The Realities of Judgements on Infringement of Patent and Notable Judgements

January 26, 2001
HARAKENZO World Patent & Trademark
Patent Attorney Kenzo HARA

I.Foundations of Legal System
(1)Japanese legal system is based on continental law so that written laws such as statutory laws are established.
(2)U.S. legal system is based on British system, so as to adopt common laws. Customary laws/case laws have been used so that basically no statutory laws are established. Legal principles are primarily made through cases.

II.Comparison of Japanese Court Organization and U.S. Counterpart
(1)Japanese Court Organization

• Five types of the courts: Supreme Court, High Courts, District Courts, Summary Courts, and Family Courts.
• A judicial system of three instances
[*1] Since cases which involve foreign companies and/or are disputed in different countries have recently increased in number, Supreme Court started to send young judges to Max Planck Institute (in Germany) for studying intellectual property, from January, 2001.
[*2] Max Planck Institute is a focal point of world-wide intellectual property specialists.
[*3] The Court is composed of judges, secretaries, court clerks and inquirers. Ex-examiners etc. sent from Japanese Patent Office are ranked as inquirers supporting judges from technical aspects.
[*4] In 2000, judges in intellectual property sections were increased from 8 to 12 (Tokyo District Court) and 3 to 5 (Osaka District Court).

(2)U.S. Court Organization • Dual organization - County Courts and Federal Courts
i.County Courts
• Each state is basically a nation state and has a sovereignty.
• Each state has a trial court and an appellate court (two or three instances).

ii.Federal Courts
• Federal Courts have limited jurisdiction in that they can only decide certain cases as defined in the Constitution.
• A judicial system of three instances: Federal District Courts, Courts of Appeal (including CAFC, Court of Appeals for the Federal Circuit), and United States Supreme Court (basically, the second trial must be
related to issues of law, and Supreme Court has power to decline review of cases from lower courts).
[*1] There are 91 Federal District Courts so that, for instance, four Courts are established respectively in California, New York, and Texas. Basically
a case is tried by a single judge, and there are 539 judges in total in 1990.
[*2] There are 13 Federal Courts of Appeal, and 169 judges in 1990.
[*3] 12 judges are in CAFC located in Washington D.C., and usually three of them hear a case.
[*4] There are nine judges in Supreme Court, which is located in Washington D.C.

iii. CAFC (Court of Appeals for the Federal Circuit)
• Established in 1982 as one of Federal Courts of Appeal, CAFC has nationwide jurisdiction to hear appeals related to patents, federal trademarks, and copyrights. The court was established to improve efficiency of legal procedures by exclusively dealing with technical cases, and standardize case laws related to patents, etc (to be pro-patent).

iv. ITC (International Trade Commission)
• Is an administrative court which is responsible for controlling unfair imports and protecting domestic industries. Appeals against ITC's decisions are heard by CAFC.

III. Reforms of Japanese Legal System
•Hollowization of the legal system
• Exclusiveness of Japanese judicial circle has been criticized
• Increase of international disputes
• Law schools will be established after 2003
• A plan to increase the number of people in legal professions to be around 150,000-160,000 (the same level as in France in terms of proportion of the number to the population)

IV. Characteristics of Japanese and American judgements
(1) Difference of the Numbers of Civil Procedures
• Japan: 225,000 cases (1990)
[*1] There were 642 suits related to intellectual property in 1999, which was doubled in 10 years. Among them, 446 suits were filed in Tokyo and Osaka District Courts.
[*2] According to the rectification of Code of Civil Procedure (§6) in 1998, it became possible to file a suit to Tokyo and Osaka District Courts from other districts, provided that the suit is related to patent,
etc. The suits to these two courts from other districts are 161 out of 191, i.e. more than 80% of the total suits.
•U.S.A.: 18,400,000 cases (1990)

(2)Subject of
the Trial
i. in Japan
• Systematic trial [filing of complaint è oral proceeding (1) è preparatory procedures for oral proceedings
(1) to (6) è oral proceeding (2) (judgement of the debate over infringement) è debate over damages]
[*1] Generally the debate over infringement finishes after around 300 days have past from the filing.
[*2] If the trial is deliberately delayed, the party responsible for the same is ordered to pay the trial expenses.
[*3] If both parties are absent from the trial, the trial is considered to be abandoned (§263 of Codes of Civil Procedure). If either one of the parties is absent, it is considered that the absent party makes a statement on a prepared paper (§158 of Codes of Civil Procedure).
• Debate over Infringement and Debate over Damages
• The plaintiff considers to claim larger amount.
• Decisions are made by professional judges.

