adequate patent infringement damages in japanese courts: comparative analysis toshiko takenaka,...
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Adequate Patent Infringement Adequate Patent Infringement Damages in Japanese Courts:Damages in Japanese Courts:
Comparative Analysis Comparative Analysis
Toshiko Takenaka, Ph.D.Professor of Law; Director, CASRIP
University of Washington School of Law
OutlineOutline
Background– Japan’s National IP Strategy
• Comparison with EU Developments
IP Enforcement Revisions– Improvements in Evidence Taking
• Document Production Orders• In-Camera Procedure
– Adequate Damages• Comparison with German damage awards
National IP StrategyNational IP Strategy
METI-JPO “Pro-Patent Policy” Initiative– Key-person: Mr. Hisamitsu Arai– Report Published by Commission on IP
Rights in the 21st Century (1977)• Intellectual Creation Cycle
– Adoption of National Strategy to Become IP based Nation
• Enactment of Basic IP Law (2002)• Creation of IP headquarters within Cabinet
IP National StrategyIP National Strategy
IP Enforcement Restructuring– 1998: Adequate damages to compensate
infringement• Adoption of US Case Law Doctrine
– 1999: Improvement in evidence taking procedures
• Expansion of scope in document production orders
• Introduction of in-camera procedures – 2004 civil procedure revisions
IP National StrategyIP National Strategy
Patent-Technology Specialized Courts– 2003 Civil Proc. Revision
• Exclusive jurisdiction: First instance-Tokyo & Osaka Dist. Ct.; Appeals-Tokyo High Ct.
– April 2005: IP High Court• Semi-independent from Tokyo High Court• Patent-Technology expertise in all levels
Tort Damage TheoryTort Damage Theory
Similar Theoretical FrameworkJapan
– Cause-in-fact– Legal/adequate cause (foreseeability)
U.S.– Cause-in-fact – Proximate cause (foreseeability)
Tort Damage PolicyTort Damage Policy
Japan – Civil Law SystemRestitution: Returning to the situation
but for infringement
U.S. – Common Law SystemRole of individuals to participate in
enforcement of rightsDeterrence of tortuous acts
Damage MeasurementsDamage Measurements
U.S. Lost Profits Reasonable Royalty (Defendant’s Profit)
– Abolished
Japan Lost Profits
– Civil Code
Reasonable Royalty Defendant’s Profit
Patent Law PolicyPatent Law Policy
U.S.Emphasis on Adequate Compensation
– No ceiling but guaranteeing bottom line– Preference for lost profits
JapanSympathy for Innocent Infringers
– Ceiling for innocent infringers– Preference for reasonable royalty
U.S.: Lost ProfitsU.S.: Lost Profits
Patentee: Burden of Proof Causation between Infringement and
Damages– Courts favor inventors– Showing the causation with a
reasonable probability (need not negate every possibility that a customer would have bought a different product)
U.S.: U.S.: Panduit Panduit TestTestInference of CausationInference of Causation
Causation Inferred by Showing:① Market demand② Capability to meet such market
demand③ Absence of non-infringing acceptable
substitute in the market④ Profits the patent would have received
but for infringement
U.S.: Lost ProfitsU.S.: Lost Profits
Entire Market Value Rule
– Patentee may recover lost profits for an entire patented product even if the patent covers only a portion of such product• Functionality requirement• Demand for the entire product
requirement
– Convoyed Sale (spare parts, etc. ）
U.S.: Reasonable RoyaltyU.S.: Reasonable Royalty
Guaranteeing Reasonable Royalty as Bottom Line Compensation– No reduction for innocent infringers– Only enhancement for willful infringers
Case-by-Case Analysis– Georgia Pacific factors– Prior license – Minimum compensation– No prior license – High royalty rate
U.S.: Selection of Two U.S.: Selection of Two MeasurementsMeasurements
Patentee can select either lost profits or reasonable royalty depending on the conditions in the market
More than one measure of damages may be applied– Lost profits as to some sale by the
infringer and a reasonable royalty as to other sales
U.S.: Selection of Two U.S.: Selection of Two MeasurementsMeasurements
Japan: Lost ProfitsJapan: Lost Profits
Multiple Tests to Negate Causation– Patentee must exploit the patented
invention– Identity between the patentee’s product and
infringing product– Presence of acceptable substitutes
High Burden of ProofApportionmentLack of Evidence Taking Procedures
Japan: Reasonable RoyaltyJapan: Reasonable Royalty
No Guarantee to Compensate Actual damages– Courts may reduce the amount exceeding
a reasonable royalty if infringement is not willful or the defendant engaged in infringing act without gross negligence
Reliance on industry standard– Prior license - Maximum compensation– No prior license – Low royalty rate
Japan: Infringer’s ProfitsJapan: Infringer’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
Japan: Infringer’s ProfitsJapan: Infringer’s Profits
Rebuttal by InfringerProof of actual damagesFactors which negate causation for the
full amount of profits– Presence of non-infringing acceptable
substitute in the market– D’s marketing efforts– Apportionment
Huge Difference in DamagesHuge 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 Revision1998 Patent Revision
Art. 102, Para 1– Presumption of causation for lost profits
Art. 102, Para 4– Removal of “ordinarily”
1998 Revision1998 RevisionCodification ofCodification of Panduit Panduit TestTest
Causation Inferred by showing:① # of infringing products sold by
infringer② Net profit-per-product that patentee
would have sold but for infringement– Deduction of variable costs only
③ Capacity to make and sell the # of products sold by infringer
1998 Revision1998 RevisionCodification of Codification of Panduit Panduit TestTest
Rebuttal by Infringer# of products P could not have sold① Difference in infringing product and
patentee’s product– Competing products
② Presence of non-infringing acceptable substitute in the market
③ Apportionment– Entire market value rule
1998 Revision1998 RevisionReasonable RoyaltyReasonable Royalty
Case-by-Case Analysis– Higher than a legally negotiated royalty– A variety of factors
Guarantee of Minimum Compensation?– Courts’ discretion to reduce surplus from
a reasonable royalty - Reserved– Split awards of lost profits and reasonable
royalty – possible?
Impact of RevisionImpact of Revision
Patent-Utility Model Infringement
1989-1994 Average Damages Awarded$0.18 M (Median: $0.04M) 35.73%
1999-2004 Average Damages Awarded$1.11 M (Median: 0.22M) 43.19%
Patent
1996-2005 Average Damages Awarded$1.71 M
Impact of RevisionImpact of Revision
Not as significant as expected– High awards in early cases– Decrease in the average amount of damages in
recent cases– Small number of cases going to damage
calculation
Possible Reasons– Infrequent request of lost profits– Multiple factors to reduce the presumed lost
profits
Impact of RevisionImpact of Revision
Japan: Damage Awards AverageJapan: Damage Awards Average
$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.: Big Damages 2005-07
U.S.: Damages Awarded Median
