Compulsory Requirements for a Company Under Japanese Patent Law for the Payment of Reasonable Profits for Employee Inventions
When a company files a patent in Japan for an invention created by one of its employees, certain compulsory requirements kick in under Japanese Patent Law regarding the payment of reasonable profits for employee inventions, if those profits are subject to Japanese law. This is a very high-level summary of those compulsory requirements.
First, when a company files as the applicant to patent an employee invention, it is a compulsory requirement for the company to pay reasonable profits to the inventor-employee.
Second, while it is not a compulsory requirement for a company to stipulate “reasonable profits” by entering into agreements with employees or adopting internal rules regarding reasonable profits, we recommend companies do so. This is because, if “reasonable profits” are not stipulated, a court will determine the amount of the reasonable profits, and its outcome could be rather unpredictable (i.e., the court may later order the company to pay more than it had already paid).
Third, when a company does stipulate “reasonable profits” by agreements or internal rules, the law requires the company to decide and pay those reasonable profits by a reasonable procedure. If the procedure is reasonable, in the event of a challenge by an inventor-employee, a court will likely refrain from intervening (i.e., will not order the company to pay more). If the procedure is unreasonable, a court will determine the amount of the reasonable profits by itself.
Fourth, while it is neither a compulsory requirement for a company to follow the procedure provided in the government-issued guidelines when entering into agreements with employees or adopting the internal rules, nor when actually calculating and paying the reasonable profits, we recommend companies do so. This is because, if companies follow the procedure in the guidelines, they can minimize the risk that the court would later order the company to pay more to an inventor-employee than it already had.
If you have questions about this topic, please contact any of the authors directly or our firm’s Intellectual Property Practice Group through the contact information available on our firm’s website.
KOJIMA LAW OFFICES | Tokyo | www.kojimalaw.jp