Various Issues Concerning IP Litigation from the
Perspective of the Legal System (*)
The Japanese IP litigation system has been highly regarded by many legal practitioners in terms ofefficiency, predictability, cost-effectiveness, etc. However, some experts and practitioners have highlighted the
difficulties in the evidence collection procedure and the insufficient amounts of damages determined in IP
litigation, which have prevented right holders from receiving sufficient remedies.
Recently, with the increasing awareness of the importance of the IP litigation system, "Enhancement of the
IP dispute resolution system" was listed as one of the three major goals in the "Intellectual Property Strategic
Program 2015." Further discussions are scheduled to be held in this fiscal year regarding the following points
in particular: [i] measures to facilitate collection of evidence in IP litigation, [ii] measures to allow the amountof damages to reflect the reality of business, and [iii] measures to enhance the stability of IP rights all the way
from the grant of IP rights to dispute resolution.
In this research, we examined various issues concerning IP litigation from the perspective of the legal
system in order to improve the usability of the IP litigation system and to promote smooth corporate activities.
We also examined what measures should be taken to make the Japanese system more attractive than othercountries' systems from the viewpoint of IP right holders who need to enforce their rights or resolve disputes.

I

Introduction

1

Background and Purpose of This Research
The Japanese IP litigation system has been steadily
improving thanks in part to the following amendments to
the Patent Act, etc.: the establishment of a provision
concerning presumption of the amount of damage (Article
102 of the Patent Act) in 1998, a provision concerning
expansion of the scope of documents that will be subject
to a court order for submission (Article 105 of said Act), a
provision concerning the calculation expert witness
system (Article 105-2 of said Act), and a provision
concerning facilitation of determination of reasonabledamages when it is extremely difficult to prove thecalculation basis for the damages (Article 105-3 of saidAct) in 1999, a provision concerning a protective order(Article 105-4 of said Act) and a provision concerning apatent invalidity defense (Article 104-3 of said Act). In
the same year, Japan established the Intellectual Property
High Court, centralized jurisdiction over IP-related cases,
and introduced the expert committee system and judicial
research official system. Nowadays, the Japanese IP
litigation system is highly regarded by many legal
practitioners in terms of efficiency, predictability,
cost-effectiveness, etc.
On the other hand, some experts and practitioners
highlighted the difficulties in the evidence collection
procedure and the insufficient amounts of damages
determined in IP litigation, which have prevented rightholders from receiving sufficient remedies. In recent years,

the JPO carried out a JPO-commissioned research project
concerning enhancement of stability of IP rights. In that
research, the JPO collected system users' opinions andstudied the current state of lawsuits in other countries
concerning standard-essential patents and activities of
Non-Practicing Entities (NPE), which attempt to exercise
intellectual property rights, in order to establish theappropriate way of exercising the right to seek an injunction.
Regarding IP dispute resolution, the JPO conducted ananalysis on IP-related judicial precedents and in-court
settlements. However, research has not been conductedsufficiently from the perspective of the legal system.
Recently, with the increasing awareness of theimportance of IP litigation, "2. Enhancement of IP dispute
resolution system" was listed as one of the three major
goals in the "Intellectual Property Strategic Program
2015." Further discussions are scheduled to be held in thisfiscal year regarding the following points: [i] measures tofacilitate collection of evidence in IP litigation, [ii]measures to allow the amount of damages to reflect thereality of business, [iii] measures to enhance the stabilityof IP rights all the way from the grant of IP rights todispute resolution, and [iv] the appropriate way of
exercising the right to seek an injunction. The document
titled "Ten Proposals from the Research Commission onIntellectual Property Strategy" states that further
examination will be conducted on the IP dispute
resolution system covering the issues mentioned in [i] to[iii] above.
In this research, we examined various issues(*) This is an English summary by the Institute of Intellectual Property based on the FY2015 JPO-commissioned research study report on theissues related to the industrial property rights system.
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IIP Bulletin 2016 Vol.25

