The Intellectual Property Review: Japan
Forms of intellectual property protection
The most important forms of intellectual property protection available in Japan are patents, design patents, utility models, trademarks and copyrights, each of which has its own legislation, briefly outlined below.
The Patent Act (Act No. 121 of 1959) protects inventions, which it defines as 'highly advanced creation of technical ideas utilising the laws of nature'. Patents are granted to the inventor of an invention with industrial applications after examination, provided the invention is not, prior to the filing of the patent application: (1) publicly known in Japan or a foreign country; (2) publicly used in Japan or a foreign country; or (3) described in a distributed publication, or made publicly available electronically in Japan or a foreign country. Patentability also requires novelty, and so patents are not granted where a person ordinarily skilled in the art of the invention would have been able to easily make the invention that would be subject to items (1) to (3) above. Japan is a member of the Patent Cooperation Treaty (PCT), which is intended to simplify the process for applicants seeking patent protection internationally for their inventions, helps patent offices with decisions on patents and facilitates public access to a wealth of technical information relating to inventions dating back to 1978.
The Utility Model Act (Act No. 123 of 1959) offers protection for utility inventions for 10 years after filing for registration. Registrations are granted without substantive examination in the case of utility model rights. The creator of a device (defined as the 'creation of technical ideas utilising the laws of nature') that relates to the shape or structure of an article or combination of articles and is industrially applicable may be entitled to a registered utility model right with respect to the device, provided that it adheres to the same criteria listed in items (1) to (3) for invention patents.
The Design Act (Act No. 125 of 1595) offers protection for novel and creative designs for a period of 20 years after registration, which is granted after substantive examination. 'Design' here is defined as any combination of shape, patterns or colours of an article, creating an aesthetic visual impression. A creator of a design that is industrially applicable can register their design, provided that it is not, prior to the filing of the application for design registration: (1) publicly known in Japan or a foreign country; (2) described in a distributed publication, or made publicly available electronically in Japan or a foreign country; or (3) similar to (1) and (2) above. Unlike many European countries, which do not require substantial examination, Japan requires substantial examination of design applications before registration is granted. In addition, the Design Act requires novelty of the design, so designs cannot be registered if a person ordinarily skilled in the art of the design would have been able to easily create the design based on shapes, patterns or colours, or any combination thereof that were publicly known in Japan or a foreign country prior to the filing of the application for design registration.
The Trademark Act (Act No. 127 of 1959) protects registered trademarks used for specific products and services for a period of 10 years, which is renewable. Any combination of characters, figures, signs, 3D shapes or combination thereof with colours, sound, motion pictures, holograms or position may be registered as a trademark if it is either used in connection with the goods of a person who produces, certifies or assigns such goods as a business; or used in connection with the services of a person who provides or certifies the services as a business. However, excluded from this are those that:
- consist solely of a mark indicating, in a common manner, the common name of the goods or services;
- are customarily used in connection with the goods or services;
- consist solely of a mark indicating, in a common manner, in the case of goods, the place of origin, place of sale, quality, raw materials, efficacy, intended purpose, quantity, shape (including shape of packages), price, the method or time of production or use, or, in the case of services, the location of provision, quality, articles to be used in such provision, efficacy, intended purpose, quantity, modes, price or method or time of provision;
- consist solely of a mark indicating, in a common manner, a common surname or name of a juridical person;
- consist solely of a very simple and common mark; or
- are, in addition to those listed in each of the preceding items, a mark by which consumers are not able to recognise the goods or services as those pertaining to the business of that particular person.
Japan is a member of the Madrid System, which is a one-stop solution for registering and managing marks worldwide since 2000.
Under the Copyright Act (Act No. 48 of 1970), copyrightable works are those in which thoughts or sentiments are expressed creatively, and which fall within the literary, scientific, artistic or musical domain. Copyrightable works include novels, plays or films, scripts, dissertations, lectures and other literary works; musical works, choreographic works and pantomimes; paintings, engravings, sculptures and other artistic works; architectural works; maps and diagrammatical works of a scientific nature, such as drawings, charts and models; cinematographic works; photographic works; and computer programs. However, works categorised as 'applied works', usually meaning those for sale as utility goods or souvenirs, cannot be protected by copyright.
