Patent Litigation in Germany, Japan and the United States 9781472561794, 9781849461955, 9781782253839

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Preface Patent systems in leading industrial nations like Germany, Japan and the United States have an important impact on research development and product commercialization. The elaboration and further refinement of efficient patent litigation proceedings in these jurisdictions is of utmost importance in order to guarantee powerful enforcement of patent rights. Practitioners with a multinational focus on patent disputes will have to be aware about the specific legal conditions in the various countries. The book provides a comparative overview on patent law and patent litigation proceedings in Germany/Europe, Japan and the United States. The systematic presentation of the legal systems including comprehensive references reveals differences and similarities. Munich, October 2014 Johann Pitz

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Reemers Publishing Services GmbH O:/Beck/Pitz/3d/Authors.3d from 28.11.2014 11:02:39 3B2 9.1.580; Page size: 160.00mm  240.00mm

Authors Dr Johann Pitz, attorney at law and patent litigator, Vossius and Partner, Munich Atsushi Kawada, attorney at law and patent attorney, Tokyo Jeffrey A. Schwab, patent attorney who specializes in IP litigation, licensing, ADR, and advertising law, New York

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Reemers Publishing Services GmbH O:/Beck/Pitz/3d/Abbreviations.3d from 28.11.2014 11:03:27 3B2 9.1.580; Page size: 160.00mm  240.00mm

Abbreviations AIA .............................................. AIPLA ......................................... ALJ ............................................... Art. ............................................... BGB ............................................. BGH ............................................. CAFC .......................................... CBM ............................................ cf. .................................................. CJEU ............................................ DOJ .............................................. ECJ ............................................... EP ................................................. EPC .............................................. EPO ............................................. et seq./seqq. ................................ EU ................................................ F. ................................................... F.R.D. .......................................... FDA ............................................. Fed. Cir. ...................................... ff. .................................................. FITF ............................................. FPC .............................................. FRAND ....................................... FRCP ........................................... FRE .............................................. FTC .............................................. FTI ............................................... GATT .......................................... GG ............................................... GKG ............................................ GPTO .......................................... GRUR .......................................... GRUR Int ................................... GRUR -RR ................................. GVG ............................................ id. ................................................. IIC ................................................ INPIT .......................................... InstGE ......................................... IPR ............................................... ITC ............................................... L. Ed. ........................................... LG ................................................ MPEP .......................................... N.D. Cal. ..................................... No. ............................................... NPE ............................................. OJ ................................................. PAO .............................................

American Invention Act American Intellectual Law Association (U.S.) administrative law judge Article Bu¨rgerliches Gesetzbuch (German Civil Code) Bundesgerichtshof (German Federal Supreme Court) (U.S.) Court of Appeal of the Federal Circuit (U.S.) Contested Business Methods confer (see) Court of Justice of the European Union (U.S.) Department of Justice European Court of Justice European Patent European Patent Convention European Patent Office et sequentia European Union (U.S.) Federal Reporter (U.S.) Federal Rules Decisions (U.S.) Food and Drug Administration (U.S.) Federal Circuit and the following “First Inventor To File” (German) Federal Patent Court fair, reasonable and non-discriminating (U.S.) Federal Rules of Civil Procedure (U.S.) Federal Rules of Evidence (U.S.) Federal Trade Commission “First To Invent” General Agreement on Tariffs and Trade Grundgesetz (German Constitution) Gerichtskostengesetz (German Court Fees Act) German Patent and Trademark Office Gewerblicher Rechtsschutz und Urheberrecht (German journal on IP and copyright law) Gewerblicher Rechtsschutz und Urheberrecht- Internationaler Teil (German journal on IP and copyright law – international) Gewerblicher Rechtsschutz und Urheberrecht- Rechtsprechungsreport (German journal on IP and copyright law- case reporter) Gerichtsverfassungsgesetz (German Judicature Act) idem (the same) International Review of Intellectual Property and Competition Law Japanese National Ventre for Industrial Property Information and Training Entscheidungen der Instanzengerichte zum Recht des geistigen Eigentums (German reporter on IP cases) (U.S.) Inter Partes Review International Trade Commission (U.S.) Supreme Court Reports, Lawyers’ Edition Landgericht (German court of first instance) (US) Manual of Patent Examining Procedures Northern District of California number non-practicing entities Official Journal Patentanwaltsordnung (German Patent Attorney Code)

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Abbreviations PatG ............................................. PGR ............................................. PGR ............................................. pp. ................................................ PTAB ........................................... PTO ............................................. RAND ......................................... RG ................................................ RVG ............................................. S. Ct. ............................................ S.D.N.Y. ...................................... SEP ............................................... SSO .............................................. Sup. Ct. ....................................... TRIPS .......................................... U.S.C. .......................................... U.S.C.A. ...................................... U.S.S.C. ....................................... UP ................................................ UPC ............................................. UPCA .......................................... v. ................................................... Vol. .............................................. ZPO ............................................. U.S. ..............................................

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Patentgesetz (German Patent Act) (US) Post Grant Review (US) pages (US) Patent Trial and Appeal Board (US) Patent and Trademark Office Reasonable And Non-Discriminatory Reformgesetz (German Reform Act) Rechtsanwaltsvergu¨tungsgesetz (German Lawyers’ Fees Act) (U.S.) Supreme Court Reporters (U.S.) District Court, Southern District of New York standard essential patent (U.S.) Standard Setting Organizations Supreme Court of the United Satets Agreement on Trade-Related Aspects of Intellectual Property Rights United States Supreme Court United States Code Annotated Supreme Court of the United Satets Unitary Patent Unified Patent Court Unified Patent Court Agreement versus Volume Zivilprozessordnung (German Code of Civil Procedure) United States Reports

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Selected Bibliography Germany Books Benkard ....................................... Busse ............................................ Fitzner/Lutz/Bodewig ............... Kraßer ......................................... Ku¨hnen ........................................ Ku¨hnen ........................................ Mellulis ........................................ Pitz ............................................... Schramm ..................................... Schulte .........................................

Patentgesetz, 10th Ed. 2006; cited: Benkard/author, PatG Patentgesetz, 7th Ed. 2013; cited: Busse/author Patentrechtskommentar, 4th Ed. 2012; cited: Fitzner/Lutz/Bodewig/author Patentrecht (Patent Law), 6th Ed. 2009 Handbuch der Patentverletzung, 6th Ed. 2013 Patent Litigation Proceedings in Germany, 6th Ed. 2013 Handbuch des Wettbewerbsprozesses, 3rd Ed. 2000 Patentverletzungsverfahren, 2nd Ed. 2010 Der Patentverletzungsprozess, 6th Ed. 2010 ¨ (German Patent Act), 9th Ed. 2014; cited: Schulte/ Patengesetz mit EPU author

Articles Brinks/Fritze ............................... Einstweilige Verfu¨gungen in Patentverletzungssachen in den United StatesA und Deutschland, GRUR Int 1987, 133 Heath ........................................... Patent Litigation in Japan and Germany: An introduction, J. Japan. L special issue No. 3 (2011), 13 Klopschinski ............................... Der Patentverletzungsprozess in Japan und Deutschland, GRUR Int. 2010, 309 Meier-Beck .................................. The interaction between infringement and invalidation decisions in German patent disputes, I. Japan. L. Special Issue No. 3 (2011), 63 Maxeiner ..................................... Der Sachversta¨ndige in Patentrechtsstreitigkeiten in den United StatesA und Deutschland, GRUR Int 1991, 85 Ohly ............................................. “Patentrolle” oder: Der patentrechtliche Unterlassungsanspruch unter Verha¨ltnisma¨ßigkeitsvorbehalt? – Aktuelle Entwicklung im United StatesPatentrecht und ihre Bedeutung fu¨r das deutsche und europa¨ische Patentsystem, GRUR Int 2008, 787 Rauh ............................................ Mittelbare Patentverletzung in Deutschland, Japan und den United States, GRUR Int 2010, 459 Rahn ............................................ Patent Infringement Proceedings in Japan and Germany: Similarities and Differences, J. Japan. L special issue No. 3 (2011), 29 Scho¨nknecht ............................... Beweisbeschaffung in den United States zur Verwendung in deutschen Verfahren, GRUR Int 2011, 1000 Japan Books Abe/Ikubo/Katayama ............... Hansen/Schu¨sslerLangeheine (eds) ........................ Hinkelmann ............................... Kawaguchi ..................................

Japanese Patent Litigation, 2nd Ed. 2012 Patent Practice in Japan and Europe, Liber Amicorum for Guntram Rahn, 2011 Gewerblicher Rechtsschutz in Japan, 2nd Ed., 2008 The Essentials of Japanese Patent Law: Cases and Practice, 1st Ed. 2006

Articles Heath ........................................... Patent Litigation in Japan and Germany: An introduction, J. Japan. L special issue No. 3 (2011), 13 Heath ........................................... Erlangung und Durchsetzung von Patentrechten in Japan, GRUR Int 1998, 555 Kimijima ..................................... Das Patentnichtigkeitsverfahren in Japan, GRUR Int 1996, 986 Klopschinski ............................... Der Patentverletzungsprozess in Japan und Deutschland, GRUR Int. 2010, 309 Rahn, ........................................... Patentstrategien japanischer Unternehmen, GRUR Int 1994, 377 Rahn, ........................................... Neuere Entwicklungen bei Patentverletzungsklagen in Japan, Mitt. 2001, 199 Rahn, ........................................... Patent Infringement Proceedings in Japan and Germany: Similarities and Differences,

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Selected Bibliography J. Japan. L special issue No. 3 (2011), 29 Rauh, ........................................... Mittelbare Patentverletzung in Deutschland, Japan und den USA, GRUR Int 2010, 459 Someno, ....................................... Grundlagen und Probleme des japanischen Patentrechts, GRUR Int 1994, 371 USA Books John R. Thomas, Martin J. Adelman & Randall J. Rader, ....................... Cases and Materials on Patent Law (St. Paul, Minn.: West 3rd Ed. 2009) John R. Thomas & Roger E. Schechter ..................... Principles of Patent Law (St. Paul, Minn.: Thomson/West 2004) Articles Bergen-Babinecz/Hinrichs/ Zum Schutzbereich von US-Patenten: Festo und eine deutsche Sicht, Jung/Kolb .................................... GRUR Int 2003, 487 Bodewig ....................................... Erscho¨pfung der gewerblichen Schutzrechte und des Urheberrechts in den USA, GRUR Int 2000, 597 Bodewig ....................................... Nichtangriffspflichten des Vera¨ußerers im US-amerikanischen Patentrecht, GRUR Int 2004, 918 Brinks/Fritze ............................... Einstweilige Verfu¨gungen in Patentverletzungssachen in den USA und Deutschland, GRUR Int 1987, 133 Calvetti/Hughes ......................... Mittelbare Verletzung und Anstiftung zur Verletzung im United StatesPatentrecht, GRUR Int 1993, 833 Calvetti/Venturino .................... Zur Gu¨ltigkeit von Patenten in den USA: Mitteilungspflichten im Patenterteilungsverfahren und im Verletzungsprozess, GRUR Int 1988, 815 The Federal Circuit Bar Association ......................... Model Patent Jury Instructions, http://www.fedcirbar.org Henry ........................................... Pretrial Discovery in USA: Exterritorialer Einfluss auf Durchsetzung und Benutzung von gewerblichen Schutzrechten, GRUR Int 1983, 82 Hufnagel ..................................... Ausweitung des Versuchsprivilegs in Europa und den USA – Verschiebung der Grenzen zwischen Patentschutz und Versuchsfreiheit bei Arzneimitteln, PharmR 2006, 209 ¨ berblick u¨ber die Vorschla¨ge Koch ............................................. Reform des Patentrechts in den USA – Ein U zur Revision und Modernisierung des Patentgesetzes, GRUR Int 1975, 103 Maxeiner ..................................... Der Sachversta¨ndige in Patentrechtsstreitigkeiten in den USA und Deutschland, GRUR Int 1991, 85 Mehler ......................................... Das Prosecution History Estoppel im US-Patentrecht, GRUR Int 2006, 278 Mu¨nsterer ................................... Fallstricke und andere Besonderheiten der US-Patentpraxis aus deutscher Sicht, MittdtPatA 2010, 332 Mu¨ller-Stoy ................................. Grundzu¨ge des U.S.-amerikanischen Patentverletzungsverfahrens, GRUR Int 2005, 558 Pakuscher .................................... Das neue zentrale Berufungsgericht in den USA – ein Schritt in die europa¨ische Richtung – Dem alten und neuen Chef-Richter Howard T. Markey, GRUR Int 1983, 71 Ohly ............................................. “Patentrolle” oder: Der patentrechtliche Unterlassungsanspruch unter Verha¨ltnisma¨ßigkeitsvorbehalt? – Aktuelle Entwicklung im US-Patentrecht und ihre Bedeutung fu¨r das deutsche und europa¨ische Patentsystem, GRUR Int 2008, 787 Pfeiffer ......................................... Ha¨tte Columbus gewusst, was aus seiner “discovery” wird – das “discovery”-Verfahren im amerikanischen Patentverletzungsprozess, GRUR Int 1999, 598 Rauh ............................................ Mittelbare Patentverletzung in Deutschland, Japan und den USA, GRUR Int 2010, 459 Reitboeck ..................................... Das rechtliche Umfeld fu¨r (und gegen) nicht operative Patentinhaber in ¨ berblick u¨ber wichtige Entwicklungen der letzten Jahre, den USA – Ein U GRUR Int 2013, 419

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Selected Bibliography Ruess ............................................ Der U.S. Court of Appeals for the Federal Circuit und seine Bedeutung im U.S.-Gerichtssystem unter besonderer Beru¨cksichtigung des U.S. Supreme Court, GRUR Int 2011, 1 Scho¨nknecht ............................... Beweisbeschaffung in den USA zur Verwendung in deutschen Verfahren, GRUR Int 2011, 1000 Wehr ............................................ Die Rechtskraftwirkung von Entscheidungen u¨ber die Nichtigkeit von Patenten in den USA – die Entscheidung in Blonder-Tongue und ihre Auswirkungen, GRUR Int 1973, 131

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Reemers Publishing Services GmbH O:/Beck/Pitz/3d/Part 1.3d from 28.11.2014 11:04:02 3B2 9.1.580; Page size: 160.00mm  240.00mm

Part 1 Survey I. The European Patent litigation system 1. National patent enforcement (1) Forum shopping. In Europe we have national patents granted by the National Patent Office in each state, and the European Patents granted by the EPO. The enforcement of national patents and traditional EP’s is based on the principle of territoriality within the existing system of national courts. These patents are only valid in the territory of the state for which they have been granted. They are independent from each other, come into existence in the designated Contracting States and are governed by the respective national laws. The plaintiff may confine himself to a single national assertion of such patent rights and file one action in one country or may file in parallel more separate patent infringement actions before the respective competent national courts of the designated Contracting States of the European Patent. The option of choosing national proceedings also offers the plaintiff the possibility of selecting the most opportune forum of the competent courts. The patent owner may sue the patent infringer, for example, in the forum of the latter’s domicile or in the forum of the place of infringement and therefore select the most opportune court for him. In view of reliable judgements granted by experienced courts in a reasonable time frame and moderate court and attorney fees, Germany is the major court place in Europe with approx. 1300 patent infringement proceedings per year (France approx. 300, Italy approx. 250, UK approx. 50) and the majority of these are trialed in Du¨sseldorf (500– 600), Mannheim (200–300) and Munich (150–250). (2) Overview of German judicial system for patent infringement procedure. (2-1) Court system1. In the case of a Germany-wide offer not limited to a particular region, the plaintiff can choose the forum within the territory of Germany. He has the choice between twelve patent chambers. The civil court chambers designated for patent cases which are located at the responsible Landgerichte (Regional Courts) have functional competence for patent infringement proceedings. The following District Courts currently have patent litigation chambers: Berlin District Court, Brunswick District Court, Dusseldorf District Court, Erfurt District Court, Frankfurt/M. District Court, Hamburg District Court, Leipzig District Court, Magdeburg District Court, Mannheim District Court, Munich District Court, Nuremberg-Furth District Court as well as the Saarbrucken District Court. Each civil court chamber comprises three judges – the Presiding Judge, a Reporting Judge and an Associate Judge. The judges are lawyers and appointed for their life time. From an economic point of view, it is advisable to choose one of the more experienced patent court chambers in Germany which are located in Du¨sseldorf, Munich, Mannheim and Hamburg. The first instance courts are generally pro – IP owners. In connection with forum shopping within Germany the respective court practice – to a certain extent depending on the personality of judges – has to be taken into account. 1

See Part 6 I. 1.

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(2-2) Procedure. An action for patent infringement is initiated by issuing a Klageschrift which combines the elements of a writ and a statement of claim (see Part 6 I. 3.). The Klageschrift usually contains the names of the parties and the relief the plaintiff is seeking, e. g., claims for an injunction and the obligation to pay damages. It also contains particulars of the patent in suit, the prior art, the alleged infringing product and sets out the alleged infringing activities of the defendant. The Klageschrift has to be filed with the Landgericht. The court serves the Klageschrift on the defendant together with a court order setting out the procedure by which it wishes to handle the matter. There are several options: it may set a date for the hearing and a time-period by which the defendant has to file his defense or it may fix a date for a first oral hearing. At the first hearing the defendant may ask for security for costs in cases where the plaintiff is residing outside the European Union. In such cases the requirements for security bonds are covered by bilateral agreements concerning the remuneration of costs. The reply brief must contain the defendant’s arguments as to whether he thinks that he does not infringe the patent or has the right to do so. In about every second case the defendant files a nullity claim or an opposition against the patent together with a request to stay the infringement procedure until the European Patent Office (EPO), the German Patent and Trademark Office (GPTO) or the Federal Patent Court decide the validity of the patent. In the hearing on the merits the court presents its opinion when the hearing starts and then proceeds to test the merits of its opinion taking into account the oral arguments presented by the parties. At the end of the hearing the court announces a date for rendering a decision. This is usually done within a couple of weeks after the hearing. The decision can be a judgment, an order to take evidence or an order to stay the proceedings due to a pending nullity suit. Appeal (Berufung) may be brought before the Court of Appeal which consists of three professional judges. In an appeal procedure the court covers matters of fact and law. The case is argued based on facts and evidence given in the court below. The introduction of new evidence is limited. Further appeals (Revision) may be taken to the Federal Supreme Court (Bundesgerichtshof) where the panel consists of five professional judges. An appeal to the Federal Supreme Court will principally only concern matters of law of fundamental importance. First instance judgments can be enforced by paying a security to the other party, the amount being fixed by the court. Second instance judgments are enforceable without giving a security. (2-3) The dual system. German patent procedure is characterized by its dual system, which means that questions of infringement and patent validity are strictly separated (see Part 7 I. 1.). The regional court only deals with the question of infringement and has no power to revoke the patent or to alter the claims of the patent. The court is bound to consider the patent enforceable and is bound by the wording of its claims. If the court considers the patent is invalid or that the claims should be restricted it can only postpone the infringement procedure until the Patent Office or the Patent Court has decided on the validity of the patent where a nullity suit or an opposition procedure is pending. In such cases the court has to foresee the possible outcome of the nullity or opposition procedures. In general, German infringement courts only postpone an infringement trial if convinced that the subject-matter of the patent was not new at the date of priority. They rarely postpone a trial if the patent only lacks an inventive step. As a matter of experience, requests for postponement were granted only in approximately 10 per cent of all cases. 2

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Questions of validity of a granted patent, including a restriction of the claims, are dealt with by the German Patent and Trademark Office (GPTO), the European Patent Office (EPO) or the Federal Patent Court (Bundespatentgericht). Nullity suits may be lodged at any stage of an infringement trial or even prior to such proceedings. (2-4) Time to trial. The time for a patent infringement action to reach a first instance decision is about 6–12 months. If an independent court expert is ordered or evidence of witnesses is required, this may extend the proceedings perhaps up to another year. In first instance proceedings a court expert is only used in approximately 5 % of all cases. Proceedings can also be stayed due to a pending nullity claim before the EPO/GPTO or the FPC. In only 10–15 % of all cases proceedings are stayed. Proceedings before the Court of Appeal may take about a year or possibly longer in cases where evidence has to be taken. About 10 per cent of all Court of Appeal cases go to the Federal Supreme Court where proceedings may take fifteen to twenty-four months. (2-5) Likelihood of success. The patentee’s chances of success are in the range of approximately 60–65 per cent in the Regional Court, over 70 per cent in the Court of Appeal and 80 per cent in the Federal Supreme Court. In only 10–15 % of all cases proceedings are stayed with regard to pending revocation claims before the FPC or the EPO/GPTO. As far as nullity suits or applications for revocation are concerned in roughly 30–50 per cent of all cases the patent is declared valid or in part revoked. (2-6) Final remedies. Injunction. German courts are able to grant an injunction to cease and desist infringement if it is established in summary proceedings (see Part 5 I. 1. (2)) or in ordinary proceedings based on the merits of the case (see Part 4 I. 1. (1)). The plaintiff can either file an ordinary claim or apply for an interim injunction. To reinforce compliance with their orders German courts impose penalty payments on the defendant. The judgment will also state that an administrative fine for each case of infringement will be imposed on the defendant. Damages and account of profits. The infringer may be ordered to deliver to the patentee relevant details about its commercial activities which are the basis for the calculation of damages claims (see Part 4 I. 1. (2), (3)). Different forms of monetary relief are possible. Under German law the affected party has the choice of three options for calculating a damages award. The party may claim its loss of profits, in which case the plaintiff must show that he suffered a loss of profits caused by the infringement. As an alternative the patentee may claim the infringer’s profits. Finally the patentee can claim a reasonable royalty payment equivalent to the amount of royalties the infringer would have paid if a licence agreement had been established between the parties. Removal and destruction2. The plaintiff may demand that the devices violating the patent be destroyed and/or removed from the market unless the infringing devices or parts thereof can be changed so that the infringement can be remedied in a less drastic fashion. Costs. The costs of a patent infringement procedure are calculated on the basis of a so-called ‘value under dispute’ which is fixed in the majority of cases by the court in the range between 1 and 2 million EUR (see Part 4 I. 1. (4), (5) and Part 7 I. 10.). Court 2

See Part 4 I. 1. (6).

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costs and incidental costs incurred by the winning party have to be reimbursed by the losing party. The amount of remunerable fees has to be calculated on basis of the RVG. Remunerable attorney fees for the other side and court costs with a value under dispute of 1 million EUR generally are in the range of 50,000.– EUR. The whole cost risk for litigation with a value under dispute of 1 million EUR lies in the range of approx. 100,000.– to 150,000.– EUR. (3) Cross-border enforcement and “torpedo actions”. The provisions on jurisdiction in the Council Regulation (EC) No. 44/2001 of December 22, 2000 on jurisdiction and recognition and enforcement of judgements in civil and commercial matters (the “Council Regulation”) – to be replaced from January 10, 2015 by Council Regulation (EC) No. 1215/2012 – allow cross-border enforcement of European Patents. Patent infringers who have their domicile in the territory of a Member State can principally be sued before the courts of this state for an infringement of foreign patents (Art. 2 (1) Council Regulation = Art. 4 Council Regulation (EC) No. 1215/2012). Where there is a plurality of defendants, Art. 6 (1) Council Regulation (= Art. 8 (1) Council Regulation (EC) No. 1215/2012) allows the selection of a court where any one of them is domiciled. In such cross-border cases, the procedural law of the court seised is applicable. The merits of the infringement action are determined on the basis of the respective applicable national patent law in addition to the applicable provisions of the EPC, especially Art. 69 EPC. Accordingly, the substantive patent law of the state for which the patent has been granted is applicable. With its decisions in the GAT vs. Luk case, the ECJ limited the possibility of crossborder enforcement. According to Art. 22(4) Council Regulation (= Art. 24 (4) Council Regulation (EC) No. 1215/2012), the courts of the Member State in which the registration has taken place have exclusive jurisdiction for actions relating to the registration or validity of patents. According to the decision of the ECJ in the GAT vs. Luk case, the exclusive jurisdiction of the courts of the Member State provided for in Art. 22(4) Council Regulation (= Art. 24 (4) Council Regulation (EC) No. 1215/2012) extends to all kinds of actions on the registration or validity of registered patents independently of the question of whether the invalidity of the patent is asserted by way of a court action or merely put in as a plea. As soon as the defendant in his defense against the charge of infringement disputes the validity of the patent-in-suit the exclusive jurisdiction of Art. 22(4) Council Regulation (= Art. 24 (4) Council Regulation (EC) No. 1215/2012) comes into operation. In this case, the court seized would be hindered from issuing a cross-border decision for lack of international jurisdiction. Despite the ECJ decision in the GAT/Luk case the Dutch courts in “Kort Geding” cases have continued to issue interim injunctions in cases where the defendant raised the issue of invalidity. With its decision in Solvay vs. Honeywell, rendered on July 12, 2013, the ECJ gave blessing to this procedural practice. Since the judge in injunction proceedings does not decide on the validity of the patent-in-suit as such but, when weighing the interests of the parties, merely takes into consideration the plea of invalidity, and possibly refuses to grant an injunction when there are considerable doubts regarding the validity of the patent, Art. 22(4) Council Regulation (= Art. 24 (4) Council Regulation (EC) No. 1215/2012) is not relevant to injunction proceedings. This rationale is supported by Art. 31 Council Regulation (= Art. 35 Council Regulation (EC) No. 1215/2012), according to which the provisional measures provided in the law of a Member State may also be sought from the courts of that state where the court of another Member State has jurisdiction to rule on the merits of the case. As a consequence of the decision, cross-border injunctions will remain an available remedy in Germany. Such cross-border strategies are also compatible with the German concept 4

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I. The European Patent litigation system

of law and therefore available in German court proceedings. It is noted however, that the actual practical filings of cross-border proceedings is fairly low. The most popular defence tactics in cross-border patent litigation in Europe was and still is the so-called “Torpedo strategy”. An infringer expecting to be sued because of infringement of a European Patent in several European countries may bring an action for non-infringement in one of the designated states of the European Patent with a jurisdiction known for its time-consuming proceedings, thereby preventing the patent owner from efficiently enforcing its patent. The practice is to file a petition for a negative declaratory judgement – so called Torpedo – requesting the court to declare non-infringement in a number of countries with the consequence that any infringement actions by a patentee are blocked in all those countries on account of Art. 27 of the Council Regulation (= Art. 29 Council Regulation (EC) No. 1215/2012). This provision clearly states “where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seized, shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seized is established. The Torpedo-strategy, however, only works in cases where the alleged infringer has succeeded to initiate the negative declaratory proceedings prior to the initiation of a cross-border infringement action. In cases of prior pending infringement suits the infringer has to defend itself in the lawsuit.

2. The Unitary Patent system Status of reforms. On December 11, 2012 the EU Parliament approved the implementation of the Unitary Patent System based on a Unitary Patent Regulation (Council Regulation (EU) No. 1257/2012 of December 17, 2012), a Translation Arrangements Regulation (Council Regulation (EU) No. 1260/2012 of December 17, 2012) and the Agreement on a Unified Patent Court signed by almost all Member States on February 19, 2013. In order to avoid blocking of implementation by Italy and Spain, in March 2011 the EU Council authorized an enhanced cooperation of 25 EU Member States in order to establish the Unitary Patent (UP) for their territories. Spain and Italy did not participate and brought an action before the CJEU against the enhanced cooperation. The claim was rejected by the CJEU on April 16, 2013. Spain has brought another action before the CJEU at the end of March 2013 against the regulations. Implementation of the court system is expected in 2016 provided that the CJEU will consider the regulations to be legal and ratification of the Agreement on a Unified Patent Court by the national parliaments of at least 13 Member States including France, Germany and the United Kingdom is completed. After implementation applicants will have the choice between national patents, European Patents (EPs) and the Unitary Patent (UP). Prosecution of Unitary Patents. It is foreseen to have one single application and examination procedure for UPs and traditional EPs (European Patents). The patentee can decide within one month after grant whether it would like a UP or would prefer a EP. If a corresponding request is not filed, then it may validate the EP patent in the respective designated states according to the current procedures. The applicant can file the application under the existing EPO language regime based on the three official languages English, German or French. During a transitional period, after grant the applicant has to provide a translation of the specification into English if the language of proceedings is French or German, or – if the language of proceedings is English – into one other official language of the EU. After the transitional period – which ends once high-quality machine translation is available for all official languages 5

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of the Member States or after 12 years – no further translations shall be required for unitary patent protection. The amount of registration and renewal fees is expected to be in the range of the fees for approximately 3–5 national validations. Court system. The Unified Patent Court (UPC) will have a first instance tribunal with local divisions in the participating Member States, regional divisions for groups of Member States which do not have a local division and a central division located in Paris with branches in Munich (for mechanical engineering) and London (for chemistry, pharmaceuticals and human necessities). The local divisions in Germany will be in Du¨sseldorf, Mannheim, Hamburg and Munich. The second instance with a common Court of Appeal is to be located in Luxembourg. Court proceedings will be governed by the Rules of Procedure of the UPC (Draft N 17–31 October 2014) which have to be adopted by the Administrative Committee. Enforcement of Unitary Patents. The UPC will have exclusive jurisdiction in respect of infringement suits, licensing matters, requests for preliminary injunctions, declarations of non-infringement and actions or counterclaims for revocation. A suit based on the new UP can be filed in every local division where the allegedly infringing product is used or where the defendant is located. In case of EU-wide offering and distribution of allegedly infringing products, the holder of the UP can choose between the available local or regional divisions in the EU Member States. Revocation actions shall be brought before the central division. Counterclaims for nullity filed as response to an infringement suit will, however, be handled by local divisions. They can either decide on claim and counterclaim, refer the case for decision to the central division (upon agreement of the parties) or stay infringement proceedings and refer the revocation matter to the central division. The first instance proceedings can be conducted in an official language of the respective Member State, an official language designated by that state or the language of the patent if agreed by parties and approved by the panel. The language of the patent will be used before the central division and the language of first-instance proceedings or, if the parties agree, the language of the patent, can be used in the appeal proceedings. The infringement decisions of the UPC will have unitary effect for all countries which have ratified the respective UPC agreement. Revocation of the unitary patent results in invalidation in the entire European Union.

National Patent  

European “Bundle”      

Unitary Patent 

 

National Strategies  

“Options” During     The Transitional Period

Centralized  European   

Patent  Litigation   One Action Limited

Separate Parallel   Actions

  To Domestic

  Limited     To Each Domestic Patents  

Patents

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II. The Japanese patent litigation system

Enforcement of European Patents. Within a transitional period of at least seven years (extendable for another seven years), proceedings for infringement and/or revocation concerning traditional European patents (EPs) may still be initiated before the national courts. After the transitional period, EPs have to be enforced before the UPC which has exclusive competence. Within the transitional period, applicants have the possibility to enforce their EPs either before national courts or – with effect for all designated states – before the UPC (Art. 83 (1) UPCA). Within the transitional period, applicants also have the possibility to exclude the exclusive competence of the UPC by an “opt out” declaration to be filed with the Registry of the UPC (Art. 83 (3) UPCA). Prior to the implementation of the UPC court system the “opt-out” notification can already be filed with the EPO. Upon its entry into the register the Agreement on a Unified Patent Court shall not apply to those EPs which are granted or applied for during the transitional period unless proceedings before the UPC have already commenced. Revocation and enforcement of traditional EPs for which an “opt out” motion is filed is limited to the existing system of national courts which decide with effect to the national territory. The plaintiff may confine himself to a single national assertion of such patent rights and file one action in one country or may file in parallel several separate patent infringement actions before the respective competent national courts of the states in which the European patent has been validated. Unless an action has already been brought before a national court, proprietors of EPs shall be entitled to withdraw their “opt out” and “opt in” at any moment with the consequence that centralized actions for revocation and/or infringement can again be initiated before the UPC. Judges and attorneys. The plan is to have a multinational composition of the UPC. The local division will consist of three lawyers with the possibility of allocating a technical judge, whereas the central division comprises two lawyers and one technical judge. The Court of Appeal consists of three lawyers and two technical judges. Attorneys- at-law as well as patent attorneys with an additional qualification (such as the European Patent Litigation Certificate) are entitled to act as professional representatives before the UPC.

II. The Japanese patent litigation system 1. Overview of Japanese judicial system for patent infringement procedure Generally speaking, the judicial system for patent infringement in Japan is similar to that of Germany, because the Japanese system of civil procedure is traditionally oriented to the German system. However, there are also influences from the Anglo-American system. The influences from the Anglo-American system are increasing and must be considered. (1) “Double track” system and concentration of jurisdiction for patent disputes. The Japanese Patent Act 1956 is the basis of the current patent system in Japan. An English translation of the Japanese Patent Act, the Code of Civil Procedure or other important Codes or Acts can be found on the website of the Japanese Government3.

3

http://www.japaneselawtranslation.go.jp.

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The main procedural flows for patent conflicts are shown as follows: the Japanese Supreme Court the Intellectual Property High Court the Tokyo or Osaka District Court

Trial Board of the Japanese Patent Office

Patent infringement

Patent invalidation

Prior to 2003, every district court in Japan had jurisdiction for patent infringement cases. However, in order to accelerate patent infringement procedures in 2003, the jurisdiction for patent infringement cases has been concentrated to the Tokyo and the Osaka District Court. The Tokyo District Court has the exclusive territorial jurisdiction for patent infringement cases in East Japan. The Osaka District Court has the exclusive territorial jurisdiction for patent infringement cases in West Japan. Appeals against decisions of the first instance courts for patent infringement cases are under the exclusive jurisdiction of the Intellectual Property High Court that was established in 2005 as a branch of the Tokyo High Court. There is the so-called “Grand Panel” in the Intellectual Property High Court that consists of presiding judges of four chambers and one additional judge, and tries to render common decisions of four chambers for cases with important issues. Any person who wants to have a patent invalidated has to make a request for a patent invalidation trial with the Japanese Patent Office. The patent invalidation trial at the Japanese Patent Office is not regarded as a judicial procedure. It is an administrative procedure. A trial board of the Japanese Patent Office decides the validity issue. The decision of a trial board of patent invalidation may be challenged in a legal action with the Intellectual Property High Court which has the exclusive jurisdiction for such actions as the first instance court. Because the patent invalidation trial is regarded just as an administrative procedure, filing an action against a decision of a trial board for patent invalidation trial is, precisely speaking, not an appeal, but a litigation for a judicial procedure at the first instance, even though the first instance is a high court. The final instance is the Japanese Supreme Court. However, the Japanese Supreme Court accepts an appeal only on the ground of a violation of the Constitution or with regard to an important legal issue. It is seldom that the Supreme Court accepts an appeal for patent cases. Therefore, the decisions of the courts of the first and the second instance are also important to understand the practice of Japanese patent law. A procedure for a patent infringement case and a procedure for a patent invalidation case are independent from each other, even if both cases relate to the same patent. Traditionally, it was deemed that Japanese infringement courts should not examine the patentability of the infringed patent and could only suspend the proceeding of infringement case if the patentability were highly suspected (see Part 7. II. 1(1)). The Japanese Supreme Court, however, rendered a decision in 2000 that district courts could also examine the patentability of an allegedly infringed patent4: 4 A judgement of Japanese Supreme Court on 11th April 2000, Case No.: Heisei 10 (o) 364, published in the Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 54, No. 4, pp. 1368 = Hanrei-Jiho No. 1710, pp. 68 = Hanrei-Times No. 1032, pp. 120 – hando-tai-sochi (semi-conductor device case or Kirby’s patent case). An English translation for judgements of the Japanese Supreme Court is available under the web site of the Japanese Court: “http://www.courts.go.jp/english/judgments/index.html”.

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II. The Japanese patent litigation system “[A] court considering a claim of patent infringement should be capable of judging whether or not there exist sufficient reasons to invalidate the patent, even prior to the issuance of a final decision invalidating the patent. If during the procedure the court finds that there exists sufficient cause to invalidate the patent, a claim of injunction, damages, or other claims based on such patent would be an extension of rights beyond the scope contemplated under the act unless it can be demonstrated that circumstances exist which justify special treatment.”5 (The emphasis with bold font is added by the author.)

The judicial effect of invalidation is not recognised in the operative part of judgement, but only in the reasons of the judgement. The judicial effect of invalidation in the judgement of an infringement court is, therefore, restricted to the case itself. The registration of patent right is not affected by the judgement of an infringement court. However, it would be almost impossible for the patent holder to file a new law suit based on the same patent. The decision of the Supreme Court has been stipulated in 2003 as Article 104-3 of Japanese Patent Act (see Part 7. II. 1(2)). (2) Number of patent litigations in Japan – Statistics. The number of patent infringement cases in Japan is around 100 cases for each year. This figure is much less than the number of cases in Germany or in the USA. The number of judgements for patent infringement cases is around 50 cases per year because half of the cases are settled by an agreement between the parties. The following table shows the number of the judgements and the settlements between 2003 and 20136. Table 1. Number of judgements and settlements between 2003 and 2013 Year Judgements

03

04

05

06

07

08

09

10

11

12

13

Total number

65

70

63

40

50

37

37

36

38

40

56

Claims are admitted totally or partially.

10

12

11

5

15

9

9

7

9

6

14

Claims are denied.

55

58

52

35

35

28

28

29

29

34

42

61

60

76

67

45

44

32

24

29

34

40

126 130 139 107

95

81

69

60

67

74

96

Settlements Total

Assuming that cases which were settled with a settlement were favourable for patent holders (see Part 7. II. 2(2-4)), based upon that assumption the chances for patent holder to win in infringement cases are approximately 50 percent.

2. Overview of Japanese court procedure for patent infringement cases An infringement case begins with filing a complaint by a patent holder or an alleged infringer with the Tokyo or the Osaka District Court which have exclusive jurisdiction for the first instance of cases relating to patent right (see Part 6. II. 1(2-1)). (1) Litigation fee and attorney’s reward. Most parts of court costs consist of the litigation fee. The litigation fee is around 0.1–0.3 per cent of the estimation of value of 5 An English translation of this judgement can be found under the web site of the Japanese Courts: http://www.courts.go.jp/english/judgments/text/2000.04.11-1998-O-No.364-134718.html. 6 The Trial Board Division in the Japanese Patent Office has counted these cases, based upon statistical figures and the analysis of judgements which have been made public in the Website of the Japanese Courts.

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the matter in dispute. This percentage is decreasing gradually, if the estimated value is increasing. The value is estimated by the plaintiff according to the formulae for calculation which are made public by the chambers specialised in intellectual property cases in the Tokyo and the Osaka District Court. There is no statutory regulation for the Japanese attorneys’ fees. The fee is therefore determined freely by agreement between client and attorney. An attorneys’ fee is not regarded as a part of court costs. Therefore, the amount of court costs becomes so small that both parties do not have much interest in the court costs. Each party has to pay for its own attorneys’ fees. If, however, the court awards damages to the plaintiff on the basis of an infringement act, a part of the attorneys’ fee is sometimes recognised as part of the damages suffered from the infringement act. Empirically, the amount of the attorneys’ fee which is recognised as part of the damages does not exceed around 10 per cent of the total amount of other damages (see Part 7. II. 9). (2) Complaint. The first part of a complaint is equivalent to the wording of an operative part of a judgement which the plaintiff seeks. According to the Japanese practice, the plaintiff has to specify an object of injunction claim by its trademark or the type of the infringing product or the machines using an infringing process, because otherwise it could be difficult to distinguish the infringing product or process from other non infringing products or processes when the final and binding judgement is enforced (see Part 7. II. 2(1-1-3)). The patent holder can apply for an injunction and the payment of compensation for the damages in the same procedure. However, the patent holder cannot demand the submission of documents about sales and costs of the alleged infringer. The patent holder can only make a request to the court to order submission of documents about sales and costs, according to Article 221 of Civil Procedure Act. In practice, a submission order is rarely issued by the court (see Part 7. II. 7(3-3)). In the second part of a complaint, the plaintiff identifies the patent right and describes acts and products or processes of the defendant which could infringe the patent right literally or by equivalence. It is seldom in Japan that an equivalent infringement is acknowledged (see Part 2. II. 2(2)). According to the Japanese practice, the features of the product are divided into some elements which are analysed in comparison with the corresponding elements of the patent. In order to make the court recognise the infringement, the plaintiff has to allege that each feature of an allegedly infringing product corresponds to each element of the patent literally or at least equivalently (see Part 7. II. 7(2-1) and 7(2-2)). With respect to compensation for the damages, a plaintiff selects one or some alternative methods which are presuming the amount of damages, for example, calculation by license analogy or by infringer’s profit. The plaintiff asserts the possible amount of damages calculated by the selected alternative methods. The plaintiff may select two or more alternative calculation methods. The court determines as damages the highest amounts from the amounts calculated by these alternative methods (see Part 4, I. 2(2-2)). (3) Course of proceedings. Together with the service of a complaint and summons to the defendant, the first date of oral proceedings is noticed to the defendant (see Part 6, II. 3(4)). The first date takes place as an oral proceeding open to the public (see Part 7, II. 6(1)). Subsequent proceedings normally takes place as proceedings which are not open to the public (see Part 7, II. 6(2-1)). Several preparatory proceedings usually take place in every two months. Both parties submit their briefs each other for several times. The court begins with the question whether products or processes of the defendant infringe the patent (see Part 6, II. 3(5-1)). The court examines whether all features of the 10

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II. The Japanese patent litigation system

products or the processes of the defendant fulfil all the elements of the product or the process of the patent literally or equivalently. Infringement courts may examine the patentability of the allegedly infringed patent. If a court holds the patent to be invalid, an infringement of the patent is denied, and the claims of the patent holder are dismissed. Therefore, the defendant often asserts the invalidity of patent on the basis of prior art documents or prior use known to the public before the filing date of the application of the patent (see Part 4, II. 2(2-1)). Against the objection of the defendant based upon the possible invalidation of the patent, the plaintiff can defend the patent by announcing possible correction of the patent which could be admitted by a trial decision for correction of the Japanese Patent Office (see Part 4, II. 2(2-2)). A defendant of an infringement action often makes a request to the Commissioner of the Japanese Patent Office for a trial for patent invalidation. The plaintiff of the infringement action, therefore, has to be confronted with double procedure for patent invalidation, namely at the infringement court as well as at the Japanese Patent Office (see Part 4, II. 2(2-1)). In a patent invalidation trial, the plaintiff, who is also the patent holder, often makes a request for correction of the patent claims and/or descriptions (see Part 4, II. 2(2-2)). The Japanese Patent Act uses a wording “correction” for the change of claims, description or drawing after the grant of a patent, and distinguishes the wording “correction” from a wording “amendment” for the change of claims, description or drawing before the grant of a patent. The plaintiff has only a few chances to make a request for correction in the patent invalidation trial, because the requests for correction are restricted to some occasions, for example, with the submission of an answer of the patent holder to the patent invalidation request, or after the prior notice of a trial decision. If an infringement court is convinced that products or processes of an alleged infringer do not fall within the protective scope of a patent, or that the patent should be recognised as invalid in a hypothetical patent invalidation trial of the Japanese Patent Office, the court dismisses the claims of the patent holder (see Part 6, II. 3(7-2)). On the other hand, if the court holds that the product or process infringes the patent right literally or equivalently, and that the patent should not be recognised as invalid in a patent invalidation trial of the Japanese Patent Office, the presiding judge will inform both parties of his opinion, and attempt to arrange a settlement based upon his opinion (see Part 6, II. 3(5-1) and Part 7, II. 2(2-4)). If a settlement cannot be reached, the court will begin with the calculation of damages, and require the defendant to disclose the actual figures of sales or costs to estimate the damages of the patent holder. If necessary, the court will ex officio names a certified public accountant as an expert for calculation of damages, and let the expert examine figures and documents of the sales or costs of the defendant (see Part 6, II. 3(5-2)). (4) Judgements. The judgement granting an injunction claim specifically lists the trademark or the type of infringing products or machines using the patented processes which are named in a complaint. If the defendant exploits the patented invention with products or machines under other trademark or type which the plaintiff has found during the procedure and wants to extend the effect of the judgement, it is necessary for the plaintiff to add the other trademark or the other type of the products or the machines to the list of products or machines to be injuncted. However, most defendants in Japan will stop exploiting the accused products spontaneously after an irrevocable court decision holding that the patent is infringed, even if not all exploitation of the patented invention is included in the judgement. The judgement accepting a claim for compensation of damages is not only declaratory, but also executable. Japanese civil law does not admit punitive damages. The court 11

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only grants the claim to compensate for the actual damages incurred by the patent holder (see Part 4, I. 2(2-2)). It is very rare that in a judgement the court will declare provisional execution of an injunction claim, while the court will often declare provisional execution of a compensation claim without security (see Part 6, II. 3(7-1)). (5) Appeals. Against the decision of a district court an appeal to the Japanese Intellectual Property High Court is possible (see Part 6, II. 3(8)). Besides an infringement action, a trial for invalidation of the patent is often requested with the Japanese Patent Office. The parties can file an action to the Japanese Intellectual Property High Court against a decision in the trial for invalidation of patent. The Japanese Intellectual Property High Court makes an effort to deal with both the appeal case of infringement action as the second instance and the action against the decision in the trial for invalidation of the patent at the Japanese Patent Office as the first instance in the same chamber of the Intellectual Property High Court, so that the judgements in both cases will be consistent with each other (see Part 7, II. 1(3)). If there is no longer the possibility to appeal against the judgement, the judgement becomes final and binding, and has the preclusive effect of res judicata. Before the 2011 Amendment of the Japanese Patent Act, the preclusive effect of res judicata could be revoked by an action for retrial if a decision of the trial for invalidation of the infringed patent became final and binding after the judgement for infringement claim had become final and binding. However, a question was raised about possible revocation because the judgement of infringement by the court had already determined the patentability of the infringed patent. It was therefore discussed whether the revocation of the determination with preclusive effect of res judicata by another decision for invalidation should be restricted. The 2011 Amendment stipulates that a judgement upholding an injunction a claim or compensation claim can only be revoked for the future so that the compensation claim will not be affected by a final and binding decision of a trial for invalidation of the patent (see Part 7, II. 1(4)). Against the decision of the Intellectual Property High Court, a final appeal or a petition for the acceptance of a final appeal to the Japanese Supreme Court is possible. Most final appeals are dismissed, and it is also rare that the Japanese Supreme Court accepts a final appeal on the basis of a petition (see Part 6, II. 3(9)).

III. The U.S. patent litigation system There is a rapidly evolving change in litigation strategy as a result of the American Invent Act (AIA). Litigants are developing strategies based upon having the newly empowered Patent Trial and Appeal Board (PTAB) accept jurisdiction to decide issues of validity, and seek to stay court proceedings or conduct the court and PTAB proceeding in parallel. Nonetheless, the basic principles underlying U.S. patent litigation after AIA remain unchanged. Although collateral attacks on validity may be available, court challenges to patents remain within the exclusive jurisdiction of the United States Federal Court system (28 U.S.C. § 1400). [Federal courts are empowered to adjudicate patent disputes.] The trial court where a patent litigation is filed is one of the federal district courts. There are 94 district courts and specific venue requirements established under the Federal Rules of Civil Procedure (FRCP). These rules control the court selection process. The district court is empowered to decide issues of validity, infringement and damages in a single action. At the request of any party (except in cases where only equitable remedies are sought) a jury trial can be demanded. Jury trials have become common. 12

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III. The U.S. patent litigation system

Federal district courts are not specialized patent courts, although many judges have become experienced in intellectual property matters because of the large number of patent litigations filed in a particular jurisdiction. The number of patent litigations has grown significantly and some federal district courts have established local rules to address patent specific issues. The federal court system established separate Courts of Appeals for regional groups of district courts. However, all patent litigation appeals are heard by a single appeals court known as the Court of Appeals for the Federal Circuit (Federal Circuit). A further appeal may be possible to the United States Supreme Court. However, there is no absolute right of appeal to the Supreme Court. A petition requesting permission to file the appeal must be filed and it is only granted in a limited number of cases. In recent years, given the importance of patents to the economy and the greater number of patent litigations, the Supreme Court has considered a greater number of appeals. Nonetheless, it is unusual for the Supreme Court to accept an appeal from the Federal Circuit unless the legal issue raised is unique and is likely to address a significant matter of general importance. The judicial system can be illustrated graphically as follows: [U.S. Supreme Court]

↑ ↑

Appeal Only With Permission

[Single Appeals Court] [Federal Circuit]

↑ ↑

Appeal As of Right

[94 Federal District Courts] [Trial Court]

Although discussed in greater detail infra the following general guidelines apply to patent litigation: (1) The judge is assigned by random selection at the time the litigation is filed in the district court. Once the judge is selected he or she generally presides over the proceedings until final judgment. (2) The patent owner has to prove infringement by “a preponderance of the evidence” (that is, that the accused product or method falls within the scope of at least one claim of the patent.) This requires proof that the infringement more likely exists than not. If the evidence tips the scale even slightly in the patent owner’s favor, the patent owner has satisfied the burden of proof on the issue of infringement. (3) If validity is challenged (and it generally is), the challenging party must prove invalidity by “clear and convincing evidence.” This is a much higher standard of proof. It requires that the trier of the facts is left with a clear conviction that invalidity has been proven. As will be discussed infra the clear and convincing burden of proof is not applicable in the Patent Office and this difference is a factor accused infringers assess in deciding whether to challenge validity under AIA in a Patent Office proceeding. Although a relatively new procedure a very significant number of Patent Office invalidation proceedings have been filed and the decisions have been consistently favorable to those challenging issued patents. (4) Although a patent owner can initiate litigation without prior notice to an accused infringer, a party who believes that it may be subject to a claim of infringement cannot initiate litigation unless that party can demonstrate that there is a sub13

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stantial controversy between parties having adverse legal interests of sufficient immediacy to warrant the issuance of a declaratory judgment. However, validity challenges in the Patent Office can be initiated without the need to establish a controversy with the patent owner. (5) Patent litigation in the United States is expensive. It typically exceeds one million ($1,000,000-U.S.) dollars if the matter proceeds through trial. In highly contested matters, fees in the multi-millions of dollars are not uncommon. Other than in exceptional circumstances, each party is responsible for its own legal fees even if accused infringer is successful in the litigation. Litigations are often settled because the cost of litigation is prohibitive given the commercial value of the product or process alleged to infringe. However, recently the Supreme Court broadened the definition of what constitutes an “exceptional” case. If an “exceptional” case is demonstrated (as discussed infra.) the loser in a patent litigation will have to pay the legal fees of the successful party. In the short time since the Supreme Court decision numerous fee-shifting applications have been made and some have been granted. The possibility of the losing party having to pay fees although still the exception is an issue to be considered in the evaluation of whether to file a patent infringement legal action. (6) There is no requirement that the patent owner exploit the patented invention for it to bring an action for infringement. It is estimated that 40 % of patent lawsuits are initiated by non-practicing entities (NPE) which have accumulated patent portfolios and established enforcement programs. Many NPE’s offer licenses under financial terms which are pragmatically acceptable given the alternative of engaging in a successful challenge to the patent.7 (7) Extensive discovery is permitted under the Federal Rules of Civil Procedure. The rules permit the parties to explore all issues relating to infringement, validity and damages including all possible patent defenses. It is not unusual for the pre-trial discovery phase to take two years or more to complete, although some district courts, by local rule, require a more rapid conclusion to the discovery process. The discovery process includes production of documents (including electronically cre7 The number of litigations filed by NPE patent owners and the costs to businesses has resulted in a number of proposed legislative and executive branch initiatives seeking to require NPE’s to pay legal fees to successful accused infringers. The ITC (which is part of the executive branch) has initiated a pilot program seeking early determination of standing to bring a Section 337 proceeding which could reduce NPE use of ITC proceedings. The state of Vermont passed a law effective July 1, 2013 which creates a right to sue a patent owner for making a “bad faith assertion” of patent infringement against Vermont businesses or residents. The law includes an 8-factor analysis to consider “bad faith” including: 1. the comprehensiveness of demand letter; 2. the timeliness of the patent asserting party in responding to a request for more detailed information regarding the demand letter; 3. whether the party asserting the patent conducted an infringement analysis against specific claims of the patent; 4. whether the demand letter required a payment of a license fee or response within an unreasonable short period of time; 5. whether the person who offers the license is requesting an amount that is not based on a reasonable estimate of the value of the license; 6. whether the claim or assertion of patent infringement is meritless and the person making the claim knew or should have known that the assertion is meritless; 7. whether the claim or assertion of patent infringement is deceptive; and 8. whether a person or subsidiary affiliates have previously filed or threatened to file one or more lawsuits based on the same or similar claim of patent infringement. It is likely the Vermont law will be challenged because under the U.S. Constitution patents are solely within the province of the federal government.

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III. The U.S. patent litigation system

ated communications), answering of questions under oath in writing (Interrogatories), requests for admissions, and the taking of pre-trial deposition testimony of potential witnesses. The rules permit inquiry into not only relevant evidence but also information that could possibly lead to relevant evidence. (FRCP 26(b)) The costs of discovery has resulted in discussions in Congress about the legislative initiatives to, for example, change the standard to permit discovery only for relevant evidence or to require a party seeking extensive discovery to pay the costs. It is too early to assess whether these initiatives will be adopted. (8) Although judges can seek the aid of independent technical experts, this is not typically the case. It is customary for each party to retain its own expert(s) on issues such as validity; infringement; damages; and Patent Office (PTO) practice and procedure. The expert(s) must disclose his or her findings and conclusions to the other party before trial in a written report and the parties are permitted to take pre-trial depositions of the other party’s experts. (FRCP Rule 26) (9) Although exclusive jurisdiction for patent litigation is vested in federal district trial courts, there have been a number of procedures available to have the PTO reassess validity. The availability of these procedures has been expanded under the new American Invents Act (AIA) and these are discussed in greater detail infra. These newly available proceedings have many of the aspects of litigated proceedings and are decided by administrative judges, not patent examiners. It is becoming more common for an alleged infringer to seek invalidation before the PTO and request that the district court suspend proceedings during the pendency of these PTO proceedings. The courts need not do so – and often do not. In such cases both the litigation and the PTO proceedings are conducted in parallel.8 (10) Patent enforcement is also possible (in qualifying situations) by seeking an exclusionary order from the U.S. International Trade Commission (ITC). The ITC is not part of the judicial branch of government. It is part of the executive branch and its decisions are not binding upon the courts. Nonetheless, ITC proceedings are being filed with greater frequency, often in parallel with court proceedings because the ITC proceeding is likely to be concluded more rapidly. Although monetary damages are not available, the remedy that is available is an exclusionary order preventing importation of infringing products. The injunctive remedy has become more important after the Supreme Court decision in the EBay decision which has limited the circumstances under which patent owners can obtain injunctions, even after successful litigation. ITC proceedings are intended to protect the rights of a patent owner that is domestically exploiting the patented technology against acts of unfair competition that arise from the importation and sale of infringing products in the United States.9 ITC proceedings are initially conducted before an administrative law judge (ALJ) and from a procedural view 8 Validity challenges in Patent and Trademark Office (PTO) proceedings may proceed in parallel with court proceedings and at the discretion of the trial court the litigation may or may not be suspended during these proceedings. In an en banc decision the Federal Circuit (In re Baxter Int’l Inc., 678 F.3 d 1357, 1365 (Fed. Cir. 2012) held that the PTO can overturn a patent in a reexamination proceeding even after a district court decided that the alleged infringer did not satisfy its burden of proof of invalidity. The court noted that the prior art before the PTO was different and as distinguished from the presumption of validity and the attendant clear and convincing evidentiary standard which the court’s apply “…a lower standard of proof and the broadest reasonable interpretation standard of claim construction apply at the PTO and therefore the agency is not bound by the court’s determination.” 9 One of the recent initiatives created to reduce the number of NPE proceedings before the ITC is a pilot program in which expedited discovery is provided to assess whether the NPE can satisfy the domestic industry requirement which is necessary for the ITC to have jurisdiction over the matter.

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Part 1. Survey

have many of the aspects of a court proceeding. The ALJ’s decision is subject to review by the full International Trade Commission. If a violation is found, the Commission issues an exclusionary order against importation which is binding unless modified by the President of the United States. The Commission’s decision is appealable to the Federal Circuit. In summary, in the United States it is possible to contest patents in the courts, in the PTO and through ITC proceedings and all could be simultaneously pending. The main unifying aspect is that the appeals court from district court, PTO and ITC proceedings is the Federal Circuit.

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Part 2 Matter of infringement I. Germany 1. Scope of protection (1) Literal and non-literal infringement. The “scope of protection” of German patents and European patents granted for Germany has its legal basis in § 14 PatG and Article 69(1) EPC. According to § 14 PatG1, the scope of patent protection is defined by the claims. Specifications and drawings are to be considered in the interpretation of patent claims. However, any interpretation of the claims from the specifications and the drawings can never restrict the protection to less than that provided by the narrowest interpretation of the claim, particularly to less than the wording of the claim2. In its judgement of March 2, 19993 the Federal Supreme Court underlined the importance of the whole content of the patent specification for the interpretation of claims. The supreme court requires a functional determination of each feature which may lead to a scope of protection different from the general technical and/or linguistic understanding of the wording. Where indications in the claims and description are absent, it is permissible to take account of the general technical understanding for the interpretation of a term used in the patent claim (BGH GRUR 2005, 754; BGH GRUR 2007, 410 – “Kettenradanordnung”. When applying § 14 PatG, it is important to also consider Article 69 EPC and the corresponding protocol on its interpretation. The protocol on the interpretation of Article 69 of the Convention, adopted at the Munich Diplomatic Conference for setting up of a European System for the Grant of Patents on 5 October 1973 reads as follows: “Article 69 should not be interpreted in the sense that the extent of the protection conferred by a European patent is to be understood as the defined by the strict, literal meaning of the wording used in the claims, description and drawings being employed only for the purpose of resolving an ambiguity found in the claims. Neither should it be interpreted in the sense that the claims serve only as a guideline and that the actual protection conferred may extend to what, from a consideration of the description and drawings by a person skilled in the art, the patentee has contemplated. On the contrary, it is to be interpreted as defining a position between these extremes which combines a fair protection for the patentee with a reasonable degree of certainty for third parties.” Pursuant to Article 164, paragraph 1, the Protocol shall be an integral part of the Convention. According to these provisions the scope of protection conferred by a patent or a patent application shall be determined by the terms of the claims. Nevertheless, the description and drawings shall be used to interpret the claims. 1 § 14 of the German Patent Act of 1981 reads as follows: The scope of a patent and of a patent application is determined by the contents of the patent claims. However, the description and the drawings are to be considered for the purpose of interpreting the patent claims. 2 See BGH GRUR 1959, 317 – Schaumgummi; BGH GRUR 1986, 803 – Formstein 3 BGH GRUR 1999, 909 – Spannschraube

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Part 2. Matter of infringement

Another important guideline for the interpretation of claims is the so-called “Protocol on the Interpretation of Article 69 of the EPC”. According to Article 1 of the Protocol the extent of protection conferred by a European patent is to be understood as that defined by the strict literal meaning of the wording used in the claims, the description and drawings being employed only for the purpose of resolving an ambiguity found in the claims. Nor should it be taken to mean that the claims serve only as a guideline and that the actual protection conferred may extend to what, from a consideration of the description and drawings by a person skilled in the art, the Patent Proprietor has contemplated. On the contrary, it is to be interpreted as defining a position between these extremes which combines a fair protection for the patent proprietor with a reasonable degree of legal certainty for third parties. According to Article 2 of the Protocol due account shall be taken of any element which is equivalent to an element specified in the claims. From this backdrop there are two types of infringement. In case of literal infringement all features of the infringing form are covered by the wording of the respective patent claim. The scope of protection of a patent may also embrace embodiments beyond the “terms” of the claims that have to be determined by interpretation (nonliteral or equivalent infringement). (2) Doctrine of equivalents. In addition to a literal patent infringement, there exists the doctrine of equivalents in German patent law. The doctrine of equivalents states that patent infringement is assumed if the specific devices or means described in the patent claim are totally or in part replaced by other devices or means which, however, serve the same purpose and which achieve the sought solution by the same technical effect as the devices or means described in the patent claim4. Thus, typical examples to which the doctrine of equivalents would be applied are the replacement of a nail (mentioned in the patent claim) by a screw and the so-called cinematic inversion5 whereby the effect is the same whether a braking device is pushed against some part in motion or whether the part in motion is pushed against the braking device. The doctrine of equivalents under German law applies to the patent claims as a whole as well as to single features of the patent claims6. The assessment of equivalence must be based on the overall context of the technical teaching protected by the patent claim. The requirements for equivalence under patent law, on the one hand, only relate to the features that are not realized in literal terms, however, on the other hand, the patented teaching must be taken into account in its entirety. Decisive are not the effects to be achieved with the feature at issue taken in isolation, but rather the effects to be achieved within the overall context of the invention7. The assessment of the subject-matter of individual features only has the purpose of determining step by step the alone relevant meaning of the patent claim as unit8. (2-1) Requirements of equivalents. The possibility to cover equivalent embodiments under the scope of protection is foreseen in Art. 2 of The Protocol on the Interpretation of Article 69 EPC, which is an integral part of the Convention: 4 See Benkard/Scharen, PatG (German Patent Act), 10th ed. 2006, § 14 No. 99; Schulte/Rinken/Ku ¨ hnen, PatG (German Patent Act), 9th edition 2014, § 14 No. 60, BGH GRUR 1979, 271 – Schaumstoffe. 5 BGH GRUR 1975, 271 – Schaumstoffe. 6 BGH GRUR 1964, 433 – Christbaumbehang and GRUR 1975, 484 – Etikettiergera ¨t. 7 BGH GRUR 2000, 1005, 1006 – Bratgeschirr; BGH GRUR 1983, 497 – Absetzvorrichtung; Schulte/ Rinken/Ku¨hnen, § 14 No. 61. 8 BGH GRUR 2006, 311 – Baumscheibenabdeckung; BGH GRUR 2007, 959, 961 – Pumpeneinrichtung.

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I. Germany “For the purpose of determining the extent of protection conferred by a European Patent, due account shall be taken of any element which is equivalent to an element specified in the claims”.

According to the case law of the BGH three requirements must generally be met in order to ensure that an embodiment, which is not in line with the literal sense of a patent forming the subject matter of a claim, will fall within its protective scope. The equivalent solution must: (1) lead to the same technical effect as the patented solution. This may already be fulfilled if the technical effect of the equivalent solution is substantially the same as the technical effect of the patented solution, see German Federal Supreme Court, GRUR 87, 280 – Befestigungsvorrichtung. (2) be obvious for a person skilled in the art, i. e. the person skilled in the art must be able to come to the equivalent solution without inventive effort. In other words, the skilled person must be able, due to his expert skills, to discover the modified means as having identical effects. (3) be considered based on the terms of the claimed technical teaching so that the skilled person would consider both embodiments as being equivalent (“equal quality”). This is not fulfilled if the teaching contained in the specification of the patent leads away from the equivalent solution because, for example, the equivalent solution is something which according to the patent description is to be avoided. Based on the above principles three questions have to be answered by a person skilled in the art in order to find out whether the challenged use form infringes equivalently or whether it is outside the scope of equivalence. Question 1: Does the non-literally used embodiment (accused use form) solve the problem underlying the patented invention with modified measures? Question 2: Is the person skilled in the art in a position to identify the equal effectivity of the abovementioned embodiment (accused use form) without inventive effort? Question 3: Is the subject-content of the plaintiff’s patent worded in such a way that there is room for the skilled person to consider a patent claim interpretation which is broader than its literal wording?

