Wednesday, August 28, 2013

New paper on damages in Japan

The July 2013 issue of AIPPI--Journal of the Japanese Group of AIPPI has several articles of interest.  One is by Eiji Katayama, Makoto Hattori, and Kaoru Kuroda is titled "Study on Requirements for Claiming Damages Based on Lost Profits."  The article discusses a recent Grand Panel of the IP High Court decision that I blogged about in May, here.  (A summary of the decision is now available in English on the IP High Court's website, here.)  As I mentioned then (citing a write-up by Michiru Takahashi and Harukuni Ito of Jones Day, Tokyo), the plaintiff Sangenic had an exclusive Japanese distributor who sold the patented articles in Japan.  The court awarded the plaintiff the defendant's profits under article 102(2) of the Japanese Patent Act.  Under this provision, however, the defendant's profits are viewed as a proxy for the plaintiff's own lost profits, rather than as a stand-alone type of remedy.  Some previous cases had held that a patentee may not recover an award of the defendant's profits if the patentee does not practice the invention itself, but the new case holds that 102(2) applies as long as the plaintiff can show that it would have made a profit but for the infringement, even if the plaintiff is not itself practicing the patent.  Katayama et al. discuss the case, as well as the legislative history, commentary, and precedent relating to article 102(2).  In their view, the High Court decision was correct to interpret article 102(2) as giving rise to a presumption that the plaintiff suffered a loss of profits equal to the defendant's profit, as long as there is reason to believe the plaintiff suffered some loss of profit (that might otherwise be difficult to quantify) and the presumption is rebuttable.  That is, if there is reason to believe the plaintiff suffered a loss of profits greater than what would be awarded under a reasonable royalty theory (article 102(3)) but the plaintiff cannot quantify what that profit is (article 102(1)), article 102(2) gives rise to this presumption, and the defendant can then try to whittle it down by showing that such a recovery would be "excessive due to a difference between the patentee and the infringer in terms of the manner of business."  Going back to the facts of the case, Katayama et al. suggest, however, that because the exclusive distributor itself might have a claim for damages against the infringer, the court should have deducted from Sangenic's award the damages suffered by the distributor.  The article concludes with a comparison of U.S. law, which does not award defendant's profits (except in design patent cases) but does require the plaintiff seeking lost profits to show that it suffered a loss; a loss suffered by an affiilated company is not, by itself, enough.   

I may have some more to say about awards of defendant's profits, in the specific context of nonpracticing entities, later this week . . .  

The journal also has an interesting writeup by Kay Konishi, titled "NPEs Now Coming to Courts in Japan--Recent Three NPE Cases," and a response by AIPPI Japan to questions concerning relief in IP proceedings other than injunctions or damages (e.g., declaratory judgments, destruction of infringing goods, publication of judgment, apology, etc.).

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