5Investigation of Preventing the Abuse of Patent Rightsthat Inhibit Industrial Development in Japan

It is said that, in the United States, there are multiple cases in which a person who is not running thebusiness of manufacturing, selling, etc. for him/herself acquires and exercises a patent right for the purposeof obtaining a settlement or a license fee with the use of the patent right. Some people call some of such
persons “patent trolls.”
Although there is no court precedent regarding a case equivalent to the aforementioned cases in Japan,
the industrial circle is expressing concern that cases of the same kind as those in the United States are also
arising in Japan. With regard to those cases, consideration from a legal standpoint has been requested.
In this study, a committee consisting of intellectuals conducted legal analysis of so-called patent trolls
based on the assertions made and problems raised by the industrial circle, and held discussions on thequestion of whether to take measures, including guidelines.
In addition, the committee compared the systems of Japan and the United States in order to consider
so-called patent trolls. Moreover, the committee also analyzed and examined recognition in Japan on thebasis of the results of questionnaire and interview surveys.

Ⅰ Introduction
1

Background

It is said that, in the United States, there are
multiple cases in which a person who is notrunning the business of manufacturing, selling,etc. for him/herself acquires and exercises apatent right for the purpose of obtaining asettlement or a license fee with the use of thepatent right. Some people call some of such
persons “patent trolls.”
Although there is no court precedentregarding a case equivalent to the aforementioned
cases in Japan, the industrial circle is expressing
concern that cases of the same kind as those in
the United States are also arising in Japan. With
regard to those cases, consideration from a legal
standpoint has been requested.
This study is based on concerns overso-called patent trolls in Japan. Incidentally,
although the term “patent troll” is indefinable,
the term “so-called patent troll” is used in thisreport for convenience.
2

Purpose and content of the study

In this study, a committee consisting ofintellectuals conducted legal analysis of so-called
patent trolls based on the assertions made andproblems raised by the industrial circle, and held
discussions on the question of whether to takemeasures, including guidelines.
IIP Bulletin 2009

In addition, the committee compared thesystems of Japan and the United States in order toconsider so-called patent trolls. Moreover, thecommittee
also
analyzedandexaminedrecognition in Japan on the basis of the results ofquestionnaire and interview surveys.

Ⅱ Comparison
betweenthe
Systems of the United States andJapan

In order to consider so-called patent trolls inJapan, the committee examined differences
between the patent systems and patent
infringement lawsuit systems, etc. of Japan andthe United States.
(1) Stage of granting a patent
Some people point out that the standard for
granting a patent is looser in the United States
than in Japan.
(2) Stage of dispute
Matters concerning systems and theiroperations in the United States are listed below.
(i) There is room to choose a forum for a patent
infringement lawsuit that is advantageous to
the patentee through forum shopping.
(ii) It is pointed out that, in claim interpretation,emphasis is placed on the dictionary or
general meanings of terms stated in theclaims in many cases.
(iii) Section 282 of the U.S. patent law stipulates● 34 ●

that the validity of a patent shall be
presumed in a patent infringement lawsuit,etc. In addition, the standard for contraryevidence is that it be “clear and convincing
evidence.”(iv) Prior user’s right is available only in limited
cases.
(v) There is trial by jury.
(vi) There are the punitive damages system and“entire-market-value rule.”(vii) The discovery system is also adopted forpatent infringement lawsuits.
Incidentally, for the period from 2001 to 2007,
the rate of patent infringement lawsuits of the
district court level, in which the patentee won, inJapan was about 20% while the rate of such patent
infringement lawsuits in the United States was
about 40%. The rate was higher in the UnitedStates than in Japan. However, there iscontroversy as to whether this result has
statistical meaning because the number oflawsuits instituted in Japan is small.

