Draft Reply - 1 for APAA Moot Case (October 15, 2004)

Draft Reply - 1 for APAA Moot Case (October 15, 2004)

The Tokyo District Court Judge Toshiaki Iimura

Mr. Kwong, thank you very much for introducing an interesting moot case for us.

My name is Iimura, a judge of the intellectual property division at the Tokyo District Court.

Let us take a closer look at the case before us, which has been handed out to all of us here. The premise of this case is that the plaintiff has filed suit in Japan. And so, I would like to make some comments on this case.

Before we go in to detail, the plaintiff, Hurrimone is likely to claim for injunctive relief and for compensation of damages based on breach of contract, the Patent Law, the Trademark Law, the Unfair Competition Prevention Law.

1. Jurisdiction

First of all, to talk about the jurisdiction, the amended Civil Procedure Law, which has just come into effect this April, has provisions that only allow claimants to file for a lawsuit concerning patents to the Tokyo district Court or to the Osaka district court. In contrast, all of the 50 district courts throughout Japan have jurisdiction over actions concerning the Unfair Competition Prevention Law and the Trademark Law. Although, at the same time, a claimant may file suit for such cases to either the Tokyo District Court or the Osaka District Court. The case before us, a patent infringement case must be brought to the Tokyo District Court or to the Osaka District Court.

2. Type of lawsuit

There are two different types of lawsuits, formal lawsuit and provisional or preliminary injunction. The provisional injunction is to seek immediate suspension of manufacturing and selling the alternative shaver (Queenie) in the situation that Hurrimone is suffering a serious damage by the manufacturing/selling of the alternative shaver (Queenie) by Whaghton and the damage would not be recovered by an ex-post compensation. It, however, should be noted that, in the provisional injunction, you can not seek the damage compensation although the immediate suspension of the infringement activity can be required.

As for the provisional injunction, the Tokyo District Court issued a decision on September 20, 1999 in which the court ordered to stop to sell a personal computer which had very similar appearance to “i-Mac” of the Apple Computer only in 20 days after t the filing of the motion.

Please also note that it is possible to file an provisional injunction and a formal lawsuit concurrently.

In the situation of the mock case, the royalty paid to Hurrimone has been sharply decreasing after July 1, 2000 which can be considered as a good ground for emergency to seek the provisional injunction. Therefore, I think that Hurrimone is entitled to file the provisional injunction based on the patent law and unfair competition law as well the lawsuit seeking injunction and damage compensation based on the patent law, trademark law and unfair competition law.

3. Claim based on the contract

Although Whagton is a licensee of Hurrimone, Whagton fails to correctly inform the quantity of the manufactured patented product to Hurrimone. This is a breach of Whagton to the License Agreement.

Therefore, Hurrimone is entitled to terminate the License Agreement on the ground of default and to claim injunction and compensation for damage by the patent infringement.

Or, without terminating the Agreement, Hurrimone is also entitled to require Whaghton to pay license fee which Whaghton was originally obliged to pay.

In case that the Agreement contains such provision that Whaghton shall not use know-how or technical secrecy disclosed by Hurrimone for any purpose other than the agreement and Whaghton’s alternative shaver includes such an information, it can be considered that Hurrimone is entitled to claim compensation for damage based on the breach against such a provision.

4. Patent infringement claims

- Literal infringement

Suppose that Hurrimone claims for  injunctive relief, prohibiting Whagton to manufacture and distribute shavers, familiar to the public in the name “Queenie” and  for compensation of damages based on the Patent Law.

The first step for the court is to decide whether or not the shavers manufactured by Whaghton (Queenie) fall within the technical scope of the literal meaning of one or more claims in the Japanese patent at issue.

The court will decide whether or not the apparatus at issue “had been” or “is” literally infringing the claims by; first of all construing the claim itself, second, referring to the specifications and drawings, and third, referring to the prosecution history and publicly known technology.

We must note that an infringement suit is based on an adversary system, or in other words accusatorial system, and therefore, the court cannot make a decision based on matters that neither of the parties hasclaimed. The same rule applies in claim construction.

The court will primarily construe a claim of a patent by taking the usage of a word within the detailed explanation in the specification into consideration, and secondarily, when there is not an appropriate definition to a certain word; the court will take other evidence beside the specification itself into account. The court will never seek for evidence on its own.

Therefore, needless to say, arguments and evidence are of utmost importance.

- Infringement on the doctrine of equivalents

A patent owner may not only argue that an apparatus falls within the literal meaning of a claim but also argue that it is an infringing equivalent. After the Supreme Court affirmed the doctrine of equivalents in the “Ballspline Case” on February 24, 1998, and ever since, such arguments have frequently been made.

There are five (5) requirements that must be met for the application of the doctrine of equivalents:

Let me simply go over the requirements that have been stated in the Supreme Court decision.

(Number one) The difference between the composition in the claims and the suspected product remain insubstantial in the light of the patented invention at issue.

