JAPAN: An Introduction to Intellectual Property: Domestic

INTELLECTUAL PROPERTY IN JAPAN 

Abe Ikubo & Katayama 

1. IP High Court First-Ever Decision Allowing Extraterritorial Application of Japanese Patent Rights

The IP High Court rendered the first-ever decision allowing the extraterritorial application of Japanese patent rights on 20 July 2022 (Case No. 2018 (Ne) 10077).

In the case, the defendant had servers in the United States and thereby provided videos mainly toward users in Japan. The plaintiff exercised its patents related to inventions showing comments on videos against the defendant.

The Tokyo District Court Decision dated 19 September 2018 (Case No. 2016 (Wa) 38565) dismissed the plaintiff’s claims because the accused products did not fall within the technical scope of the patents.

However, the IP High Court found that the accused products fell within the technical scope of the patents and stated that a part of the defendant’s infringing action occurred outside Japan, but that it could be evaluated that the defendant’s infringing action was substantially conducted in Japan as a whole. Thus, the IP High Court reversed the Tokyo District Court Decision and allowed the extraterritorial application of Japanese patent rights.

2. IP High Court Grand Panel Decision regarding Damage Presumption

The IP High Court Grand Panel rendered a decision granting reasonable royalty to the part where a presumption of damages was overturned on 20 October 2022 (Case No. 2020 (Ne) 10024). In general, three judges examine a case before the IP High Court, but the IP High Court creates a grand panel consisting of five judges in an important case. This is the 14th Grand Panel Decision in its history and the first time since February 2020.

Under the Japanese Patent Act Article 102, a patentee may claim damages against infringers, either lost-profit type damages (Articles 102(1) (2)) or reasonable royalties (Article 102(3)). Article 102(2) provides that the amount of profits earned by an infringer is presumed to be the amount of damage sustained by a patentee. The presumption under Article 102(2) can be overturned if the infringer establishes circumstances such as [i] the invention is implemented only in a partial portion of the infringing products; [ii] presence of a difference in the business forms, prices and the like, between the patentee and the infringer (non-identity of the market); [iii] presence of competitive products in the market; [iv] sales efforts (brand strength, advertisement) of the infringer; [v] presence of differences in performances of the infringement product and the product of the patentee.

In the case, the patentee sought damages which were presumed to be based upon the infringer’s profits under Article 10(2), but the defendant produced several "circumstances" to overturn the presumption. The Grand Panel admitted the above circumstances [i] and [iii] and overturned the presumption. However, the Grand Panel applied Article 102(3) to the portion overturned by circumstance [iii] and awarded reasonable royalties. In contrast, the Grand Panel denied the application of Article 102(3) to the portion overturned by circumstance [i].

3. Other Updates 

(i) METI Guideline re. SEP Licensing Negotiation

On 31 March 2022, the Ministry of Economy, Trade and Industry (“METI”) publicised the “Good Faith Negotiation Guidelines for Standard Essential Patent Licences” (“METI Guidelines”). The METI Guidelines are not legally binding but were created as norms of good faith negotiations to be followed by SEP holders and implementers involved in SEP licensing negotiations including Japanese patents. They set out a four-step negotiation process, clarifying what is expected of the parties during licensing negotiations so that they are recognised to be acting in “good faith.” It is to be noted, however, that the METI Guidelines do not guarantee that, even if followed, negotiations will be deemed to have been made in good faith in future judicial rulings because the guideline is not a legally binding law.

(ii) Japanese First Official Amicus Brief Case

The Japanese amicus brief system is where a district court or the IP High Court can invite the public to submit opinions regarding application of law and other issues in a patent or utility model infringement case enacted on 1 April 2022. Recently, the IP High Court announced it would utilise the amicus brief system for the first time on 30 September 2022 (Case No. 2022 (Ne) 10046). In the case, the IP High Court publicly asked the third parties to submit their opinions regarding the issues in the case by 30 November 2022.

(iii) Relocation of IP High Court and Tokyo District Court IP Divisions

The IP High Court and the Tokyo District Court IP Divisions moved from Kasumigaseki in Tokyo to Nakameguro in Tokyo in the middle of October 2022. The new court is called the “Business Court”, which consists of the IP High Court and the Tokyo District Court IP Divisions and Bankruptcy Divisions.

(iv) Secret Patent System (in force before May 2024)

In May of 2022, the “Japan Economic Security Promotion Act” was enacted. The Act established a “Secret Patent System” under which a patent application related to sensitive technologies such as nuclear weaponry shall be kept secret and shall not be publicly disclosed. In the system, as the primary screening, the JPO examines whether a patent application belongs to “Specific Technological Fields” to be designated by a cabinet order. Then, as the secondary screening, the Prime Minister examines whether technologies in the patent application shall not be publicly disclosed in terms of national safety. The Secret Patent System will take effect before May 2024.