The purpose of this paper is to bring an institutional perspective onto the recent debates about incentive planning for R&D workers in Japan. This purpose is fulfilled through a case study of the recent civil trials in which an ex−employee as a plaintiff claimed any compensation for the corporate in−house inventions about blue light emitting diodes (LED). As long as technical achievements are to belong to an individual worker, the incentive planning which his or her employer may design will have to face two difficult tasks. Firstly, marginal analyses commonly applied in micro economics have certain utilities under the strict assumption of decreasing returns to productive inputs, but not applicable, in principle, to R&D activities. It is because such features as experiential learning and teamwork by technical professionals may increase returns to marginal inputs of technical labor. Secondly, negotiation transactions on the arms lengths basis are alternatively applied instead of the first, but incur many transaction costs between opportunistic players. Recent Japan seems oriented toward the second planning arrangement, but this paper suggests that the economic assessments of corporate in−house inventions should be complemented by peer reviews on the
expectation that professional communities of technical experts share certain paradigms to tell us which inventions are more nascent and valuable and which are not. So far, it is said that these peer reviews have been submitted to courts after plaintiffs file complaints for compensations, but preliminary reviews at the time of patent applications may effectively decrease the probability of unexpected lawsuits and reprieve undue legal costs.