2022 <Special News Flash>｜News Letter

Grand Panel shows that regarding calculation of an amount of damages in a patent infringement lawsuit, where the presumption provided for in damages corresponding to the amount of infringer's profits (Patent Act, Article 102(2)) is partially rebutted, damages corresponding to the amount of the reasonable royalty (Patent Act, Article 102(3)) can be applied to the portion of the rebuttal of presumption.

Fujiiryoki Inc. v. FAMILY INADA Inc., Case No. 2020 (Ne). 10024 (Decision rendered on October 20, 2022)

The Grand Panel¹⁾ of the Intellectual Property High Court (IPHC) shows that regarding the determination of the amount of damages in a patent infringement lawsuit, where the presumption provided for in the Patent Act, Article 102(2) is partially rebutted, when it is recognized that the patentee could have provided a license, the Patent Act, Article 102(3) shall be applied to the portion of the rebuttal of presumption.
Also, the Grand Panel shows that of the grounds for rebuttal of presumption provided for in the Patent Act, Article 102(2), application of Patent Act, Article 102(3) is denied for the portion of rebuttal of presumption regarding grounds for rebuttal which are based on a patented invention being implemented only on a portion of an infringing product, but application of Patent Act, Article 102(3) is acknowledged for the portion of rebuttal of presumption regarding grounds for rebuttal which are based on nonidentity of markets.

The Patentee, Fujiiryoki obtained three patents A to C relating to a chair-type treatment device and a chair-type massage machine in 2010, 2011 and 2012, respectively.

On the basis of the 3 patents, Fujiiryoki filed a patent infringement suit against FAMILY INADA with Osaka District Court in 2018. The Osaka District Court found that the defendant’s products 1 to 12 did not belong to the technical scope of the inventions of the three patents and dismissed every claim of the appellant without deciding all other issues.

Against the Osaka District's decision, the appellant filed an appeal with the IPHC in 2019, based on the patents A and C regarding the defendant's products 1 to 8.

The Grand Panel of the IPHC, in summary, decided as follows regarding damages caused by defendant’s product 1.

