Introduction of Court Case -A case in which the court approved lost profits based on the fact that the patentee’s group company worked the invention-

1. Patent Infringement and Claim for Compensation for Damages

Patentees may claim compensation for acts of patent infringement (Civil Code Article 709). The compensation is generally based on lost profits. The lost profits are amount of money the patentee could have gained if there had been no infringement. Under the principles of the Civil Code, the patentee must bear the burden of proving the occurrence of damages, the amount of damages, and the causal relationship between the amount of damages and the act of infringement.

With respect to the patent infringement, it is often difficult to prove the causal relationship between the act of infringement and damages, along with the specific amount of damages. As a result, it is not easy to receive compensation for the lost profits.

In such circumstances, Patent Act Article 102 stipulates the presumption of the value of damage in order to reduce the difficulties in the presentation of evidence by the patentee.

2. Provision for Presumption of Value of Damage caused by Patent Infringement (Patent Act Article 102)

Patent Act Article 102 specifies how to presume the value of damage (see below).

• Paragraph (1): The value of damage sustained by the patentee may be established to be the total of the amounts set forth in the following items (i) and (ii) below.

(i) The amount arrived at when the amount of profit per unit for the products (the patentee would have been able to sell if the infringement had not taken place) is multiplied by the part of the quantity of products that the infringer has sold (not exceeding the quantity covered by the patentee’s ability to work the patented invention (“workable quantity”)).

(ii) If the quantity of products that the infringer has sold exceeds the workable quantity, the amount equivalent to a license fee for this quantity.

• Paragraph (2): The amount of profit that the infringer has profited from the act of infringement is presumed to be the value of damage incurred by the patentee.

• Paragraph (3): The patentee may fix the value of the damages as being equivalent to the license fee.

Paragraph (3) can be applied without proving that the act of infringement caused the lost profits. This may be considered as a minimum compensation that the patentee can receive.

The application of paragraphs (1) and (2) requires for the patentee to present evidence that the act of infringement caused the lost profits. The lost profits are interpreted as the profits that the patentee could have gained from the sale or the like of the patented products if there had been no infringing products. Therefore, if the patentee itself does not work the invention, it may be considered that there is no lost profits. In fact, we have conventionally thought that the working of the invention by the patentee is required for the application of paragraphs (1) or (2).

However, in the recent judgments, there are some cases in which the court approved the application of Patent Act Article 102(2) even if the patentee did not work the invention. The court determined that “the working of the invention by the patentee is not required for the application of Patent Act Article 102(2). This application should be approved where there are any circumstances suggesting that the patentee could have gained profits if there had been no patent infringement” (Intellectual Property High Court, Case No. 2012 (Ne) 10015 on February 1, 2013).

The following is a case in which the application of Patent Act Article 102(2) was disputed when the patentee was not engaged in the manufacture, sale or the like of the product but its group company was engaged in the same.

3. Introduction of Court Case (Intellectual Property High Court, Case No. 2021 (Ne)10091 on April 20, 2022, Prior Instance Tokyo District Court, Case No. 2019 (Wa) 14314)

(1) Summary of the Case

In this case, Plaintiff C1, who holds a Patent Right of an invention titled “Bone fracture fixation system with subchondral articular surface support”, requested an injunction against the production and sale of the Defendant’s products, and claimed payment of compensation for damages for infringement of the Patent Right.

The chart below shows the structure of a corporate group (Group Z) to which the Plaintiff C1 belongs. We created the chart based on a chart quoted in the text of the judgment.

The Plaintiff C1 is a Dutch company. The Plaintiff C1 is a subsidiary of a U.S. Company B that is a subsidiary of a U.S. Company A. The Plaintiff C1 belongs to the Group Z where the Company A is the holding company. The Plaintiff C1 manages a part of the intellectual property rights of the Group Z.

The business related to the Plaintiff’s Products, i.e. embodiments of the Patent Right, is conducted by the Companies C1 to C4 of the Group Z by sharing roles. The entirety of the business is carried out under the management and instructions of the Company B. The Company A has disclosed trauma-related business, including business related to the manufacturing and sale of the Plaintiff’s Products.

(2) Judgement of the Prior Instance

The court denied the application of Patent Act Article 102(2) because of the following reasons. The court determined the amount of damages pursuant to Patent Act Article 102(3).

The Plaintiff C1 belongs to the Group Z and manages a part of the intellectual property rights of the Group Z. The Plaintiff C1 does not engage in sale, etc. of the Plaintiff’s Products. Therefore, it cannot be found that there are circumstances where the Plaintiff C1 could have gained profits if there had been no infringement, and the Plaintiff C1 lacked the premise for applying Patent Act Article 102(2).

(We summarized the judgement to facilitate understanding thereof.)

(3) Judgement of this Court

The court approved the application of Patent Act Article 102(2) as follows. The court determined that the business using the Patent Right was not conducted by the Plaintiff C1 alone but by the Group Z as a whole, and there were circumstances where the Group Z could have gained profits if there had been no infringement of the Patent Right.

The Plaintiff’s Products, i.e. embodiments of the Patent Right, compete with the Defendant’s Products. The Plaintiff’s Products are sold by the Company C4, not by the Plaintiff C1. However, the Plaintiff C1 engages in the management and exercise of the patent right under the management and instructions of the Company B, which indirectly holds 100% of the shares of the Plaintiff C1. Under the management and instructions of the Company B, the Company C3 belonging to the same group manufactures the Plaintiff’s Products, and the Company C4 belonging to the same group sells the Plaintiff’s Products. Thus, it is found that the Group Z as a whole performed the business using the Patent Right under the management and instructions of the Company B. Thus, there are circumstances where the Group Z could have gained profits from the sale of the Plaintiff’s Products if the sale of the Defendant’s Products had not been performed.

In the Group Z, the Plaintiff C1 is in the position where the Plaintiff C1 can independently exercise the Patent Right for the group. It can be considered that the Plaintiff C1 engages in the exercise of the Patent Right from the standpoint of pursuing profits for the group. In consideration of the fact that there is no actor that exercises the Patent Right in the Group Z other than the Plaintiff C1, it should be said that Patent Act Article 102(2) may be applied to this case.

(We summarized the judgement to facilitate understanding thereof.)

4. Conclusion

In some corporate groups, a particular company (IP management company) manages the intellectual property. In this case, the IP management company (patentee) is an entity that exercises rights. If the IP management company does not work the invention, the lost profits may have been considered not to occur.

The decision introduced in this article shows that the compensation for the lost profits can be received even when a company different from the IP management company works the invention within a corporate group. In other words, if an entity exercising rights and an entity working the invention are different but they belong to the same corporate group, Patent Act Article 102(2) may be applied. There are two points, as shown in this decision, for the application of Patent Act Article 102(2).

(a). A group as a whole carries out the business using patent rights under the management and instructions of a specific company within the group.

(b). An IP management company exercises rights on behalf of the group and there is no other entity that exercises rights within the group.

We would like to continue to closely monitor whether the above two points will be followed in the future.

Edited by Hiroko Iwatsuki

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