Patent Right/
Design Right

Date
Case number

August 28, 20192019 (Ne) 10023

Court

Intellectual Property
High Court, First
Division- A case in which the design right was also permitted implicitly upon licensing of
the patent invention in the memorandum.
- A case in which the patent right and the design right were decided to be exhausted
by assignment of the worked product for the act of sales of a product to which theworked product of the patent right holder and the design right holder is attached.
Case type: Injunction
Result: Appeal dismissed
References: Article 2, paragraph (1), item (xv) (Article 2, paragraph (1), item (xxi)after amendment of Act No. 33 of 2018), Article 3, paragraph (1) of the Unfair
Competition Prevention Act, Article 78 of the Patent Act, Article 28 of the Design
Act
Number of related rights, etc.: Patent No. 3894828, Design Registration No. 1176264
Summary of the Judgment
1

This case is a case in which the appellee (plaintiff in the first trial) who

purchased an earpad to be attached to an earphone from the appellant (defendant in
the first trial) and performed manufacture, sales, and the like of the earphone allegedthat publication of an article by the appellant on the website opened thereby that the
manufacture, sales, and the like of the earphone by the appellee infringe the present
intellectual property rights (present patent right 1 and the present design right) as wellas the present patent right 2 held by the appellant, and announcement to the customersof the appellee (the present act) were applicable to an act of unfair competition under
Article 2, paragraph (1), item (xv) of the Unfair Competition Prevention Act (Article
2, paragraph (1), item (xxi) after amendment of Act No. 33 of 2018) and claimed for
injunction of the present act from the appellant under the right to seek injunction by
Article 3, paragraph (1) of the Act.
The court of prior instance found that, since the appellant's rights (present
intellectual property rights) mentioned by the present act had already been exhausted
by the appellant's assignment of the defendant's product, the fact that the appellee
infringed the present intellectual property rights was false and approved the appellee's
claim for injunction of the announcement/spread of the fact.
Then, the appellant instituted the present appeal against the portion in which theappellant lost.
2

This judgment dismissed the appeal by stating as follows in brief:ⅰ(1) Presence of licensing according to working of present intellectual property
rights
It is found that agreement was made with the present subsidiary in the present
memorandum that the appellant (A) licensed the present subsidiary to use all thepatents related to the Incore and the earpad held by the appellant and would not claim
a consideration related to the license; and (B) licensed the present subsidiary todevelop and to sell goods using the appellant's earpad and would cooperate in supplyof the earpad.

Moreover, the plaintiff's product is found to be a good developed in

the present subsidiary by using the earpad supplied by the appellant.

Moreover, theappellee was assigned with the business related to the manufacture and sales of theplaintiff's product from the present subsidiary as of November 15, 2016 andsucceeded the business, and this was accepted in advance by the appellant in Article 9of the present memorandum.
Then, it is found that the appellee manufactured and sold the plaintiff 's product on
the basis of the license of the patent invention according to the present patent right 1
given in the present memorandum.
Moreover, in view of the situation that the gist of the aforementioned license is the
manufacture and sales of the plaintiff's product, it is presumed that the present design
right was also granted implicitly at licensing of the patent invention according to thepresent patent right 1.
As described above, the appellee's manufacture/sales of the plaintiff's productshould be considered to be within the range of the appellant's grant and not to infringe
the present intellectual property rights of the appellant.
Thus, it is found that the facts announced and spread in the present act are false.
(2) Establishment of exhaustion related to present intellectual property rights
A. If the patent right holder assigns the patent product in our country, the patentright is considered to have achieved the purpose for the patent product and isexhausted, and the effect of the patent right no longer reaches acts of using, assigningor lending, or the like of the patent product, and it is interpreted that the patent rightholder is not allowed to exercise the patent right of the product (omitted).

Suchinterpretation is made because, if permission of the patent right holder is required
each time assignment of the patent product is made, smooth distribution of the patentproduct in the market is hindered, the interest of the patent right holder
himself/herself is rather harmed, and the purpose of the Patent Act prescribed in
Article 1 of the Patent Act is contracted, while the patent right holder has alreadybeen guaranteed an opportunity to ensure compensation of disclosure of the patentⅱ

invention, and there is no need to allow the patent right holder to gain double interestsin the distribution process thereof for the patent product assigned from the patent rightholder.

