Japan has made continuous progress toward strengthening domestic intellectual property protection, beginning with the government’s establishment of the Office for Intellectual Property Strategy in 2003, Other examples of this progress include changes related to the initiation of IP lawsuits and the strengthening of IP protection through the litigation system. With growing protection for intellectual property rights have come a greater number of new IP-related lawsuits. For example, there were 300 new lawsuits filed in 1991 compared to more than 600 in 2002. Given this trend, IP owners can count on the courts to protect their rights more so than in the past.

The following overview considers how IP disputes are handled in Japan.

Litigation

Intellectual property litigation in Japan is divided into two broad categories. The first kind of lawsuit involves seeking declaratory judgments to either invalidate or reverse an unfavourable administrative decision of the patent office. The other type of litigation involves actions for infringement of IP rights.

There are various considerations at work when seeking to enforce one’s IP rights through judicial proceedings, but the cost-effectiveness of engaging in litigation is the key concern, especially for corporate owners of IP rights. A cost-benefit litigation analysis should consider such important factors as the need for a quick resolution of the dispute and whether damages will sufficiently indemnify the party bringing the suit. Those two points are considered in the next section.

Swift resolution of disputes

In the event of infringement of one party’s IP rights by another, the infringed party will bring a lawsuit in order to recover damages. However, if the judicial proceedings take too long, not only will the costs associated with litigation increase, but there also is a risk that the intellectual property itself will become obsolete. Thus, even assuming the IP owner prevails over the infringing party, the benefit will not have exceeded the cost of bringing a lengthy lawsuit. Consequently, a party bringing an IP lawsuit should attempt to shorten the length of the judicial proceedings to the extent possible and seek a swift resolution to the dispute.

One way to achieve this result is to seek redress in a court that is specially set up to handle IP disputes, as is common in certain countries. Such specialised courts do not exist in Japan, which leaves IP disputes to the jurisdiction of ordinary courts. However, the Tokyo district court and Osaka district court have specialised IP sections, and in fact, most IP litigation in Japan is concentrated in those two courts. For example, the Tokyo and Osaka district courts handled more than 85% of the ongoing IP cases in 2002. Perhaps one reason for this is that quick dispute resolution depends on judges with experience handling IP-related disputes. In addition, court inspectors specialising in science and technology are assigned to the IP section of each court to assist the judges in resolving disputes.

There also is a difference in the length of disputes between those district courts that have specialised IP sections and those district courts without them. The data regarding patent-related litigation for the past five years shows that non-specialised district courts take 21 to 30 months to handle such litigation versus 16 to 21 months in Osaka and 12 to 23 months in Tokyo.

The Tokyo and Osaka district courts are trying to shorten the duration of legal proceedings once a request for IP protection has been made. For example, when an action for patent infringement is brought before the Osaka District Court, the parties to the suit are handed a schedule of proceedings that gives an overall outline of the dispute’s progression. The schedule maintains a one-year timetable  and facilitates the proceedings although it has no legal binding authority on the parties.

Sufficient damages

Japanese courts are generally following a trend toward awarding higher damages in IP-related lawsuits. In a 2002 case involving the infringement of a patent regarding Pachinko  gambling machines, the court awarded damages in the amount of JPY 7.4 billion (approximately US$68 million at the time of this writing) . The damage awards in patent infringement cases in the period from 1990 to 1994 remained constant, averaging JPY 46 million (approximately US$422,000), an amount which may not necessarily be sufficient for the protection of IP rights.

Given the difficulties inherent in proving up damages suffered by the holder of an IP right, the law has undergone reforms that make it easier to show proof. For example, the Patent Law was amended in 1998 and 1999 with the purpose of making it easier for rights holders to prove their lost earnings after an infringement had occurred. The following are three such changes under the Patent Law:

(a) A rule allowing a claim for damages computed by multiplying the IP holder’s expected profit per unit by the number of units sold by the infringing party (Patent Law, art. 102(1)).

(b) A rule that presuming as damages on the profit that the infringer made as a result of his infringing activity (Patent Law, art. 102(2)).

(c) A rule allowing as damages a claim for the amount of royalties corresponding to the patent (Patent Law 102(3)).

It is also important to note the costs and expenses incurred during the process of a lawsuit. Filing suit triggers a court fee and attorneys’ fees. The court fee is calculated according to the value of the claim, which normally would be quite high in IP infringement cases. Therefore, a person who brings an IP lawsuit should take the court fee into account when assessing whether damages will be sufficient compensation for an infringement. For example, a litigant claiming US$10 million on the grounds of an IP infringement would have to pay approximately a US$30,000 court fee.

Under Japanese law, the prevailing party in a lawsuit is entitled to make a claim for the court fee against the counterparty, but is not entitled to claim attorneys’ fees in general.

Miscellaneous considerations

Temporary injunction

Another remedy for the protection of IP rights, which does not involve a formal lawsuit but is handled in court, is the temporary injunction. The temporary injunction is a procedure that redresses grievances in emergency cases and is initiated when the aggrieved party brings a motion before the court. A temporary injunction hearing proceeds faster than a formal lawsuit. In one case involving this emergency procedure, where Apple Computer KK demanded on Unfair Competition Law grounds the temporary injunction of sales of products that were quite similar to their own , the court ordered the infringing party to suspend sales of the products in question within one month. The temporary injunction would be a useful remedy for the protection of IP rights if the goal is a quick resolution of the dispute. It should be noted that any injunction orders issued by the court will be effective for a reasonable period if more than two weeks have passed after the issuance of that order. Therefore, in the event the plaintiff obtains a court order, the plaintiff should then file a formal lawsuit within a reasonable period. The word reasonable here remains undefined.

