How will a Japanese patent infringement pay off in damages if the infringement is recognized by the courts? A new decision by the Intellectual Property (IP) High Court of Japan on February 28, 2020 gives some idea of the formula for such a calculation.
Nagoya-based beauty products company MTG Co., Ltd. sued Osaka-based company Five Stars Inc. over alleged infringement of patents (Nos. 5356625 and 5847904) for facial rollers. The lower court, Osaka District, decided in favor of MTG and ordered Five Starts to pay about US $1 million. However, a Grand Panel for the IP High Court of Japan then considered the case when it was appealed and, while agreeing that there was patent infringement on the part of Five Stars, raised the damages award to about $4 million.
https://www.ip.courts.go.jp/hanrei/g_panel/index.html as of March 3, 2020
The courts based their calculations on the Japan Patent Act’s broad stipulation but with different assumptions. The Patent Act states that when precise damages are difficult to determine, the damages awarded should estimated as the number of infringing products sold multiplied by the product price of the infringed product. The Osaka District Court estimated the proportion of value the infringed patents gave to the product as a factor in the amount of lost profits, ending up with the lower figure.
However, the IP High Court counted the full price of the infringed products (close to US $200 each) and multiplied it by the number of sold infringing products to reach the much larger damages award. It asserted that even if the patented portion forms a fraction of the overall product, the entire amount theoretically lost by the patent owner should be considered. It further commented that the District Court’s procedure had no basis or regulation calling for a proportioned calculation for damages.
If the IP High Court’s decision sticks as precedent, gives the owners of patents in Japan hopes to receive fuller damages reparations if they win a patent infringement case.
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Contact: Taro Yaguchi
Sources
Intellectual Property High Court of Japan. “大合議事件 [Grand panel cases].” https://www.ip.courts.go.jp/hanrei/g_panel/index.html Accessed March 3, 2020.
Nikkei Shimbun. “特許侵害の損害、逸失利益で推定 知財高裁が判断 [Patent infringement damages calculated based on lost profits; IP high court decides].” https://www.nikkei.com/article/DGXMZO56196100Y0A220C2CR8000/ February 28, 2020. Accessed March 3, 2020.
