inventions
System from the Standpoint of the Civil
Law

Freedom of contract is a basic principle of the
Civil Law, which is to respect an agreement
reached by a meeting of declaration of intention ofboth parties. The effect of a contract is denied forthe reason of injustice of the content, except basedon a forcible regulation, only when it is offensive to
public order and morals (Section 90 of the Japanese
Civil Code). Other than that, the Consumer
Contracts Act legislated in 2000 provides for special
regulations aiming to compensate the structuralgap in information and bargaining power between
consumers and companies, expanding the situations
that would invalidate a contract.
If Section 35 is deleted from the Japanese
Patent Law, an examination based on the Japanese
Civil Code may be necessary. In this case, theassignment of the rights to an employee’s invention
by an individual agreement will be effective inprinciple. However, if there is a mistake on the partof the employee or deception or duress by theemployer in the process of making a contract, thecontract can be invalidated or canceled under
Section 95 or 96 of the Japanese Civil Code.
Additionally, while it is not certain whether theConsumer Contracts Act is applicable to a contract
for the assignment of right to an employee’s
invention, if it is the case, the possibility ofcancellation under the Act should also be kept in(*19) Tokyo District Court Decision, Sep. 28, 1983, S56 (“Wa”) 7986; Tokyo District Court Decision, 23, 1983, S54 (“Wa”)
11717; Tokyo District Court Decision, Sep. 30, 1992 H1(“Wa”) 6758; Osaka District Court Decision, March 4, 1993,
H3(“Wa”) 292, Osaka District Court Decision, Apr. 28, 1994, H3 (“Wa”) 5984; Osaka High Court Decision, May 27, 1994,
H5 (“Ne”) 723, 763.
(*20) supra note 1 decision.
● 25 ●IIP Bulletin 2003

mind.
If Section 35 (3) and (4) are deleted from theJapanese Patent Law, the pricing for the rights
assignment will be subject to the regulation for
public order and morality under the Civil Law.
Specifically, the lower the amount of remuneration,
the more sincere and specific an agreement by theemployee may be required. The stipulation of the
remuneration will become invalid without suchagreement. To the contrary, the higher the amountof remuneration, the higher the possibility thecontract will be held as effective with a low level ofagreement by the employee. (Keizo Yamamoto)(Senior Researcher: Takeyuki Iwai)

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