Defenses to Patent Infringement in Japanese Litigation
An accused infringer in Japanese courts, depending on the circumstances, may assert a variety of defenses to allegations of patent infringement. This article discusses the following, significant defenses to patent infringement in Japanese courts:
2. Unenforceability Due to Grounds for Patent Invalidation
4. Prior Use
5. Permitted Use
6. License & Patent Exhaustion
1. Noninfringement. Unlike other defenses in Japanese patent litigation, the defense of noninfringement is not an affirmative defense where the accused infringer bears the burden of proof. With one significant exception, the burden of proving patent infringement falls upon the patentee or the exclusive licensee who is asserting the patent rights. The one exception involves a presumption of infringement arising under Article 104 of the Patent Act where the evidence shows that “the invention of a process of producing a product has been patented and the product was not publicly known in Japan prior to the filing of the patent application, a product identical with such product shall be presumed to have been produced by the patented process.” In that situation, involving the alleged infringement of process claims, the burden shifts to the defendant to overcome the presumption and to prove that the asserted process claims are not infringed.
In practice, however, the accused defendant bears, at least, the burden of persuasion in any case that the issue of infringement is in dispute. Japanese patent law recognizes (1) direct infringement, (2) indirect infringement, (3) literal infringement, and (4) infringement by equivalence. See Infringement Law Discussion on this website. The fundamental notion of a noninfringement defense is that the elements of the patent claim define the boundary of the legal monopoly granted by the patent, and to be infringed, all elements (or their equivalents) of the claim must be found in the accused product or process. Thus, to the extent strategically feasible, accused defendants endeavor to show that one, or more, of the claim elements is not present in the accused product or process.
Whether to assert noninfringement as a defense can be a vexing strategic dilemma for the patentee because pursuing defenses of both noninfringement and patent invalidity sometimes places the patentee at strategic cross purposes in advocating a particular construction or interpretation of the patent claims. See Claim Construction Discussion on this Website. This is particularly true where a narrow claim construction of the asserted claims may allow the accused infringer to escape liability for infringement but a broader claim interpretation would cause the patent claim to read on the prior art and fail for lack of novelty. In such situations, of course, the patentee faces the same dilemma, and the accused infringer must decide which of the claim construction positions the court would most readily adopt. Where possible, however, the accused infringer may elect asserting a noninfringement defense over a patent invalidity defense in an effort to leave the exclusive effect of the patent in place against other competitors in the market. Moreover, the strategic selection of one defense narrows the issues to be tried, avoids assertion of contradictory positions, and potentially strengthens the presentation of argument.
2. Unenforceability Due to Grounds for Patent Invalidation. One of the peculiar features of Japanese patent litigation is that the adjudication of a patent’s validity in the first instance is reserved for a panel of examiners at the Japanese Patent Office. Historically, the labor of adjudicating patent infringement and patent validity was divided between the district court and the JPO—if an accused infringer wished to assert that the patent was invalid, its only choice was to initiate an invalidation proceeding at the JPO under Article 123 of the Patent Act. The district court was likewise resigned to press forward with the trial of infringement and damages issues, even where it was clear that the patent ultimately would be invalidated before the JPO. That arrangement left district courts in the unpleasant situation of enforcing otherwise invalid patents or backlogging their calendars while the JPO resolved the validity questions.
In Fujitsu v. Texas Instruments, Hei 10 (o) 364 (S. Ct. Apr. 11, 2000), Minshu Vol. 54, No. 4, page 1368, the Japanese Supreme Court substantially resolved this dilemma by holding that the district court may entertain evidence concerning an asserted patent’s validity and, as a matter of equity, decline to enforce a patent that “has clear grounds for invalidation.” In that decision, which is popularly known as the “Kilby” decision, the Supreme Court explained, “If the claim for injunction against and the damages for the practice of the invention under the aforementioned patent rights were allowed, it would substantially give unjust profits to the patentee and unjust disadvantage to the person practicing the invention and it would violate the notion of equity.”
The Kilby decision, however, did not explain what was required to show “clear grounds for invalidation,” causing some to wonder if courts could find such “clear grounds” when the alleged patent defect was a lack of inventive step, which often leaves some room for reasonable disagreement. That ambiguity notwithstanding, district courts have made “clear grounds” findings for not only lack of novelty and anticipation but also for lack of inventive step.
Another question left open by the Kilby decision concerned the range of “grounds” that the district court could consider in assessing patent validity. That question was resolved by the enactment of Article 104-3(1) of the Patent Act, which provides, “Where, in litigation concerning the infringement of a patent right or an exclusive license, the said patent is recognized as one that should be invalidated by a trial for patent invalidation, the rights of the patentee or exclusive licensee may not be exercised against the adverse party.” The grounds for initiating a trial for invalidation at the JPO under Article 123 of the Patent Act are extensive and include not only lack of novelty and inventive step, but also such things as non-compliance with treaty requirements and questions about the morality and safety of the patented subject matter.
