Patent Infringement Litigation in Japan
December 1997
Dr. Shoichi Okuyama
Okuyama & Co.
The following is an account of patent litigation viewed from the perspective of a prosecution specialist as I am a Benrishi who principally handles the prosecution of patent applications before the Japanese Patent Office. I will be discussing patent infringement litigation from the stand point of the defense and primarily for the initial phase of disputes in this paper, while taking recent Japanese court decisions into consideration.
Introduction
Disputes often begin with an unexpected warning letter from an unknown party. They may also arise from broken licensing agreements as well as failed negotiations. In Japan, a warning letter is not required to begin litigation. The patentee is allowed to assume that someone has infringed its patent willfully or negligently,(1) while under civil law willfulness or negligence has to be proven to obtain damages as a matter of general principle. The alleged infringer has the burden of proof and has to prove that it used due care not to infringe the patent, for example, by having carried out a comprehensive patent search. Despite such provisions, the patentee normally sends a letter to a potential infringer because it is considered prudent to have negotiations before going to the court. Moreover, a warning letter makes it practically impossible for the infringer to prove the lack of willfulness or negligence, upon continued use of the patented subject matter.
The sender of the warning letter may sometimes not be a patentee. A registered exclusive licensee(2) is entitled to start a patent infringement lawsuit and may send you a warning letter,(3) while a non-exclusive licensee is normally not allowed to initiate such legal action. Given this understanding, I will use the term patentee for both patentee and registered exclusive licensee in this paper.
In this connection, it is highly advisable to seek advice from an attorney at law, Bengoshi, or a patent attorney, Benrishi, having them involved at an early stage of the dispute because of complexity of litigation practice and possible early resolution of disputes. It is common to form a litigation team involving litigation specialists, Bengoshi, prosecution specialists, Benrishi, and technical experts.
The Aim of the Patentee
Upon a determination of patent infringement, the action taken by the patentee will depend on his overall business goals. He may ask you to enter into licensing negotiations, pay money for past infringement or both. You may be simply asked to stop the infringement so that he can enjoy the monopoly in the market.(4)
In order to force you to come to the table for negotiation to achieve such goals, the patentee has the option of bringing a lawsuit to back up his position. He basically has two categories of available remedies: injunction orders and damage awards. The patentee may ask the court to order the infringer to stop such infringing acts as manufacture, use and sale of infringing products.(5)
This is called an injunction order. Moreover, he can also obtain a court order forcing the infringer to discard or destroy infringing products or facilities used for committing the infringement along with an order to stop the infringement.(6) If remedies against the infringement are needed on an urgent basis, the patentee can obtain a preliminary injunction order prior to more formal court proceedings. The preliminary injunction order can be obtained with prima facie case of infringement and prima facie evidence of irreparable harm. The second category is pursued by filing a lawsuit to seek a damage award. The patentee can ask for recovery of damages or restitution of unjust enrichment caused by the infringement in terms of monetary compensation.(7) Also, the patentee may have certain remedies resulting from harm to business or personal reputation caused by the infringement.(8)
First Actions to Take in Response to the Warning Letter
The first step in response to a warning letter is to check the current validity of the patent. The patent may lapse before the end of its term, which is 20 years from the actual filing date in Japan, for example, by a failure to make annuity payments. Also, patents related to pharmaceuticals and agricultural chemicals may have extended terms. There may be a recorded exclusive licensee, in which case the patentee may not be the rightful party to start such litigation. These basic facts have to be reviewed and confirmed at the Japanese Patent Office.
Secondly, a copy of the file wrapper(9) of the patent in question should be obtained for analysis. The exchange of office actions and responses between the examiner and the applicant often provide valuable clues for determining the scope of protection available under the patent.
Thirdly, it is often useful to determine if the Japanese patent has corresponding patents or applications in other countries. If there are such applications or patents, copies of all prior art references cited should, at minimum, be obtained. The Japanese patent may have been granted simply because the Japanese examiner was unable to find a very pertinent prior art reference.
Normally, in order to respond to the warning letter, the above steps should be sufficient. If the existence of more pertinent prior art references is suspected, it is, however, necessary to conduct a prior art search of patent and utility model publications in Japan and other countries. It is also possible to search through academic and non-academic journals and magazines. A variety of databases are available for such searches as an extremely useful tool. In some cases, it may be necessary to go to places like museums to locate non-documentary evidence of public use prior to the patent filing date.