[*] Although jury trial had been adopted in the past (1928 to 1943),
Jury Trial Act was suspended since growing numbers of defendants avoided jury trial because of its institutional flaws such as:
(1) judges were not bound to the decision of the jury;
(2) a defendant could not appeal;
(3) a defendant had to pay the trial expenses when the case was against him/her, etc.
• By reason of the private autonomy, an adversary system (facts by which the decision is made are exclusively taken from allegations of both parties and evidences, and the decision is made only on the point at issue) and a proceeding system (trials are basically open to the public, debates are made in front of the judge, and the decisions are made exclusively on the basis of what are presented in oral proceedings) are basic principles of the trial: based on principle of necessary oral proceedings (Code of Civil Procedure §87  ) and principle of voluntary oral proceedings (note of Code of Civil Procedure §87  ) • Burden of proof: Basically the burden of proof is on the party who is responsible for the allegation. (Exception) Conversion of the burden of proof (A is presumed to do ...)
• Ministry of Justice plans to introduce a jury for criminal cases (three professional judges and two citizens make a judgement including sentencing).

ii. in U.S.A.
• Jury is adopted only in the first trial (the right of trial by jury is preserved by amended Art. 7 of the Constitution)
[*1] More than 1,000 potential jurors are randomly drawn from voters lists è Those who  have not resided for a period of one year within the judicial district; ‚ are unable to read, write, and understand the English language; ƒ are mentally or physically infirm; or have felony charges pending against them or „ have been convicted of a felony, are disqualified using a questionnaire è Around 50 people are selected as a juror panel è unconditional challenge (up to three candidates are challenged without any reason) and conditional challenge (a candidate is challenged because of one's interest, prejudice, etc.) è 6 to 12 jurors are randomly drawn from the citizens regardless of one's race, occupation, sex, and educational background.
[*2] To jurors, the judge explains the judicial system and gives an advice on types of data on which a judgement is made, and the judge also governs the trial to fairly proceed the same. The jurors discuss the issue until all of them reach an agreement and return a verdict (or may decide by majority vote if both parties approve), and eventually the judge passes judgement.
[*3] If the jurors fail to reach an agreement after the discussion, new jurors are drawn.
[*4]Jurors decide (as a verdict):
 fact-finding (all facts at issue including action and effect, etc.);
‚ matters in which facts and laws are mixed (§102 identity, ˜103 non-obviousness, §112 requirement of disclosure, and recognition of validity/invalidity and infringement/non-infringement of the patent, and intention of infringement).
ƒ Amount of compensation
[*5]The judge makes (as judgement):
 interpretation of laws (interpretation of all kinds of laws, interpretation of claims, burden of proof, and standards of evidences)‚ Equitable decision (injunction, provisional disposition, approvement/rejection of triple damages, and suspension of execution due to fraud, etc.)

(3)Compensation
i. in Japan
• Code of Civil Procedure is considered to be a law for sorely compensating damages so that no incentives are added.
• In the case of unlawful act (including patent infringement), compensation up to substantial damages is awarded, basically without making a distinction between a result of negligence and an intentional act.
• Compensation for patent infringements has conventionally been around 2 to 30 million yen. However, the amount has recently been increased so that there was a case related to a patent of manufacturing a medicine, awarded 3 billion yen in total (Tokyo District Court case: Heisei 5 (Wa) No. 11876 on October 12, 1998).

ii. in U.S.A.
• United States Patent Law prescribes that compensation may be increased up to three times the amount found or assessed (35 U.S. §284).
Growing number of cases have recently been sentenced triple damages on the basis of the pro-patent trend.
[*1] The doctrine of triple damages is applied when the infringement is willful or through bad faith.
• The highest amount of compensation concerning patent infringement is around nine hundred million dollar in Polaroid vs Eastman Kodak.
(4)American Unique Legal Proceedings A legal system giving priority to economic efficiency.