Registration is not mandatory and a work may be protected by copyright without copyright registration. However, registration is necessary to assert against third parties the transfer (other than by inheritance or other succession) of the copyright, restrictions on the disposal of the copyright, the establishment, transfer, modification or termination of a pledge on the copyright, or restrictions on the disposal of a pledge established on the copyright. Registration is made with the Agency of Cultural Affairs (ACA) or, in the case of software programs, with the Software Information Centre (SOFTIC). The author of a work that is made public anonymously or pseudonymously may have his or her true name registered with ACA and SOFTIC based on the moral right of the author with respect to work, regardless of whether he or she actually owns the copyright. In addition, the copyright holder of any work, or the publisher of an anonymous or pseudonymous work, may register the work's date of first publication or the date when the work was first made public. In the case of computer programs, the author may have the date of the creation of the work registered with SOFTIC provided this is done within six months of the work's creation.
The protection period begins at the time the work is created and subsists for 70 years after the death of the author or, in the case of a jointly authored work, for 70 years after the death of the last surviving co-author. The copyright protection period for a work that bears the name of a juridical person, or other corporate body as its author, is 70 years either from the date the work was first made public, or, if the work was not made public within 70 years of its creation, 70 years from the date of its creation.
The copyright period for a cinematographic work is either 70 years from the date the work was first made public, or, if the work was not made public within 70 years of its creation, 70 years from the date of its creation.
i Patent Act
The Patent Act was partially amended, effective 1 April 2020, to introduce an 'inspection system', a new means of collecting evidence in patent infringement litigation, and to change the rules regarding calculation of damages, which will become more favourable to patentees.
Under the new inspection system a Japanese court may, with a motion of an applicant and by an inspection order, designate a neutral expert called an 'inspector' who will be authorised to conduct an on-site inspection (Article 105-2(1) of the new Patent Act). The inspector will have a general power to: enter factories, offices or any other places used by a respondent; ask questions; and request provision of documents, equipment and any other items that are in the possession of or under the control of the respondent. The inspector will also have a power to conduct specific activities permitted by the court, such as operation of equipment, taking measurements, conducting experiments and any other action necessary.
The inspection order is granted only when the applicant succeeds in showing that the following four conditions are met:
- necessity – collection of evidence by inspection is necessary to prove a certain fact;
- probability – there are reasonable grounds to suspect infringement of a patent right by the respondent;
- complementarity – the applicant is expected to be unable to collect the evidence by himself or herself or by any other means; and
- equivalence – the inspection should not be unreasonable: it should take into account the time required for the collection of evidence, the burden on the party, or other circumstances.
In order to ensure the effectiveness of the inspection system, the court may find the applicant's allegations as to the facts to be established to be true if the respondent does not comply with the requirements or questions of the inspector without reasonable grounds.
Furthermore, in order to protect the trade secrets of the respondent, the new Patent Act provides the following protective measures:
- the inspector may be challenged if circumstances exist indicating that the inspection will be conducted without good faith;
- an applicant, including its counsel, cannot participate in the inspection;
- the inspector owes a duty of confidentiality secured by criminal sanction; and
- an inspection report that the inspector submits to the court may not be disclosed to the public, and may be partially redacted if a party so applies and the court finds justifiable reason in the application.
Calculation of damages
In Japanese patent litigation, the amount of damages may be calculated based on the following grounds:
- the patentee's potential profits lost by the infringement calculated by using the number of infringing products sold by the accused infringer (Article 102(3) of the current Patent Act);
- the accused infringer's profits gained from the infringement (Article 102(3) of the current Patent Act); or
- the amount of reasonable royalty (Article 102(3) of the current Patent Act).
The 2019 amendment aims to implement new rules regarding calculation of damages based on Articles 102(1) and 102(3).
If a patentee seeks damages based on Article 102(1), the amount of damages claimable will be limited by the patentee's capability to sell its product that is using the patented invention. The question is whether the patentee can still be compensated for lost profit that exceeds capability stipulated in Article 102(1) by application of Article 102(3), which is considered to set out the minimum standard of compensation the patentee is entitled to. Before the 2019 amendment, the IP High Court ruled that Article 102(3) does not apply to lost profit that exceeds the patentee's capability under Article 102(1). However, under the new Article 102(1), the patentee will be entitled to seek 'reasonable royalty' even for lost profit that exceeds the patentee's capability.
