11

Problems Related to Patent Enforcement in Japan, theUnited States and South Korea

In recent years, there have been business models in which companies purchase patents fromothers despite having no intention to use the patents themselves, and enforce patent rights againstcompanies engaged in relevant business solely for the purpose of acquiring royalties. Suchenforcement is usually regarded as justifiable, but it is sometimes regarded as abusive enforcement,
depending on the mode of enforcement.
Meanwhile, protection of inventions by monopolistic rights—patent rights—is essential for thedevelopment of industry, which is the purpose of patent law, and there is hope that intellectual
property businesses that support the use and marketing of patent rights will develop in order tostimulate innovations. However, if any mode of enforcement were to be allowed, including abusive
enforcement of patent rights, it could hinder industrial development and obstruct the soundbusiness activities of companies in reverse.
This study focuses on problems related to patent enforcement, and investigates the current
status of business models related to patent enforcement, in order to create basic materials that
contribute to future studies made from the viewpoint of enforcement.

I

Introduction

A patent right is an extremely powerfulright that can be used monopolistically for a
fixed term. However, because of this power, apatent right may excessively restrict theeconomic activities of others or otherwise
hinder the development of industry, which isthe purpose of patent law, depending on themode of enforcement. Therefore, this study
focuses on problems related to patent
enforcement observed in Japan, the UnitedStates and South Korea. Then, research andanalysis are conducted from the viewpoint ofpatent enforcement with regard to the new
businessmodelsrelatedtopatentenforcement that have been drawing
attention in recent years, which are
dedicated to enforcing patent rights acquired
from others mainly for obtaining license fees.

II

Laws, Regulations and Systems
Relating to Patent Enforcement

This chapter identifies and reviews someassumable problems concerning the current
laws, regulations and systems related topatent enforcement in Japan, the United●

IIP Bulletin 2008

States and South Korea, particularly withregard to demands for compensation fordamage and demands for an injunction
against infringement.

1

Japan

(1) Problems concerning demands forcompensation for damage(i) Working of a patented invention by aright holder
A majority of court precedents andacademic theories in Japan have construed
that a right holder who is not working thepatented invention may not make the claims
under the provisions of Article 102(1) and (2),but may only claim the amount equivalent to
the royalty set forth in paragraph (3) of said
Article. However, there are conflicting
opinions as to whether a right holder who is
not working the patented invention but who
is working a competitive product (a productof the same kind) sold on the same market as
the infringing product may make the claim
under Article 102 (1) or (2).
(ii) When the patented invention relates
only to a part of an entire product
Many academic theories and court
88 ●precedents state that, when the patented
invention relates only to a part of an entire
product, the amount of damages should be
calculated by taking into consideration theextent to which the part related to thepatented invention contributes to the entire
product.
(iii) Amount equivalent to royalty
Recently, courts have tended to calculate
the reasonable amount of royalty prescribedin Article 102(3) by taking into consideration
the general amount of license fee in the same
technical field, the content of the invention,and such matters as the gist of the entire oralproceedings, when there have been no royalty
rates in past licensing cases or no pastlicensing cases to refer to.
(iv) When there are multiple infringers
When there are multiple infringers forthe same product, such as the manufacturer,
wholesaler and retailer of the product, a rightholder may claim the amount of profits
against each of these infringers as theamount of damages, under Article 102(2).
Under Article 102(1), however, the amount ofdamages is calculated based on the amount of
profit per unit of product that the rightholder would have sold, which means that the
profits lost throughout the whole distribution
process is incorporated into the valuation foreach infringing product. Therefore, it isconstrued that the right holder may not claim
the amount of damages under paragraph (1)against each of the infringers. Under
paragraph (3) as well, when a right holder
grants a license, he/she is usually able toreceive royalty only once throughout the
distribution process of a product using theinvention, so the right holder’s damage isconstrued to have been compensated withrespect to said product if he/she has received
royalty from any one of the infringers.
(2) Problems concerning demands for an
injunction against infringement(i) Whether or not the right holder isrequired to be working the patented
invention
A demand for an injunction against
infringement is supported without having the●infringer satisfy subjective requirements,
such as intention or negligence, as long as an
infringing act is found to be continuingagainst a valid patent right. Therefore, thequestion of whether or not the patented
invention is being worked is construed not toaffect the right to demand an injunction
against infringement. With regard to a
motion for a provisional injunction against
infringement, there have been cases wheresuch motion has been denied on the basisthat the right holder was not working thepatented invention.
(ii) Infringing acts subject to an injunction
There is a question of the scope of acts
against which an injunction may be issued. Ifsuch scope is too broad, it could giveexcessive protection to the right holder. The
same question could arise not only for acts
subject to an injunction, but also for objects
subject to disposal or removal.
(iii) Objects subject to disposal or removal
When a patented invention relates only
to a part of the infringer’s product, there is aquestion of whether disposal should be
admitted for the entire product. In addition,
when the infringer’s product, which uses thepatented invention, is composed of multiple,
independent components, there is also aquestion of whether disposal of suchcomponents should be admitted. When apatented invention relates only to a part ofan entire product, the extent of contribution
is often taken into account when calculating
the amount of damages, and there have been
many cases where disposal of the entire
product
wasadmitted
after
givingconsideration
totheextentofthecontribution.

