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## Reasonable Remuneration for the Japanese Patent number 26228404

### I. Summary

According to the calculation method proposed by the Tokyo High Court, Nichia calculates, at the maximum, the reasonable remuneration for the patent in suit (the "404 Patent') to be approximately 10 million yen. The main reasons are as follows,

·Nichia entered into cross license agreements, which cover the 404 Patent, with various competitors and Professor Nakamura admits that none of those competitors uses the 404 patent after those cross licenses were entered into. Therefore, no remuneration can be calculated after 2002.

·The total amount of the remuneration (including 195 patents and utility models registered with Japan Patent Office) for the period prior to the cross licenses is calculated to be 357.98 million yen. Thus, an average remuneration per registered patent/utility model is approximately 1.8 million yen.

·Even if we assume the 404 patent is more beneficial than an average patent, the maximum remuneration would be reasonably calculated as follows; JPY2,020,000,000(amount of sales) x 0.1(monopoly ratio) x 0.01(royalty rate) x 0.05(Prof. Nakamura's contribution ratio) = JPY10,100,000

### II. Reasoning

**1.** Nichia had entered into several cross license agreements, which cover the 404 Patent, with several competitors on and after 2002.

**2.** The calculation sheet prepared by the Tokyo High Court uses different calculation methods for the pre-cross license period and for the post-cross license period.

**3.** In the post-cross license period, the amount of the reasonable remuneration is calculated by the following formula as indicated in *5 of the calculation sheet attached to the court's recommendation for settlement;

(Expected amount of sales of the licensees) x (Hypothetical royalty rate)

However, Prof. Nakamura admits that none of the licensees has used, or will use, the 404 Patent after the cross license agreements were entered into. The expected amount of sales of the licensees' products which uses the 404 Patent must be 0. Therefore, without considering the hypothetical royalty rate, no remuneration can be calculated after 2002.

**4.** On the basis of the above, with respect to the 404 Patent, it is sufficient if we calculate for the 9 years period from 1994 to 2002 (i.e., the pre-cross license period).

1. According to the calculation sheet prepared by the court, the remuneration for this nine-year period for all of Prof. Nakamura's inventions is JPY357,980,000.

The average remuneration per registered patent/utility model is approximately 1.8 million yen, since it covers 195 registered patents/utility models. Thus, remuneration for the 404 Patent only would be 1.8 million yen if it is an average patent.

2. Even if we assume that the 404 Patent is more beneficial than an average patent, the maximum amount of the reasonable remuneration for the 404 Patent would be calculated as below.

3. JPY201,973,160,000 (amount of sales) which is the basis of the calculation should not be changed. And, the employer's contribution ratio of 95% should not be changed, either. Thus, 5% as Prof. Nakamura's contribution should remain the same.

4. According to the calculation sheet, which the court prepared and is attached hereto, the monopoly ratio for all of the invention is 50%. This means that, on an average, it is less than 0.3% per registered patent/utility model. Here, we assume that the 404 Patent contributed to 10% of the sales, while rest of the patents contributed to 40%, in order to estimate the maximum amount of the remuneration for the 404 Patent.

5. The royalty rate covering all of the invention is 10% for the first 3 years period, while 7% for following 6 years period, in the aforementioned calculation sheet. We believe that it would be allowed to use the "7%' royalty rate for both of these two periods, since the sales amount ratio for these two periods is 3:97.

Then, the average royalty rate for each of 195 patents/utility models is less than 0.04%. Maximum royalty rate for the 404 Patent can be estimated, at the maximum, to be 1%, while 6% for the rest of the patents.

6. On the basis of the above, the calculation should be as follows;
JPY2,020,000,000(amount of sales) x 0.1(monopoly ratio) x 0.01(royalty rate) x 0.05(Prof. Nakamura's contribution ratio) = JPY10,100,000.

**5.** In short, according to the calculation sheet prepared by the court, Nichia calculates, at the maximum, the reasonable remuneration for the 404 Patent to be approximately 10 million yen.

Contact information;

Public Relations, Nichia Corporation

Tel:+81-884-22-2311

Fax:+81-884-23-7752