Who Owns The IP Your Japan EOR Employee Creates?

/ EOR in Japan / By

Code, designs, and inventions built in Japan don’t automatically belong to the company that benefits from them, and the rules for who does own them are different for copyright and patents

The scenario below is a composite, illustrative example, not a specific case.

The arrangement

A US software company hires a Japan country manager through a local EOR partner, on paper as a secondment. He runs the whole Japan side of the business: managing the accounts the company has built there, negotiating renewals and pricing, closing new deals. A second employee, a software engineer, works under him, also placed through the EOR, building a core piece of the company’s product, a matching engine used across those same accounts.

The turn

The country manager has a falling out with the US company. He and the EOR decide to go into business together, building a similar product for a different client, and the engineer comes with him. Within a year, a very similar matching engine is running inside a new product the EOR is developing, with the same country manager running the accounts and the same engineer building the code.

The defense

The engineer never signed anything assigning the code to the US company directly, his contract was with the EOR. The services agreement between the EOR and the US company covered fees and headcount, not IP. The country manager argues the accounts were his relationships, not the company’s, he found the clients, negotiated the terms, and kept them renewing.

What the dispute actually turns on

Untangling this means asking the same question twice. Who owns the matching engine turns on who was actually directing the engineer’s work, the company or the EOR. Whether the country manager’s activity in Japan created a tax presence for the US company turns on whether he was the one habitually shaping what those Japan clients agreed to, on the company’s behalf, the entire time, regardless of who signed his paycheck.

What else it uncovers

Both questions get resolved by the exact same set of facts. If the country manager was really running the company’s Japan client relationships and shaping the terms they agreed to, that’s not just relevant to who owns the code sitting next to him, it’s close to the actual legal test for a permanent establishment. A dispute that started over who owns a product ends with the company facing three years of unfiled corporate tax exposure in Japan, plus penalties, on top of the IP question it thought was the only thing at stake.

How it actually ends

In court, the country manager doesn’t need to argue much. He points out that the company ran a real business in Japan for three years and never once became a company there, and that’s not a decision he ever had authority to make. The registration, the filings, the entity, all of it was always the US company’s obligation, not his. He walks away from the dispute personally exposed to nothing, because none of what’s just been uncovered was ever his to answer for. What started as a fight over who owns a piece of software ends with the company learning, in open court, exactly how much it never got around to setting up properly.

Most due diligence on an EOR arrangement stops at employment law and tax exposure. There’s a third question that rarely comes up until an investor, acquirer, or licensing partner asks it directly: if a Japan-based employee writes code, designs something, or invents something while working for your company, who actually owns it, given that their legal employer is the EOR, not you?

Japan’s answer isn’t the same for copyright and for patents. The two systems start from opposite defaults, and an EOR arrangement sits right on top of the gap between them.

1. Copyright: ownership can vest directly in the employer, but which employer?

Japan’s Copyright Act has a work-for-hire style rule. When the conditions are met, the employer is treated as the author from the moment the work is created, no assignment needed.

法人その他使用者（以下この条において「法人等」という。）の発意に基づきその法人等の業務に従事する者が職務上作成する著作物（プログラムの著作物を除く。）で、その法人等が自己の著作の名義の下に公表するものの著作者は、その作成の時における契約、勤務規則その他に別段の定めがない限り、その法人等とする。

For a work (except a work of computer programming) that an employee of a corporation or other employer makes in the course of duty at the initiative of the corporation, etc., and that the corporation, etc. makes public as a work of its own authorship, the author is the corporation, etc., so long as it is not stipulated otherwise in a contract, in employment rules, or elsewhere at the time the work is made.

(Copyright Act, Article 15, Paragraph 1 / 著作権法第15条第1項)

For computer programs specifically, the publication requirement drops out entirely:

法人等の発意に基づきその法人等の業務に従事する者が職務上作成するプログラムの著作物の著作者は、その作成の時における契約、勤務規則その他に別段の定めがない限り、その法人等とする。

For a work of computer programming that an employee of a corporation, etc. makes at the initiative of the corporation, etc. in the course of duty, the author is the corporation, etc., so long as it is not stipulated otherwise in a contract, in employment rules, or elsewhere at the time the work is made.

(Copyright Act, Article 15, Paragraph 2 / 著作権法第15条第2項)

So for most of what an EOR-employed engineer or designer produces, code included, the statute already answers who the author is. The open question is which “employer” it’s pointing to.

2. The wrinkle: “employer” here means whoever actually directs the work, not whoever signs the paycheck

The statute says the author is the “法人等” whose business the work was made “in the course of.” It doesn’t say the party named on the employment contract. Japan’s Supreme Court addressed this directly in a 2003 case now generally referred to as the RGB Adventure case, where a company claimed authorship over work made by someone it hadn’t formally hired as an employee.

The Court held that whether someone counts as a “person engaged in the business” of a company for this purpose isn’t decided by the formal label on the relationship, visa status, or whether a written employment contract exists. It’s decided by substance: whether the company was actually directing and supervising the work, and whether payment functioned as compensation for labor provided under that direction, evaluated case by case from the nature of the work, the degree of instruction and supervision, and how and how much the person was paid.

