An extract from The Intellectual Property Review, 9th Edition
Enforcement of rightsi Possible venues for enforcement
There are two major options for enforcement of patents, trademarks and other intellectual properties: filing a complaint with a court and obtaining an injunction or an order for payment of damages compensation or both; or filing a motion with customs to suspend the import of products alleged to infringe intellectual property rights.ii Requirements for jurisdiction and venue
The Code of Civil Procedure provides exclusive jurisdiction for cases on patents, utility model layout-designs of semiconductor integrated circuits and computer programs to the district courts in Tokyo and Osaka. In both courts, there are special divisions for litigation of intellectual property rights cases. Appeals with regard to such intellectual property infringement litigations are handled by the IP High Court, which is a specialised court for patents within the Tokyo High Court. The IP High Court also has exclusive jurisdiction over litigation to overturn Patent Office decisions.
This arbitration procedure on intellectual property rights (Intellectual Property Arbitration) started at the intellectual property departments of the Tokyo District Court and Osaka District Court on 1 October 2019 in order to resolve disputes over intellectual property rights arising in the course of business through negotiations based on the advice and views of the Arbitration Committee, which consists of judges of the intellectual property departments and lawyers and patent attorneys with extensive experience in intellectual property cases, relying on materials submitted by a certain date. It is a judicial service that provides, within the framework of the current law, a third type of dispute resolution tool that does not exist in litigation or provisional disposition.
Regarding customs procedures, the Customs Tariff Act grants all customs offices the authority to deal with intellectual property infringement cases. However, nine key offices have specialists for intellectual property rights protection. These are located in Hakodate, Kobe, Moji, Nagasaki, Nagoya, Okinawa, Osaka, Tokyo and Yokohama. Procedures are conducted at the discretion of the officers, but generally move quickly, usually taking approximately two months to conclude whether there is an infringement of IP rights.iii Obtaining relevant evidence of infringement and discovery
Unlike the US litigation system, there is no discovery procedure under Japan's Code of Civil Procedure. In principle, therefore, each party has to collect its own evidence at its own responsibility based upon rules for the burden of proof. However, there are some statutory measures for the collection of evidence from an adverse party or third parties in certain cases, before and after filing a lawsuit.
Firstly, prior to filing a lawsuit, a potential claimant can file a motion for an examination and preservation of the result of the examination. Evidence preservation can be ordered if the court is convinced that the existing circumstances could result in preventing the use of evidence, if such evidence is not reviewed or secured before the trial begins. The potential claimant has to show the likelihood of evidence being lost, damaged, modified or hidden. In practice, however, the courts often deny such motions on the basis that it is likely to inflict irreparable harm on the adversary.
Secondly, after initiating a lawsuit, the Patent Act requires the defendant to contribute to the clarification of facts by submission of the disputed product or by disclosing the disputed method. The Patent Act also provides that the court can order, upon the motion of a party, submission of information or disclosure of methods deemed relevant by the court in order to establish the infringement or for computation of damages; the party required to submit information or disclose the method cannot deny the request without justifiable reasons (e.g., that the requested information contains trade secrets or information prepared exclusively for internal purposes).iv Trial decision-maker
Intellectual property litigation is heard by a panel of three judges in the division of the court that hears intellectual property right cases; although the judges will generally have experience hearing patent cases, this is not necessarily the case and they tend to be rotated every three to five years from other courts or divisions not related to intellectual property. The parties may also make technical presentations to the court, as described below, which are usually also attended by a court-appointed technical expert.v Structure of the trial
A patent infringement trial will normally be a two-phase process. In the first phase, the terms in the claims of the patent must be interpreted, including the matters of validity and unenforceability. The second phase determines damages if the court finds it necessary after the first phase. The trial will be conducted in public, with non-public preparatory proceedings conducted in a court conference room. While the early hearings and the final hearing will normally be held in a court in public, the procedure is almost always then switched to a preparatory proceeding. Hearings, including preparatory proceedings of generally about half an hour, are held every four to six weeks. The main work in the hearings involves exchanging briefs and written evidence, although discussions are also held when the judge finds it necessary. Although hearings are normally quite short, the court will hold a technical presentation session of around 30 to 90 minutes to make an oral presentation to the judges after all of the relevant arguments and evidence have been submitted to the court in the first phase. Technical presentations are usually made by both parties. In most cases, a technical expert appointed by the court will attend the presentation.vi Infringement