Since this gist is also applicable to the design right, it is reasonable tounderstand similarly for the exhaustion of the design right.
B. The appellee purchased the defendant's product (earpad) which is a worked
product of the present intellectual property rights from the appellant having thepresent intellectual property rights, put it together with the earphone which is theplaintiff's product, a transceiver body, a connector, and a PTT switchbox
intermediating the plaintiff's product in separate zipped plastic bags, respectively,
sealed in one paper box together with a warranty and an operation manual of theplaintiff's product, and sold it.
In view of the facts as above, the appellee sold the plaintiff's product attachedwith the defendant's product, and it cannot be considered that the patent productwhich is not identical to the defendant's product is newly manufactured, but it isinterpreted that the present intellectual property rights are exhausted for the
defendant's product by assignment of the defendant's product from the appellant to theappellee.

Then, since the appellant is no longer allowed to exercise the present

intellectual patent right with respect to the appellee, the act of manufacture and thelike of the plaintiff's product by the appellant should not be considered to infringe thepresent intellectual property rights held by the appellant.

ⅲ

Judgment rendered on August 28, 20192019 (Ne) 10023 Appeal case of seeking injunction against Unfair
Competition Act (court of prior instance: Tokyo District Court, 2018 (Wa)6962)
Date of conclusion of oral argument: Jul y 8, 2019
Judgment
Appellant: NAP ENTERPR ISE Co., Ltd.
Appellee: S.O.W. Inc.
Main text
1. This appeal shall be dismissed.
2. The Appellant shall bear the cost of the appeal .
Facts and reasonsNo. 1 Gist of the appeal
1. The portion in which the appellant lost in the judgment in priorinstance shall be rescinded.
2. The appellee's claim related to the portion in the preceding clauseshall be dismissed.
No. 2 Outline of the case (abbreviations follow the judgment in priorinstance unless otherwise specified.)
1. This case is a case in which the appellee (plaintiff in the first trial)
who purchased an earpad to be attached to an earphone from the appellant(defendant in the first trial) and perform ed manufacture, sales , and the likeof the earphone alleged that publication of an article by the appellant on thewebsite opened thereby that the manufacture, sales , and the like of theearphone by the appellee infringe the present patent right 1 and the present
design right (the present intellectual propert y right s) as well as the present
patent right 2 held by the appellant and announcement to the customers of
the appellee (the present acts) were applicable to an act of unfair
competition under Article 2, paragraph (1), item (xv) of the Unfair
Competition Prevention Act (Article 2, paragraph (1), item (xxi) after1amendment of Act No. 33 of 2018) and claimed for injunction of the present
acts from the appellant under the right to seek injunction by Article 3,
paragraph (1) of the Act.
The court of prior instance found that the present patent right 2 is notincluded in the rights mentioned by the present act s, and since theappellant's rights (present intellectual prope rt y rights) mentioned by thepresent act s had already been exhausted by the appellant 's assignment of the
defendant's product, the fact that the appellee infringed the present
intellectual propert y right s was false, and approved the appellee's claim to
the extent that the injunction of the announcement/spread of the fact wassought.
Then, the appellant instituted the present appeal against the portion inwhich the appellant lost.
2. Since the basic facts are as described in No. 2 , 2 of "Facts andReasons" in the judgment in prior instance, they are cited.
3. Issues(1) Whether the facts the appellant announced or spread are false (issue 2
in the court of prior instance)
A. Presence of approval related to working of the present intellectual
propert y rights (issue 2-1 in the court of prior instance)
B. Establishment of exhaustion related to the present intellectual
propert y right s (issue 2-2 in the court of prior instance)(2) Propriet y of injunction (issue 3 in the court of prior instance)(omitted)
No. 4 Judgment of this court
This court also judges that the appellant 's present act s fall under theannouncement or spread of false facts , and the appellee 's claim for
injunction thereof is grounded.
The reasons for this are as follows:
1. Found facts
In addition to the basic facts (No. 2, 2 in "Facts and Reasons " of thejudgment in prior instance according to the citing), each of the following
facts can be found by integrating the evidences (Exhibits Ko 5, 6, 12 to 15,
Exhibits Otsu 1-1, 1-2, 2, 15) and the entire import of the oral argument:2(1) The appellant founded Nap Communications (trade name at that time
was Nap Sales Company; hereinafter, referred to as the "present
subsidiary") in 2006 and sold the defendant 's product (earpad , thename was "Incore") through the same company.
(2) The appellant made the same company a subsidiary of the appellee by
assigning stocks of the present subsidiary to the appellee in order toreconstruct management by receiving economic support by theappellee in 2010 and c oncluded the present license agreement as ofApril 16 of the same year with the present subsidiary which had
become the subsidiary of the appellee.

