In many countries, an employee is entitled to some share of an employer’s profits from an invention. For example, in the United Kingdom, an employee is in principle entitled to some part of the profits from an employee invention (Sections 39 to 43 of the Patents Act 1977); in Germany, employees should be compensated for an invention according to complex rules that take into account value, the employee’s initiative, and position (Employees Inventions Act of July, 25 1957); in France, under a recent Cour de Cassation (Supreme Court) decision, the employee should be compensated according to the value of the invention.
Most notably in Japan, Shuji Nakamura, whose invention of the blue light-emitting laser diode made him a joint winner of the 2014 Nobel prize, claimed that his former employer Nichia Corporation awarded him a mere 20,000 yen (about $200) for the invention which has proven to be worth billions of dollars; a Japanese court awarded him ¥60.4 billion (i.e., about $500 million) in a 2004 decision. The court had ruled that he could have received half the lifetime value of the patent, estimated as in excess of $1 billion; in early 2005, during an appeal of the ruling Nakamura and Nichia settled for ¥840 million (then circa $8.1 million).
The requirement that individual inventors be rewarded is in marked contrast to U.S. law. To avoid the risks that such requirements may impose, companies should ensure that employee inventions and other intellectual property is rewarded in a bonus program that is facially and broadly equitable. Such a program should have two components—a general element, which compensates all employees relatively equally for inventions, and a subjective element, which allows for extra bonuses to be paid where an invention turns out to be particularly valuable.