2012年9月9日日曜日

English translation of Supreme Court Decision of 17 October 2006, Case No. 781 (Ju) of 2004 (Hitachi Optical Disk Case)

English translation of Supreme Court Decision of 17 October 2006

Case No. 781 (Ju) of 2004

(Hitachi Optical Disk Case)

 

The main text of the order

              The final appeal is dismissed.

              The costs for the final appeal shall be borne by the appellant.

Reasons

              I. Background of the case

              1. The appellee brought suit against the appellant, seeking payment of reasonable compensation prescribed in Article 35(3) of the Patent Act (Before amendment by Act No. 79 of 2005; the same shall apply hereinafter) in exchange for the assignment of the right to obtain patents for employee inventions to the appellant in this country and in foreign countries.

              2. The judgment in prior instance has legally determined the facts as follows.

              (1) The appellant is a large conglomerate that is involved in the development, manufacture, marketing, and sales of various electric appliances and the related products. The appellee was an employee of the appellant from November 1969 through November 1996, and worked at the Central Research Laboratory of the appellant as a researcher. He was appointed as a Chief Investigator of the Institute in his late career.

              (2) When the appellee was an employee of the appellant, the appellee made jointly with other employees inventions of patents Nos. 1 to 3 listed in the separate sheet of the Judgment of First Instance (hereinafter, these inventions are called "Invention 1", "Invention 2", and "Invention 3", respectively, according to the numbering of the separate sheet, and collectively called "the Inventions"). Each of the Inventions is related to an apparatus and a method of recording information on a storage medium (optical disk) and reproducing it using laser light. The Inventions, by their nature, fall within the scope of the business of the appellant, and were achieved by an act categorized as a duty of the appellee for the appellant, and thus, fall under Employee Invention prescribed in Article 35(1) of the Patent Act.

              (3) The appellee concluded contracts with the appellant under which the rights to obtain patents, in this country and foreign countries, for the Inventions were assigned to the appellant: on 13 September 1977 for Invention 1; on 20 January 1973 for Invention 2; and on 26 December 1974 for Invention 3. Hereinafter, these contracts are collectively called "the Assignment Agreement".

              (4) The appellant filed patent applications for the Inventions in this country, had registered, and obtained patent rights. In the meantime, the appellant obtained a patent for Invention 1 in the United States of America, Canada, the United Kingdom, France, and Netherlands and patents for Invention 2 and Invention 3 in the United States of America, Germany, the United Kingdom, France, and Netherlands.

              (5) At the time the Assignment Agreement was concluded, the appellant was providing a "Guideline for Rewarding Invention and Utility Model" which stipulated that fixed amounts of premium be awarded when a patent application was filed as well as when the patent was registered. It also stipulated that for an invention which showed an outstanding effect a premium be awarded depending on the grade of its contribution. Moreover, by June 1991, the appellant had established a "Guideline for  Dealing with Invention and Utility Model", a "Guideline for Compensation Concerning Invention and Utility Model", and a "Standard for Compensation Concerning Invention and Utility Model" which stipulate that the appellant shall pay compensation calculated based on the prescribed standards to an employee who has made an invention when a patent application is filed in this country or foreign countries, when the patent right is registered in this country or foreign countries, when outstanding results are produced and a contribution to the business performance is recognized, and when royalties are received from a third party licensee. Hereinafter, these guidelines and standards provided by the appellant are collectively called "the Guideline".

              (6) The appellant gained a profit mainly by receiving royalties from multiple companies through licensing of the Inventions which patents were applied for or registered in this country or foreign countries.

              (7) According to the Guideline, the appellant paid to the appellee premiums or compensations as a price for the assignment of the rights to obtain patents for the Inventions: a total of 2,318,000 JPY for Invention 1; a total of 51,400 JPY for Invention 2; and a total of 10,700 JPY for Invention 3.

              3. The court below upheld the appellee's claim of reasonable compensation for the assignment of the rights to obtain patents for the Inventions, to the extent that the appellee seeks from the appellant a total of 163,003,716 JPY (not including the amount which had already been paid according to the Guideline), that is, 162,846,300 JPY for Invention 1; 131,750 JPY for Invention 2; and 25,666 JPY for Invention 3.

              (1) In order to discuss the issue of consideration (quid pro quo) for the assignment of right to obtain patent under the Assignment Agreement, we must determine the law applicable to the same because the subject matter thereof is the rights to obtain patents in this country and in foreign countries, and hence, the issue is international in scope. The Assignment Agreement was directed to the employee inventions made by the appellee and was concluded in this country between the appellant who is a Japanese juridical person and the appellee who is a Japanese national who was working as an employee of the appellant. Therefore, it is considered that there was an implicit agreement between the appellant and the appellee that the law applicable to the formation and effect of the Assignment Agreement be Japanese laws. Consequently, according to Article 7(1) of The Act on General Rules for Application of Laws, the law applicable to the Assignment Agreement shall be Japanese laws, including the issue of consideration for the assignment of right to obtain patent in foreign countries.

              (2) The term "the right to obtain a patent" as used in Article 35(3) of Patent Act shall encompass not only the right to obtain a patent in this country, but also the right to obtain a patent in foreign countries. Therefore, the appellee may claim against the appellant for payment of reasonable compensation for the assignment of the rights to obtain patents in foreign countries under Article 35(3) of the Patent Act and according to the standard provided in Article 35(4) of the same.

              II. With regard to the item 3 of the Reasons for Petition for Acceptance of Final Appeal presented by the representatives, Wataru SUEYOSHI et al.

