The 1999 Amendments to the Patent Law in Japan
By Dr. SHOICHI OKUYAMA, Patent Attorney
In May 7, 1999, legislation for the amendment to the Patent Law passed the Diet and subsequently became law. Emphasis is on the stronger enforcement of patents. The reform, for most parts, will take effect January 1, 2000.
1. Background
Three significant changes that have taken place in the last two years: the enactment of the new Code of Civil Procedure, the 1998 Patent Law amendment, and the 1999 Patent Law amendment, which is the main subject of this paper. In this section, we will deal with the first two, which set the background for the 1999 Patent Law amendment.
1.1 New Code of Civil Procedure
The new Code of Civil Procedure took effect in January 1998. It was the first comprehensive change in the civil procedure since 1926 and involved extensive amendments to the entire Code and related laws. Of numerous other changes,(1) amended or new provisions concerning the production of documents before the court are most important for effective patent protection.
1.1.1 Extended obligation to produce documents
One of the notable changes is the extended obligation to produce documents before the court. Japan does not have "discovery," like Anglo-American countries which have adopted this system for obtaining evidence. Previously, the obligation to produce documents was quite limited, often making it very difficult to gather sufficient documentary evidence to assist the court in considering cases. This is particularly true for patent infringement cases. The court was able to order the production of only limited types of documents, but such order was often ineffective.
The new law provides for an expanded scope of duty to produce documents. The obligation is now more general. Specific circumstances under which no obligation exists are stipulated in the new law. Those who are not parties to a particular dispute also have the duty to produce documents.
If the obligation exists, the failure to comply with court orders to produce documents may result in court sanctions. If one of the parties does not produce documents in spite of a court order, the court may regard the assertion made by the other party in connection with the content of such documents, as well as the facts to be supported by the documents, as true. This assumption of facts would represent a significant expansion of sanctions that could be used to encourage full production.
1.1.2 In camera examination by judges
The new law also allows the court to order the presentation of requested documents so that the court can independently determine if secrecy is justified, and what should be produced before the court. In such cases, the court's examination will be in camera. Only judges will have access to the produced documents and neither the opposing parties nor their counsels will be able to examine them. The new law provides a new tool to discover documents held by the other party.
1.1.3 Inquiries
Article 163 of the new law defines a new procedure in which the parties can directly exchange inquiries, termed as Shokaisho, requesting information and documents without intervention of the court. No penalties are specifically provided against a party who refuses to answer proffered inquiries; however, it is possible for the court to form an adverse impression of the case or use its discretionary power if a party does not respond to the court's urging to answer inquiries.
1.2 The 1998 Patent Law Amendment
Under the 1998 amended Patent Law, the court is no longer restricted to awarding an "average" royalty. The term "reasonable" which was found in the provisions setting the minimum level of damages awards for patent infringement (Section 102(2), Patent Law) and which reads more like "normal" or "averaged" in the Japanese language was a reason for previous conservative damages awarded by Japanese courts.
Also, under the 1998 amendment, the amount of damages can be calculated as the sales of infringing products multiplied by the unit profit that could have been earned by the patentee. It should be noted that the patentee has to prove the amount of sales made by the infringer only and he can use his own data to support the unit profit for his own patented product. He does not have to prove the causation between the infringement and the damages to be awarded.
In addition, patent annuities for the 13th year and beyond were reduced starting June 1, 1998. Criminal sanctions also became harsher under the amendment.
Nevertheless, earlier proposals made by Japanese Patent Office included numerous other items, such as the shift of burden of proof concerning patent infringement under certain circumstances, possible damages up to three times the reasonable royalty, the extension of maximum imprisonment to ten years from the current five years, the possible recovery of attorney fees for the successful party, and the broader obligation of document production beyond what is provided in the above-mentioned new Code of Civil Procedure.
