JAPAN: An Introduction to Intellectual Property: Domestic

Amid the worsened economic situation, international conflicts and the ongoing COVID-19 pandemic, IP in Japan is undergoing several important developments with regard to technological advances and the diversification of legal disputes.

Increase in Awarded Damages in Patent Infringement Litigations

In recent years, there has been a tendency to award higher amounts of damages in Japanese patent infringement lawsuits. From 2015 to 2018, there was only one case awarding more than JPY300 million. In contrast, from 2019 to 2022, the number of such cases went up to 14.

This trend seemed to begin in 2019 – ie, when the Patent Act was amended. The amendment to Article 102 (regarding damages calculation) may therefore have been one of the triggers.

Article 102 provides three types of damages calculation:

  - presumption of damages based on an infringer’s sales quantity multiplied by patentee’s profit rate (Article 102(1));

  - presumption of damages based on an infringer’s profit (Article 102(2)); and

  - reasonable royalties (Article 102(3)).

When calculating damages based on Articles 102(1) and (2), if there are any circumstances that the presumption should be overruled, such overruled portion must be deducted from a presumed amount. For the deducted portion, there had been concern about whether the patentee can demand additional reasonable royalties calculated based on Article 102(3). In this respect, the amendment to Article 102(1) in 2019 allows the patentee to demand additional reasonable royalties for the deducted portion if the patentee would have been able to grant a licence in the circumstance that is the basis for the deduction.

On 20 October 2022, the IP High Court Grand Panel (Case No 2020 (Ne) 10024) held that the patentee who calculates damages based on Article 102(2) may also demand additional reasonable royalties for the deducted portion if the patentee would have been able to grant a licence in the circumstance that is the basis for the deduction.

Introduction of the Japanese Amicus Brief System

In the age of AI and IoT technologies, patent infringement lawsuits are expected to become more complex than ever before. Therefore, it is increasingly important to create an environment that enables judges to make decisions in view of a wider range of opinions.

In April 2022, the Japanese amicus brief system was enacted. This system enables the Tokyo and Osaka district courts and the IP High Court to invite the public to submit opinions regarding the application of law and other issues in patent or utility model infringement cases.

The IP High Court announced its use of the system for the first time in September 2022. The case in question concerns whether Japanese patent rights are enforceable against infringing acts partially committed outside Japan.

Business Court and Digitalisation of IP Cases 

The IP High Court and the IP division of the Tokyo district court moved – along with the latter’s bankruptcy division and corporate case division – moved from Kasumigaseki in Tokyo to Nakameguro in Tokyo in the middle of October 2022. The new court located at Nakameguro in Tokyo is known as the “Business Court”.

In May 2022, the amended Code of Civil Procedure was passed and promulgated (the “Amended Code”). Part of the Amended Code has already come into force and, as for IP cases, the enactment has enabled parties to electronically file briefs and evidence.

Furthermore, in view of the ongoing spread of COVID-19, courts began to hold online meeting-style hearings as a replacement for hearings in courtrooms. Such online meeting-style hearings have taken root in every case.

Although the Business Court is somewhat less conveniently located than in Kasumigaseki, it is expected that digitalisation under the Amended Code will make the procedures of IP cases more user-friendly and efficient.

Economic Security, Secret Patent and Governmental Support for Advanced Technology

Recent global dynamics, including competition between China and the USA for technological hegemony, have put Japan under pressure to strengthen its economic security. Against such a background, Japan’s Economic Security Promotion Act was enacted in May 2022.

One of the pillars of the Act is the introduction of a “Secret Patent System”, the aim of which is to maintain the secrecy of patent applications that may affect national security. Under the system, a patent application will be designated as secret if it is found by the Japan Patent Office and the Prime Minister, respectively, that the application:

  - includes an invention that belongs to specific technological fields designated by a cabinet order; and

  - needs to be kept secret in view of national security.

Once the application has been designated as secret, the applicant is prohibited from practicing the invention without permission or disclosing the invention. The system will take effect before May 2024.

Another pillar of the Act is the governmental support for the development of advanced technologies that may be relevant to national security. The support programme covers 27 technologies in four areas (marine, aerospace, cyberspace and biotechnology) and includes:

  - financial support by the government;

  - establishment of a council for PPP; and

  - commissioning of research to a think tank designated by the government.

The programme is set to commence in August 2023. These systems for economic security pose new challenges and opportunities for companies operating in Japan who exploit intellectual properties as their business resources.

Guidelines on SEP Licensing Negotiation 

As the Fourth Industrial Revolution progresses, many products will be computerised and processing data will create new added value. As such, Standard Essential Patent (SEP) licence negotiations among different industries – especially those in which Japan is powerful (eg, automobiles, construction machinery and factories) – are expected to increase and be more intense.

Following the IP High Court decision in Apple v Samsung (Case No 2013 (Ne) 10043), however, there have been no significant court decisions to guide negotiations on SEPs. Thus, it is crucial for the government to provide measures to resolve such disputes efficiently.

In March 2022, the Ministry of Economy, Trade and Industry (METI) published Good Faith Negotiation Guidelines for Standard Essential Patent Licences (the “METI Guidlines”). The METI Guidelines are not legally binding but were drafted to serve as norms of good faith negotiations that should be followed by SEP holders and implementers involved in licensing negotiations that concern Japanese patents.

Use of Copyrighted Works in Music Schools 

The most recent Supreme Court decision on IP is a case concerning the use of copyrighted works in lessons at music schools. In October 2022, the Supreme Court ruled that the user of musical works performed by a student is the student – thereby rejecting the allegation by the copyright management organisation (ie, the appellant) that the music school (ie, the appellee) teaching students is a user of musical works.

The Supreme Court ruled that (i) students’ performances in music lessons are for the purpose of acquiring and improving performance techniques, and performances of musical works are merely a means to that end, and (ii) the tuition fee is compensation for receiving instruction in performance techniques and not compensation for performing the musical works.

This Supreme Court decision has struck a balance between use and protection of copyrighted works. It is expected that – based on on the premise that copyright does not extend to students’ performances – appropriate royalties for performances by teachers will be determined.