1. January 28, 2004 1 AIPLA Conference January 2004 New Defensive Tools For Japanese Patent Litigation Yoshikazu Iwase yoshikazu.iwase@andersonmori.com Anderson Mori, Tokyo Japan (Currently Training at Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.)

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4. 4 Traditional Defensive Tools for Japanese Patent Litigation Non-Infringement as Denial of Cause of Action Non-Infringement as Denial of Cause of Action Invalidity of Patent as Defense Invalidity of Patent as Defense Prior Use as Defense Prior Use as Defense Declaratory Judgment Action for Non- Infringement Declaratory Judgment Action for Non- Infringement Counterclaim for Defamation Counterclaim for Defamation Counterclaim for Groundless Suit Counterclaim for Groundless Suit Invalidity Action Before the JPO Invalidity Action Before the JPO Opposition – abolished as of January 1, 2004 Opposition – abolished as of January 1, 2004

5. January 28, 2004 5 New Defensive Tools for Japanese Patent Litigation 1. Declaratory Judgment Action for Non- Infringement Based on Invalidity of Patent 2. [Counter] Claim for Injunction Based on Antitrust Violation 3. Failure to Disclose Prior-Art Information as Abuse of Rights

6. January 28, 2004 6 Declaratory Judgment Action for Non-Infringement Based on Invalidity of Patent

7. January 28, 2004 7 Fujitsu v. TI Case If a court finds a clear reason for invalidation of a patent, a claim for injunction, damages, or other claims based on such patent are not allowed as abuse of rights. If a court finds a clear reason for invalidation of a patent, a claim for injunction, damages, or other claims based on such patent are not allowed as abuse of rights. Fujitsu v. TI, the Supreme Court (April 11, 2000) The JPO still retains the ultimate power to decide the validity of patents. The JPO still retains the ultimate power to decide the validity of patents. Courts cannot invalidate patents. Courts cannot invalidate patents.

8. January 28, 2004 8 Post Fujitsu v. TI A few lower court cases have dismissed patentee ’ s claims for injunction or damages due to invalidity of the patent without adjudicating the issue of infringement. A few lower court cases have dismissed patentee ’ s claims for injunction or damages due to invalidity of the patent without adjudicating the issue of infringement. E.g., The Tokyo District Court (May 30, 2002)

9. January 28, 2004 9 Strengths of the DJ Action Compare to Invalidity Action Before the JPO This DJ Action might be faster than invalidity action before the JPO. (The JPO ’ s average deliberation period is 15 months.) This DJ Action might be faster than invalidity action before the JPO. (The JPO ’ s average deliberation period is 15 months.) Especially, if a potential infringer admits the infringement of its product, the process before the district court will probably be faster. Especially, if a potential infringer admits the infringement of its product, the process before the district court will probably be faster. A potential infringer can force the patentee to hire an attorney to attend at least a few hearings at the Tokyo or Osaka District Court. A potential infringer can force the patentee to hire an attorney to attend at least a few hearings at the Tokyo or Osaka District Court.

10. January 28, 2004 10 Proposed Draft Complaint for Filing with Japanese Courts Plaintiff is planning to make and sell a product. Plaintiff is planning to make and sell a product. This product falls under the technical scope of a Defendant ’ s patent (admission of infringement). This product falls under the technical scope of a Defendant ’ s patent (admission of infringement). However, the Defendant ’ s patent is clearly invalid. However, the Defendant ’ s patent is clearly invalid. Therefore, a claim for injunction, damages, or other claims based on such patent are not allowed as abuse of rights. Therefore, a claim for injunction, damages, or other claims based on such patent are not allowed as abuse of rights. For the foregoing reasons, Plaintiff requests that the Court declare that Defendant ’ s claims do not exist. For the foregoing reasons, Plaintiff requests that the Court declare that Defendant ’ s claims do not exist.