i.Laches
• The infringed must not unfairly delay the action of suing (more than 6 years from the date on which the infringed noticed the infringement).
If the infringer is inflicted due to the unfair delay, the infringed cannot be compensated for the infringement before the filing of suit (can be compensated after the filing and be granted an injunction).

ii.Selection of Jurisdiction and
Venue
• Basically a jurisdiction in which the party or a matter concerned in the case is located is selected.
• In the case of breach of patent licensing contract, statute of limitations in state laws (usually 4 years) is applied.
• The venue is selected in consideration of geographical and racial prejudices, etc.

iii.Clean Hands
• Through the application, the settlement negotiation and the trial, the doctrine of clean hands is required.
• Unfair acts are such as:  fraud, ‚ intimidation, ƒ abuse of authority, „ immoral act, and … gross negligence.

iv.Discovery
• Is preparatory procedures for the trial so that allegations are organized and evidences are collected during this step.
• Targets all facts related to the reasons of suit.
• On the occasion of discovery, the party who are required to disclose the facts related to the case must accept the requirement so as to disclose insider information, unless an attorney privilege is applicable to the matter.
• Takes a long period of time (around two years for a single patent litigation; the case of Polaroid vs Eastman Kodak was over 12 basic patents so that the discovery took around 10 years, and overall litigation went on for around 14 years.) This is why litigation costs are expensive.
• Both parties acknowledge a single conclusion so that a stipulation is made, so that only the point at issue is discussed in the trial.

v.Deposition
• Is taken in an arbitrary place (usually a hotel or a law farm is selected, but in U.S. embassy or consulate when taken in Japan), in the presence of the court reporter.

vi.Fact-Finding Procedures by the Intensive Trial Method
(1)Jury trial
• The intensive trial method is adopted to improve juridical efficiency and not to keep jurors for too long days (took around two months in the case of Honeywell vs Minolta (over four patents), and a week in the case of Coyle vs Sega Enterprises (over one patent)).
• Examination of witnesses such as an expert from a third party and a patent attorney è Discussion of the jurors è Verdict è Conclusion of the trial è The judge passes the judgement
[*1] Verdict of jurors is passed as the jurors write in the juror instruction paper (usually dozens of pages)
[*2] The juror instruction paper and the result thereof is the judgement so that the judge does not write a judgement document.

(2)Bench Trial
• The judge writes the judgement document.

(5)Judgement on Patent Validity
i. in Japan
• Finding the patent invalid may be done only in a trial held in the Patent Office so that patents are not found invalid in trials of patent infringement (because of the division of jurisdiction between the Patent Office and the Courts).
[Notable Case]
Attention has been given to a judgement denying relief against infringement (Kilby case, Fujitsu Ltd. vs Texas Instruments Inc.).

The disputed patent, filed on December 21, 1971, was granted for a divisional application based on the application filed on January 30, 1964, which was based on the original application filed on February 6, 1959.

[Judgement of Tokyo High Court]
(September 10, 1997, Hanrei Jiho No. 1615-10)
[*] (Abstract of Judgement) The present application was applied to patent an invention which is identical with that of the original application so that the present application should have been invalid as defined in §39(1) of the Patent Law , and thus the same is highly likely to be judged as invalid. Furthermore, since the original application was rejected for lack of inventive step and the rejection was affirmed by the Tokyo High Court , the present application which is substantially identical with the original application also encompasses the reason of rejection as above, and hence a request to enforce such obviously invalid patent against a third party is an abuse of right.
[Judgement of the Supreme Court]
(Heisei 10 (O) No. 364, pronounced on April 11, 2000)

[*] (Abstract of Judgement) It is considered that the court is eligible to judge whether a patent encompasses a reason of invalidity or not, even before the cancellation of the patent is affirmed, so that if the trial proves that the patent clearly encompasses a reason of invalidity , a request of injunction, compensation, etc. based on right of the above-identified patent is seen as an abuse of right, unless having any special reason.
Precedents established by the former Supreme Court should be altered if the same is inconsistent with the above.

ii. in U.S.A.
• It is possible to dispute over patent validity in infringement litigation in the Court.

