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Patents - Law on Employees' Inventions - Japan

In Japan, the rights in relation to an employee's invention are governed by Article 35 of the Patent Act, an amendment to which went into effect on 1 April 2016.

Previously, the right to obtain a patent in an employee's invention was vested inherently in the employee. This right and the eventual patent right relating to the employee's invention could be transferred from the employee to the employer under an employment regulation or contractual agreement, entitling the employee to remuneration. 

Under the previous Patent Act, where the right to obtain a patent was jointly owned (e.g. in the case of joint research with employees of other entities), such right could not be transferred to the employer without the consent of all the other joint owners (e.g. employees of the other entities). Also, where the employee transferred the right to obtain a patent to a third party, and where such third party first filed the patent application, in principle, the employer could not claim against the priority of said patent application made by said third party, even where there was an agreement between the employer and employee that transferred the right to obtain the patent to the employer. 

Under the amended Patent Act, the right to obtain a patent in an employee's invention will be vested inherently in the employer if an employment regulation or contractual agreement stipulates as such in advance. In this case, the employer is not required to obtain the consent of all of the other joint owners, and the employer can claim against a patent application made by a third party based on the employee's invention, as the employer is the inherent owner of the right to obtain the patent. In the absence of a stipulation in advance, the right to obtain a patent in an employee invention inherently belongs to the employee, as it did prior to the amendment of the law, and the same problems above may occur. 

Under the previous Patent Act, an employee who enabled his employer to acquire the right to a patent or to obtain a patent would have the right to reasonable remuneration. The amendment provides in essence that said reasonable remuneration includes economic profits as well as monetary remuneration. The economic profits may include, for example, stock options, promotions with a pay raise, paid leave, or opportunities for studying abroad. 

Finally, the amended law provides for the establishment by the Ministry of Economy, Trade and Industry (METI) of guidelines for the reasonable processes to determine the reasonable remuneration to be received by the employee. These guidelines were published on 22 April 2016. Complying with said guidelines may provide a good ground to support the reasonableness of the remuneration; however, said guidelines are not legally binding.


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-When does the law on employees' inventions apply?

The Patent Act applies when an employee makes an invention that falls within the scope of the business of the employer and the activities resulting in the invention are a part of the current or previous duty of the employee (an "employee invention").


-Is the employee obliged to notify the employer of an invention?

While the Patent Act does not explicitly address a duty to notify an employer of an employee invention, whether an employee has such a duty depends on the provisions of the employment regulation or other agreements. On a practical level, it is often the case that the employment regulation, also known as "regulations on employee inventions", requires its employees to notify the employer of any inventions.


-Which duties do employers have in relation to employee inventions?

Where an employer acquires the right to a patent or to obtain a patent relating to employee inventions, the employer is obligated to provide an employee with reasonable remuneration. 


-Who becomes owner of employee inventions?

In principle, an employee will become an inherent owner of employee inventions. In this case, the employer will have a non-exclusive, royalty-free license to the patent (Article 35, Paragraph 1 of the Patent Act).

Under the amended Patent Act, an employer can become an inherent owner of an employee invention if an employment regulation or contractual agreement in advance states that the right to obtain a patent in an employee invention will be vested inherently in the employer. 

As it did prior to the amendment of the Patent Act, it is also possible that the right to obtain a patent or patent, relating to employee inventions will be inherently vested in the employee, and then will be transferred from the employee to the employer by stipulating the same effect in advance in an employment regulation or contractual agreement. 



-Is the employee inventor entitled to additional remuneration?

If an employer acquires the right to a patent or to obtain a patent, relating to an employee invention, the employee is entitled to reasonable remuneration (Article 35, Paragraph 4 of the Patent Act). Reasonable remuneration may be in any form including pecuniary remuneration, stock options, promotions with a pay rise, paid leave, and opportunities for studying abroad.


-Are contractual agreements possible?

It is possible to make contractual agreements between an employer and employee in order for the employer to acquire a patent right or the right to obtain a patent from the employee and/or to determine the amount of the remuneration. However, because Article 35 of the Patent Act is considered a mandatory provision, it is not possible to deprive the employee of the right to receive reasonable remuneration relating to the employee invention. 


-What is reasonable remuneration?

There is no clear-cut standard on how to calculate the amount of remuneration. The METI Guidelines provide guidance on the reasonable processes to determine the remuneration. In principle, if the processes laid out in Article 35(5) are duly conducted (i.e. a negotiation for setting standards, disclosure and a hearing) in accordance with said guidelines, such compliance can be considered as an important factor to establish that the remuneration determined pursuant to said processes is reasonable. 


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