Tokyo District Court / Decided May 31, 2002 / Case Nos. Hei 11(wa)29072; Hei 12(wa) 27575 and Hei 13(wa)2964 (Unreported)
(Patent Law, Section 35, Paragraph 1)
Hitachi is a major manufacturer and seller of electric appliances and machineries in Japan.
Mr. Yonezawa ("Yonezawa") was an employee of Hitachi for the period from November 21, 1969 through November 20, 1996. When the patent applications at issue were filed, Yonezawa belonged to the Multimedia System Development Division of Hitachi. In one patent application in question, Mr. Fukada ("Fukuda") was named as the sole inventor and applicant in the patent application which relates to DVD ("DVD Invention"). He was also named as the sole inventor of eight inventions concerning double density CDs ("Double Density Inventions"). Gen Research Inc., a California corporation, was the applicant for the Double Density Inventions.
Hitachi brought three separate suits against Yonezawa, Fukuda and Gen Research (hereinafter called "Defendants" collectively), claiming, among other things, that the patent applications at issue were employee inventions invented by Yonezawa himself. The three cases were consolidated and at issue before the court were:
1:Whether the DVD inventions amount to an employee's invention.
2:Whether the double density CD inventions amount to joint inventions.
3:Whether the Defendants constituted acts of joint torts or defaults.
4:Whether the Defendants are liable for damages and, if so, what is the amount of damages.
1. Employees' Invention or Not
In 1995, Yonezawa worked for Hitachi and generally engaged in the development of optical disc technology. He also participated in standard-setting activities for SD-RAM on behalf of Hitachi. Seven manufacturers including Hitachi formed a consortium for setting up industrial standard. At Hitachi, Yonezawa's roles included: (i) proposing technology for industrial standard at relevant industrial standard-setting meetings, (ii) formulating technological strategies at his company; and (iii) conducting searches on state-of-art and competitive technologies. He was in a position to receive information concerning discussions in standard-setting meetings.
The DVD Invention included specific figures, charts and drawings which were proposed as a new standard, discussed and adopted by members of the standard-setting meetings. Participation to such meetings was one of his duties at the company. For these reasons and others, the DVD Invention should be regarded as an employee's invention.
The DVD Invention was completed by a Taiwanese engineer (Mr. Liu, non-party to this case) at the request of a Taiwanese investor (Mr. Ho Shou Shan, also a non-party). Mr. Shan owned dozens of companies in Taiwan and Hong Kong. Yonezawa met Mr. Shan at an academic conference in October 1995 in USA and was asked to develop high density, more particularly, double density CDs for Chinese markets. Mr. Shan recruited Mr. Liu from a Taiwanese research laboratory and had him work on the research of CD, CD-R and DVD.
Mr. Liu completed the DVD Invention in May 1996. Under the instructions of Mr. Shan, Yonezawa arranged to have the patent application on the DVD Invention filed in a name other than Mr. Liu for the time being. Therefore, Yonezawa asked Fukuda, his nephew, to be an inventor of the DVD Invention and Fukada agreed to do so. Mr. Liu agreed to the assignment of the right to obtain a patent.
Yonezawa denied the alleged similarities of figures and charts between specific agenda at the standard-setting meetings and details of the DVD invention. Yonezawa asserted that items exchanged at the meetings were publicly known at that juncture and that they had nothing to do with the invention.
Yonezawa also denied that Plaintiff's claim regarding employee inventions. Yonezawa asserted that his research area when he was at Hitachi was magnetic demodulation recording and focused on the development of 3.5 inch optical disc within the framework of joint work with Sony for industrial standards.
1. Whether DVD Invention is Employee's Invention
1) From August 1994 until he retired from Hitachi, Yonezawa belonged to the Development Headquarter and his role as a senior researcher was to develop optical disc devices and supervise engineers of an optical disc group.
2) In 1995, seven member companies of the SD-standard consortium had a series of meetings for introducing an industrial standard on SD-RAM. Each member discussed basic concepts of the likely standard and member companies exchanged ideas for industrial standard.
Yonezawa attended two SD-standard meetings held on May 15 and May 19, 1995. In the latter meeting, Hitachi proposed a DVD format design with a track pitch of 0.74 micron. In later meetings, Hitachi proposed the adoption of "land/groove" standard and "wobbling" standard. Yonezawa did not participate in these meetings but he may have had access to information exchanged in such meetings because handouts of the consortium meetings were circulated within designated group members including Yonezawa. Such handout were marked of "CONFIDENTIAL." However, he was in a position to receive a copy of minutes of standard meetings.
