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2021.01.29 Patent

Full Enforcement of the Revised Patent Act

1. Introduction

The revised Patent Act, established on May 10, 2019, was partially enforced on April 1, 2020 when “Review of Damages Calculation Method” came into effect, and fully enforced on October 1, 2020 when “Establishment of Inspection System” came into effect. This newsletter introduces an outline of the revised Patent Act.

2. Feature of the Revision

“Establishment of Inspection System” is for strengthening procedures to collect evidence that is necessary to prove actions of patent right infringement. “Review of Damages Calculation Method” is aimed to increase damages incurred by patent right infringement. (Note: Similar revisions to Damages Calculation Method have been made to the Utility Model Act, Design Act, and Trademark Act.)

3. Establishment of Inspection System

<1> Background

Before this revision, there have been evidence collection measures to facilitate an infringed party (e.g., patentee) to prove of infringement actions, such as an order to submit a document that can be issued to an alleged infringer by the court. However, some problems have been pointed out in these measures such as that, these measures do not bind a holder of evidence and thus may lack effectiveness; and some cases are not easily determined by merely examining objects to be inspected that are obtained by these measures (e.g., as for infringement lawsuits concerning a patent right related to a manufacturing method and a patent right related to software). In addition, many developed countries have already established binding laws for evidence collection procedure. These factors have led to the establishment and enforcement of Inspection System as a legally binding evidence collection procedure in this revision.

<2> Outline of Inspection System

If an infringement of a patent right is suspected, a neutral technical expert (inspector) enters the plant or other premises of the alleged infringer, conducts necessary examinations (e.g., asking questions and requesting submission of documents) to prove the infringement of the patent right, and submits a report of inspection to the court by the court’s order. The inspection report can be used by a plaintiff of the order of the inspection as evidence.

<3> Requirements for Inspection

The following requirements are imposed for a petition for an order of an inspection to be approved:
1. Necessity (need to prove actions of infringement);
2. Probability of infringement (infringement is likely);
3. Irreplaceability (adequate evidence collection to prove infringement cannot be expected by other means); and
4. Appropriateness (excessive burden on the alleged infringer in evidence collection should be avoided).

<4> Protection of Confidentiality

As measures to protect confidentiality, it is regulated that the alleged infringer may file a complaint against the decision of the court to approve the petition for an order of an inspection filed by the plaintiff; and that the alleged infringer may file a petition for non-disclosure of all or a part of the inspection report to the plaintiff. In addition, a right of the inspector to refuse to testify and criminal charges against the inspector for leaking secrets are also regulated.

4. Review of Damages Calculation Method

<1> Determination of Damages for Portion beyond Production Capacity of Infringed Party

For example, according to Article 102(1) of the previous Patent Act, lost profit of the infringed party (profit the infringed party would have received but for the infringement) was deemed to be the amount of damage; however, for the portion beyond production capacity etc. of the infringed party (portion [A] in the drawing below), the amount presumed to be beyond the production capacity etc. of the infringed party was reducible. However, if no damage is acknowledged for this portion, it means that the patentee practically has lost his opportunity to license the rights.
Thus, in this revision, as shown in the drawing below on the right, the infringed party such as the patentee may claim for the amount equivalent to a license fee (portion [B] in the drawing) for the portion beyond their production capacity etc. in addition to the damage calculated based on their lost profit (Article 102(1)(ii) of Revised Patent Act).
Full Enforcement of the Revised Patent Act

<2> Amount Equivalent to License Fee

The newly added Article 102(4) stipulates that, in the determination of the amount equivalent to license fee (portion [B] in the drawing), it is allowed to take into account an estimated amount of money that may be agreed with the alleged infringer if negotiations were conducted assuming that the act of infringement took place. Thus, it is clearly stipulated that the amount equivalent to license fee may be determined with consideration for the fact of infringement; for example, if a patent right is infringed, the amount equivalent to license fee may be increased compared to the license fee that would have been agreed in negotiations without any action of infringement.

5. Conclusion

It is expected that Inspection System can be a powerful measure for evidence collection. We will continue to closely watch a trend in court rulings to see whether this system is appropriately used to fairly support the patentees to execute their right. As the Patent Act is revised in favor of increasing the damage incurred by patent right infringement, we are going to pay attention to whether the patentee will be adequately awarded in damages by the court.
Edited by Seiji Kimura

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