Patent Enforcement
the U.S. and Japan
Comparative Law Perspective
Toshiko Takenaka, Ph.D
Director, CASRIP
University of Washington School of Law
Visiting Professor, Waseda Law School
Outline
• Background
– Japan’s National IP Strategy
• Comparison with EU Developments
• IP Enforcement Revisions
– Improvements in Evidence Taking
• Document Production Order
• In-Camera Procedure
– Adequate Damages
• Comparison with German damage awards
National IP Strategy
• METI-JPO “Pro-Patent Policy” Initiative
– Key-person: Mr. Hisamitsu Arai
– Report Published by Commission on IP Rights in
the 21st Century (1997)
• Intellectual Creation Cycle
– Adoption of National Strategy to Become IP based
Nation
• Enactment of Basic IP Law (2002)
• Creation of IP headquarters within Cabinets
National IP Strategy
• IP Enforcement Restructure
– 1998: Adequate damages to compensate
infringement
• Adoption of US Case Law Doctrine
– 1999: Improvement in evidence taking procedure
• Expansion of scope in document production order
• Introduction of in-camera procedure
– 2004 civil procedure revision
National IP Strategy
• Patent-Technology Specialized Courts
– 2003 Civil Proc. Revision
• Exclusive jurisdiction: First instance-Tokyo & Osaka Dist.
Ct.; Appeal-Tokyo High Ct.
– April 2005: IP High Court
• Semi-independent from Tokyo High Court
• Patent-Technology expertise in all levels
Comparison with EU
• Lisbon Agenda (2007)
– Promotion of academic-industry knowledge
transfer
– Knowledge triangle
• Japan: Cycle for Intellectual Creation
Comparison with EU
• IP Enforcement Directive (2004)
– Improvement in evidence preservation and taking
procedure
– Adequate damages to compensate infringement
• Patent Specialized Courts
– EU: Community Patent System
– EPO: European Patent Litigation Agreement
Improvement in evidence
taking procedure
Evidence Taking in the U.S.
Discovery Procedure
– Fishing evidence
• Fact finding
• Evidence for trial
– Very broad scope
• Anything related to claims and defenses
• From parties as well as non-parties
Evidence Taking in the U.S.
Discovery Devices
– Interrogatories
• Location of Documents
• Person with Knowledge
– Requests for Documents & Things
– Requests for Admissions
– Depositions
• Sworn testimony recorded by a court reporter
– Expert Reports and Depositions
Evidence Taking in Japan
Request for Document
Civil Procedure Law
Article 220 of the Civil Procedure Law
i. The documents that the party has cited in the lawsuit;
ii. The documents that the person possessing the documents may be
asked for documents delivery or inspections according to another law;
iii. The documents that have been prepared with regard to the legal
relationships between the person possessing the documents and the
petitioner of the order.
Amendment of Civil Procedure Law in 1996
• Not limited to the 3 categories
• Broad area of exceptions
• One of the exceptions : documents stating secrecy
Evidence Taking in Japan
Request for Document
Patent Law
Original Patent Law
•
limited to the case where the damages need to be proved
•
Not limit the obligation to the three categories
•
General terms, and broad area of the court discretion
Amendment of Patent Law in 1999
•
not only for the proof of damages, but also for the proof of
infringement
•
does not permit to refuse the document production order on the
ground of the secrecy
•
Still broad area of court discretion
Evidence Taking in Japan
Burden of Proof
• Very rigid, cannot be used to search evidence
• The party who seeks the production order must clarify
– the representation of the document
– its purpose
– the person possessing the document
– the fact that need to be proven
– the reason for the obligation to produce
• if the plaintiff claims specify the defendant’s products that composed
an act of infringement in good faith, the defendant who wants to
deny that shall clarify the specific conditions of his/her products
Evidence Taking in Japan
In Camera Procedures
Amendment of the Civil Procedure Law in 1996
• citizen’s general obligation
• the person possessing the documents may refuse the document
productions if they contain trade secret
• the judge determines whether the information is a trade secret or
not.
Amendment of Patent Law in 1999
• Courts determine whether there is a reasonable ground to refuse the
document production.
• the court may order the parties to produce the documents and may
disclose them to the parties and ask their opinions.