3) Claim 1 of the DVD invention covers high density recording on both the convex land track and the concave groove track. Claim 2 covers a track length between 0.6 and 0.8 micron. Amendment to Claim 3 reflects the proposal made by Matsushita at the Working Group of DVD Forum on March 22, 1996. Addition of Claim 5 reflects the Matsushita's proposal for the order of recording address information. Addition of Claim 7 reflects the proposal by Matsushita and Mitsubishi at the Working Group on March 29, 1996.
Taking these facts into account, the court stated:
The DVD Invention includes many items described in the minutes of consortium meetings or reference materials handed out at the meetings, and features discussed in the DVD Forum's Working Group. The most characterizing feature of the invention is a structure to have the entire sector mark "wobble" in the direction of right and left. However, this structure is described in the material handed out to the meeting attendees and was not what Yonezawa invented. The DVD Invention as a whole largely, but not entirely, relies on the information discussed at the Working Group of DVD Forum. c Yonezawa was one of the inventors of the DVD Invention but his ownership is limited to 10% of share.
2. Whether Double Density CD Inventions are joint inventions
Plaintiff argued that the eight double density CD Inventions were achieved partly by Yonezawa in connection with his job requirements. Defendants argued that they were completed by a third party who participated in the project of Mr. Shan and that his role was limited to an intermediary to complete the Mr. Shan's project.
Yonezawa was a senior researcher at Hitachi and his responsibility covered the research and development of optical disc and recording/playing devices therefor. It is apparent from the evidence that the development of Double Density CD Inventions were part of his responsibility. Yonezawa's ownership of the Double Density CD Inventions is to a 50% share.
3. Torts Issues
Plaintiff owns a one tenth interest in the right to obtain a patent for the DVD Invention. Plaintiff also owns a one half interest in the right to obtain patents for the Double Density CD Inventions. Nevertheless, Yonezawa had the relevant applications filed in Fukada's name with Fukada's consent. The court stated:
Filing such applications by a person who does not have any right to obtain patents therefor is an illegal conduct called bonin , thus constituting torts under the Civil Code. In this instant case, tortous conducts were performed by Yonezawa and Fukada, which is against the provision of Section 719, Para. 2 (joint torts). Therefore, both Yonezawa and Fukuda are liable for damages which Plaintiff suffered from.
On damages, the court ordered as follows:
1) In the case of Hei 11(wa)29072: Yonezawa and Fukuda to pay 2,435,297 yen; and
2) In the case of Hei 12(wa)27575:Yonezawa and Fukuda jointly to pay 3,262,217 yen
In recent years, the intersection of patents and industrial standards has gained the interest of the public. When a patent is enforced against users of de jure standard, such enforcement involves complicated legal issues. A good example is the license campaign conducted by Forgent Networks against users of JPEG, a standardized image compression technology. The JPEG standard has so far been free. However, if the license campaign is successful, the JPEG standard would eventually be royalty-bearing. It is likely that users would switch from the JPEG to other industrial standard.
Claims heard by the court were conventional and not anything new. However, there are many interesting topics left unanswered. For example, if Hitachi owns 10%, then who owns the rest? Is there any chance for members of the standard-setting group to claim an interest in the ownership? What happens if an inventorship issue is raised? Since these issues were not asserted, the court did not specifically address them in this case. Reportedly, the Defendants appealed this case to the appeal court, but eventually withdrew his appeal.
It can be safely said that Hitachi won in this instant case. However, there is another case argued between the same parties, in which Yonezawa as plaintiff won the award of approximately 35 million yen as remuneration for employee inventions under Patent Law, Section 35-3. (The Tokyo District Court, decided November 29, 2002) This case is now on appeal.
In Japan, the number of court cases filed by former employees against their former employers is increasing. In almost all cases, they claim that former employers should pay certain amount of profits as their revenues accrued from their employee-created patents. A representative example is the case of Nakamura Shuji v. Nichia Chemical, in which the Plaintiff claimed the full ownership of an essential process patent concerning the blue LED invention, and remuneration for the patent in the amount of at least 2 billion yen. On the first issue, i.e., ownership, the Tokyo District court did not agree and held that it was assigned to his former employer under internal programs. The court's decision on the latter issue (i.e., remuneration) is expected shortly. More information on this decision is available in English in the newsletter of the Licensing Executive Society of Japan, "WINDS from Japan Issue #19" (http://www.lesj.org/).
(By Jinzo Fujino, Published in the AIPPI Journal, March 2003)