1 ●concerning IP litigation from the perspective of the legal
system in order to improve the usability of the IP litigation
system and to promote smooth corporate activities. We also
examined what measures should be taken to make theJapanese system more attractive than other countries'
systems from the viewpoint of IP right holders who need to
enforce their rights or resolve disputes.
The reports of the aforementioned research projects
stated that it would be too early to take legal measuresconcerning the appropriate way of exercising the right toseek an injunction. Thus, this research aims to provide
basic data for further studies by establishing a committeeof experts and having the committee discuss thefollowing issues from the perspective of the legal system:[i] the evidence collection procedure, [ii] the amount ofdamages determined in IP litigation, and [iii] the stabilityof IP rights.
2 Method of This Research(1) Research on Publically Available Information
We gathered publically available information
regarding the legal systems related to IP litigation, held
expert committee meetings, and provided basic data andreferential materials to prepare questions for aquestionnaire survey and an interview survey.
(2) Discussions at the Committee
We established a research committee consisting of
attorneys and experts specialized in this research field inorder to obtain advice based on their examination andanalysis from an expert perspective. Three issues werediscussed at the committee, namely, "stability of IP
rights," "the evidence collection procedure," and "theamount of damages determined in IP litigation."(3) Domestic Questionnaire Survey
Based on the discussions at the committee, we
conducted a domestic questionnaire survey. We sent
questionnaires by post or email to many companies, etc.
that have been recently involved in IP litigation and law
firms that have attorneys with the experience of IP
litigation.
(4) Domestic Interview Survey
Based on the discussions at the committee, we
conducted a domestic interview survey on companies, etc.
with the experience of IP litigation and law firms thathave attorneys well-experienced in IP litigation.
(5) Interview Survey on Experts
Based on the discussions at the committee and theresults of the domestic questionnaire survey and thedomestic interview survey, we prepared questions for aninterview survey and asked them to IP litigation experts.

●

II Evidence Collection Procedure
The issues related to the enhancement of theevidence collection procedure are as follows.
(1) Obligation to Clarify the Specific Conditions(Article 104-2 of the Patent Act)Regarding Article 104-2 of the Patent Act
concerning the obligation to clarify the specificconditions, the idea of requiring submission of evidence
to prove the specific conditions of the act of infringement
or penalizing the suspected infringer, if the infringer fails
to disclose the specific conditions of the act of
infringement, by presuming that the act of infringement
alleged by the right holder was actually committed,
would be inappropriate in view of the facts that the
purpose of said provision is not to require the suspected
infringer to disclose specific conditions of the act of
infringement that have not been perceived by the rightholder, and that a penalty could lead to the filing of an
exploratory lawsuit, and that the presumption of an act of
infringement would be an excessively heavy penalty on a
party that failed to provide specific information to justify
its denial in the process of identifying issues at dispute.
(2) Order for Production of Documents (Article
105 of the Patent Act)Regarding Article 105 of the Patent Act concerning
an order for production of documents, it would beinappropriate to relax the document identification
requirement in view of the facts that it would allow a
court to issue a document production order without fully
carrying out the document identification procedure andthat the violation of such order would result in the court's
recognition of the alleged fact as "truth." Regarding theidea of excluding the parties concerned from the list of
the parties to whom the documents can be disclosed andthe idea of adding third-party technical experts to such list,
it should be noted that no-disclosure to the parties
concerned and disclosure to third-party technical experts
as assistants is possible even under the current Act.
Furthermore, it would be inappropriate to establish asystem that prohibits either party concerned from seeing
any evidence submitted by the other party from theperspective of protecting the non-disclosed party's right tofollow the procedure and complying with the principle ofdue process of law. On the other hand, it would be worth
examining the idea of using third-party experts because
there is a certain level of need for expert advice. However,
it would be necessary to fully examine the feasibility offinding experts with the required level of technicalexpertise.