The 2019 amendment also sets out a new rule on calculation of 'reasonable royalty' stipulated under current Article 102(3). Current Article 102(3) only provides that the patentee is entitled to 'the amount the patentee or exclusive licensee would have been entitled to receive for the working of the invention', and does not set out any specific criteria. However, in practice, the court considers with certain weight how much the patentee would obtain if the patent in question was licensed in the normal course of business, which sometimes is said to give incentive to the infringers. In an aim to change the current practice, new Article 102(4) provides that, in calculation of 'reasonable royalty', the court may take into consideration the amount that the patentee would be entitled to 'if an agreement is reached with the infringer on the premise that the patent right … has been infringed'.
Furthermore, there have been two new IP Court Grand Judgments rendered that explain, for the first time, the factors to be considered in application of Articles 102(1) and 102(2) respectively. One notable ruling of the judgment dated 24 January 2020 is that, in relation to application of Article 102(1), even if only a part of the unique feature of the patented invention is used in a patentee's product, it can be factually assumed that the whole amount of the marginal profit that the patentee may obtain from sales of such product is the lost profit. This ruling would be beneficial to a patentee who decides to commence patent infringement litigation in Japan to seek damages.
ii Design Act
The Design Act was amended, effective 1 April 2020, to expand the protected 'design' under the current Design Act to include: (1) exterior and interior designs of buildings; and (2) graphic images that are not recorded or displayed 'on' articles (ie, movable property), such as an image displayed through a network or on a wall or table. In relation to the latter expansion, however, graphic images must still be displayed 'in relation to' articles so that images that relate to content but do not relate to function of articles will be excluded from the subject of protection.
Furthermore, there are other notable changes, such as: (1) extension of duration of design right from '20 years from the registration date' to '25 years from the filing date'; (2) a change in the system regarding 'related designs'; and (3) enhancement of indirect infringement which adopts similar rules to those under the Patent Act.
In addition, rules regarding calculation of damages are also amended, similarly to the 2019 amendment of the Patent Act.
iii Trademark Act
The Trademark Act was amended, effective 1 April 2015, to enable registration of trademarks for sound, motion pictures, holograms and colour without profile.
The amended Trademark Act also clarifies the limits of a registered trademark. The courts have adjudged that the effect of a registered trademark should be limited to the extent that the trademark represents the goods or services prescribed. This concept had been deemed self-evident and not explicitly stated in the Act. However, as many trademark holders have made excessive assertions of trademark rights, the concept has been given statutory effect to curtail such claims.
The Trademark Act was again amended on 23 May 2018 in relation to the division of applications and the amendments became effective on 9 June 2018. An applicant may file one or more new applications with regard to a part of an existing application, designating two or more goods or services as its designated goods or designated services, if the original application is pending in an examination proceeding, trial or appeal, or retrial examination, or if there is a suit against a decision on appeal to refuse the application pending in court. The new application for trademark registration is deemed to have been filed at the time of filing of the original application. Before the amendment, this divided application procedure was abused and many applicants filed new applications without paying any application fees. The amendment requires the payment of application fees to enjoy the effect of dividing.
In addition, rules regarding calculation of damages are also amended, similarly to the 2019 amendment of the Patent Act.
iv Copyright Act
The Copyright Act was partly amended and the amended act becomes effective on 1 January 2019. The Japanese Copyright Act has no general 'fair use' provision such as provided in the US Copyright Act, but the amended act expands exempting provisions in general to permit the use of copyrighted work without the approval of the copyright holder in certain defined situations. It enables the use of copyrighted works in a search or analysis service, which were questionable under the former act, without the permission of right holders.
vi Protected data
The Unfair Competition Prevention Act was partially amended, effective 1 July 2019, to include protected data. This new concept is introduced to protect business data that cannot be protected under the existing scheme regarding a trade secret, which requires data to be non-public, kept confidential and useful. In practice, data that is distributed in the market is questionable in terms of protection under the category of trade secret for lack of either non-publicity or confidentiality, but there has been a strong demand for protection of such data.
Under the Act, 'protected data' are defined as 'technical or business information' that satisfies all of the following:
- 'provided to specific persons on a regular basis';
- 'accumulated in a reasonable quantity by electronic or magnetic means'; and
- 'managed by electronic or magnetic means'.
