CASRIP Newsletter - Spring/Summer 1997, Volume 4, Issue 2
The JPO’s Review of the Appropriateness of Intellectual Property Damages
Responding to the concerns of some Japanese companies, the Japanese Patent Office (JPO) began to review the appropriateness of intellectual property infringement damages as granted by Japanese courts.1 The JPO has been campaigning to take the pro-patent tradition root in Japanese industry.
As one of the initiatives, the JPO Commissioner has organized an advisory committee and published a number of proposals on restructuring the intellectual property system to protect the fruits of R & D in an adequate way.2 One of the proposals is to increase damage awards to ensure sufficient incentives for inventors to continue their efforts for technological innovation.3
The current provision to define patent infringement damages, Article 102, suggests that the common form of damages to compensate patent infringement is the amount of money a patentee is normally entitled to receive for licensing a third party to exploit the patent. It can be interpreted that any amount over that is extra and exceptional, because it provides that the court may reduce the monetary damages unless the infringer, willfully or with gross negligence, infringed the patentee's patent.4
Legislative history also indicates that the legislator's intent behind the provision was to simply provide restitution for the patentee's loss from the infringement.5 The originally introduced proposal on the provision was based on the constructive trustee theory under German Law, guaranteeing the entitlement of infringer's profits to the patentee. The proposal was strongly criticized by the Legal Affairs Bureau as conflicting with the fundamental Japanese tort law if it was interpreted to enable the award of infringer's profits regardless of the actual damages resulting from the patentee. In response to the criticism, the language was revised to simply give patentees a presumption that the infringer's profits being the amount of the patentee's damages resulting from infringement. As a result, the provision functions to merely shift the burden of proof and thus the patentee should establish the actual amount once the infringer successfully rebuts such presumption. The original language defining the amount of money entitled to give licensing the patent for exploitation being just part of damages was revised to redefine the money being damages itself. Although the Legal Affairs Bureau was not convinced with respect to the appropriateness of adopting the language suggesting the licensing amount as a nominal damage, paragraph 3 providing the amount entitled for licensing as the damage remained intact and became effective.
Japanese courts interpreted Article 102 to mean that the principle form of measuring infringement damages is the amount being normally entitled to license the patent for exploitation and thus seldom award damages in the form of lost profits.6 The definition of the amount normally entitled to license the patent for exploitation appears to similar to that of the reasonable royalty provided 35 USC Section 284. Review of Japanese case law revealed that the amounts granted by Japanese courts are much lower than those granted.7 This is because Japanese courts rely heavily on the infringers' conditions and published industry royalty rates and royalty rates licensing government owned intellectual property. This practice highly contrasts to U.S. practice which relies heavily on the patentee's conditions. Accordingly it is very unlikely that Japanese courts would grant an amount exceeding the profits actually made by infringer. Japanese industry's perception of the current damage award is clearly split. A urvey conducted by a research institute revealed that companies in some industry fields, such as pharmaceutical and chemical industries which heavily rely on the reimbursement for the R & D investment through the patent right, want to increase the current damages.8 Interestingly, electronics and automobile industries where Japan maintains a cutting edge in competition tend to find the current damages being adequate. One third of the companies who found the current remedy being inadequate want to introduce U.S. type punitive damages which would multiplying the compensatory damages up to three times, if infringers are found to willfully infringe their patents.
A simple solution to respond the need to increase damages would be to revise Article 102. However, to obtain a consensus to revise the provision to introduce a punitive damages would be a difficult task because of a number of reasons, including: (1) there is a clear split in view of Japanese industry on the appropriateness of infringement damages; (2) damages are traditionally considered within the territory of courts, not the patent office; and (3) Japanese Supreme Courts repeatedly denied the constitutionality of provisions granting more than compensatory damages. The attempts to introduce increased damages to copyright infringement and product liability torts have not been successful as such damages being conflict with the fundamental goal of compensating damages under Japanese tort system. Nevertheless, JPO will conduct research on damages available in other jurisdictions and seek opinions from patent professionals and academia which may produce a bill to revise the current patent law in the near future.
Proposed Revision on Administrative Guidelines for Arbitration Proceeding
To accommodate the requirements provided in WTO TRIPS Article 31, and agreements between U.S. and Japan Patent Office Commissioner, JPO announced a proposed revision on the Administrative Guidelines (Un-nyo Youryou) which regulates the arbitration proceeding for granting a compulsory license. Japanese Patent Law provides arbitration proceedings to grant compulsory licenses on (1) dependent inventions (riyou hatsumei) the exploitation of which invention infringes other parties' patents or design registration;9 ; (2) inventions which has not exploited continuously for three years from the grant of the patent in Japan;10 and (3) inventions the exploitation of which are required for the interests of public.11 Although the arbitration was seldom used to request a license, this provision has been criticized by U.S. industry to give patentees pressure to grant a license since Japanese companies can always resort to the compulsory license provisions once the negotiation break up. JPO has long adopted practice restrictivly granting compulsory licenses but this proposed revision introduced explicit restriction to ban the grant of a compulsory license in violating requirements provided in bilateral and multinational agreements.
Publication of Revised Japanese Trademark Law
As reported in past issues, last year the Japanese Trademark System went through a major revision by introducing the registration of trade dress and expanding protection of unregistered well-known mark. A booklet explaining the essential points of new trademark law and answering frequently asked questions is now available from Japanese Patent Office
(TEL: 011-81-3-3581-1011) or AIPPI Japan (FAX: 011-81-3-3591-1510).
-- Toshiko Takenaka
1Tokkyo Shingai Baishogaku
Naege (Increasing Patent Infringement Damages), Nihon Keizai Shinbun (Tokyo), Feb. 21,
1997.
2The Report of the Commission on
Intellectual Property Rights in the Twenty-first Century, Toward the Era of Intellectual
Property Creation: Challenge for Breakthrough (April 7, 1997).
3Id., at 18.
4Patent Law Article 102
- Where a patentee or exclusive licensee requests a party who has intentionally or negligently infringed the patent right or exclusive license to compensate for damages resulting from the party’s infringement, the profits obtained by the party through the infringement shall be presumed to be the amount of damage suffered by the patentee or exclusive licensee.
- A patentee or exclusive licensee may request a party who has intentionally or negligently infringed the patent right or exclusive license to the amount of money the patentee normally being entitled to the patentee to receive for granting a right to exploit the patent.
- The preceding paragraph shall not preclude a request in the amount of damages exceeding the amount referred therein. In such a case, the court may take into account the fact that the party did not willfully, or with gross negligence, infringe the patent in determining such amount.
5Yoshiyuki Tamura, Chiteki Zaisanken to Songai Baishou
(Damages for Intellectual Property Infringement) 41 seq. (1993).
6Toru Toyama, Study with Respect to Proper Civil Remedies for
Infringements of Intellectual Property, 1996 Institute of Intellectual Property Bulletin
(1996).
7Id.
8Institute of Intellectual Property, Chiteki Zaisanken Shingai
ni Kakaru Minnjiteki Kyusaino Tekiseika ni Kannsuru Chousa Houkoku (Study of Property
Civil Remedies for Infringements of Intellectual Property), 24 (1996).
9Japanese Patent Law, Article 92.
10Japanese Patent Law, Article 83.
11Japanese Patent Law, Article 93.
