Recent Trends in Technology-Driven Companies -Part 5-

By Hajime Yamada (GLOCOM)

Professor Shuji Nakamura of University of California Santa Barbara, who developed the blue Light Emitting Diode (LED), filed a damage suit against Nichia Corporation, his former employer, at Tokyo District Court. It might indicate a collapse of the common notion in the industry that "discovery of an employee belongs to his company."

The blue LED is a dream device that was said to be impossible to realize in the 20th century. Existing red and green plus blue lights would mean three primary colors of light to enable full-color image expression. Professor Nakamura succeeded in commercializing the device in 1993, when he was still with Nichia. Soon after that, Professor Nakamura also developed blue lasers, which are necessary for reading information from DVDs (Digital Versatile Disk).

The market has grown rapidly, and it is expected that the total annual sales will soon exceed 200 billion yen.

The main issue in the suit that Professor Nakamura filed against Nichia is whether the corporation had paid enough compensation for the invention. Professor Nakamura did almost everything by himself from material development to manufacturing equipment designing, and acquired nearly a hundred patents. The company rewarded him with a gift of money each time. However, the amount of these gifts was only 20 thousand yen, even for "patent 404," which is considered to be especially important because it is essential for the mass production of blue LEDs.

Since then Nichia has been growing, with blue LEDs as its central commodity, and now the corporation has annual turnover of more than 60 billion yen. Professor Nakamura has been dissatisfied: Although the company has been greatly indebted to his invention, he argues that he has never been paid enough. The patent law says that a research achievement at a private corporation basically belongs to the individual who invented it, and that the corporation has a right to obtain the patent by paying compensation. Professor Nakamura is going to request a payment of two billion yen as the appropriate compensation for his inventions.

Meanwhile, development of incentive systems for researchers in Japanese industry has started.

According to a survey conducted by Nihon Keizai Shinbun in August 1999, corporations that improved their internal rewarding systems in order to encourage employees' applications for patents within the previous three years reached 39 percent, and other 40 percent were under consideration to better their systems.

In drug manufacturing industry, along with the increasing urge for an epoch-making invention of a new drug, incentive systems for inventions involving a large sum of money have been introduced to one company after another. In September of 1999, Sankyo Co., Ltd. completely revised their invention compensation system in order to encourage researchers to develop profitable medical products. In the new system, the maximum reward for an invention rose to 60 million yen per product, up from one million yen in the old system.

The first awardees by the new system were those who had developed antibiotics for injections, which were put on sale in December of 1993. A total of 27 researchers, including those who searched chemical compounds in the initial stage of studies to those who were involved in the safety assessment of pre-market products, received the rewards for the invention.

Sankyo made provisions of incentive subjects as products with a turnover of more than one billion yen within the first five years. First, the company would calculate the total amount of allowance according to the turnover and other factors. The standard is 30 million yen if the annual domestic sales are more than 50 billion yen, and 60 million yen if the annual domestic sales are more than 100 billion yen. Then, the company prioritizes each researcher's contribution to the product development with numerical points. The reward is distributed by priority according to these points.

In the past few years, such companies as Takeda Chemical Industries, Ltd., Tanabe Seiyaku Co., Ltd., and Nippon Kayaku Co., Ltd. have employed invention-rewarding systems with a large amount of money. They all aim at stimulating their researchers to be motivated to invent epoch-making new drugs.

Invention rewarding systems introduced by many companies are characteristically colored as a commendation for contributions to a company's achievements. Not only drug manufacturing companies, but also various other manufacturers including Asahi Glass Company, Sumitomo Chemical Co., Ltd. and Omron Corporation have been expanding such systems. This phenomenon can be interpreted as a message from management of companies towards their researchers: "Contribute more to corporate businesses. You mustn't only indulge in studies you like."

New inventions are sources for growth of corporations. This kind of system reform can be said to aim at securing brilliant and capable researchers. However, before an invention becomes a new product to be marketed, it needs cooperation of plant engineers, for example. Sales efforts are also inevitable for expanding markets. Therefore, some say that such a system, in which only researchers are being treated well, would lose the balance inside a company as a whole, and therefore is not a wise policy.

It will be interesting to note how Professor Nakamura's pending case is resolved, as well as how Japanese companies will change their invention rewarding systems.