That test cuts directly across the structure of an EOR arrangement. The EOR is the legal employer on paper. But in a typical EOR placement, it’s the end client who assigns the actual work, sets the specs, reviews the output, and directs how the person spends their day. Under the RGB Adventure standard, that’s exactly the kind of relationship the Court looked at to decide whose business the work was made “in the course of.”

The practical result is that the statutory default doesn’t reliably land on one predictable party in an EOR structure. Depending on how the day-to-day direction actually runs, the default author under Article 15 could point toward the client rather than the EOR, even though the EOR is the one with the formal employment contract. Relying on the default to sort this out after the fact isn’t a safe way to establish ownership.

3. Patents: the opposite default, rights start with the individual

Where copyright can vest directly in an employer, Japan’s patent system starts from the inventor. The Patent Act’s employee invention provision confirms that an employer only gets automatic rights to use the invention, not to own it, unless something more has been arranged in advance.

使用者、法人、国又は地方公共団体（以下「使用者等」という。）は、従業者、法人の役員、国家公務員又は地方公務員（以下「従業者等」という。）がその性質上当該使用者等の業務範囲に属し、かつ、その発明をするに至つた行為がその使用者等における従業者等の現在又は過去の職務に属する発明（以下「職務発明」という。）について特許を受けたとき（略）は、その特許権について通常実施権を有する。

If an employee or officer of an employer, corporation, or a national or local government has obtained a patent for an invention which, by its nature, falls within the scope of the business of the employer, etc. and was achieved by an act categorized as a present or past duty of the employee, etc. performed for the employer, etc. (an “employee invention”), the employer, etc. has a non-exclusive license on the patent right.

(Patent Act, Article 35, Paragraph 1 / 特許法第35条第1項)

A non-exclusive license lets the employer use the invention. It doesn’t give the employer ownership, and it doesn’t give the employer the right to block others, license it out, or sell it. To actually own an employee invention, the employer needs an advance arrangement in place before the invention happens:

従業者等がした職務発明については、契約、勤務規則その他の定めにおいてあらかじめ使用者等に特許を受ける権利を取得させることを定めたときは、その特許を受ける権利は、その発生した時から当該使用者等に帰属する。

In the case of an employee invention by an employee, etc., when it is prescribed in any agreement, employment regulation or any other stipulation providing in advance that the right to the grant of a patent for any employee invention is vested in the employer, etc., the right to the grant of a patent belongs to the employer, etc. from its occurrence.

(Patent Act, Article 35, Paragraph 3 / 特許法第35条第3項)

The word “あらかじめ,” in advance, is doing the real work in that paragraph. A 2015 reform (Act No. 55 of 2015, effective April 1, 2016) added this original-employer-attribution route specifically so employers could secure ownership from the moment of invention rather than through a transfer after the fact, but the provision has to already be sitting in a contract or work rules before the invention exists. Notifying the inventor afterward, or negotiating an assignment once something’s already been invented, doesn’t trigger it. The same reform also broadened what an employer can offer in exchange, replacing a money-only “reasonable consideration” (相当の対価) standard with “reasonable benefits” (相当の利益) that can include non-monetary compensation, and gave Japan’s Ministry of Economy, Trade and Industry authority to publish guidelines on what counts as reasonable.

4. Why an EOR structure creates a two-link chain, not a one-step transfer

Put the two systems together and the practical picture for an EOR arrangement looks like this. For copyright, the default authorship rule may or may not land on the EOR, depending on who’s actually directing the work day to day. For patents, ownership never lands on anyone but the individual inventor unless an advance contractual provision says otherwise, and the EOR’s own employment agreement with the worker is the only place that provision can live.

Either way, there are two separate links in the chain, not one:

The first link is between the worker and the EOR, the actual legal employer. This is where an advance invention-assignment or original-attribution clause has to exist for patents to ever vest in the EOR at all, and where clear language about work product and copyright helps remove ambiguity about whose business the work is being made “in the course of,” rather than leaving it to a fact-specific test after the relationship is already in question.

The second link is between the EOR and the end client, governed by the services agreement between them. Even where the EOR does end up owning the work by statute or by contract with the worker, that ownership needs to be passed on to the client who actually paid for it and is relying on it. Without clear assignment language in that agreement, a company can end up having paid in full for work it doesn’t cleanly own, a gap that tends to surface at exactly the wrong moment, during investor diligence, an acquisition, or a licensing negotiation.

This is a different kind of question than tax structuring. Making sure both links in this chain are addressed in the actual contracts, the EOR’s employment agreement with the worker and the EOR-client services agreement, is a normal, appropriate part of how an EOR arrangement should be documented. It isn’t advice about how a client should structure its business; it’s making sure the paperwork that already exists between the parties says what everyone assumes it already says.

This article quotes the Copyright Act (著作権法) and Patent Act (特許法) directly, along with the Supreme Court’s 2003 decision on the scope of Article 15. It’s provided for general informational purposes, to explain how ownership of work product is determined under Japanese law and where the statutory defaults can diverge from what the parties to an EOR arrangement assume. It isn’t a substitute for having a specific employment agreement or services agreement reviewed by qualified counsel, particularly for high-value inventions or work product where clean ownership matters for a future transaction.

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