Deposit money is a significant factor to consider before seeking a temporary injunction. In the event that the plaintiff obtains a temporary injunction, the plaintiff should pay a deposit to the court. The amount of the deposit will be decided by the judge based on the amount of the value of the plaintiff’s claim, the relative positions of the plaintiff and the defendant, and any other circumstances. In sum, the prevailing plaintiff in a temporary injunction proceeding must pay the court fee, attorneys’ fees, and the deposit money, in addition to the costs and expenses incurred in the subsequent formal lawsuit. This perhaps weighs against seeking a temporary injunction for cost-conscious plaintiffs, other than those in true emergency situations.

It should, however, be noted that, in principle, the courts will not issue ex parte orders if a plaintiff seeks an IP-related temporary injunction. The court will usually hold one or more hearings to consider the arguments from both parties. As a result, many cases are settled during the procedure to obtain a temporary injunction.

Furthermore, a motion for temporary injunction may be withdrawn unilaterally at any time before the order is issued. Thus, if the judge appears likely to reach a decision that is unfavourable to the motioning party, that party can withdraw the motion at the point.

New Civil Procedure Law

In response to increased calls for IP rights enforcement, the Japanese Civil Procedure Law regarding IP was revised and announced officially on 16th July 2003 (the date of issue). The law will become effective on the date decreed by the government, which in any case must be within one year from the date of issue. Thus, the revisions to the Civil Procedure Law should come into effect before mid-July, 2004. The main changes will be as follows:

Exclusive jurisdiction of all patent litigation

All trials in the first instance of patent litigation must be filed in the Tokyo or Osaka District Courts. Patent-related trials in the first instance in east Japan are handled in Tokyo District Court and those in west Japan are handled in Osaka District Court. All appeals of such cases must be filed at the Tokyo High Court.

As mentioned above, more than 85% of IP litigation is handled by the Tokyo and Osaka District Courts. In view of this statistic, the new law set exclusive jurisdiction of patent litigation in both district courts and the Tokyo High Court.

Technical expert committee

Technical expert committees that help the court and litigants to achieve a correct understanding of technical knowledge can be made available by court order.

Both the Tokyo and Osaka District Courts and the Tokyo High Court currently have non-judicial experts for the support of the judges. However, technology has increasingly become more complex, and the current number of non-judicial experts is insufficient to help the judges in an attempt to achieve accurate comprehension of technical knowledge. The new law attempts to address this shortfall by establishing a technical expert committee system.

Alternative dispute resolution

Several efficient remedies not involving courtroom litigation are available in Japan, such as arbitration, mediation, direct negotiation, and the like. Certain notable advantages of alternate remedies include the arbitrators’ expertise, the confidentiality of the proceedings, and flexibility to adapt the proceedings to different situation. For brevity, the focus of the discussion below relates to arbitration.

Arbitration is a procedure for resolving disputes in which a neutral third party (the arbitrator) renders a decision after conducting a hearing at which both parties have an opportunity to be heard. Where arbitration is voluntary, the disputing parties select an arbitrator with the power to render a binding decision. The disputing parties must mutually consent to resolve the dispute by arbitration for the decision to be enforceable. The main features of IP arbitration are as follows:

Expertise

The arbitrators are selected by the disputing parties, who have the ability to select technical experts as arbitrators. This aspect of arbitration compares favorably to court-ordered remedies in cases where a decision is required on technical grounds, given that judges themselves are not technical experts.

Confidentiality

Arbitrations are bound by the principle of non-disclosure, which encourages the use of confidential information to evaluate a dispute, such as the technical composition of a patented item and the content of license agreements. The use of such confidential information can, in some cases, lead to a more accurate or just ruling. Courtroom proceedings, on the other hand, are held in public, thereby chilling the use of such confidential information as evidence. Therefore, arbitration reduces the risk of a breach of confidentiality that exists with a court proceeding, which arguably leads to a better outcome for the parties.

Language

The disputing parties may select an official language other than Japanese by mutual consensus in the arbitration procedure. On the other hand, disputing litigants in Japan may only use Japanese in a court proceeding. This requires translation of any foreign language documents that are to be used in the litigation.

There are three major private arbitration organisations in Japan: the Japan Intellectual Property Arbitration Center (JIPAC), the Japan Commercial Arbitration Association (JCAA), and the Arbitration Center of the Bar Association that will arrange an arbitration for the disputes of IP issues.

Despite the general merits of alternative dispute resolution, very few IP cases were brought to arbitration. For example, JIPAC was established in 1998 but it has handled just three IP cases in total. JCAA handled just twenty six cases in total in 2000, and it is not certain how many of those were IP cases. There are several reasons why the Japanese are not likely to use the arbitration process for a resolution of disputes. One is the concern over the quality of the arbitrator, and another involves concern that private organisations are not as trustworthy as a court for overseeing an important dispute. Lastly, some believe that the arbitration organisations lack the requisite experience to adequately address the issues that arise in the proceeding.

Notwithstanding the benefits of the alternative dispute resolution process, concerns over the efficacy and trustworthiness of the system mean that courts will continue to play an increasing role in IP disputes in Japan.