2

United States(1) Problems concerning demands forcompensation for damage(i) Working of a patented invention by aright holder
Generally, when the right holder is notworking the patented invention, he/she may
not claim lost profit damages, but only claim
reasonable royalty damages. However, there
89 ●IIP Bulletin 2008

have been cases where the court awarded lost
profit damages to the right holder when
he/she was not working the patented
invention, but was working a competitive
product against the infringing product.
(ii) When the patented invention relates
only to a part of an entire product
Even when a patented invention relates
only to a part of an entire product, in the
United States, there is an established theory
that calculates the amount of damages basedon the retail price of the entire product, thatis, the entire market value of the product. In
contrast, there is also a theory that
calculates the amount of damages byapportionment based on the partial value ofthe product relating to the patented
invention, but the entire market value rule isapplied more frequently in actuality.
(iii) Reasonable royalty
The reasonable royalty is calculated
based on the fifteen factors indicated by the
court in the Georgia-Pacific case.
(iv) Willful infringement
Whentheinfringer’s
willful
infringement or malicious prosecution has
been established, the court may increase theamount of damages up to three times (treble
damages). In the Seagate case, the court heldthattheestablishmentofwillful
infringement requires “clear and convincing
evidence” of at least “objective recklessness”
on the part of the infringer, and it raised theburden of proof on the patentee, indicatingthat there is no affirmative obligation for the
infringer to obtain an opinion from counsel.
(v) When there are multiple infringers
When there are multiple infringers, suchas the manufacturer, seller, and user, apatentee may enforce his/her patent rightindividually against each of these multiple
infringers. However, if the full amount ofdamages has already been collected from apart of the infringers, neither compensation
for damage nor an injunction may be
demanded from the rest of the infringers.
(2) Problems concerning demands for an
injunction against infringement(i) Whether or not the right holder is●

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required to be working the patented
invention
Until the eBay ruling, an injunction
against infringement had been automaticallyissued if infringement was found. However,
the eBay ruling set forth that four factors,
which are principles of equity, must be
satisfied before a court can issue an
injunction against infringement.
(ii) When the patented invention relates
only to a part of an entire product
The eBay ruling indicated that an
injunction should not be issued when thepatented invention relates only to a part ofan entire product.
(3) Bill to amend the U.S. Patent Act
Amendment of the U.S. Patent Act iscurrently under discussion. While the reformbill includes various provisions concerning
such matters as the improvement of patentquality and calculation of the amount ofdamages, opinions are divided between the
IT industry seeking reform of the patent
system and the pharmaceutical industry
seeking a strong patent system.