Infringements can either be direct or indirect. With respect to direct infringement, the claimant must present evidence that all of the elements of the claim are satisfied in the accused product or method. According to Article 70(1) of the Patent Act, the scope of a patented invention is determined on the basis of the statements of the claims, and Article 70(2) adds that the meaning of the terms in a claim shall be interpreted in light of the specification and the drawings attached to the application. The judges will also take into account the ordinary meaning, prosecution history, the state of the art at the time of filing the application and expert opinions. The doctrine of equivalents will supplement the missing elements under the limited conditions as specified by the Supreme Court. The conditions of the doctrine of equivalents are:
- a claim element, which the subject product or method does not have, is not an essential part of the claimed invention;
- the subject product or method must have the same object and effect as the claimed invention;
- a person skilled in the art of the invention could have readily substituted the claimed element with the corresponding element in the subject product or method in view of the state of the art at the time of infringement;
- the subject product or method must not be anticipated or obvious based on the prior art; and
- the subject product or method was not intentionally excluded from the scope of the claim in the prosecution history.
Infringement may be indirect. Article 101 of the Patent Act provides that the manufacturing, assignment or importation of an item that is used exclusively for manufacturing a patented product or using a patented method, is deemed to infringe the patent regardless of the awareness of the alleged infringer. Where an item is manufactured, assigned or imported to be used not only for manufacturing a patented product or using a patented method but also for other purposes, the patent holder must prove that the alleged infringer knows both of the existence of the patent and the fact the item can be used for manufacturing the patented product or using the patented method.vii Defences
Generally speaking, the success rate of the defence of patent infringement claims is extremely high in Japan (approximately 80 per cent). The major defences to patent infringement are non-infringement and invalidity of the patent.Non-infringement
The defence of non-infringement includes existence of a licence to use, exhaustion and parallel import. The defence of the existence of a licence to use, Article 79 of the Patent Act provides a non-exclusive licence to an alleged infringer who has commercially manufactured, sold or offered for sale the invention in Japan or has been preparing to do so at the time of filing the patent application. With respect to the defence of exhaustion and parallel import, this is a doctrine that does not restrict sale of a patented product, by or with the patentee's permission. When a patentee or its licensee has sold a patented product, such sale with the patentee's permission exhausts the patentee's right to control further use and resale of the patented product. The defence of exhaustion is applied to international trade under Japanese court precedent unless restriction of sale in Japan is expressly described on the patented product when it was sold out of the Japanese market (Supreme Court, 16 April 1999). In other words, it is extremely difficult to block the importation of a patented product to Japan when the patentee or its licensee has permitted the sale of the patented product outside Japan.Patent invalidity
Unlike the US patent system, courts in Japan do not have authority to invalidate or revoke a patent. In litigation, the courts may determine that the patent is invalid but such decisions are binding only on the parties before the court, not third parties.
When the court finds that the patent should be invalidated, the court dismisses the claim of patent infringement even before or without the decision of the Patent Office. Patent invalidity is one of the most common defences in patent infringement litigation in Japan; when the defendant raises the defence of patent invalidity, in approximately 60 per cent of cases the court will make a judgment on this point and approximately 70 per cent of the judgments are against the patent holder.viii Time to first-level decision
The time to first-level decision in IP litigation tends to be longer than other types of litigation, such as regular commercial litigation. On average, IP litigation takes approximately 17 months to a first-level decision and more than 20 per cent of cases have taken more than two years.ix RemediesInjunction relief
A claim for injunctive relief requires the following facts:
- the claimant is the rightful owner or exclusive licensee of the patent;
- the infringer is commercially manufacturing, using, selling or offering to sell the infringing product;
- the infringing activities are covered by the scope of the patent claims; and
- an injunction is necessary to avoid irreparable damage.
