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A Penny For Your Thoughts...

Posted by: Kenji Hall on July 27, 2006

In a high-tech economy like Japan’s, good ideas are priceless. But Japanese tech companies have never been that generous in rewarding inventive employees for their work. Take the case of Fujio Masuoka, the father of NAND flash-memory chips, vs. Toshiba, the world’s second-largest flash memory maker.

In a story and Q&A I wrote in April, Masuoka said he’d sued his former employer for 1 billion yen (about $8.6 million). It seemed a fair asking price for an invention that’s helped Toshiba thrive despite rapid commoditization in the chip-making industry. The market for flash-memory chips, which store songs in iPods and data in high-end laptops, could reach $25 billion this year. That’s given Toshiba a second lease on life since its DRAM chip business got savaged by low-cost upstarts in Asia.

Now comes word that the two sides have reached a full settlement, with the blessing of the Tokyo District Court. The amount of compensation: 87 million yen ($750,000).


When I interviewed Masuoka, he had this to say:

I never received more than a pittance for my discovery. Yet, thanks to flash-memory chips, Toshiba is one of Japan's only thriving semiconductor makers. I'm glad Toshiba is profiting off [flash]. But I sued because I wanted to make a point: Unless Japanese companies treat their engineers better, this country will have no future. If they copied U.S. companies' incentives for engineers, Japanese tech companies might be better off than they are, now that Taiwanese and Korean companies have caught up. Many top execs in Japan just can't relate to the engineers.

If there's a silver lining to be found, it's that Toshiba agreed to pay anything at all. For that, Masuoka has Shuji Nakamura, the inventor of the blue light-emitting diode, to thank. Nakamura's 2004 lower court victory, which ordered Nichia to pay him $184 million, put Japan Inc. on notice. The two sides later reached a court-arbitrated settlement for a smaller $8.1 million sum that left Nakamura angry. But Nakamura should be happy for making an even bigger contribution than his LEDs: Because of his gumption and insistence on inventors' rights, there's now legal precedent for rewarding engineers whose ideas become hit products.

What Masuoka's settlement shows is that change is occurring at a glacial pace. But I suspect it's gaining momentum. As more Japanese engineers and inventors come forward and press their case, corporate attitudes will change. You probably haven't seen the last of people like Masuoka and Nakamura. That's good for Japan Inc. which will want to prevent a brain drain. The lure of a fatter paycheck for ideas in the West might already be attracting some of the country's best and brightest.

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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