              1. The issue of consideration for the assignment of right to obtain patent, such as whether an assignor may make a claim against the assignee of consideration for the assignment of right to obtain patent in foreign countries and how much should the price of compensation be, is nothing but an issue of "what kind of claims and liabilities do the parties to the assignment have?" Thus, it considered to be an issue of the effect (i.e., consideration for the assignment between the parties to the assignment) of the contracts or other juristic acts. (Translator's note: in this context, the term "consideration" means "Something of value given by both parties to a contract that induces them to enter into the agreement to exchange mutual performances.") Consequently, according to Article 7(1) of The Act on General Rules for Application of Laws, the law applicable to such contracts or other juristic acts shall be determined primarily by the intention of the parties. In the meantime, we must distinguish (i) the issue of how the right to obtain a patent, which is the subject matter of the assignment, is handled in foreign countries and what kind of effect it has from (ii) the issue of consideration for the assignment between the parties to the assignment. Thus, it is considered that the law applicable to the issue of how the right to obtain a patent is handled in foreign countries and what kind of effect it has should be, according to the territorial principle in patent laws, the law of the country in which a patent is registered based on the right to obtain a patent.

              2. In this case, it was found that there was an implicit agreement between the appellant and the appellee that the law applicable to the formation and effect of the Assignment Agreement be Japanese laws. Consequently, with regard to the issue of consideration for the assignment of right to obtain patent under the Assignment Agreement, such as whether the appellee may make a claim against the appellant of consideration for the assignment of right to obtain patent in this country as well as in foreign countries, the law applicable to the Assignment Agreement shall be Japanese laws. The judgment below is affirmed because it followed the same argument as above. Appellant's argument is rejected.

              III. With regard to the item 4 of the Reasons for Petition for Acceptance of Final Appeal presented by the representatives, Wataru SUEYOSHI et al.

              1. It is clear that the Japanese patent law shall not govern the right to obtain a patent in foreign countries directly (see Article 4bis of Paris Convention for the Protection of Industrial Property of March 20, 1883, as revised at Brussels on December 14, 1900, at Washington on June 2, 1911, at the Hague on November 6, 1925, at London on June 2, 1934, at Lisbon on October 31, 1958 and at Stockholm on July 14, 1967). Thus, it must be considered that the term "the right to obtain a patent" recited in Article 35(1) and (2) of the Patent Act means the right to obtain a patent in this country. Therefore, in the context of Article 35(3) of the Patent Act, it is impossible to consider that the term "the right to obtain a patent" recited in said provision alone comprises the right to obtain a patent in foreign countries. Consequently, it must be considered that provisions of Article 35(3) and (4) of the Patent Act may not be applied directly to a claim of consideration for the assignment of right to obtain patent in foreign countries.

              As an employee invention is made under employment relationship or hiring relationship, it is difficult for an employee to negotiate with an employer on an equal basis when the right to obtain a patent or the patent right for an employee invention is disposed or an exclusive right therefor is granted. Thus, the ratio legis of Article 35(3) and (4) is to realize the purpose of the Patent Act, that is, to encourage inventions, and thereby to contribute to the development of industry, through protecting employee inventors by allowing them to secure certain amount of money which is calculated according to a standard prescribed in Article 35(4) and is a part of the profit which the employer should gain from exclusively practicing the invention and is objectively estimated at the time of the disposal. Whether it is the right to obtain a patent in this country or the right to obtain a patent in a foreign country, it is equally difficult for an employee inventor to negotiate with the employer on an equal basis when the right to obtain a patent is assigned from the former to the latter. Although the right to obtain a patent may be considered as multiple discrete rights in multiple countries, they are based on an invention resulting from a single technical creative activity and are based on the same employment relationship, especially in the case when the invention is an employee invention. Therefore, it may be safely said that, as a matter of fact in our society, the right to obtain a patent in each of the countries with respect to an employee invention results from substantially the same single invention. Moreover, it is not rare that the right to obtain a patent in this country as well as those in foreign countries are collectively assigned from an employee to the employer because, in reality, in many cases at the time of the assignment, it is not certain which countries patent applications are filed in and whether patents are granted for such applications, or whether the invention is concealed as a trade secret without filing an application. It is considered that the usual intention of the parties is that the legal relationship between an employee and the employer concerning the invention should be treated in an unified way by recognizing the attribution of the right to the employer, even though the right to obtain a patent in some countries might not be the same concept as the right to obtain a patent in this country. Therefore, there are circumstances in which ratio legis of Article 35(3) and (4) should be applicable to the right to obtain a patent in foreign countries.

              Consequently, in the case where the right to obtain a patent in a foreign country, for an employee invention prescribed in Article 35(1) of Patent Act, is assigned from an employee to the employer, Article 35(3) and (4) should be applied by analogy to a claim of consideration for the assignment of right to obtain a patent in a foreign country.

              2. In the present case, the appellee made under employment relationship with the appellant the Inventions which fall under employee invention prescribed in Article 35(1) of the Patent Act, and assigned the resultant right to obtain a patent in the United States of America, the United Kingdom, France, Netherlands, and other countries as well as the right to obtain a patent in this country. Consequently, Article 35(3) and (4) should be applied by analogy to a claim of consideration for the assignment of the right to obtain a patent in each of the foreign countries above, and thus, the appellee should be able to claim against the appellant for payment of reasonable compensation for the assignment of the right to obtain a patent in each of the foreign countries under Article 35(3) of the Patent Act and according to the standard provided in Article 35(4) of the same.

              The judgment below is AFFIRMED since it is appropriate as a conclusion with regard to the issues discussed above.

              Therefore, the Court unanimously determines as stated in the main text of the order.

(Presiding Judge Kohei NASU, Judges Yoyozou UEDA, Tokiyasu FUJITA, Yukio HORIGOME)