Based on the content of the file wrapper and the result of your investigations, grounds of invalidity of the patent or a basis for restrictive interpretation of the patent claims should be sought. For example, if a prior art reference is found which anticipates the patented invention or discloses the same invention and has not been considered by the Japanese Patent Office, the patent may be invalid. If another reference is found which does not eliminate the novelty of the patented claims entirely, but clearly covers allegedly infringing product or method, it is likely that a narrow interpretation of the patented claims could be obtained from a court so as to escape from the allegation of patent infringement. For the purpose of invalidating a patent, you have to go directly to the Japanese Patent Office, as opposed to a court as in many counties. The Japanese court generally does not have authority to find a patent invalid unless the case is on appeal from a Patent Office decision.(10)
Furthermore, if the patentee is overly aggressive and send, for example, letters to many of your clients and business partners warning of your patent infringement, such actions by the patentee may harm your business. If the accusations are unfounded, you can consider to sue the patentee under the Unfair Competition Prevention Law(11) for recovery of damages and injunction orders to force him to stop such actions.
Interpretation of Patent Claims
In order to determine whether there is an infringement or not, it is necessary to first compare the patented claims and your product or method. It is important to stress that this judgement is made based on the claims. Of course, there may be definitions of some terms used in the claims located in the body of the specification, or the claims in and of themselves may not be clear, then it is necessary to refer to the text of the patent. However, the claims always form the primary basis for considering the existence of an infringement.
Section 70, Patent Law provides that the technical scope of a patented invention "shall be determined on the basis of the statements of the patent claim(s) in the specification," and the meaning of a term or terms found in the patent claim(s) is interpreted in the light of the body of the specification and the drawings.
There are several aspects to patent infringement in general. I would like to discuss them in the following.
1. Literal Infringement
As a first step, check if the allegedly infringing product or method contains all the features or limitations recited in any of the patented claims in the disputed patent. If the answer is affirmative, there is a literal infringement, and in many cases, it is better to admit the infringement. Based on this determination, it may be necessary to enter into negotiations with the patentee or consider possible modifications to the design of the product or the method in question so as to place it outside scope of the patent protection.(12)
The possibility of using prior art references or the content of the file wrapper should be considered to reach a narrow interpretation of the patent claims. However, unless the patent is clearly invalid in view of such information, the patentee often takes positions different from yours and bring a lawsuit before the court. Therefore, it is important to take a practical approach and weigh the advantages and disadvantages of such a lawsuit when deciding on the course of actions.
On the other hand, if the disputed product lacks one or more elements or features recited in pertinent claims or if the method is missing one or more steps or limitations in the claimed method, no literal infringement will be found by the court.
If the answer to the question of literal infringement is negative, the possibility of a broader interpretation of the patented claims should then be considered.
2. Doctrine of Equivalents
In recent court decisions,(13) the Tokyo and Osaka High Courts provided affirmative views on the application of the doctrine of equivalents.(14) This doctrine gives the patentee a broader interpretation of claims based on the understanding that it is often very difficult to provide adequate patent protection, if no exceptions are provided beyond the literal interpretation of the patented claims. The standards for what is equivalent seem similar among countries when they are stated in abstract form. However, the actual application of basic principles of the doctrine varies significantly from one country to another.
In a recent Tokyo High Court decision(15) in the Texas Instruments v. Fujitsu case involving the Kilby patent, presiding Judge Makino suggested the use of the time of infringement as a reference for determining the ease of replacement. This is in contrast to the currently prevailing understanding of the doctrine of equivalents among Japanese courts in which the possibility and ease of replacement is to be considered as of the filing date of the patent application.
3. Indirect Infringement v. Direct Infringement
If a product in question contains, as mentioned above, all the features and limitations recited in a patent claim or if it is considered to be an infringement under the doctrine of equivalents, it would constitute a direct infringement. The same is true for patented claims directed to methods. If your product does not contain some portion of the elements or features found in a claim, no direct infringement should be found with respect to that claim.
Moreover, if someone produces a kit which contains all the elements that form the claimed product and a person purchases and assembles it at home, neither the sale of such kit nor assembly would constitute direct infringement, because the kit lacks some features or elements that tie the claimed structural elements together, while the assembly cannot be considered to have been done "commercially" as required in Section 68,(16) Patent Law. This is also true if an unauthorized person is selling an essential component of the claimed product by omitting a few trivial elements or features recited in a patent claim. Such acts are not overlooked from the stand point of meaningful patent protection. Therefore, the Japanese Patent Law contains some provisions(17)
which regard such acts as another form of infringement, so-called "indirect infringement," thus giving the same protection as against a direct infringement. In some other countries, similar types of infringement are called contributory infringement.
Review Your Position Against the Patentee
The status of the patent in question has now been checked, and its file wrapper reviewed. The possibility of infringement by comparing the disputed product or method and the patent claims has also been evaluated while taking the prior art into consideration. Now it is necessary to review the defensive position against the patentee.
