Protection of AI and IoT-related inventions
With the emergence of new technologies such as artificial intelligence (AI) and the internet of things (IoT), Japan has reviewed and revised its patent system to enhance the protection and enforcement of patent rights. Consequently, the Japanese patent system has become more user-friendly and effective in enforcement.
About 20 years ago, the Japanese patent litigation system had a negative reputation, mainly due to its slow proceedings, poor evidence collection tools and the limited amount of damages awarded.
However, the situation has greatly improved since then. For example, patent litigation is now managed by special courts and divisions and is therefore rather speedy. On average, from filing until the decision or disposition, it takes about one year at the court of first instance (the IP divisions of Tokyo or the Osaka District Court), and about six months at the court of second instance (the IP High Court). Furthermore, there are no strict restrictions on the patent subject matter (see Alice v CLS Bank in the United States), and injunctive relief is available automatically if an infringement is found (see eBay v MercExchange in the United States), while a nullity defence is available for infringement proceedings.
Additionally, the enforcement of patent rights has been further strengthened by, among other things, the recent amendments to the Patent Act.
In this respect, former IP High Court Chief Judge Takabe points out that the Japanese IP enforcement system has significantly improved since she began her career as an IP judge more than a quarter of a century ago, especially with respect to:
- speedy proceedings and decisions;
- broader claim construction (with the case law on the doctrine of equivalents);
- larger damages awards; and
- effective evidence collection.
Effective as of 1 October 2020, an inspection system was introduced by the amendment to the Patent Act in 2019 in order to enhance procedures for collecting evidence in patent litigation. Accordingly, in addition to a document production order, there is now an inspection procedure (known as "Sasho") where, upon petition, a court may order a court-appointed inspector to gather relevant evidence from the premises of the counterparty and prepare a report. This system is unique in that the court appoints an expert who is fair and neutral for the purposes of the inspection. The procedure is available after the filing of litigation, and there are measures to protect confidential information. The system is expected to be used, for example:
- where the accused infringing products are not available, or infringement cannot be determined with the existing procedures;
- where the production methods used are on the premises of the accused infringer; or
- where business-to-business products are not available from the market; and
- for computer programs where it is difficult to ascertain how the system operates with its source code.
Effective as of 1 April 2022, an amicus brief system was introduced by an amendment to the Patent Act in 2021. Previously, the patent courts had no opportunity to hear the opinions of third parties, although there was one case, Apple v Samsung in 2014, in which the IP High Court solicited opinions regarding standard essential patent (SEP) and fair, reasonable and non-discriminatory (FRAND) disputes. The new system allows the courts to seek the opinions of third parties as amicus curiae in cases of patent infringement litigation. Given that the courts sometimes face novel issues not clearly resolved under the Patent Act due to the advent of new technology, this system is useful for the development of the Japanese IP system and the effective enforcement of patent rights.
Under Japanese patent law, patentees can seek damages based on the following three calculation methods: reasonable royalty, infringer's profits and lost profits.
As of 1 April 2020, the following two amendments were made to the Patent Act in 2019 regarding reasonable royalty and lost profits.
Firstly, damages based on reasonable royalty were previously determined in view of the royalty rate of existing licence agreements or the market rate in technological industries similar to those disclosed in the patent at issue. Under the amendment, however, the court can assume that a hypothetical negotiation between the patentee and the infringer has been made on the premise that the patent is valid and infringed, and thus can increase the damages based on reasonable royalty.
Secondly, the reasonable royalty and lost profits were previously applied separately in calculating damages. However, even where the damages presumed based on lost profits are limited to the extent of the scope of the patentee's production or sales capacity, the amendment clarified that the court could award damages for the portion beyond such capacity in accordance with the reasonable royalty basis.
Additionally, the IP High Court, in the Grand Panel cases around 2020, clarified the burden of proof and the factors to be considered in the damages calculation methods.
In addition to the above, further amendment discussions are ongoing regarding the calculation of damages, including the possibility of introducing different types of enhanced damages such as disgorgement and punitive damages.
Protection of AI and IoT-related inventions
With the progress of new technologies, the number of patents filed in the field of AI and IoT-related inventions is increasing. In this respect, the Japan Patent Office (JPO) clarified its examination guidelines and handbooks by adding examples of various technical fields regarding patent subject matter, novelty and inventive step in 2018, and description requirements (enablement, clarity and support requirements) in 2019. Additionally, the protection of important data, such as for 3D printers, is now under discussion, although programs and data structures are already categorised as patent subject matter under the current Patent Act.
The recent pro-patent trend in Japan is also reflected in the overall statistics issued by the JPO, which indicate that the allowance rate of Japanese patent applications is quite high (around 75%) and the rate of patents found invalid by JPO invalidation trial decisions is quite low (around 20%).
Although the number of patent applications for AI and IoT-related inventions is increasing, as with other countries, the enforcement of such patents is not necessarily clear at the moment. To further develop this area, the Japanese government as well as academia are currently discussing the relevant issues, such as patent infringement in supply chains (as illustrated in FTC v Qualcomm in the United States and Nokia v Daimler in Germany), joint infringement, exhaustion, automatic injunctions, SEP and the like.
As discussed above, the Japanese patent system has recently been amended comprehensively, especially in respect of enforcement, which has made Japan one of the more attractive jurisdictions for enforcing and protecting patent rights.
For further information on this topic please contact Takatoshi Monya at Nishimura & Asahi by telephone (+81 3 6250 6200) or email ([email protected]). The Nishimura & Asahi website can be accessed at www.nishimura.com.