The trade name of thecompany was changed to the present one on June 30 of the same year,
and sales of the defendant's product were promoted by producing andselling the earphone by working the patent invention according to thepresent patent right 1 in the company.
(3) However, the aforementioned intention was not necessaril y successful,and on March 23, 2016, the present memorandum (Exhibit Ko 5) was
prepared between the appellant and the present subsidiary on thebusiness with the purpose of sales of Incore (hereinafter referred to as
the "Incore business ").
In the present memorandum, together with the sales business ofthe defendant 's product and reorganization of the credit/debt
relationship and capital relationship between the appellant and thepresent subsidiary (Articles 1 to 4 of the present memorandum), it
was agreed that the appellant (A) licenses the present subsidiary to
use all the patents related to Incore and the earpad held by theappellant (first half of Article 5) and would not claim a consideration
related to the license (second half of the same Article); (B) license sdevelopment and sales of g oods using the appellant 's earpad andcooperates in suppl y of the earpad (Article 6); (C) unders tands
development of a new earphone microphone by using the supplied
earpad and licensed patents in advance and confirm s that theappellant's consent or the like is not needed for the goods
development (Article 7); (D) with reorganization/reconstruction of
the Incore business by the present subsidiary, confirm s that thebusiness would be assigned to an affiliated company of the present
subsidiary (including affiliated companies of the appellee) in advance3

and would not object to it (first half of Article 9); and (E) when thebusiness is assigned, the present subsidiary allows the present
memorandum to be succeeded to by the affiliated company w ho is theassignee, and the appellant also does business mutuall y with goodfaith on the basis of the contents of the present memorandum with theaforementioned company who is the assignee (second half of the
Article).
(4) After that, on the basis of the prese nt memorandum, the defendant 's
product was delivered from the appellant to the present subsidiary
several times, the plaintiff 's product (earphone , name: "aurocap") was
developed by the present subsidiary by using the earpad supplied by
the appellant, and manufacture and sales thereof were performed.
(5) The appellee was assigned the business related to the
manufacture/sales of the plaintiff 's product from the present
subsidiary as of November 15 of the same year and continued thebusiness.
(6) The appellee purchas ed the defendant 's product (earpad) from theappellant, put it together with the earphone which is the plaintiff 's
product, a transceiver body, a connector cable, and a PTT switchbox
intermediating with the plaintiff's product in separate zipped plastic
bags, respectivel y, sealed in one paper box together with a warrant y
and an operation manual of the plaintiff 's product , and sold it.
2. Presence of licensing according related to present intellectual propert yrights(1) As described in the aforementioned 1(3), it is found that in theagreement that was made with the present subsidiary in the present
memorandum , the appellant (A) licensed the present subsidiary to use all
the patents related to Incore and the earpad held by the appellant (first halfof Article 5) and would not claim a consideration related to the license(second half of the same Article); and (B) licensed the present subsidiary todevelop and to sell goods using the appellant 's earpad and would cooperate
in suppl y of the earpad (Article 6) .
Moreover, as described in the aforementioned 1(4), the plaintiff 's
product is found to be a good developed in the present subsidiary by using
the earpad supplied by the appellant.
4

