Comparative Study on Trademark Enforcement between Japan andthe United States: Focusing on Damages and Criminal Penalties*
Overseas Researcher: Toshiya KANEKO **The purpose of this study is to clarify the differences and actual operations involving damages
and criminal enforcement against trademark infringement between the U.S. and Japan. Concerning
damage systems, basically, Japanese trademark law awards only actual damages. However, U.S. law
awards, from a viewpoint of not only compensation but also deterrence, accounting for the infringer’s
profits, discretionary enhanced damages, mandatory punitive damages against intentionalcounterfeiting, and statutory damages against counterfeiting. Regarding actual operations, this study
shows the following. (1) Most U.S. trademark civil cases are decided by default judgements, in which
statutory damages are awarded against online counterfeit sellers; (2) The median amount of damages
which is awarded by judgment on merits in U.S. cases (2014-2018) is about six times larger than theamount in Japan (2014-2018). The reasons for this are the differences in the scale of the market or
the infringing conducts, the deterrence-based damages system, and the burden of proof of deduction
from the defendant’s sales; (3) Discretion of courts has significant meaning in terms of awarding
damages in U.S. law; and (4) state law plays more of a leading role than federal law in U.S. criminal
enforcement.

I. Introduction
The purpose of this study is to clarify the differences and actual operations involving damages
and criminal enforcement against trademark infringement between the United States and Japan.

Ⅱ. Overview of U.S. trademark damages system 1 and comparison with Japan
1. Federal law and state law* This is a summary of the report published under the 2019 Collaborative Research Project on Harmonization of Industrial Property

Right Systems under a commission from the Japan Patent Office.

** Associate Professor, Meiji University, Faculty of Law at Harvard Law School East Asian Legal Studies as Overseas Researcher
1

under the Program.
In general, see 5 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 30 (5th ed.),Westlaw (database updated Nov. 2019); 4 JEROME GILSON & ANNE GILSON LALONDE, GILSON ON TRADEMARKS § 14,
Lexis Advance (database updated Dec. 2019).

i

In the U.S., trademarks are protected under federal law (Lanham Act) and state law. Although
the Lanham Act plays a main role in civil enforcement against trademark infringement, state -lawbased claims are often alleged in federal trademark cases. Especially, punitive damages could be
provided under state law.

2. Damages under Lanham Act
15 U.S.C. § 1117 (a) provides actual damages, accounting for infringer’s profits, discretionary
enhanced (actual) damages (up to treble) and discretionary increase or decrease of recovery from
infringer’s profits. Against trademark counterfeiting, § 1117(b) provides mandatory treble damages(from AD or IP) and § 1117(c) provides statutory damages.

3. Actual damages
Many circuit courts require actual confusion for actual damages. Major

types

of

actualdamages are lost profits (lost sales), reasonable royalty (mainly for hold-over licensee) and costs forcorrective advertisement.

4. Accounting for infringer’s profits
Purposes or theoretical bases of accounting are considered as compensation, unjust enrichment
and deterrence of willful infringement.
Most circuit courts do not consider willfulness as a requirement of accounting, but the Second
Circuit and the Ninth Circuit require “willfulness” for accounting. The U.S. Supreme Court granted
certiorari in Romag Fasteners, Inc. v. Fossil, Inc., 817 F.3d 782 (Fed. Cir. 2016). In their Amicus
Brief, Mark A. Lemley and other professors support the “willfulness” requirement because ofbalancing between deterrence of willful conduct and the chilling effect on legitimate competition.
According to 15 U.S.C. §1117(a), the plaintiff need only prove the defendant’s sale. The
defendant must prove all elements of cost or deduction, including apportionment.

5. Discretionary enhanced damages and discretionary increase or decrease ofrecovery from infringer’s profits
Unlike patent law (35 U.S.C. § 284), the Lanham Act (15 U.S.C. § 1117(a)) provides “Suchsum in either of the above circumstances shall constitute compensation and not a penalty.” The natureii

of discretionary enhanced damages in patent law is considered as “punitive” 2 , but not in trademarklaw.
A “compensation and not a penalty” clause and discretionary decrease on infringer’s profits
recovery are introduced by the Lanham Act of 1946. Although the legislative intent is not clear,drafters of a trademark bill had worried about excessive damages by accounting for infringer’s
profits in Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240 U.S. 251 (1916).
Purposes of enhanced damages in trademark law are considered as (1) giving wide discretion
to trial courts for full compensation and (2) deterrence of willful infringement. But Ninth-Circuit
cases hold that only (1) compensation is the purpose of enhanced damages because of the“compensation and not penalty” clause.

6. Punitive damages under state law
Although the Lanham Act does not provide punitive damages, state law could provide punitive
damages and the Lanham Act does not preempt them.

