Judgment rendered on December 26, 2011; the original was received on the same day; court
clerk
2009 (Wa) 44391, Case of Principal Action Seeking an Injunction against Infringement of a
Patent Right, etc.
2011 (Wa) 19340, Case of Counterclaim of the Same
Date of conclusion of oral argument: July 12, 2011
Judgment
United Kingdom <hereinafter omitted>
Plaintiff in the principal action/defendant in the counterclaim: Sangenic
International Ltd.
Counsel attorney: SAMEJIMA Masahiro
Same as above: KURE Mikiko
Same as above: TAKAMI Ken
Same as above: ITO Masahiro
Sub-counsel attorney: WADA Yuzo
Patent attorney as an assistant in court: KURATA Masatoshi
Same as above: KOIDE Toshimi
Same as above: SUNAGAWA Masaru
Same as above: YOSHIDA Chikashi
Chuo-ku, Osaka-shi <hereinafter omitted>
Defendant in the principal action/plaintiff in the counterclaim:
Aprica Children's Products Inc.
Counsel attorney: KUNIYA Shiro
Same as above: SHIGETOMI Takamitsu
Same as above: WAKABAYASHI Motonobu
Same as above: TAKEHIRA Seigo
Same as above: YOSHIMURA Kosuke
Same as above: HIROSE Takashi
Counsel patent attorney: ITO HidehikoSame as above: TAKEUCHI Naoki
Main Text
1. The defendant in the principal action (plaintiff in the counterclaim) shall not import, sell, oroffer to sell the product stated in the attached List of Product 1.
2. The defendant in the principal action (plaintiff in the counterclaim) shall dispose of the
product stated in the attached List of Product 1.
3. The defendant in the principal action (plaintiff in the counterclaim) shall pay to the plaintiff in1

the principal action (defendant in the counterclaim) 21,139,152 yen with delay damages
calculated by the rate of 5% per annum on 211,298 yen for the period from December 1, 2009
until the date of completion of the payment, on 1,143,691 yen for the period from January 1,
2010 until the date of completion of the payment, on 642,923 yen for the period from February
1, 2010 until the date of completion of the payment, on 1,437,410 yen for the period fromMarch 1, 2010 until the date of completion of the payment, on 1,110,230 yen for the period
from April 1, 2010 until the date of completion of the payment, on 1,573,294 yen for the period
from May 1, 2010 until the date of completion of the payment, on 537,567 yen for the period
from June 1, 2010 until the date of completion of the payment, on 863,014 yen for the period
from July 1, 2010 until the date of completion of the payment, on 943,649 yen for the period
from August 1, 2010 until the date of completion of the payment, on 1,255,610 yen for theperiod from September 1, 2010 until the date of completion of the payment, on 878,324 yen forthe period from October 1, 2010 until the date of completion of the payment, on 935,830 yen forthe period from November 1, 2010 until the date of completion of the payment, on 1,286,010
yen for the period from December 1, 2010 until the date of completion of the payment, on
62,341 yen for the period from January 1, 2011 until the date of completion of the payment, on
279,713 yen for the period from February 1, 2011 until the date of completion of the payment,
on 713,871 yen for the period from March 1, 2011 until the date of completion of the payment,
on 2,012,677 yen for the period from April 1, 2011 until the date of completion of the payment,on 673,516 yen for the period from May 1, 2011 until the date of completion of the payment, on
542,938 yen for the period from June 1, 2011 until the date of completion of the payment, on
844,543 yen for the period from July 1, 2011 until the date of completion of the payment, andon 3,190,703 yen for the period from July 12, 2011 until the date of completion of the payment.
4. The court dismisses all the other claims made in the principal action by the plaintiff in theprincipal action (defendant in the counterclaim).
5. The court dismisses the claims made in the counterclaim by the plaintiff in the counterclaim(defendant in the principal action).
6. The court costs for the principal action and the counterclaim shall be divided into four, one ofwhich shall be borne by the plaintiff in the principal action (defendant in the counterclaim),
while the remaining three-fourths shall be borne by the defendant in the principal action(plaintiff in the counterclaim).
7. This judgment may be provisionally executed as far as paragraphs 1 to 3 are concerned.
Facts and ReasonsNo. 1 Claims
1. Principal action(1) The same as paragraphs 1 and 2 of the Main Text.

2(2) The defendant in the principal action (plaintiff in the counterclaim) shall pay to the plaintiff
in the principal action (defendant in the counterclaim) 206,729,983 yen with delay damages
calculated by the rate of 5% per annum on 15,623,538 yen for the period from November 6,2009 until the date of completion of the payment, on 2,104,200 yen for the period from
December 1, 2009 until the date of completion of the payment, on 11,589,132 yen for the period
from January 1, 2010 until the date of completion of the payment, on 4,893,768 yen for theperiod from February 1, 2010 until the date of completion of the payment, on 10,430,820 yen
for the period from March 1, 2010 until the date of completion of the payment, on 8,915,796
yen for the period from April 1, 2010 until the date of completion of the payment, on
12,546,042 yen for the period from May 1, 2010 until the date of completion of the payment, on
4,450,884 yen for the period from June 1, 2010 until the date of completion of the payment, on
7,161,294 yen for the period from July 1, 2010 until the date of completion of the payment, on
7,815,600 yen for the period from August 1, 2010 until the date of completion of the payment,
on 9,674,310 yen for the period from September 1, 2010 until the date of completion of thepayment, on 6,626,226 yen for the period from October 1, 2010 until the date of completion of
the payment, on 6,909,792 yen for the period from November 1, 2010 until the date ofcompletion of the payment, on 9,744,450 yen for the period from December 1, 2010 until thedate of completion of the payment, on 746,490 yen for the period from January 1, 2011 until thedate of completion of the payment, on 2,578,146 yen for the period from February 1, 2011 until
the date of completion of the payment, on 5,490,960 yen for the period from March 1, 2011
until the date of completion of the payment, on 14,815,572 yen for the period from April 1, 2011
until the date of completion of the payment, on 5,155,290 yen for the period from May 1, 2011
until the date of completion of the payment, on 4,156,296 yen for the period from June 1, 2011
until the date of completion of the payment, and on 70,924,915 yen for the period from July 12,2011 until the date of completion of the payment.
(3) Declaration of provisional execution
2. Counterclaim(1) The defendant in the counterclaim (plaintiff in the principal action) shall pay to the plaintiff
in the counterclaim (defendant in the principal action) 75,274,696 yen with delay damages
calculated by the rate of 5% per annum on said amount for the period from June 15, 2011 until
the date of completion of the payment.
(2) Declaration of provisional execution
No. 2 Background
1. (1) The plaintiff in the principal action/defendant in the counterclaim (hereinafter referred toas "Plaintiff") holds a patent right relating to a waste-storage device and a design right relating
to a waste-disposal cassette and has concluded a distributorship agreement with the former

