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The dispute involving the inventor of the blue light-emitting diode (LED) and his former employer has ended in a mediated settlement in which the Tokyo High Court has confirmed the in-house inventor’s right to a fair reward. The high court heard the case between Mr. Shuji Nakamura, the inventor and now a professor at the University of California at Santa Barbara, and his former company, Nichia Corp. of Tokushima Prefecture, after both sides had appealed a lower-court ruling last January.

In that ruling, the Tokyo District Court had ordered Nichia to pay Mr. Nakamura’s claim for 20 billion yen as a fair reward for the invention under the Patent Law. In the court-mediated settlement announced Tuesday, this amount was greatly reduced to about 843 million yen, comprising a reward plus compensation for the delay in payment. Nevertheless, the amount is the highest-ever decided for an in-house invention in Japan.

Tuesday’s settlement is significant in that it recognizes the rights of employees whose inventions lead to huge corporate profits. It will probably serve as a yardstick in deciding future rewards for in-house inventors.

In consideration of the possibility that rewards in general could become exorbitant, the high court reduced the degree to which it recognized Mr. Nakamura’s efforts as having contributed to Nichia’s patent earnings from the invention — from 50 percent, in the lower-court ruling, to 5 percent. Thus Nichia appears to have come off the better in the settlement. Its being let off the hook for the full 20 billion yen is likely to stir debate.

Still, as a result of his court battle, Mr. Nakamura has opened the way for guaranteeing the rights of in-house inventors. It is an historic achievement along with the Nobel Prize-class invention of the blue LED itself, which has revolutionized lighting technology.

The Nakamura lawsuit, which was first filed in 2001, has led to a dramatic improvement in the recognition of in-house inventors’ rights to approach the companies that employ them on an equal footing and seek compensation. This has marked a departure from the conventional custom of employees’ remaining silent and submissive. In the last few years, several large corporations have increased invention bonuses by more than 100 times during the course of their acquiring patents and accruing the profits therefrom.

Mr. Nakamura’s invention transformed Nichia from a specialty maker of fluorescent devices into the top maker of blue LEDs. It achieved rapid growth with its monopoly and continues to enjoy huge profits. By commercializing the blue LED, the company was able to dominate the world market with a new form of lighting that consumes little electricity and is long-lasting.

In the first ruling on the case, the Tokyo District Court took Mr. Nakamura’s side, stating that the blue LED was “a rare example of a world-class invention achieved through the inventor’s individual ability and unique ideas (despite) a poor research environment and a small company.” Mr. Nakamura initially received a reward of only 20,000 yen per patent. In terms of profit distribution, it was a travesty of justice. In fact, the Patent Law, since before World War II, has stipulated the right of an in-house researcher to receive a reward commensurate with the profits from an invention. Until Mr. Nakamura’s case, though, there had been few lawsuits, and courts had approved rewards of only a few million yen at most.

As a result of a series of lawsuits, the Patent Law has been revised to the extent that it has been deemed acceptable for employees and companies to discuss and decide on fair rewards for inventions beforehand. The amendment encourages companies to adopt a system of reward payments through consultations. For the company, deciding on rational rewards through consultation means avoiding the management risk later on of being hit with a huge claim by an in-house inventor. The out-of-court settlement between Nichia and Mr. Nakamura is in accordance with the spirit of this revision.

In practice, however, one wonders how many workers actually feel that they can discuss, on equal terms with their employer, the issue of being paid a just reward for inventions. So far, the only people who have filed suits have been former employees, and a limited number at that. Individual employees still find it very difficult to face up to their companies in a manner that some managers might view as defiant. In the future, the process of determining fair rewards should be formulated in guidelines.

Placing importance on creative and free research and paying proper rewards for inventions will increase the incentive for more developments worthy of patents, stimulate innovations in industrial technology, and help strengthen the foundations of industrial competitiveness.

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