Furthermore, as described in the aforementioned 1(5), The appellee wa s
assigned the business related to the manufacture and sales of the plaintiff 's
product from the present subsidiary as of November 15, 2016 and succeeded
the business, and this was accepted in advance by the appellant in Article 9of the present memorandum .
Then, it is found that the appellee manufactured and sold the plaintiff 's
product on the basis of the license of the patent invention according to thepresent patent right 1 given in the present memorandum.
Moreover, in view of the situation that t he gist of the aforementioned
license is the manufacture and sales of the plaintiff 's product, it is presumed
that the present design right was also granted implicitl y at licensing of thepatent invention according to the present patent right 1.
As described above, the appellee 's manufacture/sales of the plaintiff 's
product should be considered to be within the range of the appellant 's grantand not to infringe the present intellectual propert y right s of the appellant.
(2) Appellant's allegation
A. The appellant allege s that the present memorandum was interpreted
to be prepared/agreed as integral with the present licensing agreement
concluded between the appellant and the present subsidiary in 2010, andalthough the appellee was obliged to report de velopment and sales of theplaintiff's product to the appellant under Article 6 of the agreement, theappellee did not fulfill the obligation and thus, notification was made in the
document as of April 3, 2017 (Exhibit Otsu 7), the intention of cancellatio nof the agreement was indicated by an e-mail (Exhibit Otsu 6) sent to A who
is a representative of the present subsidiary from the representative of theappellant on 12 of the same month and as a result, the agreement of thepermission in the present memo randum lapsed.
However, in view of the facts found in the aforementioned 1, it should
be considered that the present memorandum was prepared in order to set the
new relations of rights between the appellant and the present subsidiarywith a view to subs equent business assignment on the basis of
circumstances generated from April of 2010 to March of 2016, and in viewof the contents of the agreement, it is difficult to interpret that the present
memorandum was prepared/agreed integral l y with the present l icensing
agreement.
5

As described above, the appellant 's allegation that, when the intentionof cancellation of the present licensing agreement was indicated, theagreement in the present memorandum also lapsed , lacks a premise and is
not grounded.
B. The appellant alleges that, since the appellant recognized that thepresent memorandum is integral with the present licensing agreement, andthe present subsidiary or the appellee is obliged to report the case on thebasis of the agreement, the agree ment according to the present memorandum
includes "miscomprehension of the element " and is invalid, and since thepresent memorandum was signed with the recognition that onl y the present
licensing agreement has a legal binding force and the present memoran dum
does not have the legal binding force as an agreement, and the present
subsidiary who is a counterpart also knew such real intention of theappellant, the agreement according to the present memorandum is invalid
due to mental reservation.
However, in the agreement in the present memorandum, the intentions ofboth parties are indicated in writing.

The contents of the recognition

mentioned by the appellant fall under the motivation of i ntention indicationin the relation with the contents of the prese nt memorandum, and since themotivation is indicated and it cannot be found to be an element of a legal act,
the allegation of miscomprehension is not grounded.

Moreover, in view ofthe description in the aforementioned A, it is not found that there was s uch
recognition that the present memorandum does not have the legal binding
force as an agreement in both parties of the present memorandum and thus,
the allegation of invalidation due to me ntal reservation is not grounded.
(3) Summary
According to the abov e, the appellee 's manufacture and sales of theplaintiff's product are within the range of the appellant 's grant and do not
infringe the present intellectual propert y right s of the appellant.
Thus, the facts announced and spread in the present act s are found to befalse.
3. Establishment of exhaustion related to present intellectual propert yrightsTo make sure, establishment of exhaustion will be also examined.
(1) If the patent right holder assigns a patent product in our country, thepatent right is considered to have achieved the purpose for the patent6

product and is exhausted, and the effect of the patent right no longer
reaches acts of using, assigning , or lending or the like of the patent product ,and it is interpreted that the patent right holder is not allowed to exercise
the patent right of the product ( see Supreme Court 1995 (O) 1988 Judgmentof Third Pett y Bench on Jul y 1, 1997/Civil Law Reports vol. 51, No. 6, page
2299, Supreme Court 2006 ( Accepted) 826 Judgment of First Pett y Benchon November 8, 200 7/Civil Law Reports vol. 61, No. 8, page 2989).

Suchinterpretation is made because, if permission of the patent right holder isrequired each time assignment of the patent product is to be made, smooth
distribution of the patent product in the market is hindered, the interest of
the patent right holder himself/herself is rather harmed, and the purpose of
the Patent Act prescribed in Article 1 of the Patent Act is contra dicted,
while the patent right holder has already been guaranteed an opportunit y toensure compensation of disclos ure of the patent invention , and there is noneed to allow the patent right holder to gain double interests in the
distribution process thereof for the patent product assigned from the patentright holder.