3company of the defendant in the principal action/plaintiff in the counterclaim (hereinafterreferred to as "Defendant") in the past. The Plaintiff alleged that the product (hereinafterreferred to as "Product 1") stated in the attached List of Product 1, which the Defendant imports,
sells or otherwise handles under the aforementioned patent right, design right, anddistributorship agreement, infringes the aforementioned patent right and design right or that, inthe aforementioned agreement, the Defendant promised to discontinue use of the Plaintiff's
intellectual property rights upon termination of said agreement. Based on this allegation, thePlaintiff filed this principal action against the Defendant to seek an injunction against the import,sale, or otherwise handling of Product 1 (Article 100, paragraph (1) of the Patent Act, Article 37,
paragraph (1) of the Design Act, and the aforementioned agreement) and disposal thereof(Article 100, paragraph (2) of the Patent Act and Article 37, paragraph (2) of the Design Act), as
well as a payment of 206,729,983 yen in total as damages (Article 102, paragraphs (2) and (3)of the Patent Act, Article 39, paragraphs (2) and (3) of the Design Act, and Article 709 of the
Civil Code), with delay damages calculated by the rate of 5% per annum as prescribed in the
Civil Code on each amount broken down for the damages for the period from the first day of themonth in which relevant damages occurred to the date of completion of the payment. (However,regarding damages and active damages that occurred during the period from July 1 to 7, 2011,
the period shall be from the 12th of the same month, which is the day following the date ofservice of a petition for amendment of the claim dated the 7th of the same month, to the date ofcompletion of the payment.)(2) The Defendant alleged that the Plaintiff notified the Defendant's customers of the fact that
Product 1 sold by the Defendant infringes the Plaintiff's intellectual property rights around July2009 and that said act of notifying falls under the act of making a false allegation that isinjurious to the business reputation of the Defendant (Article 2, paragraph (1), item (xiv) of the
Unfair Competition Prevention Act). Based on this allegation, the Defendant filed thiscounterclaim against the Plaintiff to seek a payment of 75,274,696 yen as compensation fordamages (Article 4 of the Unfair Competition Prevention Act, Articles 709 and 710 of the Civil
Code), with delay damages accrued thereon calculated by the rate of 5% per annum, asprescribed in the Civil Code for the period from June 15, 2011 (the day following the date ofservice of the written counterclaim) to the date of completion of the payment.
2. Assumed facts (Evidence is stated at the end of each item in relation to those other thanundisputed facts. Documentary evidence includes branch numbers.)(1) Parties
A. The Plaintiff is a company based on the United Kingdom that engages in the business ofmanufacturing or otherwise handling infant products in Japan and abroad.
B. The Defendant is a stock company engaging in the business of manufacturing, selling, or4otherwise handling nursery items, children's vehicles, toys, etc.
C. The Plaintiff and the Defendant share common consumers in the market of waste-storage
devices and waste-storage device cassettes and are in a competitive relationship.
(2) Plaintiff's patent right (Exhibits Ko No. 2 and No. 17)
The Plaintiff holds the following patent right (hereinafter referred to as "Patent Right"; thepatent pertaining to the Patent Right is referred to as "Patent," and the invention pertaining to
the Patent is referred to as "Invention").
Patent number: Patent No. 4402165
Title of the invention: Waste-storage device
Application date: June 5, 2009
Indication of division: Division of Patent Application No. 2006-536164
Original application date: October 21, 2004
Priority date: October 23, 2003
Priority country: United Kingdom
Registration date: November 6, 2009
Scope of claims
Claim 14 (The invention claimed in Claim 14 is referred to as "Invention 1.")A waste-storage cassette that is engaged with a waste-storage cassette rotator provided in asmall chamber on the top of a waste-storage device and is to be installed in a rotatable manner;that is a waste-storage cassette comprising an inner wall that defines the nearly column-shaped
core, an outer wall, a storage part that sits between said inner wall and said outer wall in which
folded waste-storage bags are set, an extension part that extends from the top of said inner wall
toward said outer wall wherein said folded waste-storage bags are pulled out to the inside ofsaid core beyond said extension part when used, and a structure that projects from said outerwall so that it engages with said waste-storage cassette rotator for supporting and rotating said
waste-storage cassette; and that is a waste-storage cassette structured so as to be suspended fromsaid waste-storage cassette rotator.
Claim 11 (the invention claimed in Claim 11 is referred to as "Invention 2")
A waste-storage device that comprises a small chamber on the top of the waste-storage device
that accepts a waste-storage cassette and a waste-storage cassette rotator, which is installed insaid small chamber so that it could rotate said waste-storage cassette in said small chamber andis formed to engage with said waste-storage cassette; that is a waste-storage device wherein [a]said waste-storage cassette rotator comprises an upper ring, a cylindrical wall that extends fromsaid upper ring downward, and a flange designed to support said waste-storage cassette for therotation of said waste-storage cassette, which projects from the bottom of said cylindrical wallinward, [b] said waste-storage device further comprises a waste-storage cassette that is engaged

5

with and supported by said waste-storage cassette rotator, [c] said waste-storage cassettecomprises an inner wall that defines the core of the nearly column-shaped core, an outer wall, astorage part that sits between said inner wall and said outer wall in which folded waste-storage
bags are set, [d] said waste-storage cassette has a structure that is provided on said outer wall,
projects from said outer wall, and is set to engage with a waste-storage cassette rotator that sits
in said small chamber, and [e] said waste-storage cassette is structured so as to be suspended
from a flange that projects into said inside of the waste-storage cassette rotator due to said
structure.
(3) Segmenting of constituent features
A. Invention 1 is segmented into the following constituent features (segment signs inparentheses are those assigned by the Defendant; hereinafter, regarding signs for segmenting
Inventions 1 and 2 into constituent features, signs assigned by the Plaintiff are indicated firstand corresponding signs assigned by the Defendant are indicated in the parentheses, as shown
below).
[A] ([A]) A waste-storage cassette that is engaged with a waste-storage cassette rotator provided
in a small chamber on the top of a waste-storage device and is to be installed in a rotatablemanner,[B] ([B]) that is a waste-storage cassette comprising([B-1]) an inner wall that defines the nearly column-shaped core,[C] ([B-2]) an outer wall,[D] ([B-3]) a storage part that sits between said inner wall and said outer wall in which folded
waste-storage bags are set,[E] ([B-4]) an extension part that extends from the top of said inner wall toward said outer wall
wherein said folded waste-storage bags are pulled out to the inside of said core beyond said
extension part when used, and[F] ([B-5]) a structure that projects from said outer wall so that it engages with said
waste-storage cassette rotator for supporting and rotating said waste-storage cassette, and[G] ([D]) that is a waste-storage cassette([C]) structured so as to be suspended from said waste-storage cassette rotator.
B. Invention 2 is segmented into the following constituent features.
[H] ([A]) A waste-storage device that comprises a small chamber on the top of the waste-storage
device that accepts a waste-storage cassette and[I] ([A]) a waste-storage cassette rotator, which is installed in said small chamber so that it canrotate said waste-storage cassette in said small chamber and is formed to engage with said
waste-storage cassette,([G]) that is a waste-storage device

6[J] ([B]) wherein said waste-storage cassette rotator([B-1]) comprises an upper ring,[K] ([B-2]) a cylindrical wall that extends from said upper ring downward, and[L] ([B-3]) a flange designed to support said waste-storage cassette for the rotation of said
waste-storage cassette, which projects from the bottom of said cylindrical wall inward,[M] ([C]) said waste-storage device further comprises a waste-storage cassette that is engaged
with and supported by said waste-storage cassette rotator,[N] ([D]) said waste-storage cassette comprises([D-1]) an inner wall that defines the core of the nearly column-shaped core,[O] ([D-2]) an outer wall,[P] ([D-3]) a storage part that sits between said inner wall and said outer wall in which folded
waste-storage bags are set,[Q] ([E]) said waste-storage cassette has a structure that is provided on said outer wall, projects
from said outer wall, and is set to engage with a waste-storage cassette rotator that sits in said
small chamber, and[R] ([F]) said waste-storage cassette is structured so as to be suspended from a flange thatprojects into said inside of the waste-storage cassette rotator due to said structure.
(4) Plaintiff's design right (Exhibits Ko No. 7 and No. 8)
The Plaintiff holds the following design right (hereinafter referred to as "Design Right"; thedesign pertaining to the Design Right is referred to as "Design").
Registration number: Registration No. 1224008
Design registration application date: April 22, 2004
Priority claim under the Paris Convention, etc.
Priority claim number: 95468-0002
Priority date: October 23, 2003
Priority country: Office for Harmonization in the Internal Market (Trade Marks and Designs)
Date of registration of establishment: October 15, 2004
Article to the design: Waste-storage cassette
Registered design: As described in the attached design bulletin
Explanation of the article to the design: This article is used by being fixed in a waste-storage
device, etc., and it is used to collect waste by housing a sequence of many cylindrical bags in adoughnut-shaped recess in a manner that it can be pulled out and by pulling out these bags
one-by-one and fitting the bag into a hole at the center.
(5) Act committed by the Defendant
The Defendant imports, sells, and offers to sell Product 1.
(6) Structure of Product 1

7

a. A waste-storage cassette designed to be installed on the top of a waste-storage container,b. which is a waste-storage cassetteb-1. comprising an inner wall that defines the nearly column-shaped core,b-2. an outer wall,b-3. a storage part that sits between said inner wall and said outer wall in which folded
waste-storage bags are set,b-4. an extension part that extends from the top of said inner wall toward said outer wall
wherein said folded waste-storage bags are pulled out to the inside of said core beyond said
extension part when used, andb-5. a projecting part that has four missing parts that are equally spaced in the circumferential
direction of the outer periphery of said outer wall.
(7) Comparison between the Invention and Product 1, etc.
Product 1 fulfills Constituent Features [B] to [E] ([B] to [B-4]) of Invention 1.
(8) Background to the filing of the patent application in question
A. The Plaintiff filed the patent application in question (the "Patent Application") on June 5,2009 as a divisional application of the patent application (Patent Application No. 2006-536164),
which was filed in Japan, claiming a priority based on a U.K. application on October 21, 2004.
B. For the Patent, the establishment of a patent right was registered on November 6, 2009.
(9) Transition of the distributorship agreement, etc. (Exhibit Ko No. 15 and Exhibits Otsu No.
15 to No. 17)
A. Since around 1993, the Plaintiff had designated Aprica Kasai/Aprica Childcare Institute(hereinafter referred to as "Former Aprica") as its exclusive agency in Japan. The Plaintiff andFormer Aprica concluded a comprehensive distributorship agreement (Exhibit Ko No 15;
hereinafter referred to as "Distributorship Agreement"), including the following provisions, on
November 26, 2003.
(A) If this agreement is terminated for any reason, Former Aprica shall cease to exploit all of thePlaintiff's intellectual property rights, for which it received a license from the Plaintiff, in any
form (including use in relation to stationery and vehicles without any exception) without delay,and shall return to the Plaintiff all the printed matters (excluding general catalogues of Former
Aprica) indicating that Former Aprica holds those intellectual property rights, or it shall disposeof them without charge (paragraph 12.7).
(B) Former Aprica shall cease to promote sales of and advertise the products and to use theintellectual property rights, except where it commits such act for the purpose of selling theinventory goods for which the Plaintiff does not exercise the right of repurchase. Former Aprica
may sell said inventory goods only within three months from the termination of this agreement(paragraph 14.4).