3

South Korea(1) Problems concerning demands forcompensation for damage(i) Working of a patented invention by aright holder
Although damages for lost profits are notawarded when the right holder is not working
the patented invention, damages of anamount equivalent to royalty awarded
regardless of whether or not the right holder
is working the patented invention.
(ii) When the patented invention relates only
to a part of an entire productA court calculates the amount ofdamages by taking into consideration theextent to which the patented invention
contributes to the amount of damages for theentire product, in principle.
(iii) Amount equivalent to royalty
The amount equivalent to royalty is to be
decided by taking into consideration all ofsuch circumstances as the objective technical90 ●value of the patented invention, the content
of any licensing agreement on the patented
invention concluded with a third party, andthe content of any licensing agreement
concluded with the infringer in the past. In
particular, if the right holder has concluded
any licensing agreement in the past, theroyalty that has been set under suchlicensing agreement must be taken into
account, in principle.
(2) Problems concerning demands for an
injunction against an infringer(i) Whether or not the right holder needs tobe working the patented invention
In principle, a right holder may exercise
his/her right to demand an injunction against
an infringement regardless of whether or not
he/she is working the patented invention.
However, in the case of a provisional
injunction, the fact that the right holder is
not working the patented invention issometimes considered a negative factor in
determining the need for preservation.
(ii) When the patented invention relates only
to a part of an entire productAn injunction is issued against an act ofworking the patented invention that
corresponds to the scope of claim of thepatented invention. Therefore, when thepatented invention relates only to a part ofan entire product, an injunction is issued
only for that part of the product. In somecases, the act of manufacturing the entire
product, including the infringing act, issuspended as a result, but this does not meanthat the effects of the patent right relating toa part of the product are extended to theentire product.

III Legal Principles that Restrict
Patent Enforcement Other than the
Patent Act
1

Japan

(1) Antimonopoly Act
Patent enforcement that hinders market
competition may be regulated by the
Antimonopoly Act. The Japan Fair Trade●

Commission has released “Guidelines for the
Use of Intellectual Property under the
Antimonopoly Act” (hereinafter referred to as
the “New Guidelines”) by fundamentallyrevising the “Guidelines for Patent andKnow-how Licensing Agreements under the
Antimonopoly Act” (hereinafter referred to as
the “Old Guidelines”). The New Guidelines
state that the restrictions in relation to theuse of technology subject to the Guidelines
include “any conducts of inhibiting any otherentity from using the technology,” “anyconducts of licensing other entities to use thetechnology to a limited scope” and “anyconducts of imposing restrictions on activities
conducted by other entities licensed to use
the technology.” Among these, “any conducts
of inhibiting any other entity from using thetechnology” (including cases where theroyalties requested are so expensive that thelicensor’s conducts are in effect equivalent toa refusal to license) is a new item that has
been added to those under the Old Guidelines.
Enforcement of an intellectual property rightincludes “conducts of inhibiting any otherentity from using the technology,” such as theright to demand an injunction. However, the
New Guidelines expressly indicated that, insome cases, not even such conduct may be
regarded as a conduct recognized as
enforcement. The New Guidelines mention
that “conducts of inhibiting any other entity
from using the technology” from theviewpoint of private monopolization include
actsbypatentpool
participants,
interceptions, concentration of rights, andacts related to development of a productstandard. Meanwhile, such conducts from theviewpoint of unfair trade practices include a
conduct where “a firm acquires the rights to atechnology from the right holder, with therecognition that a competitor uses thelicensed technology in its business activity
and that it is difficult for the competitor to
replace the technology with an alternative,
and the firm refuses to grant a license for itin order to block the competitor from using
the technology,” a conduct where a rightholder “refuses to grant a license to stopother firms from using its technology after
91 ●IIP Bulletin 2008

urging them to use its technology throughdeceptive means, such as falsification oflicensing conditions and making it difficult
for them to shift to other technology,” andwhere “the technology provides a basis forbusiness activities in a particular productmarket and a number of parties” “areengaging in business activities, a conduct of
discriminately
refusing
tolicenseaparticular
entitywithout
justifiablegrounds.”(2) Abuse of rights under the Civil Code
It is said that the abuse of rights
prescribed in Article 1(3) of the Civil Codemay appear to be an enforcement of rights;
but when considering the actual situations, itruns contrary to the social nature of rights
and cannot be accepted as an enforcement ofrights. This idea is aimed to respect the social
functions of rights and coordinate conflicts
that arise with the interests of others whenenforcing private rights. Thus, when patent
enforcement runs contrary to the social
nature of rights and cannot be accepted as
enforcement of a right, there is a possibility
that the patent enforcement will not beallowed, as it is abuse of a right. The
Ministry of Economy, Trade and Industry
released “Rules on Software Intellectual
Property Rights” in 2006. This rule indicates
cases
where
enforcementofasoftware-related patent may be found to be
an abuse of a right. The rule states that“evaluation and analysis of justifiability andwrongfulness of the claiming of the right”
and “weighing of interests between the casesof accepting and denying patent enforcementby the patentee” should be conducted when
determining whether patent enforcement is
an abuse of a right. With regard to the former,
the presence or absence and the extent ofjustifiability and wrongfulness are examined
for both the subjective and objective mode of
the conduct by the person claiming his/herright (and the person to whom the right isenforced). It is indicated that, when apatentee enforces a patent right solely for“the purpose of inflicting damage” or for “thepurpose of gaining unfair profits,” the●

