Spoiler alert. Always register IP under the company name. With small and medium-sized enterprises (SMEs), it is often the case that they are supported by the president’s technical capabilities. In such cases, patent applications are often filed under the president’s personal name and the patentee becomes the president’s personal name. A patentee is generally defined as a person who is entered in the register of patents as the grantee or proprietor of a patent for the time being. This situation applies not only to patents, but also to utility model registrations, design registrations, and trademark registrations.
However, the actual business entity is, of course, the company that conducts business using its inventions, utility models, designs, and trademarks. Therefore, business profits using those intellectual properties belong to the company, not to the president himself.
Where the registration is under the president’s name, problems arise when infringement cases related to those intellectual property rights occur. When the infringer actually infringes the patent right, etc., the actual damage is incurred by the company not by the right holder.
In the event that an intellectual right infringement lawsuit arises, basically, the amount of the damage to the right holder is calculated according to either of the following theories based on Article 102 para 1 or 2 of the Japanese Patent Law. The full translated text of the Japan patent law is here.
i: The amount of damage is estimated by the amount that the infringer obtained the profit by selling the accused object (para 1）.
ⅱ: The amount of damages of the right holder is presumed to be the amount of the profit of the infringer (para 2).
Either claim is possible, but it becomes a problem if the name of the right holder and the name of the party incurring the damage – i.e. the company – are not the same. Since the damage is not incurred by the right holder but by the company – even if the company was owned by the right holder.
There is no judicial precedent indicating a court decision on this point.
In general, in Japanese judicial practice, if there is a written contract document establishing a license (exclusive license) between the right holder and the company, the right holder is considered to be the company, and Article 102, paragraph 1 or 2 applies. If there is no such contract document, it is assumed that the right holder has granted a non-exclusive license to the company, and only the application of Article 102 para 3 is permitted.
Article 102 para 3 stipulates that the patent holder may claim the amount of the licensing fee as the compensation for the damage. As a result, and as a matter of course, the amount of the licensing fee will be generally only about 5% of the price of the accused object, and as compared to the amount typically claimed by the plaintiff according to Article 102 para 1 or para 2, the amount of damages awarded will be extremely low.
Regarding this point, in this type of patent infringement lawsuit that I have personally experienced, namely, when the patent holder is different than the owner of the company, we, the plaintiff, asserted and proved that:
i: The patentee had not licensed another domestic company,
ii: The patentee gave an exclusive license to another foreign company, etc.
In other words, to assert the company was substantially owned by the patent holder, so the damage to the company was the damage to the patent holder. By doing so, in the final settlement, the amount of the settlement fee was received, as the patent holder was the owner of the company, though the judge did not refer to this matter clearly.
However, regarding the considerable time that was spent on this issue in the lawsuit, it would not have been necessary to spend time on such discussions if the patent had been registered under the company name from the beginning. Therefore, especially in cases of SMEs, we strongly recommend that you register your patents, utility models, trademarks and designs under your company name.
At Kimura & Partners, we focus on supporting domestic and foreign companies, especially SMEs, register and defend their IP in what we call the IP battleground. As to this article… Always register IP under the company name.