The patentee (plaintiff) is a legal entity that manages intellectual property rights within its group companies, including the patent allegedly infringed in this case (the “Patent”), but does not manufacture or sell products which the patent is worked for or which compete with products with the products manufactured and sold by the infringer (the “Infringing Products”). The Intellectual Property High Court (the “IP High Court”) found that the group companies conducted their business using the Patent as a whole under the control and direction of a parent company who indirectly owned 100% of shares of the patentee, that the patentee was exercising its rights in relation to the Patent in order to pursue profits within the group companies, and that there was no other entity within the group companies which was exercising its rights in relation to the Patent. On this basis, the IP High Court held that Article 102, paragraph 2 of the Patent Act is applicable to the calculation of the amount of damages suffered by the patentee and awarded the patentee damages calculated based on the amount of the profit gained by the infringer from the sale of the Infringing Products under this Article (IP High Court judgment, April 20, 2022 (Case number: 2021 (ne) 10091)).
Background
The plaintiff, Biomet C.V. (a Dutch corporation), is the patentee of the Patent, belongs to the Zimmer Biomet Group (the “Group”), whose ultimate parent company is Zimmer Biomet Holdings, Inc., and manages a part of the Group’s intellectual property rights including the Patent. However, the patentee does not sell or otherwise engage in the sale of any products which the Patent is worked for or which compete with the Infringing Products.
Companies, which belong to the Group but are not the patentee, design, manufacture, import to Japan, and/or sell in Japan of products which the Patent is worked for.
The defendant, Meira Corporation, manufactures and sells products which constitute infringement of the Patent (i.e. the Infringing Products).
The patentee filed a patent infringement lawsuit against Meira Corporation to seek an injunction and damages.
The Tokyo District Court’s judgment of September 30, 2021 (wa) No. 14314
The Tokyo District Court found that the manufacture and sale of the Infringing Products constituted infringement of the Patent and granted an injunction and destruction of the Infringing Products.
Regarding the claim for damages, the patentee claimed damages under Article 102, paragraph 2 of the Patent Act that sets forth calculation of damages based on the presumption that the amount of the damages is the amount of the profits gained by the infringer from patent infringement such as by selling products which constitute infringement of the patent in question. The Tokyo District Court held that “Article 102, paragraph 2 of the Patent Act is applicable when there are circumstances in which the patentee could have obtained profits if there had been no infringement of the patent by the infringer” (the IP High Court’s judgment of February 1, 2013 (No. 2012 (ne) No. 10015), and found that in this case, although the patentee managed a part of the intellectual property rights of the Group, the patentee did not engage in the sale of any products and therefore could not have obtained profits if there had been no infringement. Thus, the Tokyo District Court denied the application of Article 102, paragraph 2 of the Patent Act, applied only Article 102, paragraph 3 of the Patent Act that sets forth calculation of damages based on reasonable license fees, and awarded damages of approximately JPY 900,000.
The patentee appealed to the IP High Court.
The IP High Court’s judgment of April 20, 2022 (No. 2021 (ne) 10091)
The IP High Court also found infringement of the Patent and granted an injunction and destruction of the Infringing Products.
With regard to the claim for damages, like the Tokyo District Court, the IP High Court held that Article 102, paragraph 2 of the Patent Act is applicable when there are circumstances in which the patentee could have obtained profits if there had been no infringement of the patent by the infringer. However, regarding the question of whether Article 102, paragraph 2 of the Patent Act is applicable to this case, based on the findings below, the IP High Court concluded that Article 102, paragraph 2 of the Patent Act is applicable to this case, and awarded damages of approximately JPY 4,500,000.
Comments
Article 102, paragraph 2 of the Patent Act provides that the amount of damages suffered by the patentee is presumed to be the amount of the profit gained by the infringer from the act of infringement of the patent.
With regard to the application of Article 102, paragraph 2 of the Patent Act, the IP High Court held in the “garbage storage machine” case that, in order for Article 102, paragraph 2 of the Patent Act to apply, it is not necessary for the patentee to work the patented invention itself, but it is sufficient if there exist circumstances where the patentee would have obtained profits if the infringer had not infringed the patent in question. This ruling has been followed in many subsequent court judgments.
However, even if it is not necessary for the patentee to work the patented invention itself in order for Article 102, paragraph 2 of the Patent Act to apply, there are still controversies on whether or not some form of working (including handling of products which compete with the infringer’s products) is necessary.
In this case, the IP High Court found that although the patentee itself did not work the Patent in any way, it could be said that the entire of the Group, including the patentee, was using the Patent to carry out their business, and that the patentee was in a position to independently exercise its rights in relation to the Patent and was exercising the Patent to pursue the profits of the Group but no other company belonging to the Group was in a position to exercise its rights in relation to the Patent, and thus affirmed the application of Article 102, paragraph 2 of the Patent Act to the calculation of the damages suffered by the patentee.
This judgment is to affirm the application of Article 102, paragraph 2 of the Patent Act by taking into consideration the manner of use of the Patent and specific circumstances pertaining to the patentee, such as the manner in which the entire of the Group, including the patentee, conducted its business, but does not provide general criteria regarding the application of Article 102, paragraph 2 of the Patent Act. It is generally considered and affirmed in some court cases that in order for Article 102, paragraph 2 of the Patent Act to be applied, the patentee itself needs to work the patented invention in some way (including the handling of products which compete with the infringer’s products). Therefore, it should be said that the IP High Court’s judgment cannot be generalized but exceptionally affirmed the application of Article 102, paragraph 2 of the Patent Act to the calculation of the damages suffered by the patentee which did not work the Patent in any way.
In recent years, there are many cases in which patents arising within a company belonging to a certain company group are assigned to a specific company belonging to the same group for the purpose of collective management of patents. However, as mentioned above and unlike the IP High Court’s judgment in this case, if the company managing the patent itself does not work the patent in any way, it may not necessarily be able to claim the amount of damages calculated based on Article 102, paragraph 2 of the Patent Act against the infringer.
Considering this, in order to ensure to claim damages calculated under Article 102, paragraph 2 of the Patent Act, rather than relying on the finding in the IP High Court in this case, it would be necessary to consider jointly owning the patent with a company which works the patent in some way (including the handling of products which compete with the infringer’s products) or granting an exclusive license (registered as "senyo-jisshi-ken” under Article 77 of the Patent Act or non-registered) to such company and then having also such company claim damages. Because damages calculated under Article 102, paragraph 2 of the Patent Act is generally larger than damages based on reasonable license fees, this will allow the patentee to recover more damages.
Written by: Mr. Masahito Imai (Attorney at Law, Patent Attorney)