Moreover, data that are kept secret are explicitly excluded from the definition of 'protected data' so there will be no overlap with 'trade secret', which will continue to be protected under the Act.
The Act restricts any person from obtaining, distributing (including assignment, import, export, etc.) and misusing protected data, which violation is subject to civil sanction but not yet criminal penalty. Nonetheless, pursuing civil sanction against a third party for violation in relation to protected data will face practical difficulties as a plaintiff will have to show that the third party obtained protected data knowing that there is violation of the Act. In addition, the third party will not be subject to civil sanction for using protected data if it subsequently became aware that the data was transferred in violation of the Act.
Since there is as yet no precedent in regard to protected data, there are still uncertainties in the use of this new system. To promote use of the protected data status, the Ministry of Economy, Trade and Industry has recently issued guidance related to this newly introduced concept.
With respect to natural products, those that do not involve the intentional development of technical ideas are not inventions under the Patent Act, but 'chemicals, bacteria, etc. isolated from natural products artificially' are created products and so constitute inventions under the Patent Act, for which patents may be granted. Genes also constitute inventions under the Patent Act on the premise that they are artificially isolated.
Patents may also be registered for cells, etc. used in genetic technology; in practice, patents have already been registered in relation to technology for the production of iPS cells by Shinya Yamanaka, a Nobel Prize-winning professor.
Inventions relating to the production of cells, plants and animals may be protected by patent rights. If a new variety is created, it may also be protected under the Plant Variety Protection and Seed Act.
Although industrial applicability is one of the requirements for patentability in Japan, surgical processes, treatment methods and diagnostic measures used in medical practice for diagnosis cannot be 'used industrially'. However, examination guidelines for the patentability of inventions relating to medical practices are gradually being eased and now stipulate that regenerative medicine, the operation of medical equipment, collection of samples from the human body, medical inventions characterised by usage with a certain dosage and administration for particular disease, may also be subject to protection.
Business methods may be registered as patents in Japan if the method is deemed as a new 'highly advanced creation of technical ideas utilising the laws of nature'. However, the requirements for registration as a business method patent are stringent and, as a practical matter, even once registered can often be reasonably easily imitated without infringement by sidestepping the patent. For these reasons, business method patent applications are rare. However, on 17 October 2018 the IP High Court ruled a business method related to provision of a steak at steak houses to be patentable. Although the decision is highly dependent on fact, careful analysis of the case may be helpful when a patent application regarding business methods is considered. In practice, business methods are commonly protected in Japan through trademarks used in association with the methods and by executing licensing and other agreements.
Computer software may be protected under the Copyright Act and the Patent Act. Computer software may be registered as a patent under the Patent Act if it can be deemed as a 'computer program, etc.', which means a computer program (i.e., a set of instructions given to an electronic computer that are combined in order to produce a specific result) or any other information that is to be processed by an electronic computer equivalent to a computer program. Registration as a patent takes time because the Patent Office conducts detailed examination of the application. However, software that includes thoughts or sentiments expressed creatively may be protected under the Copyright Act without registration, though registration through the SOFTIC is also possible. In addition, the author of a computer program may have the date of creation of his or her work registered with SOFTIC within six months of the creation of the work.
Independently developed circuit layouts for semiconductor chips may be protected as layout-design exploitation rights. Devices in relation to an article's shape, structure or combination, which are not functional as inventions, may be protected as utility model rights.
Enforcement of rights
i Possible venues for enforcement
There are two major options for enforcement of patents, trademarks and other intellectual properties: filing a complaint with a court and obtaining an injunction or an order for payment of damages compensation or both; or filing a motion with customs to suspend the import of products alleged to infringe intellectual property rights.
ii Requirements for jurisdiction and venue
The Code of Civil Procedure provides exclusive jurisdiction for cases on patents, utility model layout-designs of semiconductor integrated circuits and computer programs to the district courts in Tokyo and Osaka. In both courts, there are special divisions for litigation of intellectual property rights cases. Appeals with regard to such intellectual property infringement litigations are handled by the IP High Court, which is a specialised court for patents within the Tokyo High Court. The IP High Court also has exclusive jurisdiction over litigation to overturn Patent Office decisions.