A major obstacle against these proposals was the consistency with other laws. For example, a possible award of triple royalty was considered to be against the tenet of the current Civil Code, which only allows the recovery of actual damages suffered by plaintiffs. Under the Civil Code, the enforceability of a treble damage award made by the Californian Supreme Court was denied by the Japanese Supreme Court in its decision of July 11, 1997. The Ministry of Justice seems to have acted against many proposals that were instigated by the Japanese Patent Office and the Ministry of International Trade and Industry (MITI).
2. The 1999 Patent Law Amendment
2.1 Stronger Enforcement against Patent Infringement
As will be discussed below, the 1999 law amendment will make proof easier for the patentee and divide the burden of proof as to infringement and damages more fairly between the plaintiff and defendant.
2.1.1 Document production for proving acts of patent infringement
In addition to the extended obligation to produce documents under the new Code of Civil Procedure described above, the court will have more power to order a party to produce documents, so as to make it easier to prove infringing acts (Section 105(1), Patent Law). This is in addition to the previous provisions for document production orders for the purpose of damages calculation only.
However, the holder of requested documents can refuse such production if he has a proper reason such as trade secret or privacy (Section 105(1), Patent Law). In order to make the new and old provisions more effective, thein camera procedure found in the new Code of Civil Procedure has been adopted in the Patent Law (Section 105(2), Patent Law).
2.1.2 The defendant's obligation to clarify his own acts
Under the 1999 Patent Law, in response to an allegation of patent infringement, the defendant has to specifically explain his own acts in order to deny the alleged infringing products or acts, unless he has proper reason to refuse to do so (Section 104bis, Patent Law).
In the past, the plaintiff basically had the sole responsibility to prove the infringement while the defendant normally had full knowledge of his own acts. Generally, it is more difficult for the patentee to prove the infringement than for the defendant to explain his own acts. According to the new provisions of Section 104bis, the burden of proof should be substantially eased on the part of the plaintiff in identifying the acts of alleged infringement.
2.1.3 Appraisers appointed by the court
The court can now appoint an appraiser for the calculation of damages at the request of either party. Section 105bis, Patent Law. The parties are required to provide information to the appraiser as necessary. In the past, it was possible for the court to have accounting experts calculate the amounts of profit and/or damages, but the parties had no obligation to cooperate with the expert. However, under the amendment, it has now become obligatory for the parties to provide the information in question.
2.1.4 Determination of the amount of damages by the court
During litigation, even if the court finds infringement, it can be extremely difficult to prove the facts necessary to support the amount of damages. In such cases, the court is now entitled to decide an appropriate amount of damages on the basis of the totality of evidence presented before the court in each case (Section 105ter, Patent Law). This will give the court considerable freedom to award higher damages because the court will not have to adopt the minimum provided in Section 102(2), Patent Law, which is the reasonable royalty.
2.1.5 Communication between the courts and the Patent Office
Under the 1999 amended Law, the court will inform the Patent Office when infringement lawsuits are initiated and terminated. The Patent Office will inform the infringement court of invalidation or other proceedings which have been requested against the patent involved in the infringement litigation as well as decisions made by the Patent Office or any withdrawal of requests for such proceedings. Section 168(3) and (4), Patent Law.
2.1.6 Heavier fines for corporate offenders
The upper limit of fines to corporations will be increased about thirty three-times to 100 million yen from the current limit of 3 million yen against their officers or employees' fraudulent or deceptive conducts before the Patent Office or placement of false marking on its products (Section 201, Patent Law).
2.1.7 Eased requirements on the extension of patent terms
From the current requirements for the extension of the patent term, the following two items will be removed (Section 67 and 67bis, Patent Law):
(i) The period during which the patent owner cannot make, sell or use the patented invention to obtain governmental approval has to be 2 years or more, and
(ii) An application for the extension has to be filed at least 6 months prior to the expiration of the patent.
2.2 The Shorter 3-Year Term for Requesting Examination
The term for requesting examination will be shortened to 3 years from the current 7 years as calculated from the Japanese filing date. This will take effect for applications filed on or after October 1, 2001. For third parties it is certainly undesirable to see patent applications pending before the Japanese Patent Office more than 8 to 9 years, as it is uncertain whether any patent rights will result from patent applications. The existence of many pending applications may pose obstacles to research programs and investments.