8

(C) Intellectual property rights"This agreement covers patents, trademarks, service marks, trade names, brand names,
copyrights, rights to designs, know-how, secret information, and other intellectual property
rights, including any business reputation incidental thereto, irrespective of "whether or not
registered or capable of registration" and whether or not they exist in this area or any other area
(paragraph 1.1).
B. Based on the aforementioned agreement concluded with the Plaintiff, Former Aprica
conducted the sale of the Plaintiff's products. It started selling a waste-storage device andcorresponding waste-storage cassette called Mark I (product name: におわ な くて ポイ(niowanakute poi; odorless waste-storage device)) around 1993, a waste-storage device andcorresponding waste-storage cassette called Mark II (product name: におわなくてポイ マル
チ (niowanakute poi maruchi; multi odorless waste-storage device)) around 1999, and awaste-storage device and corresponding waste-storage cassette called Mark III (product name:におわなくてポイ・イージー (niowanakute poi ījī; easy odorless waste-storage device))around 2006. The waste-storage device of Mark I and that of Mark II do not have awaste-storage cassette rotator, but that of Mark III does have a waste-storage cassette rotator.
C. The Plaintiff and a U.S. corporation, Newell Rubbermaid Inc. (hereinafter referred to as"Newell"), agreed in the agreement dated March 7, 2008 (Exhibit Otsu No. 15) that thecontractual status under the Distributorship Agreement is transferred from Former Aprica to
Newell along with Newell's acquisition of Former Aprica's business. On April 1 of the same
year, Former Aprica transferred its business to the Defendant, which was established by Newellin Japan (Exhibit Otsu No. 16).
D. In October 2008, the Plaintiff notified that the Distributorship Agreement would not be
renewed on and after November 27 of the same year.
E. The Plaintiff and Combi Corporation (hereinafter referred to as "Combi") located in Taito-ku,
Tokyo (detailed address is omitted) concluded a distributor agreement concerning baby
diaper-disposal products (Exhibit Ko No. 56) on October 15, 2008. The Plaintiff has designatedCombi as its exclusive agency in Japan on and after November 27 of the same year. Combi sells
the Plaintiff's product, Mark III, under the product name of "ニオイ・クルルンポイ (nioikururunpoi" (waste-storage device that rolls up odor).
(10) Notice given by the Plaintiff to the Defendant's customers (Exhibit Otsu No. 48)
A. Around July 28, 2009, the Plaintiff sent to the Defendant's customers a written notice(Exhibit Otsu No. 48; hereinafter referred to as the "Written Notice"; hereinafter this act isreferred to as the "Act of Giving the Notice").
B. The following is stated in the Written Notice (Exhibit Otsu No. 48).
"As a developer and producer of diaper-disposal systems, Sangenic holds many intellectual9

property rights around the world with respect to the designs and production of diaper-disposal
pails and spare cassettes. If Sangenic … becomes aware of infringement of its own intellectual
property right by a competing product, … Sangenic would take every measure to protect its own
business from the producer or retailer that has committed said infringement."(11) Sales volume and sales of Product 1 (Exhibits Otsu No. 38 and No. 55)
The sales volume and sales of Product 1 during the period from November 6, 2009 until theend of May 2011 are as follows. The sales volume is 406,602 units (one set contains three unitsof Product 1), and the sales is 171,039,163 yen. Incidentally, the total sales of Product 1 inconsideration of the volume discount thereof made under various pretexts, such as
distribution-cost sharing, sales-promotion-cooperation costs, and sales rebate, as trade terms
agreed with each customer is 168,347,196 yen.
Periods
November 2009

Sales volumeSales

2,100 sets

¥2,112,980

December 2009

11,566 sets

¥11,436,919

January 2010

4,884 sets

¥6,429,236

February 2010

10,410 sets

¥14,374,108

March 2010

8,898 sets

¥11,102,300

April 2010

12,521 sets

¥15,732,943

May 2010

4,442 sets

¥5,375,678

June 2010

7,147 sets

¥8,630,142

July 2010

7,800 sets

¥9,436,498

August 2010

9,655 sets

¥12,556,108

September 2010

6,613 sets

¥8,783,248

October 2010

6,896 sets

¥9,358,305

November 2010

9,725 sets

¥12,860,108

December 2010

745 sets¥623,414

January 2011

2,573 sets

¥2,797,139

February 2011

5,480 sets

¥7,138,714

March 2011

14,786 sets

¥20,126,774

April 2011

5,145 sets

¥6,735,166

May 2011

4,148 sets

¥5,429,383(Nov. 6 to 30)

3. Issues[Principal action](1) Whether there is an infringement of the patent right pertaining to Invention 1(1)-1 Fulfillment of constituent features of Invention 1 (direct infringement)
10(1)-1(i) Interpretation of Constituent Features [A] ([A]), [F] ([B-5]), and [G] ([C]) of Invention1(1)-1(ii) Fulfillment of constituent features of Invention 1(1)-2 Whether there are grounds for invalidation of the patent pertaining to Invention 1(1)-2(i) Violation of Article 36, paragraph (6), item (ii) of the Patent Act(1)-2(ii) Lack of novelty (Exhibit Otsu No. 14)(1)-2(iii)a. Lack of an inventive step (primarily cited reference Exhibit Otsu No. 14)(1)-2(iii)b. Lack of an inventive step (primarily cited reference Exhibit Otsu No. 14)(1)-2(iii)c. Lack of an inventive step (primarily cited reference Exhibit Otsu No. 18)(2) Whether there is an infringement of the patent right pertaining to Invention 2(2)-1 Whether an indirect infringement of Invention 2 is constituted(2)-2 Whether exhaustion is established(3) Whether there is an infringement of the Design Right(3)-1 Constitution of the registered design in question (the "Registered Design")(3)-2 Constitution of Product 1(3)-3 Whether the Registered Design and the design of Product 1 are similar to each other(4) Propriety of a claim for an injunction based on the agreement(5) Propriety of claims for an injunction and disposal(6) Whether there is an intention or negligence(7) Damages(7)-1 Calculation of the amount of damages (Article 102, paragraph (2) of the Patent Act andArticle 39, paragraph (2) of the Design Act)(7)-2 Calculation of the amount of damages (Article 102, paragraph (3) of the Patent Act andArticle 39, paragraph (3) of the Design Act)(7)-3 Active damages[Counterclaim](1) Whether an act of unfair competition is constituted (whether the relevant act falls under theact of making or circulating a false allegation as set forth in Article 2, paragraph (1), item (xiv)of the Unfair Competition Prevention Act)
(2) Whether there is a ground for justification(3) Whether there is an intention or negligence(4) Damages
4. Allegations of the parties concerning the issues[Principal action](omitted)11

