【Heisei 18 (2006) October 17, Supreme Court】
Work made for hire, transfer of work made for hire, right to obtain patents, governing law
【Facts of the case】
A Japanese employee hired by a Japanese company and working at its Japan-based institution transfers to the employer the right to obtain patents in Japan and foreign countries relating to the work made for hire. The employer later files patent applications and obtains patents in Japan and in several foreign countries for the transferred work made for hire. The employer paid the employee 2,380,000 JPY based on company rules, however the employee files suit claiming that the “reasonable value” stipulated in Article 35 of the Japanese Patent Law requires the employer to pay more. The employee included in its claims the amount earned by the employer in the foreign countries as licensee fees.
The main arguments of the case are: (1) the governing law of the claims for the payment of “reasonable value” for the transfer of the right to obtain patents in foreign countries and (2) whether Articles 35.3 and 35.4 apply to the right to obtain patent in foreign countries.
I. Argument (1)
The Supreme Court ruled as follows:
“Issues on whether the employee may claim payment for the reasonable value for the succession of its right to obtain patents in foreign countries and issues regarding the value of the succession such as what is the reasonable amount for the succession is a matter of what kind of debts and credits the entailed parties owe each other and is a matter of what the effects of the agreement (reason for succession) are and as Article 7.1 of the Act on General Rules for Application of Laws (Act No. 10 of 1898)(*1) stipulates, should be governed firstly by the parties’ intentions.”
The Supreme Court further noted that how the right to obtain patent is treated and its effects are a question for the laws of the country in which the patent is obtained based on the right to obtain patent, in accordance with the territorial principle and should be separated from the issues of the transfer between the employee and the employer.
In this case, the Supreme Court ruled that there was an inexplicit agreement between the employer and the employee to allow the laws of Japan to govern the establishment and effect of the agreement signed between the parties and that the issues relating to the claims of reasonable value based on the agreement, such as if X may receive payment for the transfer including the transfer of the right to obtain patents in foreign countries, should be governed by the laws of Japan.
II. Argument (2)
The Supreme Court ruled that it is apparent that the Japanese Patent Law does not apply directly to foreign patents or right to obtain patent in foreign countries and based on the fact that “right to obtain patent” of Articles 35.1 and 35.2 refer to the right to obtain patent in Japan, it is literally difficult to interpret that “right to obtain patent” of Article 35.3 includes the right to obtain patent in foreign countries and that Article 35.3 and 35.4 do not directly apply to claims of reasonable value for the transfer of the right to obtain patent in foreign countries.
However, since the purpose of Article 35.3 and 35.4 is to protect employees who have invented the work made for hire and as a result to encourage inventions and to allow the field to flourish, there exists no difference between the need to protect the employees from the inequality in power balance whether it be the right to obtain patent in Japan or the right to obtain patent in foreign countries.
The right to obtain patent in Japan and other foreign countries are derived from a single invention and it is not unusual for the transfer of the right to obtain patent from the employee to the employer to be done so as a batch.
It is normal to understand that the parties’ wish is to unify the entire deal. It can be said that a situation exists which allows the purpose of Articles 35.3 and 35.4 to exert over the right to obtain patents in foreign countries.
Therefore, Articles 35.3 and 35.4 should be analogically applied for the claim for payment of reasonable value for the transfer of the right to obtain patent in foreign countries. The employee may request payment based on the standards stipulated in Article 35.3 and 35.4 for the right to obtain patent in foreign countries.
Even under the currently relevant Act on General Rules for Application of Laws (Act No. 78) and the Japanese Patent Law, the above Supreme Court ruling is still applicable.
*1: The act was fully revised as Act on General Rules for Application of Laws (Act No. 78) on June 21, 2006.