In addition, Japanese district courts will require the claimant to deposit security before the injunctive relief is ordered. Although the injunctive relief is a remedy to resolve a dispute quickly, Japanese courts, in principle, will not issue ex parte orders and have one or more hearings to hear the arguments from both parties, which means both parties, not only the claimant but also the defendant, will be called to the hearings.Damages
The patent holder or the exclusive licensee can demand damages from the infringer for losses incurred as a consequence of the infringing product. The nature of damages will be actual damages, but not punitive damages. There are three methods of computing damages provided by the Patent Act:
- multiplying the IP holder's expected profit per unit by each unit sold by the infringing party (the Patent Act, Article 102(1));
- the estimated total profit the innocent party should have received based on the profit that the infringer made as a result of his or her infringing activity (the Patent Act, Article 102(2)); and
- the amount of royalties corresponding to the patent (the Patent Act, Article 102(3)).
It is common for claimants to demand compensation based upon multiple calculation methods and later choose the method that will result in the highest amount of damages. In practice, however, nearly 40 per cent of damages awarded in patent infringement cases are for ¥10 million or less, which is extremely low.Destruction
It is common for the claimant to simultaneously petition the court to issue an injunction order and order the destruction of the infringing products. The claimant can also petition the court to issue an order for removal of materials and equipment that have been used for the production of the infringing products.Costs
It is important to note the costs and expenses incurred during the process of litigation. Filing a suit requires a court fee and attorneys' fees. The court fee is calculated according to the value of the claim, which would normally be quite high in IP infringement cases. Therefore, a person who brings an IP lawsuit should take the court fees into account when assessing whether damages will be sufficient compensation for an infringement. For example, a litigant claiming ¥1 billion on the grounds of an IP infringement would have to pay a court fee of ¥16 million.
Under Japanese law, the prevailing party in litigation is entitled to make a claim for the court fees against the counterparty, but is generally not entitled to claim their attorneys' fees.x Appellate review
A losing party at the first level may appeal to the IP High Court by filing a notice of appeal within 14 days of the date of receipt of the court decision, not including the issuance date of the judgment. Since the nature of the appeal is a continued examination of the trial in the first level, the parties may present new evidence and arguments during the appeal procedure, although the High Court will look at the coherence of the arguments and evidence presented in the district court.
Approximately 40 per cent of losing parties, following their loss at the first level, appeal to the IP High Court. However, of those, only about 20 per cent are successful in their appeal.xi Alternatives to litigation
Several efficient alternative remedies are available in Japan, such as arbitration, mediation and direct negotiation. Certain notable advantages to these alternative remedies include the arbitrators' expertise, the confidentiality of the proceedings and the flexibility to adapt the proceedings to different situations. For brevity, the discussion below focuses on arbitration.
There are three major private arbitration organisations that will arrange arbitration for intellectual property disputes in Japan: the Japan Intellectual Property Arbitration Center, the Japan Commercial Arbitration Association and the Arbitration Center of the Bar Association. Despite the general merits of alternative dispute resolution, very few IP cases have been brought to arbitration. There are several theories as to why the Japanese are averse to arbitration for the resolution of disputes. One is concern over the quality of the arbitrators, another is that there is generally less trust in the ability of a private organisation to oversee an important dispute than there is in the courts. It is also believed that existing arbitration organisations lack the requisite experience to adequately address the issues that arise in the course of the proceeding.
In addition to the private arbitrations, on 1 October 2019, the intellectual property departments of the Tokyo District Court and Osaka District Court commenced the Intellectual Property Arbitration. It is a judicial service that provides, within the framework of the current law, a third type of dispute resolution tool that does not exist in litigation or provisional disposition. The cases for the Intellectual Property Arbitration are basically the same as those related to intellectual property rights, namely cases regarding the following:
- patent rights;
- utility model rights;
- design rights;
- trademark rights;
- layout-design exploitation rights;
- unfair competition provided for in the Unfair Competition Prevention Act;
- breeders' rights under the Plant Variety Protection and Seed Act; and
- disputes related to the unauthorised use of another person's name or visual identity for advertising or commercial purposes.
Concerns over the efficacy and trustworthiness of the arbitration system mean that courts will continue to play an important, or even an increasing role, in IP disputes in Japan for the foreseeable future.