Monday, July 18, 2022

Nichia v. Toshiba: Japan's IP High Court Awards Royalty of 132 Million Yen

This decision came down in November 2020, so I am late in reporting on it, but I only learned about recently from an article by Klaus Hinckelmann in the 6/2022 issue of Mitteilungen der deutschen Patentanwälten titled Aktuelle Entwicklungen auf dem Gebiet des japanischen Patentrechts:  Gestezes- und Praxisänderungen sowie Gerichtsentscheidungen aus den Jahren 2020 and 2021 (pp. 265-74).  I then checked the IP High Court's website and found an English-language translation of the decision, Nichia Corp. v. Toshiba Visual Solutions Corp., Case No. 2017 (Wa) 27238 (Nov. 18, 2020), here.  The damages are awarded under article 102(3) of the Japanese Patent Act.

The claims in suit relate to light-emitting displays (LEDs).  The IP High Court affirms the judgment of the Tokyo District Court that the defendant infringed the claims and that the claims are valid.  On damages, the IP High Court concludes that, on the facts, it was appropriate for the royalty based to be the defendant's end products--liquid crystal display (LCD) televisions--but set the rate at 0.5%, given that the end product incorporates many other features.  More precisely, as to the royalty base, the court writes (here, from the English-language summary of the case):

In addition to the gist and the like in Article 102, paragraph (3) of the Patent Act, in view of the circumstances that [i] the present LED was mounted on the directly under type backlight and used in the first court Defendant 's product, but it should be considered that the directly under type backlight is one of main components mounted inside the first court Defendant's product which is a liquid crystal TV set and cannot be separated easily from the first court Defendant 's product; [ii] performances of the LED largely influence the image quality of the liquid crystal TV, and what LED would be used and how it would be manufactured also influences manufacturing costs; and [iii] the first court Defendant sold the first court Defendant's product as a finished product utilizing the characteristics of the present LED, and in view that the first court Defendant has gained profits from the sales of the first court Defendant's product and the like, it is reasonable to calculate the amount equivalent to the license fee in Article 102, paragraph (3) of the Patent Act on the basis of the sales of the first court Defendant's product (p.ii).

As for the rate, if I'm understanding correctly the court concludes that, based on comparables and the advantages of the plaintiff's product, an appropriate rate for the LED component alone would be fairly high, not less than 10%; but since the LED is just part of the end product, albeit an important one, it concludes that the contribution rate (the rate to be multiplied against the end product base) should be 0.5%, which gives us just under 125 million yen.  

Interestingly, the court affirmatively states, as I understand it, that the royalty rate should reflect the ex post fact that the patent in suit is valid and infringed, and thus should be higher than the normal rate (see pp. 15-16).  The court also award attorneys' fees of 5%, or 12 million yen.  The total award of about 136 million yen equals just about US$ 1 million.   This amount exceeds the amount the plaintiff claimed in the court of first instance--a matter that Dr. Hinckelmann notes with an exclamation point. 


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