V.Patent Infringement Litigation (in both Japan and U.S.A.)
1. Before the Commencement of Trial
• Warning Letter
One who receives a warning letter can bring an action for confirmation. (In U.S.A., the one can take the initiative in selection of the venue and in the discovery.)
• Settlement Negotiation (National or international investigation / Finding grounds for the amount of compensation / Legitimacy of the patent / Legitimacy of the evidences / Trial expenses / Construction of mutual trust / Duration (considering the period of limitation) / Standpoint of the opponent / Design variation / Record of negotiation (importance of "Good Faith")
[*1] In Japan, matters which are admitted in the settlement can be evidences in the trial. In the meantime, in U.S.A., matters such as infringement admitted in the settlement are basically not taken as evidences, to encourage the settlement negotiation (Rule 408 of Federal rules of Evidence).
[*2] In the case of Honeywell vs Minolta, although the amount of compensation presented in the settlement negotiation before the trial was around 3 billion yen, it was increased to around 12 billion yen in the verdict.
[*3] Japanese Civil Code (§703, etc.) allows to demand restitution of illicit gain (generally equivalent to the royalty) when the damages are extinguished due to the prescription (Civil Code §724 (Suspension of Prescription), §147 and 149, and Code of Civil Procedure §147)
[*4] In U.S.A., a report of expert opinion (may be more than one document) is prepared before starting a business, to avoid infringement which is seen as intentional.
• Settlement Agreement

2. After the Commencement of Trial
(1) Plaintiff
i. Filing the Suit
[*1] Standard estimation of compensation in injunction in Japan (Annual turnover of the defendant) × (A Profit rate of the defendant) × (remaining years of the patent right) × 1/8
[*2] Declaration for provisional execution (Code of Civil Procedure §259), the rate of interest at 5% per year (Civil Code §404)
[*3] A decision as to the principal matter is made after consultation with multiple judges, whereas the provisional execution is ordered by a single judge.
[*4] Compensation: Those who simply use the infringed matter are basically ordered to pay an amount equivalent to the royalty, meanwhile those who manufacture the infringed matter are basically ordered to pay an amount equivalent to lost profit of the patentee.
ii.Affirmation of Technical Field
iii.Specification of the Matter (Method) at Issue
iv.Comparison
v.Insistence of Literal Equivalency
vi.Insistence of "the Doctrine of Equivalents" When the Matters Are Not Literally Equivalent

[Notable Cases in Japan and U.S.A. Concerning the Doctrine of Equivalents]
[Japan]
The judgement of the Supreme Court (Ball Spline case: Heisei 6 (O) No. 1083 on February 24, 1998, see Hanrei Times Vol. 969, p. 105) presented five principles for application of the doctrine of equivalents.
 The elements of the accused product which are different from the patented invention are not an essential portion of the patented invention.

‚ The objective of the patented invention can be attained even if the elements are replaced with the structure in the accused product, and thus the accused product results in the identical functions and effects as the patented invention.
ƒ One skilled in the field would have readily conceived the interchangeability between the claimed portion and other structures at the time of import and manufacturing of the accused product.
„ The accused product is novel and would not have been identical with prior art or able to be conceived easily by one skilled, at the time of the application of the patented invention.
… No special reasons, such as the accused product was intentionally removed from the technical scope of the claim by the applicant during the patent application, are found.

[U.S.A.]
In U.S.A., the accused product is regarded as an equivalence of the patented invention, provided that claimed elements of the both parties have:  the same ways; ‚ the same functions; and ƒ the same results, and also the accused product does not give rise to prosecution history estoppel.
Last year, CAFC passed a judgement (on Festo Corp. vs SMC Corp. et al., No. 95-1066, November 29, 2000) which made a change of the doctrine of equivalents.(Abstract of Judgement)