• Protective Order is necessary
Evidence Taking in Japan
Open Trial Requirement
Constitution
• Trials need to be open to public
• Exception: only if the open trial could be dangerous to
public order or morals
• The party may ask the court to ban the inspection of the
record by people other than the parties  not enough
Evidence Taking in Japan
Open Trial Requirement
Amendment of Patent Law in 2004
• when the existence or non-existence of infringement is to
be determined, and if it is necessary for the parties or
witness to make statement regarding trade secret, the
open court may be banned
• This is exception to the open court principal
• But not to be used to prove the amount of the damages
Unfair Competition Prevention Law
• Article 13: Same system in Trade secret infringement case
Evidence Taking in Japan
Protective Order
Amendment of Patent Law in 2004
• Courts ban the use of the information against the inspecting parties
for the purpose other than the proceeding of the litigation
Unfair Competition Prevention Law
• Non-compliance: imprisonment for no more than 5 years or fine no
more than 5 million yen
Note on the description of the trade secret
• The trade secret itself should not be described
• It should be cited the location in the briefs or documents formally
• To avoid the risk of disclosure of the confidential information
US Courts
Patentee Win Rates
Price Waterhouse Coopers, A Closer Look: 2008
Patent Litigation Study: Damages Awards,
Success Rates and Time-To-Trial （PWC,
Damages)
http://www.pwc.com/extweb/pwcpublications.nsf
/docid/ebc144cf6220c1e785257424005f9a2b
Japanese Courts
Patentee Win Rates
Murata, Kaneko & Iwamatsu
35%
30%
25%
20%
15%
10%
5%
0%
2000
2001
Including utility model
2002
2003
2004
2005
2006
2007
2008
Adequate Damages
Tort Damage Theory
• Similar Theoretical Framework
• Japan
– Cause-in-fact
– Legal/adequate cause (foreseeability)
• U.S.
– Cause-in-fact
– Proximate cause (foreseeability)
Damage Measurements
• Japan
• Lost Profits
– Civil code
• Reasonable Royalty
• Infringer’s Profit
•
•
•
•
U.S.
Lost Profits
Reasonable Royalty
(Infringer’s Profit)
– Abolished
Tort Damage Policy
Japan – Civil Law System
• Restitution: Returning to the situation but for
infringement
U.S. – Common Law System
• Role of individuals to participate in
enforcement of rights
• Deterrence of tortious acts
Patent Law Policy
Japan
• Sympathy for innocent infringers
– Ceiling for innocent infringers
– Preference for lost profits
U.S.
• Emphasis on Adequate Compensation
– No ceiling but guaranteeing bottom line
– Preference for lost profits
Panduit Test
Inference of Causation
Causation Inferred by Showing:
① Market demand
② Capability to meet such market demand
③ Absence of non-infringing acceptable
substitute in the market
④ Profits the patent would have received but
for infringement
Lost Profits in US Courts
（PWC, Damages)
Lost Profits in Japanese Courts
Significant Difference in Damages
Average Damages Awarded
• U.S.(1990-92):
USD 92 M
• Japan(1990-94):
JPY 4.6 M (USD 0.46M)
– Infrequent lost profit awards
• Exploitation requirement
• Difficulty in obtaining evidence
• Apportionment
– Reasonable royalty
• Legally negotiated royalty: maximum recovery
1998 Patent Revision
• Art. 102, Para 1
– Presumption of causation for lost profits
• Art. 102, Para ３
– Removal of “ordinarily”
1998 Revision
Codification of Panduit Test
Causation Inferred by showing:
① # of infringing products sold by infringer
② Net profit-per-product that patentee would
have sold but for infringement
– Deduction of variable costs only
③ Capacity to make and sell the # of products
sold by infringer
1998 Revision
Codification of Panduit Test
Rebuttal by Infringer
# of products P could not have sold
① Difference in infringing product and
patentee’s product
– Competing products
② Presence of non-infringing acceptable
substitute in the market
③ Apportionment
– Entire market value rule
1998 Revision
Reasonable Royalty
• Case-by-Case Analysis
– Higher than legally negotiated royalty
– Variety of factors
• Guarantee of Minimum Compensation
– Courts’ discretion to reduce surplus from a
reasonable royalty
– Split awards of lost profits and reasonable royalty
– possible?
1998 Revision
Infringer’s Profits
• No Revision
Causation inferred by showing:
• Profits resulting from Infringement
– P’s exploitation of the invention (competing
products?)
– What is profit?
– Allocation of burden of proof
1998 Revision
Defendant’s Profits
Rebuttal by Infringer
• Proof of actual damages
• Factors which negates causation for the full
amount of profits
– Presence of non-infringing acceptable substitute
in the market
– D’s marketing efforts
– Apportionment
Impact of Revision
Patent-Utility Model Infringement
1989-1994 Average Damages Awarded
• $0.18 M (Median: $0.04M) 35.73%
1999-2004 Average Damages Awarded
• $1.11 M (Median: 0.22M) 43.19%
Patent
1996-2005 Average Damages Awarded
• $1.71 M
Japan: Impact of Revision
Japan: Average Damages Awarded
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
U.S.: Large Damages 2005-07
（PWC, Damages)
U.S.: Median Damages Awarded
（PWC, Damages)
Comparison with German Damage
Awards
Implementation of Directive
• Defendant’s Profits
– Calculation of Profits
– P’s exploitation of invention not necessary
– No factors for reduction
• Reasonable Royalty
– License analogy (any increase from legally negotiated
royalty?)
• Lost Profits
– Unpopular measurement
Thank You!
Acknowledgment
Some slides are prepared by Prof.
Ryu Takabayashi, Waseda Law
School and Mr. Shinichi Murata at
Kaneko & Iwamatsu