 (Number two) The same purpose or objective of the patented composition may be achieved even when a part of it is replaced by another composition, which is that of the suspected product.

 (Number three) The replacement is easily made.

 (Number four) The technical contents of the suspected product are not a collection of already known technology.

 (Number five) The applicant is not considered to have knowingly excluded the technology used in the suspected product.

Therefore, even when the structural requirement of the shaver manufactured by Whaghton (Queenie) is more or less different, it will be judged as an infringing equivalent when the five (5) requirements are met.

- Concerning protest of invalid patent

When a product is found to infringe a patent, the Defendant may argue against it by claiming that the patent at issue is invalid, even in a patent infringement suit. As I have already explained previously, if the invalidity of the patent in question is obvious, the court must reject the claim of the Plaintiff.

In this moot case, the fact is that Hurrimone sent instructions, drawings and samples of the invented shavers to 3PCO in March 1995. Therefore, Whagton may argue that the invention of this case lost its novelty, and that obviousness of the invalidity gives good reason to argue that the Plaintiff’s claim is an abuse of rights. In case of a suit, even if the court decides that a Plaintiff’s claim is an abuse of rights, such decision binds only the concerned parties and the right itself remains valid.

In our case, since a written agreement does not exist, the problem is if there was an implied confidentiality agreement between 3PCO and Hurrimone when Hurrimone provided manuals, drawings and samples to 3PCO. The existence of an implicit contract would be decided based basically on arguments and documentary evidence, and in some cases examination of witnesses are necessary.

If the court finds that there was an implicit agreement between Hurrimone and 3CPO, the protest of the invalidity of the patent will not have reason. On the contrary, if the court finds that the implied consent does not exist, the patent right of this case had had already lost its novelty at the point when the Hurrimone applied for the registration and Hurrimone’s claim would be an abuse of rights.

The decision of the Supreme Court will be legislatively changed in the amended law effective from next April. It will remove the “obviousness” requirement from its decision stating “if there exists an obvious reason of invalidity”, which provides the court a broader authority to decide the invalidity of a patent in a more positive attitude. From this aspect, the necessity for both parties to research the invalidity of a patent before filing suit has become higher as ever before.

5. concerning a claim based on the Trademark Law

The third possible claim is a claim based on the Trademark Law.

Since Whaghton sells its shavers under the mark “Queenie”, Hurrimone may possibly bring a claim demanding compensation of damages against Whaghton based on the infringement of the trademark right. As to the infringement issue, the similarity between Hurrimone’s “Queenplug” mark and Whaghton’s “Queenie” mark has to be discussed. The elements that need consideration in deciding whether or not the trademark used in the defendants products are similar to that of the plaintiff are “external appearance”, “naming” and “concept”. When the marks are similar under these elements, the marks are considered to be similar.

Now in this case, a claim of injunction based on the trademark right is not available, because Whaghton changed the mark of its shavers from “Queenie” to “Bonnie”.

6. Claim based on the Unfair Competition Law

Japan has the Unfair Competition Law enacted for the purpose of securing fair competition among business entities. If there is an act of unfair competition, any person who suffers detriment on business is entitled to require a person, who committed the act of unfair competition, injunction of such act or compensation for damage.

If a shape or mark of a product of a plaintiff is widely recognized or well known among consumers and if a defendant uses the same or similar product shape or mark, such an act constitutes unfair competition.

Further, if a plaintiff manufactures and sells a product and even if the product shape or its mark has not become well known, the plaintiff is entitled to prevent an act of imitation by a third party for three (3) years after the plaintiff started the business.

If these conditions are met in this mock case, Hurrimone is entitled to seek a relief against Whaghton based on the Unfair Competition Law.

7. Concerning a claim of compensation for damage

When an infringement of patent rights exists, the Plaintiff is entitled to compensation of his lost profit. This damage is the amount of money that would have been obtained had no infringement been committed.

Since it may be difficult for the Plaintiff to prove the amount of lost profit, clauses which lessen the burden of proof of the plaintiff are stipulated in the Patent Law.

One clause presumes that the amount of damage is equal to that of the amount of profit earned by the Defendant by selling patent-infringing products.

Another clause presumes that the amount of damage is equal to that of the amount, which is calculated by multiplying the sales volume of patent-infringing products and the amount of profit per patent-reducing product the Plaintiff would have been able to earn.

The third clause enables Plaintiff to demand the Defendant the amount equivalent to the license fee of the Plaintiff’s patent.

With these clauses, the Plaintiff’s burden of proof concerning damages is substantially reduced.

In Japanese law, there is no clause that provides triple damage or punitive damage. Japanese law only assures the compensation of damage the plaintiff actually suffered, which covers both “actual or real damage” and “the damage assumed to be equal to the lost profit expected in the business in the future”.

8. Conclusion

Last of all, I would like to add that my explanation is based on the premise that the Defendant responded to the suit that is brought to a court in Japan.

Thank you very much for your attention.

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