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enforcement of the right is very likely to be
determinedtolackjustifiability.
Furthermore, the rule mentions that apatentee’s conducts in the process leading up
to patent enforcement and the manner inwhich he/she claims his/her right may also betaken into account as factors that support alack of justifiability.

2

United States

With regard to application of antitrust
laws to intellectual property licensing
transactions, the U.S. Department of Justiceand the Federal Trade Commission havereleased “Antitrust Guidelines for the
Licensing of Intellectual Property.” Since
violation standards under antitrust laws areultimately decided by an accumulation of
court judgments, these Antitrust Guidelines
compile past court judgments. Further, in
April 2007, they released “Antitrust
Enforcement and Intellectual Property
Rights:PromotingInnovation
andCompetition,” in which they conduct
antitrust analysis on unilateral refusals tolicensing agreements, industry standards,
cross licenses and patent pools, andconcluded that the basic ideas set forth in theabove-mentioned guidelines are appropriate.

IV New Business Models Related to
Use of Patents
New business models related to use ofpatents have emerged in recent years. Suchbusiness models vary widely in terms of their
purposes and modes of using patents. For
example, in the United States, there aremanycompaniesthat
engageinpatent-licensing activities as their main
business and are mainly financed by thelicense fees acquired through patent
enforcement (hereinafter referred to as“patent-licensing companies”). This chapter
outlinesthebusinessmodelsofpatent-licensing companies and their current
status.

92 ●1Business models of patent-licensing
companies(1) Types of organizations
Manypatent-licensing
companies
directly own or manage patents and engage
in patent-licensing activities as their main
business. At the same time, some relatively
large patent-licensing companies establish
subsidiaries and have them own or manage
individual patent portfolios or have themengage in licensing activities in a dedicatedmanner.
(2) Status of engagement in R&D, productmanufacture, and sales
Manypatent-licensing
companies
specialize in licensing activities but are notengaged in product manufacture and sales.
However, there are also patent-licensing
companies that directly conduct R&D,
enforce the patents acquired for the researchachievements, and use the licensing revenue
from such patents as their main source ofrevenue. Some companies used to engage inproduct manufacture and sales when they
started their business but, due to slackeningof such business or for other reasons,specialize in patent-licensing activities atpresent.
(3) Methods of acquiring patent rights
Manypatent-licensing
companies
purchase patent rights from third parties andlicense out such patent rights. They mainlypurchase patent rights from those who do nothave sufficient experience or funds to carryout patent-licensing activities by themselves,
such as independent inventors, small- andmedium-sizedcompanies(SMEs)
anduniversities.
Somepatent-licensing
companies do not become patentees or
licensees, but support the licensing activitiesof others as consultants, or carry out
licensing activities for others as agents.
The business models of patent-licensing
companies can roughly be divided into thefollowing categories from the viewpoint of thestatus of engagement in R&D and the methodof acquiring patents:●(a) Companies that purchase patents fromthird parties, such as independent
inventors, and directly license out
individual patents or relatively small
patent portfolios as right holders;(b) Companies that do not engage in productmanufacture or sales (or only engage insuch business on a small scale), butmainly engage in R&D, and license out
the patents acquired through such R&D;(c) Companies that used to engage in (orhad planned to engage in) patent
manufacture or sales when they began
their business, but stopped engaging insuch business (or scaled down suchbusiness) due to slackening of suchbusiness or for other reasons, and mainly
engage in the licensing out of patents
that remain as assets at present;(d) Companies that are established byindependent inventors and license out
patents on the inventions they havemade;(e) Companies that collect patents, by suchmethods as purchasing patents fromthird parties, to form large patentportfolios,
andlicenseout
such
portfolios;(f) Companies that manage patents of
independent
investors
andothercompanies, and support their licensing
activities as consultants; and(g) Companies that actively engage in patent
licensing as agents for independent
investors and small companies.
(4) Technical fields and technical contentsof the target patent rights
Many patent-licensing companies handle
patents in such fields as electrical machinery,communications, and information. While thismay be attributed to various reasons, one
assumed reason is that it is easier to acquireand license out patent rights in such fields
due to the large number of patent rights
involved in a single product. On the other
hand, few patent-licensing companies target
patent rights in the biotechnology andpharmaceutical fields.