Ⅲ Industrial Circle’s Concerns andActual Condition Survey
1

Way of thinking of the Japan Intellectual
Property Association

The Japan Intellectual Property Association(JIPA) started considering measures against
so-called patent trolling-like exercise of right infiscal 2007 by launching an appropriate
enforcement project, in response to the following
facts: (i) Although no patent infringement lawsuit
has been instituted by a so-called patent troll inJapan, there is an increasing number of cases inwhich a patentee also holds foreign patent rights
and requires another party to obtain a global
license, including a license in Japan; (ii) There is
no guarantee that patent administrationcompanies that are established for the purpose of
exercising patent rights will not increase in Japan
unlike in the United States; (iii) There havealready been cases, in which a patentadministration company as mentioned above
exercises rights, in Japan. Under the project, theJIPA held discussions from the perspective ofrestriction on injunction, the amount of damages,
the issue of responsibility for infringement,
exhaustion of right and abuse of right, andreached a conclusion that, under the current system
of Japan, patent trolling-like exercise of right may
be prevented through application of the theory ofabuse of right. Then, the JIPA prepared ahypothetical case, in which the theory of abuse ofright may be applicable, based on the forms ofacts of patent trolling-like exercise of right, andprovided it to this study committee as a
subject-matter of consideration.
2

Recognition at Japan Automobile
Manufacturers Association, Inc.

The Intellectual Property Committee ofJapan Automobile Manufacturers Association, Inc.
(JAMA) regarded the exercise of right, in which
an investment fund, etc. that does not havedevelopment/production functions takes over apatent right and exploits expensive royalty, as oneof the problems to be addressed since such
exercise of right not only inhibits the sounddevelopment of industry but also is highly likely
to harm consumer interests.
So-called patent trolls operate mainly in the
United States where the intellectual propertysystem and the court system as well as theiroperations are suited to foment the activities of
so-called patent trolls.
However, in the United States, there is amovement represented by an eBay decision thatwas rendered by the Supreme Court of the UnitedStates.
In Japan, “injunction” is granted irrespectiveof the form of exercise of right if the exercise ofright is found to be an “infringement.”
Consequently, there is the “environment in which
a right holder that does not take ‘inverse risk’
exercises his/her right in a unilateral and hostilemanner with the use of ‘injunction’ based on a
Japanese patent right.” There is no guaranteethat such right holders will not seek to operate inJapan, and the hypothetical case that was
prepared by JAMA may arise for real.
3

Results of actual condition survey inJapanWith the aim of gathering informationabout
the recognition of/experience, etc. relating toso-called patent trolls, the committee conducted aquestionnaire survey targeting persons at
manufacturers, TLOs and distributors who are in
charge of intellectual property. In addition, thecommittee conducted an interview survey inparallel with the questionnaire survey for the
purpose of obtaining specific information.

● 35 ●IIP Bulletin 2009

(1) AwarenessAccording to an awareness survey on theissue of so-called patent trolls based on thepremise that the respondent “has used a Japanese
patent right,” few respondents have experience
actually becoming subject to the exercise of rightby a patent troll though many respondents haveawareness of the issue.
(2) Recognition
Various answers were obtained through arecognition survey concerning “patent trolls.”
There is a significant difference in recognition
among the types of business. In the end, it was
confirmed that the term “patent troll” isindefinable in the present situation.
(3) Experience in becoming subject to theexercise of right by a so-called patent
troll
According to the questionnaire survey, thetotal number of cases of exercise of right byso-called patent trolls with the use of Japanese
patent rights is smaller than the total number ofsuch cases with the use of U.S. patent rights, andthere are few cases that reach a license contract.
In the interview survey, some also answered thatthey were forced to put in resources to cope withthe exercise of right by so-called patent trollswith the use of Japanese patent rights.
(4) Results of other surveys
The committee also conducted surveys
concerning requests for legal revisions andrequests for preparation of guidelines, but not
many respondents had such requests.