(7) Damages(7)-1 Calculation of the amount of damages (Article 102, paragraph (2) of the Patent Act andArticle 39, paragraph (2) of the Design Act)
(Plaintiff)
The Plaintiff sustained the following damages from infringements of the Patent Right andthe Design Right committed by the Defendant (Article 102, paragraph (2) of the Patent Act andArticle 39, paragraph (2) of the Design Act)
A. Article 102, paragraph (2) of the Patent Act is applicable to this case.
In this case, the Plaintiff manufactures the Plaintiff's cassette and the Plaintiff's device in the
United Kingdom and has concluded an exclusive agency agreement with non-party Combi, andCombi imports and sells the Plaintiff's cassette and the Plaintiff's device in Japan. Therefore, thePlaintiff does not work the Patent Right in Japan. However, Article 102, paragraph (2) of the
Patent Act is applicable to this case for the following reasons.
(A) Working by a patentee is not required to apply Article 102, paragraph (2) of the Patent Act.
[i] According to popular theories and judicial precedents, Article 102, paragraph (2) of the
Patent Act is a presumptive provision concerning the amount of damages and is not a
presumptive provision concerning occurrence of damages (lost earnings). Therefore, whatshould be discussed in terms of the propriety of applying said paragraph is "whether or not lostearnings occurred," and it is not "whether or not the patentee works the invention." In short, theissue is summarized in the existence of a cause-and-effect relationship, that is, a relationshipwhere "if an infringer sells one infringing product, a patentee loses the opportunity to sell one
product." Both the Plaintiff's cassette and the Defendant's Product 1 fit only in the Plaintiff's
device and are thus substantially competing in the Japanese market. Therefore, if the Defendantsells one unit of Product 1, the Plaintiff becomes unable to sell one unit of the Plaintiff's cassette
and, therefore, sustains the damage of becoming unable to gain a profit from selling it. Suchdamage should be compensated by the Defendant from the perspective of the purpose of thesystem of compensation for damages in tort (Article 709 of the Civil Code) that is designed tohave a tortfeasor compensate damages caused by a tort in a reasonable and fair manner.
(ii) Article 102, paragraph (2) of the Patent Act only provides for the actor who exercises theright to claim damages as a "patentee or an exclusive licensee," and does not clearly specify"working by the patentee" as a condition for the application of said paragraph. Therefore, it is acorrect interpretation of law to understand that application of said paragraph shall not be
precluded if "occurrence of lost earnings" is recognized, irrespective of the existence of"working by the patentee."(iii) There is a judicial precedent in which the court upheld the application of Article 102,
paragraph (2) of the Patent Act on the basis of existence of competition in the market and a12relationship wherein the parties compete for market shares (judgment of the Tokyo District
Court of August 27, 2009). In addition, there are also judicial precedents in which the court
denied the application of said paragraph because there are no lost earnings, that is, the patentee
does not lose the opportunity to sell one product when the infringer sells one product (judgmentof the Osaka District Court of March 27, 1981 and judgment of the Tokyo High Court of June
15, 1999).
(iv) If Article 102, paragraph (3) of the Patent Act is applied instead of paragraph (2) of said
Article and the royalty rate becomes inexpensive, the amount of damages is too low as a penalty
for infringement, which is not enough to discourage illegal acts.
(B) The Plaintiff can be deemed to be working Invention 1.
(i) Even if working by a patentee him/herself is set as a requirement for application of said
paragraph, the Plaintiff can be equated with a person who works Invention 1 because of thefollowing: as mentioned above, the Plaintiff manufactures the Plaintiff's cassette and thePlaintiff's device in the United Kingdom and has concluded an exclusive agency agreement with
non-party Combi, and non-party Combi imports and sells the Plaintiff's cassette and thePlaintiff's device in Japan; therefore, essentially, the Plaintiff is working the Patent in Japan byusing non-party Combi as a tool.
(ii) The aforementioned matter can also be proven by the fact that the Plaintiff approves
non-party Combi's sales-promotion plans in Japan and provides financial assistance fornon-party Combi's sales-promotion activities, affixes the Plaintiff's name it designed to all of the
packages of the Plaintiff's cassette and the Plaintiff's device, obtains intellectual property rights
therefor in Japan, and exercises these rights (Exhibit Ko No. 52).
B. Calculation of the amount of damages(A) As mentioned in assumed facts (11), the Defendant sold 406,602 units of Product 1 in total
during the period from November 6, 2009 to May 2011, and the number of units sold annually is259,074. Therefore, the number of units sold during the period from September 2009 to July 7,
2011 is 479,842 (= 406,602 units + 259,074 units x (5/30 + 2 + 1 + 7/31)/12).
(B) The amount of profit from selling one unit of Product 1 is 334 yen (the amount alleged by
the Defendant in the counterclaim). Therefore, the marginal profit that arose during each period
mentioned in assumed facts (11) is calculated by the following formula: sales volume during
each period x 3 x 334 yen. Delay damages accrued on said marginal profit arises on the day
following the last day of each period.
In that case, the amount of the Defendant's marginal profit calculated for the period from
September 2009 to July 7, 2011 is 160,267,228 yen (= 334 yen x 479,842 units), of which theamount of the marginal profit based on the act of infringing the Design Right for the period
from September 2009 to November 5 of the same year is 15,623,538 yen (= 160,267,228 yen x

13

(1 + 1 + 5/30)/(4 + 12 + 6 + 7/31)), and the amount of the Defendant's marginal profit based on
infringements of the Patent Right and the Design Right for the period from November 6 of thesame year to July 7, 2011 is 144,643,690 yen (= 160,267,228 yen – 15,623,538 yen).
C. Counterargument against the allegations of the Defendant(A) It is merely a guess by the Defendant that the Plaintiff delivers to non-party Combi thePlaintiff's cassette under the FOB terms. Even if that is the case, the following allegation is
non-essential: The existence of working of a patent by a seller is determined based on trivial
trade terms (specifically, terms of delivery, such as FOB, DDU, or DDP), the propriety of
application of Article 102, paragraph (2) of the Patent Act is affected thereby, and the amount ofdamages also changes thereby.
(B) Originally, occurrence of lost earnings relates to an issue of whether or not the Plaintiff has
lost earnings in relation to the patent infringement committed by the Defendant. It is not
logically related to the status of sale of the Defendant's new product and other companies'
competing products that are not products infringing the Patent. The cassette for the Defendant's
new product named " にお わな くてポ イ消 臭タイ プ (niowanakute poi shoushu taipu)"(odorless waste-storage device) does not fit in the Plaintiff's device. Therefore, it also has no
relation to the market of "cassettes applied to the Plaintiff's device," of which the Plaintiff takes
notice. The same applies to other companies' competing products. Even if the market of the
Defendant's new product has a relation to the market of which the Plaintiff takes notice, aninfluence of sale of the new product cannot be considered because the new product had notexisted during the period from the start of sale of Product 1 around July 2009 until around July
2010, when the sale of the new product started.
(C) There is a provision on the obligation to purchase pertaining to the minimum purchasevolume in the agreement concluded between Former Aprica and the Plaintiff. However, only asanction against a failure to perform said obligation is the cancellation of the agreement (Article
9.2). There is no provision on monetary compensation.
(Defendant)
A. The Defendant disputes all of the Plaintiff's legal allegations. Incidentally, it is not necessary
to discuss the existence of an infringement of the Design Right of the Plaintiff because it isobvious that the Defendant does not infringe the Design Right.
B. Non-application of Article 102, paragraph (2) of the Patent Act(A) Article 102, paragraph (2) of the Patent Act is a presumptive provision concerning a
cause-and-effect relationship between an act of infringement and damages, which is one of thegeneral requirements for constitution of a tort, and the amount of damages therefrom, and it is
not a presumptive provision concerning an occurrence of damages itself. Therefore, it isconsidered necessary for a patentee to prove occurrence of damages, specifically, working of a14

relevant patent by the patentee him/herself, in order to make said paragraph applicable. In
addition, "working" of a patented invention means the acts prescribed in the items of Article 2,paragraph (3) of said Act. From the perspective of the principle of territoriality, it is considered
to mean the acts prescribed in said paragraph that are committed in Japan. Consequently, thePlaintiff needs to be "working" (Article 2, paragraph (3) of the Patent Act) Invention 1 in Japanin order to make Article 102, paragraph (2) of the Patent Act applicable to this case.
In this case, as mentioned below, the Plaintiff conducts no business in relation to thePlaintiff's product, including the Plaintiff's cassette, in Japan, and it thus does not work
Invention 1 in Japan. Therefore, Article 102, paragraph (2) of the Patent Act is not applicable inthis case.
(i) The Plaintiff did not manufacture the Plaintiff's cassette in Japan on the occasion oftransactions with Former Aprica.
(ii) The terms of delivery agreed between Former Aprica and the Plaintiff was FOB (Exhibit Ko
No. 15 and Exhibit Otsu No. 43). The Plaintiff only acquired an export permit and conductedcustoms clearance in the United Kingdom and delivered the Plaintiff's cassette to Former Aprica
while on board at the port of shipment (United Kingdom). The Plaintiff thus did not engage inimport into Japan. Although the terms of delivery agreed between the Plaintiff and non-party
Combi are unclear, the terms are basically considered as having not been changed. Therefore,
the Plaintiff does not engage in the import of the Plaintiff's cassette.
(iii) The Plaintiff entrusts non-party Combi with sales and marketing activities for the Plaintiff's
product in Japan. Therefore, the Plaintiff neither sells nor conducts marketing for the Plaintiff's
product, including the Plaintiff's cassette, in Japan.
(B) In order to say that lost earnings-type damages as provided for in Article 102, paragraph (2)of the Patent Act have occurred, it is necessary to allege and prove as a premise that the factual
condition where a patentee had enjoyed exclusive benefits based on the business of working, etc.
a patented invention in Japan was damaged due to infringement of a relevant patent right. In
order to say that such factual condition exists, it is naturally required that the patentee
him/herself be conducting business in Japan. Here, "business" is generally understood to bereferring to the fact that the patentee him/herself manufactures and sells, in Japan, a product inwhich the patented invention is worked. Even in the case of taking a stance that there is no needfor the patentee to be conducting business, it is at the very least necessary to form the premise ofa factual condition where the patentee him/herself would be able to enjoy exclusive businessinterests through the manufacturing and sale of a competing product in Japan (see the judgmentof the Kanazawa Branch of the Nagoya High Court of April 12, 2000, Nikkanko [second period
edition], 2563, at 23 and the judgment of the Tokyo District Court of August 27, 2009, 2007
(Wa) 3494). In this case, the Plaintiff neither works Invention 1 nor engages in the business of15