Since this gist is also applicable to the design right, it isreasonable to understand similarl y for the exhaustion of the design right .
(2) As described in the aforementioned 1(6), the appellee purchased thedefendant's product (earpad), which is a worked product of the present
intellectual propert y right s, from the appellant having the present
intellectual propert y right s, put it togeth er with the earphone which is theplaintiff's product, a transceiver body, a connector cable, and a PTT
switchbox intermediating with the plaintiff 's product in separate zipped
plastic bags, respectivel y, sealed in one paper box together with a warrant y
and an operation manual of the plaintiff 's product , and sold it.
In view of the facts as above, the appellee sold the plaintiff 's productattached with the defendant 's product, and it cannot be considered that thepatent product which is not identical to the defendant 's product is newl ymanufactured but it is interpreted that the present intellectual propert yrights are exhausted for the defendant 's product by assignment of the
defendant's product from the appellant to the appellee.

Then, since theappellant is no longer allowed to exercise the present intellectual p ropert yrights with respect to the appellee, the act of manufacture and the like of theplaintiff's product by the appell ee should not be considered to infringe thepresent intellectual propert y right s held by the appellant.
7(3) Appellant's allegation
A. The appellant alleges that the "assignment " of the patent productwhich is the ground for exhaustion t ypicall y refers to the right holder 'splacement of the patent product in distribution of the market, and whether
the patent product is placed in distribution of the market needs to be
decided by minutel y examining individual assignment contents byconsidering [i] whether the assigner of the patent product who is the rightholder obtains sufficient consideration; [ii] whether it is found that the rightholder assumes circulation from one to another of the patent product; [iii]relationship between the assigner of the patent pr oduct who is the rightholder and the assignee; and [iv] properties and the like of the patentproduct.

Then, the appellant alleges that, under the present relation offacts, since the patent product is not placed in distribution of the market,
the "assignment" of the patent product to be the ground for the exhaustion
does not exist.
However, the grounds for the interpretation that the exhaustion isapproved in a case where the patent right holder assigns the patent productin our country, while the patent right holder is not allowed to exercise thepatent right of the product concerned is that, as described above,fundamentall y, if the permission of the patent right holder is required eachtime assignment of the patent product is made, smooth di stribution of thepatent product in the market is hindered, the interest of the patent rightholder himself/herself is rather harmed, and the purpose of the Patent Act
prescribed in Article 1 of the Patent Act is contra dicted.

Then, to cause

the circumstances between the assigner and the assignee which cannot beknown to a third party to be related with whether or not the effect of theexhaustion is generated does not follow the gist of approval of theexhaustion.

The appellant 's allegation is not grounde d.

B. The appell ant also alleges that, even if the effect of exhaustion is
generated by assignment, in the case of invalidation on the basis of
misinterpretation or cancellation in the assignment, the effect of theexhaustion is lost , and also alleges t hat this case is such.
However, the appellant alleges invalidation on the basis of
misinterpretation and cancellation with regard to the present memorandumin this case and not with regard to the assignment of the defendant 's product8

which is the ground for exhaustion and thus, the allegation itself on theissue of effect of exhaustion is unreasonable.
(4) Brief
According to the above, the present intellectual propert y ri ghts are
exhausted by the assignment of the defendant 's product, and the appellee
does not infringe the appellant 's present intellectual propert y right s.
Thus, the facts announced and spread by the present act are found to befalse.
4. Propriet y of injunction
Since the decision on propriet y of injunction is as described in No. 3, 3of the "Facts and reasons " in the judgment in prior instance, it is cited.
5. Conclusion
As described above, the fact that the plaintiff 's product infringes thepresent intellectual propert y right s is a false fact, and the appellee 's claim
for injunction of the announcement or spread is grounded.
Therefore, the judgment in prior instance approving the appellee 's claim
is reasonable, and since the present appeal is not grounded, it shall bedismissed and decided as in the main text.
Intellectual Propert y High Court, First Division
Presiding judge: TAKABE Makiko
Judge: KOBAYASHI YasuhikoJudge: SEKINE Sumiko9