Only if Questions 1 to 3 can be answered by a skilled person with “yes”, the challenged non-literally infringing use form may be considered an equivalent infringement of the patent. (2-2) “Formstein Defense”. An important restriction of the extent of protection of a patent claim relates to the so-called “free prior art” argument. This is the argument which is frequently put forward by the accused infringer, namely that the allegedly infringing product or process was suggested by the prior art, that is to say the prior art available before the priority date of the plaintiff’s patent (“Formstein defense”). The Federal Supreme Court in its 1986 “Formstein” decision9 stated that it is admissible to advance the argument that the alleged infringement form contested as being within the scope of equivalence does not constitute a patentable invention in view of the prior art relevant to plaintiff’s patent. Therefore, the defendant who uses an equivalent form of the patented invention may defend himself in an infringement suit not only by arguing that the allegedly infringing product or process was known from the prior art but also by pointing out that the allegedly infringing product or process is not inventive vis-a`-vis the prior art. In both cases, the result, if the Defendant succeeds in having his line of argument accepted, will be that the alleged equivalent infringement form will fall outside the scope of equivalence, i. e. that it will no longer be covered by the range of equivalence. 9

BGH GRUR 1986, 803, 806 – Formstein

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Part 2. Matter of infringement

The BGH has stated that the admission of the “Formstein defense” excludes patent infringement under the doctrine of equivalence. This defense ensures that a noninventive simple development of the state of the art is excluded from a plaintiff’s patent, i. e., that it becomes “patent free” – unless it is covered by the literal wording of the patent claims10. Since the knowledge of the state of the art is critical in the assessment of the patentability of plaintiff’s patent it should consequently also be critical for answering the question to which extent the patentee is really entitled to an exclusive right (patent) granted for a limited period of time as a reward for the disclosure of his invention. The general concept behind this decision is that an equivalent embodiment is an aspect of the invention that could not be examined for its patentability during the granting procedure and thus the infringement judge should be free to determine the range of equivalence. The “Formstein defense” is quite similar to an old English principle as laid down in a 1913 decision by the House of Lords, the so-called “Gillette case”11. Its principle says that the public doing which is not patentably distinct from the prior art (this means doing something which is not novel or which is obvious) can regard itself safe from a patent infringement action, because either the patent in question must be invalid, or it is not infringed. In contrast to the “Gillette defense”, the “Formstein defense” will make the alleged infringer only safe from committing an infringement if he is not working according to the literal wording of the patent claims. The infringement judges in Germany may only restrict the scope of equivalence to this point. If the alleged infringer then still must be considered to work according to the literal wording of the Plaintiff’s patent, the “Formstein defense” cannot be applied. The only possibility the infringer can resort to in such a case is to file a nullity action against the Plaintiff’s patent. (3) Basic principles for the determination of the scope of protection. (3-1) The wording of claims. According to Article 69(1) EPC and the corresponding § 14 PatG, the patent claims are not only the starting point but also the relevant basis for determining the scope of protection of a patent. The scope of protection is exclusively determined by the terms of the claims and the extent of the inventive idea which has found expression in the patent claims12. When the technical expressions used in the patent differ from those used in the literature in the relevant technical field, then the expressions used in the patent are relevant for the interpretation of the patent13. Insofar, the patent publications represent their own dictionary where the terms may differ from those used in the regular literature. (3-2) The person skilled in the art is relevant for claim interpretation. The crucial question in claim interpretation is how the person skilled in the art reads and understands the terms used in the claims and what specific conclusions he will draw from these terms and the inventive idea presented to him14. For this purpose the perspective of an expert with average skills in the respective technical field of the invention has to be defined. (3-3) File history. The file history of a patent is in Germany not generally used as an element for the interpretation of patent claims. 10 LG Du ¨ sseldorf GRUR 1994, 509 – Rollstuhlfahrrad; BGH file no. X ZR 102/97 of January 18, 2000 – Kontaktfederblock. 11 1913, 30 RPC 465. 12 See Ballhaus and Sikinger, “Der Schutzumfang des Patents nach § 14 PatG”, GRUR 1986, 337; BGH GRUR 1986, 803 – Formstein. 13 BGH GRUR 1984, 425 – Bierkla ¨rmittel; BGH GRUR 1999, 909 – Spannschraube. 14 BGH GRUR 1983, 497, 498 – Absetzvorrichtung; BGH GRUR 1984, 425, 426 – Bierkla ¨rmittel.

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It is considered that § 14 PatG and Art. 69 EPC do not allow this possibility because they only relate to the claims, the description and drawings. This view has only recently again been confirmed by the BGH in their decision “Kunststoffrohrteil”15 where the BGH again clearly stated that the granting proceedings are basically not relevant for claim construction. Only very few exceptions exist which are based on specific circumstances, such as in the scenario that was underlying the Federal Supreme Court decision “Weichvorrichtung”16. Here, restricting statements by the patent applicant have been accepted to be relevant for claim interpretation since they were made during opposition proceedings versus a third party. This third party was later sued for patent infringement. The Supreme Court has under such circumstances ruled that it would violate the principle of good faith and thus constitute an unacceptable “venire contra factum proprium” if patentee in the infringement proceedings against the previous opponent later argues differently than he did previously in the opposition proceedings. In the decided case, patentee had to accept that his previous definitions that were made during patent prosecution must also be decisive for the later infringement case. In a very similar scenario, the owner of a German utility model has argued in a previous cancellation action that a certain embodiment is not a subject of the utility model (in order to establish novelty over prior art). In a later infringement action against the former cancellation plaintiff, the BGH has not allowed the owner of the utility model to define the scope of protection to still include the same feature which has been previously admitted not to belong to the utility model in the cancellation case17. In its decision “Polymer-foam18” dated July 17, 2012 the BGH permitted the published patent application to be taken into account in cases of contradictions between claim wording and description of the patent. In order to get clarity about the meaning of the patent claim a comparison between the granted version of a claim and former versions might be allowable. (3-4) The effect of emphasizing particular features of a patent claim in the desciption. Besides the afore-mentioned cases of waivers by the submission of restricted case papers after the filing of the original application, a limitation for claim interpretation can also be based on a specific original wording in the description of a patent. If a particular feature of a patent claim is emphasized in the patent specification as being important for accomplishing the inventive result, then the scope of protection of the claim does not encompass an embodiment lacking that feature19. A similar scenario for an originally restricted scope is given, if, for solving the technical problem of the invention, the original teaching of a patent expressly precludes a means that is used in the state of the art. In this case, too, the scope of the protection of the patent does not encompass such precluded means20. Similar considerations have been applied by the BGH in the case “Occlusion Device”21 and “Diglycidyl Compound”22. The BGH held the following: “If the description of the patent reveals several possibilities regarding how a specific technical effect 15

BGH GRUR Int 2002, 612 – Kunststoffrohrteil. BGH GRUR 1993, 886 – Weichvorrichtung. 17 BGH GRUR 2006, 923 – Luftabscheider fu ¨ r Milchsammelanlage. 18 BGH GRUR 2012, 1124 – Polymerschaum. 19 BGH GRUR 1992, 40 – Beheizbarer Atemluftschlauch;BGH GRUR 1984, 425, 427 – Bierkla ¨rmittel; BGH GRUR 1991, 444 – Autowaschvorrichtung. 20 BGH GRUR 1991, 744 – Trockenlegungs-Verfahren. 21 BGH GRUR 2011, 701 – Okklusionsvorrichtung; English translation in IIC 2011, 851. 22 BGH GRUR 2012, 45 – Diglycidverbindung. 16

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Part 2. Matter of infringement

can be attained, but only one possibility has been included in the patent claim, the use of the other possibilities does not constitute an infringement according to the doctrine of equivalence”. Where the description of a patent reveals a number of possible means of achieving a particular technical outcome but only one of these possibilities is included in the patent claim, an infringement of the patent in an equivalent manner may only be deemed to have occurred where the specific effects of the modified solution overlap with those of the protected solution and differs from the possible solutions identified in the description but not in the patent claim similarly in a similar manner to that protected solution23. (3-5) The extent of protection of a patent claim containing numerical data and ranges. According to consistent case law, the scope of protection of a patent whose patent claim contains numerical data and ranges may only in exceptional cases be extended to ranges which deviate from those stated in the patent claim. Equivalency is in general, excluded, if the new and inventive aspects of the teaching of the patent consist in these data. Third parties must be able to rest assured that what is written in the patent specification, in particular in the patent claim, is relevant for the protection conferred by the patent24.Numerical data and ranges can therefore usually be presumed to be subject to a restrictive interpretation when they are stated in the patent claim as maximum or minimum values25 which have to be considered as strictly binding “critical values. The prerequisites of equivalent infringement in cases of numerical ranges were redefined in five cases decided in 2002 by the German Federal Supreme Court. More specifically, the German Federal Supreme Court had to decide the question of equivalence for patent infringement of claims directed to features restricted by numerical ranges. In such a scenario, the Supreme Court denied equivalent patent infringement in the following cases: a) “Custodiol II”26: A claim directed to a composition consisting of various components and claiming inter alia an amount of magnesium chloride of 8 to 12 mmol does not cover, under the doctrine of equivalence, a composition matching all claimed features, however, comprising only 4 mmol of magnesium chloride. b) “Cutting Device”27: A claim directed to a cutting device inter alia defined by a particular angle of 10 to 22 is not infringed, under the doctrine of equivalence, by a respective cutting device making use of an angle of 25 . On the other hand, the German Federal Supreme Court found a cutting device making use of an angle of 8 40’ to infringe a claimed device characterized by an angle of 9 to 12 “Cutting Device”28. (3-6) Time of equivalence determination. A patented invention is considered to be infringed if the person skilled in the art is able on account of his technical knowledge available to him at the priority date of the patent to identify the modified means employed in the challenged infringement form as being equally (equivalently) effective in the solution of the problem underlying the invention29. 23

BGH GRUR 2012, 45, 47 et seq. – Diglycidverbindung. BGH GRUR 1984, 425, 427 – Bierkla¨rmittel (in this case in which the user exceeded the claimed data by 20 % to 30 % infringement was not acknowledged). 25 Benkard/Scharen, PatG, § 14 No. 74. 26 BGH GRUR 2002, 527 – Custodiol II. 27 BGH GRUR 2002, 519 – Schneidmesser II. 28 BGH GRUR 2002, 515 – Schneidmesser I; Kunststoffrohrteil, Schneidmesser I, Schneidmesser II, Custodiol I and Custodiol II in Mitt 2002, 212–224. 29 See e. g. OLG Du ¨ sseldorf GRUR Int. 1993, 242 – Epilady VIII, referring to BGH GRUR 1988, 896, 899 – Ionenanalyse 24

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The fact that the modified solution was not yet established at the priority date does not in any case preclude its inclusion within the protective scope of the Patent in the context of an equivalent infringement of the patent30. In such a case, the fact that the requirements of equivalence and discoverability on the basis of the technical teaching of the patent claim have been met will be sufficient to justify such an inclusion with the protective scope of the patent, if one assumes that the substitute would have been known to a specialist practitioner at the priority date, even though it actually only became available at a later date.

2. Direct patent infringement Acts of infringement are listed in § 9 PatG which differentiates between product patents (§ 9 No 1 PatG) and process patents (§ 9 No. 2 and No. 3 PatG). (1) Product patent. The principal ways in which infringement of a product patent can be committed are the production, offer, distribution, industrial use of a product31, its importation32 or possession for an infringing purpose. (2) Process patent. The scope of protection of manufacturing-process claims according to § 9(3) PatG which corresponds to Art. 64(2) EPC is not limited to offer or use of the process but also covers direct process products. The scope of protection is not restricted to products which are produced in Germany but also covers products which have been manufactured in foreign countries as long as the product was manufactured by the patent protected process and appeared in the territory of Germany. It is also to note that the scope of protection of process claims is not restricted to final products but also covers an intermediate which has been obtained after effecting the process steps protected in the patent in question and which is further processed for obtaining another product as long as it has not lost its characteristics which it had obtained through the patented manufacturing process33. In case of new products reference is made to the rules concerning the shifting of the burden of proof (see Part 7 I. 8. (3)). (3) Product by process patent. Product-by-process and product-by-apparatus claims are admissible under German (and European) practice; see Federal Supreme Court (BGH) in the landmark decision “Trioxan”34 and “Farbbildro¨hre”35. Since these types of claims are real product claims, a product-by-process or product-by-apparatus claim can be granted only if the product is novel and inventive. Usually such claims are characterized by the wording “product X obtained/obtainable by process Y”. The question how to construe such claims is still under discussion in Europe and not answered uniformly. According to German case law a product-by-process claim covers any product which is identical with the product obtained by realizing the features of the product-by-process claim or product-by-apparatus claim. 30 OLG Du ¨ sseldorf InstGE 10, 198 – zeitversetztes Fernsehen; Schulte/Rinken/Ku¨hnen, PatG, 9th ed., ¨ § 14 No. 64; dissenting view: Benkard/Scharen, PatG, § 14 No. 113; differentiating: Benkard/Scharen, EPU (European Patent Convention), 2nd ed. 2012, Art. 69 No. 64. 31 BGH GRUR 1990, 997 – Ethofumesat. 32 OLG Hamburg GRUR Int. 1991, 301 – Trimethoprim. 33 Schulte/Ku ¨ hnen, § 9 No. 69; Benkhard/Scharen, § 9 No. 55; Mes, Patentgesetz (German Patent Act)), 3rd ed. 2012, § 9 No. 54; Beier/Ohly, “Was heißt ‘unmittelbares’ Verfahrenserzeugnis? Ein Beitrag zur ¨ , GRUR Int. 1996, 973, 986. Auslegung des Art. 64 (2) EPU 34 BGH GRUR 1972, 80 – Trioxan, English translation in IIC 1972, 226. 35 BGH GRUR 1979, 461 – Farbbildro ¨ hre.

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Part 2. Matter of infringement

Hence, a product-by-process claim and a product-by-apparatus claim are product claims which, just as claims defined by the structural features of the product, grant absolute product protection. This means that the product is protected for any use of it, irrespective of its method of preparation. The BGH in its decision “Tetraploide Kamille”36 has again confirmed that irrespective of its concise wording (“obtainable by” or “obtained by”), the scope of protection of a product-by-process claim covers the product per se. That means that any identical product, even when produced in a completely different way, e. g. through a new and inventive process, is still embraced. As a consequence a product by process claim granted in Germany would also protect the state or use of a product that is made outside of Germany/Europe.

3. Indirect patent infringement The prohibition of indirect use, i. e., contributory patent infringement, is laid down in § 10 PatG. This provision is aimed at preventing an unauthorized use of a patented invention. It prohibits a third party from offering and supplying means and/or elements which enable the purchaser to illegally use the patented invention. (1) General principles. Any third party indirectly infringes a patent if it supplies a person in Germany with “means relating to an essential element of the invention” for unauthorised use of the invention in Germany if the supplier knows or if it is obvious in the circumstances that the said person intends to use these means for using the invention. § 10 PatG was modelled on Art. 30 of the Community Patent Convention37, which is why similar provisions are in force in a number of European countries. The idea behind indirect infringement is that the patent holder can already start legal action before his patent is actually infringed by the purchaser of such means. There are several scenarios where this is of utmost interest of the patentee. For example, if his patent is infringed by a great number of companies, it may be difficult for the patentee to locate and prosecute every individual infringer. If these infringers all depend on one supplier the patent holder can seek to stop the infringement at source by asserting claims for indirect infringement against the supplier. This efficient strategy is fast and economical. Indirect patent infringement also plays a considerable economic role in connection with replacement parts. Typically, a patent holder not only wishes to control the production and distribution of a protected device but also the business in spare parts and operating materials that are needed to use the protected invention. This is for example the case with ink jet printers and coffee pad/capsule machines. In such cases, a patent holder may try to claim the combination of a device and a replacement part wherein the configurations, shapes and dimensions of the replacement part are such that it can only be reasonably used in the concretely sold device according to the patent (in the “actual” invention). In this case, the patent holder can basically take action against third party suppliers who sell “suitable” but known spare parts or operating materials on grounds of indirect patent infringement. (2) Material requirements. The potential indirect infringer must offer or deliver, in Germany, a means which relates to an essential element of the patented invention. In doing so, he must know or should know that his customer intends to use the means for working the invention in Germany. 36

BGH GRUR 1993, 651 – Tetraploide Kamille. In the version of 1975 by means of the Gemeinschaftspatentgesetz (German Community Patent Act) of July 29, 1979. 37

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I. Germany

Offer/Delivery of a means in Germany. Unlike direct infringement and by its very nature, the notion of indirect patent infringements only covers the acts of offering or delivering an object, as opposed to manufacturing, using or possessing it for said purposes. The term “means” relates to any physical object. Double reference to the German territory. Indirect infringement requires a so called “double reference” to the German territory. Delivery or offer must take place in Germany. The customer must further intend to make use of the invention within Germany. If the potential infringer intends to use the invention abroad (e. g. assembles the protected device outside Germany) he can in principle not be liable for indirect infringement. In the past, export business regarding such parts with foreign customers was not considered as an act of contributory infringement. In its judgement of January 30, 2007 – “Radio Controlled Clock II38” – the BGH changed this view. According to the BGH the delivery of parts from Germany abroad has to be considered as an infringing act within Germany under the precondition that patent protected use in Germany is intended by the foreign customer. This was true in the “Radio Controlled Clock II”case where a German company delivered detection devices for a patent protected radio clock to its customer in Hong Kong who produced radio clocks and delivered them into Germany. Essential element of the invention. The means which are offered or delivered must relate to an essential element of the invention. In its decision of May 4, 2004 “Impeller Flow Meter”39 the BGH has construed the term “essential element of the invention” extremely broad and patentee-friendly. The Supreme Court made clear that basically every feature of the claim, unless of absolutely minor importance, is an essential element according to § 10(1) PatG. In its decision “Pipettensystem”40 dated February 27, 2007 the BGH limited this broad approach and held that components which do not contribute anything to the solution of the invention cannot be considered as an essential element, even if they are named in the features of the patent claim. In a recent case law “MPEG-2 Coding Process”41 the BGH even required that the means have to contribute to the realization of the inventive concept. Customer’s intention to use the means for infringement. The potential indirect infringer’s customer must intend to use the delivered means for working the invention in Germany, that is, for example, to complete the protected device with the delivered part. It is not required that the customer eventually and subsequently realizes this plan. It is sufficient that he plans to do so at the time of the delivery or the offer, as the case may be. The patent holder bears the burden of proof for the customer’s intention, which, depending on the case, may be difficult to establish. For proving the customer’s intention, the patentee may resort to the experiences of everyday life. For example, where the supplier recommends a certain use, it can be expected that his customers follow such recommendation. The same applies where a device is, due to its nature and composition, practically tailored for the inventive use. Where there are no such inferences as to the customer’s actual intention, the patentee can argue that it is obvious that at least a great part of the customers intend to use the object for infringing the patent. In its decision of 10 October 2000 “Luftheizgera¨t – air 38

BGH BGH 40 BGH 41 BGH 39

GRUR 2007, GRUR 2004, GRUR 2007, GRUR 2012,

313 – Funkuhr II. 758 – Flu¨gelradza¨hler; English translation in IIC 2005, 963. 769 – Pipettensystem. 1230 – MPEG-2-Videosignalkodierung.

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heating apparatus”42, the BGH has, however, ruled that this kind of evidence requires a very high probability that the object can and will be used that way. The intention to use the means in an infringing way must be beyond reasonable doubt. In yet another case of 7 June 2005 “Antriebsscheibenaufzug – drive pulley elevator”43, the BGH confirmed these findings: in that case, defendants offered drive units which due to their flatness could be used for a patented drive pulley elevator which did not require a separate machine room. They had even pointed to such use in their product brochure, the distribution of which they had in the meantime undertaken to stop. However, the unit could also be used for traditional elevators, which use was also described in their brochures. The BGH ruled that the fact alone that the installers may very well be aware of the possibility to use the unit in the advantageous way as claimed in the patent and even a certain probability that they are inclined to do so does not replace factual evidence to the effect that the installers are in fact planning such use.

II. Japan 1. Scope of protection of the patent in action Article 70, Paragraph 1 of the Japanese Patent Act stipulates that the technical scope of a patented invention shall be determined based upon the statements in the scope of patented claims attached to the application. This Article uses the expression, “technical scope of a patented invention”, in the meaning of “protective scope of a claim”, and the expression, “scope of patented claims”, in the meaning of “patented claims”. In the followings, “protective scope” is used instead of “technical scope”, and “patented claims” is used instead of “scope of patented claims”. Based upon these terminologies, we can say that the protective scope of a patented invention has to be determined on the basis of statements of a patented claim, according to Article 70, Paragraph 1 of the Japanese Patent Act. (1) Literal scope of claim. (1-1) Description and drawings. The wording of a claim is the basis for interpreting the protective scope. To interpret the wording of a claim, the description and the drawings of the patent application should be taken into consideration, according to Article 70, Paragraph 2 of the Japanese Patent Act. A judgement of the Intellectual High Court has also held explicitly that it should be necessary to take the contents of the description of patent into consideration in order to specify the literal meaning of the wording in a claim44. This represents the general notion of the Japanese infringement courts as the basis of claim interpretation. The first step for interpreting the meaning of the wording in the claim is to identify the general meaning of each term. If there is a definition for the term in the description, it is necessary to compare the general meaning with the definition. Insofar as the definition of the term is not contradictory to its general meaning, the term should be interpreted according to the definition. If the definition is contradictory to the general meaning, the infringement courts tend to seek a meaning that could harmonise those contradictory meanings. If it is impossible to harmonise the meanings, such a contra42

BGH GRUR 2001, 228 – Luftheizgera¨t (air heating apparatus). BGH GRUR 2005, 848 – Antriebsscheibenaufzug (Drive Pulley Elevator). 44 A judgement of the Intellectual Property High Court on 28th September 2006, Case No.: Heisei 18 (ne) 10007 etc., – zukei-hyoji-sochi oyobi hoho jiken (device and process for displaying figures case). 43

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diction could lead to invalidation of the patent, because of lack of clarity of the wording of the claim, pursuant to Article 36, Section 6, No. 2 of the Japanese Patent Act45. Even if there is no definition of a term used in a claim, the infringement courts tend not to use the general meaning of the term mechanically, but to take the whole contents of the description and the drawings into consideration, and to modify the general meaning of the term. If there is neither a general meaning nor a definition in the description for a term in the wording of a claim, courts tend to take the whole description and the drawings into consideration to seek the specific meaning of the term of the claim. (1-2) Prior art. Some judgements of the Supreme Court held that it was permitted to take the prior art into consideration to interpret the meaning of a word in the claim and to specify the protective scope46. The prior art is not restricted to those inventions that are explained or indicated in the description of the patent. The infringement courts, therefore, may consider any prior art to specify the protective scope. There were also some judgements which reduced a protective scope of a patented invention by cutting the part corresponding to the prior art47. This presented a problem because if a prior art reference was included in the scope of protection, the patent should rather be declared invalid, because of lack of novelty. The judgements cutting off the part including a prior art were a kind of compromise, because, before the judgement of the Supreme Court in 200048, the infringement courts might not declare a patent to be invalid, even if the courts reached the conviction that the protective scope included the prior art. Since the judgement in 2000, the infringement courts may recognise the invalidity of an allegedly infringed patent. If the part that allegedly is infringed is corresponding to the prior art, the courts can dismiss the action, because of invalidity of the patent, insofar as the patent holder does not succeed in an assertion to exclude the part corresponding to the prior art by a possibility of an (actual or hypothetical) correction decision of a trial board of the Japanese Patent Office. Therefore, it is no longer necessary to interpret the protective scope unnaturally in order to cut off the part corresponding to the prior art from the protective scope. (1-3) Prosecution history. If a patent examiner finds a reason for refusing a patent application, because of a prior art corresponding to the subject matter of the invention, the examiner will give a notice thereof to the applicant, and gives the applicant a chance to submit a written opinion, according to Article 50 of the Japanese Patent Act. The applicant tends to state an opinion interpreting the protective scope of a claim narrowly to prevent the prior art from being included in the protective scope with or without an amendment of the claim. The infringement courts often take such prosecution history into consideration. 45 Part I, Chapter 1, 2. 2. 2. 1. (4) of the Guideline for Examination for Patent and Utility Model in Japan indicates such consequence. 46 For example, a judgement of the Japanese Supreme Court on 7th December 1962, Case No.: Showa 36 (o) 464, Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 16, No. 12, pp. 2321 – tansha-toro to ni okeru dassen-boshi-sochi jiken (device for preventing the derailing of coal carriages case). 47 For example, a judgement of the Japanese Supreme Court on 4th August 1964, Case No.: Showa 37 (o) 871, Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 18, No. 7, pp. 1319 = Hanrei-Jiho No. 387, pp. 20 = Hanrei-Times No. 166, pp. 120 – ekitai-nenryo-sochi jiken (device for liquid fuel case). 48 A judgement of Japanese Supreme Court on 11th April 2000, Case No.: Heisei 10 (o) 364, published in the Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 54, No. 4, pp. 1368 = Hanrei-Jiho No. 1710, pp. 68 = Hanrei-Times No. 1032, pp. 120 – hando-tai-sochi jiken (semi-conductor device case or Kirby’s patent case).

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Documents in the prosecution history are open to the public, according to Article 186 of the Japanese Patent Act. Such documents are nowadays available also in the website of the Japanese National Centre for Industrial Property Information and Training (INPIT)49. (1-3-1) Prosecution History as a means for interpretation. The infringement courts often interpret the meaning of a term of a claim considering such an opinion of the patent holder in the prosecution. A description and drawings are named as the basis for interpretation in the Article 70, Paragraph 2 of the Japanese Patent Act. Courts, however, uses an assertion of the patent holder in the prosecution not only as a proof to recognise the understanding of the person of ordinary skilled in the art, but also a means for interpretation of a term of a claim which is almost equivalent to a description and drawings. There is also an opposite view that the prosecution history should not be considered as a basis for interpretation. According to such a view, the prosecution history should not be a means for interpretation in itself, but just a process to make the means for interpretation clear. Otherwise, a patent applicant could not freely discuss issues with an examiner. (1-3-2) Prosecution history as a reason for estoppel. Courts often prohibit the patent holder from making an assertion contradictory to the opinion which had been asserted in the prosecution, because such an assertion contravenes the equity and good faith pursuant to Article 1, Paragraph 2 of the Japanese Civil Code. For example, in an infringement case about a patented invention of fluorescein electronic endoscopy, the device of the patented invention detected three colours, namely “red”, “green”, and “blue”, while the accused device was using only two colours, namely “red” and “green”. In the opposition procedure after the registration of patent, the patent holder had stressed the merit of the three colours’ system in comparison with the two colours’ system of the prior art. The court held that the patent holder should not assert in the infringement procedure that the two colours’ system was included in the protective scope of the patented invention50. Such a contravening assertion should be forbidden not only between the parties of an opposition procedure, but also toward everyone. (2) Doctrine of equivalents. (2-1) “Ball Sprine” judgement. The doctrine of equivalents has also been recognised in Japan since a judgement in the “ball sprine” case in 199851. The judgement held that: “However, even if, within the construction as indicated in the claim in the patent specification, there is a part which is different from the products, if (a) this part is not the essential part of the patented invention, (b) the purpose of the patented invention can be achieved by replacing this part with a part in the products and an identical function and effect can be obtained, (c) a person who has an average knowledge in the area of technology where this invention belongs could easily come up with the idea of such replacement at the time of the production of the products, (d) the products are not identical to the technology in the public domain at the time of the patent application of the patented invention or 49 The documents from the filing of an application to the grant of a patent are found under the URL: http://www.ipdl.inpit.go.jp/Tokujitu/pfwj.ipdl?N0000=118. 50 A judgement of the Tokyo District Court on 16th December 2009, Case No.: Heisei 21 (wa) 18950, Hanrei-Jiho No. 2110, pp. 114 = Hanrei-Times No. 1388, pp. 317 – keiko-denshi-naishikyo system jiken (system for fluorescein electronic endoscopy case). 51 A judgement of the Japanese Supreme Court on 24th February, 1998, Heisei 6 (o) No. 1083, Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 52, No. 1, pp. 113 = Hanrei-Jiho No. 1630, pp. 32 = Hanrei-Times No. 969, pp. 105 – mugen-shudo-yo ball-spline jiku-uke jiken (ball spline bearing for infinitely sliding case).

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II. Japan could have been easily conceived at that time by a person who has an average knowledge in the area of technology where this invention belongs, and (e) there were no special circumstances such as the fact that the products had been intentionally excluded from the scope of the patent claim in the patent application process, the products should be regarded as identical with the construction as indicated in the scope of the patent claim and fall within the scope of the technical scope of the patented invention.”52 (The emphasis with bold font is added by the author.)

According to this judgement, the following five requirements must be fulfilled for the recognition of equivalence: 1) The part of the claim differing from the allegedly infringing product is not the essential part of the patented invention; 2) The purpose of the patented invention can still be achieved in the case of replacing this part, and an identical function and effect can be obtained; 3) A person of ordinary skill in the art could easily come up with the idea of such replacement at the time of the production of the product; 4) The product after the replacement is neither identical to the technology in the public domain nor could have been easily conceived by the person of ordinary skill in the art; 5) There were no special circumstances that the product had been intentionally excluded from the scope of the patent claim in the patent application process. The patent holder has to be prove that the requirements from No. 1 to No. 3, while the alleged infringer has to prove that the requirements of No. 4 and No. 5 are not fulfilled53 (see Part. 7, II. 7(2-2)). Empirically, the application of the doctrine of equivalents to an allegedly infringing product or process is denied, mainly because the requirement of No. 1 or the requirement of No. 5 is not fulfilled. It is not easy to fulfil all five requirements. Therefore, the cases in which the application of the doctrine of equivalents was approved are not so many. (2-2) Requirement No. 1 – replacement of unessential element. With respect to requirement No. 1 the meaning of “essential elements of the patented invention” is the main disputed point. Most court judgements held almost unanimously that the “essential elements of the patented invention” meant the characteristic parts of a patented invention which are necessary to solve the particular problem of the invention54. However, there are some differences in these judgements how the characteristic parts of an invention should be recognised. Most judgements assume that the characteristic parts as concrete parts of a patented invention. The infringement courts divide a claim into some features, and specify which feature is characteristic for solving the problem of the invention. If the patented invention differs from the allegedly infringing product or process in this feature, the infringement courts denied the application of the doctrine of equivalents to the product or process. For example, in a case of “water storing tank and water cleaning machine”, the patented product – a water storing tank – had a circle-formed window which was attached to the transparent wall of the tank with an “elastic ring”. There was a room 52 A full text and summary of this judgement is available under the website of the Intellectual Property High Court: “http://www.ip.courts.go.jp/eng/hanrei/g_panel/index.html”. 53 A judgement of the Tokyo District Court on 7th October 1998, Case No.: Heisei 3 (wa) 10687, = Hanrei-jiho No. 1657, pp. 122 = Hanrei-times No. 987, pp. 255, – fuka-sochi system jiken (load equipment system case); 54 Recently, for example, a judgement of the Intellectual Property High Court on 26th September 2012, Case No.: Heisei 24 (ne) 10035, Hanrei-jiho No. 2172, pp. 106 – iryo-yo kashi-gazo no seisei-hoho jiken (method of producing visible images for medical use case); a judgement of the Intellectual Property High Court on 25th April 2013, Case No.: Heisei 24 (ne) 10080, – inryo-dispenser-yo cartridge yoki jiken (cartridge container for dispenser of drinks case).

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between the tank and the window to avoid the mist. In the allegedly infringing product, there was a rectangular window which was also attached to the wall of a tank with an “elastic rectangular part”. The Osaka District Court55 held that the allegedly infringing product did not meet the requirement No. 1 of the equivalent doctrine, because “ring”shaped of the elastic part was also the characteristic part of the patented invention. The judgement about the essential part of the patent invention is quite doubtful, because the function of the “elastic ring” in the patented invention is to make an airtight room between the wall of the tank and the window, and such airtight function is independent of the shape of an elastic part, insofar as the elastic material can make an closed airtight room between the tank and the window. The judgement is not oriented to the inventive idea on the basis of the problem to be solved, but rather clings to the concrete feature of a claim, so that the applicability of the equivalent doctrine is narrower56. Some recent judgements of the Intellectual Property High Court57, however, try to interpret the characteristic parts rather as an inventive idea to be derived from the problem-and-solution approach to the patented invention. For example, in the case of an invention of a golf club head, the patented invention bound a metal plate and a plastic plate of a golf club head with “a string”, while the contested product sandwiched a metal plate with two plastic plates bound by “small plastic pieces” going through each hole in the metal plates. The Tokyo District Court, in the first instance judgement of the case58, held that binding with “a” string was the essential part of the invention, and the doctrine of equivalents was not applicable, because the contested products differed in the essential part from the patented invention using small plastic pieces. On the other hand, the Intellectual Property High Court, in the second instance judgement of the case59, held that the essential part lay in the idea of strengthening the binding force of the metal plate with the plastic plate with a means going through the holes of the metal plate, and the doctrine of equivalents was held applicable, because binding with “a” string was not an essential part of the invention, insofar as the metal plate and the plastic plate were bound with some pieces going through holes of the metal plate. Such new tendency to interpret the essential part more idea-oriented could widen the applicability of the application of the doctrine of equivalents. Future court judgements should be observed carefully in this regard. (2-3) Requirement No. 2 – identical function and effect despite replacement. Empirically, in most infringement cases in which an equivalent infringement is alleged, the requirement of No. 2 is often fulfilled. It means that the contested product or process often has at least the same function or effect as the patented invention in spite of the replacement of some parts. In other word, the requirement No. 2 might be the minimum requirement to enter into the discussion whether the doctrine of equivalents was applicable60. 55 A judgement of the Osaka District Court on 22nd March 2012, Case No.: Heisei 22 (wa) 11353 – chosui-tank oyobi jyosui-ki jiken (water storing tank and water cleaning machine case). 56 Atsushi Kawada, kinto-ron (the equivalent doctrine), 2012, Jurist 1444, pp. 81, 86. 57 An introductory judgement of the Intellectual Property High Court on 29th June 2009, Case No.: Heisei 21 (ne) 10006, Hanrei-Jiho No. 2077, pp. 123 – chuku golf club head jiken (hollow golf club head case); a judgement of the Intellectual Property High Court on 28th March 2011, Case No.: Heisei 22 (ne) 10014 – chika-kozo-butsu-yo maru-gata-huta jiken (round cover for underground structure case). 58 A judgement of the Tokyo District Court on 9th December 2008, Case No.: Heisei 19 (wa) 28614 – chuku golf club head jiken (hollow golf club head case). 59 A judgement of the Intellectual Property High Court on 29th June 2009, supra note 57. 60 Toshiaki Iimura, the ex-President of the Intellectual Property High Court, has mentioned in a symposium of the Tokyo Bar Association in 2012 – “tokkyo-funso no yori tekisei na kaiketsu (more proper solution of patent disputes)” – that the requirement No.2 of the equivalent doctrine should be examined at first among the five requirements, 2012, Patent Vol. 65, No. 8, pp. 123, 136.

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(2-4) Requirement No. 3 – obviousness of replacement at the time of infringing. It is determined in consideration of the technologies existing at the date of exploitation of a patented invention whether it is easy for a person of ordinary skill in the art to replace an unessential part with other means than the patented feature. The crucial date is, therefore, not the date of filing the patent application, but the date of the alleged infringement. Japanese infringement courts often denied the applicability of the doctrine of equivalents to a replacement which had already been foreseeable at the time of the patent application, because such modifications could have been claimed at the time of the patent application, and nevertheless had not been claimed. The doctrine of equivalent is also applicable to the replacement of a feature by a means developed after the patent application of the invention, even if such a means could have had an inventive step at the time of the patent application. (2-5) Requirement No. 4 – objection of free technology. If a product or a process is identical to the technology in the public domain or easily invented by a person of ordinary skill in the art at the filing date of the patent, everyone may exploit such a product or a process. There is no room for applying the doctrine of the equivalents for such a product or process exploiting the free technology This objection on the basis of free technology, however, has clearly become less significant after the judgement of the Supreme Court in 200061 which had admitted the objection of patent invalidity in an infringement action. If a patented product or process is close or similar to a product or a process belonging to free technology, the patent often could be invalid, because of lack of novelty or inventive step. The alleged infringer normally makes an effort to assert the invalidity of the patent so that both a literal and equivalent infringement could be denied without entering into some detailed discussion about it whether an alleged infringing product or process should belong to the protective scope of a claim. (2-6) Requirement No. 5 – objection of intentional exclusion. The objection on the basis of intentional exclusion from the scope of protection during the prosecution is a kind of file wrapper estoppel. Courts tend to take the prosecution history into consideration for interpreting the literal meaning of the wording of a claim, and furthermore do not allow the patent holder to make a statement which is contradictory to the statement asserted in the prosecution (see 2(1-3) above). With respect to the doctrine of equivalents, this tendency of courts becomes stronger, because they think it should be more deliberate to broaden the protective scope of a claim beyond the literal meaning of the claim, from the viewpoint of the function of claim which is notifying the scope of a patent right to the public. Empirically, the infringement courts often denied the application of the doctrine of equivalents because of this objection on the basis of the requirement No. 5. For example, in a case of a device consisting of a telephone transmitting/receiving unit and a mobile communication unit, the applicant of patent had made a statement that the subject matter of the invention did not have an antenna on the telephone transmitting/ receiving unit, but on the mobile communication unit, so that the subject matter of invention was different from the prior art which had an antenna on the telephone transmitting/receiving unit. The Intellectual Property High Court denied the applicability of the doctrine of equivalents to the contested product which also had an antenna on the telephone transmitting/receiving unit62. A judgement of Japanese Supreme Court on 11th April 2000, supra note 48. A judgement of the Intellectual Property High Court on 26th June 2012, Case No.: Heisei 24 (ne) 10002, – denwa-so-jyushin-unit, idotai-tsushin-chukei-tanmatsu, oyobi idotai-tsushin-tanmatsu jiken (telephone transmitting/receiving unit, mobile communication relay terminal and mobile communication terminal case). 61 62

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(2-7) Patented inventions containing numerical ranges. There are many patented inventions the claims of which are containing numerical ranges. Some of these numerical date and ranges are regarded just as the ordinary numerical ranges in the technical filed of the invention. However, most numerical ranges are regarded as the essential part of an invention. In such cases, an application of the equivalent doctrine is denied to a product or process with the ranges out of the numerical ranges, because exploitations outside of the numerical ranges do not fulfil the requirement No. 1. For example, the claim of an invention was directed to a material used for stabilising soil, which contained “aluminium sulfate” and “calcium sulfate” in a mass percentage ranging from 1 to 20 percent. In the description, the applicant of the patent stressed that the effect of invention, namely the stabilisation of the soil, was derived from the ingredients having such a range in the mass percentage. The contested product contained 28 percent of “calcium sulfate”. The Tokyo High Court63 held that the mass percentage of the ingredients from 1 to 20 percent was an essential part of the invention, and the equivalent doctrine could not be applied, because the contested material differed in the essential part from the patented invention.

2. Direct infringement Whoever exploits an invention without any consent of a patent holder or the statutory justification infringes the patent directly. Ways of “exploitation (or working)” are defined in Article 2, Paragraph 3, No. 1 to 3 of the Japanese Patent Act which exclusively enumerates the examples of exploitation acts for each category of inventions, namely invention of product, invention of process, and invention of process for producing products. This definition of “exploitation” has the function to distinguish the infringing activities from free activities. The activities which can be “exploitation” acts are limited to the activities defined in this paragraph64. In the case of an invention of product, “exploitation (or working)” means “producing”, “using”, “assigning”, “leasing”, “exporting”, “importing”, “offering for assignment or lease” or “displaying for the purpose of assignment”. In the case where the product is a computer program or the like, “assigning” or “leasing” includes “providing through an electric telecommunication line”. There are various ways of the exploitation for the invention of product. In the case of an invention of simple process, the exploitation of invention means just “using” this invention. In the case of an invention of process for producing products, the meaning of the exploitation is extended from “using” the process itself to more varied ways which are “producing”, “using”, “assigning”, “leasing”, “exporting”, “importing” or “offering for assignment or lease” the products produced by this process. Empirically, most inventions of process are related to producing products. In some courts’ cases65, the parties disputed if the patented invention was an invention of simple “process” or an invention of “process for producing”, because the scope of protection 63 A judgement of the Tokyo High Court on 12th July 2005, Case No.: Heisei 17 (ne) 10056, – ryokkadojyo-antei-ka-yo muki-shitsu-zairyo, sore-wo mochiita koso-kizai shushi-fukitsuke-kuho mataha dojyoantei-ka-hoho jiken (inorganic materials for greening and stabilising soil and spraying of thick-layer substrate seed or stabilization of soil using the same case). 64 Nobuhiro Nakyama, Tokkyo-ho (Patent Law), 2nd. ed., 2012, pp. 313. 65 For example, a judgement of the Japanese Supreme Court on 16th April 1999, Case No.: Heisei 10 (jyu) 153, Collection of Judgements for Civil Cases of Japanese Supreme Court, Vol. 53, No. 4, pp. 627 = Hanrei-Jiho No. 1675, pp. 37 = Hanrei-Times No. 1002, pp. 83 – guanijino ansoku-kosan-yudo-tai (derivative of guanidinobenzoate case).

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could be extremely different between an invention of simple process and an invention of process for producing. Sometimes the meaning of each way of exploitation itself is disputed. For example, the meaning of “producing” becomes the main issue in a case of exhaustion. If some parts of a patented product are exchanged with new parts, the parties discuss whether such an exchange of parts is new production of the patented product or simple repair of the patented product. A so-called “product by process claim” is admitted as a type of an invention of product. However, it is discussed whether or not the “process” part in the wordings of a claim limits the protective scope of the invention. “The Guidelines of Examination of Application for Patent and Utility Models in Japan”66 of the Japanese Patent Office regards that a product-by-process claim is not limited by the process part in the claim67. A judgement of the Grand Panel of the Intellectual Property High Court in 201268, however, held that “product-by-process claim” should be divided into two categories which are dealt with differently with respect to the possibility of the limitation of the protective scope of patented invention by the process part: “Where, for an invention of a product, a process to manufacture the product is stated in the scope of claims, such a claim is generally called a ‘product-by-process claim.’ …product-by-process claims as mentioned above fall into two types, specifically: (i) claims in which a product is specified by means of a process to manufacture the product because there are circumstances where it is impossible or difficult to directly specify the product by means of the structure or feature of the product at the time of filing an application (in relation to this case, such claims are referred to as ‘Authentic Product-by-Process Claims’ for convenience); and (ii) claims “in which a process to manufacture the product is stated in addition to a product, though it cannot be said that there are circumstances where it is impossible or difficult to directly specify the product subject to the invention by means of the structure or feature of the product at the time of filing an application (in relation to this case, such claims are referred to as ‘Unauthentic Product-by-Process Claims’ for convenience). The court examines product-by-process claims based on this distinction. …for Authentic Product-by-Process Claims, the technical scope of the invention is interpreted as ‘not being limited to products manufactured through the manufacturing process stated in the scope of claims but also covering any ‘products’ that are identical to the products manufactured through said process.’ Contrarily, for Unauthentic Product-by-Process Claims’, the technical scope of the invention is interpreted as being limited to products manufactured through the manufacturing process stated in the scope of claims.”69 (The emphasis with bold font is added by the author.)

This contradiction between the practice of the Japanese Patent Office and the judgement of the Grand Panel of the Intellectual Property High Court should be solved in the near future by a proper judgement of the Supreme Court.

3. Indirect infringement Besides the direct infringement, the Japanese Patent Act stipulates some types of indirect infringement in order to strengthen the protection of patents. Indirect infringement is similar to “mittelbare Verletzung” of the Germany Patent Act or “contributory infringement” of the US-Patent Act. 66 An English translation of this guideline is available under the website of the Japanese Patent Office: http://www.jpo.go.jp/tetuzuki_e/t_tokkyo_e/1312-002_e.htm. 67 Part II, Chapter 2, 1.5.2 (3) Claims defining products by the manufacturing processes (product-byprocess claims) of the Examination Guidelines for Patent and Utility Model in Japan. 68 A judgement of the Intellectual Property High Court on 27th January 2012, Case No.: Heisei 22 (ne) 10043, Hanrei-Jiho No. 2144, pp. 51 = Hanrei-Times No. 1397, pp. 199 – pravastatin lactone oyobi epipravastatin wo jisshitsu-teki ni hukumanai pravastatin sodium jiken (pravastatin sodium substantially free of pravastatin lactone and epi-pravastatin, and compositions containing same case). 69 An English translation of the full text and summary of this judgement is available under the website of the Intellectual Property High Court: “http://www.ip.courts.go.jp/eng/hanrei/g_panel/index.html”.

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(1) Old types of provisions against indirect infringements. In Japan, acts of “producing”, “assigning”, “leasing”, “importing” or “offering for assignment or lease” any products which are used exclusively for producing patented products or for using the patented process as business are regarded as an infringement of the patent, according to Article 101, No. 1 or No. 4 of the Japanese Patent Act. A product which is “used exclusively for producing the patented product or for using the patented process” means that there are not any other economical, commercial or practical possible applications than the uses for the patented product or process70. This prerequisite for these types of provisions against indirect infringements is so high that these types of provisions against indirect infringements can rarely be fulfilled. When the Japanese Patent Act 1959 was enacted, there were just two types of provisions against indirect infringements, namely the types stipulated in Article 101, No. 1 and No. 4 of the Japanese Patent Act in the present version. Just as explained above, however, the scope of indirect infringement, according to Article 101, No. 1 or No. 4 of the Japanese Patent Act in the present version, is so narrow. Therefore, there were arguments that patent holders were not sufficiently protected by these type of provisions against indirect infringements. (2) New types of provisions against indirect infringements. New types of indirect infringement have been introduced in 2002. Namely, two types of provisions against indirect infringements have been stipulated in Article 101, No. 2 and No. 5 of the Japanese Patent Act in the present version. According to the new types of provisions against indirect infringements, acts of “producing”, “assigning”, “leasing”, “importing” or “offering for assignment or lease” any products, excluding those products available generally within the Japanese territory, which are used for producing a patented product or using a patented process as business, and indispensable for solving the problems of the patented invention are regarded as an infringement of the patent, insofar as an alleged infringer knows that the invention is patented, and that the product is used for exploitation of the invention. These new types of provisions against indirect infringements were expected to be applicable more often than the old types of provisions against indirect infringements. In the new types, it is not necessary that a product is used exclusively for producing the patented product or for using the patented process. The product may have other economical, commercial or practical possible applications than the uses for the patented product or process. Therefore, the new types of indirect infringement could include producing or using wider range of products, even though these types of indirect infringement excludes producing or using such staple products which are available generally within the Japanese territory. The knowledge of the existence and exploitation of patented invention can easily be proven, for example, by a warning letter which has been sent to the allegedly indirect infringer. Some judgements of courts for infringement cases, however, require that, for approving an indirect infringement on the basis of a new type of provisions against indirect infringement, a product should have a close relationship with the innovative characteristic technical elements of the patented invention to admit the “indispensa-

70 A judgement of the Intellectual Property High Court on 23rd June 2011, Case No.: Heisei 22 (ne) 10089, Hanrei-Jiho No. 2131, pp. 109 – shokuhin no tsutsumikomi-seikei-hoho oyobi sono sochi jiken (process and device enveloping and molding foods case). The final appeal and the petition for acceptance of final appeal to the Supreme Court against this judgement was dismissed or rejected.

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bility of the product for solving the problem of the invention”71. As a result of such judgements, the scope of the new type of provisions against indirect infringements is not be so wide as expected at the time of amendment in 2002. (3) Indirect infringement in the practice. Empirically, it is rare that an indirect infringement is approved in a court judgement. In most cases, courts denied an indirect infringement. Courts often held that, for example, last products manufactured from products as a material, which were allegedly infringing the patent right indirectly, were not included in the protective scope of the patented invention. Also, courts often held that the patent allegedly infringed indirectly should be regarded as invalid by a judgement of the (hypothetical) trial for patent invalidation in the Japanese Patent Office, according to Article 104–3 of the Japanese Patent Act. It is, therefore, rare that an indirect infringement is denied because the prerequisites peculiar to indirect infringement is not fulfilled72.

III. USA 1. Scope of protection (1) The wording of the claims. The claims of a patent define the scope of protection. The figures and text of the patent provide a description and examples of the invention and provide a context for the claims. However, it is only the claims that define the breadth of the patent’s coverage. Each claim is effectively treated as if it is a separate patent, and each claim may cover more or less than another claim. (2) Claim interpretation. Claim interpretation is a question of law to be decided by the trial judge. There is no required time period during the course of litigation for the judge to rule about the scope of a claim. In some litigations it is an evolving process. In most litigations the issue is the subject of a proceeding (called a Markman hearing73) in which the judge addresses disputes the parties may have about the meaning of various of the claim elements, which in turn defines the scope of each claim. Without an early ruling it is difficult to know what is needed to establish infringement or assess the significance of the prior art as it might affect validity. Therefore, many judges have adopted the practice addressing the issue of claim scope early in the litigation process. The parties are not permitted an interim (interlocutory) appeal from the judge’s rulings about claim scope. Any appeal must await final judgment. Because the issue of claim scope is a question of law, on appeal the Federal Circuit conducts an independent assessment of claim scope. This can result in the setting aside of the final judgment or remanding the matter back to the district court on the basis that the decision below was premised upon an erroneous claim interpretation.74 71 For example, a Judgement of the Tokyo District Court on 28th February 2013, Case No.: Heisei 23 (wa) 19435 etc., – iyaku jiken (medicine case). 72 Atsushi Kawada, “kansetsu-shingai no honsitsu-ron” ha “honshitsu-ron” ka (Is the argument about the essence of indirect infringement actually an argument about the essence of indirect infringement?), chiteki-zaisan-ho-kenkyu, 2013, No. 147, pp. 1, 5. 73 See Markman v. Westview Instruments, Inc., 52 F.3 d 967 (Fed. Cir. 1995) aff’d, 517 U.S. 370, 116 S. Ct. 1384, 134 L. Ed. 2 d 577 (1996). 74 The independent review by the Federal Circuit which does not give deference to the trial court’s analysis has been the subject of criticism as many argue that the issue is a mixed question of law and fact. It is likely that the issue may soon be considered by the Supreme Court.

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The claim interpretation process and the standards used by courts are different from those which apply in PTO proceedings. A court interprets a claim in light of the specification and may look to extrinsic evidence in discerning its scope. The PTO reads claim language more broadly and considers the words to encompass the broadest interpretation that the words permit. This in part explains why a party accused of infringement often seeks to initiate PTO proceedings to attack validity because it is easier to demonstrate the applicability of the prior art to a more broadly interpreted claim. However, there are many instances in which the court does not suspend the litigation during the pendency of the PTO proceedings. On occasion, inconsistent decisions may result (See FN1 In re Baxter Int’l Inc. supra) and the Federal Circuit becomes the final arbiter. Under the provisions of AIA it is likely that there will be more court suspensions in deference to the PTO. In part this is because one of the newly available PTO proceedings known as Inter Partes Review (IPR) are (i) conducted by the Patent Trial Appeal Board (PTAB), not a patent office examiner, (ii) is a more fully contested administrative proceeding before a three administrative law judge panel, (iii) is subject to strict time constraints, i. e., it must be completed within one (1) year of the PTAB accepting the matter. Nonetheless, the decision to stay a litigation pending the IPR is a matter to be decided by the federal court judge.

2. Direct patent infringement75 Under the United States Patent Statute 35 U.S.C. § 271 there are a number of acts that constitute patent infringement, including enumerated activities which if conducted abroad can result in a violation of U.S. patent law. These include direct patent infringement and a number of activities that can be considered indirect patent infringement, including inducement; contributory infringement; and infringement through the supply of components from the USA to another country. There are two types of “direct patent infringement”: (1) “literal infringement” and (2) “infringement under the doctrine of equivalents.” To prove direct infringement by literal infringement, the patent owner must prove that the alleged infringer made, used, sold, offered for sale within, or imported into the United States a product or process that meets all of the requirements of at least one of the claims of the patent and did so without the permission of patent owner during the time the patent was in force.76 If an accused infringer’s activities do not meet all of the requirements of a claim and therefore does not literally infringe that claim, there can still be direct infringement if the accused product or process satisfies the patent claim “under the doctrine of equivalents.” (1) Requirements of equivalents. Under the doctrine of equivalents, a product or process infringes a claim if the accused product or process contains elements or performs steps corresponding to each and every requirement of the claim that is equivalent to, even though not literally met by, the accused product or process. If a person having ordinary skill in the field of technology of the patent would have considered the differences to be “insubstantial” or would have found that the structure or action (1) performs substantially the same function and (2) works in substantially the same way (3) to achieve substantially the same result as the requirement of the claim, there is equivalency.77 75 An excellent resource for understanding the predicates for infringement can be found in the Model Jury Instructions, published from time to time by the Federal Circuit Bar Association. www.federalbar.org or those of AIPLA www. Aipla.org 76 See Southwall Technologies, Inc. v. Cardinal IG Co., 54 F.3 d 1570, 1575 (Fed. Cir. 1995); see also 35 U.S.C.A. § 27.1. 77 Sanitary Refrigerator Co. v. Winters, 280 U.S. 30, 42, 50 S. Ct. 9, 13, 74 L. Ed. 147 (1929).

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(2) Time of equivalents determination. Equivalents is a mixed question of law and fact. The legal interpretation of what is the scope of the claim element is made by the court. However, the ultimate issue of whether the accused product or method element is in fact “equivalent” is decided by the trier of fact – usually a jury. (3) Equivalency and the prior art. The prior art may preclude a finding of infringement under the doctrine of equivalents. To determine whether the prior art precludes a finding of infringement under the doctrine of equivalents, it must be determined what products or processes existed in the prior art, as well as what products or processes would have been obvious from the prior art to a person having an ordinary level of skill in the field of technology of the patent at the time of the invention. If the alleged infringer establishes that a prior art product (1) meets the same claim requirements as the product or process that is accused of infringing and (2) has the same allegedly “equivalent” alternative feature(s) as the product or process that is accused of infringing or would have been obvious from the prior art to a person having ordinary skill in the field of technology of the invention at the time of the invention, then the claim has not been infringed.78 Another way the courts often express this concept is using a “hypothetical claim” analogy. The fact finder is asked to consider a “hypothetical claim” that would cover the accused allegedly equivalent product or process literally. The hypothetical claim is exactly the same as the claim at issue, except that the alleged “equivalents” claim element is substituted. It must then be decided whether this hypothetical claim would have been invalid for either anticipation or obviousness. If it is determined that the hypothetical claim would have been invalid for anticipation or obviousness, then there is no infringement under the doctrine of equivalents. (4) Equivalency and file history estoppel. A product or process cannot infringe a claim under the doctrine of equivalents if, during the patent application process, the applicant for the patent distinguished a claim feature from the prior art and after grant of the patent the patent owner seeks to ignore its earlier position. For example, the patent owner cannot successfully assert infringement under the doctrine of equivalents if statements were made to the PTO to obtain allowance of the claim which distinguished the claim from prior art in a way that restricts the scope of the claim. This is known as file history estoppel and requires careful analysis of what was said by the applicant and in what context it was said. To restrict equivalents: (1) the amendment that is asserted to limit the scope of equivalents must have substituted a narrower requirement for a broader requirement or replaced a requirement of equal scope; (2) the reason for making the amendment was related to patentability; (3) a person having ordinary skill in the field of technology of the patent at the time of the amendment would have foreseen the potential substitution of the allegedly “equivalent” alternative for the unmet claim requirement; (4) the amendment did not relate to a tangential issue other than the assertion of equivalence at issue; or (5) there was some other reason, such as the shortcomings of language which prevented the applicant from using claim language that included the allegedly “equivalent” alternative.79 78 Warner-Jenkins Co., Inc. v. Hilton Davis Chem. Co., 520 U.S. 17, 39 (1997); Johnson & Johnson Associates, Inc. v. U. R.E. Serv. Co., 285 F.3 d 1046, 1053–54 (Fed. Cir. 2002); DePuy Spine, Inc. v. Medtronics Sofomar Denek, Inc., 567 F.3 d 1314, 1321 (Fed. Cir. 2009). 79 See Honeywell Int’l Inc. v. Hamilton Sundstrand Corp., 370 F.3 d 1131, 1134 (Fed. Cir. 2004); see also Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., 344 F.3 d 1359 (Fed. Cir. 2003)(en banc); Interactive Pictures Corp. v. Infinite Pictures, Inc., 274 F.3 d 1371, 1380 (Fed. Cir. 2001); Al-Site Corp. v. VSI Int’l, Inc., 174 F.3 d 1308, 1320 (Fed. Cir. 1999); Wilson Sporting Goods Co. v. David Geoffrey &

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3. Indirect patent infringement – active inducement (1) Active inducement. Active inducement (35 U.S.C. § 271 (b)) of a claim requires proof that: (a) the alleged inducing infringer took action intending to cause acts of infringement by another who is a direct infringer; (b) the alleged inducing infringer was aware of the patent and knew or should have known that the acts, if taken by the direct infringer, would constitute infringement of that patent; and (c) the infringing acts are carried out by the direct infringer and directly infringe the claim. The patent owner has to establish specific intention on the part of the accused inducing party or deliberate activities of the accused infringer which demonstrate it was intentionally avoiding knowing the facts. Negligence is not sufficient.80 The Federal Circuit has held that the inducement can be based upon the activities of multiple parties, each of whom performs some of the steps in a method, but one party needs to direct or control the activities of the others81. The Supreme Court has held that under any circumstances direct infringement must be established and if the multiple parties are not under common control of the accused infringer, there is no liability under 35 U.S.C. § 271(b).82 Advising a third party, to for example perform a missing step to a method claim is not sufficient to establish control and therefore is insufficient to establish inducement. (2) Contributory infringement. Contributory infringement of a claim of a patent relates to activities in supplying an essential component (35 U.S.C. § 271 (c)). It requires proof that: (a) the alleged infringer sold or offered to sell, imported a component of a product, or apparatus for use in a process; (b) the component or apparatus has no substantial non-infringing use; (c) the component or apparatus constitutes a material part of the invention; (d) the alleged infringer was aware of the patent and knew that the products or processes for which the component or apparatus was made, used or sold had no other substantial use and may be covered by a claim of the patent or may satisfy a claim of the patent under the doctrine of equivalents; and (e) that use directly infringes a claim. (3) Infringement through the supply of components from United States for combinations made abroad. Active inducement of the foreign combination of components supplied from the United States violates the rights of a United States patent owner, (35 U.S.C. § 271 (f)) if: (a) the alleged infringer supplies (or causes to be supplied) components from the United States to a place outside the United States, which make up all or a substantial portion of the invention of any one of the claims of the patent; (b) the alleged infringer takes action intentionally to cause the alleged direct infringer outside of the United States to assemble the components; (c) the alleged infringer knows of the patent, and knows (or should have known) that the encouraged acts constitute infringement of that patent; and Associates, 904 F.2 d 677, 684 (Fed. Cir. 1990) disapproved of by Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83, 113 S. Ct. 1967, 124 L. Ed. 2 d 1 (U.S.S.C. 1993). 80 Commil USA LLC v. Cisco Systems, Inc. (Fed. Cir. 2013) 12–1042 Opinion 6-21-2013. 81 Muniauction, Inc. v. Thomson Corp. 532 F3 d 1318 (Fed. Cir. 2008). 82 Limelight Networks, Inc. v. Akamai Technologies (Sup. Ct. No. 12–786, June 2, 2014).

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(d) the encouraged acts would constitute direct infringement of the claim if they had been carried out in the United States. To establish active inducement of infringement, it is not sufficient to merely prove that the alleged direct infringer directly infringes the claim. It must also be proven that alleged infringer specifically intended for the alleged direct infringer to infringe the patent. An alleged infringer is also liable for infringement that occurs outside the United States upon proofs that mirror contributory infringing activities if conducted solely in the United States (35 U.S.C. § 271 (g)), i. e.: (a) the alleged infringer supplied a component, or caused a component to be supplied, from the United States to a place outside of the United States; (b) the only substantial use for the component is an infringing end product or process and that the end product or process would infringe if the combination had taken place in the United States; (c) the alleged infringer is aware of the patent and knows that the component or apparatus has no other substantial non-infringing use and may be covered by a claim of the patent literally or under the doctrine of equivalents; and (d) the alleged infringer intended that the component to be used by the alleged direct infringer and it was used in a product that would directly infringe the claim if it had been used in the United States. (4) Infringement by sale, offer for sale, use or importation of a product made outside the United States by a patented process. An alleged infringer is liable for direct infringement if, without the patent owner’s authorization the alleged infringer imports, offers to sell, sells, or uses within the United States a product which was made outside of the United States during the time the patent is in force by a process that, if performed in the United States, would infringe the claim literally or under the doctrine of equivalents (35 U.S.C. § 271(g)). However, if the product has been materially changed by an additional process or the product has become a trivial and nonessential component of another product, there is no infringement. It is of note that the statutory defenses of a material change or trivial component are not available in ITC proceedings.

4. Types of patents (1) Product patents. Product patents protect articles of manufacture and products are generally found to infringe based upon making, having made, using, selling or importation activities. A completed sale is not required. An offer for sale is sufficient. Because use or sale is an act of infringement a patent owner has the right to initiate litigation against the customer of the supplier, either with or without naming the supplier. This strategy is often used to permit the litigation to be initiated in a desired venue; or to cause concern by the customer which can result in a suspension of purchase of accused products until the issue is resolved; or to put the supplier in the position of having to provide indemnification and hold harmless agreements with its customers. (2) Process patents. Novel and unobvious processes or methods are also protectable. Infringement can be committed on the basis of the same activities established for a product. (3) Product by process patent. Patent protection is available by claiming a product on the basis of the process by which it is made. For purposes of patentability, “…even

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though product-by-process claims are limited by and defined by the process, determination of patentability is based on the product itself. The patentability of a product does not depend on its method of production. If the product in the product-by-process claim is the same as or obvious from a product of the prior art, the claim is unpatentable even though the prior product was made by a different process.” PTO Manual of Patent Examining Procedures (MPEP § 2113). What constitutes infringement of a product by process claim is unsettled. One three judge panel of the Federal Circuit has held that a product-by-process claim is not limited by the steps recited.83 Another panel has held that product-by-process claims only cover products produced by the process.84 At least one district court faced with this divergence of opinions has concluded that the recited process is a critical limitation. That decision attempted to assess the belief of the majority of the Federal Circuit court judges and concluded that the process limitation was required. 83 84

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SmithKline Beecham Corp. v. Apotex Corp., 439 F.3 d 1312, 1316, 1318–19 (Fed. Cir. 2006). Atl. Thermoplastics Co., Inc. v. Faytex Corp., 970 F.2 d 834, 846–47 (Fed. Cir. 1992).