1. Reexamination of Your Patent Portfolio
The patents you have need to be checked with respect to the patentee's, or its licensee's, products or methods. If one or more of your patents appear to cover such products or methods, they may be raised and an offer to cross license can be made. This will strengthen your position during negotiations.
2. Prior User Right
The date on which the product or method began to be made or used or substantial preparation thereof was made should be checked. For example, if the product had already been made or significant preparation for the production had been started as of the filing date of the patent in question, a so-called "prior user right" may be available as a defense.(18)
Under the prior user right, it is possible to continue to make, use or sell the product or use the method without any liability associated with patent infringement.
3. Experimental Use
Under Section 69(1), Patent Law, acts done for experimental or research purposes are excluded from the patent protection. So, if you are making a product or using a method for scientific test purposes, you basically cannot infringe any patent. The purpose of Section 69(1) is to promote scientific or technological developments. Therefore, experimental manufacturing and sale for testing market or carrying out experiments for the sole purpose of obtaining governmental approvals may not be exempted. Currently, two sets of clearly contradicting court decisions have been made concerning experimental use of patented drugs by generic drug makers during patent terms solely for obtaining governmental approvals for sale after the expiry of patents.
On July 18, 1997, the Tokyo District Court rendered three decisions in actions brought by Otsuka Pharmaceutical Co., Ltd. against several generic drug makers. In those decisions, the 29th civil division of the Court found no patent infringement for experiments done by generic drug makers during the patent term. This is a complete reversal of earlier decisions made by various courts. For example, in the Synthelabo case, the Nagoya District Court had found patent infringement because the experimental use exemption (Section 69, Patent Law) was not applicable to the experiments which were done for the sole purpose of obtaining governmental approval for future sale of old patented drugs and which did not lead to scientific advances. The line of reasoning set out in the Synthelabo cases has also been followed by the Kanazawa branch of the Nagoya High Court and Osaka District Court. This issue is interesting also in view of two recent decisions by the German Supreme Court.
Also, in this connection, preparation of drugs under prescriptions given by medical doctors would not constitute a patent infringement as provided in Section 69(2), Patent Law.
4. Compulsory Licenses
The Patent Law allows the granting of compulsory licenses for implementing dependent, i.e., related inventions.(19) It also provides for compulsory licenses for the use of inventions that have not been used for an extended period of time(20) as well as compulsory licenses on patented inventions in the interest of the general public.(21)
When a patent invention is implemented, such use may result in the implementation of another patented invention which has a prior filing date and which is owned by another party. This type of situation occurs when a patent is granted on an improvement on another patented invention with an earlier filing date. The later filed invention is called a dependent invention. The implementation of the dependent invention would constitute an infringement on the basic patent. In order to use the dependent invention the patentee has to obtain a license on the basic patent. When such license is not available, however, the dependent invention cannot be utilized,(22) impeding further development of technology and industry. Therefore, the Law provides procedures for granting compulsory licenses on the basic invention by going through a prescribed arbitration process.
The Law also provides for the granting of similar licenses when a patented invention has not been utilized over an extended period of time, so as to encourage patentees to utilize their patents. Compulsory licenses may also be granted when it is clear that the public will enjoy large benefits if an unused patent is implemented.
Several applications have been filed to initiate the arbitration process; however, no compulsory licenses of any kind have been granted thus far. Also, under one of the two bilateral agreements between Japan and the U.S. respectively concluded in January and August 1994, it has now become practically impossible to obtain a compulsory license to use a patented dependent invention if a basic patent exists.(23)
Reply to the Warning Letter
Normally, a requested date for a reply is stated in warning letters. Although there is no legal obligation to reply by this date, it would be advisable to send some form of reply. It is possible to simply state that the process of reviewing the situation is under way, while setting another date for a more substantive reply.
After the above-mentioned review process is finished, a reply stating your position can be sent to the sender of the warning letter.
Possible Actions in Response to Allegation of Infringement
A. When Infringement Is Likely
If your review leads to the conclusion that an infringement is likely to be found by the court if litigation occurs, it is necessary to consider the following options.
A1. Stop infringement
Stop the infringing acts, such as the manufacture, sale, and importation of products which come under the scope of patent protection. However, it is possible that, as an accused infringer, you may be liable for past damages even if you stop the infringing acts immediately.
A2. Enter into Licensing negotiations
Enter licensing negotiations with the patentee or exclusive licensee, provided that he is willing to give you some type of license. The above-discussed review of your patent portfolio and consideration of other factors will be important in strengthening your position during negotiations. Another option is to buy a portion or the entirety of the patent and become the patentee yourself.
