DateFebruary 1, 2013

Case number

2012 (Ne) 10015

Court

Intellectual Property High Court,
Special Division– A case in which the court held that it should be construed that the working of thepatented invention by the patentee is not required for the application of Article 102,
paragraph (2) of the Patent Act and that the application of said paragraph should beallowed where there are any circumstances suggesting that the patentee could havegained profits if no patent infringement had been made by the infringer
References:
Article 102, paragraph (2) of the Patent Act(Summary)In this case, the appellant/appellee (the plaintiff in the principal action and thedefendant in the counterclaim in the first instance; hereinafter referred to as the"plaintiff in the first instance"), who is the holder of a patent for an invention titled"Waste storage device" ((Patent No. 4402165); hereinafter such patent and invention
shall be referred to as the "Patent Right" and "Patented Invention," respectively), filed
an action against the appellee/appellant (the defendant in the principal action and theplaintiff in the counterclaim in the first instance, hereinafter referred to as the"defendant in the first instance") to seek injunction against the import and sale, etc., of
the waste storage cassettes for nappies imported and sold by the defendant in the firstinstance (hereinafter referred to as the "Product of the Defendant in the First Instance"),disposal of the Product of the Defendant in the First Instance, and compensation fordamages, by alleging that such Product of the Defendant in the First Instance infringed
the Patent Right, etc., of the plaintiff in the first instance.
The main issues were: (i) whether the Product of the Defendant in the First
Instance falls within the technical scope of the Patented Invention owned by theplaintiff in the first instance; and (ii) the method for calculating the amount of damages
sustained by the plaintiff in the first instance due to the infringement of the Patent
Right by the defendant in the first instance.
The court of prior instance (Tokyo District Court) held that, regarding issue (i) as
mentioned above, while the waste storage cassette covered by the Patent Right isdesigned to be rotatably mounted on the fixed portion of the waste storage cassetterotator and to be suspended from the waste storage cassette rotator, such cassettes
should not be recognized as being exclusively used for such purpose but should
include waste storage cassettes designed to be used by being mounted on waste storage
devices which do not have a waste storage cassette rotator. On these grounds, the court1

of prior instance found that the Product of the Defendant in the First Instance falls
within the technical scope of the Patented Invention and infringes the Patent Right.
With respect to issue (ii) as mentioned above, taking the stance that the application ofArticle 102, paragraph (2) of the Patent Act requires the working of the patented
invention by the patentee, the court of prior instance held that the amount of damage
may not be presumed pursuant to said paragraph because the plaintiff in the firstinstance had not worked the Patented Invention and admitted an amount of damage
equivalent to the amount of royalties under paragraph (3) of said Article.
In this judgment, the Intellectual Property High Court (hereinafter referred to as the"Court") upheld the judgment in prior instance, which held that the Product of theDefendant in the First Instance falls within the technical scope of the Patented
Invention and infringes the Patent Right. The Court then held that it should beconstrued that the application of Article 102, paragraph (2) of the Patent Act does not
require the patentee to work the patented invention and that the application of said
paragraph should be allowed if there are any circumstances suggesting that thepatentee could have gained profits if no patent infringement had been made by theinfringer. Based on this holding, the Court calculated the amount of damages sustainedby the plaintiff in the first instance pursuant to said paragraph and changed the amountof damages approved in the judgment in prior instance.
1. The requirement for application of Article 102, paragraph (2) of the Patent Act
Article 102, paragraph (2) of the Patent Act provides that "Where a patentee […]claims against an infringer compensation for damage sustained as a result of theintentional or negligent infringement of the patent right […] and the infringer earned
profits from the act of infringement, the amount of profits earned by the infringer shallbe presumed to be the amount of damage sustained by the patentee […]."
Under the principle of the Civil Code, any patentee who has sustained damage due
to patent infringement may seek damages only if the patentee is able to allege andprove the occurrence and the amount of damage as well as the causation between suchdamage and the act of patent infringement. In light of the fact that such proof, etc., isaccompanied with such a difficulty that it could prevent the payment of an appropriate
amount of damages, Article 102, paragraph (2) of the Patent Act provides that, if theinfringer earns profits from the act of infringement, the amount of profits earned by theinfringer shall be presumed to be the amount of damage sustained by the patentee, andthereby seeks to reduce the difficulty in providing proof. Taking into account thatArticle 102, paragraph (2) of the Patent Act was provided for the purpose of reducing2

