Ownership of Nanotech Intellectual Property

With the progressive miniaturization that has characterized semiconductor processing for decades, many semiconductor light-emitting diodes (LEDs) may now proper1y be considered the resu1t of nanotechno1ogy fabrication processes. These LEDs are ubiquitous. They are seen in almost every lighting application imaginable—as indicators on car dashboards, cameras, and cellular telephones, among others. They are also increasingly used in traffic signals instead of conventional incandescent bulbs—each of the red, yellow, and green lights is actually formed as an array of LEDs with the appropriate colors. The use of LEDs in these many applications is beneficial because their energy consumption is small even while their light output is large; they do not generate waste heat to nearly the degree of conventional incandescent forms of light and can save significant amounts of money.

Many who obey the "stop" and "go" commands of traffic lights are, however, obliviously unaware of the David-and-Goliath drama that they represent. For decades, it had been well known how to make LEDs that would produce red light. But it was notoriously difficult to fabricate LEDs that would produce green, blue, or violet light—namely, light with shorter wavelengths that could make data storage on optical disks more efficient, that could be used as a component in making white-light devices, and that could be used to tell drivers when to "go."

The fundamental development that allowed these short-wavelength LEDs to be produced in any commercially meaningful way was made by Shuji Nakamura when he was working at a small Japanese company known as Nichia Kagaku Kogyo. Almost all of the development on this was done by him after hours, on his own time, because management of the company was unwilling to provide any meaningful support for the research. Today, the word breakthrough is too often used in a cavalier fashion to describe even modest scientific developments, but this was an example where the term genuinely applies. After announcement of Nakamura's invention in 1990, the company grew extremely rapidly, from having about 400 employees to now having around 3500 employees, with some ¥200 billion (about $2 billion) in annual revenue. Nakamura's invention spawned huge investments by companies and academic researchers around the globe that have resulted in the tremendous number of consumer products that today incorporate the fruit of his discovery.

And what was Nakamura's reward? As a supplement to his regular salary, his company paid him a bonus amounting to ¥20,000 (about $150). Nakamura responded by claiming ownership of the Japanese patent where the technology was first disclosed, spawning litigation between him and Nichia that lasted for years. The litigation proceeded in somewhat of a seesaw fashion, reflecting the fact that both parties had some legitimate claim to ownership rights in the patent. In 2002, the Tokyo District Court ruled that the patent was owned by Nichia, largely due to the fact that they had paid him ¥20,000 in direct compensation for it. But the court also ruled that Nakamura was entitled to a portion of the proceeds from the invention and ordered Nichia to pay him ¥60.4 billion (about $190 million), half of Nichia's profits that were attributed to the sale of products based on the technology. A subsequent appeal to the Tokyo High Court was met by chiding from that court, encouraging the parties to settle. They eventually did, with Nakamura receiving a payment of ¥843 million (about $1.8 million) from Nichia in 2005.

This example serves as a compelling reminder of the significant value that may exist in intellectual property. While Nakamura was able to recover money despite a ruling that he did not actually own the patent, the ability to reap the benefit of intellectual property is most directly tied to ownership rights. In the case of some inventions, ownership is clear. This is true, for example, where an independent inventor develops a gadget in his garage and files a patent in his own name. But this is an unlikely scenario for the development of much nanotechnology.

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