Ⅳ Remedy for Infringement of a
Patent Right and Restriction on
the Exercise of Right1

Remedy for infringement of a patentright(1) Injunction (Article 100 of the Patent Act)The right to seek injunction is understood asa type of real right-like claimable rights, andsubjective requirements, such as intention andnegligence, are not required for seeking
injunction. According to Article 100(1) of the
Patent Act, it is possible to seek an injunction in a
preventive manner in addition to the case where apatent right is actually being infringed. Moreover,according to the judgment of the Supreme Courtof July 16, 1999, Minshu, Vol. 53, No. 6, at 957, a

IIP Bulletin 2009

demand for disposal/removal (Article 100(2)),
which is claimable incidental to Article 100(1), isclaimable only within the scope necessary forrealizing the right to seek injunction.
(2) Damages
The Patent Act makes it easy for right holders
to prove by setting a provision on the presumptionof negligence (Article 103 of the Patent Act) andprovision on the presumption of the amount ofdamages (Article 102 of the Patent Act). However,regarding the point of whether it is reasonable tostick to the idea that damages concerning
intellectual property are intended to “indemnify
losses,” fundamental discussions must be repeatedin the future as the point must be positioned in theentire system of law of damages.
(3) Presumption of negligence (Article 103)
Specific content of the presumed negligencecanbedividedinto(i)havingnotrecognized/predicted the existence of a patentright and (ii) having not recognized/predicted thatan invention belongs to the technical scope ofanother person’s patented invention. With regard
to (i) “recognition of the existence of a patentright,” the majority of court precedents recognize
the existence of the obligation to search patentrights. With regard to (ii) “whether to belong to
the technical scope,” a high level of duty of care is
imposed in general.
2

Restriction on the exercise of right(1) Regarding constraint inherent in rights(i) Basic idea of the exercise of rightThe exercise of the right to seek injunction
based on a patent right forces others to accept
some sort of disbenefit. Then, a person who has
become subject to the exercise of a patent right
will endeavor to defend him/herself, for example,
by arguing that the exercise of the right is,needless to say, not permitted under law, or byarguing that the exercise of the right constitutes
an abuse of the right. However, the exercise ofright and the abuse of right are not clearly
distinguishable as long as the theory that rights
involve inherent constraint is sometimes
asserted as a reason why a certain exercise ofright falls under an abuse of right.
(ii) Value of the exercise of a patent right thatappears to be disadvantageous at firstglanceTo acquire property, which many people● 36 ●

recognize as having low value, at low cost andelicit the potential value of the property, thereby
obtaining a profit corresponding to the differenceis the basis of all economic activities. Recognizing
such an act as unjust means denying the freeeconomy that Japan adopts, and it is justself-abnegation for companies.
In the Unazuki hot spring case (judgment of
the Supreme Court of October 5, 1935, Minshu,
Vol. 14, at 1965) which is famous as an example
case in which the theory of abuse of right wasapplied, what a person who had acquired land
intended to do did not elicit the fact that the landin question has a great transaction value. In thecase, the following point became an issue. A
person who had acquired the land pressured aperson who had installed a pipe for conveying hot
spring water by demanding the removal of thepipe, etc., and intended to have the person buy
the land together with neighboring land at a highprice, which was not at all irrelevant to thepotential transaction value of the land. Thus, ademand for the elimination of interference basedon a property right was used as a means(leverage) of requiring “another person to buy theland at an unreasonably huge cost.”
In light of this, it is not strange at all toacquire a patent right that is not being exercisedand obtain royalty by exercising the right.
However, where a person intends to covet a profit
that is totally irrelevant to the potential
transaction value of the relevant patent right,
such exercise of right may be constrained in somecases.
In the first place, private property rights
shall be defined by law, in conformity with the
public welfare (Article 29(2) of the Constitution ofJapan). As long as patent right is nothing morethan a type of rights under private law, it cannot
be immune to such inherent constraint. The
exercise of a patent right is originallyimpermissible in some cases. In other cases, it is
not permitted due to the theory of abuse of right.
(2) Abuse of right(i) Abuse of right (intellectual property right)
Abuse of right was used in the case where
the relevant patent right involves an obvious
reason for invalidation. On the other hand, there
has been almost no case in which “abuse of right”
was recognized based on the understanding that“though the right exists as valid, the exercise of
the right is not permitted under suchcircumstances.”(ii) Matters that should be taken into accountin order to recognize the exercise of apatent right as an abuse of the right
Whether a defense of abuse of right against
the exercise of a patent right should be accepted
depends on the circumstances of individual cases,
and it cannot be discussed by typifying cases
without careful consideration.
In a court precedent, the court accepted adefense after not only weighing the personal
benefit of a right holder that arises from theexercise of the right and disbenefit incurred by
the other party but also weighing the personal
benefit of a right holder and public interest(judgment of the Supreme Court on the Itatsukibase case, the judgment of the Supreme Court ofOctober 26, 1938, Daishinin Minji Hanreishu, Vol.
17, at 2057). In addition, in another court
precedent, the court accepted a defense of abuseof right for the case where the right holder
intends to obtain benefits far beyond the potential
value of the right, in other words, where theexercise of the right cannot be regarded as therealization of the value that the right originallyhas (Unazuki hot spring case).
Whether or not inherent constraint on a right isrecognized or a defense of abuse of right is
accepted against the exercise of a patent right canbe determined only through discussion based on
specific facts. Therefore, it is impossible to draw aconclusion based on the circumstances that are
mentioned as a hypothetical case in this report. A
conclusion can be drawn only based on anenvisioned case that is as concrete as a series ofevidence used in an actual lawsuit.
For patent rights, there are few scenes in whichinconvenience arises unless a defense of abuse ofright is accepted, because it is relatively easy todraw a reasonable conclusion by interpreting thescope of right in a limited manner. In addition, even
if there are cases in which the exercise of a patentright must be constrained from the perspective of
public interest as a demand for injunction made bya patentee based on a patent right conflicts withpublic interest, the Patent Act stipulates compulsory
license (Article 83 of the Patent Act) in express
terms as a method of adjusting the patentee’sinterest and public interest.
(3) Compulsory license(i) Regarding the award system
A compulsory license is established where apatented invention is not worked (Article 83 of
the Patent Act), where a patented invention isnecessary for the working of another person’s● 37 ●IIP Bulletin 2009