A3. Design around
With some modifications on the design of your product or changes in your method, patent infringement may be avoided. This normally costs substantial amounts of money, particularly if manufacturing has been done on a large scale. This option has to be considered in the context of the costs involved in the other options. Also, the patentee may seek the recovery of damages for past infringement.
B. When No Infringement Exists
B1. Argue for non-infringement
If the patent appears to be invalid after your review of the prior art and the file wrapper, you can state such in your reply to the patentee. It is possible that the patentee simply did not know the existence of prior art references which would invalidate the patent. If the patentee is willing to withdraw his allegation of patent infringement, it is often wise to maintain the patent because in effect you may be able to exclude others from entering your market based on the patent.
Even if you believe, however, that there is no infringement because your product or method is outside the scope of the patent protection, i.e., non-infringing, it may still be difficult to convince the patentee of your position. It may be necessary to consider the options discussed above for situations in which infringement is likely.
B2. File for invalidation proceedings
Unlike many other countries where you can contest the validity of a patent before the same court which is considering the question of infringement, in order to invalidate a patent in Japan it is necessary to separately request the Patent Office to invalidate the patent. The court will hear only appeals from decisions concerning validity made by the Department of Appeals at the Patent Office. If the Patent Office, and the Tokyo High Court if appealed,(24) finds that the patent is invalid, there is no patent infringement for both past and future.
Normally the court is unwilling to halt or stay the proceedings of the infringement case in order to wait for the Patent Office to decide on the question of invalidity because unless both parties agree, at least one party is likely to suffer from a delayed court decision. Unless it is very clear that a patented invention was not novel, the court presumes that the patent is valid regardless of the ongoing invalidation proceedings before the Patent Office.
B3. Declaratory Judgement Action
As an alleged infringer, you can bring a lawsuit to have a confirmation of non-infringement from a court. Such action is often called a declaratory judgement action. It may be filed to obtain the court's confirmation that you have no liability with respect to infringement of the patent, the patentee does not have a right to obtain an injunction order from the court, or you have prior user rights.
Beginning a Litigation and Going through It
In view of unsuccessful negotiations, as we discussed above, you can bring a lawsuit for a declaratory judgement. The advantage of filing a suit before the other party does lies in your ability to have your choice of court. Normally, more than one district court has jurisdiction over your dispute. However, if you file a suit first, you can have your choice of court. The Tokyo and Osaka District Courts have special divisions for IP matters. Therefore, you may want to bring a suit there to find judges more familiar with patent disputes than those in other courts. Under ordinary circumstances, it is not easy to transfer a case from one court to another once a case has been introduced in a particular court. In order to bring this type of lawsuit, or any lawsuit in general, it is necessary for a plaintiff to show that he has substantial interest in the case. For example, you must show the existence of actual disputes with the defendant.
Conversely, the patentee may bring two types of lawsuits, either independently or simultaneously: the so-called main suit (Honso in Japanese) and a petition for preliminary injunctions (Karishobun in Japanese), as discussed above. The main suit is a normal type of proceedings. After the plaintiff files a complaint, some form of preliminary hearings and formal hearings take place at intervals of one to three months. Each hearing is normally short, lasting less than half an hour unless the examination of witnesses is involved. The Japanese court has a strong tendency to rely on written documentation submitted by the parties. The main suit takes two to five years to come to a conclusion.
The preliminary injunction cases should proceed faster than the main suit. However, if there are unresolved issues such as the scope of the disputed patent, the court may not be willing to decide in the preliminary injunction action any sooner than in the corresponding main suit. Even in preliminary injunction cases, the court hears both parties, while the evidence that it examines is limited to documentary evidence and witnesses who voluntarily appear before the court.
Settlements are often encouraged within the framework of litigation by the judges hearing the case. It is also possible to have negotiations with the other party in addition to and aside from the lawsuit. No formal statistics are available on the number of patent infringement suits filed in Japan. There are about 20 to 30 patent infringement decisions annually at the district court level, and one district court judge indicated to me that about 90 % of cases filed end up in settlement without reaching a decision.
Appeals
If a decision in the main suit rendered by a District Court is not satisfactory, it is possible to file an appeal before the High Court which has jurisdiction over the particular District Court. The High Court in this case is another trial court, so it is possible to raise questions concerning facts before this court as well. The proceedings at the High Court are a continuation of what has been done before the District Court. From a High Court decision, appeal is possible to the Supreme Court, but it will consider only questions related to the interpretation of the Constitution and law.
