Important Revisions to Japanese Patent Law – Improvement to Patent Litigation System

A bill revising Japanese Patent Law (as well as other laws) was passed by the Diet (Japan’s bicameral legislature) on May 10, 2019 and promulgated on May 17, 2019.

  1. Purpose of the revisions

As a result of the digital revolution, industrial boundaries are quickly disappearing and open innovation is rapidly progressing. As a result, numerous opportunities exist for small and medium-size companies as well as start-ups that possess superior technologies to advance quickly. Additionally, excellent customer experience is quickly becoming a source of competitive strength for all types of companies.

In view of this ever-changing environment, important technologies must be sufficiently protected in the event of disputes between patent holders and other parties. Therefore, the purposes of these revisions is to: (i) improve the litigation system in connection with industrial property rights; and (ii) strengthen the design system so that designs utilizing digital technology can sufficiently protected thereby allowing new brands to be built.

This post will focus on the revisions designed to improve the litigation system.  A subsequent post will focus on the changes to the design system.

  1. Summary of the revisions to improve the patent litigation system 

   a.  Creation of a system for conducting on-site investigations by neutral technical          experts

Under the revised law, a system will be created where in the event of alleged patent infringement, a neutral technical expert will be allowed to enter a plant and/or other facilities of an alleged infringer in order to perform an investigation necessary to prove/disprove the infringement.  Practically, the way this system will work is that the Patentee or the alleged infringer may request a court appoint a neutral technical expert. The court will propose an expert.  Either or both parties may challenge the court’s proposed expert if either party believes that a fair investigation into the background or other qualifications of the proposed expert cannot be performed.

Once an expert is officially appointed, s/he will be permitted to enter the plant and/or other facilities of the alleged infringer and conduct an inspection.  Once completed, the expert will submit a formal report of his/her findings to the court.  While the court will have discretion in deciding whether to accept the expert’s report, it is expected that it will be accepted.  In principle, the fees for the investigation (and hence the expert), will be borne by the losing party.  

     b.     Revision to the method of calculating damages*

Under the previous law, damages for lost profits were calculated using the formula: number of infringing articles x the Patentee’s profit per unit.  The Patentee was not entitled to damages for lost profits for any portion that exceeded its production capability.  Under the revised law, the Patentee will now be able to collect damages for the portion exceeding its production capability.   

The amount of damages that can be awarded will be equivalent to the amount of a reasonable royalty for granting a license. Additionally, the revised law provides that one of the factors that can be considered in determining a reasonable royalty is the amount that would be determined if a negotiation were conducted based on the presumption that actual infringement occurred.

*Similar revisions have been implemented in the Utility Model Law, Design Law and Trademark Law. 

  1. Effective/Enforcement date of the Regulations

Except for a few stipulations, the revised law will take effect beginning from the date determined by a cabinet order but not later than one (1) year from the day of promulgation.

This post was written by Lisa Mueller and Katsumasa Osaki of Kawaguti & Partners.