Patent EnforcementPatent Enforcement the U.S. and Japanthe U.S. and Japan

Comparative Law PerspectiveComparative Law Perspective

Toshiko Takenaka, Ph.DDirector, CASRIP

University of Washington School of LawVisiting 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 EUComparison with EU

• Lisbon Agenda (2007)– Promotion of academic-industry knowledge

transfer– Knowledge triangle

• Japan: Cycle for Intellectual Creation

Comparison with EUComparison 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 Improvement in evidence taking proceduretaking 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 JapanRequest for Document

Civil Procedure LawArticle 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 JapanRequest for Document

Patent LawOriginal 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 JapanBurden 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 JapanIn 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 JapanOpen 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 JapanOpen 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 JapanProtective 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 CourtsPatentee 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 CourtsPatentee Win Rates

0%

5%

10%

15%

20%

25%

30%

35%

2000 2001 2002 2003 2004 2005 2006 2007 2008

Including utility model

Murata, Kaneko & Iwamatsu

Adequate DamagesAdequate 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

infringementU.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 TestInference of Causation

Causation Inferred by Showing:①Market demand②Capability to meet such market demand③Absence of non-infringing acceptable

substitute in the market④Profits 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 RevisionCodification of Panduit Test

Causation Inferred by showing:①# of infringing products sold by infringer②Net profit-per-product that patentee would

have sold but for infringement– Deduction of variable costs only

③Capacity to make and sell the # of products sold by infringer

1998 RevisionCodification of Panduit Test

Rebuttal by Infringer# of products P could not have sold①Difference in infringing product and

patentee’s product– Competing products

②Presence of non-infringing acceptable substitute in the market

③Apportionment– Entire market value rule

1998 RevisionReasonable 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 RevisionInfringer’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 RevisionDefendant’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 Infringement1989-1994 Average Damages Awarded• $0.18 M (Median: $0.04M) 35.73%1999-2004 Average Damages Awarded• $1.11 M (Median: 0.22M) 43.19%Patent1996-2005 Average Damages Awarded• $1.71 M

Japan: Impact of Revision

Japan: Average Damages Awarded

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

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