1. An amendment which narrows the scope of a claim will give rise to prosecution history estoppel with respect to the amended claim . Thus the doctrine of equivalents is not applied to the above-identified claim.
2. An amendment which creates prosecution history estoppel is not limited to an amendment for overcoming the rejection according to prior art (35USC §102, §103, and §11). A voluntary amendment that narrows the scope of a claim will give rise to prosecution history estoppel as well.
3. If a statement that an amendment is not for narrowing a claim is not written in the file wrapper, the amendment will not be a subject for the doctrine of equivalents (vindication is not accepted in the
trial).
4. Canceling an independent claim in the original application and then rewriting a claim which depended on the same to an independent claim is also considered as narrowing amendment, and hence the amended claim will not be a subject for the doctrine of equivalents.
5. In summary, amendments which do not create prosecution history estoppel are only such as an amendment not narrowing the scope of a claim (expanding amendment of the claim, etc.) or an amendment of clearly unimportant grammatical mistakes, and moreover the amendment must be accompanied with a statement that the same is not for narrowing the claim .
(Problems Likely to Be Arisen from the Judgement Above)
i. A patent imitator would examine the prosecution history of a target patent, and if a narrowing amendment of the claim, which is related to patentability, is specified, the imitator can easily avoid an infringement of the patent by changing an element of the patent which element is related to the narrowing amendment of the claim, while simply imitating other claims.
ii. It is considered that imitators will intend to abuse the judgement above, since it is possible for them to insist non-infringement only by substituting well-known alternative means for a component in an amended claim being narrowed.
iii. With respect to a component in an amended claim being narrowed, the patentee cannot expect an application of the doctrine of equivalents in accommodating after-arising technology.

(Measures Taken Against the Problems)
i.Before drafting a specification for application, prior art should be carefully searched and examined
to avoid a narrowing amendment in the future.
ii. All possible amendments should be assumed in advance on the occasion of drafting claims for application, considering a case when an original claim of the application does not meet legal requirement.
[*] • From the original application, not only independent and dependent claims but also many intermediate claims should be prepared for covering wide area.
• From the original application, claims for explaining the invention from different perspectives should be prepared.
iii. On the occasion of responding for the First Office Action, it is desirable to add new claims which are independent and have scopes being widen (it is, however, uncertain whether the doctrine of equivalents is applied to the above or not).
iv.Narrowing amendment of a claim should be avoided as much as possible, and an appeal should be requested, if necessary.
v. At the time of an interview with the Examiner, it should be noticed that an unnecessarily long summary of the interview is disadvantageous.
vi. If narrowing amendment is inescapable, the amendment should be aimed to become similar to well-known technology, yet different from the same.
vii. All amendments should be accompanied with reasons.
viii. In some cases, the invention should be applied as multiple applications rather than a single application(this is because, since divisional application is considered as a kind of amendment, claims of the divisional application have to be the same as those of the original).
ix. A claim using structural terms and a claim using means-plus-function terms should be both prepared, if possible (In some cases, it is not necessary to amend so as to narrow the claim using means plus function terms, even if the claim using structural terms must be narrowing-amended, and the means-plus-function claim can be a subject of the doctrine of equivalents.).
x. To circumvent the need of describing the reason of narrowing a claim, one can file provisionally application without including claims, and then file the regular patent application within a year from the provisional application.
xi.Counterclaim (in Japan)
[*1] In Nichia Corp. vs Toyota Gosei, 9 legal actions including counterclaims by Toyota Gosei were filed for the Tokyo District Court, over more than hundred patents related to "blue Light Emitting Diode (LED)" which Nichia has acquired. Nichia won two cases among them in the first trials last year.
[*2] "Counterclaim" (Code of Civil Procedure §146) is a lawsuit filed during the original proceedings is pending, in which the defendant brings a legal action against the plaintiff. Conditions for taking counterclaim are as below.
 The original proceedings should be arranged to continue to fact-finding proceedings, and the counterclaim
should be filed before the conclusion of oral proceedings.
‚ Requirement for merging requests should be met.
ƒ The counterclaim should be related to the original application or the defense strategy against the same.
„ The counterclaim is required not to excessively prolong the legal proceedings.

… In an appellate court, recognition of a defendant of the counterclaim is required (Code of Civil Procedure
§300  ).
[*3] Examples of counterclaims concerning patent infringement litigation:
 Requirement for prohibiting circulation of falsity (Unfair Competition Prevention Law §2  13)
‚ Injunction of circulation of falsity, compensation, and recoupment of reputation
(2)Defendant
i.Limitation of the Technical Field
ii.Consideration of Reasons for the Defense
iii. Allegation of Invalidity of a Patent and Requirement of a Trial for Seeking Invalidity
(3)Taking the trial expense into account (especially in U.S.A.), it is important to proceed a trial while checking the timing and condition of the settlement.
IV.Peculiarity of Trademark Infringement
[Notable Case]
A unique case concerning trademark was Kozosushi case (Heisei 6 (O) No. 1102 on March 11, 1997) as below. (Abstract of Judgement)