11. January 28, 2004 11 Weaknesses If the potential infringer does not admit infringement, the judge will probably examine the issue of infringement first. If the potential infringer does not admit infringement, the judge will probably examine the issue of infringement first. A request for interlocutory decision – probably denied. A request for interlocutory decision – probably denied. If the potential infringer does admit infringement and loses the case, it will have to give up its product sooner than if it had not filed this DJ action. If the potential infringer does admit infringement and loses the case, it will have to give up its product sooner than if it had not filed this DJ action. There may be an adverse inference even to its future designing-around product. There may be an adverse inference even to its future designing-around product.

12. January 28, 2004 12 On-Going Discussion on the Standard for Deciding Validity of Patents at the Courts A proposal to loosen the requirement for dismissing claims due to invalidity of patents at the courts is under discussion: A proposal to loosen the requirement for dismissing claims due to invalidity of patents at the courts is under discussion: The courts can dismiss patentee ’ s claim or invalidate a patent, where there is simply a reason for invalidation – need not be “ clear. ” The courts can dismiss patentee ’ s claim or invalidate a patent, where there is simply a reason for invalidation – need not be “ clear. ” Discussed on December 15, 2003 at the Consultation Group on Intellectual Property Litigation of the Office for Promotion of the Justice System Reform

13. January 28, 2004 13 [Counter] Claim for Injunction Based on Antitrust Violation

14. January 28, 2004 14 The Amendment to the Antimonopoly Act in 2000 Private parties became able to file a suit seeking an injunction of certain kinds of antitrust activities in 2000. Private parties became able to file a suit seeking an injunction of certain kinds of antitrust activities in 2000.

15. January 28, 2004 15 The Amendment to the Antimonopoly Act in 2000 (Cont ’ d) Sec.24 [Injunction rights] of the Antimonopoly Act Sec.24 [Injunction rights] of the Antimonopoly Act “ A person, whose interests are infringed or likely to be infringed by act in violation of Section 8(1)(v) or Section 19; “ A person, whose interests are infringed or likely to be infringed by act in violation of Section 8(1)(v) or Section 19; and thereby suffering or likely to suffer serious damages; and thereby suffering or likely to suffer serious damages; is entitled to demand the suspension or prevention of such infringements from an entrepreneur or a trade association who infringes or is likely to infringe such interests. ” is entitled to demand the suspension or prevention of such infringements from an entrepreneur or a trade association who infringes or is likely to infringe such interests. ”

16. January 28, 2004 16 Enforcement against Antitrust Violation (Excerpted from Tadashi Shiraishi, “ Introduction to Antitrust Law of Japan, ” page 30, with some omission) Order to eliminate violating act Order to pay a Surcharge Civil suit Criminal penalty DamagesInjunction Private Monopolization (Section 3, the former part) OKNoOKNoOK Unreasonable restraint of trade (Section 3, the latter part, “ Cartel ” ) OKOKOKNoOK Unfair Trade Practice (Section 19) OKNoOK OK (Section 24) No

17. January 28, 2004 17 “ Unfair Trade Practices ” Section 2, Paragraph (9) of the Antimonopoly Act Section 2, Paragraph (9) of the Antimonopoly Act “ Unfair Trade Practices ” means any act … which tends to impede fair competition and which is designated by the Fair Trade Commission. “ Unfair Trade Practices ” means any act … which tends to impede fair competition and which is designated by the Fair Trade Commission. Designation of Unfair Trade Practices (June 18, 1982) Designation of Unfair Trade Practices (June 18, 1982) 10. Tie-in Arrangement: Unjustly causing the other party to purchase a commodity or service from oneself or from an entrepreneur designated by oneself by tying it to the supply of another commodity or service, or otherwise coercing the party to deal with oneself or with an entrepreneur designated by oneself. 10. Tie-in Arrangement: Unjustly causing the other party to purchase a commodity or service from oneself or from an entrepreneur designated by oneself by tying it to the supply of another commodity or service, or otherwise coercing the party to deal with oneself or with an entrepreneur designated by oneself. 13. Dealing on Restrictive Terms: Other than any act coming under the preceding two paragraphs, dealing with the other party on conditions that unjustly restrict any transaction between the party and his other transacting party or other business activities of the party. 13. Dealing on Restrictive Terms: Other than any act coming under the preceding two paragraphs, dealing with the other party on conditions that unjustly restrict any transaction between the party and his other transacting party or other business activities of the party.

