A court official only confirmed that the 500 million yen (4.6 million dollars) suit was filed Tuesday with the Osaka District Court.
The former researcher at Sharp claims to have invented technology that improved the efficiency of liquid crystal displays (LCDs) while cutting their cost and power usage, the Yomiuri Shimbun daily said.
Flat screen monitors for televisions and computers have turned into one of the growth stories in the hi-tech sector.
The man in his sixties was paid 770,000 yen after his retirement for his extra work while the company is expected to see profits of 96 billion yen from LCD patents based on his work before they expire in 2009, the suit claimed, according to the Jiji Press news agency.
The inventor claimed that as a key contributor he should be entitled to 11.5 billion yen but is asking only for a smaller amount, it said.
Sharp said it had not yet received the suit and thus that had no comment.
The case is the latest in a series of court disputes in Japan regarding the transfer of patent rights to companies by inventors on their payrolls.
In March the inventor of flash memory chips, used in cell phones and digital cameras, filed a lawsuit seeking one billion yen from Japanese electronics giant Toshiba as his share of the patent rights to the device.
In January the Tokyo District Court ordered Japanese firm Nichia Corp. to pay a record 20 billion yen to the inventor of the revolutionary blue light-emitting diode (LED).