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Part 3 Fact Finding Before starting a dispute in patent matters, the kind and scope of the infringing activities need to be clarified. The plaintiff has the duty to collect evidence. In many cases the patent infringing object will be easy to procure. Useful information can often be found in marketing brochures or in product descriptions of the producers or distributors. Moreover, product information and company profiles posted on the internet may be publicly available. However, additional measures are often necessary to discover and provide evidence of patent infringements. The product and/or process properties which are essential for proving the use of an invention can often not be discovered without further efforts.

I. Germany 1. Test-purchase According to case law of the BGH, test-purchases in the field of intellectual property are basically permitted.1 They can only be considered as contrary to public policy under specific circumstances. This is especially the case when the test-purchaser intends to “trick” the competitor or when objectionable measures are used to bring about an illegal business. Test-purchases are necessary, for example, when the attacked embodiment is a tailor-made product, which is only sold in a limited number on a small market.2

2. Product analyses and private expertises A product analysis can provide information about the composition of the attacked embodiment where the composition cannot be recognized by appearance. Working together with a renowned research institute or an independent laboratory is recommendable. An additional expert opinion from a private expert can facilitate proving an infringement. This is especially the case when proving a process patent infringement in the chemical field where a substance analysis can deliver further information about the respective manufacturing method. Depending on the complexity of the technical fact, the commissioning of experts in the technical field can be extremely helpful for understanding and preparing the writ of technical facts in the forefront of process related disputes.

3. Inspection claim With implementing the Enforcement Directive3 on basis of the “Gesetz zur Verbesserung der Durchsetzung von Rechten des Geistigen Eigentums” (law for improvement of the implementation of rights of intellectual property), which came into effect on September 1, 2008, the implementation of an inspection and submission claim was 1 Ko ¨ hler/Bornkamm/Ko¨hler, UWG (German Act Against Unfair Competition), 32nd ed. 2014, § 4 No. 10.161. 2 BGH GRUR 1992, 612 – Nicola. 3 Directive 2004/48/EC of the European Parliament and of the Council of April 29, 2004 on the enforcement of intellectual property rights.

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included into German patent law. With § 140 c PatG the legislator defined the prerequisites for the enforcement of the inspection claim. Different from the strict criteria of the former procedural practice4, an inspection claim can not only be asserted under the condition that there is a “predominant probability” for patent infringement, but already where there is a “certain likelihood” for infringing activities. The applicant only has to provide concrete indications for the existence of patent infringement, whereas not only the act of using as such (§ 9–13 PatG), but also the whole surrounding circumstances of infringing use (for example parallel products of the respondent abroad) may be illustrated. Furthermore, the applicant has to state why the filed measures of evidence preservation is necessary and has to give reasons why, despite strong efforts, there are currently no other easier possibilities to clarify facts and preserve evidence which are similarly suitable, i. e. significant and reliable. Due to the provision of the principle of proportionality, the interests of both parties including secrecy interests have to be weighed up against each other. Thus, the rights holder who has the burden of proof is able to inspect alleged patentinfringing objects, including methods processes and manufacturing plants. Furthermore, the presentation of written documents including bank and trade documents can be requested. The presentation and inspection claims are not only used for the identification of technical characteristics but also for the clarification whether an infringing conduct is really threatening or has already been committed5. Everyone who pursuant to § 139 PatG is entitled to file claims due to patent infringement is also entitled to claim inspection or submission of evidence and documents. The respondent is the alleged patent infringer. It is not admissible to file an inspection claim against non infringing third parties. As a rule, neutral patent attorneys who are sworn to secrecy are hired by the court as experts and are appointed for performance of the inspection as well as for the production of an appropriate written expert opinion. According to the case law of the BGH “Lichtbogenschnu¨rung”6 the alleged infringer’s right to maintain secrecy has to be respected. In cases where such an expert opinion has been obtained the alleged infringer has to have the opportunity to review the expert opinion and assert interests in secrecy before it is used in court proceedings. Upon alleged infringer’s request the court may order a partial or complete limitation of disclosure. According to § 140 c (3) PatG temporary measures such as interim injunction proceedings to achieve the inspection are provided by German patent law. The urgency requirement is generally fulfilled when it threatens that evidence which is in the power of disposal of the alleged infringer will be stashed away. The initiation of a proceeding on the merits following an evidence proceeding is not required. With the introduction of § 140 c PatG, the German legislature provided an effective instrument for evidence procurement and preservation, which is comparable with the French saisie-procedure. Practitioners are increasingly using the inspection claim for evidence preservation by way of interim injunction proceedings.

4. Seizure by customs authorities In case of import or export of patent-infringing products, border seizures by customs authorities are principally available. Border seizures are sometimes efficient measures for fact finding because they provide the possibility of detention and examination of suspect goods not only at the border but also at trade fairs. Since 2003 the Council Regulation (EC) No. 1383/2003 concerning customs action against goods suspected of 4

BGH GRUR 1985, 512, 514 – Druckbalken. Schulte/Rinken/Ku¨hnen, § 140 c No. 38. 6 BGH GRUR 2010, 318 – Lichtbogenschnu ¨ rung. 5

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I. Germany

infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights provides for customs actions to protect and enforce IPR in the EU. A new Regulation (EC) of June 2013 (No. 608/2013) concerning customs enforcement of intellectual property rights has become applicable as of January 1, 2014. Based on that provisions, IPR owners can file requests for customs action in order to protect their IP rights from counterfeits at the EU borders. In case a suspicion of an IPR infringement is given, customs can detain the suspicious goods and inform the right-holder accordingly. The current EU rules provide for a simplified procedure, allowing the infringing goods to be destroyed without the need of court proceedings.

5. Information claim In order to investigate origin and distribution channels of infringing products the patent holder is entitled to claim information pursuant to § 140 b PatG. The information claim pursuant to § 140 b PatG requires proof of an act of direct or indirect patent infringement. The so called danger of first infringement is not sufficient to establish this claim. The information claim is therefore not suitable for discovery and collection of evidence of upcoming infringing activities. Information claims are excluded in cases of disproportionality between the interest of discovery and the secrecy interest of the infringing entities. In cases of obvious patent infringement, the claim of information can also be enforced by interim injunctive relief7. Third parties, who are not liable because of patent infringement by themselves but who were customers of infringing services (§ 140 b, (2), No. 2 PatG) or who provided services for infringing actions in commercial amounts (§ 140 b, (2), No. 3 PatG), are subject to the information claim. Furthermore, the person who was named to be a participant of patent infringement by a person liable to disclose information (§ 140 b (2), No. 4 PatG) is also liable to disclose information. The claim for information against third parties is available in cases of obvious patent infringement or in cases where a patent infringement action is already pending. The information claim against a third party can be enforced in separate evidence proceedings and in cases of obvious infringement by way of interim injunction proceedings.

6. Investigation by public prosecutors Investigations are ex officio made by the public prosecutor or by the police as soon as a sufficient cause for infringing activities is established. According to § 142 (1) PatG intentional patent infringement is defined as a criminal act which will be prosecuted if there is a corresponding request for a penalty by the infringed party. A judicial clarification of facts ex officio requires the commercial trade with patent protected goods. Required are intentional and repeated commercial activities which are committed in order to establish a sustainable source of income. In such a case there are wide ranging investigation possibilities which include the confiscation of patent infringing goods and searches in the premises of the infringer. These possibilities are up-to-now rarely used in practice – however they play an increasing role in cases of product piracy during trade fairs.

7. Professional confidentiality obligations Attorneys at law (§ 383 ZPO, German Patent attorneys (§ 39 a (2) Patentanwaltsordungs8) and European Patent attorneys (Art. 134 a EPC) are under an obligation to secrecy. This obligation refers to everything which the attorney becomes aware of in the 7 8

OLG Du¨sseldorf GRUR 1993, 818 – Mehrfachkleiderbu¨gel. German Patent Attorney Code (PAO).

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course of his profession. This obligation does not cover facts which are common knowledge or which do not require any confidentiality. The obligation to secrecy continues to exist after termination of the mandate. From this backdrop attorneys have the right to refuse to give evidence before German courts based on the German Code of Civil Procedure. This right may, however, be waived. The client may allow the attorney to give evidence about confidential issues.

II. Japan 1. Test purchase The purchase of a product of a third party, which allegedly infringes a patent, is a usual method to discover or confirm an infringement. If the product is sold in the market and purchasable for everybody, there is no problem to obtain the product. If a patented product, however, is an intermediate product that is traded in a closed market, it is not easy to get such product. In such case, features of the intermediate product must be proven from the analysis of an obtainable end product. If the subject matter of the infringed patent is a product produced by a patented process, the patent holder can only assume the process from an analysis of the purchased product or the general technical know-how in the art. It is, however, often difficult to specify the exact process from an analysis of the product. Because of such difficulties in proving the process of a third party, a patent holder of a process patent must often abandon filing an infringement action.

2. Product analyses and private expertises If the allegedly infringing product has been obtained, however, the composition of the product is not clear at a glance, an scientifical analysis is necessary to identify its structure. A patent holder often has an ability to analyse the product. The first analysis is normally undertaken by the patent holder to discover or confirm the infringing fact. It is, however, also usual to ask an independent public technical institute or private technical institute to analyse the product, partly because such an institute has a special analytical device, or partly because the result of the analysis by a neutral institute is more credible. The infringement courts consider the result of such analyses as proof. If the experiments of both parties yield contradictory results, the infringement courts will try to examine both experiments to decide which is more credible. Courts may take all circumstances into consideration to determine the credibility of the experiments. It is, however, very rare that courts appoint an official expert to carry out an experiment or examine the contradictory results of the experiments of both parties, because it could delay proceedings. It is also difficult for both parties to reach an agreement on the conditions of the experiment to be conducted by an expert designated by the court. An expert opinion of a professor or a researcher of a university or technical institute is also sometimes useful, if there are some disputable points about the technical matter for which an authoritative explanation is necessary. Such an opinion is submitted to a court as evidence. Courts consider such an opinion as a proof for the ordinary skill in the art.

3. Procedural measures for collecting information about infringement In the Japanese civil substantial law, namely in the Japanese Civil Code, there is neither a substantial claim for inspection of an allegedly infringing product or process nor a substantial claim for information about allegedly infringing activities. 44

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The Japanese Code of Civil Procedure and in the Japanese Patent Act, however, contains procedural measures to order the holder of documents or subject matters to submit the information. (1) Preservation of evidence. According to Article 234 to 242 of the Japanese Code of Civil Procedure, a future party to litigation may request a court to take some measures to preserve evidence before filing an action. (1-1) Prerequisites and proceeding for preservation of evidences. If a court with the jurisdiction for such litigation admits the necessity of preservation of evidences, the court may, upon a petition of a future party, issue an order to preserve the evidences, according to Article 234 of the Japanese Code of Civil Procedure. Before the start of the proceeding, the court has to send a notice in advance to the holder of such evidence, according to Article 240 of the Japanese Code of Civil Procedure. The holder is usually the other party in a future action. In the practice, such a notice is usually sent to the holder on the very day of the start of the proceeding, because, otherwise, the evidence could be hidden or destroyed. For the proceeding of preservation of evidences, the articles of normal proceeding for taking evidences are directly applicable, according to Article 234 of the Japanese Code of Civil Procedure. (1-2) Preservation of documents. A court can order the holder of documents to submit the documents for the purpose of preservation of evidences, according to Article 223 of the Japanese Code of Civil Procedure. The holder can, however, refuse to disclose the documents, if the documents belong to the technical or professional know-how to be kept secret, according to Article 220, No. 4, lit. “ha” of the Japanese Code of Civil Procedure. In most patent infringement cases, the holder of documents is the alleged infringer, and the documents often concern the secrecy interests of the alleged infringer. In such case, the alleged infringer may refuse to submit it. In the practice, therefore, the preservation of evidences cannot function to obtain information to prove allegedly infringing activities. Article 105, Paragraph 1 to 3 of the Japanese Patent Act is a special provision of Article 223 of the Japanese Code for Civil Procedure (see Part. 7, II. 7(3-3)). Article 105 of the Japanese Patent Act is, however, applied for an “action concerning the infringement of a patent right”. This special provision, therefore, might not be applicable for the purpose of preservation of documents before filing an infringement action. (1-3) Preservation of subject matters for observation. A court may also issue an order for the submission of a subject matter for observation on the request of a party for the purpose of preservation of evidence, according to Article 232, Paragraph 1 of the Japanese Code of Civil Procedure. The holder of such subject matter for observation is basically obliged to submit it. If the holder refuses to submit the subject matter for observation without justifiable grounds, he could be punished by non-penal fine pursuant to Article 232, Paragraph 2 of the Japanese Code of Civil Procedure. However, it might be a justifiable ground to refuse to submit the subject matter for observation if the subject matter for observation is related to a technical secret of the holder. In the practice, therefore, the order is not helpful to obtain an evidence related to infringement facts. There is also Article 105, Paragraph 4 of the Japanese Patent Act as a special provision for observation by the infringement courts (see Part. 7, II. 7(3-4)). This

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special provision, however, might not be applicable for the purpose of preservation of documents before filing an infringement action. (2) Disposition of collection of evidence before filing an action. According to Article 132-2 to 132-9 of the Japanese Code of Civil Procedure, a future plaintiff may inquire of a future defendant about the facts which are necessary for a future litigation. The inquiry is allowed only during the period of four months after a future plaintiff sent a notice of future litigation to a future defendant, according to Article 132-2, Paragraph 1 of the Japanese Code of Civil Procedure. The future plaintiff can make an inquiry only concerning a matter that is obviously necessary for preparing factual allegations or for proving a fact. However, the future defendant is not obliged to answer the inquiry, if it relates business or technical secrets of the future defendant, according to Article 132-2, Paragraph 1, No. 3 of the Japanese Code of Civil Procedure. The facts concerning an alleged infringement are normally business or technical secrets of a future defendant. Therefore, in practice, this disposition for collection of evidences can hardly function as a useful means for obtaining the required information about the allegedly infringing activities.

4. Seizure by customs authorities Japan is an insular state. The seizure by customs authorities is, therefore, quite important to prevent IP-infringing goods from being imported into Japan. Especially, with regard to the protection of trademark rights or copyright rights, the seizure by customs is especially important. Around one million goods which could infringe these rights are seized by customs in Japanese ports or airports every year9. However, patent-infringing goods are rarely seized by customs. The annual number of goods seized on the basis of a patent infringement is around several thousands10. It is very difficult for customs to identify a patent infringement of imported goods, and to determine the patentability of an allegedly infringed patent. Furthermore, there is a risk that an order for seizure of infringing goods is rescinded, if the allegedly infringed patent becomes invalid afterward, because of a final and binding decision of a trial for patent invalidation in the Japanese Patent Office11. To avoid the risk associated with the invalidation of patents, customs often wait for at least a first instance court judgement before ordering a seizure. There are, therefore, few cases where customs seize goods allegedly infringing a patent right. A patent holder, therefore, cannot expect to get useful information to prove a patent infringement through the seizure of allegedly infringing goods by customs.

5. Preliminary proceedings with public prosecutors It is difficult for public prosecutors or police officers to identify a patent infringement, and to decide the patentability of an allegedly infringed patent. Furthermore, even a judgement in infringement procedures that has become final and irrevocable might still be retried, if the allegedly infringed patent becomes invalid afterward. That is why public prosecutors or police officers very rarely prosecute a patent infringement case. For example, there were only 3 cases which were investigated in 2011 because of patent 9 The Japan Customs, 2013 Seizure Statistics of IPR Border Enforcement, 2014, p. 2, which is available under the Website of the Japan Customs: http://www.customs.go.jp/mizugiwa/chiteki/pages/statistics/ statistics2013.pdf. 10 Ibid. 11 A judgement of the Kobe District Court on 19th January 2006, Case No.: Heisei 16 (gyo-u) 29, – ishisei-toro oyobi ishi-sei-toro-yo-tobira (stone lantern and door of stone lantern case).

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III. USA

infringement. There was, however, no indictment in 2011 against patent infringement because of lack of enough suspicion12. On average, there is just one person or even no person per year who is indicted for patent infringement. It is, therefore, extremely rare that a patent holder obtains some useful information from public prosecution of patent infringement.

III. USA 1. Pre-filing investigation (FRCP Rule 11) The United States permits the filing of an initial pleading known as a Complaint alleging patent infringement using broadly worded allegations which identify the patent and the alleged infringing devices or methods sufficient to put the accused infringer on notice about the products or methods being challenged. However, before the filing of the Complaint the person signing the pleadings (which would include the attorneys) have an obligation to make a reasonable evaluation and reach the conclusion that there are sufficient underlying facts to support the allegations. (FRCP Rule 11) If compliance with this rule is challenged and the patent owner nonetheless continues the litigation, the patent owner (and the attorneys) may be liable for the attorney’s fees of the accused infringer. Rule 11 can also be used by the patent owner against the accused infringer if the accused infringer raises specious defenses. As a consequence, the patent owner and its counsel generally seek sufficient information to compare an accused product or process on an element by element basis with at least one claim of the patent sufficient to establish an objective good faith belief that the allegations in the complaint can be supported.

2. Product analysis To avoid Rule 11 sanctions there must be a good faith, informed comparison of the claims of a patent against the accused subject matter.13 Courts have found that the patent owner and/or its counsel has not acted properly in cases where – There was no effort made to obtain a sample and do a claim comparison.14 – There was no attempt made to obtain technical specifications.15 – There was no reasoned analysis by counsel. In most cases there is likely to be a dispute about the scope of the claim or the meaning of a particular claim element. Rule 11 is not violated if the interpretation made before the filing of the action was reasonable, even if ultimately it was in error. In some circumstances it may be acceptable to rely upon the statements made in advertising or on the label of an accused product about its ingredients.16 There is also authority for the position that comparison is not absolutely required if reasonable efforts are made to obtain the information. However, this usually requires evidence of significant pre-filing unsuccessful investigation.17

12 According to a judicial statistic of the Japanese Minisitry of Justice about the prosecution in 2011 (homu-sho, kensatsu-tokei-nenpo, 2011). 13 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3 d 1295, 1302 (Fed. Cir. 2004). 14 Judin v. United States, 110 F.3 d 780, 784 (Fed. Cir. 1997). 15 Id. at 784–785. 16 Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3 d 1295, 1302 (Fed. Cir. 2004). 17 Intamin Ltd. v. Magnetar Technologies, Corp., 483 F.3 d 1328, 1338 (Fed. Cir. 2007).

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3. Pre-filing discovery Two Supreme Court decisions, one in 200718, and one in 200919, emphasized that notice pleadings requirement under FRCP Rule 8 applies to all federal actions and therefore the Complaint must state a claim that is “plausible” based upon the factual allegations on the face of the Complaint. These decisions have resulted in some uncertainty about how the law applies to a Complaint in a patent matter. The FRCP specifically includes an acceptable form for the filing of a Complaint in a patent case. If the form is followed it is presumed that the pleading is sufficient. However, the form is limited to specific types of direct infringement and if a broader allegation is made such as indirect infringement (inducement) many courts have held that mere compliance with the form is not sufficient. Some courts have held that where indirect infringement is asserted, the Complaint must not only allege that another is a direct infringer, the Complaint must identify the direct infringer. The most recent decision by the Federal Circuit is that following the form is sufficient.20 As a general rule, the patent owner has the burden to have evidence reasonably sufficient to support the filing of a Complaint based upon information it has independently developed.21

4. Seizure by custom authorities Absent a court order, issued either under a granted preliminary or permanent injunction or some other type of provisional remedy, U.S. Customs will not seize products. There is no procedure, for example, to deposit a patent with U.S. Customs authorities and have Customs authorities stop the importation predicated on allegedly infringing products. Therefore, if a seizure is desired an application must be made seeking an injunction. (See Part 4 Injunctive Relief infra.) In addition to a court order, an exclusionary order is available from the ITC under Section 337 of the Tariff Act. Not all patent owners qualify as proper parties to an ITC proceeding and not all applications to initiate the proceeding are accepted by the ITC. In recent years significantly more proceedings have been initiated particularly because of the ITC requirement for a rapid resolution of the dispute. ITC proceedings have also come into favor by NPEs because licensing activities can be used to establish the required U.S. industry requirement for maintaining an ITC proceeding. Section 337(a)(1)(B) of the Tariff Act of 1930 declares unlawful “importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee of articles that – (i) infringe a valid 18

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L. Ed. 2 d 929 (2007). Ashcroft v. Iqbal, 556 U.S. 662, 680, 129 S. Ct. 1937, 1950-51, 173 L. Ed. 2 d 868 (2009). 20 K-Tech Telecommunications v. Time Warner (Fed. Cir. 2013). There is proposed legislation to require a mor detailed pleading, but it is unclear if it will be enacted. 21 The concern about specificity in pleading has resulted in greater consideration of a long existing, but little used Federal Rule (FRCP Rule 27) which permits discovery prior to the filing of a formal legal action. Whether FRCP Rule 27 can be used to investigate whether the basis for a patent infringement action exists is unclear. FRCP Rule 27 relates to the preservation of evidence or the perpetuation of testimony of an individual who may not be available to testify after suit is commenced. This raises issues about the limited purposes articulated in the rule and the additional requirement that the application to the district court seeking the right to take the discovery must demonstrate that the party seeking discovery expects to be a party to a legal action. Whether the party seeking the information truly expects to be a party to a legal action depends upon the evidence that the discovery seeks to uncover. 19

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and enforceable United States patent…or (ii) are made, produced, processed, or maintained under, or by means of, a process covered by the claims of a valid and enforceable United States patent (see 19 U.S.C. 1337(a)(1)(B)(1994)) and (iii) an efficiently operated U.S. industry is being harmed. The ITC, which is part of the executive branch of the government, performs the investigation. The participants include representatives of the patent owner, representatives of the ITC commission counsel and representatives of the accused infringing importer. Technically the proceeding is against the articles being imported and the proceedings are so named (e. g., “Certain Variable Windspeed Turbines and Components”). The ITC cannot award damages. The remedy sought is an exclusion order. The proceeding is initiated by a petitioner filing a proposed Complaint. Unlike the Complaint in a court action, the Complaint must set forth detailed facts sufficient to demonstrate that the patent owner is likely to establish all the predicates for an ITC investigation to be initiated. The Commission then decides if it will institute an investigation. If it does, an Administrative Law Judge (“ALJ”) is appointed. The ALJ presides over the investigation, including pre-hearing procedures as well as the final hearing. The hearing has many of the same attributes of a trial, but there is no right to a jury.22 After the presentation of evidence and witness examination, the ALJ renders an initial determination, which the Commission may review at its discretion. The Commission then issues its final determination. The Commission’s final determination then stands unless the President disapproves it. Thus either through court proceedings or ITC proceedings seizure at Customs is potentially available, but a court order or ITC order is required.

5. Government participation in the proceedings Other than in ITC proceedings, the United States government does not join in civil actions between patent litigants. However, there is authority for the Federal Trade Commission (FTC) (a United States federal agency) or the United States Department of Justice (DOJ) to bring actions on behalf of the United States for unfair trade practices. The decision to proceed with an investigation is solely in the discretion of the FTC or DOJ. Over the years, the DOJ has established guidelines for activities relating to patents which could raise issues of violation of law. The focus has generally been related to patent pools, large aggregation of patents by a single entity, or improper patent licensing practices. DOJ guidelines are not laws, but are generally respected because noncompliance often leads to the initiation of a government investigation. U.S. law requires notice to the government about significant proposed mergers and acquisitions and within the regulatory scheme is consideration of large or industry dominant patent portfolios. From a pragmatic perspective, if the DOJ initiates an investigation the parties tend to seek an accommodation such as by modifying the terms of the transaction and agreeing to more open licensing practices. 22

As well, the discovery rules before the ITC are less expansive of those available through the courts.

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Part 4 Claims of the patent holder and objections of the infringer I. Legal basis for claims 1. Germany In most cases, the patent holder’s predominant intention is to stop the infringing activities of its competitors. In addition, the right holder also seeks compensation and damages. German patent law provides for corresponding claims, such as the claim to cease and desist, claim for damages, the claim for rendering an account and the claim for destruction and/or removal of infringing products. If the court concludes that there is infringement, the judgement will contain an injunction to cease and desist and state that the defendant has to compensate the plaintiff for the damages caused by the infringement1. (1) Injunctive relief. The basic remedy for any patent infringement is the injunction, according to which the infringer is enjoined from continuing its infringing activities. The patentee may demand the infringer stop the infringement and desist from any envisaged infringing acts. This claim to “discontinuance” is also known as a “cease-anddesist” or “stop-and-desist” claim against the infringer and is based on § 139 (1) PatG. As long as the requirements of § 139 (1) PatG are fulfilled, the court has no discretion based on equity principles and an injunction must be granted2. It should always be linked to an administrative fine for each act of infringement discovered in the future. A prerequisite seeking injunctive relief is that there is a danger that an infringing act will be committed (“danger of commission”; “Begehungsgefahr”) or that an infringing act has already been committed and further acts are to be expected (“danger of repetition”; “Wiederholungsgefahr”). A single act of patent infringement is in principal sufficient for the court to presume that there exists the danger of repetition. Enforcement of such an injunction is not effected by physical force – for instance, by the closing down of a factory that manufactures infringing devices – but by fines up to EUR 250,000 for each act of infringement or jail terms of up to six months. Injunctions can be issued only if the German or European patents have been granted, and not in the case of laid-open patent applications. Injunctions can also be issued in the same way for registered utility model infringement. (2) Rendering account. In order to be able to calculate the damages in a case of patent infringement, the patentee must know the infringer’s turnover achieved with the patented devices or by the infringing activities. As usually the patentee is not in a position to obtain information on this turnover, German courts have developed the general rule that the infringer is under an obligation to render the patentee an account of all substantial facts necessary for the calculation of patentee’s damages, such as the 1

Schulte/Voß/Ku¨hnen, § 139 No. 49 ff.; Fitzner/Lutz/Bodewig/Pitz, § 139 No. 42 ff. See Ohly, “Patenttrolle” oder: Der patentrechtliche Unterlassungsanspruch unter Verha¨ltnisma¨ßigkeitsvorbehalt? Aktuelle Entwicklung im US-Patentrecht und ihre Bedeutung fu¨r das deutsche und europa¨ische Patentsystem, GRUR Int. 2008, 787. 2

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Part 4. Claims of the patent holder and objections of the infringer

number of infringing acts, the sales price of infringing devices, dates of delivery, customers, and calculation of production costs. Such claim for rendering of an account is based on the general good faith rule of § 242 of the German Civil Code and can be considered an exception to the principle of German law that the plaintiff must allege and prove all facts supporting his claims without the benefit of discovery. (3) Obligation to pay damages. It is important to bear in mind that under German law the recovery of damages takes place in two stages. The first stage is the patent litigation proceedings in which the patent holder puts forward the claims for injunctive relief, rendering of account, damages, etc. If successful, the plaintiff will obtain a declaratory judgment with respect to damages, ruling that the defendant as infringer is obliged to compensate for the plaintiff’s damage. This declaratory judgement of the “first stage” proceedings only means that the infringer is liable to pay damages. However, it does not decide about the amount of damages the infringer has to pay to the patentee. If the parties cannot agree upon the amount of damages to be paid, the patentee has to initiate further court proceedings (the “second stage” proceedings) in which he requests the court to order the infringer to pay a specific amount of damages. In many cases, this “second stage” proceedings will not become relevant as the parties will find an amicable solution of the question of damages. (3-1) Basic principles. In the case of intentional or negligent patent infringement on the part of the defendant, the judgement will contain the ruling that the defendant is obliged to make up for the plaintiff’s damage. If the infringement was not intentional, negligent infringement is normally assumed by the courts on the basis of the doctrine that each person doing business is under an obligation to ascertain the existence of relevant patents and to assume the validity of any registered patent or patent application3. The claim for recovery of damages under § 139 (2) PatG has to be distinguished from the claim for compensation under § 33 PatG. The claim for damages relates to acts of infringement after the publication of grant of patent, whereas for the time between the publication of the patent application and the publication of grant of patent only compensation based on the principles of unjustified enrichment can be claimed. In cases in which an amicable settlement with respect to the amount of damages cannot be reached it is necessary for the patentee to sue the infringer and claim a certain amount of damages. For this calculation the patentee needs information on the turnover, profits etc. which the infringer achieved by the infringing activities. The infringer’s obligation to render account is part of the “first stage” patent infringement judgement. (3-2) Calculation of damages. After rendering of account, the patentee can freely choose between three different ways to calculate the damages (lost profits, infringer’s profits, license analogy)4. (3-2-1) Patentee’s lost profits. The patentee may claim lost profits. Lost profits are calculated based on the difference between hypothetical profits and factual profits. Hypothetical profits refer to profits which can be probably expected in the normal course of affairs or under special circumstances based on arrangements of the patent holder (§ 252 BGB). “Lost profit damages” will only be awarded if the patentee or an exclusive licensee have used the patent directly and the patentee’s profits did indeed shrink as a result of the infringing acts. As the patentee also has to prove causation, i. e. that he lost sales on account of and during the period of the infringement, this calculation is often quite difficult. The pantee has principally to present facts and evidence that, the 3 4

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Schulte/Voß/Ku¨hnen, § 139 No. 72 Schulte/Voß/Ku¨hnen, § 139 No. 72; Fitzner/Lutz/Bodewig/Pitz, § 139 No. 91 ff.

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purchasers decision to buy the infringer’s (competitor’s) product was based on the patent protected features. Whereas infringer’s profit is not relevant for the calculation of lost profits in Germany it is relevant for the lost profit calculation in Japan. A further drawback of this way of calculating damages is that the patentee is obliged to disclose his own price calculation in order to prove the damage he suffered. For these reasons, the “lost profit” calculation is rarely used by patentees for calculating the amount of damages. (3-2-2) Infringer’s profits. Alternatively, the patentee may claim recovery of the infringer’s profit (even if the patentee could in fact not have made the profit himself). Calculation of infringer’s profits is based on infringer’s gross sales revenue minus costs. The patentee has to prove infringer’s profit as a result of patent infringement. He has to provide facts and evidence that the customer’s decision to buy the infringer’s product was based on patent protected features of the product. The judge has to evaluate facts having influenced customer’s decision (see FSC, Judgement of July 24, 2012 Battle carrier; Judgement of September 3, 2013 Cable Lock). Often, the technology is not even visible for the customer or only refers to an irrelevant detail of the product. The full amount can in particular not be claimed if the object of the invention only consists in an improvement of a device which is in general suitable and find its customers in the market. This is different if the used invention creates a completely new object of utility for which no equivalent non infringing alternatives are available. The judicature assesses all factors of the single case and estimates the extent to which they have been guided the customer’s decision according to 287 Code of Civil Procedure. A quote is in particular demanded where the infringing object makes use of several different patents. This calculation is often easier than the afore-mentioned lost profit calculation and it is particularly recommended when the owner of the patent is a small firm and the infringer is a large company with a high turnover from the infringing product. It might in such cases be advisable for the patent owner to even wait for a certain time after realizing the infringement, and only then initiate an infringement action. The patentee can then claim recovery of the infringer’s profit retroactively. The point is that the small company might never have been in a position to achieve such a high turnover when exploiting their patented technology in their own company. The total sum recovered could then have a much greater value than the value of stopping the third party from selling the infringing product immediately after discovering the infringement. This second method of calculating damages attracted high interest of both, legal scholars and practitioners, after the Federal Supreme Court (BGH) decision of November 2, 2000 known under the key word “Gemeinkostenanteil”5 (“Share of Overheads”) In that decision the BGH ruled that the infringer may only deduct such costs from his profits that are directly attributable to the infringing activities. Overhead expenses are therefore generally not deductible. The burden of proof for deductable costs lies with the infringer. (3-2-3) Hypothetical license fee. The method of calculating damages which is still frequently used in Germany is the so-called license analogy. In these cases, the patentee claims a reasonable royalty on the infringer’s sales. The royalty is determined by considering the (hypothetical) terms both parties (the patentee and the infringer) would have agreed upon, had they concluded a license contract. Relevant factors for determining the damages on the basis of the “license analogy” may be other licenses for the patent already granted by the patentee to third parties or licenses for comparable patents or the usual royalty rates for licenses in that industry. However, it may be difficult to determine 5

BGH GRUR 2001, 329 – Gemeinkostenanteil; English translation in IIC 2002, 900.

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the “correct” license when the patent relates only to a small part of the infringing product, such as to a valve of a machine. In such cases the basic question is whether to fix a (higher) royalty rate relating only to the patented part of the product (e. g. the valve) or a (lower) royalty rate relating to the value of the whole machine. In exceptional cases, courts award a royalty surcharge against the infringer which is to compensate for the so-called infringer’s advantage of not having respected a patent as compared to the lawful licensee. In addition, the infringer has to pay so-called accumulated interests for delayed payment. In any event, German law only provides for “simple” damages, and not for punitive damage claims as are known in the US. (3-2-4) Relations between the calculation methods. In the course of the “second stage” proceedings for payment of damages the patent holder may change from one way of calculating to another, until the damages have been paid or the court judgement on the amount of damages payable has become final. Under German law the combination of calculation methods concerning one and the same act of infringement is not foreseen with the consequence that high infringer’s profits do principally not lead to an increase of lost profits. (4) Disclosure of the source of origin and of purchasers. Moreover, the patentee can request disclosure of the source of origin and distribution channels of the infringing products (§ 140 b PatG). This so called “Third Party Disclosure” comprises the name and address of the manufacturer, the supplier and other predecessors of the product, the purchasers and mandators and the quantities of the products. This disclosure can also be enforced by a preliminary injunction. The disclosure is of particular importance in all cases in which infringing products originate from an unknown source. (5) Destruction. Under § 140 a PatG the patentee can also claim destruction of the infringing product, unless such destruction would be disproportionate to achieving the purpose of compensating for the consequences of infringement. Such destruction applies to both the products of an infringing process and the devices for the manufacture of the infringing products. (6) Removal of infringing goods. The rights holder can demand that the infringer remove the infringing goods from the market (§ 140 a (3) PatG). The right of removal also covers direct products of infringing processes6. (7) Costs. Under German law the winning party has a claim for refund of costs (court costs, lawyers fees and patent attorneys fees) (see Part 7 I. 10.). This means, the losing party has to bear the fees of its own lawyers and patent attorneys, court costs and remunerable fees of the defendant’s lawyers and patent attorneys.

2. Japan (1) Claim for injunction. (1-1) Patent holder. A patent holder can enjoin a third party from a patent infringement based upon Article 100, Paragraph 1 of the Japanese Patent Act. A patent holder has to prove the existence of a patent and some present or future activities of a third party which could exploit the patented invention. However, it is not necessary for an injunction claim that a third party infringes a patent right knowingly or negligently. An objective situation in which a patent is infringed or will surely be infringed is enough for permitting an injunction claim. 6

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In Japan, according to Article 104-3 of the Japanese Patent Act, an alleged infringer may contest the validity of an allegedly infringed patent in an infringement action. The burdens of proof differ depending upon the issue.The patent holder has the burden to prove issues about the formality of patent application, while an alleged infringer has the burden to prove novelty or inventive step. (1-2) Licensee. According to Article 100, Paragraph 1 of the Japanese Patent Act, not only a patent holder, but also a registered exclusive licensee may enjoin patent infringement. A registered exclusive license takes effect, according to Article 98, Paragraph 1, No. 1 of the Japanese Patent Act. The fact of the grant for an exclusive license and the details about the scope of such license are required to be registered in the patent register. If a registered exclusive license is agreed and registered, even the patent holder loses his right for exploitation of the patented invention, to the extent that the exclusive licensee has been granted according to Article 68, Sentence 2 of the Japanese Patent Act. There was also a discussion whether the patent holder also loses his right for injunction. In a decision, the Japanese Supreme Court held that a patent holder did not lose his right for injunction, because a patent holder also had necessity to enjoin a patent infringement even during the agreement and registration of an exclusive license, for example, in a case where the amount of the license fee was determined depending on the sales of licensed products7. According to almost unanimous opinion, a non-registered exclusive licensee without registration is not entitled to seek an injunction because the non-registered exclusive license is not notified to the public, and, therefore, the exclusiveness of the licensee is not so complete that he might assert his injunction claim against a third party by himself or instead of a patent holder8. An injunction claim for a non-exclusive licensee is denied unanimously, because he does not have any exclusive right9. It was also denied that a non-exclusive licensee asserts the right for injunction, instead of a patent holder10. (2) Claim for compensation for damages. (2-1) Overview. (2-1-1) Legal basis of claim for compensation of damages caused by infringement. An infringement act is regarded as a kind of tort. Article 709 of the Japanese Civil Code stipulates a claim for compensation of damages caused by tort. Therefore, a claim for compensation of damages caused by an infringement act is also admitted on the basis of a claim for compensation of damages caused by tort, according to Article 709 of the Japanese Civil Code. The Japanese Patent Act stipulates some special provisions for the general principle of the Japanese Civil Code, especially provisions presuming the amount of damages. (2-1-2) Claimant for compensation for damages. A patent holder as well as a registered exclusive licensee can also claim compensation for damages caused by the 7 A judgement of the Japanese Supreme Court on 17th June, 2005, Case No.: Heisei 16 (jyu) 997, Collection of Judgments for Civil Cases of the Japanese Supreme Court, Vol. 59, No. 5, pp. 1074 = Hanrei-Jiho No. 1900, pp. 139 = Hanrei-Times No. 1183, pp. 208 – seitai-ko-bunshi ligand-bunshi no antei-fukugo-tai no tansaku-hoho-jiken (searching method for stable complexes structures of biopolymer ligand molecular case). 8 A judgement of the Osaka District Court on 20th December 1984, Case No.: Showa 57 (wa) 7035, Collection of Judgments for Civil or Administrative Cases of Intellectual Properties in the Lower Instances, Vol. 16, No. 3, pp. 803 = Hanrei-Jiho No. 1138, pp. 137 = Hanrei-Times No. 543, pp. 304 – hair brush isho jiken (design patent for hair brush case). 9 A judgement of the Osaka District Court on 26th April 1984, Case No.: Showa 58 (wa) 3453, Collection of Judgments for Civil or Administrative Cases of Intellectual Properties in the Lower Instances, Vol. 16, No. 1, pp. 271 = Hanrei-Times No. 536, pp. 379 – ka-kozai no torituke kanagu jitsuyo-shin’an jiken (utility model of fixing brace for bridging members case). 10 A judgement of the Osaka District Court on 26th April 1984, supra note 9.

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infringement, according to Article 709 of the Japanese Civil Code. “Damages” means actual damages. The Japanese Civil Code as well as the Japanese Patent Act does not permit punitive damages11. The major opinion also admits a compensation claim for damages for a nonregistered exclusive licensee12. On the contrary, for non-exclusive licensees, a compensation claim for damages is unanimously denied, because their exploitation itself as non-exclusive licensees cannot be interrupted directly by the exploiting activities of others13. (2-1-3) Judicial practice for claiming the compensation for damages. In the Japanese patent litigation proceeding, a patent holder can claim not only an injunction against the exploitation of invention by a third party, but also a compensation of damages at the same time. However, in the practice, at the first stage, Japanese infringement courts concentrate on the examination whether the exploitation by the third party infringes the patent right or not. An infringement court examines the two questions, namely, whether an accused product or process of the third party falls within the protective scope of the patent, and whether the patent is valid or not. If an infringement court is convinced of the use of the patented invention by the third party, and of the validity of the patent, the court informs both parties of his conviction, and tries to persuade them to make an amicable settlement (see Part 6, II. 3(5-1), and Part 7, II. 2(2-4)). If the parties cannot reach an agreement, then the court starts the calculation of the damages of the patent holder in the second stage (see Part 6, II. 3(5-2)). The court often asks the alleged infringer to submit documents which are necessary to calculate the damages of the patent infringer (see Part 7, II. 7(3-3)). Sometimes, the court chooses an accountant to inspect such documents (see Part 6, II. 2(2-5), and Part 7, II. 7(4-3)). Only after the end of the calculation of damages, the court issues the verdict to enjoin the patent infringement as well as to order the payment of the damages. If the alleged infringer is not cooperative, this lack of cooperation can negatively affect the free determination of the court, according to Article 247 of the Japanese Code of Civil Procedure. (2-1-4) Prerequisites for claiming the compensation of damages. The compensation of damages caused by an infringement is claimed based on a kind of tort. Therefore, the infringement has to be done intentionally or at least negligently, and causes some actual damages to a patent holder, according to Article 709 of the Japanese Civil Code. The negligence of an infringer is presumed, according to Article 103 of the Japanese Patent Act. It is almost impossible to rebut such presumption, insofar as the grant of the patent has already been published in official gazette. A trust in an expert opinion of an

11 A judgement of the Japanese Supreme Court on 11th July, 1997, Case No.: Heisei 5 (o) 1761, Collection of Judgments for Civil Cases of the Japanese Supreme Court, Vol. 51, No. 6, pp. 2530 = Hanrei-Jiho No. 1624, pp. 90 = Hanrei-Times No. 958, pp. 93 – banse-kogyo America chobatsu-tekibaisho sikkou-hanketsu jiken (execution of judgement admitting punitive damages against Banse-Kogyo America case), denied the execution of a judgement of the Calfornia State Court partially, insofar as the admitted damages exceeds the actual damages of the plaintiff. 12 Newly, for example, a judgement of the Japanese Intellectual Property High Court on 11th March 2009, Case No.: Heisei 19 (ne) 10025, Hanrei-Jiho No. 2049, pp. 50 – inkan-kizai oyobi sono seizo-hoho jiken (material for seal and its manufacturing method case). This decision has admitted the compensation claim for damages to the exclusive licensee as a matter of course. There is not yet a judgement of the Japanese Supreme Court to this point. 13 A judgement of the Osaka District Court on 26th April 1984, supra note. 9.

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attorney at law or a patent attorney is not enough14. Even for an equivalent infringement, the negligence of an accused party is almost irrevocably presumed15. Damages of a patent holder caused by an infringement act principally have to be determined with the amount of money, according to Article 722, Paragraph 1 in the connection with Article 417 of the Japanese Civil Code. (2-2) Calculation of damages. In order to support a claim for compensation of damages, the patent holder has to prove the existence of actual damages and its amount, according to the general rule of the Japanese Civil Code. The amount should be calculated by the difference between the actual economical situations and the hypothetical economical situations without infringement. To prove the difference between the actual and the hypothetical situation is not easy, because it depends on various factors. For the calculation of damages, therefore, the Japanese Patent Act stipulates some special provisions to make the proof of damages easier, namely from Paragraph 1 to 3 of Article 102 of the Japanese Patent Act. (2-2-1) Patent holder’s lost profits. According to Article 709 of the Japanese Civil Code which stipulates the claim for compensation of damages caused by tort, a patent holder has to prove the amount of his damages. Most parts of the damages derived from the lost profits of the patent holder because of infringement acts of an infringer. The patent holder has to prove the difference between the “actual” economical situation and the “hypothetical” economical situation without infringement. It is, however, often difficult for a patent holder to prove the causation between the reduction of the economic situation of the patent holder and the consequences of the infringing activities, because the economic situation is influenced incidentally and complicatedly by various factors. Formerly, damages of a patent holder were often denied completely by Japanese infringement courts, because the causality between the amount of damages and infringement was not proven. To reduce the burden of proof of a patent holder, Article 102 of the Japanese Patent Act offers three alternatives which presume the amount of damages, and transfer the burden of proof about the amount of damages from the patent holder to the alleged infringer. If a patent holder chooses to assert one of these alternatives, an alleged infringer has to prove that the actual amount of damages should be less than the presumed amount of damages. There is a discussion whether these provisions to reduce the burden of proof for patent holders could also be adapted to an indirect infringement. The major opinion addressing the issue accepts the adaptation of these provisions for an indirect infringement, because the acts of indirect infringement are regarded as an infringement act of patent, according to Article 101 of the Japanese Patent Act16. (2-2-2) Patent holder’s profits estimated from the quantity of infringer’s products. According to Article 102, Paragraph 1 of the Japanese Patent Act, which was introduced 14 A judgement of the Tokyo District Court on 25th April 2002, Case No.: Heisei 13 (wa) 14954, namanori no ibutsu-bunri-jyokyo-sochi jiken (device for separating and removing impure ingredient from raw laver case). 15 A judgement of the Osaka District Court on 29th October 2002, Case No.: Heisei 11 (wa) 12586 etc., kin-soshiki-jyo kon’nyaku no seizo hoho oyobi sore ni mochi’iru seizo souchi jiken (manufacturing method and device for muscle-tissue-like gelatinous food made from a plant case). 16 A judgement of the Tokyo District Court on 2nd November 2012, Case No.: Heisei 22 (wa) 24479, Hanrei-Jiho No. 2185, pp. 115, nama-nori no ibutsu-bunri-jyokyo-sochi ni okeru namanori no tomomawari-boshi-sochi jiken (device for preventing co-rotation of raw laver in an apparatus for separating and removing foreign material in raw laver case), has adapted Article 102, Paragraph 2 of the Japanese Patent Act to an indirect infringement as a matter of course without any comments.

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1999, the amount of damage should be the amount of profit per unit of products, which was sold by a patent holder, multiplied by the quantity of products assigned by the infringer. This calculation is based on the presumption that the patent holder could have sold the same amount of products as an infringer has actually sold, and obtained the profit per unit for each sold product, if there had not been products sold by the infringer in the market. According to the opinion leading decision, “profit” means the marginal profit which can be achieved by a patent holder through selling an additional unit of his products. In the practice, however, it is not easy for infringement courts to acknowledge what should be marginal profits or losses, because there are various kinds of factors for marginal costs, so that courts have to determine which costs should be regarded as marginal costs. Such determination could sometimes be arbitrary and there are no clear criteria. For using this calculation method, a patent holder has to disclose his profit per unit of his products. It is not so difficult to prove his profit per unit, because he has evidences of, sales and costs of the products. Often a patent holder, however, does not want to disclose his profit structure which often includes trade secrets. In such cases, the alternative is not used. A question has been raised whether it is necessary for a patent holder to exploit the patented invention in order to rely on lost profits in the calculation of damages. The law in 1999 presumed that a patent holder must exploit the patented invention. Some infringement courts’ decisions17, however, decided that it was enough for a patent holder to produce substitutable products instead of a patented invention, because a causal relation for this presumption for damages could be recognised, if the patent holder sold products which were a substitute for the patented invention. This presumption could, however, be rebutted, if a patent holder did not have enough ability to produce the same quantity as an alleged infringer had produced, or if there are substitutable products of some third parties which did not infringe the patent. The patent holder has to prove his capability to have the same amount of products made as the amount of products sold by an alleged infringer. An alleged infringer may object that under concrete circumstances, for example, the existence of substitutable products of competitors, the patent holder could not have sold such amount of products, even if infringing products had not been sold. There is also a discussion whether the presumption should be so strong that such exceptions should be recognised only under restricted conditions. The law in 1999 supposed that the exception should be only admitted under strictly limited conditions, if the prerequisites for presumption were once recognised. In the practice, however, infringement courts tend to admit more exceptions from various reasons than the law maker has expected. If there are, for example, some differences of marketing power between a patent holder and an infringer, most Japanese infringement courts reduced the amount of damages which were calculated based upon such presumption. Japanese infringement courts tend to affirm such presumption easily, while they also easily admit many and various exceptions for such presumption, and reduce the amount of damages. In a case, the Intellectual High Court permitted a 99 per cent reduction of the amount calculated in the scheme of Article 102, Paragraph 1 of the Japanese Patent Act18. In this case, No. 1 to 4 of five patented inventions of a chair having some massaging functions by air bags etc. were recognised as invalid. Only patented invention No. 5 was acknowledged as valid. However, the invention No. 5 which was related to the 17 For example, a Judgement of the Tokyo High Court on 15th June 1999, Case No.: Heisei 10 (ne) 2249 etc., Hanrei-Jiho No. 1697, pp. 96, chiku-netsu-zai no seizo-hoho jiken (manufacturing process of phase change materials case), 18 A judgement of the Japanese Intellectual Property High Court on 25th. September 2006, Case No.: Heisei 17 (ne) 10047 – air-massage-ki jiken (air massaging device case).

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timing for swelling up the seat air bag and the foot air bags had just a peripheral benefit for the whole air massage chair. As the reasons for reducing the amount of damages of the patent holder, the court held that: “In this case, the following circumstances can be found: (i) Each of the appellee’s products cannot realize the function of Invention 5 unless certain operation modes are selected; (ii) the operation involving Invention 5 is an ancillary operation of a chair-type massager and its effect is limited; (iii) the operation involving Invention 5 is rarely featured in the booklets for the appellant’s products or those of appellee’s products; (iv) at the time of the registration of the establishment of Patent 5, the appellee’s market share was not more than ten percents, and there were influential competitors in the market for chair-type massagers; (v) the appellant’s products are also equipped with characteristic functions that are different from Invention 5, such as the function to massage both with massaging balls and air bags, and the function to automatically detect the pressure points by an optical sensor, and consumers seem to have chosen the appellant’s products while placing more importance on these functions; (vi) the appellee’s products are massagers that use air bags for massaging, and such type of massagers are not very competitive in the market and therefore the appellee’s selling power was limited. Taking all these circumstances into consideration, it is appropriate to find the assigned quantity of the appellant’s products from which the quantity that the appellee would have been unable to sell is deducted to be 1 % of the total assigned quantity of the appellant’s products.”19 (The emphasis with bold font is added by the author.)

(2-2-3) Patent infringer’s profits. According to Article 102, Paragraph 2 of the Japanese Patent Act, which was introduced in 1959, the amount of profits earned by an infringer through the exploitation of a patented invention shall be presumed to be the amount of damage sustained by the patent holder. This alternative is based on the presumption that a patent holder could have obtained the same profits as the profit earned by an infringer, unless infringing products have been sold. It is not easy for a patent holder to know the profit of an infringer from the infringing products. In order to reduce the burden of proof of a patent holder, for example, courts may order the submission of documents that are necessary to calculate the profit of the infringer, according to Article 105 of the Japanese Patent Act (see Part. 7, II. 7(4-1)). There is a discussion whether it is necessary for a patent holder to exploit the patented invention in order to adopt such presumption. There is an opinion that the provision should not be adapted unless a patent holder exploited the patented invention itself. In practice, however, some decisions of infringement courts applied such provision, even though the patent holder produces only substitutable products, because a causal relation between the profit of the infringer and the loss of the patent holder could be recognised, if the patent holder sells substitutable products. Recently, the Grand Panel of the Japanese Intellectual Property High Court has made a judgement to broaden the applicability of Article 102, Paragraph 2 of the Japanese Patent Act as follows20: “It should be construed that applying Article 102, paragraph (2) of the Patent Act should be allowed when there are any circumstances suggesting that the patentee could gain profits if no patent infringement had been made by the infringer. It would then be reasonable to construe that various circumstances, such as the difference between the patentee and the infringer in terms of the manner of business, shall be taken into consideration as circumstances that call for a reduction in the presumed damage amount. Furthermore, as mentioned below, it would be reasonable to consider that application of the Article 102, paragraph (2) of the Patent Act does not require the patentee to have worked the patented invention.”21 (The emphasis with bold font is added by the author.) 19 An English translation of a summary of the judgement is under the web site of the Japanese IntellectualProperty High Court: http://www.ip.courts.go.jp/hanrei/pdf/20110816100054.pdf. 20 A judgement of the Japanese Intellectual Property High Court on 1th February 2013, Case No.: Heisei 24 (ne) 10015, Hanrei-Jiho No. 2179, pp. 36 = Hanrei-Times No. 1388, pp. 77 – gomi-chozo-kiki jiken (waste storage device case). 21 An English translation of a summary of the judgement is under the web site of the Japanese IntellectualProperty High Court: http://www.ip.courts.go.jp/hanrei/pdf1/g_panel/10015_zen.pdf.

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The alleged infringer has submitted an appeal to the Japanese Supreme Court and it is still not clear whether the applicability of this alternative would be broadened. Infringement courts admit wider adaptability of this presumption of damages pursuant to Article 102, Paragraph 2 of the Japanese Patent Act, while they often recognise various exceptional grounds to revoke such presumption partially, and reduce the amount of damages correspondingly. As grounds for the reduction of the presumed amount of damages come into consideration, for examples, the short of producing or selling ability of the patent holder, the existence of other competitors providing competitive products, know-how or bland which the infringer has developed by himself, the difference of markets between the patent holder and of the infringer etc. (2-2-4) Licence analogy. According to Article 102, Paragraph 3 of the Japanese Patent Act, a patent holder may regard the amount of an adequate license fee, which the patent holder would have been entitled to receive for the exploitation of the patented invention, as the amount of damages. According to Article 102, Paragraph 4 of the Japanese Patent Act, this adaptation of license analogy does not prevent the patent holder from claiming damages more than the amount of an adequate license fee. Therefore, the major opinion and most decisions of infringement courts suppose that the compensation of an adequate license fee according to Article 102, Paragraph 3 of the Japanese Patent Act should be a guarantee of the minimum amount of damages, being independent of the actual loss of the patent holder. Because infringement courts suppose that an adequate license fee should be the minimum amount of damages, they tend to admit only a lower rate as an adequate license fee, mostly two or three percent of the sales of infringers. (2-2-5) Relations between these alternatives for calculation of damages. A patent holder may assert one or more of any alternatives until the end of oral proceeding in the second instance, unless the assertion of the other alternatives is found to have been delayed intentionally or through gross negligence, and unless it will delay the conclusion of the suit, according to Article 157 of the Japanese Code of Civil Procedure. If two or more alternatives are asserted at the same time, infringement courts may principally recognise the highest amount between the amounts calculated by these alternatives. There is a discussion if the license analogy according to Article 102, Paragraph 3 of the Japanese Patent Act could be combined with other calculation alternatives, namely Article 102, Paragraph 1 or 2 of the Japanese Patent Act. For example, if the amount of recognised damages is less than the amount calculated by the formula of Article 102, Paragraph 1 of the Japanese Patent Act, because of less producing ability of the patent holder, it is discussed whether the patent holder could additionally assert the damage calculated by the license analogy for the difference between the quantity of the products sold by the infringer and the producing ability of the patent holder. Some former decisions have admitted the additional amounts of damages on the basis the license analogy22. However, most of recent decisions23 denied additional damages 22 For example, relatively recently, a judgement of the Osaka District Court on 10th February 2005, Case No.: Heisei 15 (wa) 4726, Hanrei-Jiho No. 1909, pp. 78, byori-soshiki kensa-hyohon sakusei-yo torei jiken (tray for preparing test specimen of pathologic histology case), has admitted to apply the Article 29, Paragraph 3 of the Japanese Utility Model Act, which is equivalent to Article 102, Paragraph 3 of the Japanese Patent Act, to the amount of the infringer’s products which could not have been sold by the plaintiff, even if infringement products had not been sold in the market. 23 A judgement of the Japanese Intellectual Property High Court on 22nd. December 2011, Case No.: Heisei 22 (ne) 10091, Hanrei-Jiho No. 2152, pp. 69 = Hanrei-Times No. 1399, pp. 181, – hikai-chu no

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calculated by the license analogy for the reduced amount from the amount of damages calculated by the formula of other alternatives. One of recent decisions of the Japanese Intellectual Property Court held24: “As Article 102, paragraph (1) of the Japanese Patent Act stipulates a method of calculating the amount of passive damages incurred by the patentee in both its main clause and proviso, for the purpose of restoring the state where there was no tort of infringement of the patent right, by monetarily evaluating actual damages incurred by the patentee and compensating the disbenefits of the patentee, the amount of damage calculated pursuant to said paragraph should be regarded as a result of evaluating all of the passive damages incurred by the patentee; on the other hand, paragraph (3) of said Article stipulates that the patentee, etc. may claim money in the amount equivalent to the amount of money which the patentee, etc. would have been entitled to receive for the working of the patented invention by the infringer (the amount equivalent to a royalty) as the amount of damage incurred by the patentee, etc., and represents a provision for convenience in proving damages incurred by the patentee due to tort of infringement of the patent right; however, as long as it is understood that paragraph (1) of said Article intends to restore the state where there was no tort by evaluating all of the passive damages incurred by the patentee and thereby compensating for all of the benefits of the patentee as mentioned above. If the patentee claims passive damages calculated pursuant to paragraph (1) of said Article, it is not possible to claim damages pursuant to paragraph (3) of said Article in parallel with said claim, and the patentee is unable to claim the amount calculated pursuant to said paragraph.”25 (The emphasis with bold font is added by the author.)

(3) Claim for compensation for the use of an opened invention before grant of patent. If a patent holder has sent a warning to a third party who is using the disclosed invention of an application before the registration of the grant of a patent, the patent holder may also demand the compensation for the use of the disclosed invention after the registration, according to Article 65 of the Japanese Patent Act26. In the practice, Japanese courts admit the amount on the basis of a license analogy as the compensation for the use of a disclosed invention which corresponds to the amount in the case of the compensation claim for damages27. (4) Other claims. (4-1) Procedural claims for submission of documents. In the Japanese civil substantial law, namely in the Japanese Civil Code, there is no substantial claim for information about allegedly infringing activities. The Japanese Code of Civil Procedure and the Japanese Patent Act, however, contain almost identical provisions which admit infringement courts to order the holder of information to submit this information (see Part 7, II, 7(3) and 7(4)). A patent holder, for example, may ask an infringement court to order the holder of documents to submit the documents which are necessary to prove infringement acts jyu-kinzoku kotei-ka shori-zai jiken (method of immobilizing heavy metals in fly ash and agent for immobilizing heavy metals case); a judgement of the Japanese Intellectual Property High Court on 24th. January 2012, Case No.: Heisei 22 (ne) 10032 etc. – solid golf ball jiken (solid golf ball case). 24 A judgement of the Japanese Intellectual Property High Court on 22nd. December 2011, supra note 23. 25 An English translation of a summary of the judgement is under the web site of the Japanese IP-High Court: http://www.ip.courts.go.jp/hanrei/pdf/20120330165008.pdf. 26 To the detail of the compensation claim for the use of the opened invention, s. Atsushi Kawada, “What Can an Applicant Do before Grant of a Patent? Compensation Claim in Japanese and German Law”, in: Bernd Hansen & Dirk Schu¨ssler-Langeheine, eds, Patent Practice in Japan and Europe – Liber Amicorum for Guntram Rahn, Netherlands, 2011, pp. 457–483. 27 A judgement of the Japanese Intellectual Property High Court on 27th May 2010, Case No.: Heisei 21 (ne) 10006 – chuku golf club head jiken (hollow golf club head case), has admitted the same 3-percent license rate as the compensation not only for damages caused by an infringement of a patent, but also for the use of an opened invention before the grant of patent. A judgement of the Tokyo District Court on 13th November 2008, Case No.: Heisei 18 (wa) 22106 – taibutsu lens to shiryo to no ichi-kankei wo gyaku ni shite kakudai-zo wo eru hoho to sono oyo jiken (method for obtaining enlarged image by reversing relation between objective lens and sample and its application case) – admitted 10 per cent rate license fee as the compensation for damages as well as the compensation for the use of an opened subject matter before the grant of patent.

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or the amount of damages caused by infringement activities, according to Article 223 of the Japanese Code of Civil Procedure or Article 105, Paragraph 1 of the Japanese Patent Act. The holder may, however, refuse to disclose such documents, if the documents contain his technical or professional secret, according to Article 220, No. 4, lit. “ha” of the Japanese Code of Civil Procedure, or if the holder has a “reasonable reason” to refuse the submission of the documents, according to Article 105, Paragraph 1, Sentence 2 of the Japanese Patent Act. As a “reasonable reason” in the meaning of this provision, a technical or professional secret typically comes into consideration. (4-2) Claim for measures preventing further infringement. According to Article 100, Paragraph 2 of the Japanese Patent Act, a patent holder can claim measures which are necessary to prevent further infringement, for example, the disposal of products constituting the infringement, or the removal of facilities used for the infringement. This claim is supplementary, and may only be asserted and admitted with an injunction claim. (4-3) Claim for costs. The winning party has a claim for refund of procedural costs, according to Article 61 of the Japanese Code of Civil Procedure. However, such refundable costs include neither the fees of attorneys at law nor patent attorneys. Court costs mostly consist of litigation fee which has to be paid by a plaintiff before filing an action, according to Article 137, Paragraph 1 of the Japanese Code of Civil Procedure. Litigation fee amounts to around 0.1 to 0.3 per cent of the estimated value of the matter in dispute, and court costs are, therefore, so small that both parties do not have much interest in the burden of the costs. The winning patent holder, however, can claim a part of the attorneys’ reward as a part of damages suffered from the infringement. Empirically, the amount of the attorneys’ reward which is recognised as part of damages hardly exceeds around 10 per cent of the total amount of other damages (see Part 7, II, 9).

