1. Patent Exhaustion in Japan JPAA International Activities Center Kaoru Kuroda AIPLA Mid-Winter Institute IP Practice in Japan Committee Pre-Meeting Seminar

2. BBS Supreme Court Case (1997) adopted the domestic exhaustion in dicta. Once a patentee assigned a patented product in Japan, the patent right will not be effective against activities such as using, assigning or leasing this patented product because the patent right for this product is exhausted by achieving its purpose. 2 Exhaustion Cases in Japan

3. (1) Protection of security of transaction: When the patented product is placed on the market, the product is assigned to the assignee on the premise that the assignee will obtain the rights to use and reassign the product. Otherwise, free circulation of products in a market would be obstructed ; (2) Preventing double recovery: There is no need for the patentee to receive a double recovery during the course of distribution of the product. 3 Exhaustion Cases in Japan BBS Supreme Court Case (1997) stated following rationales for domestic exhaustion.

4. Exhaustion Cases in Japan 4 Manufacturing Approach Exhaustion Approach Disposable Camera (1), (2) (Tokyo, Dist. Ct., 2000) Acyclovir (Tokyo High Ct., 2001) Acyclovir (Tokyo Dist. Ct., 2001) Ink Cartridge (Tokyo Dist. Ct., 2004) Ink Cartridge (IP High Ct., 2006) Ink Cartridge (Sup. Ct., 2007) BBS case (Sup. Ct., 1997) Products are processed or replaced by third party

5. Disposable Camera (1) & (2) (Tokyo Dist. Ct., 2000) 5 Plaintiff has utility model rights or patent rights relating to a disposable camera. Defendant was accused of refilling the used plastic housings of disposable cameras with new film and batteries and selling the refilled product. Fact (Konica case and Fujifilm case) Disposable Camera = only pre-equipped film is supposed to be used.

6. 6 By judging from the nature of the product, the character of the transaction, and utilization form of the product in accordance with social convention, the right holder may not necessarily grant the assignee unqualified rights to reassign the assigned product free from being accused. In that case, the right holder may exercise his right if the assignees activity exceeds the qualified scope of activity. Holding (Exhaustion approach) Disposable Camera –Konica (Tokyo Dist. Ct., 2000) Not exhausted (=infringe) because the accused activity was beyond the scope of activity foreseen by the right holder as of the assignment.

7. 7 A patent right would not be exhausted when (1)A third party reuse or reassign after the function of the patented product has been depleted; or (2)A third party replaces an element of a patented product that corresponds to the essential part of the patented invention, and thus the resulting product is not equivalent to the original patented product. Holding (Exhaustion approach) Disposable Camera –Fujifilm (Tokyo Dist. Ct., 2000) Not exhausted (=infringe) because the function of the disposable camera at issue was depleted when it was used up.

8. Ac clovir case (Tokyo Dist. Ct., 2001, Tokyo High Ct., 2001) 8 The defendants bought a pharmaceutical compound containing the patented drug acyclovir as an active ingredient. They extracted and purified the acyclovir, then produced and sold a new pharmaceutical compound containing the resulting acyclovir as an active ingredient. Fact

9. 9 Exhaustion is denied when: (1)a functionally depleted patented product is reused; (for the same purpose as the original use) or (2)an element of a patented product corresponding to the substantial part of the patented invention is replaced. The situation in this case did not fall into either category. Holding (Exhaustion approach) same as Fujifilm case Exhausted (=not infringe) because the fact in this case did not fall into either category. Acyclovir (Tokyo Dist. Ct., 2001)

10. 10 A patent right may be exhausted with respect to the assignees activities, such as using and assigning, but may not be exhausted with respect to the assignees manufacturing activity. Therefore, if the assignees activity is evaluated as manufacturing a new product, it constitutes infringement of the patent right. Holding (Manufacturing approach) Exhausted (not infringe) because the defendants activity did not yield any chemical reaction with regard to the acyclovir, nor did this activity produce any new acyclovir by some chemical reaction (not manufacturing). Acyclovir (Tokyo High Ct., 2001)

11. Ink Cartridge (Tokyo Dist. Ct., 2004, IP High Ct., 2006, Sup. Ct., 2007) 11 The plaintiff, an owner of a patent right relating to an ink tank for an inkjet printer, produced an ink cartridge as a patented product and sold it. The defendants accused infringement, in relevant part, was washing the used ink tanks and refilling it with ink, and selling the products thus obtained. Fact

12. 12 A patent right may not be exhausted with respect to the assignees manufacturing activity. Therefore, if the assignees activity is evaluated as manufacturing a new product, it constitutes infringement of the patent right. Exhausted (=not infringe) because refilling the used ink tank with ink does not constitute manufacturing a new ink tank. Ink Cartridge (Tokyo Dist. Ct., 2004) Holding (Manufacturing approach) same as Acyclovir case

13. 13 A patent right is not exhausted in the following situations: (1) where the patented product is reused or recycled after its function has been depleted due to the expiration of the original life span of the product (1 st Category), or (2)where a third party processes or replaces the whole or a part of the patented product which corresponds to the essential part of the patented invention (2 nd Category). Holding (Exhaustion approach) Not Exhausted (=infringe) because refilling the used ink tank constituted processing or replacing the essential part of the patented products (2 nd Category). Ink Cartridge (IP High Ct., 2006)

14. 14 If a patented product transferred by the patentee in Japan is processed or partially replaced, and by those actions it is recognized that a non-identical patented product is freshly manufactured, the patentee should have the right to enforce the patent right with regard to the freshly manufactured product.. Holding (Manufacturing approach) Not Exhausted (=infringe) because when ink is used up, the essential function of the ink tank is blocked, however, when Defendant washed the used tank and refilled it with ink, the essential function was revived, which constitutes manufacturing a non-identical patented product. Ink Cartridge (Sup. Ct., 2009)

15. Thank you! Abe, Ikubo & Katayama Kaoru Kuroda kaoru.kuroda@aiklaw.co.jp