patented invention (Article 92 of said Act) andwhere the license is particularly necessary for
public interest (Article 93 of said Act). However,in any case, it is necessary to hold license
negotiations with the patentee, etc. before
requesting an award. Thus, it is allowed torequest an award only where such negotiations
have not reached a license contract. Moreover, as
for constraints relating to the award system, it is
not only necessary to fulfill the requirements
provided in Article 83, etc. of the Patent Act but
is also necessary to comply with the TRIPS
Agreement and the Japan-U.S. comprehensive
agreement, etc.
In addition, under the award system, arequest for an award is not accepted if thegrounds for the award cease to exist before theaward is rendered. Even if an award has been
rendered, the award may be rescinded in somecases for reasons including the case where thegrounds for the award have ceased to exist(Article 90(1), Article 92(7) and Article 93(3) ofthe Patent Act).
(ii) Relationship with the issue of so-called
patent trolls(a) Regarding a request for an award
A person who files a request for an award will
describe the necessity of working of the otherparty’s patented invention. Therefore, if a person
suspected of infringing a patent files a request for
an award, the rendering of an award might beunderstood as allowing the act of infringement.
Thus, it has been pointed out that there isconcern that it will cause adverse effects on
patent infringement lawsuits that are now
pending or can be instituted in the future.
(b) Award in the case where a patented invention
is not worked
The award system is intended to promote theworking of patented inventions. Therefore, wherea patentee is holding license negotiations with
two or more persons, even if some of such
persons file a request for an award, the grounds
for establishing a compulsory license will cease toexist if the patentee grants a license to anothersuch person.
(c) Compulsory license in the case where apatented invention is necessary for theworking of another person’s patented invention
Due to the Japan-U.S. comprehensive
agreement, it is necessary to obtain a judicial oradministrative finding to the effect that thepatentee’s act is anticompetitive.

