Revision of the Employees’ Invention System in Japan (as of April 1, 2016)
1. Outline of the Amendment (Article 35, Paragraphs 1 to 7)
When an invention is made by an employee, the right to obtain a patent belongs to the employer, if any provision in an agreement, work rules or any other contract stipulates in advance that the right to obtain a patent for an employee invention attributes to the employer. (In the absence of such provision, the right to obtain a patent belongs to the employee in consideration of the basic rule set forth in Article 29 of the Japanese Patent Law providing that the right to obtain a patent primaryly belongs to the inventor).
If the employer is attributed the right to obtain a patent based upon the aforementioned provision, the employee is entitled to receive a reasonable remuneration or other economic profits.
The Ministry of Economy, Trade and Industry (METI) has now established guidelines on the decision-making procedure for determining what is to be regarded as a reasonable monetary or other economic benefit.
2. Amended Article 35 of the Patent Act
Article 35 of the Japanese Patent Act will be amended as of April 1, 2016 as follows:
A new Article 35 Paragraph 3 is implemented: In a case of an employee’s invention, the right to obtain a patent shall belong to the employer from the time of its occurrence, as long as the contract, work rules or any other provision stipulates so in advance.
The existing Article 35 Paragraph 3 concerning the remuneration rights of an employee is shifted to Paragraph 4 with a modification: The right to a “reasonable remuneration” will be changed into a “reasonable monetary or other economical profit” (hereinafter “reasonable profit”).
The existing Article 35 Paragraph 4 is shifted to Paragraph 5 with a modification: When deciding on the content of the reasonable profit, the situation of the consultation to set forth the criteria between the employer and employees, the situation of the disclosure of the criteria set forth, and the situation of hearing of the employees’ opinion have to be taken into consideration, and the assignment of the reasonable profit shall not be such that it is recognized to be unreasonable.
A new Article 35 Paragraph 6 is added: The METI shall establish guidelines for the situations that need to be taken into consideration according to the previous paragraph, and announce such guidelines.
3. Some Details of the METI Guidelines
The METI has announced guidelines on the decision-making procedure for determining what is to be regarded as a reasonable monetary or other economic benefit. During the decision-making procedure, consultation, disclosure of criteria, and hearing of the opinion are required.
There is no limitation as to how to conduct the consultation. Consultation with a representative of the employees is possible. An agreement as the result of the consultation is not required.
There is no limitation as to how to disclose the criteria. Notice boards, distribution of the documents via e-mails etc., uploading on intranets or websites may be considered appropriate measures. The degree of the disclosure shall be such that the content of the reasonable profit, conditions for granting the profit, or other items for deciding the content of the reasonable profit need to be concretely disclosed.
(3) Hearing of the opinion
There is no limitation as to how to conduct the hearing. The timing of the hearing can be prior to the decision of the content of the reasonable profit or after the tentative grant of the reasonable profit based on the criteria. Employers have to give a sincere response to opinions from employees. An agreement on the decision of the content of the reasonable profit is not required.
The METI guidelines do not mention the details/specifics of the reasonable amount of monetary profit etc., so that the focus will be on the decision-making procedure. If you need assistance in regard to such procedure, please let us know.