93 ●IIP Bulletin 2008

(5) Modes of patent enforcement
As patent enforcement is the corebusiness of patent-licensing companies, themode of patent enforcement can be regarded
as an important strategy that affects theirbusiness. Since their main source of revenue
is the license fees acquired through patent
enforcement, they adopt various strategies inorder to acquire more license fees.
(i) Approachandtimingofpatentenforcement
Companies generally send warning
letters in advance when enforcing patentrights, as do patent-licensing companies.
However, there are rare cases where they will
file a patent infringement lawsuit without
sending a warning letter in advance. This is a
strategy to make the opposing party consent
to the licensing at an early stage. Meanwhile,patent-licensing companies often enforce
patent rights at the stage when the target
technology has widely spread throughout themarket. The reason is considered to be thatthe wider the technology or product has
spread in the market the higher license fees
the companies are able to acquire.
(ii) Target licensees
There are cases where patent-licensing
companies adopt a licensing strategy totarget multiple companies as their licensees.
When there are multiple target licensees,
patent-licensing
companies
sometimes
enforce the patent right against each of suchtarget licensees one by one rather thanenforcing the right against all of them at once.
This strategy uses the license fees acquired
from the first few target licensees to fund thedisputes (lawsuits) against the other target
licensees. This strategy also aims to use thefact that the first few target licensees haveconsented to the licensing as material for
raising the effectiveness and the value of thepatent right, and to carry out the licensing
negotiations and lawsuits with the othertarget licensees more advantageously.
(iii) Infringement searches
In order to acquire license fees by patent
enforcement, it is necessary to persuade theopposing party by proving that one’s own
patent right is being infringed by that party.
●

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Therefore, the search on the infringement
statusisthemostimportantandfundamental element in enforcing a patentright. Thus, some patent-licensing companies
have legal experts, such as lawyers andpatent attorneys, and/or engineers who are
well-versed in the technology as in-housestaff to conduct searches on the infringement
status.
However,since
infringement
searchers require time and money, it has
been pointed out that some patent-licensing
companies enforce patent rights without
conducting sufficient searches.
(iv) Amount of license fee
Generally, a person who enforces apatent right for the purpose of acquiring alicense fee tries to acquire as high a license
fee as possible. This tendency is more
noticeable in the case of patent-licensing
companies, which depend on license fees forrevenue. However, the amount of license fee
demanded by patent-licensing companies
differs depending on the strategy they take.
For example, when they target multiple
companies as licensees and approach them
one by one, in approaching the first target,
the priority will be placed on concluding thelicensing agreement, rather than on
acquiring a license fee. Thus, the demandedamount of license fee is sometimes relatively
low so as to reach settlement at an earlystage. There is also an aim to obtain highlicense fees by acquiring low license fees frommultiple companies. On the other hand, whentargeting one or two companies as licensees,
patent-licensing companies may demand ahigh license fee against large, highly
profitable companies. In either case,patent-licensing
companies
sometimes
demand a moderate amount that the target
licensee is able to pay but would be morereasonable than starting a lawsuit, by giving
consideration to the financial strength of thetarget company and the litigation costs, forthe purpose of early and easy acquisition of
the license fee.
(v) Other licensing terms
Somepatent-licensing
companies
demand that a provision on actively making
public the conclusion of the licensing
94 ●agreement be included in the licensing terms.
This may be due to the fact that a licensing
agreement has been concluded is informationthat a patent-licensing company wants toactively make public, as it represents abusiness achievement of the patent-licensing
company. Another assumed reason is that thefact of having concluded a licensing
agreement will be an advantageous factor insubsequent licensing negotiations.
(v) Filing of a patent infringement lawsuit
A patent infringement lawsuit is filed
when no agreement has been reached inlicensing negotiations or when applying
pressure on the opposing party in order toacquire a license fee at and an early stage. Ina patent infringement lawsuit, it is common
to demand not only damages but also an
injunction. For patent-licensing companies,
the main purpose of filing such lawsuit is toacquire money to cover damages, but theysometimes demand an injunction in order topersuade the opposing party to pay a licensefeeandachieveearlysettlement.
Patent-licensing companies tend to hire
lawyers based on a contingency fee basis.
Therefore, compared to the general cases
where companies hire lawyers by the hourand have to pay a large amount in costs
because of it, patent-licensing companies do
not bear this large amount in costs.

