Under the revision of the Patent Act in 2019, the system of "on-site inspection (sasho)" will be available soon (expected to be in around October 2020) in patent infringement lawsuits, which enables to collect evidence concerning patent infringement by allowing access to premises of an alleged infringer and equipment in the premises (Articles 105-2 ~ 105-2-10 of the Patent Act). In this article, we set out below the overview of the system of on-site inspection.
1. Background
In patent infringement lawsuits, a patentee often faces difficulties in collecting evidence proving patent infringement. Although the Patent Act provides some legal frameworks which facilitate a patentee to prove patent infringement such as a court order where a possessor of documents necessary for establishing patent infringement is ordered to submit such documents to the court, it is said that such legal frameworks are not sufficient for patentees. Thus, a stronger effective system for collecting evidence concerning patent infringement like the discovery system in the United States and the inspection system in Germany has been desired.
2. Requirements of on-site inspection
To overcome the problem of difficulties in collecting evidence proving patent infringement, the system of on-site inspection has been introduced by the revision of the Patent Act in 2019. On-site inspection is a process where an expert appointed by a court ("inspector") enters an alleged infringer's premises and collects evidence concerning patent infringement. However, on the other hand, on-site inspection can impose a heavy burden on the alleged infringer. For this reason, there are some requirements for on-site inspection. First, the necessity of collecting evidence to assess patent infringement must be found. Secondly, there need to be reasonable grounds to suspect that the alleged infringer infringes the patent concerned. In other words, evidence submitted by the parties (without conducting on-site inspection) needs to show that there is a high possibility of patent infringement. On-site inspection is assumed to be conducted in such case in order to collect further evidence for establishing patent infringement. "Exploratory" on-site inspection to widely collect evidence concerning patent infringement is not permissible. Thirdly, there must be a situation where collection of evidence by other means is not sufficient. Fourthly, on-site inspection should not be an excessive burden for the alleged infringer. For example, in some cases, on-site inspections can require shutdown of factories or use of valuable reagents, and it could be inappropriate to force the alleged infringer to accept such an excessive burden.
3. Steps of on-site inspection
On-site inspection is available only in patent infringement lawsuits; on-site inspection is not available before the patent infringement lawsuit is filed to the court or in infringement lawsuits of other intellectual properties such as utility models, designs or trademarks. In a patent infringement lawsuit, a patentee files a petition for a court order of on-site inspection when the patentee finds it necessary. After hearing an opinion of the alleged infringer in the lawsuit, the court issues a court order of on-site inspection if the requirements for on-site inspection mentioned above are met, and appoints a third party in a neutral and fair position as an inspector who will actually conduct on-site inspection. An inspector most likely will be appointed from attorneys-at-law, patent attorneys, academic experts who have expertise in the relevant field. The inspector will visit premises of the alleged infringer and conduct examination by asking questions to the alleged infringer, asking the alleged infringer to provide documents in the premises, operating the alleged infringer's equipment, conducting measurement and experiment, etc. In view of protecting trade secrets of the alleged infringer, the alleged infringer or its counsels can be present at the on-site inspection while the patentee and its counsels cannot.
The alleged infringer must accept on-site inspection and cooperate with the inspector. If the alleged infringer rejects on-site inspection or does not cooperate with the inspector without a due reason, the court is allowed to deem that the patentee's arguments about patent infringement to be assessed by the on-site inspection are true. On this point, mere fact that trade secrets will be revealed by on-site inspection does not constitute a due reason to reject the on-site inspection (although this does not mean that trade secrets of the alleged infringer are never protected as discussed below).
After on-site inspection, an inspector must prepare a report about the outcome of the on-site inspection ("on-site inspection report") and submit it to the court. Since the on-site inspection report may contain trade secrets of the alleged infringer, the court sends its copy only to the alleged infringer first. Within two weeks from the receipt of the on-site inspection report, the alleged infringer may file a request to prevent the on-site inspection report from being disclosed to the patentee in whole or part. Considering the balance between the necessity for establishing patent infringement and the necessity for protecting trade secrets, the court determines whether to disclose the on-site inspection report to the patentee.
Once the on-site inspection report has been determined to be disclosed to the patentee, the patentee may access and copy the on-site inspection report, then use it as evidence for establishing patent infringement in the patent infringement lawsuit. In case that a patentee has access to trade secrets contained in an on-site inspection report, the patentee may be subject to a court order where the patentee is ordered not to disclose the trade secrets to others nor to use the trade secrets for any purpose other than the purpose of using them for the relevant patent infringement lawsuit.
4. Comments
For on-site inspection newly introduced by the revised Patent Act, there are some strict requirements in view of avoiding excessive burden on the alleged infringer as well as protecting trade secrets of the alleged infringer. Moreover, there are some important but unanswered questions for on-site inspection (for example, it is not clear whether on-site inspection is available to conduct examination in an alleged infringer's premises outside Japan). However, it can be said that the system of on-site inspection will certainly be a strong tool for patentees to collect evidence concerning patent infringement, which can lead to more victories for the patentees.
Written by: Mr. Masahito Imai (Attorney at Law and Patent Attorney)