manufacturing and selling a competing product in Japan. Therefore, there is no room forapplication of Article 102, paragraph (2) of the Patent Act.
(C) In this case, there are various circumstances on which the Plaintiff is not recognized ashaving suffered lost earnings.
(i) Circumstances on which the number of sales of the Plaintiff's cassette is reduced other thanexistence of Product 1
a. Sale of the Defendant's new product (a non-infringing competing product)
In July 2010, the Defendant started selling device and cassette of its new product named "に
おわなくてポイ消臭タイプ (niowanakute poi shoushu taipu)" (odorless waste-storage
device) (Exhibit Otsu No. 45). This product is characterized by the use of a deodorizing
antibacterial film to wrap up used diapers and the low-running costs that result from easystorage of many diapers with a shorter length of film, which is achieved by eliminating thetwisting motion from the process of wrapping up used diapers with the film. Thanks to the
Defendant's sales-promotion activities, etc., the Defendant sold about 123,000 devices and about
668,000 cassettes during the period from the start of selling said new product until the end of
May 2011. According to the results of research conducted by a third party (see Attachment 1 of
Exhibit Otsu No. 44), the sales share of waste-storage devices is as follows as of March 2011
after the Defendant started selling the aforementioned new product: the Defendant: 56%;
non-party Combi: 41%; and Angelcare: 3%. In light of an increase in the sales share of said new
product within a short period of time, it cannot be denied that consumers' switch from thePlaintiff's product to the aforementioned new product contributed to a decrease in the number ofsales of the Plaintiff's cassette.
b. Existence of other company's competing product (a non-infringing product)
Out of many competing products (Attachment 2 of Exhibit Otsu No. 44) that have the same
usage as that of the Plaintiff's product, a product named "らくらくおむつバケツ (rakuraku
omutsu baketsu" (easy diaper pail) (made by Angelcare) has been highly appreciated byconsumers since its sales started in 2007 in Japan, and its market share has gradually increased.
In a survey conducted by the Defendant in 2008, the aforementioned other company's productwas evaluated as better than the Plaintiff's product in terms of the shape, use of color, odor
containment, and operability. The volume of diapers contained per cassette of said othercompany's product was larger than the Plaintiff's cassette, and the price of said other company's
waste-storage device was lower than that of the Plaintiff's device. Therefore, it cannot be denied
that an increase in the sales volume of the aforementioned other company's product contributed
to a decrease in the number of sales of the Plaintiff's cassette.
c. Cessation of use of the Plaintiff's device and change of the method of using it
As of 2010, the device of the Plaintiff's product had problems, such as some parts coming

16off and cutters becoming dull. This caused some consumers to cease to use the Plaintiff's
product and purchase another product (Exhibit Otsu No. 46). In addition, in light of economic
trends, there seem to be a considerable number of consumers who refrain from purchasing thePlaintiff's cassette that uses longer film, who dispose of diapers only with plastic shopping bags,
or who dispose of diapers by placing garbage bags or plastic shopping bags in the Plaintiff's
device instead of the Plaintiff's cassette in order to cut household costs.
d. Unreasonableness of figures that the Plaintiff uses as a basis
The Plaintiff has not submitted any objective evidence in relation to the quantity of cassettes
that should be sold per device and the use rate. Moreover, the duration of use of the device isaffected by consumers' cost-consciousness, which reflects the age and number of consumers'children, consumers' taste, and economic conditions as well as existence of other competingproducts, etc., and it does not become a uniform figure every year. There are only feeble
grounds for alleging, based on the use rate, etc. alleged by the Plaintiff, that the sales volume of
the Plaintiff's cassette is decreasing.
(ii) Other circumstances that underpin the absence of lost earnings
The Plaintiff sells to non-party Combi the Plaintiff's product, including the Plaintiff's
cassette, and has granted an exclusive right to sell them in Japan. In concluding a sales
agreement on which the exclusive right to sell is granted, it is common to set provisions on theminimum purchase volume. In some cases, such an agreement includes provisions that make it
mandatory for the purchaser to purchase the agreed minimum purchase volume or provisions oncollection of the amount equivalent to supposed profits from any shortfall in the minimumpurchase volume as a penalty. In light of this, the agreement concluded between the Plaintiff andnon-party Combi is also considered to include such provisions. Therefore, the Plaintiff can be
economically indemnified even in the case of a failure to achieve the minimum purchasevolume, irrespective of the actual sales of the Plaintiff's cassette. Even if the sales of thePlaintiff's cassette decrease due to the sale of Product 1, the Plaintiff would suffer no lostearnings.
(7)-2 Calculation of the amount of damages (Article 102, paragraph (3) of the Patent Act andArticle 39, paragraph (3) of the Design Act)
(Plaintiff)
The Plaintiff sustained the following damages from the infringements of the Design Rightand the Patent Right committed by the Defendant (Article 102, paragraph (3) of the Patent Act
and Article 39, paragraph (3) of the Design Act).
A. In this case, the Plaintiff has concluded an exclusive agency agreement with non-party
Combi, and there is hardly any possibility that the Plaintiff will grant a license to the Defendant.
Therefore, it was originally impossible to think of the "objectively reasonable amount in the17case where the patentee, etc. grants a license." Consequently, there is no room for application of
Article 102, paragraph (3) of the Patent Act.
B. In the case of applying Article 102, paragraph (3) of the Patent Act by way of experiment, the"amount the patentee or exclusive licensee would have been entitled to receive" (the amountequivalent to the royalty), as set forth in Article 102, paragraph (3) of the Patent Act, refers to
the "objectively reasonable amount in the case where the patentee, etc. grants a license." Taking
into account the following circumstances of this case, the amount equivalent to the royalty is
considered to be at least 167 yen (the amount equivalent to 37.95% of the sales price, 440 yen),that is a half of 334 yen, which is the amount of profit per unit of Product 1 as self-confessed by
the Defendant: [i] the Defendant acknowledges a profit of 334 yen per cassette; [ii] thePlaintiff's cassette has high margins, and when the profit margin of a product in which a patent
is worked is high, the royalty therefor should be set high; [iii] when the Plaintiff grants a license
to one other than non-party Combi, which is its exclusive agency, it is forced to change theexclusive agency agreement concluded with non-party Combi and would reconsider its sales
strategy in Japan; therefore, the royalty rate cannot be regarded as "objectively reasonable" interms of commercial practice unless it is significantly higher than ordinary royalty rates (around
3 to 5%); and [iv] other circumstances. Other circumstances are as follows: [a] the Plaintiff has
dominated the Japanese market by a cassette it developed; [b] Invention 1 is technically
excellent; [c] the degree of contribution made by Invention 1 to Product 1 of the Defendant isextremely high; and [d] the Plaintiff's adoption of the policy of not granting a license to a person
other than non-party Combi indicates the big economic appeal of Invention 1.
C. Counterargument against the allegations of the Defendant(A) The Plaintiff's waste-storage device, Mark III, is an excellent product made by improving an
old product, Mark II. Invention 1 pertaining to the cassette therefor is also presumptively
recognized as being of high value.
(B) A license for Invention 1 is granted with a focus on the ability to fit in Mark III; and theability to also fit in Mark II is not an element that is taken into account in determining thelicensing of Invention 1. Even if use with Mark II is considered to be an element that is taken
into account in determining the licensing of Invention 1, it cannot become a factor that causes a
reduction in the royalty rate of Invention 1 in light of the fact that the Plaintiff ceased to sellMark II five years ago and that Mark II accounts for around 7% of the Plaintiff's devices
existing in Japan.
(C) Contribution made by the Defendant in relation to the sale of the Plaintiff's product isnothing more than contribution made by the Defendant for value owing to the Plaintiff'smonetary contribution based on the distributorship agreement. It thus does not become anelement that is taken into account in determining the royalty rate. The penetration of a product18

into consumers is determined based on the quality and performance of the product, and it is thePlaintiff that made an improvement to the product. The device of Mark II had been made into abrand with the name of the Plaintiff, and it is the Plaintiff that developed and improved the
product and obtained intellectual property rights therefor. The Defendant made no contribution.
It is the Plaintiff that designed and manufactured the cassette of Mark III to fit in the devices ofboth Mark II and Mark III, and this is the essence of the development in this case. The Plaintiff
sincerely takes its social responsibility for consumers. In order to perform this responsibility, thePlaintiff performed an assured and uninterrupted shift from the Defendant to non-party Combi
to ensure that the Plaintiff's consumers can receive the provision of its goods in an assured andefficient manner.
(D) Even if a position in the market were established owing to market development efforts,
those efforts were made not by the Defendant but by Former Aprica.
(Defendant)
A. Regarding the sales volume and sales of Product 1
As mentioned in assumed facts (10), the total sales of Product 1 in consideration of thevolume discount thereof for the period from November 6, 2009 to the end of May 2011 is168,347,196 yen.
B. Regarding the royalty rate
In this case, the reasonable royalty rate for Invention 1 is 1%, comprehensively taking into
account the following individual specific circumstances: [i] the fact that the technicalsignificance and value of Invention 1 cannot be considered to be high; [ii] the fact that Product 1
is often used in the form of not utilizing the technical features of Invention 1; and [iii] thedevelopment of the market of waste-storage devices by the Defendant, the power of "Aprica"
brand, the Defendant's sales network, and substantial contribution through sales efforts, as the
background behind the actual sales of Product 1.
(A) Content of Invention 1, etc. (distance from publicly known art, etc.)
Invention 1 is an invention of a waste-storage cassette, and the structure of thewaste-storage cassette itself is described in Exhibit Otsu No. 14 Invention. A difference exists
merely in the point of whether or not a part with which a structure that projects from the outerwall engages is a rotator. Even where Invention 1 involves novelty and an inventive step, it isclose to publicly known art, and the structure that projects from the outer wall itself cannot be
considered to be technically excellent. Therefore, Invention 1 is not the one that is of high value
as an invention.
There is no example licensing of Invention 1 because there is no need to use Invention 1 andthere is thus no motivation for a third party to obtain a license therefor. Specifically, Invention 1
is close to publicly known art, and a competing product of the Plaintiff's product (Attachment 2