This arbitration procedure on intellectual property rights (Intellectual Property Arbitration) started at the intellectual property departments of the Tokyo District Court and Osaka District Court on 1 October 2019 in order to resolve disputes over intellectual property rights arising in the course of business through negotiations based on the advice and views of the Arbitration Committee, which consists of judges of the intellectual property departments and lawyers and patent attorneys with extensive experience in intellectual property cases, relying on materials submitted by a certain date. It is a judicial service that provides, within the framework of the current law, a third type of dispute resolution tool that does not exist in litigation or provisional disposition.
Regarding customs procedures, the Customs Tariff Act grants all customs offices the authority to deal with intellectual property infringement cases. However, nine key offices have specialists for intellectual property rights protection. These are located in Hakodate, Kobe, Moji, Nagasaki, Nagoya, Okinawa, Osaka, Tokyo and Yokohama. Procedures are conducted at the discretion of the officers, but generally move quickly, usually taking approximately two months to conclude whether there is an infringement of IP rights.
iii Obtaining relevant evidence of infringement and discovery
Unlike the US litigation system, there is no discovery procedure under Japan's Code of Civil Procedure. In principle, therefore, each party has to collect its own evidence at its own responsibility based upon rules for the burden of proof. However, there are some statutory measures for the collection of evidence from an adverse party or third parties in certain cases, before and after filing a lawsuit.
Firstly, prior to filing a lawsuit, a potential claimant can file a motion for an examination and preservation of the result of the examination. Evidence preservation can be ordered if the court is convinced that the existing circumstances could result in preventing the use of evidence, if such evidence is not reviewed or secured before the trial begins. The potential claimant has to show the likelihood of evidence being lost, damaged, modified or hidden. In practice, however, the courts often deny such motions on the basis that it is likely to inflict irreparable harm on the adversary.
Secondly, after initiating a lawsuit, the Patent Act requires the defendant to contribute to the clarification of facts by submission of the disputed product or by disclosing the disputed method. The Patent Act also provides that the court can order, upon the motion of a party, submission of information or disclosure of methods deemed relevant by the court in order to establish the infringement or for computation of damages; the party required to submit information or disclose the method cannot deny the request without justifiable reasons (e.g., that the requested information contains trade secrets or information prepared exclusively for internal purposes).
iv Trial decision-maker
Intellectual property litigation is heard by a panel of three judges in the division of the court that hears intellectual property right cases; although the judges will generally have experience hearing patent cases, this is not necessarily the case and they tend to be rotated every three to five years from other courts or divisions not related to intellectual property. The parties may also make technical presentations to the court, as described below, which are usually also attended by a court-appointed technical expert.
v Structure of the trial
A patent infringement trial will normally be a two-phase process. In the first phase, the terms in the claims of the patent must be interpreted, including the matters of validity and unenforceability. The second phase determines damages if the court finds it necessary after the first phase. The trial will be conducted in public, with non-public preparatory proceedings conducted in a court conference room. While the early hearings and the final hearing will normally be held in a court in public, the procedure is almost always then switched to a preparatory proceeding. Hearings, including preparatory proceedings of generally about half an hour, are held every four to six weeks. The main work in the hearings involves exchanging briefs and written evidence, although discussions are also held when the judge finds it necessary. Although hearings are normally quite short, the court will hold a technical presentation session of around 30 to 90 minutes to make an oral presentation to the judges after all of the relevant arguments and evidence have been submitted to the court in the first phase. Technical presentations are usually made by both parties. In most cases, a technical expert appointed by the court will attend the presentation.
Infringements can either be direct or indirect. With respect to direct infringement, the claimant must present evidence that all of the elements of the claim are satisfied in the accused product or method. According to Article 70(1) of the Patent Act, the scope of a patented invention is determined on the basis of the statements of the claims, and Article 70(2) adds that the meaning of the terms in a claim shall be interpreted in light of the specification and the drawings attached to the application. The judges will also take into account the ordinary meaning, prosecution history, the state of the art at the time of filing the application and expert opinions. The doctrine of equivalents will supplement the missing elements under the limited conditions as specified by the Supreme Court. The conditions of the doctrine of equivalents are:
- a claim element, which the subject product or method does not have, is not an essential part of the claimed invention;
- the subject product or method must have the same object and effect as the claimed invention;
- a person skilled in the art of the invention could have readily substituted the claimed element with the corresponding element in the subject product or method in view of the state of the art at the time of infringement;
- the subject product or method must not be anticipated or obvious based on the prior art; and
- the subject product or method was not intentionally excluded from the scope of the claim in the prosecution history.