IIP Bulletin 2009(iii) Summary
As mentioned above, cases where an award isavailable are very limited under the current
system. Moreover, it must be said that it is hard
to exploit the award system in the case where apatented invention is not worked or that in thecase where a patented invention is necessary for
the working of another person’s patented
invention, as countermeasures against so-called
patent trolls.
Incidentally, whether a request for an award
for public interest (Article 93) is accepted is amatter of the necessity of the patented invention
for public interest; therefore, it is not related tothe point of whether the request is filed by aso-called patent troll.
(4) Exhaustion
The domestic exhaustion of patented
products was instructed in obiter dictum in the
judgment of the Supreme Court of July 1, 1997,
Minshu, Vol. 51, No. 6, at 2299, and it wasaffirmed in general terms in the judgment of theSupreme Court of November 8, 2007, Minshu, Vol.
61, No. 8, at 2989.
Thus, the exercise of right by the patentee
against a manufacturer of completed products
after obtaining royalty from a parts manufacturer
is to be hampered by exhaustion.
(5) Presumption of negligence
Takingcourt
precedents,
etc.
into
consideration, it is extremely rare that
presumption of negligence is completely vanished
for a person who is working a patented invention
as a business.
Next,
turning
attentiontotheaforementioned
relationshipbetweenamanufacturer of completed products and amanufacturer of parts, etc., whether warranty
against defects (Article 570 of the Civil Code)under the Civil Code is applicable becomes anissue since the latter provides parts to be used forthe infringement of a patent right.
Where the manufacturer of parts, etc. hasconcluded a contract that prohibits reverse
engineering with the manufacturer of completed
products, the manufacturer of completed products
cannot comprehend the technical content of theparts, etc. and is not allowed, under the contract,
to investigate the relationship with the relevant
patent right. There is also a theory that, in such acase, the manufacturer of completed products is
to be regarded as without knowledge and freefrom any negligence.

● 38 ●

3

Measures against unlawful exercise ofright(1) Claim for damages, etc. against aso-called patent troll for the reason of a
tort pertaining to an unjust patent
infringement lawsuit, etc.
Where a so-called patent troll instituted aprincipal action of a patent infringement lawsuit,executed a judgment, filed a petition for aprovisional disposition order or executed aprovisional disposition order, if the act falls undertorts, damages (Article 709 of the Civil Code)may be claimed against the so-called patent troll.
Then, there seems to be no special problem inapplying general standards for determining theestablishment of a tort as mentioned below andsuch standards based on court precedents
concerning intellectual property infringementcases, even in relationship with so-called patenttrolls, as long as such application is premised on
the Japanese patent system and patent
infringement lawsuit system as well as theiroperations.
(i) In the case of institution of a principal
action or filing of a petition for a provisional
disposition order
The judgment of the Supreme Court ofJanuary 26, 1988 denied the establishment of a
tort due to institution of a principal action or filingof a petition for a provisional disposition order.
(ii) In the case of execution of a judgment
According to the judgment of the Supreme
Court of July 8, 1969, it seems that theestablishment of a tort due to execution of ajudgment is affirmed only in exceptional cases.
(iii) In the case of execution of a provisional
disposition order
The judgment of the Supreme Court of May 7,
1938 and the judgment of the Supreme Court ofDecember 24, 1968 affirmed the establishment of
a tort.
(2) Demand for injunction and claim fordamages, etc. against a patent troll forthe reason of slander of businesspertaining to an unjust warning of patent
infringement to a customer
A “competitive relationship” as prescribed in
Article 2(1)(xiv) of the Unfair Competition
Prevention Act must be recognized between a
so-called patent troll and a demandant.
According to a theory that positively

confirms a “competitive relationship” at different
transaction stages and a potential “competitive
relationship,” etc., even where a so-called patenttroll only intends to grant a competitive
manufacturer a license for its patented invention
for value, the so-called patent troll can still be
regarded as in a “competitive relationship” with
manufacturers that work the patented invention
or competitive technology, as long as it is aperson who grants a license for the patented
invention for value as business.
Incidentally, in multiple recent prevailingcourt precedents, the court positively confirmed
room to dismiss the illegality of said demand andclaim by considering them as a justifiable exerciseof right, and held the requirements therefor andelements to be considered, etc.
(3) Antimonopoly Act
It is believed that, only for the limited formsof acts, the exercise of right by a so-called patenttroll is restricted based on the Antimonopoly Act.
With regard to Article 21 of the
Antimonopoly Act that excludes the exercise ofright based on intellectual property from theapplication of the provisions of the Act, it is apresent concurrent understanding that the Act isapplicable to the exercise of right that has asignificant influence on competition. However, as
long as influence on the place of “competition,” inother words, market, as defined by Article 2(4) of
the Antimonopoly Act is a ground for regulation
under the Act, a so-called patent troll will not
become subject to regulation under the Act
unless such influence can be proven. In thisregard, as the Intellectual Property Guidelines
typically point out, where a right holder who
holds prevailing technology exercises a relevant
right in a discriminatory manner, the exercise ofright is highly likely to be considered as aproblem under the Antimonopoly Act. However,in other cases, particularly, in the case where aright holder seems to be exercising his/her rightin an equitable manner, there remains a difficult
problem concerning the proof of influence oncompetition in terms of the current interpretationof law.