3. USA (1) Injunctive relief. In the United States injunctive relief is available, but not automatically granted in patent cases. The grant of a preliminary and permanent injunctive relief requires establishing entitlement based upon the applicant’s demonstrating the existence of the legal and factual predicates to the imposition of an injunction. A preliminary injunction can be granted at anytime before the full trial on the merits is completed. Upon obtaining a favorable judgment, the patent owner may seek entry of a permanent injunction. The grant of an injunction is within the discretion of the judge based upon his or her determination whether the legal and factual requirements have been met. In the past most courts granted injunctive relief if a patent violation was established because irreparable harm was presumed to exist if the patent was infringed. The threat of an injunction was a powerful weapon used by most NPE patent owners against accused infringers. However, in its 2006 decision the Supreme Court of the United States in the Ebay case28 made clear that the criteria for the imposition of an injunction in patent matters is the same as in non-patent matters. Each element required to establish the need for injunctive relief must be demonstrated and irreparable injury cannot be presumed. As a consequence of the Ebay decision, the likelihood of obtaining an injunction has been significantly reduced. Patent owners must not only demonstrate irreparable injury but as well, a balancing of the equities favoring the grant of an injunction and weighing the public interest. Also, as has been recently held in the Apple v. Samsung mobile 28

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phone litigation, the relationship of the patented invention to the motivation for purchase needs to be considered.29, 30 In view of the likelihood that an NPE will not be granted an injunction in a court proceeding, NPEs have initiated ITC proceedings because of the threat posed of an exclusionary order. This has become part of the strategy by NPE’s to obtain settlements – and is the reason in June of 2013 a Pilot Program has been established by the ITC to have an early assessment of the ability of an NPE to establish the “domestic industry” requirement. Previously the “domestic industry” requirement was not assessed until late in the ITC proceeding.31 A court will not issue an injunction without a record establishing the legal and factual predicates. If a preliminary injunction is sought, the patent owner must also demonstrate a substantial likelihood of success on the merits. If a preliminary injunction is granted, the patent owner must place a security bond in favor of the accused infringer in the event the patent owner is unsuccessful in the litigation. Because of the significant consequences of the court’s decision, if a preliminary injunction is sought, many courts not only require the filing of sworn statements by witnesses and the presentation of documentary evidence in support (and against) the granting of the injunction the judge is likely to conduct an evidentiary hearing with witnesses providing sworn testimony and being subjected to cross-examination by adversary counsel. The decision to grant a preliminary injunction is left to the sound discretion of the court, which must render findings of facts and conclusions of law supporting the court’s decision (FRCP 65(a)). The granting of a preliminary injunction is one of the few interlocutory district court decisions that is immediately appealable to the Federal Circuit. Generally, if an accused infringer can demonstrate potential meritorious defenses (such as potentially invalidating prior art or the acceptance by the Patent Office of a petition to) or showing that a reasonable interpretation of the claims supports a significant non-infringement position, and the patent has not been previously adjudicated, it is difficult to obtain a preliminary injunction. (2) Accounting and monetary relief. Under 35 U.S.C. § 284, a successful patent owner is entitled to damages adequate to compensate for infringement, which in no event shall be less than a reasonable royalty. Except in cases involving a design patent 29

Apple, Inc. v. Samsung Electronics Co., Ltd., 678 F.3 d 1314, 1325 (Fed. Cir. 2012). In a rarely taken step the United States Trade Representative, acting on behalf of the President disapproved the decision of the ITC to enjoin certain Apple IPhone and IPad products from being imported into the United States. The stated rationale focuses on the standard setting FRAND issues (See Part 4 Defenses (2) Infra). Samsung is free to pursue remedies for infringement in its co-pending court action. However, the commentators suggest that the President is sending a signal to the International Trade Commission to be more cautious before issuing injunctive relief without full consideration of the public interest. In a recent court decision in Realtek Semiconductor Corp. v. LSI Corp., Case No. 5: 12-CV03451, Judge Whyte of the Northern District of California enjoined LSI from seeking an exclusion order from the ITC, because it was an improper attempt to use the injunctive relief threat of the ITC proceeding to extract royalties in excess of the FRAND rate. 31 In a rarely taken step the United States Trade Representative, acting on behalf of the President disapproved the decision of the ITC to enjoin certain Apple IPhone and IPad products from being imported into the United States. The stated rationale focuses on the standard setting FRAND issues (See Part 4 Defenses (2) Infra). Samsung is free to pursue remedies for infringement in its co-pending court action. However, the commentators suggest that the President is sending a signal to the International Trade Commission to be more cautious before issuing injunctive relief without full consideration of the public interest. In a recent court decision in Realtek Semiconductor Corp. v. LSI Corp. Case No. 5: 12CV-03451, Judge Whyte of the Northern District of California enjoined LS1 from seeking an exclusion order from the ITC because it was an improper attempt to use the injunctive relief threat of the ITC proceeding to extract royalties in excess of the FRAND rate. 30

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(which has a special statutory infringer profits forfeiture provision), a successful patent owner is not entitled to an infringer’s profits. The patent owner in a proper case is however entitled to its own lost profits. Nonetheless, even in competitive situations lost profits are not automatically awarded. To obtain lost profits the patent owner needs to establish what are referred to as the Panduit factors32, which require a showing that: (a) There was a demand for the patented product or method or product produced by the method. (b) There were no available, acceptable, non-infringing substitute products, or if there were, then the patent owner must demonstrate its market share and the number of the sales made by the infringer that the patent owner would have made despite the availability of other acceptable, non-infringing substitutes. (c) The patent owner had the manufacturing and marketing capacity to make any infringing sales actually made by the infringer and for which the patent owner seeks an award of lost profits – in other words that the patent owner was capable of satisfying the demand. (d) The amount of profit that the patent owner would have made if the infringer had not infringed. The issue of whether lost profits are available and if so, how they are calculated is generally the subject of significant dispute. It is customary for each party to retain a financial expert not only to evaluate the financial records to determine what constitutes the patent owner’s lost profits but, as well, to assess the capability of the patent owner to have achieved the sales, the capability of the patent owner to have supplied products if the sales could have been made, and an allocation of expenses which are used in the profits analysis between fixed and variable expenses. As well, technical experts are often called upon to provide opinion testimony about the availability or lack thereof of acceptable non-infringing alternatives. To the extent lost profits are not available, the statute provides for a reasonable royalty award. There are a number of factors having their genesis in the seminal Georgia Pacific decision33 which are used to determine the reasonable royalty. The factors are not all inclusive and some may be more or less significant depending upon the facts of each case. The 15 Georgia Pacific factors are: (1) The royalties received by the patent owner for licensing the patent, proving or tending to prove an established royalty. (2) The rates paid by licensees for the use of other similar patents. (3) The nature and scope of the license, such as whether it is exclusive or nonexclusive, restricted or non-restricted in terms of territory or customers. (In litigation it is presumed to be a non-exclusive license.) (4) The patent owner’s policy of maintaining its patent monopoly by licensing the use of the invention only under special conditions designed to preserve the monopoly. (5) The commercial relationship between the patent owner and licensees, such as whether they are competitors in the same territory in the same line of business or whether they are inventor and promoter. (6) The effect of selling the patented product and its relevance in promoting sales of other of the patent owner’s products; the existing value of the invention to the Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2 d 1152, 1156 (6th Cir. 1978). Georgia-Pac. Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970) modified sub nom. Georgia-Pac. Corp. v. U.S. Plywood-Champion Papers, Inc., 446 F.2 d 295 (2 d Cir. 1971). 32 33

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patent owner as a generator of sales of non-patented items; and the extent of such derivative or “convoyed” sales. (7) The duration of the patent term. (8) The established profitability of the patented product, its commercial success and its current popularity. (9) The utility and advantages of the patent property over any old modes or devices that had been used. (10) The nature of the patented invention, its character and the commercial embodiment produced by the licensor, and the benefits to those who used it. (11) The extent to which the infringer used the invention and any evidence probative of the value of that use. (12) The portion of the profit or selling price that is customary in the particular business or in comparable businesses. (13) The portion of the realizable profit that should be credited to the invention as distinguished from any non-patented elements, manufacturing process, business risks or significant features or improvements added by the infringer. (14) The opinion testimony of qualified experts. (15) The amount that the patent owner and a licensee would have agreed upon at the time the infringement began if they had reasonably and voluntarily tried to reach an agreement. It is presumed that in the negotiations the patent is valid and infringed. Information relevant to damages, whether lost profits or reasonable royalty, is usually sensitive, highly confidential business information. The required exchange of information between the parties is usually provided under a protective confidentiality order (“Confidentiality Order”) which requires that the most sensitive information is to be provided on an “attorneys’ eyes only” basis. Only the attorneys or the experts can review the information. Nonetheless, once a trial begins the court decides how much of the trial testimony and evidence will be available to the public. Despite the parties attempt to shield sensitive information from the public, trial courts need not agree to do so. Although instances where a judge has sealed the courtroom for purposes of this testimony are still prevalent, not all judges agree to restrict public access to evidence provided in court proceedings. (3) Obligation to pay damages. All infringers named in the lawsuit are jointly and severally liable to pay an award of damages rendered jointly against them. Although there may be indemnification agreements between, for example, the named infringing supplier and the named customers, that is a private matter between them. The successful patent owner can seek enforcement of the judgment against any of the infringing parties. The enforcement of a judgment is not automatically stayed if there is an appeal. Any losing party must make an application to the court seeking a stay – and it generally will not be granted unless the party against whom judgment has been rendered provides a bond or other security guaranteeing that the judgment will be paid if the appeal is unsuccessful. (4) Disclosure of the source of origin and of purchasers. Broad discovery is available to the parties (or their counsel). Parties must disclose books, records and other materials that are relevant or likely to lead to relevant evidence. This includes, for example, identifying sources of raw materials; disclosure research and development information; the identity of suppliers; and financial relationships with purchasers. Representatives of the parties and employees with knowledge of discoverable information are required to be made available for pre-trial depositions in which each can be questioned for up to seven hours under oath. Third party witnesses are subject to subpoena for purposes of pre-trial discovery. 65

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Generally the parties will negotiate, and the court will issue a Confidentiality Order in which the use of the materials and the testimony is restricted to the litigation and that the competitor’s counsel and experts are the only individuals with access to the highly confidential information of an opposing party. There are also strict rules against “spoliation” of evidence. Once a litigation is contemplated, even if it is not yet initiated, the destruction of files or records which could be related to the matter is prohibited. If destruction takes place, the court can order sanctions against the party responsible for the destruction. Sanctions often prevent a party from contesting an issue and in extreme cases can result in an adverse judgment. The discovery rules and issues relating to “spoliation” have become a more important issue with the advent of “e-discovery”. There is a greater use of email in communications and to a much greater extent business records are retained in electronic form. Many businesses have policies for the automatic overwriting or destroying emails or other electronic data on a scheduled basis. These destruction policies must be suspended during the pendency of the litigation or there is a significant risk that a meritorious case can be prejudiced or even lost.34 (5) Destruction of infringing goods. Ordering the destruction of infringing goods in the hands of the infringer depends upon whether a permanent injunction is granted. A successful patent owner, in its application for an injunction, generally sets forth the relief it seeks. This can be prohibitory or mandatory. The court can order the infringer to stop doing something (prohibitory) and/or order the infringer to take certain affirmative steps, such as the destruction of infringing goods (mandatory). If an injunction is granted, generally the order requires that the infringing goods within the control of the infringer be served up for destruction and includes provisions to assure compliance (for example, through sworn certifications of compliance by officers of the infringer or independent third parties). If a permanent injunction is not ordered, destruction will not be ordered, but a remedy which requires an ongoing accounting would be put into place, and the terms and conditions of any continuing sale would be the subject of the court order. (6) Removal of infringing goods. In most cases there is no requirement for parties not participating in the litigation to remove from sale the products already purchased by them. U.S. patent law has an “exhaustion” doctrine. Once a patent owner has received consideration for use of the patent the patent owner has “exhausted” its remedies against those who purchased from the infringer. Therefore sales of products already in the hands of purchasers, even with the imposition of a permanent injunction, will not be ordered removed from the purchasers unless the purchaser is a named party in the litigation because the monetary damage award has compensated the patent owner for products already in the stream of commerce. Nonetheless, in rare circumstances (such as where the infringing products pose a danger due, for example, to lack of proper manufacture) a recall may be ordered. (7) Costs. “Costs” are by statute awarded to a successful litigant.35 However, the items which are included in taxable costs are defined by the statute.36 In patent cases “costs” do not include attorneys’ fees. As a result an award of costs only represents a fraction of the actual costs incurred by litigants. Recently the significant costs incurred in assembling and providing adversaries with electronic discovery has been considered 34

See Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003). See 35 U.S.C.A. § 284. 36 See 28 U.S.C.A. § 1920. 35

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by some courts as a taxable cost under the theory that they represent the 21st century equivalent of recoverable “copying” costs. (8) Award of attorney’s fees. Except in exceptional cases each party is responsible for its attorney’s fees.37 The exceptions generally include cases in which there was either some type of abuse in discovery, improper and unnecessary delays created by the unsuccessful party in litigation, or the raising of specious claims or where the infringer has been found to have acted willfully. The Supreme Court has recently broadened the factors a district court can consider in deciding whether a matter is “exceptional” under 35 U.S.C. § 285. This could significantly increase the risk that a loser in a patent litigation could be responsible for the attorney’s fees of the successful party.38 Willfulness requires a determination that the alleged infringer acted recklessly. This requires proof, on an objective basis, that the infringer acted despite a high likelihood that its actions infringed a valid and enforceable patent. Where there were legitimate or credible defenses, even if not ultimately successful, their existence demonstrates a lack of recklessness. The patent owner must also prove that the infringer actually knew or should have known that its actions constituted an unjustifiably high risk of infringement of a valid and enforceable patent. Factors which are often considered in the willfulness analysis include: (a) whether the infringer acted in accordance with the standards of commerce for its industry; (b) whether the infringer copied the product or process; (c) whether there is a reasonable basis to believe that the infringer did not infringe or had a reasonable defense to the infringement; (d) whether the infringer made a good faith effort to avoid infringing the patent, for example, whether the infringer attempted to design around the patent; (e) whether the infringer tried to cover up its infringement; and (f) whether the infringer relied upon the opinion of counsel in cases in which the infringer relies upon an opinion of counsel as a defense to willful infringement. At one time there was a negative inference that could be drawn if an opinion of counsel was not received. This is no longer the law.39 It is up to the alleged infringer to determine whether it wishes to offer evidence of such reliance. Although the trier of the facts decides whether the patent owner has established the factual predicates for a finding of willfulness, the ultimate decision whether to award attorney’s fees is made by the judge.

II. Objections in patent litigation 1. Germany An important question for legal practitioners, especially if they are representing the defendant, is which pre-trial and procedural counter-measures are available to the alleged infringer to take against the plaintiff’s measures. (1) License agreement, compulsory license, anti-trust defence. (1-1) License agreement. The patentee’s lawsuit will be dismissed if the defendant can prove the existence of a license on the patent in his favour and if the challenged use is covered by the license agreement. In practice parties often dispute about legal effectivity of the termination of the license agreement. 37

See 35 U.S.C.A. § 285. Octane Fitness LLC. vs. Icon Health & Fitness (Sup. Ct. April 29, 2014). 39 In re Seagate Tech., LLC, 497 F.3 d 1360, 1373 (Fed. Cir. 2007). 38

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A permission to use may also be established if the patentee made use of a “Declaration of Willingness to Grant Licenses” (§ 23 PatG). All acts of use exceeding the extent of the “permission” (license, compulsory license) constitute a patent infringement40. (1-2) Compulsory license. Another defence is based on a compulsory license according to § 24 PatG by which the defendant can take legal action and request that the FPC grants a compulsory license, if the patentee refuses to grant a license to the defendant who is willing to pay a reasonable royalty. The regulation of § 24 PatG is to be directly applied to European patents in accordance with the European Patent Convention, where these have been granted for the Federal Republic of Germany and are accordingly subject, in that regard, to German law (Art. 2 paragraph 2, Art. 74 EPC). The provisions in the German Patent Act cover the compulsory licence in the public interest (§ 24(1) PatG) and the compulsory licence in the case of dependent patents (§ 24(2) PatG). Special provisions for compulsory licences for pharmaceutical products for the promotion of public health are foreseen in the Regulation (EC) No. 816/2006. The existence of a public interest which is required for the grant of a compulsory licence (sec. 24(1) GPA) depends on the circumstances of the individual case. In this context it is necessary to consider inter alia technical, commercial, ideological and political aspects such as – Medical aspects – Development of the industrial technology in a sector which is particularly important to the public – Significance of the invention – Promotion of public health – Substantial cost reduction or improved therapeutic action of pharmaceuticals – A markedly lower level of side effects than existing pharmaceuticals Prior to a court action the person seeking a license has to endeavor to obtain a licence from the patentee under “reasonable conditions”. The procedure for the grant of a compulsory licence corresponds to the procedure in a nullity action (cf sec. 81 GPA). The competent authority for an action to grant a compulsory licence is the Nullity Senate of the Federal Patent Court (sec. 66 Patent Act) as well as, in the second and final instance, the Federal Supreme Court (sec. 110 GPA). In practice, applications for compulsory licences are not applied for frequently. However, in many cases, the mere possibility of adopting compulsory measures provides a strong incentive for an agreement between patentee and potential licensees. This is the so-called “fleet in being” effect of the compulsory licence. Since the establishment of the Federal Patent Court in 1961, only a small number of compulsory licence proceedings have been initiated. Compulsory licence was granted in only one case by the judgment of the Federal Patent Court dated June 7, 1991 – “compulsory licence”, which was revoked by the judgment of the FSC dated December 5, 1995 – “Polyferon”. In this case, the Federal Patent Court granted a compulsory licence having regard to the public interest in the medical use of the patented active substance “human immune interferon”. Using human immune interferon, the petitioner manufactured a pharmaceutical product (polyferon) for the treatment of chronic polyarthritis and obtained approval, under the pharmaceuticals law, for application of the product. The petitioner was also the proprietor of dependent patents in respect of specified uses of human immune interferon. (1-3) Anti-trust defence. Among the most important questions in contemporary patent and competition law is if and how far the use of patent rights may amount to an 40

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BGH GRUR 1967, 676, 680 – Gymnastiksandale.

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act of abuse of a dominant position. Someone who produces according to a patented standard in industry is able to defend himself against the suit of the patent holder regarding his standard essential patent (SEP) with a license objection based on antitrust law. This means that the user of the SEP can claim that the patent holder misuses the monopoly by refusing a license under FRAND (Fair, Reasonable And Non Discriminating) condition. Thereto the user has to demonstrate that he endeavoured unsuccessfully to get a licence on such adequate terms and that the patent holder violates the prohibition regarding antitrust law to discriminate against other companies or to encumber them without factual reason. According to the case law of the BGH “Orange Book Standard” (Judgement of May 6, 2009 – GRUR 2009, 694) he is, however, only allowed to use the patent in anticipation of the unlawfully refused licence treaty, when he stops to deny infringement and the validity challenge and fulfils the duties resulting from the treaty aimed for, especially when he pays the adequate licence fee to the patent holder or when he at least guarantees the payment. The determination of adequate criteria for the antitrust defence against the enforcement of SEPs is under discussion and will finally have to be defined by the Court of Justice of the European Union which is asked to provide a preliminary ruling in the litigation Huawei/ZTE (Case No. C-170/13). In the decision on Apple/Motorola of April 2014 the European Commission expressed the preliminary view that an interpretation of the “Orange-book”-ruling of the Federal Supreme Court of Germany whereby a willing licensee is essentially not entitled to challenge the validity and essentiality of the SEPs in questions is potentially anti-competitive. (2) Revocation action and the dual system. Basically, the infringer has very few really effective measures at his disposal if the infringement has been or is being committed and if the plaintiff’s patent is valid. However, the infringer will in most cases attack the patent on which the infringement suit is based by filing an invalidation suit (nullity suit) against the plaintiff’s patent with the Federal Patent Court in Munich. German patent procedure is characterized by its dual system which means that questions of infringement and patent validity are strictly separated41. The District Court only deals with the question of infringement and cannot revoke the patent or alter the claims of the patent. The infringement court must respect a granted patent and the wording of its claims. Once the invalidation proceedings (nullity or opposition proceedings) against the plaintiff’s patent are pending, the defendant (in the patent infringement case) may request that the patent infringement proceedings be “stayed” (i. e. interrupted) until a decision on the validity of the patent has been made. However, this request must be well reasoned for the infringement court to become convinced that the invalidation action against the patent has good chances to succeed. At present, German infringement courts are very reluctant to order a stay, especially when the material which the plaintiff presents in the invalidation suit against the patent is identical or very similar to the material used during the granting procedure before the Patent Office. The court’s decision on a stay is governed by the chances of success it foresees for the nullity or opposition proceedings. Experienced litigation courts in Germany only suspend the proceedings if there is a very high likelihood for invalidity and they are convinced that the subject matter of the patent was not new at the date of priority. They rarely suspend the proceedings if the revocation claim is only based on lack of inventive step. Experience shows that applications for a stay of proceedings were granted in less than 15 % of all cases. (3) Prior use right. Any person who has already used the protected invention before the filing date or the priority date of the plaintiff’s patent (whichever is applicable) shall 41

See also Part 7 I. 1.

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be entitled to a prior use right (§ 12 PatG). One prerequisite for the prior use right to come into existence is, however, that the user must have been in possession of the protected invention (i. e., that the prior user understood the technical problem and knew its solution) before the filing or priority date42. The other prerequisite which a person must meet to be entitled to a prior use right is that he must have used the patented invention in Germany before the filing date or priority date of the patent. At least one of the acts of use as listed in § 9 and § 10 PatG must have been performed by the prior user in order that he will be entitled to a prior use right. Preparatory steps instead of an actual use may be sufficient when they show a serious intention to use the invention43. The “prior user” may continue to use the invention for the same technical subject as he did before the filing date and there are no limits regarding the amounts produced. However, the prior use right is linked to the user’s enterprise. (4) Test privilege. In order to promote research and development, § 11 No. 2 PatG provides that the effects of a patent shall not extend to acts done for research purposes. The research exemption was first introduced into law in the 1981 German Patent Act. Apart from the research exemption, the second exemption pursuant to § 11 No. 2 b PatG, with effect from September 6, 2005, is the Bolar exemption (Roche-Bolar provision). This exemption from the effects conferred by the patent was introduced into law in order to facilitate obtaining marketing authorizations for medicinal products. It allows studies and trials necessary for obtaining a marketing authorization. (4-1) Research privilege. (4-1-1) Legal provision. According to § 11 No. 2 German Patent Act (PatG), the effects of a patent shall not extend to “acts done for experimental purposes relating to the subject-matter of the patented invention”. Relevant for determining the scope and limitations of the so-called “experimental use exemption” are the German Federal Court of Justice (FCJ) decisions of July 11, 1995 (Klinische Versuche I) (Clinical Trials I)44 and April 17, 1997 (Klinische Versuche II) (Clinical Trials II)45. The criteria laid down in these decisions not only apply to clinical trials but are also generally applicable to non-clinical research. (4-1-2) Research on the subject matter. The research exemption will only apply if the research is directed to the patented subject-matter as such. Research with a patent protected process or product to obtain information about other products or processes is not covered by the privilege. Where the patented subject-matter is merely a tool for carrying out research, § 11 No. 2 PatG does not apply. The use of patented tools and test procedures for carrying out privileged experiments are not exempted from patent protection as long as the patented tools and test procedure are merely used as means for carrying out the experiment. Obtaining new information. According to the case law of the FCJ, a privileged experiment is a planned action for gaining new knowledge about the subject-matter of the patented invention. It is important in this context to differenciate between already known information and new findings. If an experiment is directed to resolving any questions and/or obtaining further information about the subject-matter of the patented invention, the research exemption is given. 42

BGH BGH 44 BGH 45 BGH 43

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GRUR 1964, 491 – Chloramphenicol; BGH GRUR 1964, 496 – Formsand II. GRUR 1964, 20 – Taxilan. GRUR 1996, 109 – Klinische Versuche. NJW 1997, 3092 – Klinische Versuche II.

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The FCJ in its decisions Clinical Trials I and II refers to a case-by-case evaluation where not only the kind of the tested substance but above all the intentions of the persons and companies involved must be taken into account. Experiments are permissible which relate to the constitution of the patented substance, for example, experiments for investigating its composition, producibility, technical usability and effects46. Allowed are also experiments for testing the functionality of the patented invention. According to the FCJ decision “Clinical Trials I”, this exemption includes using the subject-matter of the invention for finding new, previously unknown applications or indications and – according to the decision “Clinical Trials II” – experiments for obtaining information about the properties and effects of the patented substance within the known pharmaceutical indications. Where preclinical and/or clinical trials are carried out on substances which are not known to have medical utility in order to find out whether it does have medical utility they fall within the existing experimental use exemption. (4-1-3) Economic purposes of research. As long as the experiments are conducted to gain new knowledge the final purpose of the experimental use is not relevant. Therefore, it is also permissible to conduct experiments for commercial purposes. It is also not crucial whether the experiments are conducted not just for research purposes but also with the aim of commercial exploitation. The research exemption does not apply in cases where the activities are done solely for the purpose of generating revenues or clarifying commercial factors, such as market needs, price acceptability and marketing options47. Abuse of privilege. If experiments are carried out on a scale no longer justifiable as having an experimental purpose, they are not permissible experimental use acts within the meaning of § 11 No. 2 PatG. Thus, the case law of the FCJ prevents the use of the exemption where the activities are a large-scale test series such that the market will be flooded with patented substances and so block the sales of patent owner’s original products. Patent protected products may therefore only be generated and used in a range that is necessary in order to achieve the purpose of the desired research. Stocking of patent protected products for the purpose of future marketing after the expiry of patent protection is not allowed. Research tools. In cases where patent protected tools, for example, laboratory equipment, chemical reagents are required for studies and experiments it is necessary to obtain patentee’s permission. The use of research tools is only permitted as long as they are to be used for study and research. – Since the patent protection of research tools does not extend to the information generated therewith, there does not exist a cease and desist claim for the use of the obtained data in further technical developments even if the use of the tool was not authorized48. Outsourced research. According to the prevailing opinion in the literature it should be possible to outsource research to contractors as long as the work remains research on the subject matter of the patent49. It is advisable to specifically define the purpose of the 46 BGH GRUR 1981, 734 – Erythronolid; LG Berlin GRUR 1985, 375 – Klinischer Test; LG Du ¨ sseldorf GRUR Int. 1986, 807 – Feldversuche; BGH GRUR 1990, 997 -Ethofumesat. 47 Cf. Mes, § 11 No. 7. 48 Cf. von Meibom/vom Feld, Durchgriffsanspru ¨ che (Reach-Through-Anspru¨che) bei Patenten fu¨r Forschungszwecke in: Festschrift Bartenbach, pp. 385, 390 et seqq. 49 See for example Benkard/Scharen, PatG, § 11 No. 8.

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contractual work in the respective agreements with the contractors. This is because the research exemption only extends to contractors that are aware that their work is performed in the context of privileged research. Third party support. The experimental use exemption covers the production of the patented object of study by a company enjoying the right to conduct experiments under the experimental use exemption provided that the kind and volume of said production is exclusively directed to experimental purposes. The question of whether the preparation and distribution of the object of study by a third party not involved in the experiment will fall under the experimental use exemption when said subject is used by the customer for experimental purposes is still under dispute. In patent literature occasionally the view is held that the experimental use exemption also covers such supplying acts50 provided that the supplier knows that the recipient intends to use the received products/means for performing research on their subject matter. The wording of § 11 No. 2 PatG suggests, however, that acts done for experimental purposes are only privileged as long as they are carried out for performing the experiment51. The fact that offer and sale of patent-protected test substances are not acts done for experimental purposes is an argument against privileging them. In case it is according to the prevailing opinion in the literature it is in any case not be permitted to advertise and offer patent-protected test substances to an indefinite group of customers by merely stating “for experimental purposes”52. (4-2) Bolar exemption. The exemption regulated by § 11 No. 2 b PatG provides that the effects of a granted patent do not extend to studies and trials, including their practical requirements, necessary for obtaining drug approval for the marketing of a drug within the European Union or drug approval in a Member State of the European Union or abroad. This exemption is similar to the so-called Roche-Bolar (Safe Harbour) Exemption in the United States. It is limited to research purposes for obtaining market approval for a pharmaceutical compound. However, within this range its scope of exemption is broader than the exemption regulated by § 11 No. 2 PatG as it is not limited to research on the subject matter of a protected product or process but also allows research with a patent protected product or process. According to the prevailing opinion of scholars a use act involving a research tool will therefore fall under the Bolar exemption of § 11 No. 2 b PatG if the use of the tool is necessary for obtaining approval data or if it is explicitly required by the approval authority53. The German Bolar provision is not limited to generics but also covers trial activities with innovative drugs for the purpose of obtaining regulatory approval. Studies that are undertaken with a view to filing applications for marketing authorisations outside the EU also fall under the scope of the Bolar exemption in Germany. 50

Cf. Fa¨hndrich/Tilmann, Patentbenutzende Bereitstellungshandlungen bei Versuchen, GRUR 2001, 901. Cf. Benkard/Scharen, PatG, § 11 No. 6, who in this connection refer to an early decision of the Supreme Court of the German Reich according to which the sale of a patented device to be used by the customer for experimental purposes or for inspiring him to improvements was not exempted from patent protection. 52 Cf. Chrocziel, Die Benutzung patentierter Erfindungen zu Versuchs- und Forschungszwecken, 1986, 195; Straus, Zur Zula¨ssigkeit klinischer Untersuchungen am Gegenstand abha¨ngiger Verbesserungserfindungen, GRUR 1993, 308, 311; Chrocziel/Hufnagel, Versuchsprivileg und Unterstu¨tzungshandlungen – Abgrenzungsfragen im “Bermuda-Dreieck” der Doppelparagraphen 9, 10, 11 Nr. 2/2 b PatG in: Festschrift Mes, 2009, p. 59 et seqq. 53 Cf. Holzapfel, Die patentrechtliche Zula ¨ssigkeit der Benutzung von Forschungswerkzeugen, GRUR 2006, 11 set seqq; von Meibom/vom Feld, Durchgriffsanspru¨che (Reach-Through-Anspru¨che) bei Patenten fu¨r Forschungswerkzeuge in: Festschrift Bartenbach (2005), pp. 385, 398. 51

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Contrary to the legal situation in the US54 it is, according to German patent law not sufficient if the experiments carried out merely have a reference to the pharmaceutical approval proceedings. Rather, it is necessary that the studies and trials are necessary for directly obtaining data required in the approval proceedings. (5) Statute of limitation. The patentee can no longer enforce his cease-and-desist claim against an infringer upon expiration of three years from the end of the year when he became aware of the infringing act (§ 141 PatG, § 195, 199 (1) German Civil Code (BGB)) or after 10 years from the infringement if he does not become aware of it before this time-limit (§ 141 PatG, § 199 (4) BGB). Claims for damages are regularly time-barred after three years (§ 141 PatG in conjunction with § 195 BGB). The term starts running at the end of the year in which the claim has arisen, i. e. the damage occurred, and the entitled party has become acquainted or should have become acquainted without gross negligence with the claimestablishing circumstances (i. e. the infringement act and the damage) and the liable party (§ 199 (1) BGB). Without consideration of the knowledge or grossly negligent ignorance of the liable party and the relevant facts the claim for damages becomes time-barred 10 years after its origin, i. e. after expiry of 10 years from occurrence of the loss (§ 199 (3) No 1 BGB). The claim on account of unjustified enrichment in the case of patent infringement afforded under patent law remains in nature a claim for compensation, which merely in connection with the legal consequences refers to the law concerning unjustified enrichment (§ 818 ff. BGB). Pursuant to § 141 PatG in conjunction with § 852 BGB it becomes time-barred 10 years after its origin, i. e. after occurrence of the loss. The claim for compensation under the law relating to unjustified enrichment exists independently of the patent owner’s knowledge of the damaging act and allows compensation even after expiry of the statutory three-year period of limitations which is applicable in compensation cases. However, according to Federal Supreme Court (BGH) decisions the infringer is only “enriched” by the use of the invention and thus merely needs to pay a reasonable license fee. In connection with compensation for unjustified enrichment the entitled party may neither claim its missed profit nor the profit obtained by the infringer. (6) Laches. The enforcement of claims arising from a patent infringement may be inadmissible even before the 10-year statutory period of limitation has lapsed, if the patentee has knowledge of the infringing acts without taking measures against it during a certain period of time and the infringer has reason to suppose because of particular circumstances that the patentee will no longer bring suit. In real terms, the plea of laches is rarely successful. (7) Exhaustion. The placement of patent protected products on the market with consent of the patentee would lead principally to an “exhaustion” of patent rights. According to the case law of the BGH there is not an unlimited exhaustion of patent 54 In Merck vs.Integra, the Court of Appeal of the Federal Circuit (CAFC) decided on July 27, 2007 about the reach of the Bolar exemption. In said case Merck had used a specific peptide sequence in experiments for research of angiogenesis inhibition, on which Integra held patent rights. These experiments were directed to determining whether various peptides covered by the patent were suitable for pharmaceutical use. The CAFC decided that the safe harbor exemption did not apply on the grounds that the experiments carried out were not reasonably related to the development and submission of information to the FDA and that some of the data obtained were not used for approval purposes. The Supreme Court vacated the judgment of the CAFC and remanded the case for a renewed decision. According to the findings of the Supreme Court it is sufficient if the experiments reasonably relate to FDA approval proceedings. Thus, the preclinical trials were covered by the Bolar exemption.

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rights in such cases. Exhaustion is limited to the individual product and the “normal”, “conventional” intended use of it. Not covered by exhaustion is remanufacturing with the consequence that the exclusive patentee keeps the right to manufacture patent protected products.55 In practice admissible repair on the one hand and inadmissible remanufacture on the other hand have to be differentiated. According to the case law of the Federal Supreme Court it has to be decided whether the measures taken by the purchaser have to be considered as “conventional” intended use. If this is the case it has to be decided in a second step whether the measures preserve the identity and characteristics of the purchased patented product. By balancing the interest involved the patent holder’s interest in an unhindered exploitation of his invention and the purchaser’s interest in the unhindered use of the product have to be weighed56. Exchange of essential parts which embody the technical or economic advantage of the invention is remanufacturing. Exchange of parts or use of spare parts which is not within the established practice is considered to be remanufacturing even if the parts do not reflect the technical effect of the invention.

2. Japan A third party is prohibited from exploiting a patented invention without a legal reason or a contractual permission. If an infringement action is taken against a third party, the third party can assert that his product or process does not exploit the patented invention, not only because it does not belong to the protective scope of invention, but also because, as an objection, the invention is lack of validity of patent, or he is permitted to exploit it on the basis of a legal or contractual reason. (1) License. (1-1) License agreement. If there is a contractual license, an infringement action will be dismissed, insofar as the exploitation of the licensee falls in the scope of the contract. If, however, the exploitation exceeds the limit of the contract, it could be not only a mere breach of the contract, but also a patent infringement. It is discussed what kind of breach of contract could lead to a patent infringement. It would depend on the broken contractual clause and the manner of breach. For example, in a case57, the plaintiff, namely a patent holder, granted the defendant a non-exclusive license for the patented cutter, which divides plastic pots for plant, under the condition that the cutter should not be used for pots supplied by other persons than the plaintiff. The defendant, namely the licensee, used the cutter for the pots supplied by other persons, and violated the condition in the license. The court held that the violation was related only to an additional condition, and did not affect the permission for exploitation of the patented cutter. The court, therefore, denied the patent infringement. (1-2) Non-exclusive licenses granted by the Commissioner. In the Japanese Patent Act, there are three kinds of non-exclusive licenses that are granted by the Commissioner of the Patent Office, namely: 1) Non-exclusive granted license in the case of the lack of adequate exploitation for three years by the patentee, according to Article 83 of the Japanese Patent Act, 2) Non-exclusive granted license in the case of indispensability to use the patented invention for exploiting the patented invention of another person, according to Article 92 of the Japanese Patent Act, and 55

Confer BGH GRUR 1973, 518 – Spielautomat II. BGH GRUR 2012, 1118 – Pallettenbeha¨lter II, BGH GRUR 2004, 758 – Flu¨gelradza¨hler. 57 A judgement of the Osaka District Court on 26th December 2002, Case No.: Heise 13 (wa) 9922 – iku-byo-pot no bunri-jigu oyobi bunri-hoho jiken (device for separating seeding pot and separation case). 56

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3) Non-exclusive granted license in the case of necessity for public welfare, according to Article 93 of the Japanese Patent Act. In more than 50 years after the enactment of the Japanese Patent Act 1959, there were several cases in which applications for grant of these licenses were filed with the Japanese Patent Office. There was, however, no case until now in which a license was granted by the Commissioner of the Japanese Patent Office. Most applications were supposedly withdrawn because an agreement would be reached between the disputed parties, or because the applicants abandoned the application. It is not clear whether an infringement court admits such a defence on the basis of a non-exclusive license which could possibly be admitted by the Commissioner. (1-3) Legal licenses. (1-3-1) Types of legal licenses. The Japanese Patent Act stipulates some legal licenses that are all non-exclusive licenses. The reasons why such legal licenses are permitted vary. Following are typical legal licenses: 1) Non-exclusive license of an employer pertaining to an employee invention, according to Article 35, Paragraph 1 of the Japanese Patent Act; 2) Non-exclusive license of a third party based on a prior use, according to Article 79 of the Japanese Patent Act; 3) Non-exclusive license of a patent holder etc. based on an exploitation prior to the registration of the beginning of a trial for invalidation of a patent, according to Article 80, Paragraph 1 of the Japanese Patent Act; 4) Non-exclusive license of an owner etc. of a design right which conflicts with a patent, and expires before the expiration of the conflicting patent, according to Article 81, Paragraph 1 and Article 82, Paragraph 1 of the Japanese Patent Act; 5) Non-exclusive license of a third party based upon an exploitation between the invalidation and the revival of a patent by a retrial, according to Article 176 of the Japanese Patent Act. (1-3-2) Legal license based upon a prior use. There are various kinds of legal nonexclusive licenses as above. Most of them rarely come into consideration in the practice. However, the non-exclusive license based upon a prior use pursuant to Article 79 of the Japanese Patent Act is relatively more important than other legal licenses. The technical and industrial research and development of competing companies often directs to almost the same course. When, for example, liquid crystal televisions or displays are being developed, relevant various products or processes are also being developed. A manufacturer of final products like liquid crystal displays often asks several manufacturers of parts or materials for displays. As a result, these manufacturers of parts or materials have developed similar parts or materials, and filed many patent applications for these developments almost at the same time. In such cases, a nonexclusive license based on a prior use comes into consideration as a defence method for an applicant with a younger filing or priority date against an applicant with an older filing or priority date. The prerequisites of the non-exclusive license of a third party mainly are as follows, according to Article 79 of the Japanese Patent Act: 1) Firstly, the third party has to complete the same invention by himself as a patented invention, without knowing the patented invention, or has to get the same invention as a patented invention from another inventor who had developed the same invention without knowing the patented invention; 2) Secondly, the third party has to have begun the business as an exploitation of the same invention, or at least begun the preparation for the business, before the filing date of the patented invention. 75

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Practically, it is often disputed whether a third party has already begun the “preparation for business” or not. A judgement of the Japanese Supreme Court58 held that the “preparation for business” meant that the intention for an immediate exploitation (or work) was objectively recognisable: “‘preparation for business’ as the working of an invention as provided in Article 79 of the Patent Law should be construed as a state of affairs such that a person who made the same invention as the invention for which a patent application has been made without knowing its content, or having acquired the knowledge from this person has an intention to immediately work the invention, although he has not reached the stage of implementation of the business, and such an intention has been expressed in the manner and extent objectively recognisable.” (The emphasis with bold font is added by the author.)59

There is also a remaining question in which situations the intention to work the invention should be recognized. It is difficult to generalise the cases in which the intention is objectively recognisable, because it depends upon several factors, for example, costs for preparation, type or size of product, necessity of governmental permission for production etc. Only if a sample product or a sample tool for process has been made, some judgements acknowledged that such an intention was already objectively recognisable. If, however, there were still large possibilities for improvement of such samples, courts often denied to recognise such an intention. In a case60, for example, it was disputed whether a legal non-exclusive license based upon a prior use could be established for defendant’s speaker made of plural layers of paper. The court held that it was not enough to recognise such an intention objectively from the facts that some sample products had been made and exhibited in a trading fair, and it was necessary to begin to prepare a commercial production based on concrete orders from customers, or begin to prepare the producing line. If, however, as in the leading case of the Japanese Supreme Court, the product is so large and expensive that it is almost impossible to make a trial product, the completion of a basic design could be enough to recognise the “preparation of exploitation”. (2) Validity of invention. (2-1) Change of dual system- Kilby patent case. Japanese infringement courts presumed for a long time that they were not entitled to decide the validity of an allegedly infringed patent (see Part. 7, II. 1(1)). Such an attitude of Japanese infringement courts was a reflection of an idea of dual system which was traditionally adapted to the Japanese patent system. It was being thought that the validity of a patent should be decided exclusively by the Japanese Patent Office, because the Japanese Patent Office was specialised for the technical matters, and therefore adequate to decide the validity of a patent. Recently, such a tradition has been changed drastically by a judgement of the Japanese Supreme Court in 200061, which held that infringement courts were allowed to decide the validity of the patent declaratorily in the reasoning to dismiss the claim of 58 A judgement of the Japanese Supreme Court on 3rd October 1986, Case No.: Showa 61 (o) 454, Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 40, No. 6, pp. 1068 = Hanrei-Jiho No. 1219, pp. 116 = Hanrei-Times No. 627, pp. 105 – do-ko-ro (or walking-beam kanetsuro) jiken (walking beam type heating furnace case). 59 An English translation of this judgement can be found under the web site of the Japanese Courts: http://www.courts.go.jp/english/judgments/text/1986.10.03-1986.-O-.No.454.html. 60 A judgement of the Tokyo District Court on 31st October 2007, Case No.: Heise 16 (wa) 22343 – speaker-yo shindo-ban no seizo-hoho jiken (method for manufacturing diaphragm for speaker case). 61 A judgement of the Japanese Supreme Court on 11th April 2000, Case No.: Heisei 10 (o) 364, Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 54, No. 4, pp. 1368 = Hanrei-Jiho No. 1710, pp. 68 = Hanrei-Times No. 1032, pp. 120 – hando-tai sochi jiken (semi-conductor

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the patent holder (see Part. 7, II. 1(2)). Even though an infringement court may declare the invalidity of the patent, such a decision does not bind the Japanese Patent Office legally. The patent holder, however, is confronted with the difficulty, as a matter of fact, to assert his patent right to other third parties after the dismissal of the former action. After the decision of the Japanese Supreme Court, there were many judgements by the courts of lower instances declaring the invalidity of a patent in the reasoning of its judgement. Based upon such judgements, Article 104-3 of the Japanese Patent Act was enacted, that the authority of infringement courts to declare the invalidity of a patent. It was enacted in 2004. According to Article 104-3, Paragraph 1 of the Japanese Patent Act, a patentee is not allowed to exercise a patent right against a third party, if the patent should been recognised as invalid in a trial for invalidation of the Japanese Patent Office. This objection is regularly asserted by an alleged infringer. Statistically speaking, infringement actions are often dismissed because of this objection62. There is an opinion that, because of the introduction of this objection as to validity of patent, the position of patent holders might have become weaker unfairly. However, there is also an opposing view against such an opinion. According to a report of a chairman of a chamber specialised for intellectual property rights of the Tokyo District Court63, about one third of patent infringement cases were settled by an agreement which was mostly preferable for patentees. Therefore, the prospect of patent holders for a success in an infringement cases is more favourable than the artificial statistical figure about the result of judgements. (2-2) Countermeasure of patent holders – correction. An effective countermeasure of a patent holder against the objection as to validity of patent is the correction of patent claims. In many cases, patent holders try to correct patent claims to avoid the invalidity of the patent. If a trial for invalidation is pending in the Japanese Patent Office, the patent holder may make an application for the correction only in the trial proceedings for invalidation, according to Article 134-2 of the Japanese Patent Act. If the defendant does not submit an application of the trial for invalidation, the plaintiff can make an application of trial for correction, which is independent of the trial for invalidation, according to Article 126 of the Japanese Patent Act. For example, in a recent infringement case64, it was disputed whether an invention of a golf ball was infringed, and adequate corrections lead to avoid the invalidity of a patent. The characteristic feature of the invention was the material of the core of the golf ball which contained thiophenol as chain transfer agent of polymerization reaction. The patent holder firstly had made an application for correction in an invalidation trial to avoid the invalidation of patent. After the end of the dismissed invalidation trial, the patent holder had newly filed a request for the trial for correction of a patent claim from “thiophenol” to “pentachlorothiophenol (PCTP)” in order to avoid the still possible device case) or so called Kilby tokkyo jiken (Kilby’s patent case) named after the inventor who was a holder of the Nobel Prize 2000, Jack Kilby. 62 According to the statistic in the article of an officer of the Japanese Patent Office, Tomoyasu Sato, shinpan-seido no gaiyo to saikin no doko (summary of the trial system of the Japanese Patent Office and recent tendency), Patent Vol. 63, No. 2 (2010), pp. 93, 102, there were 170 cases where Japanese infringement courts decided from August 2000 to December 2008 the validity of patent of the allegedly infringed patent. At 112 of 170 cases, namely two-third of cases, the patents were regarded as invalid. 63 Misao Shimizu, tokei-suji-to ni motozuku Tokyo-chisai-chizai-bu no jitsujyo ni tsuite (actual situations of the chambers for intellectual property in the Tokyo District Court on the basis of statistical figures etc.), 2010, Hanrei-Times No. 1324, pp. 52. 64 A judgement of the Tokyo District Court on 26th February 2010, Case No.: Heise 17 (wa) 26473 – solid golf ball jiken (solid golf ball case).

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invalidation of the patent. The Japanese Patent Office permitted the correction. Based upon the corrected invention, the Tokyo District Court held that the effect of “pentachlorothiophenol” could not have been anticipated from the prior art, and ordered the payment of 1. 7 billion yen – ca. 13 million Euro – as compensation for damages. However, a correction as a countermeasure against an objection as to validity of a patent often delays the patent infringement procedure. Recently, the Japanese Supreme Court has made a judgement to use Article 104-3, Paragraph 2 of the Japanese Patent Act which permitted the dismmisal of a delayed objection based on the validity of a patent mutatis mutandis to the case of delayed application for trials of correction by the patent holder65. The patentee tried to correct the patent many times, and made applications for correction to the Japanese Patent Office. However, almost all applications were rejected by the Japanese Patent Office. The last application for correction had finally been admitted after the infringement procedure had already been appealed to the Japanese Supreme Court. In such cases, normally, a judgement of the Japanese Intellectual High Court should have had to be reversed. The case in a final appeal has to be sent back to the Japanese Intellectual High Court in order to examine the validity of patent based upon the corrected claim, because the object for the examination of validity of patent has been changed, and the former decision of the Japanese Patent Office about the validity of patent was not valid anymore66. In the case of the delayed correction decision above, however, the Japanese Supreme Court has denied such a conclusion, because the patent holder had had chances for a long time to assert the same correction as the final correction during the lower instances, so the multiple trials for correction of the claim applied by the patent holder should be regarded as misuse of the correction system. (2-3) Delay of procedure and the amendment of the Japanese Patent Act 2011. Article 104-3, Paragraph 2 of the Japanese Patent Act states that the objection to validity of patent can be dismissed by the court upon a motion or ex officio, if the objection is made only for the purpose of delay of the proceeding unreasonably. Japanese infringement courts generously permit an objection as to validity of patent, even if it is asserted almost in the last phase of the procedure, or even in the appeal procedure67, because the judgement of an infringement court which admits the infringement of the patent should have to be reversed, according to Article 338, Paragraph 1, No. 8 of Japanese Civil Procedure Code, if a decision of a trial board of the Japanese Patent Office, which admits the invalidation of the patent, becomes final and binding afterward. 65 A judgement of the Japanese Supreme Court on 24th April 2008, Case No.: Heisei 18 (jyu) 1772, Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 62, No. 5, pp. 1262 = Hanrei-Jiho No. 2068, pp. 142 = Hanrei-Times No. 1317, pp. 130 – knife no kako-sochi jiken (device for working knife case). 66 The Japanese Supreme Court has made some judgements about the appeal cases against invalidation decision of the Japanese Patent Office where a correction in a correction procedure was admitted after the decision of invalidation decision. For example, a judgement of the Japanese Supreme Court on 9th March 1999, Case No.: Heisei 7 (gyo-tsu) 204, Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 53, no. 3, pp. 303 = Hanrei-Jiho No. 1671, pp. 133 = Hanrei-Times No. 999, pp. 234 – tai-kei kaku-gata kokan no seizo hoho jiken (a process for manufacturing large-diameter square steel pipes case), held that the invalidation decision had to be cancelled, if a correction decision had become final. This decision could be applied mutatis mutandis to the objection as to the validity of patent in an infringement case. 67 A judgement of the Japanese Intellectual Property High Court on 30th September 2005, Case No.: Heisei 17 (ne) 10040, Hanrei-Jiho No. 1904, pp. 47 = Hanrei-Times No. 1188, pp. 191 – jyoho-syori-sochi oyobi jyoho-shori-hoho jiken (information processing device and information processing means case), or ichitaro jiken (Japanese word processor “ichitaro” case), held that a new objection as to the patent validity is not necessarily hindered in the appeal procedure by Article 104-3, Paragraph 2 of the Japanese Patent Act.

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The amendment 2011 of the Japanese Patent Act has introduced the Article 104-4 which restricts the revocation of a final and binding decision which has admitted a patent infringement, even if the patent is declared as invalid in an invalidation trial of the Japanese Patent Office (see Part. 7, II. 1(4)). This new article purposes that an infringement court could dismiss delayed objections as to validity of patent with more confidence, because a final and binding decision could not be revoked afterward by an invalidation decision of a trial board in the Japanese Patent Office. An effect of this amendment is not clear, because infringement courts have discretion to decide whether a delayed objection should be dismissed or not. For example, recently, the Japanese Intellectual Property High Court has not dismissed, but still admitted an assertion of an objection as to the validity of patent in the appeal procedure, even though the alleged infringer had not asserted any objection as to the validity of patent in the first instance68. It is, however, advisable that objections as to the validity of patent should be asserted with evidences in the early phase of the first instances. (3) Restrictions of patent rights. For various reasons, a patent right can be restricted. For example, patent rights have a term of 20 years from filing, cannot be enforced against exploitations for a private or experimental use, or can be exhausted as to a patented product which has once come on the market. Such restrictions can function as objections in an infringement action. (3-1) Expiration of patent rights. A Japanese patent right expires after 20 years from the filing date of the patent application, according to Article 67, Paragraph 1 of the Japanese Patent Act. The expiration of a patent right can function as an objection against claim for injunction as well as claim for compensation of damages. The injunction is not permitted after the expiration. It is often the case that a patent right expires during an infringement procedure. A claim for compensation of damages cannot be established after the expiration of a patent right. However, compensation claims which were established before the expiration of the patent right are not affected by the expiration. The duration of a patent right can be extended up to 25 years in special cases, according to Article 67, Paragraph 2 of the Japanese Patent Act. If an administrative permission is necessary for the exploitation of the patented invention from the view point of the safety, and if a long period of delay exists, for example, because of clinical tests, the duration of the patent right is extended up to 25 years. A cabinet order designates two cases, namely medicines and agricultural chemicals as insecticide or herbicide, where administrative permission is required. Even if the duration of a patent right is extended, the protective scope of the patent right is limited to the product and the specific usage of the product of the governmental permission after the extension of the patent right, according to Article 68-2 of the Japanese Patent Act. Formerly, “product” should be defined by the efficacious material of a medicine, independent of a patent claim. Recently, however, the Japanese Supreme Court held that the “product” should not be defined by the efficacious material of a medicine, but defined by the relevant patent claim69. However, it is still unclear whether 68 A judgement of the Japanese Intellectual Property High Court on 11th April 2013, Case No.: Heisei 24 (ne) 10092, Hanrei-Jiho No. 2192, pp. 105 – nama-nori no ibutsu-bunri-jyokyo-sochi ni okeru namanori no tomo-mawari-boshi-sochi jiken (device for preventing co-rotation of raw laver in an apparatus for separating and removing foreign material in raw laver case). 69 A judgement of the Japanese Supreme Court on 28th April 2011, Case No.: Heisei 21 (gyo-hi) 326, Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 65, No. 3, pp. 1654 =

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the protective scope of the extended patent right would be limited to the efficacious material with the specific usage inside the relevant patented claim. There are often disputes about the validity of the extension of a patent duration between pharmaceutical firms developing patented medicine and generic pharmaceutical firms. Generic medicine firms often file an application for trial with the Japanese Patent Office to make an extension of a patent duration invalid totally or partially, according to Article 125-2 of the Japanese Patent Act. Such a possible invalidation of extension can function as objection in a patent infringement action. It is often disputed whether a clinical test should be necessary to obtain a permission. For example, in a case70, a Japanese medicine firm developed an antibacterial medicine, and gave a license to a foreign medicine firm. The foreign licensee conducted two clinical tests one after another in the USA. The permission of FDA for producing the medicine had been obtained in the USA as a result of the first clinical tests, when the licensee, however, had already prepared the second clinical tests before the permission of FDA. Based on two clinical tests in the USA, the Japanese medicine firm filed an application for permission of producing the medicine, and obtained the permission of the Japanese Welfare and Labour Ministry. After the permission, the Japanese medicine firm filed an application for extending the duration of the Japanese patent right based upon the second experiment. The Japanese Patent Office admitted the extension of the patent duration. 13 generic medicine firms filed an application for trial of invalidation of the extension. The board of trial in the Japanese Patent Office decided to invalid the extension of the patent duration for the period of the second clinical test in the USA. The Japanese medicine firm filed an action for rescinding the trial decision with the Japanese Intellectual Property High Court. The Japanese Intellectual Property High Court held that the first experiment was enough to obtain the permission for producing the medicine, and the second experiment was not necessary for the permission, so that the extension only based upon the period of the second experiment was invalid. (3-2) Private uses. A patent holder has a monopoly to exploit the patented invention only for commercial purposes, according to Article 68 of the Japanese Patent Act. Therefore, an exploitation only for private use does not infringe the patent. There is a discussion whether a contributory infringement could be recognised, if a part supplier should produce or sell some parts for end products which are used only for private uses. The major opinion71 admits a contributory infringement, because the main reason for the introduction of the contributory infringement into the Japanese Patent Act 1959 is to regard such cases as a patent infringement. In most cases, however, the parts are used not only for the exploitations for private uses, but also for commercial uses72. Therefore, such discussion has a little practical meaning. (3-3) Experimental purposes. The exploitation of a patented invention for an experimental or research purpose does not infringe the patent right, according to Hanrei-Jiho No. 2115, pp. 32 = Hanrei-Times No. 1348, pp. 102 – hoshutsu-seigyo-sosei-butsu jiken (composition for controlling release case). 70 A judgement of the Japanese Intellectual Property High Court on 28th October 2009, Case No.: Heisei 20 (gyo-ke) 10486, Hanrei-Jiho No. 2058, pp. 101 = Hanrei-Times No. 1319, pp. 230 – pyridobenzooxazine yudotai jiken (pyridobenzooxazine derivative case). 71 For example, a judgement of the Tokyo District Court on 25th February 1981, Case No.: Showa 50 (wa) 9647, Collection of Judgments for Civil or Administrative Cases of Lower Instances, Vol. 13, No. 1, pp. 139 = Hanrei-Jiho No. 1007, pp. 72 – jido preset sibori-shiki ichi-gan reflex camera jiken (auto preset diaphragm type single-lens reflex camera case), has also supported the major opinion. 72 A judgement of the Japanese Intellectual Property High Court on 30th September 2005, supra note 69, has denied the objection based upon the private use, as to a word processor sofrware because it was obvious for the court that the software was used not only for private uses, but also for commercial uses.

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Article 69, Paragraph 1 of the Japanese Patent Act. The protection of patent rights aims to encourage inventions, and thereby to contribute to the development of industry as stipulated in Article 1 of the Japanese Patent Act. If an experimental exploitation were restricted, it would become difficult to develop new technologies. Such result could contradict the purpose of the patent protection. That is why such an exploitation is permitted in spite of the existence of a patent right. Therefore, for example, an experiment or research to confirm the effect of a patented invention does not infringe a patent right. An experiment or research to develop other inventions does not also infringe a patent right, because such an experiment or research purposes the development of new technologies. However, selling some parts or materials that are indispensable for an experiment or research could infringe the patent right for such parts or materials. Generally speaking, an experiment or research to obtain some information which does not directly relates to the development of technologies can infringe a patent right. It was, however, once disputed between brand-name medicine firms and generic medicine firms whether clinical tests, which exploited a patent before the expiration of the patent right, but the purpose of which was to obtain the governmental permission for commercial uses only after the expiration of patent right, could be exempted because of the experimental privilege. Generic medicine firms needed a few years to undertake clinical tests which were necessary to obtain a permission of the Japanese Health Minister for producing a generic medicine. If the generic medicine firms could not start the clinical tests before the expiration of the patent right, the duration of the patent right, as a matter of fact, could be extended for a few years even after the expiration of the patent right. The Japanese Supreme Court rendered a judgement in 199973. The judgement held that clinical tests to obtain information, which was necessary to get a governmental permission for commercial uses after the expiration, did not infringe the patent right based upon the following grounds: “One of the basic principles of the patent system is to let any person use the invention freely, once the period of subsistence of the patent has expired, and thus benefit society as a whole. The Law on Pharmaceutical Business requires the approval of the Minister of Public Health for the production of pharmaceutical products in order to ensure their safety. For this application, various tests are required and the materials on the result of these tests have to be attached to the application. The same applies also for the following products; it is required to conduct designated tests for a certain period. In order to conduct such tests, it is necessary to produce and use the chemical substance or pharmaceutical product which falls within the technical scope of the patented invention of the patent holder. If it is understood that such tests are not the ‘test’ as provided by Article 69, Paragraph 1 of the Patent Law and that within the period of subsistence of the patent, such production is not allowed, third parties will be unable to freely use the invention for a substantial period even after the expiry of the period of subsistence. This outcome should be regarded to be against the above-mentioned basic principle of the patent system.”74 (The emphasis with bold font is added by the author.)

(3-4) Restriction of exercise patent right against passing vessels or aircrafts. A patents right cannot be exercised against vessels or aircrafts merely passing through Japan, as well as machines, apparatus, equipment or other products used for such vessels or aircrafts, according to Article 69, Paragraph 2, No. 1 of the Japanese Patent Act. 73 A judgement of the Japanese Supreme Court on 16th April 1999, Case No.: Heisei 10 (jyu) 153, Collection of the Judgements for Civil Cases of the Japanese Supreme Court, Vol. 53, No. 4, pp. 627 = Hanrei-Jiho No. 1675, pp. 37 = Hanrei-Times No. 1002, pp. 83 – guanidine ansoku-kosan-yudo-tai oyobi gai-guanidine ansoku-kosan-yudo-tai wo ganyu suru ko-plasmin-zai to suizo-shikkan-chiryo-zai jiken (guadinobenzoic acid derivatives and anti-plasmin agent and remedies for pancreas diseases containing the said guadinobenzoic acid derivatives case). 74 An English translation of this judgement can be found under the web site of the Japanese Courts: http://www.courts.go.jp/english/judgments/text/1999.04.16-1998-Ju-No.153.html.

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Vehicles, however, are not objects of such restrictions, because Japan is surrounding by the sea, so that a vehicle cannot pass through Japan from abroad. The restrictions have some practical effect. Whitout these restrictions, for example, aircrafts landing in Japanese airports could be confiscated to preserve the rights of patent holder. (3-5) Medical treatments. A patent right for an invention of a medicine cannot be exercised against the acts of preparation of the medicine prescribed by a doctor or dentist, according to Article 69, Paragraph 2 of the Japanese Patent Act. This article restricts a patent right to be exercised only against such acts of preparation of a medicine. However, the Japanese Patent Office supposes that medical treatments are also free from patent rights, because medical treatments are not “industrial applications” in the meaning of Article 29, Paragraph 1 of the Japanese Patent Act, and therefore a patent is not granted for medical treatments75. This exemption does not mean that manufacturing or selling of medicines or medical devices for medical treatments are free from a patent infringement, if there are patent rights for such medicines or devices. Only medical treatments by doctors using such medicines or devices are exempted from the patent rights. (3-6) Exhaustion of patent right. If a patent holder has sold a patented product in the market, it is supposed that his patent right could not reach the further transfer of the product. Such a doctrine of exhaustion is not stipulated in the Japanese Patent Act, but acknowledged by the Japanese Supreme Court in the so-called “Ink Tank Case”76. It is discussed whether such a doctrine is based upon an implied licence, or upon an industrial policy. In the so-called “BBS Parallel Import Case”, the Japanese Supreme Court held that the exhaustion was not affected by an agreement of parties77. It means that the Japanese Supreme Court regards the exhaustion as a restriction on the basis of industrial policy, because an implied licence could be changed by an explicit agreement between contractual parties. Therefore, contractual restriction cannot prevent the exhaustion with respect to third parties. The exhaustion doctrine recently drew an attention in the cases of recycling of cartridges or ink tanks of printers. Recycling makers asserted that they just refill empty cartridges or ink-tanks with toner or ink, and the exhausted patent rights should not have been infringed. Printers’ maker replied that the acts refilling the cartridges or ink tanks with toner or ink was the reproduction of new cartridges or ink tanks, and infringed the related patents. The Japanese Supreme Court in the case held that various factors had to be comprehensively considered as follows: 75 The Japanese Patent Office, Examination Guidelines for Patent and Utility Model in Japan (stand: July 2013), Part II, Chapter 1, 2.1 List of Industrially Inapplicable Inventions. A judgement of the Tokyo High Court on 11th April 2002, Case No.: Heisei 12 (gyo-ke) 65, Hanrei-Jiho No. 1828, pp. 99 – geka-shujutsu wo saisei-kanou ni kogaku-teki ni hyoji suru tame no hoho oyobi sochi jiken (process and device for the reproducible optical representation of a surgical operation case), has supported the conclusion of the Japanese Patent Office, although the judgement has shown some doubt about the industrial unapplicability of medical treatments. 76 A judgement of the Japanese Supreme Court on 8th November 2007, Case No.: Heisei 18 (jyu) 826, Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 61, No. 8, pp. 2989 = Hanrei-Jiho No. 1990, pp. 3 = Hanrei-Times No. 1258, pp. 62 – ekitai-syuyo-yoki, gai-yoki no seizohoho, gai-yoki no package, gai-yoki to kiroku-head to wo ittai-ka shita ink jet head cartridge oyobi ekitatosyutsu-kiroku-sochi jiken (liquid containing vessel, manufacture thereof, package thereof, ink jet head cartridge integrated with vessel and recording head, and liquid jet recorder case). 77 A judgement of the Japanese Supreme Court on 1st July, 1997, Case No.: Heisei 7 (o) 1988, Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 51, No. 6, pp. 2299 = Hanrei-Jiho No. 1612, pp. 3 = Hanrei-Times No. 951, pp. 105 – jido-sha no sharin jiken (wheel for automobile case) or BBS heiko yunyu jiken (BBS parallel import case).

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II. Objections in patent litigation “If the patented product, assigned in Japan by the patent holder or the licensee who was licensed by the patent holder, has been modified or its components replaced, and as a result, it can be regarded as a novel production of the patented product which is not identical to the first patented product, the patent holder is entitled to exercise the patent right over this patented product. Whether the product can be regarded as a novel production of this patented product or not should be determined by taking into consideration the characteristics of the patented product, the content of the patented invention, the manner of modification and the exchange of components as well as the circumstances involving the transaction in a comprehensive way. As characteristics of the Patented Product, the function of the product, structure and materials, application, usable life, mode of use, and as the manner of modification or replacement of components, the state of the Patented Product at the time of modification, the content and extent of the modification, the usable life of the replaced components, the technical function and the economic value of the component within the Patented Product should be taken into account.”78 (The emphasis with bold font is added by the author.)