Infringement may be indirect. Article 101 of the Patent Act provides that the manufacturing, assignment or importation of an item that is used exclusively for manufacturing a patented product or using a patented method, is deemed to infringe the patent regardless of the awareness of the alleged infringer. Where an item is manufactured, assigned or imported to be used not only for manufacturing a patented product or using a patented method but also for other purposes, the patent holder must prove that the alleged infringer knows both of the existence of the patent and the fact the item can be used for manufacturing the patented product or using the patented method.
Generally speaking, the success rate of the defence of patent infringement claims is extremely high in Japan (approximately 80 per cent). The major defences to patent infringement are non-infringement and invalidity of the patent.
The defence of non-infringement includes existence of a licence to use, exhaustion and parallel import. The defence of the existence of a licence to use, Article 79 of the Patent Act provides a non-exclusive licence to an alleged infringer who has commercially manufactured, sold or offered for sale the invention in Japan or has been preparing to do so at the time of filing the patent application. With respect to the defence of exhaustion and parallel import, this is a doctrine that does not restrict sale of a patented product, by or with the patentee's permission. When a patentee or its licensee has sold a patented product, such sale with the patentee's permission exhausts the patentee's right to control further use and resale of the patented product. The defence of exhaustion is applied to international trade under Japanese court precedent unless restriction of sale in Japan is expressly described on the patented product when it was sold out of the Japanese market (Supreme Court, 16 April 1999). In other words, it is extremely difficult to block the importation of a patented product to Japan when the patentee or its licensee has permitted the sale of the patented product outside Japan.
Unlike the US patent system, courts in Japan do not have authority to invalidate or revoke a patent. In litigation, the courts may determine that the patent is invalid but such decisions are binding only on the parties before the court, not third parties.
When the court finds that the patent should be invalidated, the court dismisses the claim of patent infringement even before or without the decision of the Patent Office. Patent invalidity is one of the most common defences in patent infringement litigation in Japan; when the defendant raises the defence of patent invalidity, in approximately 60 per cent of cases the court will make a judgment on this point and approximately 70 per cent of the judgments are against the patent holder.
viii Time to first-level decision
The time to first-level decision in IP litigation tends to be longer than other types of litigation, such as regular commercial litigation. On average, IP litigation takes approximately 17 months to a first-level decision and more than 20 per cent of cases have taken more than two years.
A claim for injunctive relief requires the following facts:
- the claimant is the rightful owner or exclusive licensee of the patent;
- the infringer is commercially manufacturing, using, selling or offering to sell the infringing product;
- the infringing activities are covered by the scope of the patent claims; and
- an injunction is necessary to avoid irreparable damage.
In addition, Japanese district courts will require the claimant to deposit security before the injunctive relief is ordered. Although the injunctive relief is a remedy to resolve a dispute quickly, Japanese courts, in principle, will not issue ex parte orders and have one or more hearings to hear the arguments from both parties, which means both parties, not only the claimant but also the defendant, will be called to the hearings.
The patent holder or the exclusive licensee can demand damages from the infringer for losses incurred as a consequence of the infringing product. The nature of damages will be actual damages, but not punitive damages. There are three methods of computing damages provided by the Patent Act:
- multiplying the IP holder's expected profit per unit by each unit sold by the infringing party (the Patent Act, Article 102(1));
- the estimated total profit the innocent party should have received based on the profit that the infringer made as a result of his or her infringing activity (the Patent Act, Article 102(2)); and
- the amount of royalties corresponding to the patent (the Patent Act, Article 102(3)).
It is common for claimants to demand compensation based upon multiple calculation methods and later choose the method that will result in the highest amount of damages. In practice, however, nearly 40 per cent of damages awarded in patent infringement cases are for ¥10 million or less, which is extremely low.
It is common for the claimant to simultaneously petition the court to issue an injunction order and order the destruction of the infringing products. The claimant can also petition the court to issue an order for removal of materials and equipment that have been used for the production of the infringing products.