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(3) Protective Order (Article 105-4 of the Patent
Act)
Regarding Article 105-4 of the Patent Act
concerning a protective order, the idea of reviewing andtoughening the punishment on a party that violated aprotective order would be inappropriate because it would
make it even more difficult to use the protective ordersystem.
(4) Evidence Collection (Article 132-2 andArticle 132-4 of the Code of Civil Procedure)and Evidence Preservation (Article 234 of
said Act) Prior to the Filing of an Action
Regarding the pre-action evidence collection
procedure, in light of the principle that prohibits
exploratory evidence collection, the difficulty ofguaranteeing the enforceability of the pre-action
procedure under the Japanese legal system, and the facts
that the parties concerned might have to bear heavier
litigation burdens, that patent trolls, etc. could abuse suchprocedure, and that a patent right is unique in that it could
be invalidated, it would be inappropriate to make theprocedure enforceable. The idea of using the evidence
preservation system for the purpose of evidence
disclosure would be contradictory from the perspective oflegal theory because evidence preservation is permitted
only when there is a risk of loss of evidence. On the other
hand, under Article 132-4, paragraph (1) of the Code ofCivil Procedure, which specifies "on-site inspection by acourt execution officer" and "opinions from experts,"
necessary measures should be able to be devised andimplemented more actively since said provision imposes
the obligation not to interfere with those court execution
officers and experts. However, regarding the idea of
having a court execution officer conduct an on-site
inspection for a patent infringement lawsuit, it has been
pointed out that it is not realistic to expect a court
execution officer to make a determination on technicalmatters.

III Amount of Damages Determined in IP
Litigation
The issues concerning the amount of damages
determined in IP litigation are as follows:(1) Presumption of the Amount of Damage(Article 102, paragraphs (1) to (3) of the
Patent Act)Regarding Article 102, paragraph (1) of the Patent
Act, the idea of limiting the disclosure of the profit rate of
the plaintiff, which is demanding payment of damages
under said provision, to the parties concerned would beinappropriate because it would allow the plaintiff tocircumvent the obligation to disclose the profit rate under●

IIP Bulletin 2016 Vol.25

Article 102, paragraph (1) of the Patent Act despite thefact that the plaintiff's disclosure of the profit rate is apremise for demanding payment of damages under said
provision.
Regarding Article 102, paragraph (2) of the Patent
Act, the idea of establishing a statutory provision
concerning the cases where the amount of damage will be
reduced based on a contribution rate and the idea oflisting the points that should be taken into consideration
when applying a contribution rate could contribute toimproving predictability. However, such ideas would beinappropriate because they could make flexible resolution
impossible in some cases. Meanwhile, regarding the ideaof imposing the burden of proving the non-contribution
rate on infringers, it should be noted that sucharrangement already exists in the name of "partial
reduction of the presumed amount of damage."
Regarding the idea of establishing a statutory
provision to permit simultaneous application ofparagraphs (1) and (3) of Article 102 of the Patent Act, it
should be noted that such simultaneous application isalready possible and that prompt establishment of suchstatutory provision is not necessary. Even if such statutory
provision ensures the consistent legal interpretation thatsuch simultaneous application is permitted, it isquestionable how beneficial such statutory provision
would be.
Regarding Article 102, paragraph (3) of the Patent
Act, it will be inappropriate to increase the amount ofdamages for an intentional or malicious act of
infringement because this could damage the predictabilityof the system due to the difficulty in determining whether
the act is intentional or malicious. Meanwhile, based on
the results of the domestic questionnaire survey and thedomestic interview survey, an analysis of license
agreements has revealed that the royalty rate agreed in alicense negotiation conducted after the detection of
infringement tends to be higher than the royalty rateagreed in a voluntary license negotiation. We have also
recognized that, in some cases, the royalty rate
determined in a license negotiation after the detection of
infringement is almost the same as the royalty rate
determined in a voluntary license utilization. Therefore, itwould be inappropriate to statutorily specify that the
royalty rate determined in an infringement lawsuit should
always be higher than the regular royalty rate. Moreover,since the deletion of the word "regular" from Article 102,
paragraph (3) of the Patent Act in the amendment of 1998,
it has been clarified that the royalty rate determined by
calculating the amount corresponding to the royalty rate
specified in Article 102, paragraph (3) of the Patent Act
can be larger than the regular royalty rate. In fact, it has
been noted that, since the amendment of the Patent Act in
1998, the royalty rate determined by a court has become
higher than the one determined prior to the amendment.
3 ●Thus, there seems to be no need to amend Article 102,
paragraph (3) at this moment. Regarding the idea ofcreating a database and guidelines concerning royalty
rates, although some people find them useful asreferential materials, the creation of a useful database andguidelines as referential materials for a person
determining a royalty rate would be impossible in reality
due to the facts that it is difficult to collect data about
actual royalty rates which are supposed to be kept secretunder a license agreement and that the royalty could be
set at a level higher than the value of a patented invention.
The creation of an insufficient database and guidelines
could cause inaccurate use of figures and would notcontribute to the determination of appropriate royalty
rates.
(2) Issues Related to the Legal Nature of Article
709 of the Civil Code as a Special Provision
In connection with Article 709 of the Civil Code, theconcept of punitive damages is incompatible with theprinciple of compensatory damages specified in the Civil
Code. Since punitive damages are not compatible with
the Japanese legal system, the introduction thereof would
be inappropriate. The idea of amending Article 104,
paragraph (4) of the Patent Act in such a way that said
provision permits an increase in the amount of damages
in the case of an act committed either intentionally or bygross negligence would be inappropriate in view of thefacts that it is difficult to determine whether a certain act
has been committed either intentionally or by grossnegligence and that such amendment would discourage
legal acts as well.
(3) Attorneys' Fees
Regarding the defeated party's liability to bear theattorneys' fees, since there is no statutory provision thatobliges the defeated party to bear the attorneys' fees, theattorneys' fees should be paid not by the defeated party,
but in the way determined based on a causal relation withinfringement. If the defeated party is obliged to bear theattorneys' fees, it would discourage the filing of a lawsuit.
In many lawsuits in Japan, the plaintiff and the defendant
are self-represented. It is important to note that Japan is
not one of the countries where representation by anattorney is mandatory and that the issue of attorneys' fees
should be examined in consideration of the principle ofmandatory attorney representation.