A (A) The Patent Act, Article 102(2) provides that, where a patentee claims against an infringer compensation for damage sustained as a result of the intentional or negligent infringement of the patent right, and the infringer earned profits from the act of infringement, the amount of profits earned by the infringer shall be presumed to be the amount of damages by the patentee.
The effect of the provision is that, since a patentee will face difficulties trying to prove the amount of damages and the like, and consequently an adverse event of failing to recover an adequate amount of damages may occur, it is reasonable to alleviate the burden of proof by presuming that the amount of profits earned by the infringer, if any, is the amount of damages sustained by the patentee. Therefore, where there are circumstances to presume that a patentee could have earned profits if there had been no act of patent infringement by the infringer, it should be considered that the patentee sustained damage by the act of patent infringement, and it should be interpreted that the Patent Act, Article 102(2) should be applied, then (see Judgment by the Intellectual Property High Court, Grand Panel, February 1, 2013, and Judgment by the Intellectual Property High Court, Grand Panel, June 7, 2019). Further, in light of the effect of the provision of the Patent Act, Article 102(2), where the patentee has been exporting or selling products of the same type having common demanders with those of the infringing products, and the products of the patentee are in competitive relationship (competitive products) in which the products could have been exported or sold in the market if there had been no such act of patent infringement by the infringer, it can be appraised that sales of the products of the patentee are decreased by the act of infringement, and thus it is reasonable to consider that circumstances that the patentee could have obtained profits if there had been no act of patent infringement by the infringer are present. Moreover, in order to say that such circumstances are present, it should be considered that it is not necessarily required that the products of the patentee are implemented products of the patented invention, or that the products of the patentee produce functional effects similar to those of the patented invention.
(B) It is recognized that the appellant exported the appellant’s product 1 to common destination countries at the same time the defendant’s product 1 was exported. The appellant's product 1 is a same type of product with a common demander as the defendant’s product 1 in that it is a “chair-type massage machine provided in the armrest part with an antebrachial region medical treatment mechanism which massages the antebrachial region of a patient”. Considering that it has a common function of being able to massage the antebrachial region of a patient, it is recognized that the appellant's product 1 is a product in a competitive relationship (a competitive product), that is, the appellant's product 1 could have been exported to each of the markets of the above common destination countries if the defendant’s product 1 was not exported. Therefore, it is recognized that circumstances that the appellant could have earned profits if there had been no act of infringement of the present patent C by the appellee are present.
Therefore, regarding calculation of the amount of damages sustained by the appellant relating to export of the defendant’s product 1, the Patent Act, Article 102(2) is applied.
B The amount of profits (marginal amount of profits) that the appellee earned by exporting the defendant’s product 1 is presumed to be the amount of damages sustained by the appellant pursuant to Article 102(2) (hereafter this presumption is referred to as the “presumption of this case”).
The appellee asserts that (i) the patented invention being applied only to a portion of the defendant’s product 1, (ii) the presence of competitive products in the markets, (iii) nonidentity of the markets, (iv) business efforts (brand power, promotional advertising, etc.) of the appellee and (v) performance (features, design, etc.) of the defendant’s product 1, correspond to grounds for rebuttal of presumption in this case. However, the court recognizes that, although (i) and (iii) correspond to grounds for rebuttal, (ii), (iv) and (v) do not.
Further, to collectively consider the contents of the grounds for rebuttal of above (i) and (iii), technical significance of the invention of present patent C and the like, the contribution rate of the invention of present patent C to the formation of purchase motivation of the defendant’s product 1 is recognized to be of a specific rate, but beyond this rate, it is recognized that there is no reasonable causality between the marginal amount of profits earned from the defendant’s product 1 and the amount of damages sustained by the appellant.
Therefore, the “presumption of this case” is rebutted within the above scope, and thus the amount of damages sustained by the appellant based on the Patent Act, Article 102(2) is recognized to be an amount corresponding to the above rate of the marginal amount of profits earned from the defendant’s product 1.
C (A) The Patent Act, Article 102(3) provides that the patentee may fix the value of the damage that the patentee has personally incurred as being equivalent to the amount of money the patentee would have been entitled to receive for the working of the patented invention, and may claim compensation for this against a person that, intentionally or due to negligence, infringes the patent, and Article 102(5) (Article 102(4) before amending the Patent Act in 2019) main clause provides that the provisions of paragraph (3) do not preclude any claim to compensation for damage in excess of the amount provided for therein. Further, considering that a patent right prohibits a third party to work a patented invention in the course of trade without obtaining a license from the patentee and has an effect of being able to preclude the working thereof (see the Patent Act, Article 68), it is considered that the Patent Act, Article 102(3) provides that, regardless of whether the patentee oneself works the patented invention, or has the capacity to work the patented invention, the patentee may claim against an infringer compensation for damage as the minimum amount the patentee is entitled to receive as a license fee, and the amount of damages in this paragraph corresponds to profits entitled to receive as a minimum guarantee for the loss of opportunity of a license (opportunity of a license, hereafter the same).
On the other hand, considering that the amount of “profits” (marginal amount of profits) earned from the act of infringement by the infringer provided for in the Patent Act, Article 102(2) is calculated by deducting costs from the amount of sales obtained by multiplying the price of the infringing product by the number of sales and the like, it is considered that the amount of damages the patentee sustained presumed from the provision of this paragraph corresponds to profits lost by the reduction in sales of the licensed products or competitive products that the patentee could have sold oneself if there had been no act of infringement by the infringer.
Considering that the patentee can earn profits by implementing the patented invention oneself, or concurrently can earn profits by licensing the patented invention, it is considered that the damage of the patentee sustained by the act of infringement by the infringer can be profits lost by the reduction in sales of the licensed products or competitive products that the patentee could have sold oneself if there had been no act of infringement by the infringer, and profits that could have been earned by the loss of opportunity of a license.
As such, even where the presumption provided for in the Patent Act, Article 102(2) is partially rebutted, when it is recognized that the patentee could have provided a license, the Patent Act, Article 102(3) shall be applied to the portion of the rebuttal of presumption.
Further, it is considered that grounds for rebuttal of presumption by the Patent Act, Article 102(2), similarly to Article 102(1), include grounds for rebuttal for the reason that the number of sales and the like of the infringing products exceed the capacity of the patentee to implement sales and the like, and grounds for rebuttal for the reason that there are circumstances in which the patentee cannot make sales and the like for the reason other than the one mentioned above. Regarding the portion of rebuttal of presumption relating to the grounds for rebuttal for the above reason of exceeding the capacity, it is recognized that the patentee could have provided the license unless there are exceptional circumstances. Whereas, regarding the portion of rebuttal of presumption relating to the grounds for rebuttal for the above reason of existing circumstances of not being able to make sales and the like, it is considered that, under the facts of the circumstances, whether or not the patentee could have provided the license should be judged individually.
(B) The reasons for the grounds for rebuttal of presumption in this case are that the patented invention is implemented only on a portion of the defendant’s product 1, and nonidentity of markets.
Whereas, regarding the portion of rebuttal of presumption relating to the grounds for rebuttal for the reason of nonidentity of markets, at the time the defendant’s product 1 was exported to each destination country by the appellee, it is not recognized that the appellant exported the appellant's product 1 in the destination countries, and therefore, the portion of rebuttal of presumption is due to the fact that in each of the markets in the destination country, it cannot be recognized that the appellant's product 1 is in competitive relationship where the appellant's product 1 could have been exported if the defendant’s product 1 is not exported, and it is recognized that the appellant could have provided the license, although there are circumstances that the appellant oneself could not export the products regarding the number of export products corresponding to the portion of rebuttal of presumption.
On the other hand, regarding the portion of rebuttal of presumption relating to the grounds for rebuttal with a reason that the invention according to present patent C is implemented only on a portion of the infringing product, the “presumption of this case” is rebutted for the reason that the invention according to present patent C does not contribute to individual defendant’s product 1 throughout the entire number of export products corresponding to the portion of rebuttal of presumption, and regarding the portion in which the invention according to present patent C does not contribute, it cannot be recognized that the appellant could have provided the license.
As such, in this case, it is reasonable to admit the application of the Patent Act, Article 102(3) only to the portion of rebuttal of presumption relating to the grounds for rebuttal with a reason of nonidentity of the markets.
D The amount of damages of the appellant sustained by defendant’s product 1 is the sum of the amount of damages based on the Patent Act, Article 102(2), and the amount of damages based on Article 102(3) relating to the portion of rebuttal of the presumption of paragraph (2) with a reason of nonidentity of the markets.

¹⁾ Grand Panel: The grand panel is convened to hear cases where it is necessary to virtually unify court decisions, or cases involving important issues, which is somewhat similar to en banc in CAFC of the U.S.A. Since the founding of the IPHC in 2005, 15 cases including the above case have been heard by the Grand Panel.

K&P’s Comments The damages caused by defendant’s product 1 were decided as the sum of the amount of damages based on the Patent Act, Article 102(2), and the amount of damages based on Article 102(3) relating to the portion of rebuttal of presumption of paragraph (2). Therefore, there is a possibility that the amount of damages will increase in future cases.

(by Fuminori HAYASHI, Patent Attorney)