18. January 28, 2004 18 Outcome … No Injunction granted as of the end of 2002. No Injunction granted as of the end of 2002. No case involving patent infringement as of the end of 2002. No case involving patent infringement as of the end of 2002. Cf. The number of non-patent cases as of the end of 2002: Cf. The number of non-patent cases as of the end of 2002: 3 dismissal decisions; 3 dismissal decisions; 1 settlement; and 1 settlement; and 14 pending cases. 14 pending cases.

19. January 28, 2004 19 Prospective Situations Where Defendant Can Succeed in This [Counter] Claim Plaintiff granted in the past or grants a restrictive license to you. Plaintiff granted in the past or grants a restrictive license to you. Plaintiff, forming a patent pool, refused to grant a license to you. Plaintiff, forming a patent pool, refused to grant a license to you. You should check the Guidelines for License Agreement published at: You should check the Guidelines for License Agreement published at: http://www2.jftc.go.jp/e-page/guideli/patent99.htm http://www2.jftc.go.jp/e-page/guideli/patent99.htm

20. January 28, 2004 20 Strategic Analysis Compare to File a Request for Investigation with the JFTC Strengths: Strengths: Need not wait for the JFTC ’ s action. Need not wait for the JFTC ’ s action. Defendant (a potential infringer) can give Plaintiff (a patentee) a visible pressure. Defendant (a potential infringer) can give Plaintiff (a patentee) a visible pressure. Defendant may force Plaintiff to hire antitrust attorneys. Defendant may force Plaintiff to hire antitrust attorneys. Defendant may choose preferable forum to file a [counter] claim. Defendant may choose preferable forum to file a [counter] claim. Weaknesses: Weaknesses: Must prove “ serious injury. ” Must prove “ serious injury. ” No case granting injunction so far. No case granting injunction so far.

21. January 28, 2004 21 Failure to Disclose Prior-Art Information as Abuse of Rights

22. January 28, 2004 22 Introduction of Disclosure Requirement Effective as of January 1, 2002 Patent Applicant ’ s Obligation to Disclose Information on Prior Art Patent Applicant ’ s Obligation to Disclose Information on Prior Art Section 36, Paragraph 4 of the Patent Law: Section 36, Paragraph 4 of the Patent Law: “ The detailed description of the invention … shall comply with the following “ The detailed description of the invention … shall comply with the following (ii) Where a person desiring a patent knows, at the time of filing a patent application, any inventions publicly known through documents … which are related to the invention, the detailed description of the invention shall contain the source of information on the invention publicly known through a document such as the title of a publication in which the invention publicly known through a document is described. ” (ii) Where a person desiring a patent knows, at the time of filing a patent application, any inventions publicly known through documents … which are related to the invention, the detailed description of the invention shall contain the source of information on the invention publicly known through a document such as the title of a publication in which the invention publicly known through a document is described. ”

23. January 28, 2004 23 Introduction of Disclosure Requirement Effective as of January 1, 2002 (Cont ’ d) Violation may lead to rejection Violation may lead to rejection Section 49(v) of the Patent Law However, once a patent is issued, it does not constitute a reason for invalidation. However, once a patent is issued, it does not constitute a reason for invalidation.