19

of Exhibit Otsu No. 44) is manufactured and sold without using the technical feature(comprising an extension part that engages with a waste-storage cassette rotator) of Invention 1.
(B) Use for the device of Mark II
As a considerable number of units of the device of Mark II are continuously used, Product 1
is also continuously purchased. However, the technical feature of Invention 1 is not realized incases where consumers use Product 1 by fitting it in the device of Mark II, which is awaste-storage device lacking a rotator, and the function and effect of Invention 1 are also not
produced in such cases. Therefore, Invention 1 makes no contribution to the sale of Product 1.
(C) Regarding the Defendant's efforts for market development
As of the time when the Defendant was in a contractual relationship with the Plaintiff, it
developed the market of waste-storage devices in Japan by conducting proactive activities, suchas preparation of pamphlets (Exhibits Otsu No. 59 and No. 28 to No. 30), advertisement
placement in magazines (Exhibit Otsu No. 60) and on websites, implementation of events, sales
activities targeting retailers and wholesalers (Exhibits Otsu No. 61 and No. 62), and market
research, based on its own determination, calculation, and responsibility to the extent that it canensure profits in consideration of the purchase price of the Plaintiff's product set by the Plaintiff.
Thereby, the Defendant sold about 167,000 units of the device of Mark I, about 470,000 units ofthe device of Mark II, and about 240,000 units of the device of Mark III in the Japanese market.
Precisely because the Defendant could develop the market, it became possible to sell Product 1
to an unspecified number of consumers. Moreover, the Defendant is one of the top brands thatare very high-profile and trusted in the baby goods market in Japan. The Defendant had held
this position in Japan before it started selling the Plaintiff's product, including the Plaintiff's
cassette. Consumers consider being a product of a trustworthy top brand as an importantelement when choosing baby goods due to their tendency to put emphasis on the health, safety,
etc. of infants. Therefore, the power of the Defendant's brand substantially contributes to thesales volume of Product 1. The fact that the Plaintiff's cassette is sold by a third party in theJapanese market indicates the Plaintiff's low sales capabilities in said market.
C. Amount equivalent to the royalty(A) According to the results (Exhibit Otsu No. 56) of research on royalty rates by technicalclassification based on questionnaire surveys conducted from November 2009 to February 2010,
the average royalty rate in the "transportation" category, to which waste containers belong, isjust above 3%. However, in this case, there are many grounds for making the royalty rate lower
than the usual royalty rate in the industry. Therefore, the royalty rate of 1% should beconsidered reasonable. There are judicial precedents in which the court found a royalty rate ofless than 1%, which is lower than the usual royalty rate in the industry, for the reason of a low
value of the patented invention, etc. (see the judgment of the Tokyo District Court of December

20

14, 2007, Patent, Vol. 62, No. 8, at 58 and the judgment of the Tokyo District Court of February
15, 2007, Hanta, No. 1282, at 283).
(B) As mentioned above, the reasonable royalty rate for Invention 1 is 1%. Therefore, theamount equivalent to the royalty for the period from November 6, 2009 to the end of May 2011
is 1,683,471 yen (calculated by the following formula: total amount of sales x royalty rate = theamount equivalent to the royalty, 168,347,196 yen x 0.01; decimal places are rounded off).
(7)-3 Active damages(Plaintiff)
A. Calculation of the amount of damages(A) In order to carry out the proceedings, there is no other choice but to appoint counsels, andfees for attorneys and patent attorneys, etc. are inevitable. Therefore, the total amount ofcounsels' fees should be found to be damages that have a cause-and-effect relationship with theact of infringement committed by the Defendant.
(B) The Plaintiff paid 46,462,755 yen in total as fees for attorneys and patent attorneys for theperiod from July 2009 to July 7, 2011. Specifically, the Plaintiff paid 41,423,205 yen from July2009 until October 2010 and 5,039,550 yen from November of the same year until July 7, 2011
(converted at 135 yen a pound).
(C) The amount equivalent to 30% of the fees mentioned in (B), 13,938,826 yen, cannot be
categorized into either the fees for infringing the Patent Right or those for infringing the Design
Right. Moreover, the amount equivalent to 70% of the fees mentioned in (B), 32,523,929 yen,
can be categorized into either fees for infringing the Patent Right or those for infringing the
Design Right. Out of said amount, the amount of fees for infringing the Patent Right is
22,766,750 yen (accounting for 70% of said amount) while the amount of fees for infringing the
Design Right is 9,757,179 yen (accounting for 30% of said amount).
B. The entire amount of damages in the amount equivalent to fees for attorneys and patent
attorneys should be recognized.
(A) In judicial precedents on the cases seeking damages based on infringements of a patent right,
design right, etc., the amount equivalent to fees for attorneys and patent attorneys is not around
10% of the admissible amount of damages, but it is determined in consideration of the difficultyof the action, proceedings, the claims upheld by the court, and background to filing the action,etc.
(B) In this case, the total amount of counsels' fees should be found to have a considerable extent
of cause-and-effect relationship with the act of infringement, taking into account the following
peculiarities of this case: [i] the Plaintiff is an overseas resident, and it is very difficult for the
Plaintiff itself to carry out the proceedings; [ii] this action is a highly specialized action for
intellectual property right infringement for infringing a patent right and a design right; [iii] in21this case, it was necessary for the Plaintiff to take comprehensive measures against
infringements; [iv] the act of infringement committed by the Defendant constitutes a violationof the principle of good faith in relation to the agreement and it is very malicious, as it was
intentionally committed; the Defendant sufficiently predicted or should have been able topredict that if it commits such act of infringement, it would cause a dispute without fail, and thePlaintiff, who is an overseas resident, has no other choice but to appoint counsels; therefore, it isobvious that the Defendant predicted or should have been able to predict circumstances thatcaused special damages, specifically, counsels' fees (analogical application of Article 416,
paragraph (2) of the Civil Code).
C. On these grounds, damages sustained by the Plaintiff are as follows.
(A) Damages from infringement of the Patent Right or the Design Right[i] Damages from infringement of the Design Right (Article 39, paragraph (2) of the DesignAct): 15,623,538 yen + [ii] damages from infringement of the Patent Right or the Design Right(Article 102, paragraph (2) of the Patent Act or Article 39, paragraph (2) of the Design Act):
144,643,690 yen + [iii] damages pertaining to counsels' fees based on infringement of the
Design Right: 9,757,179 yen + [iv] damages pertaining to counsels' fees based on infringementof the Patent Right: 22,766,750 yen + [v] damages pertaining to counsels' fees based on
infringement of the Patent Right or the Design Right: 13,938,826 yen = 206,729,983 yen(B) Damages from infringement of the Patent Right[ii] + [iv] + [v] = 181,349,266 yen(Defendant)
A. The Defendant argues against the allegations of the Plaintiff.
B. The amount of damages equivalent to fees for attorneys and patent attorneys should bedetermined based on the amount equivalent to the expenses that were necessary for carrying out
proceedings from a legal perspective. In judicial precedents, such amount was found by using
around 10% of the admissible amount of damages as a gauge. There are some cases where thecourt found the amount exceeding 10% of the admissible amount of damages in considerationof the specialized nature, difficulty, etc. of actions for patent infringement. However, in most ofsuch cases, the admissible amount of damages was small, ranging from 100,000 to 6,000,000
yen. This is because the court adopted an especially exceptional handling in such cases in orderto give relief to the patentee, etc. when the admissible amount of damages is small though thepatentee, etc. required a large amount of labor. Even in such cases, fees for attorneys and patent
attorneys never exceed several millions yen. Moreover, there is no contractual relationshipbetween the Plaintiff and the Defendant, and the Defendant committed no violation of theagreement (violation of the principle of good faith). Therefore, the Plaintiff's allegation
concerning the Defendant's intention based thereon is also unacceptable.