Significantly, one of the grounds for patent invalidation under Article 123(1)(vi) of the Patent Act is invalidation of the patent “where the patent has been granted on a patent application filed by a person who is not the inventor and has not succeeded to the right to obtain a patent for the said invention.” Although “any person” can initiate an invalidation proceeding at the JPO on most of the available grounds, only “interested persons” may assert patent invalidity due to the misappropriation of the invention by one who is not the inventor. See Article 123(2) of the Patent Act. In contrast, Article 104(3)-1 of the Patent Act is not so limited, and accused infringers may raise inventorship defects in district court even if they are not “interested persons” entitled to pursue those same issues before the JPO in a trial for patent invalidation.
A final challenge presented by the Kilby decision is the potential for burdensome and contradictory parallel actions in the JPO by the accused infringer seeking patent invalidation or by a patentee seeking correction of the patent claims. Under Article 126 of the Patent Act, a patentee may initiate a “trial for correction” in the JPO to obtain, among other things, a “restriction of the scope of claims.” Although a patentee cannot request a trial for correction after a trial for patent invalidation in the JPO has been filed, nothing prevents the patentee from seeking correction during litigation. Moreover, under certain circumstances, the patentee may even seek to amend the claims in the context of the invalidation trial. This places the district court in the position of not only assessing the validity of the granted claims but also forecasting the merits of amendments to the claims that the patentee might secure in the parallel JPO actions. The district courts have not shied away from that challenge and routinely assess the patentee’s potential routes for amending the claims and likelihood of success. As a practical matter, the risk of conflicting rulings between the JPO and the district court on patent validity issues is minimized by the fact that appeals from both the district court patent litigation and JPO administrative proceedings are made to the Tokyo IP High Court, which ultimately ensures uniformity between the parallel court and administrative actions.
In addition, the Patent Act itself promotes coordination between the district courts and the JPO. For example, Article 168 of the Patent Act requires the JPO and the district courts to provide notice to each other of actions instituted regarding the infringement or validity of patents. Significantly, Article 168(1) of the Patent Act authorizes the JPO to suspend its trial proceedings “until the decision in another … court proceedings have been concluded.” Moreover, although technically a district court ruling on the invalidity of a patent is not a final adjudication of patent invalidity, the ruling is binding on the patentee and, in practice, prevents the patentee from further infringement actions until the validity questions are finally resolved.
4. Prior Use. Japanese patent law protects investments made and businesses commenced in technologies that, although are covered by a granted patent, pre-dated the filing of the patent application. Article 79 of the Patent Act defines the circumstances and conditions giving rise to these prior user rights:
A person who, without knowledge of the content of an invention claimed in a patent application, made an invention identical to the said invention, or a person who, without knowledge of the content of an invention claimed in a patent application, learned the invention from a person who made an invention identical to the said invention and has been working the invention or preparing for the working of the invention in Japan at the time of the filing of the patent application, shall have a non-exclusive license on the patent right, only to the extent of the invention and the purpose of such business worked or prepared.
As provided by this law, the prior use must have occurred in Japan, and the non-exclusive license granted under the law is limited “to the extent of the invention and the purpose of such business worked or prepared.” Thus, although one may qualify for prior user rights in a patented technology, the license cannot be expanded to later business endeavors that did not utilize the technology prior to the patent application. The Japanese Supreme Court has expansively interpreted the “only to the extent of the invention” limitation, holding that “‘[t]he extent of the invention and the purpose of the business as practiced or prepared’ shall not be limited to the embodiment actually practiced or prepared by the prior user at the time of the patent application (priority date), but shall mean the scope of the technical idea or invention embodied by such embodiment.” Judgment rendered on Oct. 3, 1986, Supreme Court, Sho 61 (o) 454, Minshu Vol. 40, No. 6, page 1068. As a consequence of this ruling, the prior user is able to make modifications to the prior embodiment of the invention “so long as they are identical to the embodiment so practiced or prepared in terms of the underlying invention.” Id.
5. Permitted Use. Article 69 of the Patent Act imposes several limitations on the scope of patent rights, permitting the use of inventions for certain products and activities.
Article 69 of the Patent Act provides:
(1) A patent right shall not be effective against the working of the patented invention for experimental or research purposes.
(2) A patent right shall not be effective against the following products:
(i) vessels or aircrafts merely passing through Japan, or machines, apparatus, equipment or other products used therefor; and
(ii) products existing in Japan prior to the filing of the patent application.
(3) A patent right for the invention of a medicine (refers to a product used for the diagnosis, therapy, treatment or prevention of human diseases, hereinafter the same shall apply in this paragraph) to be manufactured by mixing two or more medicines or for the invention of a process to manufacture a medicine by mixing two or more medicines shall not be effective against the act of preparation of a medicine as is written in a prescription from a physician or a dentist and the medicine prepared as is written in a prescription from a physician or a dentist.