Appeals from decisions in preliminary injunction cases are different from the main suit and more complicated.
Conclusion
We have quickly reviewed the course of patent infringement litigations in Japan. While this paper is by no means comprehensive, it should give you an overall view of what can happen in such disputes, particularly at early stages.
FOOTNOTES1. Patent Law, Section 103, which provides that: "A person who has infringed a patent right or exclusive license of another person shall be presumed to have been negligent as far as the act of infringement is concerned."
2. Licenses should be registered at the Japanese Patent Office. Particularly, exclusive licenses need to be registered in order for them to be effective against third parties. Unregistered exclusive licensee may recover damages but cannot enjoin others from infringing his licensed patent.
3. See, for example, Section 100, Patent Law.
4. Patent Law, Section 68, which provides that: "A patentee shall have an exclusive right to commercially work the patented invention. However, where the patent right is the subject of an exclusive license, this provision shall not apply to the extent that the exclusive licensee possesses the right to work the patented invention."
5. Patent Law, Section 2(3) defines the working of an invention as follows.
"'Working' of an invention in this Law means the following acts:
(i) in the case of an invention of a product, acts of manufacturing, using, assigning, importing or offering for assignment or lease (including displaying for the purpose of assignment or lease - hereinafter the same) of the product;
(ii) in the case of an invention of a process, action of using the process; and
(iii) in the case of an invention of a process for manufacturing a product, acts of using, assigning, leasing, importing or offering for assignment or lease of the product manufactured by the process, in addition to the acts mentioned in the preceding paragraph."
6. Section 100, Patent Law.
7. Under the Japanese system, practically speaking discovery found in Anglo-American systems is not available. It is often difficult to obtain evidence the other party has during the course of litigation. However, for calculation of damages, both parties may request the production of pertinent documents under Section 105, Patent Law.
8. Section 106, Patent Law.
9. The file wrapper is the set of all documents the Patent Office has concerning a particular patent or patent application.
10. This does not mean that you should not bring up the issue of invalidity before the court hearing your infringement case. While the court does not rule on the issue of invalidity, it may take the grounds for invalidity that you presented into consideration when determining the scope of protection.
11. 11/ Section 2(1)(xi) of the Unfair Competition Prevention Law defines, as one manner of unfair competition act, notifying and distributing false statements of facts which harm good will of a person who is in competitive relationship.
12. So-called "designing around."
13. THK v. Tsubakimoto case (concerning a spline ball bearing), Tokyo High Court, February 1994; and Genentech v. Sumitomo Pharmaceuticals case (concerning human tissue plasminogen activator (t-PA)), Osaka High Court, March 1996.
14. The Japanese courts have considered the doctrine of equivalents in terms of the following three elements:
(1) Whether the claimed invention and the accused product solve the same problem and share the same technical idea;
(2) Whether no significant effects arise from differences between the claimed invention and the accused product; and
(3) Whether replacing an element or feature was possible and easy for a skilled person based on the state of art as of the filing date.
15. This judgement was rendered on September 10, 1997 (case No. 1994 (ne) 3790). No infringement was found for Fujitsu on the nearly 40 years old patent owned by Texas Instruments. While the Tokyo High Court commented on the doctrine of equivalents in general, it did not base its judgement on the doctrine.
16. Supra.
17. Section 101, Patent Law provides that: "The following acts shall be deemed to be an infringement of a patent right or exclusive license: (i) in the case of a patent for an invention of product, acts of manufacturing, assigning, leasing, importing or offering for assignment or lease of, in the course of trade, article to be used exclusively for the manufacture of the product; (ii) (omitted)"
18. Section 79, Patent Law provides for what is more commonly known as prior user rights in terms of a non-exclusive license. Section 79 reads as follows: "Where, at the time of filing of a patent application, a person who has made an invention by himself without knowledge of the contents of an invention claimed in the patent application or has learned the invention from a person just referred to, has been commercially working the invention in Japan or has been making preparations therefor, such person shall have a non-exclusive license on the patent right under the patent application. Such license shall be limited to the invention which is being worked or for which preparations for working are being made and to that purpose of such working or the preparations therefor.
19. Section 92, Patent Law.
20. Section 83, Patent Law.
21. Section 93, Patent Law.
22. Section 72, Patent Law.
23. The August 1994 agreement stipulates that: "Other than to remedy a practice determined after judicial or administrative process to be anti-competitive or to permit public non-commercial use, after July 1995, the JPO is not to render an arbitration decision ordering a dependent patent compulsory license to be granted."
24. The Tokyo High Court has exclusive jurisdiction over cases which are appeals from decisions made by the Appeal Department of the Japanese Patent Office.