Monday, February 18, 2019

Damages for Extraterritorial Injuries in Japanese Patent Law

When an act of domestic infringement causes the patent owner to suffer an extraterritorial loss, is the patent owner entitled to recover damages for that extraterritorial loss?  Last year the U.S. Supreme Court in WesternGeco held that the answer is yes, at least in cases arising under section 271(f) of the U.S. Patent Act, though questions remain whether the Coutrt's reasoning applies to infringement under other provisions of the act.  I think it does, but opinions differ.  For previous coverage on this blog, see, e.g., here and here, with the latter noting a Canadian patent case, and U.S. and German copyright case law, permitting monetary recoveries for extraterritorial harm.

Anyway, while I was in Japan two weeks ago, I learned from Professor Masabumi Suzuki that there are at least two cases in which Japanese courts have awarded damages for extraterritorial injuries caused by domestic infringement:  the Judgment of the Osaka District Court, Jan. 28, 2010, 2007 (Wa) 2076, and the Judgment of the Tokyo District Court, Sept. 25, 2013, 2010 (Wa) 17810, aff'd in part, Judgment of the IP High Court, Dec. 4, 2014, 2013 (Ne) 10103.  Summaries of all three can be found on the IP High Court's IP Judgments Database:   of the Osaka District Court decision here, of the Tokyo District Court decision here, and of the IP High Court decision here.  The second of the two--the Tokyo District Court/IP High Court case--requires a bit of explanation to understand.  There were two plaintiffs, the patentee/exclusive licensor and its exclusive licensee.  The defendant made infringing products in Japan, and exported and sold some of them outside Japan.  On these facts, the court permitted the exclusive licensee to recover damages under Japan Patent Act article 102(1) based on the exclusive licensee's profit margin multiplied by the defendant's sales, which included sales from products the defendant sold outside of Japan.  (This amount is presumed to be the exclusive licensee's lost profit under article 102(1).)  The patentee/exclusive licensor in turn sought to recover its own lost royalty, that is, the royalty the exclusive licensee would have paid the exclusive licensor, but-for the infringement, including royalties the exclusive licensee would have paid on the foreign sales.  Under Japanese law, however, when there is an exclusive license that has been registered with the Japan Patent Office, the license excludes even the patent owner from practicing the patent (see, e.g., my book p. 294 n.25), and the patent owner therefore cannot recover a reasonable royalty under Patent Act article 102(3).  Instead, it must prove its damages (if any) under the more rigorous requirements of article 709 of the Civil Code.  Here, the IP High Court held that the patentee/exclusive licensor was unable to prove that its licensee would have made those foreign sales, and thus it could not recover a lost royalty based on those sales.  In other words, for purposes of assessing the exclusive licensee's damages, the court presumes that the licensee would have made the defendant's sales (including the foreign sales), absent the infringement, while for purposes of assessing the licensor's damages, the licensor has to prove that the licensee would have made the alleged lost sales (and in this case, at least as for the foreign sales, it wasn't able to).  The overall result may seem odd, but the court concludes that it follows from the differing burdens of proof under the applicable statutes.  Nevertheless, both this case and the Osaka case provide examples of Japanese courts' apparent willingness to award damages for extraterritorial harms, under appropriate circumstances.  

No comments:

Post a Comment