https://www.tmi.gr.jp/uploads/2023/07/24/jptu_issue24.pdf#page=6

Introduction

In patent infringement cases seeking compensation for damages, it is quite difficult to verify the causal relationship between the infringing act and the damage suffered, as well as the amount of damage, in accordance with the general requirements under the Civil Code. Therefore, Article 102 of the Patent Act (serving as a special provision of the Civil Code) allows for the patentee’s side to have a reduced burden for verification. For instance, Article 102(2) stipulates that the amount of profits of the infringer is assumed to be the amount of damage, provided, however, that this presumption can be wholly or partially rebutted if the infringer successfully proves circumstances hindering a legally sufficient cause between the infringer’s profit and the patentee’s damages. Furthermore, Article 102(3) stipulates that the patentee may claim compensation for at least the amount equivalent to the license fee to which the patentee would have been entitled.
In cases where the amount of damage is assumed according to Article 102(2) of the Patent Act, there has been an unsettled issue of whether the application of Article 102(3) is acceptable with regard to the rebutted portion of the presumption based on the amount by which the patentee’s production/sales capacity is exceeded, and in turn whether the lost profits which could be attained by the patentee through sales plus the amount equivalent to the license fee can be assumed as the amount of damage, as with the idea of Article 102(1).

Under such circumstances, the Grand Panel of the Intellectual Property High Court (“IPHC”) in Japan released a judgment which accepted, for the first time, the concurrent application of Article 102(2) and Article 102(3) of the Patent Act with regard to the calculation of damages based on patent infringement (judgment by the IPHC as of October 20, 2022 (R2 (2020) (Ne) No. 10024)), and this judgment has been attracting a lot of attention in this field.

Determination by the Court

The IPHC pointed out that, given that the patentee can gain profits not only by directly working the patented invention but also by granting a license for the patented invention to a third party, it should be regarded that the damage incurred by the patentee due to the infringement by the infringer can be considered as being the lost profit resulting from a decrease in the sales of the product working the invention or the competing product which the patentee could have sold or otherwise worked if no patent infringement had been made by the infringer, plus the lost profit resulting from the loss of a licensing opportunity. In light of this point, the IPHC has shown determination criteria to the effect that, even where the presumption under Article 102(2) of the Patent Act is partially rebutted, if the patentee is found to have been able to grant a license for the rebutted portion of the presumption, it should be regarded that the application of paragraph (3) of that Article would still be allowed. The IPHC further ruled that “Grounds for rebuttal of the presumption under Article 102, Paragraph (2) of the Patent Act are regarded as including, as in the case of Paragraph (1) of that Article, grounds for rebuttal due to the quantity of sales, etc. of the infringing product exceeding the patentee's ability to sell or otherwise work the patented invention, and grounds for rebuttal due to circumstances under which the patentee could not sell or otherwise work the patented invention for any other reason. It is construed that, with regard to the rebutted portion of the presumption relating to the abovementioned grounds for rebuttal due to the quantity exceeding the patentee's ability to work the patented invention, the patentee is found to have been able to grant a license unless there are special circumstances; however, with regard to the rebutted portion of the presumption relating to the abovementioned grounds for rebuttal due to circumstances under which the patentee could not sell or otherwise work the patented invention for any other reason, whether or not the patentee could have granted a license under the facts of those circumstances should be determined on an individual basis.”

 

Conclusion

The patent system and judicial proceedings in Japan have been subject to criticism for the amounts of damage determined in infringement cases being too low and insufficient in terms of the protection of patent rights. In response, the Patent Act has been revised to allow for greater amounts of damage to be claimed, and relevant precedents have been made in recent years. The present judgment can be considered as being in line with such trend in terms of its basic principles, and it seems that it will contribute to an increase in the amounts of damage which can be accepted in patent infringement lawsuits in Japan.