In previous newsletters dated October 3 and November 4, 2022, we introduced recent Japanese lawsuits for patent infringement: 2018 (Ne) Case No. 10077 and 2022 (Ne) Case No. 10046. The lawsuits were concerned whether the “work” of patented inventions across borders of countries via a network constituted infringement of Japanese patents in view of the principle of territorial jurisdiction. The main issue of the case 2018 (Ne) Case No. 10077 was whether or not the act of providing a program to a terminal located inside Japan from outside of Japan infringed the Japanese patent. The Intellectual Property High Court found such act constituted infringement of patent, but the Defendant appealed to the Supreme Court. The case 2022 (Ne) Case No. 10046 is ongoing proceeding in the Intellectual Property High Court, and recently invited public opinions on this lawsuit.

In this article, we now introduce a decision (2018 (Wa) Case No. 25436) made earlier than the lawsuits above. In 2018 (Wa) Case No. 25436, it was disputed whether acts of producing allegedly infringing products in Indonesia and supplying them to Japan in supply chains can be construed as infringement of Japanese patent rights. We believe that the decision should be drawn attention in the present day where international supply chains are expanding, and also taken into consideration when discussing what the principle of the territorial jurisdiction should be.

 

 

 

The Plaintiff (Ajinomoto Co., Inc.) holds patent rights relating to a method for producing L-glutamic acid (Patent No. 3651992 and Patent No. 5343303). On the other hand, the Defendant (CJ Japan Corp.) and CJ Indonesia belonged to a corporate group (hereinafter, “CJ Group”) with a South Korean corporation, CJ CheilJedang Corporation (hereinafter, “CJCJ”) as its center company. The Defendant, jointly with CJ Indonesia, was involved in ways of producing monosodium glutamate (hereinafter, “MSG in question”) by using the Defendant’s production process conflicted with the Plaintiff’s patent rights, and importing into Japan the products thereby.

That is, the MSG in question was produced using the Defendant’s production process in CJ Indonesia’s factory in Indonesia, but had two sales distributions: “Portion sold by Defendant” and “Portion sold by “CJ Indonesia”. The “Portion sold by Defendant” indicates the products that the Defendant had purchased from CJ Indonesia, imported into Japan from Indonesia, and offered to transfer and transferred inside Japan. The “Portion sold by CJ Indonesia” indicates the products that Japanese customers had purchased in Indonesia from CJ Indonesia, and then imported into Japan by the customers.

The Plaintiff filed a patent infringement lawsuit against the Defendant, claiming that the acts of importing, transferring, and offering to transfer the MSG in question, jointly with CJ Indonesia, infringed Plaintiff’s patents.

 

 

 

The court found the Defendant’s acts with respect to the “Portion sold by Defendant” as “work” of the patented inventions (Article 2, paragraph 3, item 3 of the Patent Act), and calculated an amount of damages under Article 102, paragraph 2, of the Patent Act. However, the Defendant alleged that they did neither transfer nor import the “Portion sold by CJ Indonesia” because the “Portion sold by CJ Indonesia” was purchased and imported directly from CJ Indonesia by the Japanese customers. Accordingly, the points of dispute were: whether or not the Defendant’s acts with respect to the “Portion sold by CJ Indonesia” were construed as the “work” of Plaintiff’s patents; and the amount of damage from the Defendant with respect to the “Portion sold by CJ Indonesia”.

 

 

 

The court found the transfer with respect to the “Portion sold by CJ Indonesia” took place outside Japan since the customers imported and transferred the MSG in question. However, the court determined that the Defendant, jointly with CJ Indonesia, had engaged in sales activities inside Japan and “offered to transfer”, thus infringing Plaintiff’s patents with respect to the “Portion sold by CJ Indonesia” as well, for the following reasons.

•  In the CJ Group, group companies shared roles in producing and selling products in countries around the world, and the Defendant was one of the sales bases and CJ Indonesia was one of the production bases.

•  An order form of the ”Portion sold by CJ Indonesia” contained a statement that the seller was CJ Indonesia; however, such order forms were sometimes sent to the Defendant, and in those cases, the order forms were sent to CJ Indonesia via the Defendant.

•  A commission contract was made between the Defendant and CJ Indonesia that a part of profits from sales of the “Portion sold by CJ Indonesia” would be paid to the Defendant.

•  The Defendant engaged in delivery of samples and recovery of defective products of the MSG in question with respect to the “Portion sold by CJ Indonesia”.

•  Expenses relating to the “Portion sold by CJ Indonesia” were recorded in the Defendant’s accounting based on instructions by or based on an agreement with CJCJ.

 

Further, the court found establishment of joint tort by the Defendant and CJ Indonesia with respect to “Portion sold by CJ Indonesia” for the following reasons.

•  The Defendant and CJ Indonesia belonged to the CJ Group, the group companies shared roles in producing and selling CJ-brand and the other products in countries around the world.

•  Both “Portion sold by the Defendant” and “Portion sold by CJ Indonesia” were products of the MSG in question produced by CJ Indonesia for sales in the Japanese market. The Defendant was not party to a sales contract but conducted sales activities with regard to the “Portion sold by CJ Indonesia”, while receiving a share of the profits therefrom and engaging in delivery of samples and recovery of defective products as in the “Portion sold by the Defendant”.

•  In the accounting of the Defendant, overall amounts of transportation expenses, warehouse expenses, etc. concerning sales of the MSG in question were divided into the “Portion sold by the Defendant” and the “Portion sold by CJ Indonesia” based on instructions by CJCJ, the parent company of CJ Indonesia.

 

Furthermore, as described above, the court determined that the amount of damages caused by the “Portion sold by Defendant” was calculated in accordance with Article 102, paragraph 2, of the Patent Act. However, the Defendant alleged that the amount of damages should not be calculated based on the sales amount of the ”Portion sold by CJ Indonesia”, but instead should remain within the scope specific to the “offer to transfer”, in calculating the amount of damages from the ”Portion sold by CJ Indonesia” under Article 102, paragraph (2) of the Patent Act.

In response to the Defendant’s allegations, the court found the determinations of the joint tort by the Defendant and CJ Indonesia with respect to the “Portion sold by CJ Indonesia” and also on an integral relationship of the “Portion sold by CJ Indonesia” and the “Portion sold by Defendant”. Accordingly, the court decided that the amount of profits made by the Defendant was to be calculated based on the total sales amount of the “Portion sold by CJ Indonesia”, when applying Article 102, paragraph (2) of the Patent Act.

 

 

 

The court found not only the “Portion sold by CJ Indonesia” infringed the patents, but also the expensive compensation due to the joint tort, which should be drawn to the attention. That is, it can be said that the calculation of the amount of damages from the “Portion sold by CJ Indonesia” based on the total sales amount of the “Portion sold by CJ Indonesia” implies that the amount of damages was approved at a level equivalent to that the “Portion sold by Defendant”. Therefore, the court appears to have decided the amount of damages corresponding to demands that the Defendant would have lost in the Japanese market, while maintaining the principle of territorial jurisdiction.

As we introduced in the newsletter dated October 3, 2022, the Policy Promotion Council hosted by the JPO discussed in 2022 what the principles of territorial jurisdiction should be for patent rights in an increasingly networked society. Accordingly, the court decision in the lawsuit above may be taken into consideration to discuss the principle of territorial jurisdiction in the future. We will continue to pay attention to development of discussion on this matter.

 

 

Edited by Makoto Kumazaki