7. Special damages for trademark counterfeiting(1) Trademark counterfeiting“Trademark counterfeiting” is a special type of trademark infringement. In addition to theregistered trademark infringement requirement (15 U.S.C. § 1115(a)), trademark counterfeiting
requires identity with or substantial indistinguishability from the registered mark and use on or inconnection with the same goods or services of the registered mark (§ 1116 (d)(1)(A), § 1127).

(2) Mandatory treble damages (§ 1117(b))
15 U.S.C. § 1117 (b) provides that the court shall treble the amount of actual damages orinfringer’s profits against intentional trademark counterfeiting. This clause was introduced by the
1984 amendment.
According to the Senate Report, one of the legislative intents was to deter intentional trademark
counterfeiting. The Senate Report clearly states that the mandatory treble damages are “punitive”
and “penalty.” Another intent was to motivate trademark owners to file civil suits against trademark

2

Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923 (2016)iii

counterfeiting.

(3) Statutory damages (§ 1117(c))
Statutory damages were introduced in the Lanham Act by the 1996 amendment. The Senate
Report pointed out that it was extremely difficult or impossible to prove damages against
counterfeiters, who often concealed or discarded records or did not make any records.
Statute amounts (minimum and maximum) were doubled by the 2008 amendment.

8. Comparison with Japan
Basically, the Japanese trademark law award only actual damages. This is because, in Japan,
the purpose of the damages system is considered as not penalty and deterrence but compensation.
However, in practice, courts and legislators take the deterrence effect of damages into consideration,
especially in the calculation of damages.
The Japanese trademark law (Art. 38 of the Japanese Trademark Act and Art. 5 of the Japanese
Unfair Competition Prevention Act) provides some calculation and presumption clauses for actual
damages: rebuttable presumption of lost sales quantity (Art. 38 (1) of the JTA); rebuttablepresumption of damages from the infringer’s profit (Art.38(2) of the JTA) and reasonable royalty
damages (Art.38 (3) of JTA). For proving actual damages (especially lost profits), Japanese law isfavorable to right holders.
For application of Art. 38 (2), plaintiffs have to show circumstances suggesting that theplaintiff could have gained profits if no trademark infringement had been made by the infringer.
And plaintiffs have to show the total amount of marginal profits earned by infringement. But,
practically, it seems that the defendant has to prove the marginal costs if the plaintiff proves thedefendant’s sales. Defendants can rebut if they show that the actual damages to the plaintiff were
smaller than the profits (deduction by smaller damages). Those are the main differences comparedwith U.S. accounting for infringer’s profits.
According to Art. 18,74.7-8 of the TPP, the Japanese Trademark Act introduced “preestablished damages” by the 2018 amendment (Art. 38 (4); after the 2019 amendment, Art.38 (5)).
Art. 38 (4) enables a trademark owner to recover damages equivalent to “the costs which are
ordinally incurred in acquisition and renewal of trademark registration” when the infringer’s markand goods are the same as the registered mark and goods.
However, reasonable royalty damages (Art. 38 (3) of the JTA) play a partly similar role to U.S.
Statutory damages. Courts have some discretion in calculating the royalty rate or the amount ofiv

reasonable royalty. In some cases, courts found a higher (sometimes double) royalty rate fordamages than the rate in ordinary license agreements.
On the whole, in U.S. law, the wide discretion of the trial courts plays a significant role inawarding damages. Japanese courts also have some discretion in calculating damages, but thisdiscretion is mainly used for compensation of actual damages.

Ⅲ. Civil trademark cases and damages in U.S. and Japan
Most U.S. case data are based on Lex Machina. Japanese cases are based on the JapaneseSupreme Court Website Database.

1. Number of civil cases
The number of civil trademark (TM) and other intellectual property law (IP) cases in Japan isvery small. The approximate average numbers of civil cases filed per year (2014-2018) is 3,287 for
U.S. trademarks, 84 for Japan trademarks and 554 fir Japan IP in total.
However, most U.S. IP cases are resolved by withdrawal. And most U.S. trademark judgments
are default and consent judgments. The ratio of default judgments in U.S. trademarks (43.2%) ismuch higher than U.S. patents (8.2%) and Japanese general IP (9.4%). Most

trademarkdefault

judgments seem to be cases of online counterfeit sellers. In Japan, the main enforcement against
such online counterfeit sellers is criminal.

2. Damages in general
According to Lex Machina Trademark Litigation 3 , most (80%) judgments in trademark
damage awarded cases (2009-2017 Oct.) are default judgments and most default judgments awarded
statutory damages.
In “Mass Counterfeiter Default Damages” (total 1,191 cases, 2009-2018), which iscategorized by Lex Machina, the mean amount of statutory damages per defendant is $959,339; themedian is $500,000, and the mode is $2,000,000.