IV Stability of IP Rights
The issues related to the stability of IP rights are as
follows.
(1) Stability of Legal Relationships
The idea of establishing a time limit for the filing of●a trial for invalidation and the submission of an invalidity
defense or imposing a uniform limit on what constitutes
grounds for invalidation based on which an allegation canbe made would be inappropriate because it would prevent
patents from being invalidated even when they should nothave been granted in the first place and would lead to acontinuous monopoly.
(2) Determination of Patent Invalidity in an
Infringement Lawsuit (Article 104-3 of the
Patent Act)Regarding the idea of introducing the "obvious"
requirement to Article 104-3 of the Patent Act, it would
be unnecessary at this moment to modify the scope of thegrounds for invalidation based on which an invalidation
defense is raised so that said scope will be narrower than
the scope of the grounds for invalidation based on which
an invalidation is sought in an invalidation trial. Since
users consider the court's authority for patent invalidation
appropriate, the introduction of such requirement would
be unnecessary at this moment for the purpose ofaffecting the process of the formation of a court's
pre-ruling opinion. On the other hand, it will be possible
to consider adding the "obvious" requirement, if
necessary, as a court procedure to prevent theunnecessary extension of the examination period.
However, some people question the effect of the additionof such requirement. As described above, the "obvious"
requirement could be added only after examining thepossibility of amending the provision concerning a limit
on re-trial (Article 104-4). Regarding the stability of IP
rights, since the opposition system was established in theamendment of the Patent Act of 2014, it is necessary to
examine the effect of said system on the stability of IP
rights in infringement litigation.
Furthermore, it would be inappropriate to impose
stricter limits on the grounds for invalidation based on
which an invalidity defense can be raised than the limits
imposed on the grounds for invalidation based on whichan allegation can be raised in a trial for invalidation bylimiting said grounds for invalidation based on which aninvalidity defense can be raised to one based on evidenceor to a usurped application or the lack of novelty. This isbecause, even if Article 104-3 limits the grounds forinvalidation based on which an invalidity defense can beraised, any patent right that can be clearly considered to
be invalid on any other grounds for invalidation would beconsidered to be unexercisable based on the legal theories
presented in judicial precedents prior to the introductionof Article 104-3, which could consequently disturb
judicial practices. On the other hand, it has been indicatedthat it is possible to take the stance that it is not necessary
to synchronize the result of a civil lawsuit with that of an
administrative lawsuit. Furthermore, it would beinappropriate to abolish the invalidity defense system.
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(3) Modification of the Scope of a Patent Right
Regarding the idea of introducing a system to permit
a patentee to expand or modify the scope of the patentright after patent grant, some people found that such
system would permit a patentee to make a necessary
amendment to the insufficient patent claims based on
which an examiner's decision to grant a patent was made,even though they admitted that unconditional permission
would be inappropriate, so that a product that anotherparty manufactured by working the patented invention
will fall under the amended claims of the patent. Before
the introduction of such system, it would be necessary tocarefully consider essential preconditions such as theintroduction of an intervening right and the restriction ofa retroactive effect, which would greatly change the basisof the current system.
(4) Introduction of a System to Check Patent
Validity with the JPO
Regarding the idea of introducing a system to check
patent validity with the JPO after patent registration, such
newly established system to check patent validity is
considered to be useful as long as users can use thesystem regardless of whether a lawsuit has been filed or
not as a means to resolve a dispute prior to the filing of alawsuit. However, according to the domestic
questionnaire survey and the domestic interview survey,
many respondents said that they could not imagine any
circumstances under which such system should be used.
There are many issues to consider before establishingsuch system, such as whether a patent should beinvalidated if its validity is denied under said system. At
the same time, it is important to grasp users' needs.
Regarding the practice of suspending judicial
proceedings if either party concerned requests the JPO's
patent validity evaluation, such court's decision tosuspend judicial proceedings is appropriate under thecircumstances where no legislation fact exists. Anyamendment that would limit the court's power to control
judicial proceedings would be inappropriate.
(5) Relationship between Trial Proceedings at
the JPO and a Defense of Invalidity or
Correction Raised in a Lawsuit
Regarding the situation where any right holder thatraises a defense of correction is required to request acorrection, whereas any suspected infringer that raises a
defense of invalidity is not required to request a trial forinvalidation, some people pointed out that the balance
between right holders and suspected infringing infringers is
unequal in terms of offense and defense. Other people
pointed out that, while invalidity must be proven based on
objective data, a correction can be requested voluntarily by
any right holder and therefore that there is no unreasonablediscrimination between those two parties. Furthermore, it●