According to the decision, various factors, which have to be taken into consideration comprehensively, are 1) the characteristics of the product, 2) the content of the patented invention, 3) the manners of modification and the exchange of components as well as 4) circumstances of the trading of the products. The characters of the products are, for example, the functions, structures, or materials of the products, the purposes, duration or manners of use. The manners of modification are, for example, the conditions of the product at the time of modification, the content or the extent of modification. The extent of exchanges of parts is related to the duration of the exchanged components, the technical functions or the economic values of the components in the patented products. As to the content of the patented invention, however, the decision did not name any examples. However, “the content of the patented invention” is probably related to “the essential parts of invention” in the decision of the Japanese Supreme Court which had recognised the equivalent theory at first time in Japan79. “The essential parts of invention” is understood as the characteristic of a patented invention which is closely related to the means to solve the purpose of the invention, and without which the technological idea could be different80. (3-7) Parallel import. Patents for the same invention in the various countries of the Union of the Paris Convention are independent each other according to Article 4bis of the Paris Convention. The Japanese Supreme Court also accepts this principle of the independence of patents in the “BBS Parallel Import Case”81. The Japanese Supreme Court, however, presumed an implied license for the Japanese territory, if a patented product was once assigned outside of Japan as follows: “if a patent holder in Japan or an equivalent person assigns a patented product outside Japan to another person, the patent holder, unless there is an agreement with the assignee excluding Japan from the areas of sale or use of the said product, may not seek an injunction in Japan concerning the patented product on the basis of the patent right against the person who acquired the product from the assignee, except in cases where the above agreement has been made and is explicitly indicated on the product.”82 (The emphasis with bold font is added by the author.) 78 An English translation of this judgement can be found under the web site of the Japanese Courts: http://www.courts.go.jp/english/judgments/text/2007.11.08-2006.-Ju-.No.826-165104.html. 79 A judgement of the Japanese Supreme Court on 24th February, 1998, Case No.: Heisei 6 (o) 1083, Collection of Judgements for Civil Cases of Japanese Supreme Court, Vol. 52, No. 1, pp. 113 = HanreiJiho No. 1630, pp. 32 = Hanrei-Times No. 969, pp. 105 – mugen-shudo-yo ball-spline-jiku’uke jiken (infinitely sliding ball spline bearing case). 80 For example, a judgement of the Tokyo District Court on 23rd March 2000, Case No.: Heise 10 (wa) 11453, Hanrei-Jiho No. 1738, pp. 100 = Hanrei-Times No. 1059, pp. 205 – nama-nori no ibutsu bunri jyokyo souchi jiken (foreign matter separating and removing apparatus for raw laver case). 81 A judgement of Japanese Supreme Court on 1st July, 1997, supra note 79. 82 An English translation of this judgement can be found under the web site of the Japanese Courts: http://www.courts.go.jp/english/judgments/text/1997.07.01-1995-O-No.1988.html.

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Those who import patented products in Japan may assert an objection of this implied license, if the products once have been assigned by the patent holder or its licensees lawfully. In order to reply to this objection, the patent holder has to assert that he has recognisably indicated on the product, its package or an enclosed document that the product may not be traded other than the countries or territories limited in the agreement which has excluded Japan from such countries. (3-8) Abuse of patent rights. If a patent holder behaved as though he would have given a license to a third party, and if it is reasonable that the third party believed in the attitude of the patent holder, and continued for a long period of time to exploit the patented invention, the exercising the patent right against the third party could be prohibited because of an abuse of rights which is not permitted according to Article 1, Paragraph 3 of the Japanese Civil Code. In practice, however, such an objection is quite rarely recognised. (3-9) FRAND. In order to establish a worldwide standard of products, there are some worldwide patent pools, especially for electromagnetic communication products like mobile phones or smart phones, which consist of many patents being possessed by various patent holders. Such patent holders have to declare the willingness to give a license under fair, reasonable and non-discriminating conditions, so-called FRAND, to any parties who want to use such standard. In a case, an alleged infringer as a plaintiff file an action for confirmation of the absence of liability for patents of smart phones because of unfaithful negotiations of the patent holder, namely the defendant, with the allegedly infringer. The Tokyo District Court declared that such refusal should be a misuse of a patent right under concrete circumstances of the case83. The court, namely, held that: “Based on a comprehensive evaluation of the circumstances where the defendant violated the goodfaith obligation to conduct sincere negotiations and to provide Apple, the plaintiff’s parent company, with important information in the process of concluding a FRAND license agreement for the Patent Right, which may be considered to be essential for standards based on the FRAND Declaration; where, under such circumstances, the defendant maintains its request for the provisional disposition in order to seek an injunction against the import, assignment, etc., of Product 2 and Product 4 based on the Patent Right as of the last date of the oral argument; where the defendant disclosed the patent in question to the ETSI about two years after the adoption of the technology related to the patent in question (Alternative E-bit Interpretation) as a standard upon the defendant’s request for modification of the 3GPP standards; and any other circumstances that occurred in the course of the licensing negotiations for the Patent Right between Apple and the defendant, the defendant’s act of exercising the right to demand damages based on the Patent Right with regard to Product 2 and Product 4 without fulfilling the aforementioned good-faith obligation constitutes an abuse of right and is therefore impermissible. The court concluded that the plaintiff’s request for confirmation of the absence of liability shall be accepted.”84 (The emphasis with bold font is added by the author.)

This case was disputed in the Japanese Intellectual High Court. Recently, the Japanese Intellectual High Court has rendered a judgement85, and held that the claim of the 83 A judgement of the Tokyo District Court on 28th, February 2013, Case No.: Heisei 23 (wa) 38969, Hanrei-Jiho No. 2186, pp. 150 = Hanrei-Times No. 1390, pp. 81, – ido-tai-tsushin-system ni okeru arakajime settei sareta nagasa indicator wo mochiite packet data wo so-jyushin suru hoho oyobi sochi jiken (method and apparatus for transmitting/receiving packet data using pre-defined length indicator in a mobile communication system). 84 An English translation of a summary of this judgement is under the web site of the Japanese IP-High Court: http://www.ip.courts.go.jp/hanrei/pdf/20131007113646.pdf. 85 A judgement of the Japanese Intellectual Property High Court on 16th, May 2014, Case No.: Heisei 25 (ne) 10043 – ido-tsushin-system ni okeru arakajime settei sareta nagasa indicator wo mochiite packet data wo so-jyushin suru hoho oyobi sochi jiken (method and apparatus for transmitting/receiving packet data using pre-defined length indicator in a mobile communication system).

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appellant for compensation of damages constitutes an abuse of right, insofar as the amount of compensation of damages exceeded the amount of an adequate license fee which a patent holder would be entitled to receive, if there had been a license contract. (4) Statute of limitation. A patent holder cannot claim the compensation of damages against an infringer, if the patent holder has not exercised the claim within three years from the time when the patent holder had known of an infringement act and the infringer, or within twenty years from the time of the infringement, according to Article 724 of the Japanese Civil Code. If infringement acts are being repeated, the statute of limitation is independently applied to each infringement act. A patent holder can also claim the return of unjustified enrichment, which usually corresponds to an adequate license fee, from an infringer, according to Article 703 of the Japanese Civil Code. The claim shall be extinguished, if it is not exercised for ten years from an infringement act, according to Article 167, Paragraph 1 of the Japanese Civil Code. However, the claim is existing longer than the claim for compensation of damages, so that, in the practice, the claim for return of unjustified enrichment comes sometimes into consideration.

3. USA (1) Defenses – in general. Although prior art anticipation and obviousness defenses are asserted by most accused infringers, there are many other defenses available. In almost all patent litigations the possible existence of these defenses are explored in discovery even if not initially affirmatively asserted. If a potential defense is discovered the pleadings can be amended, but unless the request to amend the pleading is made before the filing of the first responsive pleading of the adversary party, the amendment will require permission of the court. (FRCP Rule 15) Non-prior art defenses include invalidating infirmities due to failure of the statutory “written description” requirement and the “enablement” requirement (35 U.S.C. § 112); defenses based upon challenges to inventorship; defenses based upon compliance with the patent applicant’s duty of candor with the PTO (“inequitable conduct”); defenses based upon laches; defenses based upon equitable estoppel; defenses based upon unclean hands; and defenses based upon on-sale or other statutory bars. The number of potential defenses and the factual predicates required to establish them is a key factor in the complexity and significant expenses associated with patent litigation. Brief explanations of some of these non-prior art defenses are set forth: (1-1) Written description requirement. 35 U.S.C. § 112 (a) requires that a patent contain an adequate written description of the invention. The scope of the claims must be supported by the written description of the originally filed application. Although claim language can and is usually modified during patent prosecution, no new matter can be added to the originally filed description. The adequacy of a written description is considered from the viewpoint of a person of ordinary skill in the field of the technology of the patent at the time the application was filed. If such a person would have recognized that the disclosure described the full scope of the claimed invention as finally claimed in the issued patent, then the written description requirement under law has been satisfied. If not, the unsupported claims are invalid.86 86 Phillips v. AWH Corp., 415 F.3 d 1303, 1316–17 (Fed. Cir. 2005); Ariad Pharmaceuticals, Inc. v. Eli Lilly & Co., 598 F.3 d 1336 (Fed. Cir. 2010). On June 2, 2014, the Supreme Court in Nautilus Inc. v. Biosig Industries, U.S. No. 13-369, 06/02/14 established a new test to decide indefiniteness (325 U.S.C. § 112(2), namely that the patent’s claims, viewed in light of the specification and prosecution history, inform those skilled in the art about the scope of the invention with reasonable certainty.

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(1-2) Enablement. 35 U.S.C. § 112 (a) also requires what is referred to as an “enabling” disclosure. If the written description is inadequate and the claims are not enabled, the claim is invalid.87 Adequacy of description and enablement although related are separate and distinct. Enablement requires sufficient disclosure in the patent to permit a person of ordinary skill in the field of technology to make and use the full scope of the claimed invention at the time of the original filing without having to conduct undue experimentation. Some amount of experimentation to make and use the invention is permissible. What constitutes “undue” experimentation generally requires consideration of a number of factors. These include: (a) the time and cost of any necessary experimentation; (b) how routine any necessary experimentation is in the field; (c) whether the patent discloses specific working examples of the claimed invention; (d) the amount of guidance provided in the patent; (e) the nature and predictability of the relevant technology; (f) the level of ordinary skill in the field; and (g) the scope of the claimed invention. None of these factors alone are dispositive. It is a balancing assessment.88 (1-3) Inventorship. A United States patent is invalid if inventors are intentionally omitted or improperly named. Inadvertent omission or misjoining of inventors is not fatal and can be corrected. To be an inventor the person must make a significant contribution to the conception of at least one or more of the claims of the patent.89 What is significant is measured against the scope of the full invention. Merely helping with experimentation or advising the inventors regarding well known concepts or current state of the art does not make a person a co-inventor. The person must make a significant contribution to the idea that forms the basis of the claim. A person may be a named inventor even if he or she did not make the same type or amount of contribution as other inventors or even if he or she did not contribute to the subject matter of every claim of the patent. Co-inventors do not have to physically work together, although they must have had some open line of communication during or at approximately the time of the inventive effort.90 (1-4) Inequitable conduct. “Inequitable conduct” had become one of the most common defenses raised in patent litigation. Some even characterized it as a plague. It is based upon assertions that the applicant violated a duty of candor and good faith in its dealings with the PTO. Ultimately inequitable conduct is an issue for the judge to decide, although juries often make the factual determinations regarding the often contested facts which are relevant to the inequitable conduct assessment. The defense is likely to be less prevalent in view of recent Federal Circuit decisions and availability of the newly enacted Supplement Examination Proceeding under AIA. To place the issue in context, if a patent applicant fails to supply material information or supplies false information or statements and does so with an intent to deceive the PTO, the patent can be held to be unenforceable.91 The alleged infringer must prove that a 87

Ariad Pharmaceuticals, Inc. v. Eli Lilly & Co., 598 F.3 d 1336 (Fed. Cir. 2010). In re Wands, 858 F.2 d 731, 737 (Fed. Cir. 1988). 89 Pannu v. Iolab Corp., 155 F.3 d 1344, 1350–51 (Fed. Cir. 1998). 90 Falana v. Kent State Univ., 669 F.3 d 1349, 1358 (Fed. Cir. 2012) (citing Eli Lilly & Co. v. Aradigm Corp., 376 F.3 d 1352, 1359 (Fed.Cir.2004)). 91 Digital Control, Inc. v. Charles Mach. Works, 437 F.3 d 1309, 1313 (Fed. Cir. 2006)(citing Norian Corp. v. Stryker Corp., 363 F.3 d 1321, 1330–31 (Fed.Cir.2004)). 88

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person meaningfully involved in the prosecution of the patent application withheld material information or submitted materially false information or statements during examination of the patent and the person did so with an intent to deceive the Examiner into issuing the patent. The Federal Circuit decision in Therasense v. Becton Dickinson has redefined the essential factors required to establish inequitable conduct which requires emphasis, both intent and materiality. The decision is likely to reduce the number of successful challenges to validity based upon assertions of inequitable conduct.92 In addition to the Therasense decision the America Invention Act (AIA) has created a previously unavailable procedure (Supplemental Examination) which is intended to reduce the number of inequitable conduct challenges and provide a safe harbor to patent owners. It permits patent owners an opportunity to bring to the attention of the PTO post issuance, information about prior art or other matters which if not disclosed could potentially be the basis of an inequitable conduct defense. It is the hope that the Supplemental Examination procedure will permit patent owners to remedy any purported omission which an alleged infringer would rely upon to try and establish inequitable conduct. (2) Anti-trust defense. A patent is a legal monopoly. Therefore, anti-trust defenses arise not from the fact of the monopoly per se, but rather the manner in which it is exercised. The defense is raised in the context of patent misuse. It is also the subject of possible governmental action. For example, the Department of Justice (DOJ) has been giving greater scrutiny to acquisitions involving companies with large portfolios of patents and the impact on the costs and ability to foreclose competition. In addition to situations involving acquisition of large patent portfolios, some of the more recent investigations opened by DOJ relate to the standard settings process under which an industry group establishes a standard for the operation of a device or system so that there is system-wide compatibility. Many companies belong to the industry groups. Under guidelines Standard Setting Organizations (SSO) have generally adopted “FRAND” or “RAND” rules among its members. FRAND is an acronym for the requirement of a member to grant a license that is Fair, Reasonable And Non-Discriminatory.93 All members agree to offer licenses under FRAND guidelines. Allegations of improper standard setting activities have been raised in civil actions asserting that the patents are unenforceable because of an alleged misuse predicated upon the patent owner having been a member of the SSO, participated in the standard setting, influenced the creation of the standard, did not disclose that it was filing patents which would, if granted, require license sin order to comply with the standard.94 92 Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3 d 1276, 1287 (Fed. Cir. 2011). To prevail on the defense of inequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the PTO. The accused infringer must prove both elements – intent and materiality – by clear and convincing evidence. If the accused infringer meets its burden, then the district court must weigh the equities to determine whether the applicant’s conduct before the PTO warrants rendering the entire patent unenforceable. Id. Intent requires evidence of a “deliberate decision” to deceive. In other words, it was known that it was material and a deliberate decision was made to withhold it. However, without more, “intent” is still not proven and does not prove specific intent to deceive. The Federal Circuit also held that materiality be established as “but-for Materiality.” If materiality and intent are proven, the patent is only rendered unenforceable “where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim.” 93 RAND is sometimes used and is an acronym for “Reasonable And Non-Discriminatory.” 94 Qualcomm Inc. v. Broadcom Corp., 548 F.3 d 1004, 1008 (Fed. Cir. 2008).

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DOJ officials have identified specific policies that SSO’s could implement which would promote competition. These include: (a) Licensing commitments made to the standards body should bind both the current patent owner and subsequent purchasers of the patents. (b) A commitment to a process that is faster and lower cost for determining FRAND rates or adjudicating disputes over FRAND. (c) A FRAND dispute resolution process under which the licensor specify a cash price for its standard essential patents rather than relying on cross-licensing arrangements between patent holders.95 None of these have been implemented, but are currently the subject of not only U.S., but international discussions. (3) Licenses. The United States does not have provisions for compulsory licenses and a patent owner need not practice the patented invention to claim rights or initiate litigation. However, the change in the law limiting the right to injunctions has provided a de facto licensing scheme. If an injunction is not granted, from a pragmatic perspective, the court is called upon to order the terms of an ongoing license. As a general proposition, acting under a license or acting as a recipient from a licensee is a defense to infringement. However, it is dependent upon the nature of the license granted and the extent to which rights set forth in the license agreement provide a defense to the license or purchasers from a licensee. In 1992 in its Mallinckrodt v. Medapart96 decision the Federal Circuit decided that a restriction against resale “For Single Patient Use Only” could be enforceable. Although strictly not a licensing decision it reinforced the principle that post sale restrictions could be enforceable. It recognized that the implied license which is part of the concept of “the exhaustion of patent rights with a first sale” could have exceptions. In 2008 the Supreme Court in Quanta Computer v. LG Electronics97 addressed the issue in the context not of an absolute sale of the patented product, but in circumstances where a restriction is made part of a licensing transaction. LG had licensed patents to Intel. The license provided that it was only applicable if Intel used the technology in Intel microprocesses. There was no license granted to any third party chip purchaser using the Intel products in combination with non-Intel components. The Supreme Court ruled in favor of Quanta, the third purchaser from Intel, under principles of patent exhaustion. The Supreme Court appears to have placed emphasis on the fact that the license from LG to Intel did not prevent Intel from selling its products. Although many commentators are of the opinion that the decision effectively overruled Mallinckrodt, the Supreme Court did not specifically address the issue. A restriction imposed in a direct license may be appropriate as between the licensor and licensee and may be enforceable, but the extending of those restrictions to customers of the licensee implicates the exhaustion doctrine. Therefore, field of use or other limitations remain common, but terms that control post sale restrictions by the licensee are problematic.98 95 See, United States Department of Justice and United States Patent Office “Policy Statement on Remedies For Standards Essential Patents Subject to Voluntary F/Rand Commitments, Jan. 2013. 96 Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2 d 700, 704 (Fed. Cir. 1992). 97 See Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 618, 128 S. Ct. 2109, 2111, 170 L. Ed. 2 d 996 (2008). 98 Nonetheless, the recent decision of the Supreme Court in the Monsanto case in which the naturally occurring progeny of “Round-up Resistant” soy bean seeds could not be used given the use restriction on the purchase of the patented seeds suggests that it is appropriate to restrict resale if it in effect is used to replicate the patented invention. Bowman v. Monsanto Co., 133 S. Ct. 1761 (U.S. 2013).

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A unique aspect of United States patent law in the area of licensing is “licensee estoppel.” As a general principle under contract law, if a company negotiates and accepts a license and is acting under that license, it is estopped from challenging the licensor about the subject matter licensed without abrogating the license. However, in the famous case of Lear v. Atkins99, the Supreme Court of the United States decided that it is in the public interest to have potentially invalid patents subject to challenge. The court reasoned that the parties having the greatest economic incentive to challenge potentially invalid patents are licensees. As a result, the court held that licensee estoppel does not apply to patent licenses and that licensees may challenge the licensed patents. It is of note that assignor estoppel, which prevents a party from who sells a patent to another party from challenging ownership still applies in the United States.100 (4) Invalidation, (prior art) and parallel patent office proceedings. (4-1) Anticipation and Section 102 statutory bars. The two (2) principal prior art challenges to validity are based upon “anticipation” (35 U.S.C. § 102) and obviousness (35 U.S.C. § 103), although in recent years attacks based upon whether the subject matter is patentable (35 U.S.C. § 101) particularly with regard to business method and software related patents have become the subject of significant litigation. Despite the Supreme Court of the United States decision in Bilski v. Keppos101 in 2010, and the Mayo v. Prometheus102 there nonetheless remains significant uncertainty about how unpatentable subject matter evaluations under 35 U.S.C. § 101 are to be made.103 On June 19, 2014, the Supreme Court unanimously affirmed the Federal Court’s earlier judgment that patent claims directed to certain computer-implemented business methods were patent ineligible under 35 U.S.C. 101, Alice Corporation Pty. Ltd. v. CLS Bank International et al. (U.S. No. 13-298, 6/19/14). The patents disclose schemes to manage certain forms of financial risk that are present when two parties exchange financial obligations. The patent claims were directed to a method and system for facilitating the exchange of these obligations between two parties by using a computer system as a third-party intermediary. The Supreme Court primarily followed the framework it had established in 2012 in the Mayo decision. First, the court determines whether the claim at issue is directed to one of the patent-ineligible concepts, including “laws of nature, natural phenomena, and abstract ideas.” If so, the court determines whether the claim includes additional elements that “transform the nature of the claim” into a patent-eligible application. In Alice, the court held that the claims at issue are drawn to the abstract idea of intermediated settlement. Next, the court concluded that the “claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention.” Many practitioners and commentators were hoping that the Supreme Court would take this opportunity to provide a more clear definition of an “abstract idea” and how much more was required for its “transformation into a patent-eligible application.” The court did provide some additional guidance by referencing some of its prior decisions. Namely, the court held that the concept of intermediate settlement in Alice is the same as the concept of risk hedging in Bilski v. Kappos (2010) because both are considered a “fundamental economic practice” and therefore fall into the “abstract idea” exclusion. 99

Lear, Inc. v. Adkins, 395 U.S. 653, 676, 89 S. Ct. 1902, 1914, 23 L. Ed. 2 d 610 (1969). Diamond Scientific Co. v. Ambico, Inc., 848 F.2 d 1220 (Fed. Cir. 1988). 101 Bilski v. Kappos, 130 S. Ct. 3218, 177 L. Ed. 2 d 792 (2010). 102 Mayo Collaborative Services v. Prometheus Laboratories, Inc., 130 S. Ct. 3543, 177 L. Ed. 2 d 1120 (2010). 103 CLS Bank Int’l v. Alice Corp. Pty. Ltd., (U.S. No. 13-298 6/19/14). 100

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Moreover, the court seemed to hint at what type of transformation is required to move a claim out of the “abstract idea” category by referring to its decision in Diamond v. Diehr (1981): “In other words, the claims in Diehr were patent eligible because they improved an existing technological process, not because they were implemented on a computer.” In contrast, the claims in Alice did not “improve the functioning of the computer itself” or “effect an improvement in any other technology or technical field.” This decision will impact the potential validity of many issued patents containing computer-implemented business method claims in the financial business sector when challenged before the courts. (4-2) Anticipation and Other Section 102 statutory bars. The statutory bars under 35 U.S.C. § 102 were rewritten under AIA. As a result, there are now two versions of 35 U.S.C. § 102. The statutory bars applicable to applications filed prior to March 16, 2013, i. e., patent applications filed under the old “First To Invent” (FTI) standard are different than those that apply to the newly enacted “First Inventor To File” (FITF) system created under AIA. The law as it applies to First To Invent applications and patents defines prior art based upon the date of invention. Under AIA prior art is defined based upon the effective filing date of the patent application. Under either standard for someone to be entitled to a patent, the invention must be new. Inventions are new when the identical product or process has not been made, used, or disclosed before. This is referred to as anticipation. Anticipation is determined on a claim-by-claim basis. The pre-March 16, 2013 filed applications Section 102 statutory bars which include both prior art as well as other activities which affect validity provide that: (1) An invention is not new if it was known to or used by others in the United States before the date of invention. An invention is known when the information about it was reasonably accessible to the public on that date. (35 U.SC. § 102 (a)(1)) (2) An invention is not new if it was already patented or described in a printed publication, anywhere in the world before the date of invention. A description is a “printed publication” only the printed publication was publicly accessible (generally requiring that it be catalogued so that it can readily be located). (35 U.S.C. § 102 (a)(2)) (3) Rights to a patent are lost if the claimed invention was already patented or described in a printed publication, anywhere in the world by the patent owner or anyone else, more than a year before the effective filing date of the application for the patent. An invention was patented by another if the other patent describes the same invention claimed by the patent owner to a person having ordinary skill in the technology. (35 U.S.C. § 102 (b)(1)) (4) Rights to a patent are lost if the claimed invention was publicly used, sold, or offered for sale in the United States more than one year before the effective filing date of the application for the patent. An invention is publicly used when it was either accessible to the public or commercially exploited. An invention is sold or offered for sale when it is offered commercially and what was offered was ready to be patented, i. e., a description to one having ordinary skill in the field of the technology could have made and used the claimed invention even if it was not yet reduced to practice. (35 U.S.C. § 102 (b)(2)) (5) Rights to an invention can be lost through abandonment. (35 U.S.C. § 182) (6) Rights are lost if the patent applicant obtained a patent for the invention in a foreign country before the filing date of the application in the United States or the patent application was filed in a foreign country more than a year before the filing date of the application for the patent in the United States. (35 U.S.C. § 119) 90

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(7) An invention is not new if it was described in a published patent application filed by another in the United States under the PCT system which designated the United States, and was published in English before the date of invention. (35 U.S.C. § 102 (a)(2)) (8) An invention is not new if the claimed invention was described in a patent granted on an application for patent by another filed in the United States under the PCT system and designated the United States, and was published in English and the application was filed before the date of reduction to practice or the filing date of the application for the patent. (35 U.S.C. § 102 (a)(2)) (9) The patent holder is not entitled to the patent if named inventor did not invent the invention. (35 U.S.C. § 102 (a)(2)) (10) An invention is not new if the invention was made by someone else in the United States before the invention was made by patent applicant and the other person did not abandon, suppress, or conceal the invention. (35 U.S.C. § 102 (a)(2)) Under AIA, Section 102 has been modified. Critical prior art dates are based upon the effective filing date of the application, not the date of invention. New Section 102 is entitled Sec. 102. Conditions for patentability; novelty and provides: (a) Novelty; Prior Art-A person shall be entitled to a patent unless1. The claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or (Leahy-Smith AIA § 3(b)(1)(a)) 2. the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122 (b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention. (b) Exceptions1. Disclosures Made 1 Year Or Less Before The Effective Filing Date Of The Claimed Invention – A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (1)(1) ifA. the disclosure was made by the inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor, or B. the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor. 2. Disclosures Appearing In Applications and Patents – A disclosure shall not be prior art to a claimed invention under subsection (1)(2) if – A. the subject matter disclosed was obtained directly or indirectly from the inventor or a joint inventor; B. the subject matter disclosed had, before such subject matter was effectively filed under subsection (a)(2), been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor, or C. the subject matter disclosed and the claimed invention, no later than the effective filing date of the claimed invention, were owned by the same person or subject to an obligation of assignment to the same person.

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(b) Intentionally Omitted (c) Patents and Published Applications Effective as Prior Art- For purposes of determining whether a patent or application for patent is prior art to a claimed invention under subsection (1)(2), such patent or application shall be considered to have been effectively filed, with respect to any subject matter described in the patent or application – 1. if paragraph (2) does not apply, as of the actual filing date of the patent or the application for patent; or 2. if the patent or application for patent is entitled to claim a right of priority under section 119, 365(a), or 365(b), or 365(c), based upon 1 or more prior filed applications for patent, as of the filing date of the earliest such application that describes the subject matter. (4-3) Obviousness (35 U.S.C. § 103) and person of ordinary skill. Even if an invention may not have been identically disclosed or described before it was made by an inventor, nonetheless to be patentable the invention must also not have been obvious to a person of ordinary skill in the field of technology of the patent at the time the invention was made (35 U.S.C. § 103). AIA has also modified the statute with respect to 35 U.S.C. § 103. Section 103 which will be applicable to patent applications and issued patents filed prior to March 13, 2012 provides: (a) A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains Patentability shall not be negatived by the manner in which the invention was made. (1) Notwithstanding subsection (a), and upon timely election by the applicant for patent to proceed under this subsection, a biotechnological process using or resulting in a composition of matter that is novel under section 102 and non-obvious under subsection (a) of this section shall be considered non-obvious if – (A) claims to the process and the composition of matter are contained in either the same application for patent or in separate applications having the same effective filing date; and (B) the composition of matter, and the process at the time it was invented, were owned by the same person or subject to an obligation of assignment to the same person. (2) A patent issued on a process under paragraph (1) – (A) shall also contain the claims to the composition of matter used in or made by that process, or (B) shall, if such composition of matter is claimed in another patent, be set to expire on the same date as such other patent, notwithstanding section 154. 3. For purposes of paragraph (1), the term “biotechnological process” means – (A) a process of genetically altering or otherwise inducing a single-or multi-celled organism to – (i) express an exogenous nucleotide sequence, (ii) inhibit, eliminate, augment, or alter expression of an endogenous nucleotide sequence, or (iii) express a specific physiological characteristic not naturally associated with said organism;

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(B) cell fusion procedures yielding a cell line that expresses a specific protein, such as a monoclonal antibody; and (C) a method of using a product produced by a process defined by subparagraph (A) or (B), or a combination of subparagraphs (A) and (B). (1) Subject matter developed by another person, which qualified as prior art only under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the claimed invention was made, owned by the same person or subject to an obligation of assignment to the same person. (2) For purposes of this subsection, subject matter developed by another person and a claimed invention shall be deemed to have been owned by the same person or subject to an obligation of assignment to the same person if – (A) the claimed invention was made by or on behalf of parties to a joint research agreement that was in effect on or before the date the claimed invention was made; (B) the claimed invention was made as a result of activities undertaken within the scope of the joint research agreement; and (C) the application for patent for the claimed invention discloses or is amended to disclose the names of the parties to the joint research agreement. (3) for purposes of paragraph (2), the term “joint research agreement” means a written contract, grant, or cooperative agreement entered into by two or more persons or entities for the performance of experimental, developmental, or research work in the field of the claimed invention. Section 103 as amended by the America Invents Act removes subsections (b) and (c). New section 103 reads as follows: A patent for a claimed invention may not be obtained, notwithstanding that the claimed invention is not identically disclosed as set forth in section 102, if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains. Patentability shall not be negated by the manner in which the invention was made. Under current law, obviousness is determined by what one of ordinary skill in the art understood at the time of the invention. Under AIA obviousness is based upon knowledge existing “before the effective filing date of the claimed invention.” Under the new 35 U.S.C. § 103, the earlier 35 U.S.C. § 103(b) was removed. For patent applications filed prior to March 16, 2013, § 103(b) permits narrowing of the prior art available against process claims if the applicant also includes these claims in an application containing claims to patentable compositions of matter. This exception will not be available for FITF applications. Another important benefit for filings under AIA is that invalidation for obviousness for post-March 16, 2013 patent filings is no longer available if the prior art and the application or patent are assigned to the same entity, or is the subject of a joint research agreement at the time of the invention. The differences between pre and post AIA obviousness standards notwithstanding, it is expected that the manner in which obviousness is assessed will not change. Merely demonstrating the presence of each element of a claim in the prior art does not necessarily prove obviousness. The law recognizes that almost all inventions rely on existing elements. The key evaluation is whether at the time of the invention (or filing) there was a reason that would have prompted a person having ordinary skill in the 93

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relevant technology to combine the elements in a way the invention does. This analysis requires consideration of whether the claimed invention was merely the predictable result of using prior art elements according to their known function(s); whether the claimed invention provides an obvious solution to a known problem in the relevant field; whether the prior art teaches or suggests the desirability of combining elements claimed in the invention; whether the prior art teaches away from combining elements in the claimed invention; whether it would have been obvious to try the combinations of elements, such as when there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions; and whether the change resulted more from design incentives or other market forces. Consideration also needs to be given to whether the prior art provided a reasonable expectation of success. Obvious to try is not sufficient in unpredictable technologies.104 Objective evidence (sometimes called “secondary considerations”) is also relevant to the evaluation, such as: (a) Commercial success; (b) Whether the invention satisfied a long-felt need; (c) Whether and what others had tried and failed to make in the past; (d) Whether others solved the problem at roughly the same time; (e) Whether others have copied the invention; (f) Whether there were changes in related technologies or market needs contemporaneous with the invention that provided signposts to making the claimed combination; (g) Whether the invention has achieved unexpected results; (h) Whether others in the field praised the invention; (i) Whether persons having ordinary skill in the art of the invention expressed surprise or disbelief regarding the invention; (j) Whether others sought or obtained rights to the patent from the patent owner; and (k) Whether the inventor proceeded contrary to accepted wisdom in the field.105 (4-4) Level of ordinary skill. In deciding the level of ordinary skill in the field of invention, consideration of factors, including but not limited to the following are relevant: (1) the level of education and experience of the inventor and other persons actively working in the field; (2) the types of problems encountered in the field; (3) the prior art solutions to those problems; (4) the rapidity with which innovations are made; and (5) the sophistication of the technology.106 (4-5) Scope and content of the prior art. The scope and content of prior art in assessing obviousness includes prior art in the same field regardless of the problem addressed and prior art from different fields if a person of ordinary skill in the art using common sense might look to these other fields to solve the problem. Prior art which was specifically considered by the Examiner during the prosecution of the application is less likely to be persuasive because of the deference given to the PTO Examiner. It is of note that under the newly created Patent Office post grant challenges no deference is given to the Examiner’s analysis of the prior art. (4-6) Challenges outside the United States court system. Prior to the AIA there were a limited number of potential challenges to the validity of a patent outside the court system. The main challenge was a “reexamination proceeding”. There were two types. In 1980 ex parte reexamination was first permitted and that procedure still exists after AIA. In 104

KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 127 S. Ct. 1727, 167 L. Ed. 2 d 705 (2007). Id. 106 Custom Accessories, Inc. v. Jeffrey-Allan Indus., Inc., 807 F.2 d 955, 962–63 (Fed. Cir. 1986). 105

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1999 inter partes reexamination procedures were added which, effective September 16, 2012, are no longer available – although pending inter partes reexaminations will be continued until conclusion. Both reexamination proceedings were initiated by a “requestor” filing a petition requesting the PTO to reexamine the issued patent based upon prior art which is described in the petition. The PTO then decided if it would grant the petition to reexamine the patent – which it did in almost all cases. Once the petition was granted the PTO then reexamined the patent to determine whether it should be reconfirmed. The reexamination process permitted (and with respect to ex parte reexaminations still permits) reconfirming of claims; adding claims; or amending claims (although claims cannot be broadened if offered more than two years after the grant of the patent or rejection of claims). The requestor’s right to participate in the post-petition reexamination process differed based upon whether the reexamination was ex parte or inter partes. In the case of ex parte reexamination, once the reexamination petition is granted the requestor can no longer participate. The proceedings continue between the patent owner and the patent examiner and in general follow the PTO practice employed in the examination of patent applications. Ex parte reexaminations have resulted in a significant number of reconfirmations. Many of the requestors were the patent owners. Under ex parte proceedings, the identity of the real party in interest seeking reexamination need not be disclosed to the PTO and most third party reexaminations were filed by attorneys without identifying the real party in interest. The decision to stay a pending litigation based upon the pendency of an ex parte reexamination is made by the judge and is highly fact dependent. If the reexamination was filed well after litigation was filed, the stay will likely not be granted. Inter partes reexamination required disclosure of the real party in interest, permitted participation of the requestor in the post-petition phase and prevented the requestor from relying in litigation on the same prior art it relied upon in the reexamination process and which was found by the Examiner to be non-persuasive. There are a substantial number of inter partes reexamination proceedings still pending. Given the long pendency of the proceedings there are likely to be unresolved inter partes reexaminations in the United States for many years. The pendency of inter partes reexaminations are also often the basis for a request for a suspension of a pending or later filed court proceeding. Given the adversarial nature of the inter partes proceeding, courts have demonstrated a greater tendency to be more favorably inclined to grant a stay, but applications for a stay have been and are regularly rejected by the courts. Nonetheless, the PTO proceeding will continue. Therefore, parallel court and PTO proceedings may proceed and inconsistent determinations are possible. An en banc decision the Federal Circuit (In re Baxter Int’l, Inc., 678 F.3 d 1357, 1365 (Fed. Cir. 2012)) held that even after a court decision favorable to the patent owner, the PTO can nonetheless overturn a patent in a later resolved reexamination proceeding. The Federal Circuit noted that although the district court decision found that the accused infringer had not established sufficient evidence to prove invalidity, the prior art before the PTO was different. The Federal Circuit also recognized the difference in claim interpretation and burdens of proof between PTO and court proceedings. As distinguished from the presumption of validity and the attendant clear and convincing evidentiary standard which a court applies, “…a lower standard of proof and the broadest reasonable interpretation standard of claim construction apply at the PTO and therefore the agency is not bound by the court’s 95

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determination.” As a result, the Federal Circuit affirmed the decision of the PTO that the patent was invalid. Under AIA inter partes reexaminations have been replaced with a series of new PTO proceedings. Because the law relating to what qualifies as prior art and the date applicable in assessing whether the materials are “prior” differ for FTI patents and FITF patents the AIA procedures differ. (5) The key AIA procedures are: (5-1) Supplemental examination. Under the newly created Supplemental Examination procedure a patent owner may request supplemental examination of an issued patent to consider, reconsider or correct information believed to be relevant to the patent. The procedure is intended to reduce the number of inequitable conduct assertions in litigation because it permits the making of disclosures which might form the basis of the defense. The request may address not only prior art, but can address any condition for patentability, which includes issues relating to patentable subject matter (35 U.S.C. § 101); anticipation or obviousness (35 U.S.C. §§ 102 and 103); as well as compliance with the written description requirements (35 U.S.C. § 112). Information considered, reconsidered or corrected during Supplemental Examination cannot be the basis for rendering a patent unenforceable. Importantly, the immunity does not apply to allegations pled in a civil action or noticed to the patent owner before the date of the request of the Supplemental Examination. (5-2) IPR. All patents are eligible for IPR whether based upon pre or post AIA filings. However, an IPR cannot be filed if the petitioner has filed an invalidity action in court or the petition is filed more than one (1) year after service of an infringement Complaint. Only anticipation and obviousness grounds based on patents or printed publication can be asserted. There is a basic threshold which must be established before for the IPR proceeding to continue. The IPR petition must demonstrate a reasonable likelihood that the petitioner would prevail as to at least one of the claims challenged. IPR has already significantly impacted patent litigation and a significant number of filings have been made. As distinguished from inter partes reexamination (which can no longer be initiated). IPR is a proceeding: 1. Conducted before three (3) administrative law judges (AIJs) by the Patent Trial Appeal Board (PTAB). 2. Is conducted in many respects procedurally as were interferences (in which priority of invention is challenged) and is more in the nature of an extended ongoing trial on the issue of prior art based validity challenges. The procedures permit a narrowing amendment of the claims, but the claims must be shown to be patentable over all known prior art, not just the prior art raised by the challenger. The federal courts appear to be more inclined to suspend litigation and await the results of the prior art validity challenges before the Patent Trial and Appeal Board (PTAB), i. e., the tribunal that decides IPR proceedings. The decision by the PTAB whether the filing demonstrates a reasonable likelihood of prevailing is made within three (3) months and the trial on the merits must be concluded within one (1) year thereafter. As originally enacted there was a nine (9) month post grant waiting period before an IPR could be initiated. However, this was changed and this “dead zone” no longer exists.107 There are a number of restrictions which present a third party from initiating 107 Initially the 9 month period was included in the AIA because the Post Grant Review (PGR) proceeding (which are akin to an opposition) could only be brought in the 9 month period following grant of the patent. However PGR are only available for patent filings having an effective filing date on our after March 16, 2013 and therefore PGR proceedings will likely not be available for years.

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an IPR. If an accused infringer seeks a declaratory judgment of non-infringement or invalidity in court, it cannot later seek an IPR. If sued, an alleged infringer can initiate an IPR. However, if the alleged infringer brings a lawsuit seeking invalidity before seeking an IPR, it cannot seek an IPR. There are many factors to be considered in assessing whether to initiate an IPR, including: 1. The potential benefit of having the PTAB assess prior art from a broader perspective than the courts. The PTO gives the claims the broadest meaning the language permits given the description. This generally favors accused infringers. 2. Only validity is in issue and the discovery costs in investigating other defenses and damage issues are deferred. This is also viewed as favorable by accused infringers. 3. There are however adverse consequences if the accused infringer is not successful in the IPR. If the accused infringer is unsuccessful, it cannot later challenge validity in court based upon the prior art raised or which could have been raised in the IPR. 4. Direct testimony is by sworn declarations. Cross-examination is permitted but is not taken before the PTAB. It is taken in the attorneys offices and the record can then be offered to the PTAB. 5. A final hearing of 2 hours is conducted before the 3 judge panel and is presented by the attorneys. No witness testimony is taken at the hearing. 6. Settlement is possible up until a decision by the PTAB is rendered. IPR has quickly become part of an overall defense strategy and the use of IPR needs to be assessed prior to any accused infringer taking the affirmative step of seeking a declaration of invalidity in the courts. (5-3) Post Grant Review (PGR). Only first inventor to file (FITF) patents (that is applications filed under AIA) are eligible for PGR. The petitioner must not have filed an invalidity action. PGR permits expanded grounds beyond the prior art grounds previously available under inter partes reexaminations to attack validity, such as patentable subject matter and compliance with the written description requirements. The petition must demonstrate that it is more likely than not that at least one of the claims challenged is unpatentable. Unlike inter partes reexamination which could be filed at anytime during the term of a patent, PGR challenges may only be requested on or before the date that is nine (9) months after the grant of the FITF patent.108 Many aspects of PGR and IPR are similar. Because only FITF patents are eligible for PGR, it will be a number of years before the procedure will be used. (5-4) Contested Business Methods (CBM) proceeding. Contested Business Methods (CBM) proceedings employ the PGR standards and procedures with certain exceptions and are applicable to both FITF and FTI patents. Therefore the procedure is currently available. In view of the nature of the proceeding, which has many of the attributes of a civil court litigation, there is a limited transitional program limiting the number of CBM’s that can be filed and the issues that can be raised until such time as additional judges are appointed. To qualify the patent must be a business method patent in specific categories. As well, the petitioner must have been sued or charged with infringement. As part of the transitional program, only anticipation and obviousness prior art defenses can be asserted. For the PTO to accept the matter the petition must demonstrate that it is more likely than not that at least one of the claims challenged is unpatentable on prior art grounds. The CBM program has specific provisions relating to seeking a stay of a court action. The provisions permit the CBM filing to be the basis of an application to stay any co108 A bill has been offered in the Senate to eliminate the 9 month period, but it has not been acted upon by Congress.

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pending district court litigation involving the same patent and establishes factors that a court should consider in assessing whether the stay should be imposed. These include consideration of: (1) whether the grant of denial of a stay will simplify the issues in question and streamline the trial; (2) whether discovery is complete and a trial date has been set; (3) whether the grant of denial of a stay would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and (4) whether the grant or denial of a stay will reduce the burden of litigation on the parties and on the court. In an exception to the general rule against interlocutory appeals, the AIA permits an alleged infringer to take an immediate interlocutory appeal from any denial of a stay of litigation by the court.109 (5-5) Prior use rights. Prior to AIA there were only a limited number of circumstances in which a prior user could claim a defense to patent infringement. These prior user rights were limited to patents directed to methods of doing or conducting business. AIA extended the prior user right defense to patents covering all technologies. However, AIA has imposed several limitations and exceptions to the defense. These include a prohibition against license, assignment or transfer of the defense other than in connection with an assignment or transfer of the entire business to which defense the defense relates. As well, the defense is geographically limited to cover only those sites where the invention was used before the critical date.110 Under AIA the prior user rights defense is limited to parties that can prove commercial use at least one year prior to the filing date of the patent application by clear and convincing evidence and the defense includes limitations on the types of activities that can be continued as well as the transfer and the enforcement of the rights. Under AIA foreign entities cannot assert prior user rights based upon activities in their home country, but can employ the benefit of the prior user rights defense if the prior commercial use of the invention was in the United States. There is also an exception made for universities. The prior use defense is not available with respect to patents owned by or assigned to universities or university affiliated technology transfer organizations. It is unclear whether the university ownership must be total or partial. There appears to be an open question concerning the consequences of a university maintaining a minority interest in a patent and the ability of the majority interest non-university patent owner to take advantage of the exemption and insulate the patents from a prior use defense.111 In considering the consequences of the prior use defense under AIA, Congress asked the PTO to study and prepare a report on specific issues including: potential consequences of the operation of prior user rights in the industrialized world and the potential impact on innovation of small business on trade secret law and the prior use relationship with the first invent patent system. (5-6) Experimental use. The on sale bar which prevents the issuance of a valid patent (35 U.S.C. 102(b)) is subject to an experimental use exception. The exception is not codified but has developed from judicial decisions. The most recent Supreme Court decision on the issue is the Pfaff decision.112 The Supreme Court defined “on sale” as requiring not only that an embodiment of the claimed invention was subject to a commercial offer for sale, it also required that the invention was ready for patenting at the time of the sale. Whether something is “ready 109

AIA § 17:9. AIA § 8:3. 111 AIA § 8:4. 112 Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 56, 119 S. Ct. 304, 306–307, 142 L. Ed. 2 d 261 (1998). 110

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for patenting” for its intended purpose is determined in the context of the patent claim. Later refinements of a device that was on sale and falls within the wording of the claim does not mean that it wasn’t ready for patenting. It is also of note that a sale in which market acceptance is being tested does not fall within the experimental use exception unless the patent owner retains control over the product by keeping it at its facility and controls the test procedures.113 (5-7) Statute of limitation. The statute of limitations for purposes of seeking damages for past infringing activities is six years calculated from the date that the legal action was filed. If an infringement is ongoing damages will be awarded for the period of infringement that occurs during the period of infringement as well as for activities that fall within the six year period immediately preceding the filing of the action. (35 U.S.C. § 286) The new AIA has not changed the six (6) year damages statute of limitations. However, AIA amended the statute of limitations that relates to the initiation of disciplinary proceedings by the PTO against United States patent attorneys and United States patent agents. Any disciplinary proceeding before the PTO must be commenced not later than the earlier of either the date that is ten years after the date on which the misconduct forming the basis for the proceeding occurred, or one year after the date on which the misconduct forming the basis of the proceeding is made known to an officer or employee of the PTO.114 (5-8) Laches. Laches relates to issues of delay and whether a patent owner is entitled to recover damages for acts that occurred before it filed a lawsuit. The delay must be for an unreasonably long and inexcusable period of time coupled with a showing that the alleged infringer has been or will be prejudiced in a significant way due to the delay. The burden is on the alleged infringer to prove laches. There is no minimum amount of delay required to establish laches. However, if the delay is for six years there is a rebuttable presumption that the delay was unreasonable and unjustified and that material prejudice has resulted. The burden then shifts to the patent owner to come forward with evidence to prove the delay was justified or that material prejudice did not result.115 Facts and circumstances that can justify a long delay can include: (1) being involved in other litigation during the period of delay; (2) being involved in negotiations with the alleged infringer during the period of delay; (3) economic or health restrictions during the period of delay; (4) war time conditions; and (5) some dispute about ownership of the patent rights during the period of delay.116 The consequence of laches is not invalidation. Rather it is a suspension of any rights by the patent owner to monetary damages for the “laches” period.117 (5-9) Equitable estoppel. Equitable estoppel is another defense based upon delay which if found to exist, results in a forfeiting of the right to any relief from the infringer. This generally arises where the patent owner communicated something in a misleading way to the alleged infringing party about the lack of infringement or that the patent owner has no intention to sue the alleged infringer. The alleged infringer must show it 113

In re Smith, 714 F.2 d 1127 (Fed. Cir. 1983). The new regulation is (77 FR 45247) it amends (35 U.S.C. § 32), the cite can read simply: (35 U.S.C. § 32). 115 Crown Packaging Tech., Inc. v. Rexam Beverage Can Co., 679 F. Supp. 2 d 512, 520–21 (D. Del. 2010). 116 A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2 d 1020, 1033 (Fed. Cir. 1992). 117 Adelberg Laboratories, Inc. v. Miles, Inc., 921 F.2 d 1267, 1270 (Fed. Cir. 1990). 114

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relied on misleading communications and that it will be materially harmed if the patent owner is allowed to assert a claim that is inconsistent with the prior misleading communication.118 (5-10) Prosecution laches. The defense of prosecution laches arises out of the late introduction of claims which captures then existing commercial products. In general, amending claims during patent prosecution which target a known product or method is permissible. The defense only arises if there has been an abuse of that process.119 Although an original patent specification remains unchanged, claims generally are subject to a series of revisions and amendments. Issued patents are often the result of the filing of continuation or divisional applications so that the pendency period during which claims can be amended extends for many years. As a consequence certain claims only arise for the first time late in the prosecution process. The owner of a patent may be barred from enforcing these later solicited claims against an infringer where there was an unreasonably long delay in filing of the claims and the infringer, or another private party, or the public will be prejudiced if the patent owner is entitled to enforce the claims despite the unreasonable delay in securing them.120 The period of delay begins when the patent owner filed the original application and ends when the patent owner filed the application containing the claims asserted in the lawsuit. In assessing whether the defense is available, consideration is given to the period of delay and whether the alleged infringers or others invested time, money and effort in developing and manufacturing products covered by the late filed claims which were not violative of earlier filed claims.121 (5-11) Unclean hands. The unclean hands defense is often raised but rarely established. If established, it is a defense against enforcement of a patent, not its validity. Where the owner of a patent acts inequitably, unfairly or deceitfully towards the alleged infringer or the court and those activities had the immediate and necessary consequence of adversely affecting the relief the patent owner seeks in the lawsuit, the equitable defense of unclean hands can result in an unenforceable patent or an order rendering the patent unenforceable until such time as the wrongful activity can be correct, if that is possible.122 118

A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2 d 1020, 1028 (Fed. Cir. 1992). Symbol Technologies, Inc. v. Lemelson Med., Educ. & Research Found., 422 F.3 d 1378, 1384–85 amended on reh’g in part sub nom. Symbol Technologies, Inc. v. Lemelson Med., Educ. & Research Found., LP, 429 F.3 d 1051 (Fed. Cir. 2005). 120 Id. at 1385-86. 121 Cancer Research Tech. Ltd. v. Barr Laboratories, Inc., 625 F.3 d 724, 732 (Fed. Cir. 2010). 122 Aptix Corp. v. Quickturn Design Sys., Inc., 269 F.3 d 1369, 1376 (Fed. Cir. 2001). 119

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Part 5 Pre-procedural measures I. Pre-procedural measures of the patent holder 1. Germany (1) Warning letter due to patent infringement. (1-1) Practical and judicial meaning. Though not mandatory, a pre-trial warning letter giving the respondent the opportunity to acknowledge the right holder’s claims may be advisable. The serious and definite request to cease and desist in connection with the threat of legal proceedings in case of non-compliance is characteristic for the warning letter. Thus it is different from the exchange of views about alleged infringing activities or a so called “entitlement enquiry” (“Berechtigungsanfrage”). Before filing a warning letter it is nevertheless recommended that the patent owner analyze the strength of its legal position and evaluate the extent and the detectability of infringing activities. The potential reactions of the warned person have to be considered. The recipient of the warning letter can, for example, file a declaratory action to establish the non-existence of patent infringement without any further counter-warning. The warned person gains time to think about possible counter measures and to prepare them (see Part 5 II.1.). As far as an extrajudicial dispute, if settlement is not to be expected, one should refrain from a warning letter in favour of a tactically advantageous surprising effect. As far as injunctive relief is threatening, the warned person should reject the warning letter with a corresponding statement and can, if necessary, file a protective letter in order to inform the courts in advance about upcoming legal disputes. Though not mandatory, a pre-trial warning letter giving the respondent the opportunity to acknowledge the right holder’s claims may be advisable. In case of filing a lawsuit without prior warning the Plaintiff has the obligation to pay the costs of proceedings in cases where the Defendant accepts the claims immediately after having received the court action. Pursuant to § 93 ZPO such costs consequences can be avoided if the plaintiff has sent out a warning letter prior to filing the law suit.1 According to the jurisdiction of the BGH2 a duty to answer does not exist. Independent from the place of residence of the warning person every court, which would also be responsible for a suit for performance with a converse title of judgement, is responsible for such an action3. (1-2) Unauthorized warning. The unauthorized warning is considered to be an illegal intervention in the business of the warned person4. A warning is regarded as unauthorized, when the allegation of infringement of IP rights is wrong, i. e. when either the protective right is invalid or will be revoked or in cases where the alleged infringing activity is not covered by the scope of protection of the relevant patent5. The warning person does 1

Vgl. OLG Du¨sseldorf GRUR 1980, 135 – Fotoempfa¨nger. BGH GRUR 1995, 167, 169 – Kosten bei unbegru¨ndeter Abmahnung. 3 See Teplitzky, Wettbewerbsrechtliche Anspru ¨ che und Verfahren (antitrust claims and proceedings), 10th ed. 2012, Kap. 41 No. 71. 4 BGH GRUR 2005, 882 – Unberechtigte Schutzrechtsverwarnung; BGH GRUR 2006, 433 – unbegru¨ndete Abnehmerverwarnung; Benkard/Scharen, PatG, pre § 9–14 No. 16 with further references. 5 BGH, GRUR 1969, 479, 481 – Colle de Cologne. 2

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therefore have to convince himself of the validity and the extent of his protective right by precise evaluation of facts and law. An incomplete general warning with a mere reference to the patent without explanations concerning literal or equivalent infringement may be considered as an act of unfair competition, even if the allegation of infringement is correct and based on a valid patent. The person wrongly warned can file a declaratory action to establish the non-existence of a right without prior counter-warning6. When customers are warned, stricter requirements have to be respected rather than in cases where the warning letter is adressed to producers since customers often comply with the cease and desist request and switch to products of competitors or purchase the products of the warning company. A customer warning can basically only be claimed, when a previous producer warning was unsuccessful7. The legal position has to be outlined with particular accuracy with the assistance of lawyers.8. When the customer warning is not founded, the producer of the allegedly infringing products is entitled to claim compensation for damages against the warning person9. (1-3) Exhaustion periods. In context of pre-procedural disputes a possible concession of exhaustion periods should not be overseen. The right holder may allow the alleged infringer to sell the goods within a certain period of time without the right holder claiming for injunctive relief. The concession of exhaustion periods can be a basic incentive for a way of settlement of disputes. (2) Preliminary injunctions. (2-1) A survey of summary proceedings in patent law. Preliminary injunctions offer the fastest way for the right holder to obtain judicial relief in Intellectual Property infringement matters. In patent infringement matters, the injunction claim (§ 139 para 1 German Patent Act (PatG) as well as the information claim as to origin and distribution chains of the infringing products (§ 140 b PatG) can be secured by way of preliminary injunction whereas the damage claim and the recall claim are not open to this preliminary instrument (OLG Hamburg, GRUR-RR 2007, 29 – Cerbero Card). In order to secure the destruction claim the right holder can request that the infringing products be preliminary detained by the bailiff. The main advantage of preliminary injunction proceedings concerns the aspect of time. Preliminary injunctions may be granted within only a few days after having filed the corresponding request. Given the fact that they may even be issued without the involvement of any oral court hearing (so called ex parte injunction) or any other prior notification they can deploy a surprising effect upon the respondent. (2-2) Procedural principles in injunction proceedings. The German Code of Civil Procedure contains general provisions in § 935 et seqq ZPO, as to when preliminary injunctions may be issued. These provisions also apply to patent matters. According to § 937(1) ZPO, each court with competence for patent matters has jurisdiction to issue preliminary injunctions, that means, that any court with which a main action for cessation can be filed can issue a preliminary injunction. In case of a prior pending main action the court handling the main action has exclusive jurisdiction to issue a preliminary injunction. The Federal Republic of Germany does not have a uniform case law regarding the prerequisites for the issuance of preliminary injunctions, and therefore the regional differences are to be considered when choosing a court. Oral proceedings are not 6

BGH GRUR 1995, 697, 699 – FUNNY PAPER. BGH GRUR 1979, 332, 337 – Brombeerleuchte. 8 See LG Du ¨ sseldorf GRUR 1968, 156, 158 – Schutzrechtsverwarnung. 9 BGH GRUR 2007, 313 – Funkuhr II; BGH GRUR 1977, 805 – Klarsichtverpackung. 7

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compulsory under § 937 (2) ZPO, and therefore the issuance of a preliminary injunction is legally admissible upon an ex parte request. In patent matters, an injunction request is normally dealt within oral proceedings, because often the legally and technically difficult fact situation can be discussed and assessed best in a hearing. A subsequent main action is not mandatory. However, according to § 926 ZPO, the Defendant can request that a term for a main action by the Plaintiff be set. Under Articles 936, 925 ZPO, the court can make the issuance of a preliminary injunction dependent upon the condition that the Plaintiff provides a security and that thus Defendant’s interests are protected. If the preliminary injunction proves to be unjustified right from the start or is reversed because no action was filed following the term set under § 926(2) ZPO the party which has obtained the preliminary injunction is liable to compensate the Defendant for all damages suffered from enforcement. (2-3) Validity of the patent of disposal. A necessity to enforce the injunction claim by means of a preliminary injunction is only given if the validity of the patent is sufficiently clear which is to be shown by the applicant. Contrary to the main proceedings, the Court has no means to stay the proceedings in order to wait for the decision in opposition or nullity proceedings since this would interfere with the accelerative character of preliminary proceedings. In the event that the patent has been or is likely to be challenged in opposition or nullity proceedings in near future, it remains to be shown by the applicant that the objections raised against the patent are not justified and that the patent will be upheld.10 The validity can be deemed to be sufficiently likely in cases where the patent has already survived opposition or nullity proceedings at first instance.11 In case the patent has been declared void at first instance an injunction may nevertheless be granted if the decision is evidently incorrect which needs to be shown by the applicant.12 (2-4) Infringement. The Plaintiff has to furnish prima facie evidence of the fact of infringement. Such prima facie evidence is limited to evidence which the court can evaluate immediately either based on the written request or the oral presentation in case of a court hearing. Such prima facie evidence can be for example a sworn affidavit, a sample of the alleged infringing product, a private expertise or a witness or an expert which is present during the hearing. The fact of infringement must be shown in such a way as to enable an assessment of the scope of protection and the infringement form in summary proceedings. The Plaintiff has to show the actual nature of the challenged embodiment and its subsuming under the patent claim and provide prima facie evidence therefore. In the case of non-identical infringements, this proof may become difficult to provide depending on the technical field. In the case of equivalent infringement forms, equivalence must be plain to the court too. Hence, in the case of difficult technical questions, it is advisable to submit a private expert opinion. Generally applicable criteria as to when prima facie evidence of the infringement must be submitted cannot be phrased, just as in the case of the assessment of protectability. A reliable assessment of the infringement issue is often not possible in summary proceedings because of the technical complexity of the matter. This is all the more so as in summary proceedings the court cannot appoint a court expert but has to rely on the means of evidence procured and presented by the parties13. 10

OLG Du¨sseldorf InstGE 12, 114 – Harnkatheterset. OLG Du¨sseldorfGRUR-RR 2008, 329 – Olanzipin; OLG Du¨sseldorf InstGE 12, 114 – Harnkatheterset; OLG Du¨sseldorf GRUR-RR 2011, 81 – Gleitsattelscheibenbremse II; OLG Karlsruhe BeckRs 2011, 02760. 12 OLG Du ¨ sseldorf GRUR-RR 2008, 329 – Olanzipin;OLG Du¨sseldorf InstGE12, 114 – Harnkatheterset. 13 See OLG Karlsruhe GRUR 1982, 169, 171 – Einhebel-Mischarmatur. 11

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(2-5) Urgency. The applicant must furthermore demonstrate the “urgency” of the matter. This requirement concerns the necessity to enforce the injunction claim by means of a preliminary injunction. Whether the requirement of temporal urgency is met can not be answered by referring to fix time limits but must be assessed by evaluating the circumstances of each individual case. Decisive is whether the applicant has done its part in rapidly enforcing its claims. The relevant time span varies between the relevant litigation courts in Germany and lies approximately between 1–6 months starting from the moment when the right holder got notice of the infringement and not from the moment when he could have taken notice while complying with its obligation to observe the market. The right holder, once he obtains the infringing product, must rapidly initiate examinations as to whether the product infringes or not. A delay may be justified in the event that the assessment of infringement requires complex and time consuming investigations or analyses. According to current Court practice it shall not speak against urgency if the patentee, despite having knowledge of the infringing product, retards the filing of the request until the patent has been upheld in pending opposition proceedings.14 (2-6) Proportionality. In contrast to ordinary court proceedings, where an injunction has to be granted obligatory in case of patent infringement, the court in preliminary injunction proceedings has a certain discretion. In this context a balance of interests has to be made where the effect of the alleged infringement on the patent holder has to be weighted against the harm to the accused infringer, should the preliminary decision be in error. (2-7) Enforcement and remedies. The enforcement of preliminary injunctions is effected by service on the defendant. It is the applicant’s obligation to serve the injunction on the defendant within one month after the day of deliverance at applicant. If the applicant is represented by attorneys at law duly appointed in the preliminary injunction proceedings the injunction must be served on the attorneys instead. Once the preliminary injunction has been served, it is legally valid and the respondent has to immediately stop any acts that could be considered to be in contravention of the prohibitive injunction. If the defendant continues to infringe the applicant’s rights, the applicant can request the competent court to affirm that the defendant acted against the prohibitive injunction and that the defendant is thus subject to the payment of a fine of up to 250,000,– E, set by the court for each case of contravention (execution of the injunction). Even if the defendant is located abroad it is still possible to execute the preliminary injunction within Germany if the defendant owns assets in Germany. Preliminary injunctions are provisional court orders. They neither give a final verdict on the matter nor are they materially binding with respect to the outcome of main proceedings which are independent and can be initiated as an alternative, at the same time or after preliminary injunction proceedings. A possible way to render a preliminary injunction final and hereby avoid initiation of main proceedings is to ask the defendant to issue a final statement. Such declaration need to encompass a material acknowledgement of the provisional order as well as a waiver of all potential legal remedies against the injunction (i. e. opposition, § 924 ZPO; request to bring main action, § 926 ZPO; revocation due to changed circumstances, § 927 ZPO). If the defendant agrees the dispute is permanently settled, if not, the applicant is free to file a lawsuit. 14

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German Law provides several remedies for parties against whom a court has granted a preliminary injunction. In particular, the defendant might consider filing an opposition against the decision. The aim of opposition proceedings is to have the Court’s decision on the preliminary injunction revoked. After an opposition has been filed, the Court having granted the preliminary injunction will schedule an oral hearing. During the oral hearing, both parties can bring forward their arguments and the court will then either revoke or affirm the preliminary injunction. Since the opposition does not suspend the effect of the preliminary injunction the defendant is obliged to comply with the obligation until it has been revoked by the Court. In the event that the Court deems the injunction to have been unjustified the defendant is entitled to claim reimbursement of all damages suffered as a result of the enforcement and execution of the injunction. As an alternative to opposition against the preliminary injunction the respondent may request a court order according to which the applicant has to file the main action against the defendant within a reasonable period of time (§ 926 ZPO). In case the main action is not filed, the injunction will be cancelled. (2-8) Damages. The Plaintiff has to pay damages, irrespective of whether or not he is at fault, if the preliminary injunction was unjustified from the very beginning or if the preliminary injunction was reversed in opposition proceedings. The unjustified nature of the injunction must have existed from the beginning, that is at the time the preliminary injunction issued. This precondition is met for instance if the patent is retroactively revoked or declared null and void. The Plaintiff even has to reimburse the Defendant for any expenses necessary to avert or mitigate the consequential damages of the wrongly issued preliminary injunction.