2

Patent troll problem

While use of patent rights is expected tofurther expand in the future with the
emergence of IP business operators who
promote use of patents, the problem ofabusive patent enforcement (patent troll
problem) has also surfaced. Although no clear
definition exists at present, a patent troll is
considered to be a “person who acquires apatent but does not manufacture anything
using that patent and who, after anothercompany manufactures a product and places
it on the market, files a lawsuit to suspend
such production or intimidates the company
to that effect in order to gain a large amountof settlement money,” and this is presenting a
big problem. Generally, disputes related to●patent rights often arise between businesses
in the same industry, in which case efforts
are made to settle the disputes through crosslicensing. However, as patent trolls do notcarry out R&D or production themselves,disputes cannot be settled through crosslicensing. This is the major reason thatpatent trolls are posing a threat to companies.
Another reason is that, while patent trolls
adopt various business models, some of themdemand high amounts of licensees using all
kinds of means, such as demanding an
injunction, based on patent rights of which
validity is doubtful, without even sufficiently
proving the infringement status.
(1) United States
As the eBay case and other lawsuits
related to patent trolls were filed insuccession, the patent troll problem drew a
lot of attention in the United States. At thesame time, problems in the current U.S.
patent system were highlighted, including
poorer quality patents and the standards forcalculating damages. At present, the U.S.
Congress is deliberating a bill to amend the
U.S. Patent Act, which covers mattersconcerning the patent troll problem. In
particular, companies in the IT field, where
the patent troll problem is more conspicuous,
are strongly calling for revision of the current
patent system, stating that abuses of patentrights are hindering the economy andinnovations.
(2) South Korea and Japan
The patent troll problem is not as
conspicuous in South Korea and Japan as in
the United States. However, the patent troll
problem has begun to draw attention since
many Korean and Japanese companies havebeen facing patent infringement lawsuits in
the United States. In Japan, for example, anExpertResearch
CommitteeontheStrengthening of Competitiveness throughIntellectual Property was established in theIntellectual Property Strategy Headquartersof the Cabinet Secretariat, and the committee
has taken up the patent troll problem mainly
seen in the United States as a subject of
95 ●IIP Bulletin 2008

study related to the information andcommunications field. A report compiled by aproject team for said field points out thatpatent trolls’ acts to acquire high amounts oflicense fees and settlement money is posing aproblem.

3

Differences between patent enforcementby patent-licensing companies and thatby general companies

patents other than the essential patent,
in line with the licensing of the essential
patent;(g) Motion for a provisional injunction by aperson not working the patented
invention; and(h) Motion for a provisional injunction
lacking a factual or legal basis withregard to the right or legal relations.

VI Summary
It became clear that the purpose andmodeofpatentenforcementbypatent-licensing companies differ from thoseof patent enforcement by general companies
in a number of respects. The presence of suchdifferences is one of the reasons that various
discussions have been held on the patent troll
problem. Indeed, many people believe that
there is a lack of balance between theadvantages gained by enforcing patent rights
and the disadvantages suffered from being
enforced patent rights.