3. Comparison on judgment on merits cases

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Brian C. Howard, Lex Machina Trademark Litigation Report 2017v

There were about 123 U.S. cases in which damages were awarded by judgment on merits orjury verdicts for trademark infringement or willful dilution from 2014 to 2018 (data in Lex Machina),
in which the mean amount of total damages was $2,653,870 and the median was $204,151. The
most used damage type is accounting for infringer’s profits (77 cases). Next is statutory damages (46cases).
There were about 37 Japan cases in which damages were awarded from 2014-2018 andpublished on the Supreme Court Website, of which the mean amount of total damages is $235,501
and the median is $35,964. The most used damage type is presumption from infringer’s profits (18cases). Next is reasonable royalties (15 cases).
So, the median amount of U.S. trademark damages in judgments on merits ($204,151) is 5.7
times larger than that of Japan ($35,964).
One of the biggest factors behind the difference in the amount of damages is the scale of market
or infringing conducts. In 2016, the U.S.’s GDP at current rates was 3.8 times larger than Japan’s.
The median amount of defendant sales ($1,645,707) in U.S. cases is five times larger than the amount($332,473) in Japan infringer’s profits presumption cases.
The second factor is that U.S. law provides a deterrence-based damages system (accounting,enhanced damages, punitive damages, mandatory treble damages and statutory damages). Enhanced
damages and punitive damages increased the amount of actual damages and infringer’s profits by
30%. Even in a judgment on merits, the amount of statutory damages is generally much higher than
any type of Japanese damages.
The third factor is differences in accounting for infringer’s profits and presumption from
infringer’s profits. In the U.S., there were not a few cases in which courts found the defendant’s sales
as profits without any deduction. And deduction for apportionment only occurred in one case andwas considered in two discretional decrease cases. Japanese courts are more flexible in deducting
costs. But deduction for apportionment and smaller actual damages is approved by courts in only a
few cases in Japan too.

Ⅳ. Criminal trademark enforcement in U.S. and Japan
Unlike Japanese law, the U.S. federal law criminalizes not trademark infringement but only
trademark counterfeiting (18 U.S.C. § 2320).
The number of federal criminal trademark prosecutions in the U.S. (72 in 2018) is muchsmaller than in Japan (302). Possible causes of this small number are that federal prosecutors arevitoo busy and right holders use civil enforcement. Another reason is the role of state law 4. The total
number of prosecutions in all states is not clear, but 105 people were sentenced as trademark
counterfeiters in New York (2015). And many state laws provide much broader 5 interpretation of
trademark offense than U.S. federal law.
In contrast with the small prosecution numbers, the ratio of those sentenced to prison under
U.S. federal law (about 50%) is much higher than in Japan (5%). This high ratio seems to be causedby the 2000 amendment of the United States Sentencing Guidelines. By the amendment (becauseof the 1997 NET ACT), the basic offense level for trademark counterfeiting increased from 6 to 8,
and it introduced a minimum offense level (12) for offenders involved in manufacture or import ofcounterfeit goods.

Ⅴ. Conclusion
Against online trademark counterfeit sellers, default judgement and statutory damages areheavily used in U.S. trademark law. In Japan, criminal enforcement is the main enforcement against
such offenders. Concerning this point, more study on the basic differences in civil procedure law(especially identification of defendants and services) and social costs and benefits of default
judgment and criminal enforcement is needed.
In U.S. law, the wide discretion of the trial courts plays a significant role in awarding damages.
Japanese courts also have some discretion in calculating damages, but this discretion is mainly used
for compensation of actual damages, not for deterrence.
This study did not reach a normative conclusion about whether Japan should introduce a
deterrence-based damages system. But it should be noted that excessive deterrence would chilllegitimate trade and expression.
In U.S. law, discretion of courts plays an important role in awarding damages. And the
Discretionary Decrease clause has been used for balancing. However, discretion of courts is a goodtool just for resolution of the case, but it is not so suitable for avoiding a chilling effect on legitimate
trade.
If we strengthen the trademark damages system in order to deter infringement, we need toclarify which conducts should be deterred and how they should be defined. We also should reconsider
current trademark offenses from such a view.
See Jeremy M. Wilson et al., Product Counterfeiting Legislation in the United States: A Review and Assessment of Characteristics,
Remedies, and Penalties, 106 J. Crim. L. & Criminology 521 (2016); Kari Kammel et al., The Crime of Product Counterfeiting: A
Legal Analysis of the Usage of State-Level Statutes, 18 Chi.-Kent J. Intel. Prop. 125 (2019).
5 In Commonwealth v. Omar, 602 Pa. 595 (2009), the Pennsylvania Supreme Court voided the trademark counterfeit offense clausein Pennsylvania state criminal code based on the overbreadth doctrine.
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