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has been pointed out that right holders are prepared tomake a correction if an opposition is raised, whereas
suspected infringers have to face an unexpected lawsuit
and therefore that an imbalance between offense anddefense is inevitable and should not be regarded as an issue
per se. Moreover, since right holders are obliged to fulfil
patentability requirements and establish claims, it is notnecessary to statutorily stipulate that a request forcorrection is not required to be made when a defense ofcorrection is raised or that a request for a trial forinvalidation is required to be made when a defense ofinvalidity is raised.
(6) Prevention of Revival of a Dispute
Regarding the idea that, after the JPO has made adecision to uphold a patent in a trial for patent
invalidation, a party to an infringement lawsuit should beprohibited from raising a defense of invalidity on thesame grounds, if we are facing the problem that such aninvalidity defense actually delays dispute resolution, it ispossible to interpret that such an invalidity defense isprohibited even under the current law. However, it might
be a good idea to consider legal amendment to clarify thatthe same dispute cannot be revived.
(7) Reduction of the Double Risks Shoulderedby Patentees
It has been pointed out that, in order to prove patentvalidity, each patentee has to win both an infringement
lawsuit and an invalidation trial. The idea of abolishing
the system of invalidation trial and only permitting adispute over patent validity in an infringement lawsuit isinappropriate because the system of invalidation trial is avery effective, frequently-used means of dispute
resolution that was established separately from theinfringement litigation system.

V Conclusion
Discussions have been made about how to improve the
IP dispute resolution system. After a series of amendments to
the Patent Act and creation of the Intellectual Property High
Court, etc., Japan has come to have a highly reputable IP
dispute resolution system. It is still important to review the IP
dispute resolution system from time to time in order toreflect recent changes in the industrial structure and new
developments in international harmonization negotiations.
Further examination is necessary to ensure that the Japanese
IP dispute resolution system satisfies users' needs, while
maintaining a high level of legal stability and predictability
in consideration of the insights on the legal system of IP
dispute resolution and the opinions from system users gained
through this research.
(Seniror Researcher: Kohei BABA ,Researcher Takashi ABE)
5 ●