2.3 Absolute Novelty
Knowledge or act, including Internet publication, outside Japan will be a novelty bar. A claimed invention lacks novelty if it is "publicly known or publicly used in Japan or foreign country." Section 29(1), Patent Law. This is a departure from the current novelty standard and reflects the reality in which information is transmitted and exchanged instantaneously and globally.
Under the revised Patent Law, an invention lacks novelty if it is:
(1) publicly known in Japan or in any foreign country,
(2) publicly used in Japan or in any foreign country,
(3) described in publication distributed or become publicly available through electric tele-communication lines in Japan or in any foreign country.
Also, it is confirmed that the invention disclosed through the Internet will be treated in the same way as that described in printed publication. To Section 29 concerning novelty, as well as Section 30 concerning exceptions to the loss of novelty, the following provisions are added: "invention which was described in distributed publication or became available to the public through electric tele-communication circuits."
2.4 Fee Reductions
Extra claim charges for annuities and for requesting examination were lowered by about 8% on average. The fee reductions took effect on June 1, 1999.
The extra fee for each additional claim in the first to third annuities, for example, is now 1,100 yen, reduced from 1,400 yen. Also, the official fee for requesting examination for each additional claim has been reduced from 2,700 yen to 2,000 yen (Administrative Rule under Section 195, Patent Law). The basic fee or annuities per application did not change.
More entities, such as small businesses, are entitled to reduced, exempted or deferred first to third annuities, and reduced or exempted examination fees (Sections 109 and 195bis, Patent Law).
2.5 Other Improvements for Stronger Protection
The following discussion will cover several changes that we have not discussed above. These changes should benefit applicants and patentees by providing them with tools for better protection.
2.5.1 Eased requirements for the grace period
The novelty may be found for an invention that has been disclosed prior to filing if the disclosure satisfies certain conditions, such as through publication in printed matter or through presentation at certain technical conferences, and if a patent application for the disclosed invention is filed within 6 months. Under the amendment to the Patent Law, an invention that could have been easily made on the basis of the disclosed invention will be patentable despite the fact that it lacks an inventive step over the disclosed invention. Such disclosed invention will now be excluded from the applicable prior art basis when the inventive step is measured under Section 29(2) (inventive step) of the Patent Law (Section 30, Patent Law).
Prior to the law amendment, the claimed invention had to be identical to the disclosed invention to be considered novel. For example, if the invention was under development when it was disclosed, even within 6 month before filing the patent application, the invention might have been modified. If the modification did not give rise to an inventive step, the modified invention would lack an inventive step over the disclosed invention.
2.5.2 The improved "Hantei (Interpretation)" procedure
The "Hantei (Interpretation)" procedure may be requested if an interpretation of patent claims made by the Patent Office is desired with the respect to a specific product or process. The "Hantei" procedure will be strengthened by incorporating the following two new features:
(i) The Patent Office will take evidence following relevant civil procedures used before the court (Section 71(3), Patent Law), and
(ii) The court may request the Patent Office to issue an opinion when necessary (Section 71bis).
2.5.3 Earlier publication upon request
Upon request, a patent application can be published in less than 18 months from its filing or priority date. Such earlier publication will be useful when it is necessary to quickly establish the status of Section 29bis prior art, which can be used to defeat later filed applications on the basis of the whole contents of the application upon publication.
2.5.4 The position of appeal secretary created
The position of appeal secretary will be created to speed up appeal and trial proceedings (Section 144bis, Patent Law). This position is independent from appeal examiners. The appeal secretary will be responsible for matters of notarial or secretarial nature, such as preparation of records and expected to speed up appeal and trail proceedings.
1. 1 For detailed discussions, see http://www.okuyama.com/civil96.doc available in a WordPerfect file.