Nakamura, who left Nichia in 1999 and is currently a professor at the University of California in Santa Barbara, sued Nichia claiming that he had not been adequately compensated for his role in helping the company to become the world's leading supplier of blue and white LEDs, as well as the violet lasers that are used in next-generation DVD systems. During his tenure at Nichia, Nakamura filed a huge number of patents relating to all aspects of nitride LED technology.
In January 2004, the Tokyo District Court awarded Nakamura the sum of 20 billion yen ($193 million) which he had demanded. The court actually valued Nakamura's contribution to the company at 60.4 billion yen, based on Nichia's sales and the revenue that it might theoretically have received from licensing a key patent relating to the epitaxial growth of LED material.
Nichia immediately appealed the decision, claiming that Nakamura's role had been overstated and that Nichia's success was due to the work of a large team of researchers and engineers, as well as substantial investment on the part of the company.
Nichia also said that the key patent in the ruling handed down by the Tokyo District Court has very limited relevance. Nichia's main rivals such as Cree and Toyoda Gosei have never used the patented technology and Nichia itself does not use the technology in production.
Nakamura said in a statement that he was "totally dissatisfied" with the settlement but he accepted the ruling on his lawyer's recommendation. The Tokyo High Court, which mediated the settlement, proposed a cap of 600 million yen in order to prevent a major effect on Nichia's financial health. The additional amount reflects the delay in payment.