the difficulty in proving the amount of damage as mentioned above and that the effectthereof is merely presumptive, there are no reasonable grounds for making therequirements for the application of said paragraph particularly strict.
Thus, it should be construed that the application of Article 102, paragraph (2) ofthe Patent Act should be allowed when there are any circumstances suggesting that thepatentee could gain profits if no patent infringement had been made by the infringer.
Moreover, it would be reasonable to construe that various circumstances such as thedifference between the patentee and the infringer in terms of the manner of businessshall be taken into consideration as the circumstances to reduce the presumed amountof damage. Furthermore, as mentioned below, it would be reasonable to consider thatthe application of the Article 102, paragraph (2) of the Patent Act does not require thepatentee to work the patented invention.
2. Judgment concerning this caseWith respect to the plaintiff in the first instance, the Court found that the plaintiff
in the first instance and Company A concluded a distributorship agreement, based on
which the plaintiff in the first instance designated Company A as a distributor of theproduct of the plaintiff in the first instance (hereinafter referred to as the "Product ofthe Plaintiff in the First Instance") in Japan and sold (exported) to Company A thecassettes that the plaintiff in the first instance manufactured in the U.K. by use of thePatented Invention, and that Company A sold the cassettes manufactured by theplaintiff in the first instance to general consumers in Japan, and thereby that theplaintiff in the first instance may be considered to have sold in Japan throughCompany A the cassettes it manufactured. On the other hand, with respect to thedefendant in the first instance, the Court found that the defendant in the first instance,
which had been importing the Product of the Defendant in the First Instance into Japanand selling it in Japan, was in competition with not only Company A but also with theplaintiff in the first instance in the Japanese market for waste storage cassettes, andthat the sales of the cassettes manufactured by the plaintiff in the first instance havebeen decreasing in Japan due to the act of infringement by the defendant in the firstinstance (the act of selling the Product of the Defendant in the First Instance).
In view of these facts mentioned above, it may be found that there werecircumstances suggesting that the plaintiff in the first instance could have gained more
profits if no infringement had been made by the defendant in the first instance.
Therefore, it is reasonable to conclude that there are no reasons to preclude theapplication of Article 102, paragraph (2) of the Patent Act in calculating the amount of3

damage sustained by the plaintiff in the first instance.
In regard to this, the defendant in the first instance alleged that, in consideration of
the principle of territoriality as well as the fact that Article 102, paragraph (2) of thePatent Act is not a provision for the presumption of occurrence of damage per se, theapplication of said paragraph requires the act of "working" as prescribed in Article 2,paragraph (3) of said Act by the patentee in regard to the patented invention in Japan.
The defendant in the first instance further alleged that, in Japan, the plaintiff in the firstinstance has not conducted the sale, etc., of the cassettes manufactured by the plaintiff
in the first instance by use of the Patented Invention, and therefore Article 102,paragraph (2) of said Act shall not be applied for the calculation of the damage
sustained by the plaintiff in the first instance.
However, taking into consideration the facts that Article 102, paragraph (2) of thePatent Act does not contain any wording requiring the working of the patented
invention by the patentee, and that said paragraph was provided for the purpose ofreducing the difficulty in proving the amount of damage, and further that, since said
paragraph is merely a presumptive provision, it would be unreasonable to impose
especially strict requirements for the application of said paragraph, the act of working
patented invention by the patentee may not be regarded as a requirement for theapplication of said paragraph.
As described above, it should be construed that the application of Article 102,
paragraph (2) of the Patent Act should be allowed where there are any circumstancessuggesting the patentee could have gained profits if no patent infringement had been
made by the infringer.
Therefore, in this case, regardless of whether the abovementioned act of theplaintiff in the first instance may be regarded as the "working" as provided for in
Article 2, paragraph (3) of the Patent Act, Article 102, paragraph (2) of the Patent Act
may be applied. This construction would not make the Patent Right effective outside
Japan and therefore would not violate the principle, which is generally called theprinciple of territoriality.
Based on these findings, the allegation of the defendant in the first instance may
not be accepted and Article 102, paragraph (2) of the Patent Act may be applied to thecalculation of the amount of damage sustained by the plaintiff in the first instance, andtherefore, the amount of damage may be presumed under said paragraph.

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