Miracle Max comments

Posted in: Nobel winner Nakamura was salaryman who took on bosses See in context


Just to be clear, I was not implying that what Nichia did was acceptable or proper. I was simply acknowledging that many other Japanese companies were engaged in the same improper conduct. And, as previously noted, many others were held to account for such conduct.

Yes they did, but it's not as clear-cut as some would have us believe.

There is nothing more clear-cut in this case than Nichia’s failure to meet its legal obligation. The arguments being put forth by you and turbotsat miss the point. The two of you are arguing that other things should have been considered when determining the appropriate amount of compensation for Prof. Nakamura’s invention. That is all well and good, but Article 35(4), as written at the time, clearly says that only two things needed to be taken into consideration: the profit from the invention and the contribution by the employer. You may not agree with that, but that is what Nichia was legally required, but failed, to do. The judges who heard the evidence presented by both sides(rather than relying on heresay) found that Nichia made 120.8 billion yen in profit from Prof. Nakamura’s invention. In order for the 20,000 yen payment to be “reasonable remuneration” under Article 35(4), Prof. Nakamura’s contribution to the invention would be valued at 0.0000016%. This would be highly unlikely for a person awarded a Nobel Prize for said invention.

Paying that, plus paying 'reasonable remuneration' at a similar level for all the other patents involved, would have seen Nichia financially destroyed.

That is a flawed argument in two respects. First, it assumes that all patents required to practice the technology are of equal value. This is not a realistic scenario. In almost all emerging technologies there is a very valuable foundational patent that claims the basics of the technology so that all others who want to practice the technology need to get a license. Most other patents in the same technological field are of little value because alternatives to the claimed invention are available. Based on the awarding of the Nobel Prize, it seems pretty safe to assume that Prof. Nakamura’s patent was a foundational patent in the field. Therefore, it is unlikely that Nichia would have been required to pay for all other patents at a similar level. Second, the “reasonable remuneration” standard applies only to inventions made by employees. Since it is pretty clear that Prof. Nakamura was the only person at Nichia working on the blue LED technology all related patents could have been covered in a single settlement between the parties, had Nichia chose that course of action. If Nichia made commitments to others that made the technology financially impractical, that would be a problem Nichia brought on itself and irrelevant to its obligation to Prof. Nakamura.

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Posted in: Nobel winner Nakamura was salaryman who took on bosses See in context

It's cherry-picking unless they took into account all the unprofitable projects

turbotsat... As applicable in 2004 (there have been some changes as the result of this case), Article 35(3) clearly stated that the amount of compensation paid for the rights to an employee invention was to be determined by looking at the profit from the invention at issue, not from the employee's entire employment history. You can call it cherry-picking, but that was what the law required Nichia to do.

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Posted in: Nobel winner Nakamura was salaryman who took on bosses See in context

No, my complaint is that Nichia is getting a lot of unwarranted flak for normal business practices and Nakamura is getting a lot of unwarranted glory for denigrating his former employers.

Nichia may be catching a lot of flak, but it is hardly unwarranted. I don't know the details of the relationship between Prof. Nakamura and Nichia during his 20 years of employment, but none of that information is particularly relevant to this case. The most important fact in this case is that Prof. Nakamura was employed by Nichia at the time he invented the Blue LED. Because of this, each side had specific legal obligations to the other. If you understand the legal framework, you will see that it was Nichia, not Prof. Nakamura, that failed to honor its side of the employment agreement.

Because the blue LED was invented by Prof. Nakamura as part of his work for Nichia and using Nichia resources, it was legally an “employee invention”. Article 35(1) of the Japanese Patent Law makes clear that such inventions are owned by the employee, and the employer has only a right to use the invention free of charge as part of its business (called “shop rights”, which cannot be licensed by the employer). Undoubtedly, however, Prof. Nakamura signed an employment agreement that required him to assign full ownership to Nichia. It is clear that he did this because Nichia licensed the patent and even sued Prof. Nakamura himself. When an assignment takes place under an employment contract, as happened in this case, Article 35(3) of the Patent Law states that the employer must pay the employee “reasonable remuneration” for the assigned rights. In addition, Article 35(4) states that the amount of the remuneration will take into consideration the profits earned from the invention and the employer’s contribution. That’s the law, now consider what Nichia did (or more precisely didn’t do) in this case.

Despite a clear legal obligation to do so, Nichia never paid Prof. Nakamura more that the 20,000 yen originally paid when the patent was granted. In its decision in 2004, the Tokyo District Court, after hearing the arguments from both sides, determined that Nichia made 120.8 billion yen in profit from the patent and that Nichia’s contribution to the invention was 50%, thereby calculating the amount that should have been paid to Prof. Nakamura at 60 billion yen. They ordered Nichia to pay only 20 billion yen because that was the amount requested by Prof. Nakamura. Nichia, of course appealed the judgment to the Tokyo High Court, which ordered the parties to try to negotiate a settlement. The High Court made it clear that it would not uphold the District Court order and would limit its finding for Prof. Nakamura’s contribution at 5% (6 billion yen). In the end, Prof. Nakamura settled for 608 million yen in compensation and 236 million yen in fees for delays in payment. This amount valued Nichia’s contribution to the patent at 99.5%. For 8 years between 1993 and 2001, Nichia had the chance to do the right (legally required) thing, but chose not to do so. Nichia’s conduct, however, was consistent with normal business practices at the time. In addition to the blue LED case, there were several other cases around that time brought by former employees against large Japanese companies, including Sony, Ajinomoto, Hitachi, and Olympus seeking additional compensation for profitable employee inventions. In most of these cases the companies were ordered to pay tens of millions of yen in additional compensation to the inventors.

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