● 39 ●IIP Bulletin 2009

Ⅴ Way of Thinking “Inhibition of
Development of Industry” fromthe Viewpoint of Economics
1

Whether the “exercise of a patent right ina manner that inhibits the developmentof industry” is possible

The system to promote technologicaldevelopment is required because: (i) it isextremely risky to invest money in technologicaldevelopment projects; (ii) the unit cost ofinvestment for technological development is on
the increase; and (iii) what is more, it is not very
costly to imitate the achievements made byothers. The patent system is considered to beserving as an important part of that system.
On the other hand, the patent system grants
exclusive rights, and deadweight loss is thus
inevitable. The patent system is aimed atensuring investment in new technologies at theexpense of utilization of technologies. If there isan argument that the possible inhabitation ofutilization of technology by persons other than
the right holder through the exercise of therelevant exclusive right is part of “inhabitation of
the development of industry,” it means that the
inhabitation is what has been supposed under thesystem.
2

Consideration from the viewpoint of
economics

Patent rights are unique rights. Individual
patent rights have different technical content
from other patent rights. In addition, the value ofa patent right depends on the person who works
the patented invention since whether technology
can be efficiently exploited depends on the abilityof the user (human assets as complementary
assets) in many cases. Therefore, the value ofindividual patent rights is determined mainly
through bilateral negotiations.
From a model in economics, so-called patenttrolls’ acts of taking aim at large companies, notclarifying the point at issue and not having
production/R&D facilities for themselves can beunderstood as efforts to strengthen bargaining
power in such negotiation process. That is, theacts of keeping the results of negotiations
unpredictable and possessing mere rights
separately from complementary assets areunderstood as nothing more than efforts for
optimization in the case where there is room toincrease monetary consideration by such acts.

IIP Bulletin 2009

From these, if the mechanism of the negotiation
process is understood better, the influence of
preconditions for negotiations on bargaining
power will be more predictable.
However, since it is not that value estimationis concluded immediately after the determinationof preconditions for negotiations, it is necessary
to conduct hypothetical comparative analysis,
including the question of whether or not parties
concerned will become more likely to move in the
direction of settlement if the system is reformed
so that more time is required before an injunction
is granted through court procedure, and utilize
the results of the analysis as basic materials for
improving the system.

Ⅳ Summary
In Japan, the issue of so-called patent trolls is
not considered to be apparent, and the concept of“patent troll” cannot be made clear; therefore,
there have arisen problems in terms of legislativetechnique. Thus, the committee decided not tomake a specific proposal for reform in this study.
The publication of guidelines concerninginterpretation of law, which should be determinedonly
through
court
procedure,byanadministrative agency can mislead parties
concerned from the aspect of predictability;
therefore, careful handling is required. In addition,
the success or failure of a defense of abuse ofright can be determined only through discussion
based on specific facts. It is thus impossible tostereotype the cases where a defense of abuse ofright is accepted. In the interview survey, there
was hardly any opinion that requests preparationof related guidelines. Therefore, the committee
reached a conclusion that guidelines concerning
the issue of so-called patent trolls are not to beprepared.
When discussing a desirable way of the rightto seek injunction, etc. in the future, attention to
be paid to the point that balance between theprotection and exploitation of inventions under
the patent system should be sufficiently carefully
examined in consideration of constraints imposedby agreements so as to ensure that the interestsof individual inventors and patent brokers will not
be impaired to a significant extent.

● 40 ●(Researcher : Takuma ABE)