24. January 28, 2004 24 Introduction of Disclosure Requirement Effective as of January 1, 2002 (Cont ’ d) Legislatures ’ explanation: Legislatures ’ explanation: “… This system is primarily designed to achieve a prompt examination process. Failure of a patent application to satisfy the requirement does not mean that the invention described in the application is substantially defective, and even if the invention is patented as it is, it would not directly harm the benefit of any third party seriously. ” “… This system is primarily designed to achieve a prompt examination process. Failure of a patent application to satisfy the requirement does not mean that the invention described in the application is substantially defective, and even if the invention is patented as it is, it would not directly harm the benefit of any third party seriously. ”

25. January 28, 2004 25 Can the Violation of Section 36(4)(ii) Be a Ground for Abuse of Rights? Abuse of Rights (Article 1, Paragraph 3 of the Civil Code) Abuse of Rights (Article 1, Paragraph 3 of the Civil Code) Determined under overall consideration of parties ’ intent and objective circumstances. Patentee ’ s malicious intent helps courts find the plaintiff ’ s claim abuse of rights. Determined under overall consideration of parties ’ intent and objective circumstances. Patentee ’ s malicious intent helps courts find the plaintiff ’ s claim abuse of rights. Cf. Inequitable Conduct in the U.S. Cf. Inequitable Conduct in the U.S. Materiality plus Intent to Deceive the PTO Materiality plus Intent to Deceive the PTO “The more material the omission or the misrepresentation, the lower the level of intent required to establish inequitable conduct, and vice versa.” “The more material the omission or the misrepresentation, the lower the level of intent required to establish inequitable conduct, and vice versa.” Critikon, 120 F.3d at 1256 (Fed. Cir. 1997)

26. January 28, 2004 26 Can the Violation of Section 36(4)(ii) Be a Ground for Abuse of Rights? (Cont ’ d) Example of Defendant ’ s Arguments: Example of Defendant ’ s Arguments: There is a clear reason for invalidation of the patent due to lack of inventive step under Section 29, Paragraph 2, and thus patentee ’ s claim is not allowed as abuse of rights. There is a clear reason for invalidation of the patent due to lack of inventive step under Section 29, Paragraph 2, and thus patentee ’ s claim is not allowed as abuse of rights. Even if the reason for invalidation of the patent is not clear enough, taking into account of the patentee ’ s intentional concealment of the primary prior art in violation of Section 36, Paragraph 4, item (ii), patentee ’ s claim is not allowed as abuse of rights. Even if the reason for invalidation of the patent is not clear enough, taking into account of the patentee ’ s intentional concealment of the primary prior art in violation of Section 36, Paragraph 4, item (ii), patentee ’ s claim is not allowed as abuse of rights.

27. January 28, 2004 27 Can the Violation of Section 36(4)(ii) Be a Ground for Abuse of Rights? (Cont ’ d) Objective Circumstances (Materiality, e.g. Similarity of prior art to the patented invention) StrongMediocre [Abuse of Rights] Malicious Intent (Intent to Deceive) [Abuse of Rights] Malicious Intent (Intent to Deceive) There is a clear reason for invalidation. Not Clear Enough Not Clear Enough Supplemented by Intent?

28. January 28, 2004 28 A Useful District Court Case Facts: A utility model holder made its invention publicly known by distributing a product specification disclosing the invention before filing an application. Facts: A utility model holder made its invention publicly known by distributing a product specification disclosing the invention before filing an application. Decision: Decision: There is a reason for invalidation regarding the utility model. There is a reason for invalidation regarding the utility model. This reason was caused by the act of Plaintiff itself, and Plaintiff knew this fact at the time of filing the application. This reason was caused by the act of Plaintiff itself, and Plaintiff knew this fact at the time of filing the application. Therefore, a claim for injunction and damages is not allowed as abuse of rights. Therefore, a claim for injunction and damages is not allowed as abuse of rights. The Tokyo District Court (February 29, 2000)

29. January 28, 2004 29 AIPLA Conference January 2004 New Defensive Tools For Japanese Patent Litigation Yoshikazu Iwase yoshikazu.iwase@andersonmori.com Anderson Mori, Tokyo Japan (Currently Training at Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.)