2. Japan (1) Warning. If a patent holder believes that products or processes of a competitor should infringe his patent, a patent holder may immediately file an action with the alleged infringer. A patent holder, however, normally send a warning to an alleged infringer before taking a legal action. If he files a legal action immediately, will result in significant costs and take up a great deal of time for the patent holder. He rather wants to seek an amicable settlement with the alleged infringer so that he could get economical benefits without incurring the costs of litgation. Furthermore, it is often difficult even for an expert to determine whether products or processes of a competitor infringe his patent or not. The validity of a patent is always not so clear. A patent which is once registered could be invalidated. It is unpredictable whether the patent holder could win the infringement suit in the end. Moreover, there are neither any legal disadvantages nor sanctions for a patent holder, even if he does not file an action immediately after a warning. That is why a patent holder often chooses to first send a warning. A patent holder often has an interest to negotiate with an alleged infringer about a license agreement. In such a case, a patent holder only specifies the patent number in a warning and indicates the relevance between his patent and some products and processes of a competitor, and asks a response of an alleged infringer within two weeks or so. If a patent holder does not have any interests in licensing the patent at all, the patent holder clearly makes a demand in warning to stop the infringing activities immediately. It is, however, not so often that a patent holder clearly asks an alleged infringer to stop the infringement activities immediately. The reaction of an alleged infringer and the proceeding of negotiation between the parties vary. However, there are typical situations. An alleged infringer often asks to 105

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postpone his response for one month or so to research the possibility of the infringement and the patentability of the patent indicated in the warning. In the investigation, an alleged infringer seeks the reason why his products or processes should not infringe the patent, and consults some experts. An alleged infringer normally answers that there should be not an infringement and/or the patent should be invalid. Against such a response, the patent holder asks the alleged infringer to specify the reasons why the products or processes could not infringe the patent or why the patent could be invalid. The negotiation between a patent holder and an alleged infringer sometimes comes to the end immediately after the exchanges of some letters. It sometimes continues a few years during which they have meetings repeatedly. If such a negotiation stagnates, the patent holder decides whether a judicial action should be taken or not. There are not any restrictions for the timing when a patent holder should take a judicial action. A patent holder may file an infringement action in anytime, if the patent right does not expire and the infringement activities continues. A patent holder has enough time to consider whether he files a legal action or chooses not to enforce his patent right. (2) Preliminary injunction. If a patent holder is convinced that activities of a competitor infringe his patent, and decides to take a legal action, the patent holder has a choice whether to petition for a preliminary injunction or file an action for an ordinary injunction. There is no time limit for a petition for a preliminary injunction, insofar as the patent right is effective. Even after a few years from the end of negotiations, a patent holder may make a petition for a preliminary injunction, even if such delay could make an infringement court have some doubt about the necessity for an immediate remedy by a preliminary injunction. If a patent holder chooses a preliminary injunction, the same court, in principle deals with both the preliminary and ordinary injunction case, according to Article 12, Paragraph 2 of the Japanese Civil Provisional Remedies Act. In practice, infringement courts tend to deal with both procedures at the same pace and very deliberately. The patent holder, therefore, could hardly expect an immediate remedy of a patent infringement dispute with a preliminary injunction. However, there are some advantages for a preliminary injunction. For example, the judicial costs for preliminary injunction are much cheaper than for an ordinary injunction. The petition for a preliminary injunction against one respondent costs just 2,000 Yen, i. e. around 15 Euro. Furthermore, it is quite difficult to release an alleged infringer from the execution of an order for a preliminary injunction, once a preliminary injunction is ordered, because it is not permitted for the alleged infringer to pay money for the release from the execution of the order for preliminary injunction being enforced. Regularly only the final and binding judgement on the merits can reverse an order of a preliminary injunction. Therefore, once a preliminary injunction is ordered, the order could be so burdensome for an alleged infringer that he has to stop producing the products or using the processes. If the alleged infringer does not obey the order, the execution is compelled indirectly by an order of the court to pay to the patent holder a fixed amount of money daily until performing the ordered obligation, according to Article 52 of the Japanese Civil Provisional Remedies Act in connection with Article 172 of the Japanese Civil Execution Act. (2-1) Preliminary injunction as a provisional remedy. The preliminary injunction is regulated by the Japanese Civil Provisional Remedies Act. There are three categories as provisional remedies in the Japanese Civil Provisional Remedies Act, which are 1) the provisional seizure to secure a claim for payment of money, 2) the provisional 106

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disposition of a disputed subject matter to prevent the change of the existing state of such subject matter, and 3) the provisional disposition to determine the provisional status. A preliminary injunction belongs to the the provisional disposition to determine the provisional status. A preliminary injunction, however, fulfils the claim for injunction as a matter of fact, even though the remedy is temporary. Therefore, infringement courts which have jurisdiction for a preliminary and ordinary injunction tend to order a preliminary injunction very deliberately. In any cases it is necessary for issuance of an order of a preliminary injunction as a provisional disposition to hold a hearing date at which an alleged infringer may be present, according to Article 23, Paragraph 4 of the Japanese Civil Provisional Remedies Act. Hearings take place repeatedly to examine the case as carefully as in the examination of the case on the merits. If an action for an ordinary injunction has also been filed parallel, dates for such hearings are normally held on the same dates as for oral proceedings. (2-2) Characters of a preliminary injunction. A preliminary injunction is characterised by the quickness of remedy, the temporality of remedy, and the dependence on a proceeding on the merits. Ideally, a petition for a preliminary injunction has to be decided so quickly as possible because a preliminary injunction prevents the patent holder from suffering present risk of unavoidable damages. Therefore, the necessity of a preliminary injunction can be proven by prima facie evidence. In fact, however, the quickness of provisional remedies is not adapted to a preliminary injunction. A preliminary injunction could fulfil the claim of a patent holder. The disadvantages to an alleged infringer will be significant and cannot be ignored. Infringement courts, thus, are quite deliberate in dealing with a preliminary injunction and, as a matter of fact, demand the proof without reasonable doubt. Furthermore, infringement courts are obliged to hold a hearing where an alleged infringer might be present, according to Article 23, Paragraph 4 of the Japanese Preliminary Remedy Act, and often repeat hearings that could delay the procedure of a preliminary injunction. A preliminary injunction is a temporal remedy for a patent holder until a judgement for an ordinary injunction is rendered. Therefore, an order for a preliminary injunction can be revoked according to Article 37, Paragraph 1 of the Japanese Civil Provisional Remedies Act, if, on the request of the alleged infringer, the court orders the patent holder to file an action on the merits based upon the patent infringement within a certain period of time and, nevertheless, the patent holder fails to file an action within the period. A preliminary injunction depends on the judgement for an ordinary injunction on the merits. If an action on the merits for an ordinary injunction is dismissed, the preliminary injunction might be revoked by the court on the request of the alleged infringer, according to Article 38, Paragraph 1 of the Japanese Civil Provisional Remedies Act. The secrecy of procedure which is normally a typical character for provisional remedies is, however, lacking in a preliminary injunction, because a hearing of an alleged infringer is necessary, according to Article 23, Paragraph 4 of the Japanese Civil Provisional Remedies Act. (2-3) Material prerequisites for an order of a preliminary injunction. A preliminary injunction is ordered if there is an effective patent and a necessity to avoid any substantial damages for a patent holder from patent infringement, according to Article 23, Paragraph 2 of the Japanese Civil Provisional Remedies Act. 107

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If a patent holder is not exploiting the patented invention, damages of the patent holder from infringement activities of a third party could be limited to monetary damages equivalent to license fee. In such a case, the necessity for preserving the patent right by a preliminary injunction could be denied15. However, the necessity for preserving the patent right was admitted in a case where the patent holder gave a license to a third party16. In another case, the court admitted the necessity not only because there were licences with third parties, but also because the patent holder was obliged contractually to take an action against possible infringers17. Whether the necessity could still be admitted is not clear if the patent holder is not exploiting the patented products itself, but producing or selling products which can be competing with the allegedly infringing products. It is not unusual for a patent to be declared invalid in the trial for patent invalidation in the Japanese Patent Office or recognised as invalid by an infringement court. A preliminary injunction which is just a provisional remedy is revoked, if an invalid decision by a trial board of the Japanese Patent Office becomes final and irrevocable, or if an action for an ordinary injunction is dismissed because of invalidation of a patent finally and irrevocably. That is why infringement courts examine the necessity for preserving a patent right by a preliminary injunction very deliberately. The necessity for preserving a patent right by a preliminary injunction, therefore, may be denied, if an infringement court recognises that the allegedly infringed patent is likely to be invalidated by a trial for patent invalidation of the Japanese Patent Office18. (2-4) Procedure. (2-4-1) Jurisdiction. The court which has jurisdiction for the first instance of an ordinary injunction also has exclusive jurisdiction for a preliminary injunction, according to Article 12, Paragraph 2 of the Japanese Civil Provisional Remedies Act. Such courts are restricted to the Tokyo or Osaka District Court, according to Article 6, Paragraph 1 of the Japanese Code of Civil Procedure. As a matter of fact, the same chamber of the Tokyo or Osaka District Court usually deals with both injunction procedures, if a petition for a preliminary injunction and an action for an ordinary injunction are pending at the same time. Therefore, infringement courts tend to examine both cases at the same date and with the same interval. The quickness of a provisional remedy is not adapted to a preliminary injunction against a patent infringement. (2-4-2) Petition. In a petition for an order of a preliminary injunction, the followings have to be indicated, according to Article 13, Paragraph 1 of the Japanese Civil Provisional Remedies Act: 1) a patent right to be preserved, 2) infringing activities and 3) a necessity preserving the patent right, namely, the likeliness of substantial damages for the patent holder to be avoided with a preliminary injunction. 15 A decision of the Nagoya District Court on 20th May 1985, Case No.: Showa 59 (yo) 318, Collection of Judgments for Civil or Administrative Cases of Intellectual Properties in the Lower Instances, Vol. 17, No. 2, pp. 239 – zen-jido datu-bu sochi jiken (automatic rice shell threshing machine case). 16 A decision of the Tokyo District Court on 16th February 1990, Case No.: Heisei 1 (mo) 7011, Collection of Judgments for Civil or Administrative Cases of Intellectual Properties in the Lower Instances, Vol. 22, No. 1, pp. 1 = Hanrei-Jiho No. 1341, pp. 140 = Hanrei-Times No. 724, pp. 240 – VSsokko jiken (variable slope side ditch case). 17 A decision of the Osaka High Court on 31st July 1992, Case No.: Heisei 3 (u) 1205, Collection of Judgments for Civil or Administrative Cases of Intellectual Properties in the Lower Instances, Vol. 24, No. 2, pp. 451 – hito soshiki plasminogen kassei-ka inshi jiken (t-PA case). 18 A decision of the Japanese Intellectual Property High Court on 23th July 2013, Case No.: Heisei 24 (ra) 10014 – keitai-denwa-tanmatsu (mobile phone case).

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A patent right to be preserved is specified by one or more patent claims which are allegedly infringed. Infringing products or processes are specified just like in an ordinary injunction, namely, by the type-numbers or the names of the infringing products or the products produced by infringing processes. The necessity for preserving the patent right is a special and important indication for a preliminary injunction. The patent holder has to assert that the patent holder is exploiting the patented inventions or has given a licence of the patent to a third party so that the patent holder will suffer disadvantages which could not be recovered by monetary compensation of damages. The necessity for preserving a patent right could be denied, if an infringement court recognises that the allegedly infringed patent should be invalidated. However, the validity of the patent is assumed by the fact that the patent right is registered effectively. An alleged infringer has to dispute the validity of the patent, for example, with evidences for prior art. (2-4-3) Relation of a preliminary injunction with an ordinary injunction. A preliminary injunction and an ordinary injunction are sometimes pending at the same time in the same court. It seems to be unnecessary to maintain two parallel and almost identical procedures. Sometimes infringement courts, therefore, recommend a patent holder to withdraw the petition for a preliminary injunction. However, there is also an advantage for maintaining a petition for a preliminary injunction besides an action for an ordinary injunction. Namely, an order for a preliminary injunction is enforceable immediately. Such immediate enforceability is lacking in a decision for an ordinary injunction, unless an order for discretional provisional execution is declared in the main text of a judgement, according to Article 259, Paragraph 1 of the Japanese Code of Civil Procedure. Infringement courts rarely declare a provisional execution of an ordinary injunction. Even if an infringement court declares a provisional execution of an ordinary injunction, it is quite usual that the court also declares additionally and by its own authority that the provisional execution of an ordinary injunction may be avoided if an alleged infringer provides security, according to Article 259, Paragraph 3 of the Japanese Code of Civil Procedure. Under these circumstances, it is not always unnecessary in the practice to maintain a petition for a preliminary injunction besides an action for an ordinary injunction. In some cases, a petition for a preliminary injunction is submitted also during the procedure for an ordinary injunction on the merits. For example, in a procedure for an ordinary injunction, an infringement court often informs both parties of the conviction of the court about the existence of an infringement, and tries to persuade parties to reach an amicable settlement, in particular about compensation of damages from infringement activities, before the court pronounces a sentence. If, however, the procedure for confirming the amount of damages is delaying extraordinarily because of the stagnating negotiations for an amicable settlement, the necessity for preserving the patent right could be affirmed, and the patent holder tries to make a pressure by submitting for a preliminary injunction. (2-4-4) Hearing. Before an order for a preliminary injunction, a hearing of an alleged infringer is necessary, according to Article 23, Paragraph 4 of the Japanese Civil Provisional Remedies Act. As a result, there is no risk that an alleged infringer receives a preliminary injunction without prior notice. An alleged infringer who has been warned need not submit protective letters informing all infringement courts in Japan of non-infringement reasons beforehand to avoid an order for a preliminary injunction without hearing. 109

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Hearings for a preliminary injunction take place a few times if there is no parallel procedure for an ordinary injunction. It is rare that an infringement court makes an order after a few hearings, insofar as the alleged infringer disputes the infringement of his activities or the validity of the patent. Hearings are not opened to the public. If a court is not convinced of the infringement or the validity of the patent, the court often recommends that the patent holder file an action for an ordinary injunction and/or withdraw the petition for a preliminary injunction. If a patent holder files an action for an ordinary injunction after or at the same time as a preliminary injunction, an infringement court appoints the same date for the ordinary and preliminary injunctions. Patent infringement cases are regularly referred to preparatory proceedings after the first oral proceeding. Preparatory proceedings are not opened to the public. It is possible to have hearings for a preliminary injunction and preparatory proceedings for an ordinary injunction at the same date, because both procedures are not opened to the public. Because hearings and preparatory proceedings take place at the same date and with the same pace, the parties make the same allegation and submit the same proofs for both the hearings and preparatory proceedings. These proceedings continue around one year or more on average. If the court is convinced that there were no infringing activities, the petition for a preliminary injunction and/or the claim for a permanent injunction are dismissed. Against the dismissal of the petition for a preliminary injunction, the patent holder may file an immediate appeal. If, on the other hand, the court is convinced of the infringement of the patent rights, the court tries to propose an amicable settlement to both the parties. In most cases, the parties reach an agreement, because the alleged infringer is afraid of the risk from a preliminary injunction the enforcement of which cannot normally be stopped. (2-4-5) Proof with prima facie evidences. The prerequisites of a preliminary injunction have to be proven by prima facie evidences, according to Article 13, Paragraph 2 of the Japanese Civil Provisional Remedies Act. Prima facie evidences are limited to the evidences which courts can examine immediately, because a preliminary injunction should be ordered as quickly as possible to avoid present and substantial damages of the patent holder. However, a preliminary injunction is only a provisional remedy, and can be revoked afterward by a controversial judgement for an ordinary injunction. Furthermore, a claim of a patent holder for an ordinary injunction could, as a matter of fact, be fulfilled by a preliminary injunction, and an alleged infringer often suffers unignorable disadvantages from a preliminary injunction. Therefore, infringement courts examine the issues very deliberately before deciding to issue an order for a preliminary injunction and demand the same level of proof as for an ordinary injunction, even though there is limitation of evidence for a preliminary injunction. A patent right which should be preserved can be proved easily by submission of a copy of the publication in the patent gazette. The infringing activities of an alleged infringer can be proved by a product of an alleged infringer, its analysis or its pamphlets. If, however, the patent holder cannot obtain the product of an alleged infringer, it is not easy for the patent holder to prove the details of the product. A petition for order to submit document according to Article 221 of the Japanese Code of Civil Procedure is not allowed as prima facie evidence. If the patent holder wants to utilise the documents which the alleged infringer possesses, the patent holder should rather choose an action for an ordinary injunction. It is possible for an alleged infringer to submit some documents spontaneously in order to deny the infringement. It was disputed whether an alleged infringer might also 110

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submit a motion for a protective order for trade secret which was included in the documents that the alleged infringer wanted to submit, according to Article 105-4 of the Japanese Patent Act. It is necessary, as a matter of law, for a preliminary injunction to be decided as quickly as possible. A protective order for trade secret could delay the decision for a preliminary injunction. Therefore, there was a doubt whether a procedure for a protective order for trade secret was adequate for a preliminary injunction. The Japanese Intellectual High Court denied the application of a protective order for trade secret to a preliminary in a decision19. However, the Japanese Supreme Court admitted to apply a protective order for trade secret to a preliminary injunction20. The necessity preserving the patent right, namely, the likeliness of substantial damages for the patent holder to be avoided with a preliminary injunction can be proven by the fact that the patent holder exploits the patented invention by himself or gives a license to a third party to exploit the patented invention. The patent holder need not to prove the validity of the patent, because the validity is assumed from the fact that the patent is registered effectively. An alleged infringer has to prove the invalidity of the patent which is allegedly infringed by his activities. If the invalidity of the patent is proven by primafacie evidences which are submitted by the alleged infringer, the necessity preserving the patent right becomes uncertain. Infringement courts, however, seem to require almost the same level of proof for the invalidation as just in the objection of invalidity against an ordinary injunction. The courts, as a matter of fact, examine such a case almost with the same procedure as for an ordinary injunction. (2-5) Decision and objection. (2-5-1) Dismissal of a petition and immediate appeal. If the prerequisites for a preliminary injunction are not fulfilled, the petition for a preliminary injunction is dismissed. Against the decision to dismiss the petition, the patent holder may file an immediate appeal within an unextendable period of two weeks from the day of the notification of decision, according to Article 19, Paragraph 1 of the Japanese Civil Provisional Remedies Act. It is often the case that the proceeding for an ordinary injunction is running parallel to the proceeding for a preliminary injunction. Therefore, it is not unusual for infringement courts to dismiss a claim for an ordinary injunction and a petition for a preliminary injunction at the same date21. In such a case, an appeal against the dismissal judgement and an immediate appeal against the dismissal decision are also pending to the same chamber of the Japanese Intellectual Property Court at the same time. The immediate appeal is not decided immediately, as a matter of fact, but at the same date as the date of a judgement for the appeal against the dismissal judgement. 19 A decision of the Japanese Intellectual Property High Court on 7th July 2008, Case No.: Heisei 20 (ra) 10002, Hanrei-Jiho No. 2015, pp. 127, stressed that there was no clear wording of the Japanese Patent Act to admit a protective order to a preliminary injunction. 20 A decision of the Japanese Supreme Court on 27th January 2009, Case No.: Heisei 20 (kyo) 36, the Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 63, No. 1, pp. 271 = Hanrei-Jiho No. 2035, pp. 127 = Hanrei-Times No. 1292, pp. 154, held that the wording “litigation” of the Japanese Patent Act could include not only the proceeding for a legal action on the merits, but also for a provisional disposition like a preliminary injunction. 21 For example, there were recently a judgement for an ordinary injunction and two decisions for a preliminary injunction of the Tokyo District Court for the same patent at the same date. Namely, a judgement of the Tokyo District Court on 28th February 2013, Case No.: Heisei 23 (wa) 38969, HanreiJiho No. 2186, pp. 150 = Hanrei-Times No. 1390, pp. 81 and two decisions of the Tokyo District Court on 28th February 2013, Case No.: Heisei 23 (yo) 22027 and 22098 – ido-tsushin-system ni okeru arakajime settei sareta nagasa indicator wo mochiite packet data wo so-jyu-shin suru hoho oyobi sochi jiken (method and apparatus for transmitting/receiving packet data using pre-defined length indicator in a mobile communication system case). These cases are famous because they are Japanese part of the dispute about FRAND between smart phones companies, Apple and Samsun.

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(2-5-2) Issue of an order for a preliminary injunction, objection and appeal. If, on the other hand, the court is convinced of the infringement of the patent rights, the court tries to propose an amicable settlement to both the parties before a decision. In most cases, the parties reach an agreement, because the alleged infringer is afraid of the risk of a preliminary injunction the enforcement of which cannot be stopped regularly. It is, therefore, rare for infringement courts to issue an order for a preliminary injunction actually. However, an amicable settlement cannot be reached, infringement courts issue an order for a preliminary injunction, while requiring provision of security, according to Article 14, Paragraph 1 of the Japanese Civil Provisional Remedies Act. The security may be the basis for the compensation of damages which the alleged infringer suffers from an order for a preliminary injunction which is revoked afterward. The court issuing the order has discretion to decide the amount of the security in consideration of possible disadvantages of the alleged infringer or other circumstances. The amount could be almost as high as the interest which the patent order seeks by an action for an ordinary injunction. The order for a preliminary injunction is enforceable immediately after the notification of the order. Against the order, an alleged infringer may file an objection to an order for a preliminary injunction with the court that has issued the order, according to Article 26 of the Japanese Civil Provisional Remedies Act. However, the filing of an objection itself cannot prevent the order from executing. The alleged infringer has to petition to the court to order a stay of execution of the preliminary injunction, according to Article 27, Paragraph 1 of the Japanese Civil Provisional Remedies Act. The prerequisite for ordering a stay of execution is quite high. There has to be clearly grounds for revocation of the order for the preliminary injunction, or the likelihood that executing the preliminary injunction could cause damages which could not be compensated afterward. Such a clear ground is, for example, a final and binding decision of patent invalidation by a trial board for patent invalidation of the Japanese Patent Office after issuing an order for a preliminary injunction, because, with such a decision, the patent right to be preserved is lacking retrospectively, according to Article 125 of the Japanese Patent Act. If a decision of patent invalidation is not final and binding, it is not enough to deny the necessity for preserving the patent right, because the decision can be rescinded by a litigation filed with the Japanese Intellectual High Court against the trial decision22. Against a decision for an objection to an order for a preliminary injunction, an alleged infringer can file an appeal within two weeks after the notification of the decision, according to Article 41, Paragraph 1 of the Japanese Civil Provisional Remedies Act. The Japanese Intellectual High Court has a jurisdiction for appeal against a decision for an objection23. Also an appeal cannot stay the execution of the order. (2-6) Revocation of a preliminary injunction. If a judgement of an infringement court which denies the infringement in a suit for an ordinary injunction becomes final and binding, an order for a preliminary injunction has to be revoked on the request of 22 A decision of the Japanese Intellectual Property High Court on 29th September 2008, Case No.: Heisei 19 (ra) 10008, Hanrei-Times No. 1290, pp. 296 – jelly-jyo taieki-roshutsu-boshi-zai oyobi sore wo shiyo shita taieki-roshutsu-boshi-hoho jiken (jellylike preventive material for humoural ooze and method for preventing humoural ooze using the same case). 23 A decision of the Japanese Intellectual Property High Court on 29th September 2008, Case No.: Heisei 19 (ra) 10008, Hanrei-Jiho No. 1290, pp. 296 – jelly-jyo taieki-roshutsu-boshi-zai oyobi sore wo shiyo shita taieki-roshutsu-boshi-hoho jiken (jellylike preventive material for humoural ooze and method for preventing humoural ooze using the same case).

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the alleged infringer, according to Article 38, Paragraph 1 of the Japanese Civil Provisional Remedies Act. The same is also applied, if a decision of patent invalidation by a trial board of the Japanese Patent Office becomes final and binding. In such cases, the patent holder has to compensate damages which an alleged infringer has suffered from the revoked preliminary injunction, if the patent holder is negligent in deciding the existence of infringement activities or the validity of patent. A preliminary injunction is just a provisional remedy and cause serious irrevocable damages against an alleged infringer so that the patent holder should be obliged to examine deliberately the necessity of such a provisional remedy. Therefore, a negligence of the patent holder and the responsibility of the patent holder to compensate damages of the alleged infringer are regularly admitted24.

3. USA (1) Warning letter. There is no requirement in the United States for a warning letter, although it is common practice. Often warning letters are sent not only to the manufacturer or supplier of the alleged infringing product, but to their customers. Warning customers has the effect of a commercial deterrent because many customers will seek written indemnification against claims of infringement or cease doing business with the supplier until the matter is resolved. Customers, because they either use or sell the patented product, are equally liable under U.S. patent laws for patent infringement, but logically look to the supplier to defend them. The sending of a warning letter does have potential adverse consequences. If the letter places the recipient in the position where it can demonstrate that there is a substantial controversy between the parties of sufficient immediacy, it will provide the basis for the recipient to initiate a declaratory judgment action seeking a judgment of non-infringement and/or invalidity. This provides the accused infringer with the opportunity to select the venue, consider filing PTO validity challenges before litigation is filed and provide assurances to its customers that it will affirmatively protect them.25 For example, the accused infringer could file an IPR petition or an ex parte reexamination petition. Often patent owners carefully craft letters which make no accusation. They advise the recipient of the existence of a patent; indicate that an investigation regarding the product or method has not been completed; and suggest that the recipient independently review the patent to determine whether, for example, the recipient would want to discuss a possible license with the patent owner should the recipient believe it appropriate for it to do so. This may effectively prevent the filing of a declaratory judgment action by the recipient, but may still result in the initiation of an IPR or ex parte reexamination validity challenge. The decision whether to send a warning letter and to whom depends upon the objectives of the patent owner. These include consideration about whether there is a concern that litigation will be initiated by the accused infringer in a district court which is perceived to be more favorable to an accused infringer; whether there is concern that 24 A judgement of the Tokyo District Court on 17th December 2002, Case No.: Heisei 13 (wa) 22452, – kori-seikei-sochi jiken (ice forming machine case); a judgement of the Osaka High Court on 15th October 2004, Case No.: Heisei 16 (ne) 648, Hanrei-Jiho No. 1912, pp. 107 = Hanrei-Times No. 1188, pp. 313 – saiko-mado-tsuki-kosei-door no seizou hoho jiken (method for manufacturing iron doors with windows for lightning case) 25 In at least one pending matter the NPE sent 8000 warning letters relating to a patent portfolio of more than 20 patents in which the issue has been raised about whether this is violative of the anti-trust laws, U.S. anti-racketeering laws and a patent misuse.

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PTO proceedings will be filed; and whether it is believed that notifying customers could have potentially beneficial commercial consequences for the patent owner. Unless it is shown that the warning letter is totally frivolous and therefore constitutes tortious interference with advantageous business relationships between the alleged infringer and its customers, the patent owner will not be subject to any damages for the sending of the letter. Before sending the warning letter the patent owner (or its attorney) should, after a reasonable investigation, conclude that there is sufficient evidence to support an assertion of infringement. (2) Injunctive relief. Both preliminary and permanent injunction are not automatically granted, but are available remedies if the basis for them is demonstrated.26 Preliminary injunctions are available if a patent owner can demonstrate: – A substantial likelihood of success on the merits. – Irreparable injury. – The balancing of harm with the equities weighing in favor of the patent owner. – The patent owner provides a security bond in an amount to be determined by the judge against the damages that could be incurred by the alleged infringer if ultimately it is determined that the accused infringer is not liable. Although a preliminary injunction can be requested at any time during the pendency of a litigation, it is generally requested at the outset of a litigation, with the application to the court filed at the same time the Complaint is filed. The patent owner, acting ex parte asks the court to sign an order requesting that the alleged infringer show cause why a preliminary injunction should not be granted. The application to the court must include a verified showing, with supporting evidence and sworn statements of witnesses demonstrating that all of the requisite elements for an injunction are present. The accused party is then provided the opportunity to defend the application for injunction. If it can be demonstrated that there is an immediate need for some relief even prior to the alleged infringer providing its position, the request to the court can include an application for a Temporary Restraining Order, which can only issue for a limited duration (FRCP Rule 65). In view of the consequences if granted, the proofs required to obtain a preliminary injunction are significant. In situations where the patent owner believes that it is entitled to a preliminary injunction but does not have a fully developed factual basis to seek the injunction, it is possible for an application to be filed with the court along with the Complaint for an order seeking expedited discovery on the issues relevant to seeking injunctive relief. In the ordinary course of a litigation the discovery period does not begin until after initial pleadings have been exchanged. However, the court has the authority, if it is convinced that there is good cause, to accelerate the discovery process, particularly where a party can demonstrate that it is needed as a basis for a possible application for a preliminary injunction. Unlike most matters decided by the district court which cannot be appealed until after final judgment, the granting of a preliminary injunction can be immediately appealed to the Federal Circuit.

26 eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 392–93, 126 S. Ct. 1837, 1840, 164 L. Ed. 2 d 641 (2006).

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II. Pre-procedural measures of the infringer 1. Germany (1) Negative declaratory action and counter-warning. The unjustified warning gives reason to file a declaratory action to establish the non-existence of a right and to clarify the unjustified claimed infringement before the court without previous counter-warning27. In order to avoid legal disputes it is possible to reject an unjustified warning with a counter-warning combined with the request for a cease and desist declaration. (2) Protective letter. A party who is likely to be confronted with an injunction (possible defendant) may, as a preventive measure of protection, file a so called protective letter with the Court expected to be addressed by the injunction request. The goal of a protective letter is to avoid the grant of the injunction without oral hearing (ex parte injunction). Since the respondent usually does not know which Court will be chosen by the possible applicant, it is advisable to file protective letters with all twelve German Courts competent to hear patent infringement matters. In the protective letter the possible defendant should bring forward arguments as to why an anticipated preliminary injunction against the possible defendant would be unjustified. In view of the requirements for the grant of a preliminary injunction the possible defendant will primarily outline in the protective letter that the patent is invalid and revocable, that there is no infringement and lack of urgency. Although the Courts are not obliged to consider the protective letter, the competent judges will usually refrain from granting an ex parte injunction and rather schedule an oral hearing before deciding upon the matter. (3) Application for issuing a injunctive relief due to unauthorized claim of patent rights. The holder of a granted protective right is allowed to advertise the patent even if it is still possible to appeal against the patent28. Before a patent is granted it is not allowed to advertise with the hint to an already granted patent, even if the advertising person is already the owner of a utility patent. Basically it is also not allowed to refer to patent protectionafter the patent has been expired. Advertising a mere patent application before its publication is not allowed29. False patent marking is considered to be illegal and gives the right to claim information as to the patent upon which the arrogation is based (§ 146 PatG). Based on unfair competition rules it is also possible to raise cease and desist and damages claims.

2. Japan (1) Counter warning. (1-1) Counter warning based on a patent. If a competitor sends a warning against another competitor because of patent infringement, the other competitor begins to research whether the competitor would infringe some patents possessed by the other competitor. If there are some patents which the competitor could infringe, the other competitor sends a counter warning against the competitor. The technical area of the counter warning is normally the same as that of the warning being sent by the competitor. In some cases, the competitor abandons to take an action against the other competitor, if the competitor is afraid of an infringement by his products. However, the 27

Benkard/Scharen, PatG, pre § 9-14 No.16. See Benkard/Ullmann, PatG, § 146 No. 19; Jacobs/Lindacher/Teplitzky, GroßKommentar zum UWG (German Act against Unfair Competition) § 3 Rdz.726. 29 O ¨ sterr. OGH (Austrian Federal Supreme Court) GRUR Int. 1976, 455, 456 – Patent angemeldet. 28

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competitor and the other competitor often begin to negotiate, and discuss the value of patents to be allegedly infringed each other. The development of the negotiations is case by case quite various. If, for example, there is a dispute about the validity of a patent, a filing of a request for a trial for patent invalidation is agreed between parties in some cases in order to determine if the one of parties should get a license for a patent of the other party. Such a negotiation continues from several months to even a few years. In some cases, an agreement for a license or cross-license is reached between parties. In other cases, the patent holder abandons further negotiation or files an action with an infringement court. (1-2) Counter warning based on an unfair competition. If a patent holder sends a warning not only to a competitor, but also to a buyer, and if nevertheless the infringement is denied afterward by a final and binding judgement, because the products of the competitor are out of the protective scope of the patent or because the invalidation of the patent is declared, such a warning to a buyer is regarded as a false allegation which has been injurious to the business reputation of the competitor. Such a warning was therefore regarded by many judgements as an “unfair competition” in the meaning of Article 2, Paragraph 1, No. 14 of the Japanese Unfair Competition Prevention Act since 197230. Competitors often make a counter warning against the patent holder, whenever a patent holder sends a warning to a buyer based upon a patent infringement, because such a warning to a buyer could be “unfair competition”. If such a warning to a buyer is admitted as an unfair competition, a competitor whose products or processes infringed a patent allegedly may make a claim to suspend or prevent a warning against buyers, insofar as such a waning is infringing or is likely to infringe business interests of the competitor, according to Article 3 of the Japanese Unfair Competition Prevention Act. If the patent holder sends a warning against buyers and if, for example, the patent becomes invalid afterward, the patent holder is also responsible for compensating the damages of the competitor caused by infringing the competitor’s business interests, insofar as the patent holder believes the validity of his patent negligently, namely without careful research for the validity of the patent, according to Article 4 of the Japanese Unfair Competition Prevention Act. In most previous judgements, a negligence of the patent holder was recognised. However, there was also an opinion criticising such strict judgements which did not admit an exception, because it should be difficult for a patent holder to make a proper decision whether products or process of a competitor infringed the patent, and therefore such strict judgements could unnecessarily hold a patent holder back even from a fair enforcement of a patent31. In 2001, a judgement of the Tokyo District Court also supported such a criticising opinion and denied an unfair competition in consideration of the relevant circumstances, in particular difficulties in determining the patentability of the patent to be infringed allegedly, even if a declaratory judgement of non-infringement

30 There is no judgement of the Japanese Supreme Court about such a case. However, there are quite a lot of judgements of the first or second instances which admitted unfair competition as to a warning against buyers, if a judgement of non-infringement became final and binding, since the first affirmative judgement of the Tokyo District Court on 17th March 1972, Case No.: Showa 45 (wa) 2700, Collection of Judgments for Civil or Administrative Cases of Intellectual Properties in the Lower Instances, Vol. 4, No. 1, pp. 98 = Hanrei-Times No. 278, pp. 374 – fuigo-baki-jiken (sandals with whistles case). 31 Kasufumi Doi, eigyo-hibo-koi to shite no kenri-singai-keikoku (warning against infringement activities as false allegation injurious to the business reputation of the competitor), 1982 nihon-kogyoshoyuken-hogakkai-nenpo (yearly report of the society for the industrial property law) No. 5, pp. 56.

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had become final and binding32. In the appeal of this case, the Tokyo High Court also supported this judgement of the Tokyo District Court33. Several judgements of the Tokyo District or High Court supported such an opinion and admitted an exception in consideration of relevant circumstances until 2006. There was also a counter opinion criticising such a new tendency of the Tokyo District or High Court, because a false allegation injurious to the business reputation of a competitor should be regarded as an unfair competition, according to the wording of Article 2, Paragraph 1, No. 14 of the Japanese Unfair Competition Prevention Act, and there was no reason to deny a unfair competition, even if it was difficult even for an expert to determine the existence of an infringement act34. Recent judgements returned to the previous tendency again, and admitted an unfair competition almost without exceptions, when a judgement for non-infringement became final and binding. A few judgements, however, considered the difficulties in determining the patentability as one of elements to decide whether the patent holder had enforced his patent right negligently. In a case, the Japanese Intellectual Court denied the compensation of damages, because it should be difficult for the patent holder to recognise clearly the possibility of the invalidation of the patent at the time of warning, and thus the negligence was lacking in the warning against buyers of the competitor35. Even though some judgements denied an unfair competition itself or a negligence of a patent holder exceptionally, there is a high risk of legal responsibilities for a patent holder, if the patent holder sends a warning not only against his competitors, but also against buyers of the competitors. (2) Protective letter. Before 1989 when the Japanese Civil Provisional Remedies Act has been enacted, there used to be cases in which an alleged infringer who had been warned by a patent holder sent a protective letter to all or important infringement courts in Japan to avoid an order for a preliminary injunction without hearing. However, according to Article 23, Paragraph 4 of the Japanese Civil Provisional Remedies Act, before an order for a preliminary injunction, a hearing of an alleged infringer is necessary. As a result, there is almost no risk that an alleged infringer receives a preliminary injunction without hearing. An alleged infringer who has been warned need not submit protective letters informing all infringement courts in Japan of non-infringement reasons to avoid an order for a preliminary injunction without hearing. 32 A judgement of the Tokyo District Court on 20th September 2001, Case No.: Heisei 12 (wa) 11657, Hanrei-Jiho No. 1801, pp. 113= Hanrei-Times No. 1115, pp. 272 – jiki-shingo-kiroku-yo kinzoku-funmatsu jiken (ferromagnetic metal pigment case). In this case, a German company warned a Japanese electronic company in 1994, based upon patent infringement of products which a Japanese competitor was selling to the Japanese electronic company. The Japanese competitor filed an action for declaratory judgement to the Tokyo District Court in 1996 and the court declared the non-infringement of the products of the Japanese competitor in 2000. After the judgement became final and binding in 2000, the Japanese competitor filed an action with the German company to claim the compensation of damages which had been caused by a false warning – an unfair competition – to a third party. 33 A judgement of the Tokyo High Court on 29th August 2002, Case No.: Heisei 13 (ne) 5555, HanreiJiho No. 1807, pp. 128 – jiki-shingo-kiroku-yo kinzoku-funmatsu jiken (ferromagnetic metal pigment case). 34 Yoshiyuki Tamura, Fusei-kyoso-boshi-ho-gaisetsu (Outline of the Japanese Unfair Competition Prevention Law), 2nd. ed., 2003, pp. 447; Masabumi Suzuki, Comments for the Judgement of the Tokyo District Court on 28th January 2004, Hanrei-Jiho No. 1870, pp. 181. 35 A judgement of the Japanese Intellectual Property High Court on 24th Feburary 2011, Case No.: Heisei 22 (ne) 10074, Hanrei-Jiho No. 2138, pp. 107 = Hanrei-Times No. 1382, 335 – osu-neji buhin jiken (male screw parts case).

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(3) Declaratory judgement. An alleged infringer who is warned by a patent holder sometimes files an action for declaratory judgement which confirms that the products or process of the alleged infringer does not infringe the patent right36. If an alleged infringer just wants to confirm the invalidation of a patent, he may also file a request for a trial for patent invalidation. If, however, the alleged infringer wants to determine that his products are out of scope of claims of the said patent, he needs to file an action for declaratory judgement. The alleged infringer may also make a request to the Japanese Patent Office for its advisory opinion on the technical scope of a patented invention, according to Article 71 of the Japanese Patent Act. However, such an opinion of the Japanese Patent Office does not have res judicata, but is just an advisory opinion. Therefore, such requests for the advisory opinion are not used so often37. A decision with res judicata is an advantage of the declaratory judgement. Another advantage of a declaratory judgement is that an alleged infringer who has been warned can choose an infringement court between the Tokyo and Osaka District Court, considering which court could be advantageous for him. If the alleged infringer has his main office in Osaka and a patent holder has it in Tokyo, the alleged infringer prefers to choose the Osaka District Court, because otherwise the alleged infringer in Osaka would has to appear to the Tokyo District Court which is 500 km far away from Osaka. In an action of an alleged infringer for a declaratory judgement of non-infringement, the alleged infringer has to specify products or processes which he thinks do not infringe a patent. Against an action for a declaratory judgement, the patent holder has to allege all the facts which establish the infringement of the products or processes specified by the alleged infringer. In a procedure for a declaratory judgement, a patent holder also makes often counterclaims, according to Article 146 of the Japanese Code of Civil Procedure. The patent holder counterclaims injunction of producing the products or using the processes as well as compensation of the damages caused by such infringement activities of the alleged infringer. If a declaratory judgement confirming non-infringement of activities of the alleged infringer becomes final and binding, the judgement has the same effect as a judgement to dismiss the claims of the patent holder.

3. USA (1) Counter-warning/protective letter. In the United States there is no requirement that an accused infringer respond to a warning letter. However, the failure to consider the accusation after receiving a warning letter can be used as evidence of willfulness. Generally a warning letter provides the accused infringer with an arbitrary date in which to cease and desist from the asserted infringing activities. Although the requested response date has no force of law it is customary for counsel for the accused infringer to acknowledge receipt and indicate the amount of time it is believed necessary before a considered response can be made. 36 Such a case is, for example, a judgement of the Tokyo District Court on 28th February 2013, Case No.: Heisei 23 (wa) 38969, Hanrei-Jiho No. 2186, pp. 150 = Hanrei-Times No. 1390, pp. 81 – ido-tsushinsystem ni okeru arakajime settei sareta nagasa indicator wo mochiite packet data wo so-jyu-shin suru hoho oyobi sochi jiken (method and apparatus for transmitting/receiving packet data using pre-defined length indicator in a mobile communication system case). 37 There were 35 requests for advisory opinion to the Japanese Patent Office in 2012, according to the Statistic Parts of the Yearbook of the Japanese Patent Administrative Activities in 2013, which is edited by the Japanese Patent Office in 2013 (Tokkyo-cho, tokkyo-gyosei-nenji-hokoku-sho, 2013-nen-han, tokeishiryo-hen), p. 9.

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Typically, if the warning letter does not specify with particularity the basis for the accusation, such as by the inclusion of a chart which applies a claim on an element by element basis to an accused device or method, it is the general practice for the representatives of the accused infringer to demand that degree of specificity. The request for specificity has a number of benefits. It could provide a basis for the accused infringer to claim that the warning letter was without legal support and was an act of unfair competition. It assists in formulating a non-infringing position because it requires the patent owner to take a written position setting forth the patent owner’s interpretation of the claim elements. This better enables the accused infringer’s counsel to assess issues of infringement and better determine what prior art is likely to be most relevant to a validity challenge. Unless the infringement accusation has been anticipated, it is likely that the accused infringer will need a reasonable time to evaluate the accusation. This generally requires not only a study of the patent and its claims and a comparison of the claims to the accused infringer’s products but, as well, it requires a review of the file history of the negotiations of the patent with the PTO. The prosecution history plays a significant role in claim evaluation and in assessing infringement both in terms of assessing the intended scope of the claims, but as well, the potential availability of a claim of infringement under the Doctrine of Equivalents because it established the position the patent owner’s representative took in communications with the PTO to distinguish the prior art. It also assists in evaluating what prior art should be relied upon. Because of the presumption of validity that is accorded an issued patent, a challenge based upon prior art is significantly more likely to succeed if the prior art relied upon by the accused infringer differs from that which was before the Examiner. However, and importantly, there is no presumption of validity in post grant invalidations proceedings before the PTAB. (2) Opinions of counsel. Business enterprises often become aware of the intellectual property rights of its competitors. It is not unusual for them to seek opinions of counsel relating to possible issues of validity and/or infringement of these patent rights. At one time the failure to offer an opinion of counsel in defense to a claim of infringement permitted the judge to instruct the jury that the jury could draw an adverse inference against the alleged infringer. The landmark decision by the Federal Circuit in the Seagate Technologies38 decision changed the law. The absence of an opinion of counsel can no longer be used by a patent owner to draw an adverse inference. Although Seagate changed the law, until AIA the failure of an opinion could still be used to draw an adverse inference where the issue was not direct infringement, but rather inducement. AIA, by statute, effective September 2012, eliminated the adverse inference from inducement. (35 U.S.C. § 298) Nonetheless, the obtaining of the opinion of counsel and its contents are still regularly obtained. Favorable opinions can be offered at trial to demonstrate that the accused infringer was acting in good faith and with the reasonable belief that the patent was either not infringed or invalid or both. This is becoming more important in defense of inducement infringement claims because the intention of the accused infringer is at issue. A reasoned opinion of counsel evidences the absence of wrongful intent. This is even more important in view of the Supreme Court decision about what constitutes and “exceptional” case and its fee shifting consequences. A good faith belief in the merits of the litigation will likely be of primary consideration in the court’s assessment. 38

In re Seagate Tech., LLC, 497 F.3 d 1360, 1369–70 (Fed. Cir. 2007).

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There are many factors to consider in deciding whether to rely upon an opinion of counsel. Opinions of counsel are confidential and non-discoverable under the principles of the attorney/client and the attorney work product privilege. If an accused infringer intends to rely upon an opinion it must waive the privilege and the waiving of the privilege cannot be selective. Every opinion received on the subject must be disclosed. The requirement that all opinions be disclosed includes those opinions which may have been solicited from other counsel. Each attorney that wrote or participated in the creation of the opinion(s) is subject to being deposed before trial and/or become a witness at trial and be questioned about the basis of the opinion. Ultimately the decision to rely upon an opinion of counsel is multifaceted and assessed on a case-by-case basis. (3) Declaratory judgment proceedings. The United States judicial system is the creation of the United States Constitution. The Constitution requires that courts only decide a “case or a controversy.” The federal courts are not empowered to give advisory opinions.39 To qualify as a case or controversy there must be a dispute that is ripe for adjudication. Therefore, if a party becomes aware of a patent and believes that there could be a possible assertion against it, until there is a sufficient basis to establish a controversy a court action cannot be initiated. However, the PTO does not have the same jurisdictional restriction. PTO challenges, i. e., ex parte reexaminations; IPR; and (in proper circumstances) PGR or CBM proceedings can be initiated in the absence of any threat of litigation. Generally, if an accused infringer initiates litigation by seeking a declaration of invalidity and/or non-infringement, the patent owner counterclaims for patent infringement. The case otherwise proceeds as a case initiated by the patent owner. There are a number of reasons why declaratory judgments are brought. In some instances the accused infringer seeks to address concerns of its customers and believes that it is in its business interest to be perceived as being wrongfully accused. Significant consideration is given to selection of the district court where the action will be filed. The venue statute in the United States with regard to where patent cases can be filed is very liberal. New York federal courts particularly the Southern District of New York, which covers Manhattan, have many judges with years of experience in patent litigations. The Eastern District of Texas has a reputation of having jurors that are very patent owner friendly and have awarded significant damages to patent owners. For this reason a significant number of patent litigations filed by NPEs are in the Eastern District of Texas. There are other districts known to bring patent cases to trial more rapidly. Other districts such as the Northern District of California have many judges who have gained familiarity with patent disputes on highly technical subjects. Many accused infringers, particularly foreign entities have concerns about jury trials in communities where the patent owner is a large employer and seek to avoid those venues. In sum, the decision whether to initiate a declaratory judgment action and if so where is it multi-faceted. (4) Request for injunctive relief due to unauthorized claim of patent rights. Once a litigation is filed an accused infringer can seek an order of the court seeking to stop what it believes is the harassment of its customers. If an abuse can be shown judges have ordered patent owners to temper and/or restrict communications to customers during the pendency of the litigation. 39

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As previously discussed, the recently filed Motorola case40 is seeking to use the alleged loss of customer good will as a separate basis for affirmative claims of damage. It is not as yet clear whether the court will permit the action to proceed or will dismiss it. 40

Apple, Inc. v. Motorola, Inc., 869 F. Supp. 2 d 901, 920 (N.D. Ill.2012).

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Part 6 Infringement proceedings I. Germany 1. Jurisdiction and courts The competent court for patent infringement proceeding is determined by the residence and/or the seat of business of the alleged infringer (§§ 13, 17 ZPO). Furthermore, an infringement action can be filed with the courts where infringing activities have been committed. When several acts of infringement are involved, the unlawful act is regarded as committed everywhere, where part of the matter of infringement had been realised. If, for instance, patent infringement was committed by sending brochures, the court of jurisdiction of the place where the brochures where sent from as well as the court of jurisdiction of the place of destination are competent. If patent infringement was committed by newspaper advertisements, every place of jurisdiction, where these advertisements are published regularly, is competent. In the case of a Germany-wide offer not limited to a particular region, the plaintiff can choose the forum within the territory of Germany. He has the choice between twelve patent chambers. The civil court chambers designated for patent cases which are located at the responsible Landgerichte (Regional Courts) have functional competence for patent infringement proceedings. The following District Courts are currently having patent litigation chambers: Berlin District Court, Brunswick District Court, Dusseldorf District Court, Erfurt District Court, Frankfurt/M. District Court, Hamburg District Court, Leipzig District Court, Magdeburg District Court, Mannheim District Court, Munich District Court, Nuremberg-Furth District Court as well as the Saarbrucken District Court. Such civil court chambers comprise three judges – the Presiding Judge, a Reporting Judge and an Associate Judge. The judges are lawyers and appointed for their life time.

2. Parties and participants to the proceedings (1) The parties. At the filing stage of the action it must be clarified who has the right to become a plaintiff for pursuing the claims under patent law in court proceedings, and who, in addition has the necessary right of action (standing to sue). The action must be directed against the alleged patent infringer(s). Anybody using the invention without being authorized to do so can be made a defendant in patent infringement proceedings (2) Right to sue. (2-1) The registered patent holder. The patent owner registered in the patent register has the right to sue. In the interest of legal clarity and legal certainty, the law does not tie the right of action, to the substantive ownership of the patent which may be difficult to ascertain, but to the recordal in the patent register (§ 30 (3) PatG). (2-2) Several patent owners. According to the rules of co-ownership pursuant to §§ 741 et seqq. ZPO, in case of patent infringement, each co-owner has the right to file an action in his own name for injunctive relief and payment of damages to all coowners, as long as the co-owners of a jointly owned patent have not concluded an 123

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agreement to the contrary or adopted a decision on this issue1. According to § 6 (2) PatG, the right to the patent belongs to the co-inventors jointly unless they have concluded a different agreement with regard to their internal relationship2. Each coowner has the right to sue even if some or all other co-owners do not agree to the institution of legal proceedings. Since each co-owner may only file an action in his own name, the other co-owners do not automatically become party to the proceedings. Nevertheless, as co-owners of the patent they are affected by the consequences of patent infringement proceedings. Therefore, pursuant to § 749 (1) ZPO each co-owner may at any time request for cancellation of the joint ownership. The co-owners have the right to contractually agree on the legal relations between each other with regard to the jointly owned patent. This also applies to the right to sue. For example, it may be stipulated that patent infringement proceedings may only be initiated if all co-owners agree. If the co-owners of a patent agree on pursuing a common purpose with the invention or the patent, such as co-operation in the development and exploitation of the invention, the rights conferred by the patent can no longer be asserted by an individual partner alone. The rules of partnership apply (§§ 705 et seqq. PatG). Accordingly, the capacity to sue and be sued belongs to the partnership3 or (alternatively) to all partners. (2-3) Right to sue of the licensee. On the basis of § 139 PatG, an exclusive licensee also has the right to sue. Here, it is not necessary to provide evidence for a – merely declaratory – entry of the license into the patent register (§ 30 (4) PatG)4. According to prevailing opinion, the right to sue of the holder of an exclusive license is not subject to the condition that his license has been granted by a patent owner formally legitimated by registration in the patent register5. For proving his right to sue it is sufficient if he submits the license agreement. An explicit authorization to sue by the patent owner is not required. With respect to claims based on patent infringement, the grant of a simple licence does not per se establish a right to sue on behalf of the licensee6. For asserting claims for injunctive relief and destruction it is required that the registered patent owner authorizes the licensee to file a lawsuit. Typically, a plaintiff who holds a non-exclusive license will submit a declaration of assignment of the right to sue (Prozessstandschaftsund Abtretungserkla¨rung) which, in addition to a declaration of license grant, will contain an authorization to assert claims for injunctive relief based on the patent-insuit, and the assignment of the claims for compensation for damage accrued past, present and future. It is advisable to submit a written license agreement. (3) The defendant’s standing to be sued. (3-1) Alleged infringers. Patent infringement proceedings may be brought against any person making use of an invention without being authorized to do. It is possible to bring a patent infringement suit against anyone who has used a patented invention in breach of §§ 9 to 12 PatG and the 1 Busse/Keukenschrijver, PatG, § 6 No. 38; BGH GRUR 2000, 1028 – Ballermann; Kraßer, § 19 page 350; for copyright law, a corresponding provision is contained in § 8 (2) Clause 3 UrhG (German Copyright Act). 2 BGH GRUR 2001, 226 – Rollenantriebseinheit; BGH GRUR 2003, 702, 704 – Geha ¨usekonstruktion; BGH GRUR 2005, 663 – Gummielastische Masse II. 3 BGH NJW 2001, 1056 – Rechtsfa ¨higkeit der (Außen-) GbR. 4 Benkard/Rogge/Grabinski, PatG, § 139 No. 17. 5 Busse/Keukenschrijver, § 139 No. 25, Schulte/Rudloff-Scha ¨ ffler, § 30 No. 45; Benkard/Ullmann, PatG, § 15 No. 97; RGZ 89, 81, 83; different opinion: see Stumpf/Groß, Der Lizenzvertrag (License Agreement), 8th ed. 2005, No. 403; Rogge, Die Legitimation des scheinbaren Patentinhabers nach § 30 Abs. 3 Satz 3 PatG, GRUR 1985, 734, 737. 6 Mes, § 139 No. 34.

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infringed party may bring a claim for injunction against him regardless of fault. An infringer can be a natural person engaged in business or a legal person that is liable for any patent-infringing acts of its legal representatives (§ 31 ZPO) and senior executives7. Where the infringer ceases to exist, its legal successor becomes liable8. By virtue of a legal change of party, the legal successor takes the place of the previous defendant in the proceedings. Anyone who has adequately and causally contributed to the illegal use of a patent can be sued as patent infringer irrespective of the kind and extent of his contributory acts9. A claim for injunction does not necessarily require fault. It is sufficient that the contributing party has contributed to the infringing acts either by manufacturing, selling or promoting patent-infringing products10. According to the principles of contributory or indirect patent infringement pursuant to § 10 PatG, it is possible to bring a patent infringement action against any person who without having the consent of the patentee offers to supply a person, other than a person entitled to exploit the patented invention, with means relating to an essential element of such invention for exploiting the invention, where such person knows or it is obvious from the circumstances that such means are suitable and intended for exploiting the invention. (3-2) Two or more infringers. Where there are two or more infringers, each one of them is obliged to cease and desist from committing infringing acts. Patent infringement proceedings can be initiated against them jointly. However, this approach is not always necessary and economically expedient. If a patent owner finds out that a third party (competitor) produces and sells the patented product, he will first assert his claims for patent infringement against the patent-infringing manufacturer as such and not against the latter’s commercial customers. Often the customers of the competitor are likewise the patent owner’s own customers or potential customers so that from an economic point of view a lawsuit against them would not be expedient. Moreover, patent infringement proceedings against the manufacturer have the advantage that the “source” of patent-infringing activities is attacked and, if successful, a further patent-infringing use by distributors and other commercial customers is prevented by the injunction against the manufacturer. However, it must also be considered that the legal effects of the decision in the infringement proceedings are limited to the defendant party and do not extend to identical infringing acts committed by a third party. Therefore, to sue two or more infringers will extend the reach of enforcement and the liability basis of claims for compensation. (3-3) Managing directors11. A person responsible for the acts of it’s company is also liable under patent law.12. Thus, legal representatives or senior executives of a commercial company are personally liable provided they have caused the patent infringement by their own acts or taken part in it13. For liability under patent law the mere knowledge of infringing acts will only suffice if in the specific case there has been a breach of 7

OLG Du¨sseldorf GRUR 1951, 316. Schulte/Voß/Ku¨hnen § 139 No. 24. 9 BGH GRUR 2002, 618 – Meißner Dekor; Brandenburg, Patentverletzung durch Mitwisserschaft?, MittdtPatA. 2005, 205; zur weitreichenden Sto¨rerhaftung: Mes, § 139 Nos. 41 et seqq. with further references. 10 Schulte/Voß/Ku ¨ hnen § 139 No. 29; with regard to the definition of disturber (“Sto¨rer”) under competition law, see BGH GRUR 1991, 769, 770 – Honoraranfrage, with further references. 11 Go ¨ tting, Die perso¨nliche Haftung des GmbH Gescha¨ftsfu¨hrers fu¨r Schutzrechtsverletzungen und Wettbewerbsversto¨ße, GRUR 1994, 6. 12 BGH GRUR 1995, 62 – Betonerhaltung; BGH GRUR 1994, 441, 443 – Kosmetikstudio. 13 BGH GRUR 1976, 248, 250 – Vorspannangebot. 8

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organizational duties. This would be the case if the patent-infringing acts fall into his sphere of responsibility14. With the claims personally directed against managing directors, pressure is increased on the defendant, and it becomes, moreover, possible to file a claim for compensation against managing directors and the commercial company as joint and several debtors (§§ 840, 421 et seqq. ZPO)15. (4) Attorneys of record. In patent infringement proceedings before the Landgerichte (German Regional Courts), representation by lawyers is mandatory (§§ 78, 786 ZPO). The parties must be represented by attorneys-at-law admitted to the bar in Germany. Generally, legal counselling and judicial representation will be shared with a patent attorney about whose involvement in the proceedings the court will be advised. The co-operation of technical experts and lawyers ensures that the legal questions can be successfully handled on the basis of the technical facts. Since August 2002, attorneysat-law admitted to the local court are not only admitted in first instance proceedings but also in appeal proceedings before the Oberlandesgerichte (Higher Regional Courts/ Appeal Courts) throughout Germany16. The briefs in the patent infringement proceedings (statement of claim, statement of defence, reply, rejoinder) must be filed by lawyers appointed by the parties as attorneys of record. (5) Experts. (5-1) Court experts. Where there are statements of fact that are in dispute between the parties, the court may issue an order to take evidence (Beweisbeschluss). This usually happens when the judges using their discretion as provided for in § 286 ZPO and taking into account the rules on the distribution of the burden of proof consider it necessary to take evidence. This is consistently the case when facts relevant for the decision have been substantively disputed. Discretion by the court as provided for in § 287 ZPO makes it possible to reject the evidence offered. Thus, for example, the court’s own expertise may avoid the commissioning of an expert opinion17. Chambers with technical expertise frequently decide in first instance proceedings without taking evidence. Where the court renders a decision to take evidence, the parties are requested to make suitable suggestions for a court expert and to present their objections, if any, to the suggested candidates. Pursuant to § 406 ZPO, it is possible to object to an expert if from the point of view of the objecting party there are sufficient objective reasons which in the eyes of a reasonable party are suitable to raise doubts concerning the expert’s impartiality. This will, in particular, be the case when the expert is closely connected to a party18. Naturally, the parties will suggest experts of whom they expect that they are at least neutral to their own party and engaged in a technical field covering the technical facts in dispute. Often, university professors are chosen who are well known and renowned in their technical field. The court will inform the proposed expert asking him/her to check whether there exists a personal or professional relationship with one of the parties which could give rise to doubts with regard to his/her independence. Regularly, the contacted person will be requested to state the expected expenditure of time, work and costs. The appointment of a court expert is made by court order. In this connection, the party bearing the burden of proof is consistently required to pay to the court cashier an advance for the expert opinion calculated on the basis of the court expert’s cost estimate. The court expert will only be appointed if the advance payment has been received in due time. 14

Schulte/Voß/Ku¨hnen § 139 No. 28 with further References. Cf. Schulte/Voß/Ku¨hnen § 139 No. 29. 16 VertrA ¨ ndG, BGBl. 2002 l, 2850 et seqq. 17 Cf. Zo ¨ ller/Greger, ZPO (German Code of Civil Procedure), 30th ed. 2014, § 402 No. 7. 18 BGH, Decision of July 11, 1995 – X ZR 99/93 = BeckRs 1995, 04575. 15

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The court expert functions as assistant to the court. He has the duty to elucidate the technical problems that are relevant for the understanding of the patent-in-suit and for the evaluation of the infringement issue19. The legal evaluation of facts as well as the interpretation of the patent-in-suit is reserved to the trial judge(s) and may not be left to the court expert20. (5-2) Party-appointed expert. A party-appointed expert who is often involved in patent law cases must be distinguished from a court expert. For a substantive explanation of complex technical issues it is often advisable to resort to the expertise of renowned experts. The use of private experts facilitates the technical understanding of the facts and increases the credibility of the presentation if the private experts are prominent and renowned persons. All the same, any presentation by a party-appointed expert, be it in form of an independent citation or in the form of a separate expert opinion must be considered as party submission. Against this backdrop, the use of party-appointed experts on both sides does not prevent an order to take evidence, rather it provokes the appointment of a neutral court expert in case where the respective private party experts have different views on relevant facts. (6) Third party intervention. In certain circumstances, the patent-infringing user may have warranty claims or claims for damages against a third party. For example in case of a sales contract, the given patent infringement constitutes a defect of title so that it may be possible for the sued patent infringer to assert recourse claims against the producer of the patent-infringing product. In such a case it is advantageous to the defendant in pending patent infringement proceedings to give a third party notice to the producer. The third-party notice is the formal communication of the defendant party to a third party that it has been sued for patent infringement and that it will hold the third party liable if it loses in the infringement proceedings. The third-party notice is effected by requesting the court in writing to inform the third party about the third-party notice and about the subject-matter and status of the proceedings by providing the third party with the case records (§§ 72, 73 ZPO). For the third-party notice to be effective it is necessary that the formal requirements mentioned in § 73 ZPO are fulfilled and that the party giving the third-party notice may reasonably assume that when it loses the patent dispute it will have or have to expect the mentioned claims21. The object of the third-party notice is the so-called intervention effect, which consists in that in third party proceedings, the party notified of the intervention will be held responsible for all legal and factual findings of the decision in the patent infringement proceedings. In particular, the party notified of the intervention cannot raise the plea that the finding of patent infringement was incorrect (§§ 74 (3), 68 ZPO). The intervention effect will set in independently of whether or not the party notified of the intervention has actually been involved in the patent infringement proceedings as party intervening on the side of the party having given notice to intervene. Where the party notified of the intervention decides to join the proceedings as intervening party in order to assist the defendant in preventing a threatening claim for recourse, it will declare its intervention in writing to the court. In his writ he will have to show that claims for recourse threaten in order to substantiate the required legal interest (§§ 66, 70, 71 ZPO). 19 See Schreiber, Der gerichtliche Sachversta ¨ndige im Patentverletzungsprozess, MittdtPatA. 2009, 309 et seqq. 20 BGH GRUR 2006, 131 – Seitenspiegel. 21 Zo ¨ ller/Vollkommer, § 72 No. 4.