It is important to note the costs and expenses incurred during the process of litigation. Filing a suit requires a court fee and attorneys' fees. The court fee is calculated according to the value of the claim, which would normally be quite high in IP infringement cases. Therefore, a person who brings an IP lawsuit should take the court fees into account when assessing whether damages will be sufficient compensation for an infringement. For example, a litigant claiming ¥1 billion on the grounds of an IP infringement would have to pay a court fee of ¥16 million.
Under Japanese law, the prevailing party in litigation is entitled to make a claim for the court fees against the counterparty, but is generally not entitled to claim their attorneys' fees.
x Appellate review
A losing party at the first level may appeal to the IP High Court by filing a notice of appeal within 14 days of the date of receipt of the court decision, not including the issuance date of the judgment. Since the nature of the appeal is a continued examination of the trial in the first level, the parties may present new evidence and arguments during the appeal procedure, although the High Court will look at the coherence of the arguments and evidence presented in the district court.
Approximately 40 per cent of losing parties, following their loss at the first level, appeal to the IP High Court. However, of those, only about 20 per cent are successful in their appeal.
xi Alternatives to litigation
Several efficient alternative remedies are available in Japan, such as arbitration, mediation and direct negotiation. Certain notable advantages to these alternative remedies include the arbitrators' expertise, the confidentiality of the proceedings and the flexibility to adapt the proceedings to different situations. For brevity, the discussion below focuses on arbitration.
There are three major private arbitration organisations that will arrange arbitration for intellectual property disputes in Japan: the Japan Intellectual Property Arbitration Center, the Japan Commercial Arbitration Association and the Arbitration Center of the Bar Association. Despite the general merits of alternative dispute resolution, very few IP cases have been brought to arbitration. There are several theories as to why the Japanese are averse to arbitration for the resolution of disputes. One is concern over the quality of the arbitrators, another is that there is generally less trust in the ability of a private organisation to oversee an important dispute than there is in the courts. It is also believed that existing arbitration organisations lack the requisite experience to adequately address the issues that arise in the course of the proceeding.
In addition to the private arbitrations, on 1 October 2019, the intellectual property departments of the Tokyo District Court and Osaka District Court commenced the Intellectual Property Arbitration. It is a judicial service that provides, within the framework of the current law, a third type of dispute resolution tool that does not exist in litigation or provisional disposition. The cases for the Intellectual Property Arbitration are basically the same as those related to intellectual property rights, namely cases regarding the following:
- patent rights;
- utility model rights;
- design rights;
- trademark rights;
- layout-design exploitation rights;
- unfair competition provided for in the Unfair Competition Prevention Act;
- breeders' rights under the Plant Variety Protection and Seed Act; and
- disputes related to the unauthorised use of another person's name or visual identity for advertising or commercial purposes.
Concerns over the efficacy and trustworthiness of the arbitration system mean that courts will continue to play an important, or even an increasing role, in IP disputes in Japan for the foreseeable future.
Trends and outlook
The pace of patent examination processing has improved in recent years. Use of the accelerated examination system or super-accelerated examination system is increasing slowly, and allows for much faster examinations than the usual process. In addition to faster examinations, a manual for quality control has been published to help improve the quality of patent examinations; the quality of patent examinations has also improved since the establishment of the Subcommittee on Examination Quality Management.
With the spread of IT tools and new technology, such as the internet of things (IoT) and artificial intelligence, new issues are being thrown up in relation to copyright, etc. The Subcommittee Report on Appropriate Protection, Use and Distribution of Copyrighted Works, etc., published in February 2015, delves into the relationship between cloud services and copyrights, etc., and the relationship between copyright and services that enable users to use content in relation to personal use of copies saved on servers in the cloud on various mobile terminals, and so on.
These are also ongoing discussions in government on the handling of 3D printing technology and related IP systems, the relationship between automatically accumulating databases and IP rights, and copyrights on creations that are actually produced by artificial intelligence.
Open innovation is gradually spreading among Japanese companies. Toyota announced that it will open up its fuel cell vehicle patents for free use and Panasonic is doing the same for its IoT-related intellectual property rights. These companies hope that opening up the patents will spur growth in markets for their technologies.
1 Chie Kasahara, Kunihiro Sumida and Takafumi Ochiai are partners and Gai Matsushita is of-counsel at Atsumi & Sakai.