22

(omitted)
No. 3 Court Decision on the Issues
Regarding the [principal action](omitted)
14. Regarding Issues (7) Damages, (7)-1 Calculation of the amount of damages (Article 102,
paragraph (2) of the Patent Act), (7)-2 Calculation of the amount of damages (Article 102,
paragraph (3) of the Patent Act), and (7)-3 Active damages(1) As mentioned above, the Defendant infringes the patent right pertaining to Invention 1 byimporting, selling, and offering for sale Product 1. Therefore, the Defendant assumes theobligation to compensate damages from said act sustained by the Plaintiff.
(2) Calculation of the amount of damages under Article 102, paragraph (2) of the Patent Act
The Plaintiff alleges calculation of damages under Article 102, paragraph (2) of the Patent
Act while the Defendant alleges that the presumption set forth in said paragraph is notapplicable because the Plaintiff is not working the patent right pertaining to Invention 1 in Japan.
Therefore, this issue is discussed below.
A. According to evidence (Exhibit Ko No. 56) and entire import of argument in addition to theassumed facts, the Plaintiff and Combi concluded a "distributorship agreement concerning baby
diaper disposal products" on October 15, 2008; and in said agreement, (omitted) the Plaintiff did
not make clear the content of the exclusive sales agreement concluded with Combi, such aswhether there are provisions on royalties, the time and place of delivery of products, and thetime of payment for the products, other than the content disclosed by Exhibit Ko No. 56.
B. In light of the fact found above and the fact that the Plaintiff itself had not alleged, during theperiod before the conclusion of oral argument of this case, that the Plaintiff was working thePatent in Japan, it can be found that the Plaintiff granted to Combi the exclusive right to sell andthat Combi took charge of import, sale, or otherwise handling of the Plaintiff's products relating
to waste-storage devices in Japan though the time of transfer of the ownership of the Plaintiff's
products is not clear in some point. Therefore, the Plaintiff cannot be found to have worked the
Patented Right in Japan.
Consequently, the Plaintiff lacks a prerequisite for the presumption set forth in Article 102,
paragraph (2) of the Patent Act, and the amount of damages cannot be calculated under said
paragraph.
C. In this regard, the Plaintiff alleges as follows: working by the patentee is not a prerequisite23

for the application of Article 102, paragraph (2) of the Patent Act, and said paragraph isapplicable if the patentee is recognized as suffering lost earnings, that is, if there is a
cause-and-effect relationship in which "the patentee loses the opportunity to sell one product if
the infringer sells one infringing product"; if there is competition or a relationship wherein theparties compete for shares in the market, there is a basis for the application of said paragraph; inthis case, it is obvious that the Plaintiff becomes unable to sell one unit of the Plaintiff's cassette
if the Defendant sells one unit of Product 1; therefore, occurrence of lost earnings is found. The
Plaintiff also alleges that it can be deemed to be working Invention 1.
However, as mentioned above, working of a relevant patented invention by the patentee inJapan should be considered a prerequisite for applying Article 102, paragraph (2) of the Patent
Act.
Incidentally, even from the perspective as alleged by the Plaintiff, what is questioned here is
not whether the patentee loses the opportunity to sell one product if the infringer sells one
infringing product but whether the Plaintiff, who is the patentee, can be considered to be losing
the same amount in profits as the amount that it could have obtained through the working of thepatent right as a result of the infringer's act of selling the infringing product. It is also questioned
whether there is a fact that is sufficient to deem the Plaintiff to be working Invention 1 in Japan.
In this regard, the Plaintiff merely clarifies the fact that Combi imports and sells thePlaintiff's product, which is not sufficient to prove that the Plaintiff loses the same amount in
profits as the amount that it could have obtained through the working of the patent right by itself
in the case where the infringer sells one infringing product. It can also not be said that the fact
on which the Plaintiff can be deemed to be working Invention 1 in Japan has been made clear.
Consequently, the aforementioned allegations by the Plaintiff are unacceptable.
D. As mentioned above, it should be said that the presumption set forth in Article 102,
paragraph (2) of the Patent Act is not applicable to the Plaintiff and that the amount of damages
cannot be calculated under said paragraph.
(3) Calculation of the amount of damages under Article 102, paragraph (3) of the Patent Act
A. As mentioned in assumed facts (11), the sales volume and sales of Product 1 in each month
during the period from November 6, 2009, on which the Patent Right was established, to the endof May 2011 are as described in the table above. The total sales volume is 406,602 units while
the total amount of sales is 171,039,163 yen.
B. Based on this, circumstances that should be taken into account in calculating the "amount thepatentee or exclusive licensee would have been entitled to receive for the working of thepatented invention" (Article 102, paragraph (3) of the Patent Act) are examined.
(A) According to evidence (Exhibit Ko No. 56 and Exhibits Otsu No. 28 to No 31, No. 44, No.
47, No. 56, and No. 63) and entire import of argument in addition to the assumed facts, the24following facts can be found.
(i) Class B 65 relating to the gathering and transporting of household waste and waste
equivalent thereto, such as waste disposal units and garbage boxes, under the International
Patent Classification belongs to the technical classification of "transporting." According to a
handbook titled "ロイヤルティ料率データハンドブック～特許権・商標権・プログラム著
作権・技術ノウハウ～ (roiyarutīryōritsu dēta handobukku tokkyoken shōhyōken puroguramu
chosakuken gijutsu nouhau)" (Royalty rate data handbook: patent rights, trademark rights,
program copyrights, and technical know-how) published by the Research Institute of Economy,
Trade and Industry on August 31, 2010, royalty rates for patent rights in the patent classification
to which waste disposal units, garbage boxes, etc. belong, that is, "transporting," are between
the minimum value of 0.5% and the maximum value of 6.5%. The average thereof is 3.7%. For
exclusive licenses, royalty rates are between the minimum value of 1.0% and the maximum
value of 16.5%, and the average thereof is 2.0%. For licenses granted through settlement talks,such as actions, royalty rates are between the minimum value of -3.0% and the maximum valueof 16.5%, and the average thereof is 1.5%. Regarding the usual royalty rates, the cases of setting
the royalty rate as 2 to less than 3% account for 14.3%, those of setting it as 3 to less than 4%
account for 40.8%, and those of setting it as 4 to less than 5% account for 26.5% (Exhibit Otsu
No. 56).
(ii) The Plaintiff concluded an exclusive agency agreement with Combi, and thereby granted to
Combi the exclusive right to sell its waste-storage devices and cassettes.
(iii) The Plaintiff and Former Aprica had sold Mark II and Mark III as double-branded products
by affixing both the trademarks of the Plaintiff and Former Aprica thereto. The Plaintiff andFormer Aprica started selling Mark II in 1999, and sold the accumulated total of 470,362 units.
In 2006, they started selling the device of Mark III, and sold the accumulated total of 240,521
units (Exhibits Otsu No. 28 to No. 31 and No. 63).
(iv) Incidentally, some users are continuously using the device of Mark II even after the end ofits sale (Exhibit Otsu No. 47).
(v) Moreover, in July 2010, the Defendant started selling the device and cassette of its newwaste-storage device named "におわなくてポイ消臭タイプ (niowanakute poi shōshū taipu)"(odorless waste-storage device). The Defendant sold 123,000 units of the device in total(monthly average of about 11,000 units) and about 668,000 cassettes in total (monthly averageof about 60,000 units) (Exhibit Otsu No. 44).
(vi) The sales shares of Combi, Angelcare, and the Defendant for waste-storage devices atretailers before June 2010, which is before the Defendant started selling the aforementioned new
product, were 90%, 10%, and 0%, respectively. However, their sales shares as of March 2011,
which is after the Defendant started selling the aforementioned new product, were 41%, 3%,25

and 56%, respectively (Exhibit Otsu No. 47).
(B) According to the facts found above, the usual royalty rate in the technical field to which the
Patent belongs is recognized as being between 3 and 4%. However, in this case, the Plaintiff
concluded an exclusive agency agreement with Combi and thereby granted to Combi theexclusive right to sell. Therefore, the royalty rate is presumptively recognized as being higher
than the usual royalty rate in the case of additionally granting a license to the Defendant. In
consideration of this, the royalty rate in this case should be considerably high, even taking into
account the fact that Former Aprica sold Mark II and Mark III with the Plaintiff as
double-branded products at some point and Former Aprica is presumptively recognized ashaving made reasonable efforts and contributions to market development and that the sales
share of Combi in the market declined after the Defendant started selling its new product. In
consideration of the aforementioned circumstances, it is reasonable to find the reasonableroyalty rate for calculating the "amount the patentee or exclusive licensee would have been
entitled to receive for the working of the patented invention" as set forth in Article 102,
paragraph (3) of the Patent Act to be 10%.
(C) The Defendant alleges that the reasonable royalty rate for Invention 1 is 1%,
comprehensively taking into account the following individual specific circumstances: [i] the factthat the technical significance and value of Invention 1 cannot be considered to be high; [ii] thefact that Product 1 is often used in the form of not utilizing the technical features of Invention 1;
and [iii] the development of the market of waste-storage devices by the Defendant, the power of"Aprica" brand, the Defendant's sales network, and substantial contribution through sales efforts,
as the background behind the actual sales of Product 1. However, regarding [i], the technicalvalue of Invention 1 cannot be recognized as not being high even through comparison withpublicly known documents. Regarding [ii], there is no specific allegation and proof on that point.
Regarding [3], as mentioned above, even if such circumstances are recognized, it is reasonable
to find that the royalty rate in this case becomes considerably higher than the usual royalty rate
in consideration of other circumstances in this case. Therefore, the Defendant's allegation thatthe reasonable royalty rate is 1% is unacceptable.
C. Consequently, it is reasonable to find the amount of damages sustained by the Plaintiff under
Article 102, paragraph (3) of the Patent Act to be the following amount calculated bymultiplying the amount of sales for each month (assumed facts (11)) by a reasonable royalty rateof 10%. Incidentally, regarding June and July (1st to 7th; the 7th of the same month is the end of
the period subject to the claim for payment of damages that the Plaintiff made in a petition for
amendment of a claim dated the same) 2011, the average of the amount of sales for the period
from January to May 2011 (monthly amount of 8,445,435 yen) is considered to be the amountof sales for the relevant period. Moreover, although the Defendant alleges that the discount26

