JAPAN: An Introduction to Intellectual Property: Bengoshi

AN OVERVIEW OF INTELLECTUAL PROPERTY: JAPAN

As to the recent notable topics and trends in the intellectual property field in Japan, we hereby introduce: (i) the IP High Court cases (Dwang v FC2 case and Fuji Medical Instruments v Family Inada case); (ii) patent disputes in the life science field; and (iii) recent amendments to IP-related laws in Japan.

1. Notable IP High Court Cases 

First, in September 2022 the IP High Court announced that it would collect third-party opinions towards the legal issues included in the case pending at the IP High Court (Dwang v FC2 case). This announcement was based on the newly established third-party opinions collection system in 2022 under the Japanese Patent Law Article 105-2-11.

The legal issues for collection are as follows:

1) In case the accused infringer sets up a server outside Japan in relation to a system patent invention which comprises the server and plural terminal equipment, does the accused infringer’s act constitute a “production” as an act practising the patent under Japanese Patent Law?

2) If yes, what kind of legal requirement(s) should be established in order to evaluate the “production”?
This case includes very important legal issues regarding how an accused infringer’s act conducted outside Japan should be dealt with and evaluated in relation to the act of practising the patent in Japan. Many parties are eagerly awaiting the IP High Court decision to be made in 2023.

Second, in October 2022 the IP High Court Grand Panel rendered an important decision regarding calculation of damages in a patent infringement case (Fuji Medical Instruments v Family Inada case. For full disclosure, Fuji Medical Instruments was represented by our firm, Oh-Ebashi LPC & Partners). Under Article 102(2) of the Patent Act, the amount of profits earned by an infringer is presumed to be the amount of damage incurred by a patentee. Such presumption can be overturned if the infringer successfully demonstrates circumstances showing a lack of a legally sufficient causal relationship between the infringer’s profit and the patentee’s damages, such as [i] the difference between the patentee’s business and infringer’s business (non-identity of the market); [ii] the presence of competing products in the market; [iii] marketing efforts of the infringer (branding, advertisement); [iv] performance of infringing products (features other than the patented invention including function and design); and [v] the fact that the invention is implemented only in a partial portion of the infringing products. The IP High Court Grand Panel in the present case held that even if a portion of the presumption under Article 102(2) is overturned, the patentee may seek a reasonable royalty under Article 102(3) if it could be found that the patentee could have granted to the infringer a licence for such overturned portion. On the one hand, the Grand Panel admitted the award of reasonable royalties to the overturned portion under circumstance [i]. On the other hand, it denied awarding reasonable royalties to the overturned portion under circumstance [v] since it could not be found that the patentee lost the opportunity to grant a licence to the infringer to such portion.

Since 2019 the IP High Court Grand Panel has rendered important decisions on some unresolved issues regarding calculation of damages in patent infringement cases. The present IP High Court Grand Panel decision will also have a significant impact on the practice of calculation of damages in patent infringement litigation in Japan.

2. Patent Disputes in the Life Science Field  

As a recent trend in Japan significant patent disputes in the life science field (mainly pharmaceutical related) have increased year by year.

One of the highlighted big patent disputes in the pharmaceutical field decided in 2022 was the Pregabalin case in which the patentee Warner Lambert Co (a subsidiary of Pfizer) filed 13 patent infringement lawsuits against more than 20 generic drug manufacturers before the court. In 2022 the IP High Court decided in favour of generic drug manufacturers by finding (i) non-infringement of a part of the patent claims, and (ii) invalidity of the other part of the patent claims based on lack of description requirements.

Another case which includes quite important unresolved legal issues is the Remich case. The patentee Toray Industries, Inc filed patent infringement lawsuits against generic drug manufacturers based on the cause of action that the generic drug falls into the scope of the patent right (as a medical use patent) whose patent term was extended based on the registration of extension of patent term. In Japan there is no case law with regard to the issue to what extent the scope of a patent right (as a medical use patent) will cover a generic drug whose additive ingredients are different from those of the brand-name drug. The case is currently pending before the IP High Court and will be decided in 2023.

3. Recent Topics Regarding Amendments to IP-Related Laws in Japan

The amendment to the Trademark Act to restrain foreign business entities from selling imitation products to individual customers though mailing services: In principle, in order to prove infringement of a trademark right by a third party, it is necessary to show that such third party uses such mark in its business. Preventing a foreign business entity from selling imitation products directly to individual customers in Japan through a mailing service had been considered to be difficult under the Trademark Act. However, the increase in cross-border e-commerce had created a situation where this issue cannot be overlooked. To deal with this issue, the recent amendment to the Trademark Act regards “an act of a person in a foreign country causing another person to bring the product into Japan from the foreign country” as a prohibited act (Art.2(7)). This amendment would enable custom officers to seize imitation products with a mark identical or similar to a registered trademark sold from foreign entities directly to individual customers in Japan by sending a package through a mailing service. This amendment took effect on 1 October 2022.

4. The Amendment to the Patent Act to Introduce the Newly Established Third-Party Opinions Collection System

As mentioned in 1. Notable IP High Court Cases in this article, the Japanese Patent Law was amended to establish the third-party opinions collection system in 2022. Under the third-party opinions collection system, courts can call for the submission of written opinions from a wide variety of third parties during a patent infringement case or other related case while it is pending. This amendment took effect on 1 April 2022. Basically, no qualification is required for parties to submit a written opinion and even companies established outside Japan can submit a written opinion. The third-party opinions collection system is sometimes called the “Japanese version of the amicus curiae system”. However, it should be noted that there are a lot of differences between the amicus curiae procedure in the United States and the third-party opinions collection system in Japan. For instance, the proceeding to call for written opinions from third parties starts only when the plaintiff or the defendant in a case files a motion for it and the court decides to call for written opinions from third parties. In addition, courts will examine written opinions from third parties only when either the plaintiff or defendant submits the written opinions to the court as evidence. In other words, if no written opinion from third parties is submitted to the court as evidence, the court does not consider any of the contents of the written opinions from third parties. It would be advisable for foreign parties to seek advice from local counsel regarding the details of this system.