V

Points to Note
Enforcement

upon

PatentThis chapter summarizes the points tonote upon patent enforcement in Japan, inlight of past court judgments, “Rules on
Software Intellectual Property Rights” and“Guidelines for the Use of Intellectual
Property under the Antimonopoly Act.” Thefollowing modes of patent enforcement arelisted as points to note:(a) Demand for a license fee (an amountequivalent to royalty) against multiple
persons involved in the same product;(b) Demand for a license fee for the entire
product based on a patent right relating
only to a part of the product;(c) Claim of lost profit damages by a person
not working the patented invention;(d) Demand for a high license fee thatexceeds the objective value of the patentright and demand for an injunction;(e) Demand for a license fee so high that it isin effect a refusal to license;(f) Demand for acceptance of licenses for●

IIP Bulletin 2008

Business models related to use of patentrights, which bring about plenty of benefits
in terms of marketing and effective use of
intellectual property, are expected to further
develop in the future. On the other hand,drawing attention as the so-called patenttroll problem are acts of not manufacturing
or selling products themselves but solely
enforcing patents acquired from others andgaining license fees by sometimes using suchmeans as demanding an injunction against
product manufacture or sales. Under suchcircumstances, in the United States, theSupreme Court judgment in the eBay caseheld that the question of whether or not an
injunction should be issued should bedetermined based on principles of equity,
indicating a certain response to the patenttroll problem. However, it was revealed thatthe factors behind the patent troll problem
not only included the threat of an injunction,
but also the problem of cost. In other words,
due to the high litigation costs in the UnitedStates, such as the lawyers’ fees, companies
are reluctantly paying the license fees
without arguing in lawsuits. This isconsidered to be a huge problem since itmeans allowing patent enforcement that isirrelevant to the validity of the patent rightor the infringement status.
Somepeopleregardanypatentenforcement by a person not engaged inpatent manufacture or sales to be patenttrolling. However, the problem of patenttrolling is in the mode and results of thepatent enforcement rather than in the entity
enforcing the patent. Thus, it is considered tobe appropriate to regard the fundamental
96 ●problem to be “patent enforcement aimed atacquiring money that exceeds the value of theinvention by applying pressure in terms of an
injunction or costs through filing an
infringement lawsuit, such as a lawsuit
seeking an injunction, without relying on an
appropriate determination of value of theoriginal invention.” The following can be<Mode of enforcement>
By applying pressure in terms of an
injunction or costs through filing an
infringement lawsuit, such as a lawsuit
seeking an injunction
Without relying on an appropriate
determination of value of the original
invention
Patent enforcement aimed at acquiring
money that exceeds the value of theinvention

derived by regarding such mode of patent
enforcement to be a problem and reviewing
how it relates to issues that can be expected
to occur in the patent system and operation
thereof.

<Issues in the patent system and operation thereof>- Semi-automatic issuance of an injunction- High litigation costs (lawyers’ fees)- High amount of damages- Low foreseeability of the litigation outcome- High amounts of license fees/damages- Poorer patent quality- Conflict with the purpose of the patent system- Hindrance to innovations

The fact that the above-mentioned issues
in the patent system and operation thereof
are deeply related to the present U.S. patent
system suggests that patent trolling ispresenting a big problem in the United States.
Some of these issues are currently discussed
in the bill to amend the U.S. Patent Act, so
attention should be paid to the future
developments. On the other hand, theseissues have not surfaced in Japan as
conspicuously as in the United States.
However, in Japan, for instance, the right todemand an injunction is a right to which apatentee is naturally entitled; thus, if an
infringement is found, an injunction is issued,in principle. As the legal system thus differs
between Japan and the United States, thedetermination standards indicated by theSupreme Court judgment in the eBay casecannot be directly imported to Japan, butthere is at least a need to examine whether or
not provisions on abuse of rights should beapplied. In addition, the amount equivalent
to royalty and the standards for calculating
the extent of contribution in the case where apatented invention relates only to a part ofan entire product are currently not quite
clear; so these elements should be made●clearer. There is also a question of whether ademand for an injunction against the entire
product should be upheld in the case ofenforcement based on a patent that relates
only to a part of the entire product. In orderto promote industrial development andinnovations, which are the objectives ofpatent law, it is essential to precisely protect
patentees and their inventions and stimulate
incentives for technological development. To
this end, there is a need to strengthen
protection of patent rights. However, if any
mode of patent enforcement were allowed, it
could hinder industrial development inreverse. In order for Japan to promote
innovations and strengthen its international
competitiveness in the future, it would needto develop infrastructure that facilitatesmarketing and use of patents, such as
achieving
sound
expansionofthepatent-licensing market.
(Researcher: Takashi ISHIHARA)

97 ●IIP Bulletin 2008