Inventing a Contract?

Shuji Nakamura is a smart guy. He is largely responsible for inventing the blue LED, while employed by Nichia Corp., an invention which was very, very lucrative for the company. However, Nakamura-san is a little bit disappointed. You see, he only managed to get the Japanese government to extort 844 million yen ($8.2 million) from his former employer, rather than the 20 billion yen ($194 million) he was hoping for. Extorted? I am assuming so, because in the most comprehensive article I can find on the story, there is no mention of a contract giving him any royalties from his invention.

Look at the legal theory being put forth in the article linked above:

In theory, the appropriate reward for an invention by a corporate employee can be easily calculated by multiplying the profit generated by the invention by the ratio of the employee’s contribution. The district court estimated Nakamura’s contribution at 50 percent, or 60 billion yen, of the profit his invention yielded for the company.

Nakamura-san is obviously on board with this theory now, after all, he invented something that made his company billions. However, would he have been enthusiastic for it had he frittered away a few years in their labs and invented nothing? Then, instead of the salary he likely was paid, he would get nothing at all. Most likely, he would prefer the salary. That is the nature of the typical employer-employee relationship for scientists, like it or not. The employer provides the materials, lab equipment, lab space, assistants, salaries, and cool logos, all at the risk of getting nothing in return. The employee trades that risk of making no money for his efforts for a salary, and perhaps some nominal award should he invent, say, blue LED’s. Any profit-sharing would be negotiated in the employment contract up front.

However, through the magic of the state, Nakamura-san can have it both ways. He simply got the Japanese government to retroactively add a profit-sharing clause to his contract. Remember, without the state, who would make sure our contracts got enforced as written? Oops.

2 thoughts on “Inventing a Contract?”

  1. It’s also possible that he did not contract away his IP rights to inventions.

    There was a big flap for decades because comics giant Jack Kirby long refused to sign the standard work-for-hire contracts that would have made his creations exclusive property of Marvel Comics.

  2. Kennedy: “It�s also possible that he did not contract away his IP rights to inventions.”

    Except that he doesn’t have any natural rights to demand tribute for the use of the invention–unless his employer made some kind of contract with him agreeing to give him exclusionary control over their use of things he made while he was working for them.

    Maybe they did make such a contract, but there isn’t any evidence of that in the story, and it would certainly make the court case much more open-and-shut than it seems to have been, since the issue wouldn’t have been “IP” but rather breach of contract. Broadly speaking, if I’m paying you to show me how to make things, and I go on to make the things that you show me, the amount that you negotiated for your job up-front is precisely what you should have the right to demand. I may like brilliant inventors a lot more than I like the sanctimonious money-men who drive most of the intellectual enclosure movement these days, but that doesn’t make putting the fences up on other people’s rightly acquired property any less odious.

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