Although subparagraphs (2) and (3) define a relatively narrow class of permitted products and conduct, subparagraph (1) is an open-ended definition that potentially applies to any “experimental” research, regardless of its commercial objectives or implications. In 1999, the Japanese Supreme Court interpreted the experimental use exception literally, applying the exception to clinical trials of patented chemical compounds aimed at obtaining approval for the commercial marketing of the drug. See Judgment rendered on Apr. 16, 1999, Supreme Court, Hei 10 (ju) 153, Minshu Vol. 53, No. 4, page 627. The Supreme Court held that the use of the patented compound in clinical trials was “practice of the patented invention for the purpose of experiment or research under Article 69.” Id. The Supreme Court’s decision reversed lower court rulings that sought to limit the application of the exception to drug trials due to their commercial objective and nature.
6. License & Patent Exhaustion. A patentee may license another to use the patented invention. There are numberless types of licenses, each with a different purpose and range of restrictions placed upon the licensee’s use of the patented invention by the licensor patentee. A license may be exclusive, granting the licensee exclusive rights to use the patented invention either in its entirety or in a restricted geographical region or period of time. A license may be non-exclusive, permitting the patentee to license many under the patent. A license may grant the licensee the right to expressly sublicense the patent to others under certain conditions or in the case of “have made” rights, the implicit right to sublicense the patent rights. Have made rights arise in a license that, among other things, permit the licensee to make the patented product or to “have the patented product made” by another for the benefit of the licensee. The patentee may also be a member of a “patent pool” where members contribute patent licenses to the pool, thereby granting non-exclusive licenses to other members of the pool.
Although it is rare that a patentee will outright sue an express licensee for patent infringement, it does happen in situations where the patentee alleges that the licensee has breached the license or exceeded the scope of the license by, for example, selling in non-licensed territories. In such cases, the accused infringer asserts the license as a defense, and the court construes the license in light of the accused infringer’s conduct to determine if that conduct is actually licensed or, if not, an infringement of the patent. The license defense arises more frequently in actions against persons who are not directly licensed by the patentee. For example, a manufacturer of a patented product may assert that its entire production was made under “have made” rights of the patentee’s licensee, and the court will construe the have made rights and determine if the accused infringer unlawfully produced product for its own benefit or benefit of non-licensed entities.
The license defense is often raised in situations where the accused infringer asserts an “implied license” such as in a case where the accused infringer is licensed to sell a patented product but is accused of infringing the licensor’s patent on a process for making the product. The court will construe the product license and determine if the right to make the product by the separately patented process was implied in the license grant or if production was to be performed by other, feasible non-patented methods. Another implied license arises in the context of the patentee’s or patent licensee’s unrestricted sale of a patented product. Unless restrictions are placed on the purchaser at the time of the purchase, the sale of the product implies the purchaser’s ability to use the product free of infringement under the patent. In such circumstances, the patent rights in the purchased product are said to be “exhausted” or extinguished.
In Japan, the defense of patent exhaustion was historically available and recognized in Japanese courts, especially where the patentee made an unrestricted sale of a patented product to another in Japan. The harder question presented to the Japanese courts arose in the context of a patentee’s unrestricted sale of a patented product outside of Japan—would the subsequent importation of that product into Japan constitute an infringement of the patentee’s rights under the Japanese patent? In its “BBS” decision, the Japanese Supreme Court held that the unrestricted sale of the product abroad exhausted the patentee’s rights in Japan, and the product could be imported into Japan without infringing the Japanese patent. See Judgment rendered on July 1, 1997, Supreme Court, Hei 7 (o) 1988. The same result follows even when the sale of the product takes place in a country in which the patentee has no patent rights—the unrestricted sale exhausts the rights granted in the Japanese patent. Id.
Although the unrestricted sale of a patented product may “exhaust” the patent rights, those exhausted rights may be revived under certain circumstances, such as when someone alters or modifies the purchased product. In 2007, the Japanese Supreme Court was faced with such a situation, where Canon Corporation asserted that a third party’s recycling of Canon ink jet printer cartridges constituted an infringement of Canon’s otherwise exhausted patent rights. Although there had been disagreement among the lower courts, the Supreme Court ruled that the recycled cartridges were “newly manufactured” products against which Canon could assert its patent rights. See Judgment rendered on Nov. 8, 2007, Supreme Court, Hei 18 (ju) 826, Hanta No. 1258, page 62. As guidance for future cases, the Supreme Court instructed that in determining whether an accused product constitutes a “newly manufactured” product, “[c]onsideration of the manner of modification and exchange of parts shall include the state of the product when being modified, etc., the details and degree of the modification, durable term of the exchanged parts, the technical function and economic value of the parts in the patented product.” Id.
Thus, the Japanese Supreme Court’s decision in the Canon case creates a rule similar to principles under U.S. law where the mere “repair” of a purchased product does not revive the patent rights but the impermissible “reconstruction” of the product does revive the rights, enabling the patentee to assert the patent against the reconstructed product.