amount should be taken into account, it is not reasonable to take into account said amount incalculating the reasonable amount set forth in Article 102, paragraph (3) of the Patent Act assuch discount falls under individual circumstances.
(A) November 2009 (6th to 30th): 211,298 yen(B) December 2009: 1,143,691 yen(C) January 2010: 642,923 yen(D) February 2010: 1,437,410 yen(E) March 2010: 1,110,230 yen(F) April 2010: 1,573,294 yen(G) May 2010: 537,567 yen(H) June 2010: 863,014 yen(I) July 2010: 943,649 yen(J) August 2010: 1,255,610 yen(K) September 2010: 878,324 yen(L) October 2010: 935,830 yen(M) November 2010: 1,286,010 yen(N) December 2010: 62,341 yen(O) January 2011: 279,713 yen(P) February 2011: 713,871 yen(Q) March 2011: 2,012,677 yen(R) April 2011: 673,516 yen(S) May 2011: 542,938 yen(T) June 2011: 844,543 yen(U) July 2011 (1st to 7th): 190,703 yen(V) Total: 18,139,152 yen(4) Active damages
It is reasonable to find the active damages, which have a considerable cause-and-effectrelationship with the act of infringement committed by the Defendant, including fees for
attorneys and patent attorneys, to be 3,000,000 yen in consideration of the nature, etc. of thiscase.
(5) Therefore, it should be said that there is a reason for the Plaintiff's claim for the payment ofdamages based on infringement of the Patent Right to the extent that the Plaintiff seeks paymentof 21,139,152 yen in total with delay damages calculated by the rate of 5% per annum, asprescribed in the Civil Code on each amount relating to each period between November 2009
and June 2011 for the period from the first day of the following month to the date of completionof the payment and on the amount relating to July 2011 and active damages of 3,000,000 yen for27

the period from July 12, 2011, which is the day following the date of service of a petition for
amendment of a claim dated July 7, 2011 to the date of completion of the payment.
Regarding the [counterclaim]
1. Regarding Issue (1) Whether an act of unfair competition is constituted (whether the relevant
act falls under the act of making or circulating a false allegation as set forth in Article 2,paragraph (1), item (xiv) of the Unfair Competition Prevention Act)
(1) The Defendant alleges that the Act of Giving the Notice, that is, the Plaintiff's act of
notifying the Defendant's customers of the notified matters in question by sending the Written
Notice (Exhibit Otsu No. 48), falls under the act of making a false allegation that is injurious tothe business reputation of the Defendant (Article 2, paragraph (1), item (xiv) of the Unfair
Competition Prevention Act). Therefore, this point is considered below.
A. According to evidence (Exhibits Otsu No. 47 to No. 49) and entire import of argument inaddition to the assumed facts, the following facts can be found.
(A) Around May 2009, the Defendant saw its way to start selling Product 1 at the end of July of
the same year, and therefore, the Defendant started conducting sales activities, such as
explaining Product 1 and soliciting orders, targeting its customers. Around June of the same
year, the Defendant received informal orders for Product 1 from certain customers.
(B) Around July 22, 2009, the Defendant obtained information to the effect that the Plaintiff andCombi are circulating their intension to strictly cope with infringements of intellectual property
rights in the industry.
(C) As mentioned in assumed facts (11), around July 28, 2009, the Plaintiff and Combi sent the
Written Notice (Exhibit Otsu No. 48) to the customers of the Plaintiff and the Defendant. The
Written Notice contains the following statements.
"Since November 27, 2008, Combi Corporation has been appointed as a distribution partner
by Sangenic International Ltd., a U.K. Corporation owing and manufacturing the
Combi/Sangenic diaper disposal system, in relation to all of the customers and trade channels ofSangenic International Ltd. in Japan.""These products have long been successful since their sales started in the Japanese market in
1993. During that period, Sangenic's system for development and production has establisheditself as a market leader. Sangenic has accumulated a wealth of knowledge in the relevant fieldof business and has always continued investing in product development based on patents
relating to technologies so as to ensure that high-quality products will be delivered from theproduction base in the United Kingdom to the Japanese market. The component parts (pail,spare cassette, and film) of the Combi/Sangenic diaper disposal system are designed to provide
a high-quality, functional, hygienic method to dispose of used diapers. ...""As a developer and producer of diaper disposal systems, Sangenic holds many intellectual28

property rights around the world with respect to the designs and production of diaper disposal
pails and spare cassettes. If Sangenic … becomes aware of infringement of its own intellectual
property right by a competing product, … Sangenic would take every measure to protect its own
business from the producer or retailer that has committed said infringement."(D) Around July 28, 2009, the Defendant was notified by multiple customers that they would
refrain from purchasing Product 1.
(E) The Defendant sent to its customers a written notice (Exhibit Otsu No. 49) dated July 28,
2009, notifying them that "We would like to notify you that our product which we've scheduled
to start selling shortly" (Product 1) "would never infringe another company's patent right."
B. According to the facts found above, the Act of Giving the Notice committed by the Plaintiff
coincides with the time when the Defendant started selling Product 1. However, the Written
Notice (Exhibit Otsu No. 48) does not specifically refer to intellectual property rights held by
the Plaintiff, the infringer, the infringing product, etc. In addition, regarding "diaper-disposal
pails and spare cassettes," the Plaintiff states in the Written Notice (Exhibit Otsu No. 48) that "If
Sangenic … becomes aware of infringement of its own intellectual property right by acompeting product, … Sangenic would take every measure to protect its own business from theproducer or retailer that has committed said infringement." In terms of the content of the Written
Notice, the Written Notice is considered only to be indicating to the Plaintiff's customers thePlaintiff's general intent of exercising rights against the infringer to protect its own business if
the Plaintiff becomes aware of the fact of infringement of its intellectual property right.
Therefore, the Act of Giving the Notice cannot be found to be the act of making or circulating a"false allegation that is injurious to the business reputation of another person." There is no otherevidence sufficient to find this.
(2) The Defendant alleges as follows: in consideration of the timing of the Act of Giving the
Notice and circumstances such as where Defendant's Product 1 is the only product that can bemounted on the Plaintiff's waste-storage device, even if the Defendant is not clearly indicated in
the Written Notice, the Written Notice is specific enough for customers who have received it tounderstand that the notified fact is about the Defendant; therefore the Act of Giving the Noticefalls under an act that is injurious to the business reputation of another person as set forth in
Article 2, paragraph (1), item (xiv) of the Unfair Competition Prevention Act. However, as
found above, although the statements in the Written Notice relate to "diaper disposal pails andspare cassettes," they are considered only to be indicating the Plaintiff's general and abstract
intent. In consideration of this, it cannot be found that the act of making a false allegation as
alleged by the Defendant was committed. Consequently, the aforementioned allegation of the
Defendant is unacceptable.
2. On these grounds, there is no reason for the claims made in the counterclaim by the29Defendant without the need for a ruling on other issues.
No. 4 Conclusion
On these grounds, there is a reason for the claims made in the principal action by the
Plaintiff to the extent of seeking an injunction against importing, selling, offering for sale ofProduct 1 and disposal of Product 1 as well as seeking the payment of the amount for eachperiod mentioned above with delay damages calculated by the rate of 5% per annum asprescribed in the Civil Code thereon for the period from the first day of the following month,when the period after a tort starts (however, July 12, 2011 in relation to the amount for said
month and the amount of active damages), to the date of completion of the payment. Therefore,
the claims made in the principal action by the Plaintiff shall be upheld to that extent. On theother hand, other claims shall be dismissed because there is no reason therefor. The claims madein the counterclaim by the Defendant shall also be dismissed as there is no reason therefor.
Accordingly, the judgment shall be rendered in the form of the main text.
Tokyo District Court, 29th Civil Division
Presiding judge: OSUGA Shigeru
Judge: KIKUCHI Eri
Judge: OGAWA Masatoshi

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