Even if a third party uses a mark similar to a registered trademark for a trademark of products manufactured and sold by the party, it is considered that damages as illicit profit, which is equivalent to royalty, are not caused , provided that clearly the registered trademark has not been recognized by costumers at all and the use of the mark similar to the registered trademark does not affect the third party's sales of products at all.
[*] In the cases of patent infringement, the infringer is ordered to pay compensation equivalent to royalty or more, even if the infringer does not practice the patent (Patent Law §102 ƒ„ ). In this kind of cases, past judgements on trademark also admitted the payment of 0.2 to 3.0% of royalty even if the trademark has not been used.

VII. Q&A
1. It has been relatively difficult to prove an infringement of a patent of manufacturing method, etc. I have heard that although being no equal to the discovery procedure in United States, legislation on duty of disclosure is now proceeded in Japan.
To what extent is the new act practically useful, and what do I have to care about?
i.Calculation of Compensation
(1) Substantial damages of the patentee, licensee et al.
(2) Affirmed as an amount of damages of the patentee, licensee et al. as below:
§102  — Number of the infringed product transferred by the infringer × Profit per unit of the infringed product for the patentee, licensee et al. (Not beyond the limit of operativity of the patentee, licensee et al.)
(3) An assumed amount of damages that the patentee, licensee et al. suffered è An amount of profit of the infringer (§102 ‚ )
(4) An amount of the royalty or more, even if the patentee, licensee et al. do not practice the invention.
ii.Assumption of Negligence (§103)
iii. Assumption of Manufacturing Method (§104)
iv.Infringer's Duty to Disclose the Concrete Embodiment (§104 ‚ ) (for proving the act of infringement with ease)
This is for resolving the difficulty of specifying infringing products by the patentee. Based on the principle of justice, speedfulness, and good faith (§2 of Code of Civil Procedure), duty of collaboration for legal proceedings between the parties is clarified.
v.Requirement of Production of Document (§105  ) and "In Camera" (§105 ‚ )
vi.Appointment of Expert Damage Calculator (§105 ‚ )
vii.Assumption of an Appropriate Amount of Damages by the Court, when the Amount of Damages Is Improvable (§105 ƒ )

2.Please let me know about notable cases concerning Unfair Competition Prevention Law and Copyright Law.
(1)Provisional disposition of civil affairs with regard to unfair competition, Tokyo District Court case: Heisei 11 (Yo) 22125 on September 20, 1999 (Apple Computer vs KK Sotec) According to the judgement, a shape of a PC of the creditor, "iMac" is recognized as well-known product, and a product of the debtor is ordered to stop selling and manufacturing thereof under Unfair Competition Prevention Law §3(1) and §2(1)(i), since the product of the debtor could be confused with the product of the creditor.
(2)Civil action with regard to unfair competition, Toyama District Court case: Heisei 10 (Wa) No. 323 on December 6, 2000 (JACCS Co. vs Nihonkai Pact) Judgement: Use of the domain name is regarded as "use" of "marks such as products" as defined in Unfair Competition Prevention Law §2  (i) and (ii), and under §2  (ii) of the same, injunction is granted against the defendant for the use of the registered domain name "http://www.jaccs.co.jp" and "JACCS" in the homepage of the defendant, which are similar to the famous trademark "JACCS" of the plaintiff. (Petition for appeal has been filed.)
[*1] Registration of domain names is decided on the basis of first come, first served, and hence many well-known companies were asked to buy the domain names at high prices.
[*2] International dispute is arbitrated by WIPO (World Intellectual Property Organization), and Sony, Nintendo, etc. won the cases arbitrated by the organization. WIPO only deals with disputes related to domain names
finished with ".com".
[*3] WIPO's judgement follows principles as below:
 Probability of causing mistake or confusion
‚ Whether the user of domain name has lawful right or not
ƒ Existence of bad faith

3. Could you outline recent notable cases in Japan concerning business method patent? Although many lawsuits related to business method patent have been brought in U.S., still there are none in Japan.