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Besides, any third party may intervene in patent infringement proceedings on the side of the plaintiff or the defendant (§§ 66 to 71 ZPO) provided it has a legal interest in the success of the joined party. The party intervening on the side of a litigant does not itself become a party to the proceedings. However, pursuant to § 67 ZPO it is entitled to independently submit pleas in law (for attack and defense) as well as to effectively take any procedural steps. Its procedural steps and declarations may not be inconsistent with those of the main party. Firstly, the intervening party has the opportunity to influence the legal dispute in favour of the party having given notice to intervene and thus to its own advantage, secondly, pursuant to § 68 ZPO it has the right to make pleas (as means of attack or defence) in the third party proceedings which it would not have without its intervention. The party intervening on the side of the defendant is not allowed to plead that the main party, i. e. the party giving notice to intervene, has inadequately acted in the infringement proceedings. However, it will be heard to the extent that it was prevented by the status of the legal proceedings at the time of its intervention or by declarations or actions of the main party to make pleas (as means of attack or defence) or to make pleas as means of attack or defense which were unknown to it which the main party failed to assert either deliberately or by gross negligence.

3. Procedure (1) Filing the complaint. A patent infringement suit is filed by submitting a complaint to the court. This complaint must contain the names of the parties, the relief requested, and the grounds on which the action is based. According to the remedies granted by law for patent infringement, the plaintiff normally requests an injunction, the rendering of account for the number of infringing acts, and a declaratory judgment for damages. In addition, the plaintiff also requests destruction of the infringing devices and/or additional information about the source of origin and the distribution channels. The grounds for the action must include an outline of patent protection, a description of the patent infringement, and if necessary, the legal arguments in support of the allegations of infringement. The relationship between request, tenor of the judgement and enforcement have to be taken into account by the plaintiff. According to a recent decision of the Federal Court of Justice (FCJ) the Plaintiff is obliged to take care that the means which according to the complaint show the use of the patent claim are defined in the Statement of Claim in such a way that a formulation of the judgment corresponding to the statement of claim may provide the basis for enforcement. It is not sufficient to merely repeat the wording of the patent claim even in a case where the Plaintiff alleges literal infringement22. (2) Reply to a complaint. The complaint submitted to the court is served upon the defendant together with the summons. Following such service and summons, the defendant is obligated to file his defence within a certain time period, which is at least two weeks, but is normally six weeks to two months. This time period can be extended by the court at the request of the defendant. In line with the complaint, the answer must contain the defendant’s requests, which will ordinarily comprise a request for dismissal and, if a nullity suit against the patent is filed, a request for suspension until a final decision is reached in the nullity suit. In addition, the answer must contain all defences to plaintiff’s requests which the defendant intends to rely on in the lawsuit. After service of the answer upon the plaintiff, the plaintiff may file a counter-brief. It should be pointed out, however, that 22

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each party can submit additional briefs on the merits up to one week before the oral hearing at the latest. The number of written pleadings exchanged is not restricted. (3) Oral hearing. The court has the obligation to try to reach a settlement between the parties before the hearing. The judges give an introduction regarding facts and legal aspects on the basis of the party’s briefs and point out open questions. The parties will plead the case and answer the court’s questions. The duration of the hearing of an ordinary patent case is about 1–3 hours. (4) Judgement and appeal. The judgement decides the issues of judgement for the success party and the costs of the proceedings. The costs are imposed on the unsuccessful party or – where the plaintiff only prevails in part – will be proportionally allocated to the prevailing and the unsuccessful party. The judgement is binding upon the parties if the unsuccessful party does not lodge an appeal within the prescribed period for the appeal. Non-appealable (final) judgements may be enforced immediately. Appealable judgements are in general declared to be “provisionally enforceable”. In this case, a security deposit or a bank guarantee must generally be provided by the plaintiff prior to the enforcement of the judgement. First instance judgements are not often enforced if an appeal is lodged, because if a provisionally enforceable judgement is reversed after its execution, compensation must be paid for any damage caused by the execution of the judgement and any unjustified compensation for damages already paid must, of course, be returned. It should be mentioned that the judgement also covers slightly modified embodiments, provided the cease-and-desist claim described in the operative part of the judgement is not affected in its essence23. The effect of the final decision only lasts for the duration of the protective right. From the judgements of the Landgericht (District Court) an appeal may be lodged to the Oberlandesgericht (Higher District Court). The Higher District Court also consists of three professional judges. In contrast to the legal situation prior to a fairly recent reform of the German civil procedure24 where in appeal proceedings both the facts of the case and the legal situation could be examined in full (i. e. the appeal gave the parties previously the possibility of arguing the case entirely de novo), an appeal nowadays mainly to considers the legal considerations made in the first instance proceedings. The appeal decision has to be based on the previously submitted facts. Further factual statements are only permitted under special conditions (cf. § 531 ZPO). It is basically no longer possible to introduce new evidence at the appeal stage. Judgements rendered by the Higher District Courts on appeals may be challenged by further appeals (so called “Revision”) on points of law filed with the BGH. The BGH has a specialized patent chamber (Patent Senate) which consists of five professional judges. The BGH will accept the “Revision” where the legal matter under dispute has fundamental importance or is required to safeguard consistent development of case law. If the BGH accepts the appeal, it is bound to the facts as ascertained in the judgement on appeal. Therefore, this court can only examine legal aspects of the previous judgement on appeal. (5) Procedural guidelines of the court. Even if there are unified rules of procedure based on the German Code of Civil Procedure the court practice varies from court to 23 24

E. g. OLG KarlsruheGRUR 1984, 197 – Andere Ausfu¨hrungsform. The respective reform act came into force on Jan. 1, 2002.

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court in Germany. Judges in Munich have developed “general terms and conditions” of the Patent Courts at the Regional Court in Munich. The so called “Munich proceedings” seeks to optimize and accelerate court proceedings even in complex patent cases. Key issues are holding two hearings on the merits and observing a strict system of time limits. In cases where it is absolutely necessary to obtain expert evidence, the court expert becomes involved already prior to the main hearing. The early first hearing provides the parties with a first assessment as to which lines of arguments might be considered to be convincing by the court. In such an early hearing it may be clarified whether further technical submissions are required and where in the court’s view there are gabs in the submissions and the offers of evidence regarding infringement. At the end of the early first hearing the court discusses the further procedure with the parties and fixes time limits for submitting further briefs. Time limits agreed upon the parties are generally not extendable. In the interest of explication of proceedings at the main hearing the issues relevant for decision will be discussed with the parties and their representatives. In cases where no written expert opinion is necessary Munich patent infringement proceedings first instance will take between six and ten month from filing the law suit until the first instance decision is pronounced. In cases of patent disputes, the Regional Court Munich offers the possibility of mediation under the direction of a court mediator who usually is a member of the other Patent Court and my possibly be supported by a mediator from the Federal Patent Court. On average a mediation attempt will last two month so that even it is not successful, a decision can be obtained in eight to twelve month after filing the law suit. According to the Du¨sseldorf court practice the court will either fix the date for a first formal oral hearing or initiate the so called “written proceedings”. In case of a first formal oral hearing the court will fix dates and time limits for the further course of proceedings and may give the parties legal advice concerning the correct drafting of their claims. After the exchange of written submissions from both sides the main hearing on the merits is scheduled approximately ten to twelve month after filing the statement of claim. In case of “written proceedings” the court does not fix a first formal oral hearing but gives procedural instructions including dates and time limits in written form. In such a case only one oral hearing takes place.

II. Japan 1. Jurisdiction (1) International jurisdiction and governing law. Situations sometimes arise when the Courts in Japan are asked to decide issues about patents issued in other countries. Formerly the international jurisdiction for civil cases having international relevance was judged case by case on the basis of impartiality toward the parties as well as fairness and promptness of a judgment25. A clear guideline was lacking in the international jurisdiction. The Japanese Code of Civil Procedure was, however, amended in 2011 with some provisions for the international jurisdiction from Article 3-2 to 3-12. This amendment came into force in 2012. The international jurisdiction is now determined pursuant to the new provisions. 25 A judgement of the Japanese Supreme Court on 16th October 1981, Case No.: Showa 55 (o) 130, the Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 35, No. 7, pp. 1224 = Hanrei-Jiho No. 1020, pp. 9 = Hanrei-Times No. 452, pp. 77 – Malaysia-koku jiken (Malaysia Airway case).

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The provisions relating to patent infringement cases are Article 3-3, No. 8 about the international jurisdiction for tort cases and Article 3-5, Paragraph 3 about the international jurisdiction for the existence or absence or effect of an intellectual property right. According to Article 3-3, No. 8 of the Japanese Code of Civil Procedure, the international jurisdiction of a court of Japan for an action relating to a tort is permitted, if the tort took place in Japan. A tort takes place in Japan, if a part of the tort acts is committed in Japan, or if the result from the tort acts occurred in Japan and the occurrence of such a result in Japan was not ordinarily unforeseeable. According to Article 3-5, Paragraph 3 of the Japanese Code of Civil Procedure, an action relating to the existence, absence or effect of an intellectual property right which is established upon registration in Japan shall be under the exclusive jurisdiction of a court of Japan. There are just a few years from the amendment so that no judgement has been observed yet for a patent infringement case. The following explanation is, therefore, still a hypothetical interpretation. (1-1) Injunction claims. The question is whether Japanese courts have the international jurisdiction for an injunction claim on the basis of a foreign patent right, if a part of infringement activities takes place in Japan. If, for example, machines infringing a patent right are being produced in Japan and exported to the U.S., and the preparing activities for infringement in the U.S. take place in Japan. The case falls under Article 3-5, Paragraph 3 of the Japanese Code of Civil Procedure, because the case is relating to the “effect of an intellectual property right”, and only courts in the U.S. where the patent right is registered have the international jurisdiction for the case. If, however, a patent holder of the patent right in the U.S. is a Japanese company, it is convenient for the patent holder to file an action on the basis of the U.S. patent with a Japanese court against another Japanese company who are producing and exporting such machines. There is no problem about the exclusive jurisdiction of the U.S. patent right in matters relating to the U.S., because the existence, absence or effect of the patent right in the U.S. is not affected by a judgement of Japanese courts about the validity of the U.S. patent. The activities in Japan can also be regarded as a part of infringement activities which could be a kind of “tort” infringing the patent right in the U.S. The officers of the Japanese Ministry of Justice who were responsible for preparing the draft of the amendment of the Japanese Code of Civil Procedure are of the opinion that Japanese courts have the international jurisdiction for injunction claims on the basis of a foreign country, if a part of activities takes place in Japan, because such activities are a kind of “tort” in the meaning of Article 3-3, No. 8 of the Japanese Code of Civil Procedure26. If Japanese courts have the international jurisdiction for an injunction claim on the basis of a foreign country, the next question is which law should be the governing law for such a case. With respect to injunction claims, there is no clear provision in the Japanese Act on General Rules for Application of Laws. In a case where a Japanese person claims an injunction based on the U.S. patent against a Japanese company, the Japanese Supreme Court held that27: 26 Tatsufumi Sato, Yasuhiko Kobayashi (ed.), ichimon-itto Heisei 23-nen minji-sosho-ho-to-kaisei – kokusai-saiban-kankatsu-seido-hosei no seibi (Q&A Amendment of the Japanese Code of Civil Procedure 2011 – the adjustment of the system for the international jurisdiction), 2012, pp. 68. 27 A judgement of the Japanese Supreme Court on 26th September 2002, Case No.: Heisei 12 (jyu) 580, the Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 56, No. 7, pp. 1551 = Hanrei-Jiho No. 1802, pp. 19 = Hanrei-Times No. 1107, pp. 80 – FM-shingo-fukucho-sochi jiken (FM signal demodulator case case).

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Part 6. Infringement proceedings “It is appropriate to construe that the country having the closest bearing on the relevant patent right should be the county where the patent right was registered. Therefore, we rule that the law governing an action for prohibition and an action for destruction of the infringing goods be the law of the country where the relevant patent right was registered, and accordingly for the said action for prohibition and the said action for destruction of the infringing goods, it is adjudicated that the law of the U.S. where the said U.S. patent right was registered be the governing law.”28 (The emphasis with bold is added by the author.)

If the governing law for an infringement case is the law of the U.S. as indicated in this judgement of the Japanese Supreme Court, the defence based on the patent invalidity may also be admitted in the Japanese infringement action just as in American infringement actions. If, however, the governing law is the law of Germany, the patent invalidity as a defence could not be asserted in the Japanese infringement action just as in German infringement actions29. (1-2) Claims for compensation of damages. Claims for compensation of damages are derived from patent infringement activities which are generally thought as “tort”. Article 3-3, No. 8 of the Japanese Code of Civil Procedure According to the international jurisdiction for such claims belongs to the courts in the country where a part of the tort acts is committed or where the result of the tort acts occurred and the occurrence of the result in the country was not ordinarily unforeseeable. If, for example, machines infringing a patent right in the U.S. are being produced in Japan and exported to the U.S., the preparing activities for infringement in the U.S. take place in Japan. In such a case, a part of the tort acts would take place in Japan, so that Japanese courts would have the international jurisdiction for the claims on the basis of the U.S. patent. With respect to the governing law for claims for compensation of damages from infringing a foreign patent right, the Japanese Supreme Court held in the case above that30: “The law governing the act of infringing a patent should be determined as a matter of tort subject to the principle of liability due to negligence including the act of instigating, aiding and abetting, etc. with the focus on the act of a tortfeasor. In this case, as the Appellee’s act of tort alleged by the Appellant took place within Japan in all cases, the country where the Appellee carried out the said act should be regarded as ‘the place where a fact constituting a cause occurred’ as described in Article 11, Paragraph 1 of the Law Concerning the Application of Laws in General [at present: Article 17 of the Japanese Act on General Rules for Application of Laws], and accordingly, the law of Japan should be the governing law.”31 (The emphasis with bold is added by the author.)

According to this judgement, the governing law for claims for compensation of damages from infringing a foreign patent right is the law of Japan, insofar as a part of tort activities takes place in Japan. (2) National jurisdiction. (2-1) Jurisdiction for the first instance. In Japan, only the Tokyo or Osaka District Courts have Jurisdiction for infringement cases, according to Article 6, Paragraph 1 of Civil Procedure Act. The Tokyo District Court has the exclusive jurisdiction for the cases which have a venue in East Japan, namely Districts of Hokkaido, Tohoku, Kanto, Chubu (including Mie Prefecture). The Osaka District Court has the exclusive jurisdiction for the cases which have a venue in West Japan, namely Districts of Kinki (excluding Mie Prefecture), Chugoku, Shikoku, Kyushu. 28 An English translation of this judgement is under the web site of the Japanese Supreme Court: http:// www.courts.go.jp/english/judgments/text/2002.9.26-2000.-Ju-.No.580.html. 29 Tatsufumi Sato, Yasuhiko Kobayashi (ed.), supra note 26, p. 115, Fn. 30 A judgement of the Japanese Supreme Court on 26th September 2002, supra note 27. 31 An English translation of this judgement is under the web site of the Japanese Supreme court: http:// www.courts.go.jp/english/judgments/text/2002.9.26-2000.-Ju-.No.580.html.

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The general venue is the domicile of the defendant, according to Article 4 of the Japanese Code of Civil Procedure. If, for example, the defendant has the domicile in Tokyo, the patent holder can file an infringement action with the Tokyo District Court. The patent holder can also file an infringement action with the court which has a venue because of the place of tort, according to Article 5, No. 9 of the Japanese Code of Civil Procedure. If, for example, products infringing a patent allegedly are being sold in Osaka, the patent holder can also file an infringement suit with the Osaka District Court. The Japanese patent holder can claim not only an injunction, but also the compensation of damages at the same time in the same infringement action. The venue for a claim for compensation of damages is the domicile of the creditor of the claim, namely, the domicile of the patent holder. If, therefore, the patent holder having his domicile in Osaka wants to exercise a claim for injunction as well as a claim compensation of damages at the same time, he can file an infringement action for both claims with the Osaka District Court even in the case where an alleged infringer has the domicile in Tokyo and he is selling his products only in Tokyo. (2-2) Jurisdiction for the second instance. The Japanese Intellectual Property High Court located in Tokyo has the exclusive jurisdiction for an appeal against a judgement of the Tokyo or Osaka District Courts for an patent infringement case, according to Article 6, Paragraph 3 of the Japanese Code of Civil Procedure. The Japanese Intellectual Property High Court, however, may transfer an appeal case to the Osaka High Court, according to Article 20-2 of the Japanese Code of Civil Procedure, if it is proper to avoid the substantial detriment or delay under consideration of circumstances. Such circumstances should be recognised, if, for example, both parties of the appeal case have their domicile in Osaka. (2-3) Jurisdiction for the final instance. The final appeal can be filed with the Japanese Supreme Court. According to Article 312 of the Japanese Code of Civil Procedure, however, reasons for a final appeal are restricted to the violation of the Japanese Constitution or the violation of some important proceeding provisions. Based upon the petition of a party for acceptance, the Japanese Supreme Court has discretion to accept the case which contains an important legal issue, according to Article 318 of the Japanese Code of Civil Procedure. It is, however, very seldom that the Japanese Supreme Court accepts the final appeal of patent infringement cases.

2. Parties to the proceeding (1) Courts. The infringement courts of the Tokyo or Osaka District Court are civil courts. There are four chambers specialised for intellectual property cases in the Tokyo District Court, while there are two specialised chambers in the Osaka District Court. Each chamber consists of three judges. These judges are normally just educated in a law faculty of a university and disciplined just as lawyers. It is true that they have good fundamental knowledge of natural sciences, but they are not usually educated in the field of natural sciences. In the the Tokyo or Osaka District Courts, however, some research officials are in charge of conducting an examination of intellectual property cases, according to Article 92-8 of the Japanese Code of Civil Procedure. Most research officials are dispatched from the Japanese Patent Office, and have been educated in a faculty of a field of natural sciences. They well support judges of chambers specialised for intellectual property cases from the technical point of view. (2) Parties. (2-1) Plaintiffs. A plaintiff of an infringement action is normally a patent holder. An exception is an action for a declaratory judgement which is filed by an 133

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alleged infringer and seeks a confirmation of non-infringement of his products or processes (see Part 5, II, 2(3)). The explanation hereinafter principally deals with the case where a patent holder as a plaintiff files an infringement action. (2-1-1) Existence of an effective patent right. A plaintiff of an infringement action has to prove the existence of his effective patent right. The proof for an effective patent is a copy of the registration of the patent. The infringement court will dismiss the suit, if the plaintiff cannot prove his right with a copy of registration. A patent right becomes effective upon the registration of patent which has been granted by an examiner of the Japanese Patent Office, according to Article 66, Section 1 of the Japanese Patent Act. If a patent right becomes effective upon the registration of patent after filing an infringement action, the action is not dismissed because of the delay of the registration. After the opening of a patent application, but before the registration of a granted patent, the patent applicant may send a warning to a third party exploiting the opened invention in order to secure the claim for compensation for the use of the opened invention, according to Article 65, Paragraph 1 of the Japanese Patent Act. The applicant, however, cannot exercise the secured claim for compensation for the use of the opened invention before the registration of the patent, according to Article 65, Paragraph 2 of the Japanese Patent Act (see Part 4, I, 2(3)). A patent right expires, if a period of 20 years elapses from the filing date of the patent application, according to Article 67, Paragraph 1 of the Japanese Patent Act, or if a patent holder fails to pay the patent fee under Article 108, Paragraph 2 of the Japanese Patent Act as well as the surcharge under Article 112, Paragraph 2 of the Japanese Patent Act, according to Article 112, Paragraph 4 of the Japanese Patent Act. The expiration of a patent right because of elapse of the existing period or failing the patent fee and the surcharge becomes effective without the registration of the fact. An injunction claim expires if the patent right expires, while the claim for compensation of damages which has been established before the expiration can exist further. A patent right also expires, if the patent holder waives the patent right. The expiration of a patent right because of a waiver becomes effective upon the registration of the fact of the waiver of the patent right, according to Article 98, Paragraph 1, No. 1 of the Japanese Patent Act. A waiver of a patent right does not always means a waiver of the claims for compensation of damages which have been established before the waiver, but it means at least the waiver of an injunction claim. (2-1-2) Transfer of patent rights. A patent right can be transferred. If the patent right is transferred from an old patent holder to a new patent holder during the procedure, the new patent holder has to success the infringement procedure. After the succession of the infringement action, the new patent holder obtains a substantial and procedural position to claim an injunction. Compensation claims which have been established for the former patent holder before the registration of transfer are not necessarily transferred to the new patent holder. It depends on the reason of the succession. Reasons of succession could be various. If an old patent holder assign his patent right to a new patent holder, such an assignment of a patent right becomes effective, when the old and new patent right holder register the fact of the assignment, according to Article 98, Section 1, No. 1 of the Japanese Patent Act. The assigner obtains the claim for injunction with the assignment of the patent right without any extra agreement. The claims for compensation of damages, however, are not trans-

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ferred to the assignee, if the assigner and the assignee do not agree an extra agreement for the assignment of the claims for compensation of damages which have already been established. Most patent holders are capital corporations. Typical cases of succession for such capital corporations are merger of companies, split of a company, or business transfer with whole assets including patent rights. If the patent right is transferred because of merger of companies, the change of the patent holder becomes effective without registration of the fact of the transfer. The new patent holder, however, submits a copy of patent and commercial registration to report the change of the patent holder to the court. If a part of company is split into another company or a company is split into two new companies with a patent which is being exercised judicially, it would be disputable whether the transfer of the patent could become effective without registration of the fact of the transfer. The change of the patent holder should be reported in any case by the submission of a copy of patent and commercial registration. The trust of patent rights could be prohibited, if the trust is only purposed to conduct the litigation, according to Article 10 of the Japanese Trust Act. A non-practicing entity could violate the provision, if actual patent holder exist behind a non-practising entity and trust their patent rights to the non-practicing entity mostly with the intention of exercising the patent rights judicially to obtain profits from allegedly infringers. It would not be, however, so easy to prove the existence of the actual patent holders and the trust for exercising the patent rights judicially. (2-1-3) Registered exclusive licensee. If a patent holder grants a registered exclusive license, the licensee can also become a plaintiff of infringement cases, according to Article 100 of the Japanese Patent Act. The monopoly right of a patent holder to exploit the invention is restricted in the extent that a registered exclusive license is granted, according to Article 68 of the Japanese Patent Act. There was also a discussion if the patent holder loses his entitlement to file an infringement action based upon the licensed patent, if he grants a registered exclusive license. A judgement of the Japanese Supreme Court held that the patent holder did not lose the entitlement to file an infringement action32 (see Part 4, I. 2(1) for details). Some judgements of the lower instance held that a non-registered exclusive licensee could not claim an injunction, but he could claim a compensation of damages which are equivalent to his lost profit caused by infringement activities of an alleged infringer33. According to a judgement34, non-exclusive licensee could neither claim injunction nor compensation of damages, because a non-exclusive licensee was not prevented from exploiting a patented invention by infringement activities of a third party. (2-3) Defendants. A defendant of a patent infringement action is normally a person who is allegedly exploiting a patented invention without consent of patent holder or 32 A judgement of the Japanese Supreme Court on 17th June, 2005, Case No.: Heisei 16 (jyu) 997, Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 59, No. 5, pp. 1074 = HanreiJiho No. 1900, pp. 139 = Hanrei-Times No. 1183, pp. 208 – seitai-ko-bunshi ligand-bunshi no antei-fukugotai no tansaku-hoho-jiken (searching method for stable complexes structures of biopolymer ligand molecular case). 33 For example, a judgement of the Japanese Intellectual Property High Court on 11th March 2009, Case No.: Heisei 19 (ne) 10025, Hanrei-Jiho No. 2049, pp. 50 – inkan-kizai oyobi sono seizo-hoho jiken (material for seal and its manufacturing method case). 34 A judgement of the Osaka District Court on 26th April 1984, Case No.: Showa 58 (wa) 3453, Collection of Judgments for Civil or Administrative Cases of the Intellectual Properties in the Lower Instances, Vol. 16, No. 1, pp. 271 = Hanrei-Times No. 536, pp. 379 – ka-kozai no toritsuke kanagu jiken (fixing brace for bridging members case).

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another justifiable ground. If a third party is exploiting the patented invention by himself alone, there is not any difficulty to determine who is defendant of an infringement action. There are, however, difficulties to determine who is a defendant of an infringement action, if a number of persons are related to infringement activities. If each participant in infringement activities can be recognised separately as direct infringer, for example, a producer and a seller of products, a patent holder may file an action against each participant separately or together to claim injunction and/or compensation of damages. In the case where each participant takes just a partial role of infringement activities, but acts with common understanding for such activities, a patent holder may still file an infringement action against each participant separately or against all participants together to claim injunction and/or compensation of damages, because the whole activities of those participants can be recognised as a direct infringement. There was also a judgement35 which held that a direct infringement should be recognised, if a person controlled other persons just as a tool for his direct infringement activities. If each activity of each participant is independent of each other so that such an activity cannot be recognised as a direct infringement, the contributory infringement pursuant to Article 101, No. 1, 2, 4 or 5 of the Japanese Patent Act comes into consideration. According to the prevailing opinion36, Article 101, No. 1, 2, 4 and 5 of the Japanese Patent Act about the contributory infringement enumerate restrictively the types of cases in which participants can be regarded as infringers. Against those who fulfil the prerequisites of one of contributory infringement types stipulated in No. 1, 2, 4 or 5 of Article 101, an injunction can be claimed by a patent holder. Other types of participants can be defendants just as a tortfeasor pursuant to Article 709 of the Japanese Civil Code. In the frame of tort in the meaning of the Japanese Civil Code, the patent holder cannot claim injunction, but just claim the compensation of damages from the participants’ activities, insofar as they act knowingly or at least negligently. An executive officer can be named as a defendant and held responsible to compensate damages caused from infringement activities of a company, according to Article 429, Paragraph 1 of the Japanese Company Act which stipulates the liability of company officers who are knowingly or gross-negligently in performing their duties for damages of a third party. (2-4) Representatives of civil procedure. In the Japanese civil procedure, a party do not need to be represented by an attorney at law. If a patent holder is a natural person, he may alone appear in an oral proceeding as a party, and make an assertion or statement in a patent infringement action. Such cases without a representative are sometimes observed. Most parties to infringement actions are, however, represented by attorneys at law who have enough experiences in patent infringement cases. Besides attorneys at law, a patent attorney may appear in court as an assistant accompanying a party or an attorney at law, according to Article 5, Paragraph 1 of the Japanese Patent Attorney Act. The position of a patent attorney as an assistant is dependent of the authority of a party or an attorney at law who may revoke or correct the statement of a patent attorney immediately after such a statement, according to Article 5, Paragraph 2 of the Japanese Patent Attorney Act. 35 A judgement of the Tokyo District Court on 20th September 2001, Case No.: Heisei 12 (wa) 20503, Hanrei-Jiho No. 1764, pp. 112 = Hanrei-Times No. 1094, pp. 245 – denchaku-gazo-no-keisei-hoho jiken (formation of electrodeposited image case). 36 For example, a judgement of the Tokyo District Court on 17th August 2004, Case No.: Heisei 16 (wa) 9208, Hanrei-Jiho No. 1873, pp. 153 = Hanrei-Times No. 1172, 302 – sessaku-overlay-koho jiken (cutting overlay construction method case).

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If a patent attorney has passed the examination for representative of specific infringement cases and has noted the fact supplementary in the patent attorneys’ register, the patent attorney may co-represent the specific infringement cases with an attorney at law, according to Article 6-2, Paragraph 1 of the Japanese Patent Attorney Act. A patent attorney with such supplementary note may appear in court only with an attorney at law, according to Article 6-2, Paragraph 2 of the Japanese Patent Attorney Act. As an assistant or a co-representative, patent attorneys support attorneys at law especially with respect to technical matters. Empirically, patent attorneys participate in almost 90 per cent of patent infringement cases as an assistant or a co-representative. (2-5) Experts. A court may designate an expert who has a knowledge or experience to give an expert opinion, according to Article 213 of the Japanese Code of Civil Procedure. In an infringement action, a court may designate an expert with technical knowledge or experience to give an expert opinion for technical matters. An expert opinion is, however, just one of proofs the value of which a court may assess with free determination pursuant to Article 247 of the Japanese Code of Civil Procedure. A court is, therefore, not bound by an expert’s opinion. Courts may at their own discretion decide whether an object of an infringement action falls within the scope of protection of a patent, or whether a patent should be regarded as nullified in the invalidation trial of the Japanese Patent Office pursuant to Article 104-3 of the Japanese Patent Act. There are technical research officials in the Tokyo or Osaka District Court as well as in the Japanese Intellectual High Court who are mostly dispatched from the Japanese Patent Office (see 2(1)). Judges can at any time consult them about technical matters. That is, therefore, why it is very seldom that an expert is appointed for technical matters in infringement actions. For the calculation of damages, a certified public accountant is sometimes appointed as an expert by the court upon a petition of a party, if the court is convinced that the patent right should be infringed and some damages are arising from the infringement acts. If an expert for the calculation of damages, parties have to explain matters necessary for the calculation of damages to the expert pursuant to Article 105-2 of the Japanese Patent Act. Several months are normally necessary for the preparation of an expert opinion for the calculation of damages. The cost for an expert opinion had to be paid in advance by the party who makes the petition for it. The court is not bound to the opinion of a certified public accountant as an expert, but the court used to respect the expert opinion of a certified public accountant. Parties often submit opinions of an expert who are chosen privately by each party for judicial or technical aspects of infringement cases. Because Japanese infringement courts may decide the patentability of allegedly infringed patents, a party also submit an opinion of attorneys at law in a neutral position for the aspect of patentability. Courts normally deal with such an opinion just as mere evidence or assertion of a party. (2-6) Third parties. A third party who has a legal interest in the result of an action may intervene in the action in order to assist the plaintiff or the defendant of the action, according to Article 42 of the Japanese Code of Civil Procedure. In an infringement action, for example, a supplier is often contractually obliged to cope with infringement actions filed against the buyer of the products. Even without such a contract, the supplier is in any cases responsible for reimbursement to a loss of the buyer caused by a final and binding judgement which upholds claims of the patent holder against the buyer. In such a case, the supplier has a legal interest to intervene in such an infringement action in order to avoid or reduce his responsibility. 137

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A competitor who has also been warned by a patent holder has an interest in the result of an infringement action against another competitor. Such an interest is, however, not a legal interest, but an interest as a matter of fact, because products of competitors are different from each other, so that there is no direct relation between alleged infringement activities of both competitors. Competitors who have been warned by a patent holder, however, often exchange the information each other, or sometimes a competitor supports another competitor as a matter of fact ex-judicially.

3. Procedural steps (1) Filing a complaint by a plaintiff. With filing a complaint, a civil procedure begins, according to Article 133, Paragraph 1 of the Japanese Code of Civil Procedure. In a complaint, the parties and the object and statement of the claim have to be indicated, according to Article 133, Paragraph 2 of the Japanese Code of Civil Procedure. If a patent holder asserts an injunction claim based on a patent infringement, the patent holder has to state that at least an effective patent right is being infringed or is afraid of being infringed by acts of an alleged infringer who is producing products or using processes which falls within the protective scope of a claimed invention. The products have to be specified by the trademark, name or type of the products, or the processes have to be specified by the trademark, name or type of the products made or used by the processes (see Part. 7, II. 2(1-1-3)). The protective scope of a claimed invention is determined by the patent claim in consideration of the description and drawings (see Part 2, II.). A patent holder may also assert a claim for compensation of damages with or without an injunction claim at the same time. In such a case, a patent holder has to state the amount of the damages caused by the infringement act of an alleged infringer (see Part 4, I. 2). Infringement courts, however, separate the proceeding for recognition of infringement and for examination of validity of patent, as a matter of fact, from the proceeding for calculation of damages. Only just after the courts are convinced of the infringement and the validity, the courts begin the proceeding for calculation of damages. In a complaint, accordingly, a patent holder just asserts a claim for compensation of damages with the amount of damages and the calculation scheme in order to interrupt the 3-years negative prescription of the claim pursuant to Article 724 of the Japanese Civil Code. The details for calculation of damages are asserted afterward by the plaintiff in the preparatory proceeding for calculation of damages. The court fees have to be paid in advance by the plaintiff with a complaint. The court fees do not include attorneys’ fee. The amount of the court fees is around 0.3 percent of the economic value of the action which is estimated by the formula of the Tokyo or Osaka District Court for actions based upon an intellectual property right. (2) Service of a complaint to the defendant. If a complaint fulfils its formal prerequisites and the court fees are paid in advance, the complaint has to be serviced upon the defendant, according to Article 138, Paragraph 1 of the Japanese Code of Civil Procedure. If the defendant has a domicile in Japan, there is little difficulty to service the complaint upon the defendant. If, however, the defendant is a foreign company, the complaint has to be sent to the domicile of the defendant abroad. Japan is a member state of the Convention of 1 March 1954 on Civil Procedure (Hague Civil Procedure Convention) and the Convention of 15 November 1965 on the

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Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (Hague Service Convention). Between Japan and the U.S. there is also the Consular Convention which admits the service of judicial documents through consular agents of each country. If the defendant is a German company, the Japanese civil court makes a request for service with the complaint and its translation to the Central Authority of Germany in the meaning of Article 2 of the Hague Service Convention. It takes around 4 months in average to service judicial documents upon a German company37. Article 8, Paragraph 1 of the Hague Service Convention admits the service abroad directly through the Japanese consular agents. Germany, however, declared the opposition to such service through consular agents upon persons within Germany other than Japanese nationalities38. The service through the Japanese consular agents upon a German company is not available for Japanese Courts. Article 10, Sub-Paragraph (a) of the Hague Service Convention also admits to send judicial documents by postal channels directly to a defendant abroad. Germany, however, also is opposed to send judicial documents by postal channels39. If the defendant is an American company, the service to the Central Authority of the U.S. which takes 5 months in average40 and the service through Japanese consular agents which takes 3 months in average41 are available for Japanese courts, because the U.S. are not opposed to such service in the U.S. Japanese courts are not interfered also with sending judicial documents from Japanese courts by postal channels directly to the defendant in the U.S., pursuant Article 10, Sub-Paragraph (a) of Hague Service Convention. If, however, once a Japanese attorney at law is designated as representative for the defendant abroad, further judicial documents are serviced through the attorney upon the defendant. (3) Answer of the defendant to a complaint. The defendant makes a written answer to a complaint. A written answer may have also a function as a preparatory brief. An answer is, however, normally quite simple in the practice. In most cases, the answer just asserts the dismissal of the claims in the complaint, and states that the reasons of the dismissal should be asserted in the first preparatory brief which will be submitted afterward. Even if the defendant does not appear the first date of the oral proceeding, the submitted written answer is regarded as stated in the oral proceeding, according to Article 158 of the Japanese Code of Civil Procedure. In infringement cases, the defendant sometimes requests in a written answer that the presiding judge should ask the plaintiff to clarify some words of the patent claims, according to Article 149, Paragraph 1 of the Japanese Code of Civil Procedure, and states that the defendant will submit the first preparatory brief only just after the clarification of these words by the plaintiff. 37 Saiko-saiban-sho-jimu-sokyoku-minji-kyoku (Civil Affairs Bureau of General Secretariat in the Japanese Supreme Court) (ed.), Kokusai-minji-jiken-tetsuzuki-Handbook (Handbook for the International Procedure of the Civil Cases), 2013, p. 443, table of average time necessary for the service abroad in each country. 38 “Table Reflecting Applicability of Articles 8(2), 10(a)(b) and (c), 15(2) and 16(3) of the Hague Service convention” in the web site of the Hague Conference on Private International Law under “http:// www.hcch.net/upload/applicability14e.pdf”. 39 Ibid. 40 Saiko-saiban-sho-jimu-sokyoku-minji-kyoku (Civil Affairs Bureau of General Secretariat in the Japanese Supreme Court) (ed.), supra note 37, p. 443, table of average time necessary for the service abroad in each country. 41 Ibid.

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(4) Begin of oral proceeding. The first date of the oral proceeding is designated in summons. The date is empirically about one month after the expected date of the service of the complaint. The change of the first date is allowable, if the parties agree its change, according to Article 93, Paragraph 3 of the Japanese Code of Civil Procedure. Otherwise, the change of the date of the oral proceeding shall be allowed, only if there are obvious reasons, for example, overlapping of two proceeding date of the representative. On the first date of the oral proceeding, the court normally refers a case to preparatory proceedings, according to Article 168 of the Japanese Code of Civil Procedure. The first date of the preparatory proceeding is designated by the presiding judge hearing the opinion of both parties. The first date of the preparatory proceeding takes place empirically one or two months after the first date of the oral proceeding. (5) Preparatory proceeding. A patent holder may assert not only an injunction claim, but also a claim for compensation of damages at the same time. In the practice, however, the proceeding for recognition of infringement and the proceeding for calculation of damages are, as a matter of fact, separated. In accordance with this separation of proceedings, evidences for each matter are also examined separately. Only after the court is convinced of an infringement and the validity of the allegedly infringed patent in the proceeding for recognition of infringement, the court begins the proceeding for calculation of damages. (5-1) Preparatory proceeding for recognising infringement. A preparatory proceeding for recognising an infringement takes place several times with interval of one or two months. It continues about one year empirically. The plaintiff and the defendant make their assertion mutually with evidences so that the facts become clearer gradually. The plaintiff states the facts in the complaint with evidences which are necessary to substantiate the infringement of specified products or processes of the defendant. The defendant firstly has to make it clear that he admits or denies the facts asserted in a complaint. Normally, a defendant denies the infringement and/or the validity of a patent. If the plaintiff concretely states reasons why the products or processes of the defendant could infringe the patent with evidences, the defendant has to clarify the specific features of his products or processes which are not insistent with the features of the patent, according to Article 104-2 of the Japanese Patent Act (see Part 7, II. 7(3-1)). The “Double Track” system is applied for the Japanese patent infringement dispute (see Part 7, II. 1). The defendant often asserts that the patent infringed allegedly should be invalid, according to Article 104-3 of the Japanese Patent Act. Furthermore, the defendant often makes a request for a trial for patent invalidation to the Japanese Patent Office. These two independent procedures of the two independent organisations are going on so-called “Double Track”, and meet together in the Japanese Intellectual Property Court in an appeal phase. If the court is convinced of the infringement and the validity of the patent, the court attempts to arrange a settlement, according to Article 89 of the Japanese Code of Civil Procedure. If the parties agree with a settlement in the judicial procedure, the settlement shall have the same effect as a final and binding judgment, according to Article 267 of the Japanese Code of Civil Procedure (see Part 7, II. 2(2-4)). If the parties cannot reach a settlement and the plaintiff only claims injunction of infringement, the court renders a judgement to injunct the infringing activities of the defendant. If, however, the plaintiff also claims the compensation of damages, the court goes into the preparatory proceeding for calculation of damages.

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(5-2) Preparatory proceeding for calculation of damages. In order to admit a claim for compensation of damages, the patent holder has to prove the existence of actual damages and its amount, according to the general rule of Article 709 of the Japanese Civil Code. Article 102, Paragraph 1 to 3 of the Japanese Patent Act, however, presents three alternatives for the estimation of damages (see Part 4, I. 2(2-2)). The court may order the defendant to submit documents that are required to calculate the damage arising from the said act of infringement, according to Article 105 of the Japanese Patent Act (see Part 7, II. 7(3)). The court may also appoint a certified public accountant as an expert to calculate the damages and to inspect the documents of the defendant necessary for the calculation of damages. The defendant is obliged to explain the facts which are necessary for the expert to calculate the damages, according to Article 105-2 of the Japanese Patent Act (see 2(2-5)). (6) Conclusion of oral proceeding. Before the judgement, the court refers the case from the preparatory proceeding to the oral proceeding again. The parties shall state outcome of the preparatory proceeding, according to Article 173 of the Japanese Code of Civil Procedure. The court then concludes the oral proceeding, and designates the date for rendering a judgement. According to Article 251, Paragraph 1 of the Japanese Code of Civil Procedure, the court shall render a judgment within two months from the date of conclusion of oral argument. The two months’ term is not compulsory. The date for rendering a judgement, however, is normally designated a few months after the conclusion of the oral proceeding. (7) Judgement. The court renders a judgement based on the original of a judgement document, according to Article 252 of the Japanese Code of Civil Procedure. The parties can accept a copy of the original of the judgement directly after rendering a judgement. The judgement document contains the tenor, the indisputable facts, the allegation of the parties, reasons of the court for the judgement containing found facts and their submission under the law sometimes with the interpretation of relevant provisions. (7-1) Judgement recognising infringement. If the court is convinced of the infringement and the validity of patent as well as the damages, the court upholds the claims in the judgement. According to Article 259, Paragraph 1 of the Japanese Code of Civil Procedure, the court may declare the provisional execution additionally. In most infringement cases, courts do not render a declaration of provisional execution for an injunction claim. The court, however, often render a declaration of provisional execution for the claim for compensation of damages. According to Article 259, Paragraph 3, the court may also declare that the provisional execution of claims can be avoided if the defendant pays security. The amount of the security to avoid the provisional execution is determined discretionally by the court which has rendered the judgement. The amount of the security is empirically about 70 percent of the amount of the damages. (7-2) Judgement denying infringement. If the court is not convinced of an infringement or the validity of the patent, the court dismisses the claims in the judgement. Even if the court recognises the invalidity of the patent, the registration of the patent at the Japanese Patent Office is still valid. It is, however, difficult for the patent holder to file an action again, even against other persons than the defendant, as a matter of fact. If the decision of the trial board of the Japanese Patent Office to the effect that a patent is to be invalidated becomes final and binding, the patent shall be deemed invalid 141

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retroactively from the time of registration, according to Article 125 of the Japanese Patent Act. In such a case, the claims of the patent holder have to be dismissed. The patent holder sometimes withdraws the action by himself with the consent of the defendant, according to Article 261, Paragraph 1 and 2 of the Japanese Code of the Civil Procedure. (8) Appeal to the Japanese Intellectual Property High Court. The Japanese Intellectual High Court which has an exclusive jurisdiction for appeals of patent infringement cases. If a judgement of the Tokyo or Osaka District Court upholds the claims of the plaintiff, the defendant may file an appeal to the Japanese Intellectual High Court. If, on the contrary, the judgement dismisses the claims of the plaintiff, the plaintiff may file an appeal to the Japanese Intellectual High Court. The period for an appeal to the court of the second instance is two weeks from the day when the service of a judgement has been received, according to Article 285 of the Japanese Code of the Civil Procedure. The period is unextendable. The court, however, may specify an additional period in the interests of a person abroad, according to Article 96, Paragraph 2 of the Japanese Code of the Civil Procedure. The additional period is normally 30 days. After filing an appeal, the appellant has to submit a preparatory brief to explain the reason for appeal. The appellee also has a right to file an incidental appeal until the oral proceeding is concluded in the second instance, according to Article 293, Paragraph 1 of the Japanese Code of the Civil Procedure. The provisions about the first instance, except as otherwise provided, shall also apply mutatis mutandis to proceedings in the second instance, according to Article 297 of the Japanese Code of Civil Procedure. The appeal case is, therefore, almost a continuation of the first instance. The parties may assert new arguments, state new facts or submit new evidences, insofar as such allegations or evidences will not delay the conclusion of the action, according to Article 157, Paragraph 1 of the Japanese Code of the Civil Procedure. With respect to appeal for infringement cases, an alleged infringer may assert a new reason on the basis of new evidences for prior art to make the patent invalid in the second instance. Each party of the trial for the patent invalidation at the Japanese Patent Office may file an action to the Japanese Intellectual High Court against the trial decision in order to rescind the decision which is disadvantage for the party, according to Article 178, Paragraph 2 of the Japanese Patent Act. The Japanese Intellectual High Court has an exclusive jurisdiction for such action, according to Article 178, Paragraph 1 of the Japanese Patent Act. In the “Double Track”-system, not only the trial board of the Japanese Patent Office, but also infringement courts of the Tokyo or Osaka District Court have an authority to determine the validity of a patent. The decisions of two independent organisation could contradict each other. The Japanese Intellectual Property High Court, however, has an exclusive jurisdiction for the action rescinding the decision of the trial board as well as for the appeal against the judgement of the Tokyo or Osaka District Court. The conflicts of two decisions can be harmonised, as a matter of fact, in the Japanese Intellectual High Court (see Part 7, II. 1.). (9) Final appeal to the Japanese Supreme Court. Against the judgement of the Japanese Intellectual High Court, a final appeal may be filed with the Supreme Court, according to Article 311, Paragraph 1 of the Japanese Code of the Civil Procedure. The period for a final appeal is two weeks from the day when the service of a judgement has 142

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been received, according to Article 313 in connection with Article 285 of the Japanese Code of the Civil Procedure. The additional period for a person abroad, usually 30 days, is also admitted for the period for the final appeal. Reasons for final appeal are restricted to a misconstruction of the Japanese Constitution or any other violation of the Japanese Constitution, according to Article 312, Paragraph 1 of the Japanese Code of Civil Procedure. It is almost impossible to find such a reason for final appeal for an infringement case. Parties, however, make a petition to the Japanese Supreme Court to accept the case as a final appeal on the ground that the judgement of the Japanese Intellectual High Court is inconsistent with precedents rendered by the Supreme Court or the case involves material matters concerning the construction of laws and regulations, according to Article 318, Paragraph 1 of the Japanese Code of Civil Procedure. The final appellant has to submit a statement of reasons for final appeal 50 days after the final appeal, according to Article 315, Paragraph 1 of the Japanese Code of Civil Procedure and Article 194 of the Japanese Rules of Civil Procedure. Sometimes the final appeal is accepted for infringement cases, especially when the Grand Panel of the Japanese Intellectual Property Court renders a judgement for the important issue concerning the construction of laws or regulations.

III. USA 1. Jurisdiction Although patent litigation is solely within the jurisdiction of the federal courts, state courts can decide cases which involve patent rights that are not determinative of validity and infringement. For example, matters relating to patent licenses are breach of contract cases and decided by state courts. Unless there is some other jurisdictional basis, such as the diversity of citizenship of the litigants or jurisdiction based upon another federal statute, the district court cannot decide a breach of contract case. The key jurisdictional issue for a federal district court is whether there is a question arising under federal law, subject as the Patent Act. The issue is not always clear. For example, the Supreme Court recently decided that claims of malpractice against a patent attorney with regard to his representation relating to PTO activities and/or patent litigation are not matters which arise under the patent laws.42 Although the patent laws are central to the dispute, they are collateral facts which can be heard by a state court. There are 94 federal district courts throughout the United States and its territories. Each of them has jurisdiction to hear and decide cases arising under the patent laws of the United States. Assuming that the accused infringer has sufficient contacts within the particular geographical area assigned to a district court, the accused infringer may be sued in that venue (28 U.S.C. § 1391). The selection of venue is often disputed and applications seeking a change in venue are not uncommon. There are no special patent judges. The same judge who presides over a patent litigation hears all other matters that fall within the district court’s jurisdiction, including both civil and criminal matters. As a general rule when a litigation is filed the judge is selected at random and that judge retains responsibility for the matter through trial. Certain district courts, in view of the significant number of patent litigations have developed special rules to be used in patent cases, particularly relating to discovery, Markman (claim scope) hearings and other issues unique to patent litigation. 42

Gunn v. Minton, 133 S. Ct. 1059, 185 L. Ed. 2 d 72 (2013).

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There are eleven courts of appeals situated throughout the United States, each of which has jurisdiction to hear appeals from the federal district courts within their circuit. However, there is only one appeals court designated to decide patent appeals from all district court decisions. It is the Court of Appeals for the Federal Circuit, generally referred to as the Federal Circuit. It is located in Washington, D.C. Although it also has jurisdiction to decide a limited number of other matters, the majority of matters before it are patent matters and its judges are patent law specialists. The Federal Circuit is often the final arbiter for patent matters. Although decisions from the Federal Circuit are appealable to the Supreme Court of the United States, permission from the Supreme Court is required before an appeal is accepted. In recent years the Supreme Court has accepted a greater number of patent appeals than it has in the past. Nonetheless, the vast majority of patent litigations end with the decision of the Federal Circuit.

2. Parties to the proceedings (1) Court. The United States provides for the right of a jury trial in patent matters unless no monetary relief is being requested. Under the United States judicial system judges decide issues of law; jurors decide issues of fact; and judges decide issues relating to equitable remedies such as injunctions. At the time a patent litigation is filed a judge is chosen at random from the panel of judges sitting in the district. As well, it is customary for a Magistrate judge to be selected to assist the judge. Federal judges are appointed by the President of the United States with the advice and consent of the United States Senate.43 They serve for their lifetime, although at a certain age they may take “senior status”, which permits them the right to reject matters assigned to them and limit their schedules. Magistrate judges are appointed for ten years. Generally they function most effectively in deciding discovery disputes. Decisions by the Magistrate regarding discovery disputes (or indeed any dispute assigned to the Magistrate by the judge) are appealable to the judge. The judge and Magistrate judge handle all of the proceedings up to trial. Unless both parties agree to have the trial conducted by the Magistrate judge, the district court judge presides at the trial, making rulings of law and deciding issues such as the admissibility of testimony and the proper instructions that should be provided to the jury. The jury selection process differs slightly from district court to district court. In general the parties suggest questions to the judge to determine whether a potential juror is biased and should be excluded but the judge does the questioning. In addition to the right to excuse a prospective juror for cause, the parties are entitled to a number of preemptory challenges which they can use to dismiss prospective jurors. Depending upon the court the jury sometimes consists of 6, 8 or 12 jurors – although patent matters are generally tried to a jury of 6. (2) Necessary and permissible parties. The owner of 100 % interest in the patent is a necessary party. Where there are multiple owners they must all agree to act. It is not possible to initiate a patent litigation unless all of the patent owners agree to act together as plaintiffs. Where there is joint ownership, it is important that an agreement be reached that the parties will act in concert. From a practical perspective, if all of the owners do not act together the patent is pragmatically unenforceable. Under United States law any owner of a patent can license the rights to others and does not have to account to any other owner of the patent. 43

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Therefore, a litigation cannot be initiated without the consent of all owners and unless there is an agreement to the contrary, any owner named in the litigation can settle the litigation, for example, by licensing the accused infringer without the consent of the other owners. Non-exclusive licensees cannot initiate an action for patent infringement. In general, an exclusive licensee also cannot initiate a patent litigation on its own. However, there are instances where an exclusive licensee can do so. Whether the exclusive licensee has standing to initiate proceedings depends upon the provisions of the exclusive license agreement. Courts look to the provisions of the license to see if the patent owner expressly gave the exclusive licensee the right to sue. However, the presence of a contractual provision granting the right to sue, without more, is not sufficient. The courts look to the entirety of contract terms including the breadth of grant; the length of license and whether given the totality of the circumstances the accused infringer can properly avail itself of the defenses of invalidity against the party suing it.44 If all of the necessary parties are named in the litigation additional permissible parties can also be named. This could include exclusive licensees, if the licensees can demonstrate separate injury. It is highly unlikely that a non-exclusive licensee could qualify as an injured party because it is unlikely that it can establish that it suffered financial harm when the very nature of its license contemplates competition. Nonetheless, if the nonexclusivity is based upon geography such that the licensee is exclusive in an area, injury to the non-exclusive licensee might be demonstrated. (3) Rights of action. In patent matters the most common causes of action are the patent owner’s claim for infringement and the counterclaim filed by the accused infringer seeking patent invalidation on any number of the grounds available to an accused infringer in defense of a claim of infringement. Although many patent litigations are solely directed to issues of infringement and validity of a patent, to the extent there are other disputes between the parties whether related to the patent or otherwise, they can be combined in a single litigation. If these are not disputes normally within the jurisdiction of the federal courts, they can nonetheless be included under principles of ancillary jurisdiction. (FRCP Rule 18) (4) Adding of additional parties. After the initial filing of the Complaint, there is a period of time in which a party can amend the Complaint without the need for the court’s permission. Thereafter, amendment of the Complaint and the adding of parties cannot proceed without seeking permission from the court to do so. The application to the court needs to demonstrate good cause. In general, if the litigation is still in its early stages, courts are liberal in permitting the pleadings to be amended. (FRCP Rule 14) (5) Representatives. Although the issue is one of state law, there is a general long standing understanding that corporations, limited liability entities and other business entities other than individuals must be represented by counsel. Individuals can appear pro se, but judges generally advise individuals to seek representation given the complex nature of the proceedings. Nonetheless, an individual can file or defend a patent litigation, although it is a rare occurrence. (28 U.S.C. § 1654) Once a party appoints its legal representative the counsel files a formal Notice of Appearance with the court so that all subsequent papers will be directed to counsel. It is not unusual for lead counsel not to be admitted to practice in the state where the district court is located. In such circumstances it is necessary for the party to appoint local counsel to appear with the lead counsel. The lead counsel and other non-admitted 44

Aspex Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3 d 1336, 1340 (Fed. Cir. 2006).

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attorneys then make application to be admitted pro hac vice before the district court. These applications for admission are customarily granted provided the attorneys have not been subject to disciplinary proceedings elsewhere and represent that each has become familiar with the local rules and agree to abide by them. Once a party enters an appearance and appoints a counsel it is ethically inappropriate for the counsel for one party to speak to a principal of another party unless the other party’s counsel participates. Principals can always speak to other principals, but attorneys cannot speak to opposing principals absent participation by or consent by opposing counsel. Although, generally counsel is selected because of his or her experience with patent matters, counsel need not be admitted to practice before the PTO nor demonstrate any technical knowledge or expertise. Nonetheless, for PTO proceedings at least lead counsel must be admitted to practice before the Patent Office. (6) Experts. It is the general practice in the United States for each party to retain its own experts on issues that it believes requires expertise. Although the court has the inherent power to seek the aid of an expert of its own, this is not the usual situation. Generally, experts are retained in such areas as: – Practice and procedure before the PTO to enable the jury to understand the patent solicitation process and how it may have a bearing on the claims and/or the actions and statements made by the patent owner’s representatives to the PTO in seeking the grant. – Technical experts to explain the technology, the prior art and how it relates to the patents. – Technical experts who on an element by element basis apply the claims of the accused product or method. – Economists or certified public account representatives who analyze the financial information in support of the lost profits and reasonable royalty damage analysis. – Technical experts to explain any issues of “equivalency” from a technical perspective. Often a single expert testifies on a number of issues. Under the FRCP Rule 26 each expert must provide a written report which is exchanged with the opposing party’s counsel. The expert is subject to pretrial depositions so that the basis and conclusions made in the expert report can be explored. Discussions between the expert and counsel for the party who they had been retained by are not subject to the attorney/client or attorney work product privilege and can be discovered. (7) Third party participation. There are a number of ways in which third parties can participate either directly or indirectly in litigation. Where, for example, the patent owner has sued a number of different parties in different proceedings, all of which are based upon the same patent, it is customary for the parties to enter into a common interest agreement which permits the sharing of information and strategies and still preserve the attorney/client and attorney work product privilege.45 Where there are multiple parties named in the same litigation, although they may share a common interest in defending the litigation they often do not have identical 45 At one time it was relatively easy to include all accused infringers in a single proceeding. A recent amendment to U.S. law has made that more difficult. It is now more usual, especially with regard to cases filed by NPE’s, for a series of separate litigations to be filed often in the same court against various defendants. See Optimum Power Solutions LLC v. Apple Inc., C 11-1509 SI, 2011 WL 4387905 (N.D. Cal. Sept. 20, 2011); WiAV Networks, LLC v. 3Com Corp., C 10-03448 WHA, 2010 WL 3895047 (N.D. Cal. Oct. 1, 2010).

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business interests. In those situations it is customary for the parties to enter into a joint defense agreement which permits the sharing of information and strategies without the loss of the attorney/client privilege and also restricts access to confidential information between the parties themselves. In other instances an unnamed party may provide financial assistance and direct the activities of counsel, but is not itself a named party to the litigation. If the non-party controls the litigation decisions the non-party will be bound by the decision on issues relating to infringement and validity in any subsequent proceeding in which the nonparty is directly named as a party.46 Third parties are also subject to being subpoenaed, both to provide testimony and documents by a party in the discovery phase or to testify at the trial. Attorneys for the parties, as officers of the court have the authority to issue subpoenas for the production of documents and to require the attendance of witnesses to provide, either pre-trial or trial. (FRCP Rule 45) There are provisions under the Federal Rules of Civil Procedure for the subpoenaed company or witnesses to object and if an objection is raised in which event the party issuing the subpoena will be required to make an application to the judge and demonstrate that there is good cause for requiring the production of the evidence. (FRCP Rule 45) Particularly given the cost and disruptive nature of third party discovery which has been exacerbated with the advent of e-discovery, the issue of compensation to the third party is becoming more important. Third parties are more actively seeking reimbursement and various district court decisions addressing the issue and the amounts should be calculated is emerging.

3. Procedure (1) Filing of the complaint. Generally a patent litigation is initiated by the filing of a formal pleading called a Complaint. The complaining parties are called “plaintiffs”. The proceeding begins officially with the filing of the Complaint at the federal district court. The Summons to participate and the Complaint must be formally served upon the accused infringers, called “defendants” within 120 days. If service is not timely accomplished the case is automatically dismissed. (FRCP Rule 3) (2) Answer to the complaint. Assuming service within the proper timeframe, the party called the defendant served has a period of time (generally 20 days) within which to file a formal pleading called an Answer, which is a paragraph-by-paragraph refutation of the allegations made in the Complaint. If a counterclaim is included as part of the Answer (and it is customary to seek a declaration that the patent is invalid or not infringed) the plaintiff has ten days within which to file a formal pleading called a Reply, which is also a paragraph-by-paragraph refutation of the defendant’s allegations. The paragraph-byparagraph refutations are formalistic and either admit, deny or explain that the pleading party lacks information sufficient to form a belief about an allegation. It is customary for the attorneys (with the approval of the court) to obtain by stipulation an extension of time to Answer or Reply (or otherwise respond) so that a proper factual investigation can be made of the accusations and to consider whether there are procedural defects sufficient to have a defendant seek dismissal on jurisdictional, venue or pleadings inadequacy grounds. See, for example, FRCP § 12(b)(6). (3) Proceedings leading to the decision of the court. Once issue is joined by the filing of these initial pleadings, there are requirements regarding initial fact disclosures 46

Taylor v. Sturgell, 553 U.S. 880, 881, 128 S. Ct. 2161, 2164, 171 L. Ed. 2 d 155 (2008).

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between the parties. (FRCP Rule 26) The court generally orders an initial pre-trial conference in which it requests the parties to meet and confer and provide to the court a proposed schedule for: (a) the time to amend pleadings if any amendments are going to be requested including the time to add parties without the permission of the court; (b) the time necessary to complete fact discovery; (c) the time necessary to complete expert witness discovery; (d) how the parties wish to handle the number of written interrogatories that may be asked; (e) the number of hours permissible for deposing witnesses if more than 7 hours for any particular witness is going to be requested; (f) a plan for e-discovery; (g) the time when dispositive motions (such as motions for summary judgment) on legal issues can be filed; and (h) a general estimate as to the prospective length of trial. The court then issues a Scheduling Order. Some courts are flexible about permitting these times to be extended upon agreement of the parties if supported by a factual showing of need. Once the Scheduling Order has been signed by the judge the parties then proceed with pre-trial activities. This generally proceeds without court intervention unless there is a dispute regarding discovery that the parties cannot resolve. The Scheduling Order also provides for status conferences at agreed to dates. The status conferences generally only require the appearance of counsel to advise the court about the progress of the pre-trial activities and to address any prospective issues. It is becoming customary for the court to encourage settlement discussion and many courts now require non-binding mediation in matters. As the trial date approaches the court will require certain pre-trial submissions by the parties including proposed exhibit lists setting forth anticipated evidentiary objections; an exchange of deposition testimony designations which a party proposed will be offered at trial for witnesses that will not appear at trial; proposed jury instructions and proposed voir dire questions for prospective jurors. Many courts impose time limits for the length of the trial. Each party is provided with a predetermined amount of time to present its case. The time is computed on the basis of the time that a party’s witness is testifying, as well as the time the party’s counsel is cross-examining witnesses or is otherwise presenting information, such as in opening statements or closing arguments. (4) Motion practice and oral hearings. During the course of litigation there are many applications made in the form of motions to the court. For example, they may include: (a) a motion to dismiss the Complaint for failure to state a cause of action with specific specificity; (b) a motion to change the venue because the wrong district court has been selected or is not a court that is “convenient” under the rules; (c) a motion to dismiss a party because the court lacks personal jurisdiction over the party; (d) a motion to add parties; (e) a motion for a preliminary injunction; (f) various motions to resolve discovery disputes; (g) a motion seeking an order from the court addressing issues of claim scope; (h) motions directed to the claim scope determinations; and (i) motions seeking to disqualify experts on the basis of lack of expertise; and 148

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(j) motions for summary judgment seeking a determination that a trial is not needed on some issue or issues because the law, coupled with uncontroverted facts, permits a final adjudication of the issue. This generally includes issues such as validity, infringement, lost profits, or any of the asserted defenses. Although motions can be made orally or wherever the parties are before the court, in general motions are made in writing. There are various rules establishing the extent of notice that needs to be provided to an adversary to respond. Most courts permit the moving party an opportunity to reply to the extent that an adversary’s response raises new issues. It is within the discretion of the judge to determine whether oral argument is necessary. Motions generally include a Notice of Motion in which the moving party provides notice explaining the requested relief and the date for the matter to be heard by the court. The Notice is accompanied by sworn declarations of a witness with knowledge of the facts related to the motion; exhibits which include the evidence being relied upon; and a memorandum of law in support (or opposed) to the relief requested. If an oral hearing is scheduled, it generally takes the form of oral arguments to the judge by the attorneys. In some instances the court will order an evidentiary hearing in which the witnesses are sworn and testimony is taken. All court proceedings are public and the proceedings are recorded by an official court reporter. Although it is permissible for a judge to rule from the bench at the conclusion of a hearing, it is customary for the judge to reserve decision and later issue a formal written opinion which includes the court’s findings of facts and conclusions of law which support the ruling. Other than a decision on a motion that concludes the case or grants a preliminary injunction, interim appeals are generally not available with permission of the court. (5) Trial, judgment and appeal. Trials are presided over by the judge who controls the conduct of the trial, decides issues about the admission of testimony and evidence, and instructs the jury about the law. After the giving of his or her direct testimony, witnesses are subject to crossexamination by opposing counsel and the judge is also free to ask the witness questions. Generally juries are not permitted to ask questions and are instructed not to discuss the testimony until all of the testimony from both sides has been received. Juries are generally provided with a verdict sheet which sets forth a number of specific factual questions about the jury’s verdict on issues of validity, infringement and monetary damages. Once a jury verdict is reached it is rendered in open court with the parties in attendance and thereafter the jury is dismissed. However, that does not end the district court proceedings. It is customary for the party who is dissatisfied with all or part of the jury’s decision to ask the court to set aside the jury verdict and have the court decide judgment in favor of that party as a matter of law. Usually the court requests written submissions in support of this application. A briefing schedule is provided. Once the court reaches a decision regarding the post-trial motions, a judgment is entered and the period of time for appeal begins. All appeals are made to the Federal Circuit. The appeal process generally includes a Notice of Appeal and a Statement of the Grounds for Appeal. The other party may defend the appeal and may also cross-appeal with respect to any part of the decision it was dissatisfied with. There then follows an appellant’s brief, an appellee’s answering brief; and an appellant’s reply brief. There is oral argument before a three judge panel of the Federal Circuit, which generally takes all matters under advisement and after further consideration issues a written decision. 149

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Questions of legal error are assessed de novo by the Federal Circuit. Issues regarding factual findings are decided on the basis of whether there was sufficient evidence to support the findings and the Federal Circuit will affirm the decision if there is sufficient evidence in the record to support it even if the judges would have personally reached a different factual conclusion based upon the evidence. Appeal from the Federal Circuit to the Supreme Court of the United States is only available if a petition is filed seeking permission to appeal and the petition is granted. Petitions are rarely granted unless the issue relates to a significant issue of patent law. The appeal to the Supreme Court is heard by all nine Justices.

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Part 7 Procedural principles I. Germany 1. The dual system The law governing patent proceedings in Germany is characterized by the separation of infringement and nullity proceedings1. The nullity senates decide whether the patentin-suit is to be declared null and void in the scope of the requests made by Plaintiff, whereas the infringement court examines whether the contested infringement product falls under the patent-in-suit. In infringement proceedings the court is bound to the subject-matter of the patent2. The infringement courts do not have the authority to decide on validity of the patent3. However, the examination and determination of the scope of protection of the patent does not fall into the responsibility of the patent court, but is reserved for the infringement courts4. The objection that the patent-in-suit is invalid is not allowed in German patent infringement proceedings. In view of the exclusive responsibility of the Federal Patent Court, invalidity of the patent-in-suit cannot even be claimed by way of an invalidity counterclaim (Nichtigkeitswiderklage). However, pursuant to § 148 ZPO (Code of Civil Procedure) it is left to the court’s discretion to stay the patent infringement proceedings on request of Defendant when an opposition or nullity suit is filed against the patent-insuit. The stay of the infringement proceedings up to a final decision by the nullity court may lead to a situation where the patent owner is hindered for several years from enforcing his patent. The acceleration of the nullity appeal proceedings by the entering into force of the Patent Modernization Act of July 31, 2009 on October 1, 2009 helps to attenuate this disadvantage in the interest of the efficiency of the German patent system. In contrast to a patent infringer, the user of a utility model is allowed to assert in infringement proceedings that the utility model is not protectable. In this case, the infringement court must examine novelty, inventive step and the other material protection requirements of the utility model. Where the defence of Lo¨schungsreife (invalidity) is well-founded, the court will find that the utility model is invalid – which finding is only effective inter partes – and the utility model infringement action will be dismissed5. Independently of a formal limitation of the utility model by the filing of newly drafted claims or by a limited defence in cancellation proceedings, the owner of the utility model may formulate a limited claims version in the infringement proceedings. In this case, the 1 Pakuscher, Der U.S. Court of Appeals for the Federal Circuit – ein Modell fu ¨ r Europa?, GRUR Int. 1990, 760, 764; Pakuscher, Nichtigkeits- und Verletzungsprozess im deutschen und europa¨ischen Patentrecht, RIW/AWD 1975, 305; Kraßer, § 36 page. 890; Horn, Patentverletzungsprozess und Nichtigkeitsverfahren, GRUR 1969, 169; Stauder, Zur Gestaltung des ku¨nftigen Patentverletzungsverfahrens in Europa, GRUR Int. 1975, 86, 87, Stauder, Die tatsa¨chliche Bedeutung von verletzungs- und Nichtigkeitsverfahren in der Bundesrepublik Deutschland, Frankreich, Großbritannien und Italien, GRUR Int. 1983, 234, 240. 2 Stro ¨ bele, Die Bindung der ordentlichen Gerichte an Entscheidungen der Patentbeho¨rden, GRUR Int 1957, 1. 3 Benkard/Rogge, PatG, § 22 No. 7; BGH GRUR 1979, 624, 25 – Umlegbare Schießscheibe. 4 Benkard/Rogge, PatG, § 22 No. 7 with further references; BGH GRUR 1988, 757, 760 – Du ¨ ngerstreuer. 5 Cf. Loth, Gebrauchsmustergesetz (Utility Model Act), 1st ed. 2001, Introduction to § 15 No. 12.

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infringement court must not only examine whether the contested embodiment falls within the scope of protection of the new claims, but also whether these are legally valid. Here it must in particular determine whether the restricted claims version is still supported by the original disclosure6. Also in cases where in infringement proceedings the patent is only asserted to a limited extent, the infringement court must – insofar deviating from the principle of separation of actions – deal with the legal validity of the patent-in-suit.

2. The principle of party control Patent infringement proceedings are civil proceedings which are subject to the parties’ authority to dispose. The court will only act on request of the parties and may only find within the scope of the parties’ requests. In view of the principle of disposition, the subject-matter of infringement proceedings is determined by the parties’ procedural declarations. (1) Substantive motions. (1-1) Subject-matter of the motions. The Statement of Claim addressed to the Landgericht (Regional Court) which is competent for patent disputes shall contain the functional designation of the parties, the cause of action, and the legal consequences sought by Plaintiff in the form of demands for relief or motions for judgment (Klageantra¨ge). In patent infringement proceedings, the demand for relief and the cause of action, i. e. the actual state of affairs establishing the legal consequences sought, determine the matter in dispute. The asserted procedural claim is only wellfounded when the legal consequences sought can be based on one of the relevant bases for a claim under substantive patent law. In accordance with the substantive law claims pursuant to § 139 PatG, in the context of a usual patent infringement action, the demands for relief are directed to omission, the obligation to pay damages, rendering of account, and, where applicable, the removal and destruction of patent-infringing products. The demand for relief regularly also comprises a “Ordnungsmittelandrohung” (a threat of punitive measures to compel particular conduct or to punish for contempt of court) within the meaning of § 890 (2) ZPO. This threat is included in a granted decision. It has the consequence that, if the decision is not complied with, at the Plaintiff’s request a fine for contempt of court will be imposed by the court. The demand for relief must define in detail the contested embodiment which in Plaintiff’s view makes use of the patented teaching, so that the matter in dispute is clearly defined as required by § 253 ZPO. In this connection it is essential that the technical features of the litigated embodiment are described in a way appropriate to the features of the asserted patent claim. Independently of the question of whether there is literal or equivalent use, the demand for relief describes the concrete form of the contested embodiment. To the extent that the infringing embodiment fully corresponds to the wording of the patent claim, the wording of the patent claim may be used in the demand for relief. In this case, the operative part of the judgement (“Urteilsformel”) will orientate itself as far as possible on the wording of the patent claims7. Where the contested embodiment differs from the wording of the asserted patent claim, it is not sufficient that Plaintiff merely uses the wording of the patent claim. This also applies where Plaintiff assumes that the infringing embodiment makes equivalent 6 BGH GRUR 2003, 867 – Momentanpol; Stjerna, Die eingeschra ¨nkte Geltendmachung technischer Schutzrechte im Verletzungsstreit, MittdtPatA. 2009, 302. 7 Meier-Beck, Probleme des Sachantrags im Patentverletzungsprozess, GRUR 1998, 276 ff.; BGH GRUR 1986, 803, 806 – Formstein.

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use of the patent claim. In this case, the statement of claim must set forth the reasons why, in spite of the deviation from the wording of the patent claim, an equivalent use of the invention and thus a patent infringement is given. In patent infringement proceedings, sub-claims of the patent-in-suit are often asserted by so called “Insbesondere-Antra¨ge” (“in-particular” claims). Generally, they are not independent claims on the merits, but only exemplary concretions of the main claim of the patent. If the features of the main claim asserted in the demand for relief are fulfilled, a cease and desist or omission claim exists also in the case that additional features of the asserted sub-claims have not been realized. The benefit of “in particular” asserted sub-claims is evident in case constellations in which the right of prior use asserted by Defendant or the Formstein8 objection raised only applies to the main claim of the patent, but not to the sub-claim(s). In such case, the “in-particular” claims function as alternatively available claims on the merits which may be asserted without that the demand for relief has to be amended. (1-2) The principle of the binding nature of the application. The court is bound by the asserted cause of action and the motions, and is not authorized to grant to a party something that has not been requested (§ 308 (1) ZPO). In analogy to this binding nature of the application, the parties, too, are bound by their own motions. Once the lawsuit has become pending9, amendments to the application for substantive relief are only allowable if Defendant agrees or if the court considers the amendments to be useful (§ 263 ZPO). This also applies where the amended demand for relief is based on the same factual situation. An addition to the factual or legal statements is not deemed an amendment to application for substantive relief, e. g., when instead of the originally asserted literal patent infringement, Plaintiff asserts an equivalent infringement (§ 264 No. 1 ZPO). The application for substantive relief continued to be binding even when the lawsuit is withdrawn. Without Defendant’s consent, the lawsuit can only be withdrawn up to the commence of the oral hearing of Defendant on the merits. In infringement proceedings, Defendant, too, has it in his hands to restrict, by a limited defence, by acceptance and/or partial renunciation, the matter in dispute to certain use acts attacked with the lawsuit. Settlement agreements and concordant settlement declarations constitute options for a joint action by the parties. (2) Commencement and termination of the proceedings. (2-1) Bringing a suit. Beginning and end of patent infringement proceedings are in the hands of the parties. The proceedings begins upon Plaintiff’s request with the filing of a statement of claim (bringing a suit). Remedying and sanctioning of a patent infringement depend on the private initiative of the patent owner and do not occur ex officio. (2-2) Withdrawal of action. Up to the commencement of the oral hearing of Defendant on the merits, the lawsuit may be withdrawn without Defendant’s consent by a statement of withdrawal (§ 269 (1) ZPO). In case of a withdrawal of action Plaintiff shall bear all costs of the proceedings. Plaintiff will thus only use the option of a withdrawal of action in exceptional cases. A withdrawal of action will particularly be an option when Plaintiff, due to circumstances which at the time of bringing the suit were not known to him, must expect a dismissal of the action. A withdrawal of action in pending patent infringement proceedings will, in particular, occur when the parties have agreed to amicably settle the lawsuit. In such a case, typically, Plaintiff will withdraw his 8

See Part 2 I: 1. (2-2). According to the German Code of Civil Procedure, the lawsuit becomes pending upon proper service of the statement of claim to the defendant (§ 261 ZPO). 9

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action and Defendant consent to this withdrawal of action and refrain from requesting a cost decision to avoid such cost decision, with the consequence that Plaintiff will merely have to bear his own attorney’s fees and the accrued court fees. When an action is withdrawn, the lawsuit is deemed to have not been filed at all. When an action is withdrawn in appeal proceedings, this automatically renders the first-instance decision ineffective without that it has to be explicitly revoked (§ 269 III ZPO). A new lawsuit between the same parties about the same matter in dispute is not allowable. (2-3) Acceptance. Defendant may terminate the proceedings by accepting the claim(s). According to § 93 ZPO, Plaintiff shall bear the costs of the court proceedings when Defendant immediately accepts the claim and when by his actions he has not given cause for bringing the action. Plaintiff may avoid the cost risk resulting from an immediate acceptance by sending a pre-trial warning letter (see Part 5 I. 1. (1)). To be distinguished from “acceptance of the claims” is the signing of a cease and desist declaration that corresponds to the claim in conjunction with a declaration that no patent-infringing acts have been committed. Where the signed cease and desist declaration corresponds to claim, the lawsuit is resolved on the merits. If the originally filed claim was maintained, the originally filed application for substantive relief would be dismissed for lack of a need for legal protection. If the lawsuit was originally unjustified, Plaintiff shall bear the costs of the proceedings. (2-4) Settlement. The conclusion of an amicable settlement has no direct impact on the continuance of the pending proceedings. Thus, pending proceedings may still continue. A termination of proceedings requires that separate procedural steps be taken, such as a withdrawal of action. In contrast, a settlement in court will directly lead to the termination of the proceedings. The pending proceedings terminate by virtue of the parties’ volition without that the court needs to render a corresponding decision. A settlement in court is a contract which regulates claims and obligations, including the obligation to cease and desist, and – where there is an enforceable content – constitutes an enforceable title. This is the essential advantage of a settlement in court. The disadvantage consists in that the formulation of settlement agreement often causes problems. In many cases it is therefore to be preferred to conclude an amicable settlement agreement in which Plaintiff undertakes to withdraw the action and Defendant undertakes to refrain from requesting a decision on costs. When in such a case the lawsuit is withdrawn it is advisable to inform the court that an amicable settlement has been concluded. In such case there will be no decision on costs. Plaintiff will generally have already paid the accrued court fees in advance and get stuck with the costs. Any excess amounts will automatically be refunded to Plaintiff by the court cashier. It is possible to introduce an amicable settlement into the proceedings. For this purpose, a date for recording the settlement will be set. The parties declare for the records that they “have concluded the herewith submitted settlement and that this declaration was read in accordance with § 162 ZPO. (3) Changes in the factual and legal situations. (3-1) Change of party. Where a Plaintiff or Defendant withdraws from the proceedings it is under certain circumstances possible that the pending proceedings are continued with a new Plaintiff or Defendant. In civil law proceedings, a change of party by operation of law is to be distinguished from a change of party as willed by the parties to the proceedings. A practically relevant case of a change of party by operation of law is when insolvency proceedings are opened against the assets of a party. In this case, this party shall leave the proceedings, and, pursuant to § 240 ZPO, the proceedings will be continued after the appointment of an 154

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“Insolvenzverwalter” (insolvency administrator) provided the asserted claims for patent infringement form part of the “Insolvenzmasse” (insolvency assets). In this case, the “Insolvenzverwalter”, as legal successor of the party, will step into the “Prozessrechtsverha¨ltnis” (the legal position as litigant) and continue the proceedings in place of the insolvent party. According to the case law, a voluntary change of party is admissible if the relevant party agrees thereto (§ 263, 267 ZPO) or if the change of party is expedient (§ 263 ZPO). Both new and old Plaintiff must consent to the change of party. In addition, if the Defendant has already been heard on the merits of the case he must give his consent too (§ 269 (1) ZPO). In light of this legal situation it must be clarified already in preparing for a patent infringement action who is a possible Plaintiff. The question of choosing the “right” Plaintiff is of particular importance in the case of business associations having subsidiaries and affiliated companies that are domiciled in Germany or abroad. It may, for example, be considered that a Patentee domiciled abroad authorizes a German subsidiary to file a suit so as to obviate the need for providing a security for costs as prescribed for a foreign plaintiff. A change of Plaintiff without consent of the Defendant’s party is only possible if the Defendant’s party has not yet been heard on the merits. Once an action has been brought, the assignment of the patent-in-suit to a third party not involved in the proceedings has no influence on the legal position as litigant10. The Plaintiff and former Patentee remains the party in the patent infringement proceedings that has a standing-to-sue and continues to have the right to assert claims for patent infringement11. The new Patentee is not entitled to take over the proceedings as main party from the former Patentee without the express consent of the Defendant. By operation of law and registration, the former holder of rights retains his right to assert the rights from the patent also for his legal successor12. Thus, this is a case of legal standing-to-sue. Particularly relevant is also the selection of the correct Defendant, although during pending patent infringement proceedings Plaintiff retains the right to take further action against new Defendants. Where an oral hearing has already taken place, the consent of the previous Defendant is necessary for a change of Defendant. This consent may not be replaced by expediency (§ 269 I ZPO in analogy). For becoming a party it is not necessary that the new Defendant gives his consent. However, he is only bound to the previous outcome of the proceedings if he does not raise objections thereto. (3-2) Invalidation or restriction of the patent-in-suit. Changes in the legal status of the patent during pending patent infringement proceedings must be taken into consideration by the infringement court at every stage of the proceedings. From the procedural aspect, the cancellation, revocation, partial revocation, clarification as well as amendments and restrictions of granted patent claims are considered as changing the legal situation binding for the proceedings, and must be taken into consideration in all instances of the lawsuit. The infringement court is bound to the changed patent law situation as soon as in opposition, nullity or restriction proceedings a decision on the amendment of the patent claims has become final13. In view of the prohibition of an inadmissible broadening, these amendments may only lead to a restriction of the scope of protection and not go beyond the disclosure content as originally filed. Such 10

Benkard/Scha¨fers, PatG, § 30 No.17 a. Benkard/Scha¨fers, PatG, § 30 No. 17 a, § 36 No. 2.; BGH GRUR 1979, 145, 146 – Aufwa¨rmvorrichtung. 12 RGZ 151, 129, 136; Rogge, Die Legitimation des scheinbaren Patentinhabers nach § 30 Abs. 3 Satz 3 PatG, GRUR 1985, 734, 737. 13 Benkard/Rogge/Grabinski, PatG § 139 No. 4; Cf. BGH GRUR 1965, 480, 483 – Harnstoff. 11

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restrictions may, for example, become necessary when in opposition proceedings the Patentee is required to delimit his patent against newly cited prior art. When in such a case further features are incorporated into the claims of the patent-in-suit or individual features are specified, this may possibly have the consequence that the infringing embodiment in litigation no longer fulfils all features of the amended patent claim and thus no longer constitutes an infringement of the patent. It is controversially discussed how to deal with self-restrictions of the Patentee in parallel opposition or nullity proceedings where the patentee in infringement proceedings asserts the restricted claims version or a new feature combination. In this case, the demand for relief is based on a newly constructed patent claim. Where this is not just an auxiliary self-restriction, an “examined protective right” no longer exists. Therefore, the view is understandable that amendments of the original version of the patent claim in opposition proceedings or nullity proceedings are per se an acknowledged reason for a stay of the proceedings14. In contrast, according to a patentee-friendly view it must be examined whether the legal validity of the patent-in-suit in its restricted version is highly likely or whether a stay of the proceedings must be ordered in view of considerable doubts with respect to the legal validity of the patent-in-suit15. Where the Opposition Division or the Nullity Senate has commented on patentability, this statement must be considered in the decision regarding a stay of the proceedings16. Upon the Defendant’s requests, the complete revocation or invalidation of the patent-in-suit during pending patent infringement proceedings will lead to a dismissal of the lawsuit. The same applies when the patent claims have been amended such that the embodiment in litigation no longer falls under the patent-in-suit. Independently of restriction, opposition or nullity proceedings, in pending infringement proceedings a patent may be asserted in restricted form, e. g., by combining several claims, for the purpose of avoiding threatening opposition proceedings or nullity suits. The infringement court must take into consideration the termination of the patent-insuit by expiry or for other reasons provided for in § 20 PatG. For this no separate finding by the examination or nullity instances is required. In this case, Plaintiff may declare that the asserted cease and desist claim is disposed of so as to avoid the dismissal of the lawsuit. If the patent is invalidated or maintained in a restricted version only after a decision in the infringement proceedings has become final, it is possible to cross the execution effect of the infringement decision by an action to oppose execution pursuant to § 767 PatG. This has the consequence that the execution of the judgment is no longer enforceable. In addition, there is the possibility to overcome the infringement decision by way of a “Restitutionsklage” (proceedings for restitution) and to reclaim already paid damages on the basis of claims for unjustified enrichment pursuant to § 812 BGB.

3. Adversarial system The principle of party presentation which is relevant for all kinds of civil proceedings also applies to patent infringement proceedings. Accordingly, the parties decide which facts they submit to the court for decision. The submissions of the parties are binding to 14 Cf. OLG Mu ¨ nchen GRUR 1990, 352, 353 – Regal-Ordnungssysteme; LG Mannheim, Decision of May 23, 2006-2 O 150/05. 15 Ku ¨ hnen, Handbuch der Patentverletzung, 7th ed. 2014, No. 1050; Stjerna, Die eingeschra¨nkte Geltendmachung technischer Schutzrechte im Verletzungsstreit, MittdtPatA 2009, 302, 305; Augenstein/Roderburg, ¨ nderung der Patentanspru¨che, GRUR 2008, 457; Busse/ Aussetzung des Patentverletzungsverfahrens nach A Keukenschrijver, § 140 No. 12; different view: Bu¨hling, Anpassung der Anspru¨che an die angegriffene Ausfu¨hrungsform im Patent- und Gebrauchsmusterverletzungsprozessin: Festschrift Mes, 47, 49. 16 Stjerna, Die eingeschra ¨nkte Geltendmachung technischer Schutzrechte im Verletzungsstreit, MittdtPatA 2009, 302, 307; Ku¨hnen, No. 1049.

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the court. Generally, the court will not investigate the facts ex officio. It is therefore the burden of the parties to the proceedings to submit the facts relevant for the court decision and, if necessary, to provide corresponding evidence. Plaintiff’s factual submissions are conclusive if they are based on a thorough subsumption of the important factual elements under the relevant qualifying conditions for the demand for relief. It is the Plaintiff’s intention to give explanations of the technical field, of the relevant patent claims and of the contested embodiment that are easily understandable. In the Statement of Defence, Defendant will either try to show inconsistencies in the Statement of Claim or to present the factual basis for his objections and defence. In view of the fact that the appeal court’s competence for fact finding has been limited by the reform of civil procedure in Germany and the fact that the position of the first instance court was strengthened it is now – more than ever – necessary that the parties clarify all relevant facts and thoroughly prepare the first-instance proceedings. The proponent may supplement the factual submissions by available documentation as well as by illustrations and photographs. Moreover, it is possible to submit expert opinions by private experts. This is particularly recommended in cases where technical facts are concerned which cannot be directly understood.

4. Investigative principle and judicial information obligation In the ambit of the principle of judicial investigation, the court is obliged to investigate ex officio the facts having an important bearing on the decision. The principle of judicial investigation relates to the question in which manner the facts relevant for the decision are to be determined. It neither relates to the question of disposal of the proceedings as such nor to the subject-matter of the proceedings. Whereas under application of the principle of party presentation it is up to the parties which facts they want to submit to the court for decision, the nature of the principle of judicial investigation consists in that the facts having an important bearing on the decision is investigated ex officio without that the court is limited by the parties’ submissions. The principle of judicial investigation does not apply to patent infringement proceedings. In accordance with the principle of party presentation, it is the parties’ duty to present the facts substantiating the asserted claims and, if necessary, to provide corresponding evidence. This is not inconsistent with the fact that the granted patent ensures prohibitive rights against any third party, since any claims asserted in patent infringement proceedings only apply to the parties involved in the proceedings (inter partes). The public interest is taken account of by the principle of judicial investigation in examination proceedings, in both German and European opposition proceedings, in nullity proceedings, and in compulsory licensing proceedings17. With the amendment of the provisions on civil procedure by Art. 2(1) No. 22 ZPO-RG (Civil Procedure Reform Act), § 142–144 ZPO provide for the taking of evidence by the court of its own motion. Thus, the court is allowed to also clarify undisputed facts beyond the facts, submissions and arguments of the parties. Although the principle of judicial investigation does not apply to patent infringement proceedings, the court has the duty to induce the parties to provide the factual data and the means of evidence required for the finding of justice in connection with the relief sought. This “Hinweispflicht”, i. e. the court’s duty to give advice, provided for in § 139 17 § 87 (1) PatG explicitly prescribes the applicability of the principle of judicial investigation for proceedings before the Patent. Its application in German opposition proceedings is based on § 59 (4) PatG in conjunction with § 46 (1) Clause 1 PatG. The applicability of the principle of ex officio examination in first and second instance European opposition proceedings is evident from the wording of Art. 114(1) EPC and Art. 101 EPC.

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ZPO and applicable to all civil proceedings is of particular importance in the context of complex patent law disputes. Accordingly, the court has the duty to prompt the parties to make a complete presentation of the relevant facts in due time, in particular to supplement insufficient information respecting the asserted facts, to name the means of evidence and to make appropriate requests (§ 139(1) ZPO). The court is barred from basing its decision on aspects of the case that have obviously been overlooked or been considered irrelevant by a party, unless it has pointed out such aspects and given the parties the opportunity to be heard on them. The same applies to aspects which the court sees differently from both parties (§ 139(2) ZPO). The court’s duty to give advice also applies to objections on the points to be taken into consideration ex officio. These concern the procedural prerequisites to be examined by the court ex officio, such as the capacity to sue and be sued, and the right of action. With regard to these points the court is obliged to give the parties the opportunity to submit the required proof18. The court is not obliged to conduct own investigations. Furthermore, according to § 139 ZPO, the court is obliged to inform about any legal points of view overlooked by the parties. Since the reform of the civil proceedings19, the largely conclusive finding of crucial facts takes place in the first instance proceedings. It is almost impossible to add further subject-matter in the appeal instance. Against this backdrop, the judge’s duty to give advice is of increased significance in the first instance proceedings20.

5. The legal judge Like all other court proceedings, patent infringement proceedings are subject to the constitutionally protected principles of independence of the judiciary (Art. 92, 97 GG (German Basic Law), of the legal judge, i. e. the judge assigned by law (Art. 101 GG), and the guarantee of the right to a court hearing (Art. 103 I GG). According to the postulate of the legal judge, the court competent for every possible lawsuit is to be appointed in advance on the basis of statutory provisions. In patent infringement proceedings – just as in all other civil proceedings – the legal judge ensues from the provisions of the GVG (Gerichtsverfassungsgesetz, German Judicature Act), from the ZPO (Code of Civil Procedure), as well from the court’s schedule of responsibilities (Gescha¨ftsverteilungsplan). Patent infringement proceedings are civil law cases, for which legal recourse is given to the ordinary civil courts. This is not inconsistent with the fact that the grant of patents is an act of state. According to § 143 PatG, the civil divisions of the Landgerichte (Regional Courts) are responsible for all patent disputes regardless of the value of the matter in dispute. The territorial jurisdiction ensues from § 12 ff. ZPO (cf. Part 6 I). The staffing of the court ensues from the schedule of responsibilities of the court having territorial and in rem jurisdiction. An assignment to an individual judge which is in principle possible according to § 348 ZPO, is generally not indicated in patent law disputes so that the Patentkammer (patent chamber) – consisting of a presiding judge, an associate judge and the reporting judge – will decide the case (cf. Part 6, I.1.).

6. Right to be heard The right to a fair hearing is contained as fundamental procedural right in Art. 103 GG (German Basic Law) and in Art. 6 (1) European Convention on Human Rights. The 18

Zo¨ller/Greger, § 139 No. 14 with further references. The German Civil Procedure Reform Law of July 27, 2001 has come into effect on January 1, 2002. 20 The same applies to the court’s duty to give advice according to § 83(1) PatG (German Patent Act) in patent nullity proceedings. 19

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principle of the right to a fair hearing is a manifestation of the access to justice guarantee of the German Basic Law. It comprises the right of the parties to comment on the subject-matter of the proceedings and the duty of the court to take into account the pleadings of the parties. The court’s duty to provide information or give advice is a manifestation of the right to a fair hearing. When taking into account the principle of equality according to Article 3 GG (German Basic Law) it guarantees the equality of the procedural positions of the parties before the court.

7. Oral presentation and publicity Patent infringement proceedings are civil law proceedings for which according to § 128 (1) ZPO an oral hearing is required. The parties discuss the legal action directly before the trial court, the written submissions being included into the oral hearing without that it is necessary to make a specific reference thereto. The main hearing in patent infringement proceedings is open to the public (§ 169 Clause 1 GVG (German Judicature Act)). Even if the main hearing takes place on site outside of the court building (§ 219 ZPO), the proceedings still remain open to the public. In this case, a corresponding notice is to be posted at the seat of the court so that it is possible for any interested citizen to attend the hearing. The principle of publicity also applies to the taking of evidence in the oral hearing as well as to the pronouncement of the judgment. An exception is made with regard to the taking of evidence outside of the trial date by a “beauftragter Richter” (referee, i. e. a member of the court hearing the case but having no competence to decide by himself) or a “ersuchter Richter” (requested judge, i. e. a judge from another court requested by the trial court to hear a witness so as to spare the witness a long way to travel). In this case, the hearing will only be open to the parties to the hearing so that persons not involved in the proceedings are excluded (§ 357 ZPO). Under particular circumstances, the court has the right to exclude the public (§ 171 b, 172 GVG). However, in patent infringement proceedings this right is very rarely exercised.

8. Burden of demonstration and burden of proof (1) Extent of the burden of demonstration and proof. It is the Plaintiff’s obligation in patent infringement proceedings to show that he is entitled to exercise the rights from the patent-in-suit. In case of a cease and desist or injunction claim, the burden of demonstration relates in particular to the infringing act(s) of the Defendant and the risk of recurrent or first infringement, and, in case of a compensation claim, it relates, in particular, to showing that the Defendant was at fault and caused the damage. The submissions are conclusive when the actual submissions of the Plaintiff fulfil all features of the asserted patent claim. The submissions are substantiated when all relevant facts of the infringement are presented accurately and, as far as possible, under indication of the source of information. Mere sweeping statements “made at large” are regularly not sufficient21. Thus, the Plaintiff has to show that the contested embodiment as such is subsumable under the features of the asserted patent claim. In contrast, it is the Defendant’s duty to argue conclusively and substantively either that there has not been any infringing use or that the contested use act does not interfere with the rights of the patent owner for other reasons, and to prove the same in case of dispute. A lack of use may, e. g., ensue from the fact that the use act is not to be attributed to the Defendant, or that the actual form of the contested embodiment differs from the description by the 21

BGH GRUR 1975, 254, 256 – Ladegera¨t II.

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Plaintiff. That a patent is not infringed although the contested embodiment has been correctly characterized may, e. g., be due to the fact that the features of the asserted patent claim are not fulfilled. This is, for example, due to the fact that the Plaintiff has incorrectly interpreted the features of the asserted patent claim or that not all features of the patent claim are fulfilled. Moreover, claims for patent infringement cannot be enforced when it is possible to object or plea with regard to the relief sought. In case of dispute, the burden of proof for an infringement of the patent by the Defendant as well as for all facts which establish a claim, such as the risk of recurrent infringement in case of a compensation claim, falls to the Plaintiff. Where the Defendant contests that the embodiment at issue comprises specific features or that these features fall under the claims features of the patent, it is always the Plaintiff who bears the burden of proof, although the Defendant knows the contested infringing embodiment better. On the other hand, in case of dispute, the Defendant has to prove the objections asserted by him. This applies, e. g., to the plea that no infringement is given in view of existing license rights, rights of continued use or prior use, own use rights, as well as to the plea of the exhaustion of the patent right, or the plea of the Statute of Limitations or forfeiture. The distribution and extent of the burden of presentation and proof in the course of the proceedings will ensue from the parties’ submissions in the concrete case. Where the Plaintiff’s factual submissions are not conclusive, the Defendant is not required to dispute the allegation of infringement already in view of the fact that a patent infringement has not been fully shown to be given. The more substantially the patentinfringing features presented by the Plaintiff, the higher the requirements regarding the Defendant’s burden of presentation and proof. The Defendant is not obliged to inform the Plaintiff about the actual form of the contested embodiment even where the Plaintiff has no direct access to the presumed patent-infringing product or method, or where with regard to individual features of the infringing product he is dependent on assumptions and conclusions drawn from known facts. In this connection, the procedural obligation to be truthful and the legal prohibition of untruthful denial are of utmost importance for the operability of the distribution of the burden of presentation and proof. According to § 138 (1) ZPO there exists an obligation to make truthful statements, limited only by legally separately protected secrecy interests – e. g., due to a possibly threatening prosecution, for the protection of the private sphere, as well as for the protection of business secrets (§ 383 ZPO) – and obligations to maintain secrecy (§ 383 Nos. 4 to 6 ZPO). Breaches of the procedural obligation to be truthful will be prosecuted (malicious use of process). They possibly form a ground for restitution according to § 580 No. 4 ZPO. In addition, according to § 138 (2) ZPO, each party is obliged to plead on the facts alleged by the other party. This burden of explanation on the part of the parties has the effect that uncontradicted material factual claims may be regarded as admitted (§ 138 (3) ZPO)22. The above-described system of the burden of proof and presentation ensures an economic focussing of the proceedings on disputed and material facts so that the relevant subject- matter is usually reduced to individual disputed substantive issues. (2) Exemption of certain facts from the burden of proof. In spite of the principle that in particular the Plaintiff has to prove the facts in his favour, in the case law certain rules regarding presumption have been acknowledged. In addition, the law provides for an alleviation of the standard of proof. Where a patent-infringing act has occurred, it is 22 Cf. Mes, Si tacuisses.– Zur Darlegungs- und Beweislast im Prozess des gewerblichen Rechtsschutzes, GRUR 2000, 934.

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presumed that there exists a risk of recurrent infringement which is a requirement for the grant of a cease and desist claim. Accordingly, the Plaintiff will meet his burden of presentation of evidence of possible future infringements by presenting a concrete infringement. In the case law of the BGH, principles have been developed which under certain circumstances make it easier for the party bearing the burden of presentation and proof to provide evidence23. The burden of presentation on the part of the Defendant may increase, e. g., due to the fact that the Plaintiff has presented the infringing facts as far as was possible to him but has no way to establish the facts, whereas the Defendant can readily give the required information without unduly burdening him in the circumstances24. In such cases, the Defendant can only meet his burden of presentation of evidence by providing positive information that is contrary to the assertions in the Plaintiff’s Statement of Claim. Furthermore, subject to the requirements of § 138 (4) ZPO, it may be admissible to plead ignorance. A plea of ignorance is only allowable with regard to facts that have neither been own acts of the party nor objects of its own observations. In connection with the application of § 138 (4) ZPO, the focus should lie on reasonable duties to provide clarification and information in the sphere of one’s own responsibility and observation. Where the features in question do not fall into the own sphere of knowledge and observation, there may nevertheless exist certain obligations to make inquiries or to provide clarification, so that possibly the involvement of experts or the performance of product analyses may be deemed acceptable. Where the facts from one’s own sphere of observation are disputed by pleading ignorance the “Gesta¨ndnisfiktion” will ensure, i. e. the legal fiction of admission of the truth of the facts at issue, of § 138 (3) ZPO, with the consequence that the fact in dispute is considered to be admitted without that further inquiry is required. A further alleviation of the standard of proof is provided for in § 287 ZPO. The court has the right to estimate according to its due discretion the occurrence and the amount of a loss in as far as the Plaintiff presents to the court concrete and sufficient facts for the determination of the damages. According to prevailing opinion, Art. 43 TRIPS neither contains an alleviation of the standard of proof nor a shifting of the burden of presentation of evidence. Independently of the question of whether the Agreement on Trade-Related Aspects of Intellectual Property Rights of April 15, 1994 (TRIPS)25 is considered to constitute direct national procedural law or merely the standard for the interpretation of national procedural law, Art. 43 TRIPS merely provides that in case where a party having difficulties in discharging its burden of proof has presented all reasonably available evidence sufficient to support its claims, the infringement court shall have the authority to order that the relevant evidence specified by the first party and which lies in the control of the other party be produced by this other party. According to the case law of the BGH referring to an order for presenting a document pursuant to § 142 ZPO for this it is necessary that the Plaintiff shows the likelihood of a patent infringement and that the requested presentation is suitable and necessary for clarifying the facts, and further that it is commensurable and fair to the party ordered to present evidence taking into account its legally protected interests26. Thus, in patent infringement proceedings it is not necessary that the court orders a presentation of documents pursuant to § 142 23

BGH GRUR 1993, 980, 983 – Tariflohnunterschreitung with further references. BGH GRUR 1963, 270 – Ba¨renfang. 25 BGBl. 1994 II, p. 173. 26 BGH GRUR 2006, 962 – Restschadstoffentfernung; LG Du ¨ sseldorf, Decision of June 6, 2002 – 4aO 86/01 = InstGE 2, 231, 237 – Pharmazeutische Verschlusselemente. 24

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ZPO where the Plaintiff’s factual submissions with regard to the infringement are inconclusive as the application of this provision would have the effect of spying on the Defendant. (3) Shifting of the burden of proof. § 139 (3) PatG provides for a shifting of the burden of proof where a patent is directed to a process for obtaining a new product. In such a case, the “same” product shall, in the absence of the proof to the contrary, be deemed to have been obtained by the patented process. In view of this provision the Plaintiff is spared having to show that the contested product was in fact obtained by the patented process. However, he must show and, in case of dispute, also prove that the product obtained by the patented process is a “new” product and that the Defendant uses the “same” product. Independently of the novelty definition of § 3 PatG, a “new” product already exists when it differs in any clearly distinguishable feature from the products known at the priority date27. The presumption rule according to § 139 (3) PatG loses its basis already when the existence or producability of a product having the same properties shows that the products having the characteristics of the invention could also have been obtained by applying production processes other than the patented one. It is not relevant whether said product has been enablingly disclosed and thus was available to the public in the sense of § 3 PatG28. Where the presumption according to § 139 (3) PatG is deemed to be rebutted, the patent owner must show that the relevant products were obtained by the patented process29. The aspect of identity of products is fulfilled when the essential properties of the patented process product and those of the contested product are identical, with slight deviations being harmless and equivalent products also being comprised. The reversal of the burden of proof also applies to such modified processes that fall into the scope of protection of the process patent and the product whereof is identical with the contested product. Where the presumption of § 139 (3) PatG that an infringement is given takes effect in favour of the Plaintiff, the only defence left to the Defendant is to prove that he uses a different production process. It generally applies that he cannot require that the necessary factual submissions be withheld from the adverse party in view of company secrets30. (4) Taking of evidence and means of evidence. In § 88 PatG, the taking of evidence is regulated only for proceedings before the patent court. For patent infringement proceedings, the regulations of the Code of Civil Procedure apply. § 355 ff. ZPO contain regulations on the taking of evidence and the means of evidence. The taking of evidence is ordered by an evidence order of the court (§ 355 (2) ZPO) where and in as far as relevant facts are disputed and a corresponding offer of evidence of the party bearing the burden of evidence exists. Means of evidence are judicial view or inspection (§ 371 ff. ZPO), witnesses (§ 373 ZPO), experts (§ 402 ff. ZPO), documents, and the interrogation of a party. According to § 142–144 ZPO, beyond the factual statements of the parties, the court may order of its own motion the submission of files, an inspection by the court, and expert opinions. 27 LG Mu ¨ nchen GRUR 1964, 679, 680 – Appreturmittel; According to the prevailing view, e. g., the degree of purity of a chemical compound known from the prior art cannot establish its novelty unless the Plaintiff can show that a correspondingly pure product could not be obtained by any of the production processes known at the priority date, cf. EPO T 728, 98, OJ EPO 2001, 319 – reines Terfenadin; BGH GRUR 1974, 332 – Cholinsalicylat; Benkard/Mellulis, PatG § 3 No. 876; Busse/Keukenschriver, § 3 No. 130; EPO T 1990/1996 GRUR Int. 1998, 988 – Erythro-Verbindungen/NOVARTIS 28 Busse/Keukenschriver, PatG (PatG) § 139 No. 215; LG Du ¨ sseldorf InstGE 3, 91, 95 – Steroidbeladene Ko¨rner; BGH GRUR 1977, 100, 104 – Alkylendiamine II 29 BGH GRUR 1977, 100 – Alkylendiamine; LG Du ¨ sseldorf, InstGE 3, 91 – Steroidbeladene Ko¨rner. 30 OLG Du ¨ sseldorf InstGE 10, 122 – Geheimverfahren.

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An inspection by the court is appropriate when patent-infringing features can be seen on the patent-infringing product. Where the court orders a judicial inspection, the contested embodiment is inspected by the court and examined for the presence of patent-infringing features in an evidential hearing specifically scheduled for this purpose. In general, the parties cannot be forced to provide products in their possession for the purpose of judicial inspection unless the requirements for an inspection claim according to § 809 BGB are fulfilled. Testimonial evidence is only exceptionally used as evidence for an infringement but is especially relevant in cases where the Defendant has claimed a prior use right that is disputed. The most important means of evidence in patent infringement proceedings is expert evidence. On the basis of the court’s order to take evidence, a neutral court-appointed expert is commissioned to provide in writing the answers to the questions put by the court. Because of the delay associated with obtaining an expert opinion by a court expert – a one-year delay of the proceedings must be expected – and because of the increase in the cost risk, the Plaintiff will try to convince the court of the existence of the enabling technology by detailed explanations and possibly also by private expert opinions, whereas the Defendant will rather try to provoke an evidence order by complicating the technical issues.

9. The principle of concentration Any person who has brought a patent infringement action may bring a further action against the Defendant on account of the same or a similar infringement on the basis of another patent only if, through no fault of his own, he was not in a position to assert that patent also in the earlier suit. This obligation to concentrate the lawsuits as provided for in § 145 PatG is intended to prevent a large number of successively filed individual actions based on different patents against the same Defendant because of the same infringing act31. § 145 PatG forms the basis for a plea that proceedings are precluded which will not be taken into consideration by the court of its own motion and which has to be made prior to the oral hearing. To avoid the preclusion effect of § 145 PatG, the Plaintiff has to use all possible patents in the same proceedings. In the interest of the Defendant, the principle of concentration prevents a large number of individual proceedings and the accompanying increase of the cost risk. Pursuant to § 263 ZPO, where it is appropriate or where the Defendant agrees, the patent owner may assert further patents-in-suit even in pending first instance proceedings, and pursuant to § 533 ZPO generally also in appeal proceedings. Since a broadening of the Plaintiff’s demand for relief in appeal proceedings has been restricted, the introduction of further patents-in-suit is only possible under limited conditions so that it appears advisable to assert all possible patents already in the first instance proceedings. A broadening of the Plaintiff’s demand for relief is unproblematic where the respective patent has only been granted during the appeal proceedings32.

10. Liability of the losing party to pay the costs (1) Cost risk. According to the relevant provisions on the costs of litigation in § 91 ff. ZPO, the losing party in patent infringement proceedings is obliged to bear the costs of the lawsuit, including the court and attorneys’ fees. Accordingly, the prevailing party has a claim for the reimbursement of costs against the other party. On the basis of the 31 32

Official Grounds Sheet 36, 103, 115. LG Du¨sseldorf InstGE 6, 47 – Melkautomat.

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decision on costs to be made ex officio in the court decision, on application of the prevailing party the court issues a decision fixing the costs which, as enforceable title, serves to enforce the payment of the costs of the proceedings. The losing party will have to reimburse the accrued court fees on the basis of the Gerichtskostengesetz (GKG, Court Fees Act) as well as the legal fees and expenses of the lawyer and the patent attorney of the prevailing party. Pursuant to § 143 (3) PatG, the fees of a patent attorney according to the RVG (Rechtsanwaltsvergu¨tungsgesetz, German Lawyers’ Fees Act) in patent infringement proceedings are reimbursable in the same amount as the fees of an attorney-at-law. In first-instance patent infringement proceedings with a value of the matter in dispute of EUR 1 million, the losing party will have to reimburse court fees in the amount of EUR 16,008.00 as well as the other party’s fees for a patent attorney and a lawyer on the basis of the GKG and the RVG in an amount of approximately EUR 24,000.0033. This amount is composed of each of a 1.2 Terminsgebu¨hr (hearing fee) in an amount of EUR 5,655.60 as well as each of a 1.3 Verfahrensgebu¨hr (litigation fee) in an amount of EUR 6,126.90 for the other party’s patent attorney and attorney-atlaw. To this must be added reimbursable travelling costs as well as costs and expenses necessary for processing the case. Here, the expenditure of time or any fees agreements between the prevailing party and its attorneys are disregarded. The losing party will also bear the costs for its own patent attorneys and lawyers. The legally prescribed minimum fee according to RVG amounts to about EUR 24,000.00. Where hourly billing has been agreed upon, the fee may even be higher in view of a corresponding expenditure of time. (2) Value of the matter in dispute. The Plaintiff in patent infringement proceedings shall state the value of the matter in dispute in his Statement of Claim (§ 253 (3) ZPO). It is the Plaintiff’s obligation to estimate the value of the matter in dispute based on his interest in the discontinuance of patent-infringing acts and his interest in the corresponding rendering of account and having the court declare liability for damages. Unlike with an action for damages with which a specific amount of money is sued for, in patent infringement proceedings it is not possible to state the exact amount of the value of the matter in dispute. The value of the matter in dispute is relevant for a calculation of the court fees on the basis of the Gerichtskostengesetz (Court Fees Act) as well as for a calculation of the lawyer’s and patent attorney’s fees on the basis of the Rechtsanwaltsvergu¨tungsgesetz (German Lawyer’s Fees Act). In addition, the provisionally estimated value of the matter in dispute forms the basis for the advance payment for court costs required by the court before service of the action. The parties are at liberty to raise objections in the pending proceedings against the amount of the provisionally fixed value of the matter in dispute. The Plaintiff may at any time correct his indication of the value of the matter in dispute. In many cases, the Defendant’s party will readily accept the provisional estimation of the value of the matter in dispute. Moreover, the court very rarely makes use of its opportunity under § 63 (3), (1) GKG (Gerichtskostengesetz, Court Fees Act) to amend ex officio the estimated value of the matter in dispute. Accordingly, the court usually fixes the value of the matter in dispute per order in its decision without giving specific reasons. Within a term of 6 months from the legal validity of the decision on the merits or from any other termination of the proceedings, the order fixing the value of the matter in dispute may be formally appealed (§ 68 GKG). It is even possible to file an appeal against the value of the matter in dispute in a case where in the first instance proceedings the value in dispute was fixed consensually. Thus, the prevailing party in 33

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first instance proceedings has the opportunity to assert a higher value of the matter in dispute in appeal proceedings. In patent infringement proceedings, the decisive factor for the fixing of the value of the matter in dispute is the patent owner’s interest in having further infringing actions prevented in future and in having the Defendant render account of any use acts committed by him and in having the court declare that the Defendant is obliged to pay compensation and damages. The relevant date for calculating the value in dispute is the filing date of the lawsuit (§ 40 GKG) so that subsequent new knowledge by the Plaintiff, possibly against the background of an expected rejection of the lawsuit, does not justify a reduction of the value of the matter in dispute. Indications for the estimate that insofar is left to the free discretion of the court (§ 3 ZPO) are in particular: the turnover of the infringed party with the patented products, the turnover of the infringing party with the patent-infringing products (encroachment factor) as well as – with regard to the cease and desist claim – the remaining patent life at the time of bring the action (time factor)34. In every instance, the value of the matter in dispute is calculated and fixed, with the beginning of the respective proceedings being the relevant time for the calculation of the value (§ 4 (1) ZPO). Consequently, the value of the matter in dispute fixed in first instance proceedings will not necessarily be used in appeal proceedings. In procedural practice, the amount of the value of the matter in dispute to be specified by the Plaintiff is frequently a means of exerting economic pressure. If the economically powerful Plaintiff succeeds in getting accepted a very high value of the matter in dispute, the corresponding cost risk may lead to considerable economic strain on the competitor attacked for patent infringement. Economically weaker companies will try, especially in patent infringement proceedings against large companies, to keep the value of the matter in dispute as low as possible. However, in this connection it is to be noted that a unilateral determination of the value of the matter in dispute is not possible and that an upward or downward correction at the other party’s suggestion or request must be expected. § 144 PatG relates to a particular case of the fixing of the value of the matter in dispute in favour of economically weak parties. If, in a patent case, a party satisfies the court that the awarding of the costs of the case against him according to the full value in dispute would considerably endanger his financial position, the court may, at his request, order that party’s liability to pay court costs to be adjusted in accordance with a portion of the value in dispute that shall be appropriate to his financial position. As a result of the order, the favored party shall likewise be required to pay the fees of his attorney-at-law only in accordance with that portion of the value in dispute. The fact that the requirements for this reduction of the value in dispute are fulfilled must be made credible. This reduction is granted by the court by way of an appealable decision (§ 68 (1) GKG). The court fees and the attorneys’ fees of the non-favoured party are based on the actual value in dispute.

II. Japan 1. “Double Track” system If a patent holder files an infringement action, based upon his patent right, against an alleged infringer, the alleged infringer may dispute the patentability of the patent in the infringement procedure. Furthermore, the alleged infringer, independent of the infringement procedure, often request an invalidation trial of the Japanese Patent Office to dispute the patentability of the patent. Such Japanese patent proceeding system is called as “double track” system. It means that the patentability is examined not only by a trial 34

See Benkard/Rogge/Grabinski, PatG § 139 No. 167 with further references.

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board of the Japanese Patent Office, but also by an infringement court. An alleged infringer has “double chance” to dispute the patentability of a patent in an infringement procedure as well as in an invalidation trial under such “double track” system. (1) Separation system before the judgement in 2000. Until the judgement of the Japanese Supreme Court in 200035, the Japanese patent proceeding system was a kind of separation system which was somewhat similar to the German traditional system for disputing the patent validity. Japanese infringement courts could not deny the patentability of a patent being infringed allegedly, but had to regard the patent as effective, unless an invalidation decision of a trial board of the Japanese Patent Office became final and binding. Therefore, infringement courts that had a doubt about the patentability of the patent often waited a decision of trial board of the Japanese Patent Office, as a matter of fact, or suspended infringement procedures pursuant to Article 168, Paragraph 2 of the Japanese Patent Act until a decision of trial board36. However, it often took a few years until a trial board made a decision. In the meanwhile, infringement courts have to delay a judgement. (2) Introduction of “Double Track” system by the judgement in 2000. The judgement of the Japanese Supreme Court in 2000 has changed the Japanese previous separation system, and allowed infringement courts to dismiss an infringement action as a misuse of patent right, if the infringement court considered that the patentability of the patent should be denied. This judgement of the Japanese Supreme Court aimed to speed up infringements procedures. The judgement was, afterward, confirmed by the Amendment of the Japanese Court Act in 2003 which introduced Article 104-3, Paragraph 1 in the Japanese Patent Act as follows: “Where, in litigation concerning the infringement of a patent right or an exclusive license, the said patent is recognized as one that should be invalidated by a trial for patent invalidation, the rights of the patentee or exclusive licensee may not be exercised against the adverse party.”37

(3) Contradiction between courts’ judgements and the JPO’s decisions. Article 1043 of the Japanese Patent Act does not mean that infringement courts could invalidate the patent itself. Infringement courts may only dismiss an infringement action against an alleged infringer on the ground that the patent should “hypothetically” become invalid in an invalidation trial of the Japanese Patent Office. A decision of trial board of the Japanese Patent Office could be different from that of an infringement court. Such contradictable decisions between a trial board of the Japanese Patent Office and an infringement court can, as a matter of fact, be adjusted by the Intellectual Property High Court, because the Intellectual Property High Court has a jurisdiction not only for an appeal against a decision of the Tokyo or Osaka District Court for infringement cases, but also for a rescinding action against a decision of a trial board of the Japanese Patent Office. There is, however, often time lag between two decisions of two procedures, so that procedures as a whole could be delayed. 35 A judgement of the Japanese Supreme Court on 11th April 2000, Case No.: Heisei 10 (o) 364, the Collection of Judgements for Civil Cases of the Japanese Supreme Court, Vol. 54, No. 4, pp. 1368 = Hanrei-Jiho No. 1710, pp. 68 = Hanrei-Times No. 1032, pp. 120 – hando-tai-sochi (semi-conductor device case or Kilby’s patent case). 36 Makiko Takabe, Kilby-hanketsu 10 nen – tokkyo-ken wo meguru funso no ikkai-teki-kaiketsu wo mezashite – jyo (10 years after Kilby’ patent case – aiming the solution of patent disputes by a single decision – the first half), 2010, Kinyu-Shoji-Hanrei No. 1338, pp. 2. 37 An English translation for the texts of the Japanese Patent Act including this article is found under the website of the Japanese Government: http://www.japaneselawtranslation.go.jp/law/detail/?id=42&vm=04& re=01.

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(4) Invalidation of patent after the final and binding judgement. In spite of practical efforts to adjust contradictory decisions, there was still a problem. Anyone may dispute the patentability of the patent once again with another reason, for example with a different combination of prior art, even after a final and binding judgement of an infringement court. Although an infringement court had upheld the claims of a patent holder, because the court had admitted the patentability of the patent in the action, the final and binding judgement could be disputed by the retrial of the previous procedure pursuant to Article 338, Paragraph 1, No. 8 of the Japanese Code of Civil Procedure, if the patentability of the patent was denied afterward by a decision of a trial board of the Japanese Patent Office. As a result, final and binding judgements of infringement courts were in an instable situation. To make judgements of infringement courts more stable, the Japanese Patent Act was amended in 2011. This amendment tried to restrict such effect from a later invalidation decision of a trial board of the Japanese Patent Office on final and binding judgements of infringement courts. Article 104-4 of the Japanese Patent Act which was introduced by the amendment 2011, a defeated party cannot assert the invalidation of the patent as a reason for a retrial of the infringement procedure with respect to the judgement for compensation of damages, even if the patent has became invalid by a later decision of a trial board of the Japanese Patent Office. On the other hand, the judgement for injunction has to be subject to the retrial because of a later decision for invalidation of the patent. The defeated, alleged infringer, therefore, may assert the invalidation of the patent as a ground for retrial in order to make res judicata of the judgement for injunction ineffective pursuant to Article 338, Paragraph 1, No. 8 of the Japanese Code of Civil Procedure. (5) Discussion to reform the “Double Track” system. Although some factual or legal efforts have been made up to now, the double track system is more preferable for alleged infringers, because alleged infringers have double chance to dispute the patentability of patent. There are some arguments that the situation should be made more advantageous for patent holders, because patent holders have invested in research and development, have invented new technical ideas also for the society, and have made many procedural efforts to obtain patent rights. It is, however, still discussed how to adjust the double track system in order to balance the interests of patent holders and third parties. There is an opinion that the invalidation procedure of patent should be restricted after the filing of an infringement action and only the infringement court should decide the patentability of patent in the action38. On the contrary, there is also an opinion that infringement courts should restrain from deciding the patentability of patent in the action, unless the patent were clearly lacking in patentability, and should suspend the infringement procedure and wait the decision of a trial board of the Japanese Patent Office39. We can hardly find a unanimous opinion to this point yet.

38 Makiko Takabe, chiteki-zaisan-ken-sosho kongo no kadai – jyo (future problems of the lawsuit based on the intellectual property rights, 1st half), 2007, NBL No. 859, pp. 14, 18. 39 Yutaka Koike, tokkyo-ho 104-jyo-no-3 no seitei ni itaru haikei to sono unyo ni tsuite (background of enacting Article 104-3 of the Japanese Patent Act and its practical application), 2010, Nihon-KogyoShoyuken-Hogakkai-Nenpo (Annual Report of Japan Association of Intellectual Property Law) No. 34, pp. 263, 271–272; Syuhei Shiotsuki, sosho deno shinpo-sei no shinri (examination of inventive step in patent cases), in: Nakayama Nobihiro et al., Commemorative Volume for 80 years old of Minoru Takeda, 2013, pp. 199, 213–214.

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2. Principle of party disposition Infringement courts are also civil courts to which also the principle of party disposition is applied. The principle of party disposition means that the matters of judgements and the beginning or ending of procedures have to be decided by parties. (1) Substantive motions. The civil court cannot make a judgment on any matters for which parties have not claimed, according to Article 246 of the Japanese Code of Civil Procedure. It is the first part of the principle of party disposition. As the consequence of the principle, a plaintiff has to specify parties and claims in a complaint submitted to a court, according to Article 133, Paragraph 2 of the Japanese Code of Civil Procedure. (1-1) Specification of claims. (1-1-1) Discretion of a patent holder to specify the claims. In an infringement action, a patent holder may claim only either injunction or compensation of damages, or claim both injunction and compensation of damages at the same time. Furthermore, a patent holder may claim proper measures to prevent an alleged infringer from further infringement, for example, the disposal of products constituting infringement or the removal of facilities used for infringement, at the same time with an injunction claim, according to Article 100, Paragraph 2 of the Japanese Patent Act. If the patent holder chooses only a claim for compensation of damages, an infringement court cannot admit injunction claim, because of the principle of party disposition. A patent holder has also discretion to choose which patent should be used as the basis of an infringement action. Even if a claim on the basis of a patent is dismissed by a final and binding judgement, the patent holder can file anther infringement action on the basis of another relevant patent as to the same products or processes. There are no obligations for a patent holder to file every relevant patent in the same infringement procedure. It means that there is no equivalent principle in the Japanese Patent Act as the principle of concentration in the meaning of Article 145 of the German Patent Act which prevents a further patent infringement action on account of the same or similar infringement as a former infringement action. A patent holder has also a discretion to choose which patent claims in a patent should be the basis for claims for injunction or compensation of damages. A patent holder tends to assert not only the main patent claim, but also several sub patent claims to shift the risk of invalidation of the main patent claim, even though the protective scope of sub patent claims is narrower than that of the main claim. After the opening of oral proceedings, the plaintiff can also amend the claim or statement of claim until the end of oral proceedings, if the basis for the claim remains unchanged, insofar as the proceeding would not delay because of such amendment, according to Article 143, Paragraph 1 of the Japanese Code of Civil Procedure. In an infringement case, the damages could increase during the procedure. Because of the principle of party disposition, without claiming the compensation for the further damages additionally, the court may not decide more damages than the amount of damages which is claimed in the complaint. It is often the case that the patent holder adds the further damages to increase the total amount of damages until the end of the oral proceeding. The addition of the claim for such further damages is possible until the end of oral proceeding in the second instance. (1-1-2) Initiative of an alleged infringer. An alleged infringer may also take an initiative as a plaintiff to filing an action to seek a judgement which confirms that a patent holder does not have any infringement claims against the alleged infringer with 168

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respect to some specified products or processes of the alleged infringer. Against such a negative confirmation claim, the patent holder may also file an action to claim injunction or compensation of damages in the same procedure as counterclaim pursuant to the Article 146, Paragraph 1 of the Japanese Code of Civil Procedure. Based upon the counterclaim, the infringement court may make decisions for the negative confirmation claim as well as the positive claims for injunction or compensation of damages. (1-1-3) Specification of the objects of claim. Courts are bound by the proposal of a plaintiff as to objects of claim. However, it is a question how the objects of claim should be specified in a complaint of a patent infringement case. Traditionally the objects of claim were specified by the concrete elements of the defendant’s products or processes which were allegedly equal or equivalent to the features of the patented invention. The parties tended to fiercely discuss the adequacy of the specification, so that one or two years had been spent only for the specification of the objects of claim. In 2000, the presidents of the chambers specialized for intellectual properties cases in the Tokyo District Court made a proposal to improve such judicial practice in the patent infringement cases40. They proposed that the objects of claim be specified with the type number or trademark of infringing products or products produced by infringing processes, and the dispute as to the concrete elements or structures of product or process should be discussed as the grounds for claims. After this proposal, a few years delay of an infringement procedure has been solved. (1-2) Specification of parties. A patent holder has discretion to choose against whom an infringement action should be filed, if there are several alleged infringers involved in infringement activities. For example, if several suppliers provide the same kind of parts to companies assembling last products, and a supplier possesses a patent for the parts, the supplier may choose companies assembling the last products or/and some other suppliers as defendants. If an assembling company is neither actual nor potential client, it is possible that the supplier possessing the patent files an action against the assembling company. If an infringement action is filed against an assembling company, other suppliers who are supplying the parts to the assembling company often intervene in the infringement procedure as an intervener or as a party to assist the assembling company, because suppliers often have a contractual obligation to indemnify an assembling company from any damages from infringement caused by supplied parts. A supplier possessing a patent does not need to file an action against all suppliers at the same time. In order to save the costs, sometimes, the supplier possessing the patent files an action against only one of suppliers as a probe. If the supplier possessing the patent wins the infringement suit against one of suppliers, it is easier for the supplier possessing the patent to negotiate with other suppliers. In a special case, namely in a case of a pharmaceutical patent, a patent holder, i. e. of brand-name drugs company, files an action against many generic pharmaceutical company at the same time41. A patent holder wants to maintain the privileged price of 40 Tokyo-chiho-saiban-sho chiteki-zaisan-ken-sosho kento-iinkai (investigating board of the Tokyo District Court for intellectual property cases), chiteki-zaisan-ken-singai-sosho no un’ei ni kansuru teigen (proposals for reforming the practice as to intellectual property infringement cases), 2000, Hanrei-Times No. 1042, pp. 4, 7–9. 41 For example, in a case of a judgment of the Tokyo District Court on 28th February 2013, Case No.: Heisei 23 (wa) 19435, 19436 – iyaku jiken (medicine case – Tokyo) and a judgement of the Osaka District Court 27th September 2012, Case No.: Heisei 23 (wa) 7576, 7578, Hanrei-Jiho No. 2188, 108 – iyaku-jiken (medicine case – Osaka), where a brand name pharmaceutical company filed four actions against 18 generic pharmaceutical companies in total.

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his brand-name drugs in the Japanese National Health Insurance’s Reimbursement Price List. The patent holder, therefore, makes efforts to prevent generic companies from entering into the market. (2) Party’s discretion for ending the procedure. Parties may end a procedure in any time. Civil courts cannot prevent parties from ending a procedure by themselves. Courts can end the procedure only with a judgment, if parties cannot settle the dispute by themselves. These consequences are also derived from the principle of party disposition. The second part of the principle is reflected in several articles of the Japanese Code of Civil Procedure. Courts have to end a procedure, if the plaintiff withdraws the action, the parties make a settlement, the plaintiff waives all claims, or the defendant acknowledges all claims. (2-1) Withdrawal of action. (2-1-1) Prerequisites of withdrawal of action. The plaintiff may withdraw an action in whole or part before a judgement becomes final and binding, according to Article 261, Paragraph 1 of the Japanese Code of Civil Procedure. After the defendant has submitted a brief or has begun to conduct an oral proceeding on the merits, however, the plaintiff cannot withdraw his action without consent of the defendant, according to Article 261, Paragraph 2 of the Japanese Code of Civil Procedure. If two weeks have passes, without objection of the defendant, after a service of a document to the defendants as to withdrawal or after his appearance to a oral proceeding where an action is withdrawn orally, the defendant is deemed to have consented to the withdrawal, according to Article 261, Paragraph 5 of the Japanese Code of Civil Procedure. (2-1-2) Effect of withdrawal of action. If an action is withdrawn, an action is deemed not to have been pending before the court, according to Article 262, Paragraph 1 of the Japanese Code of Civil Procedure. It means that, in principle, the plaintiff is not prevented from filing the same action again. If, however, the former action has been withdrawn after a final judgement on the merits before becoming final and pending, the plaintiff may not file the same action again, according to Article 262, Paragraph 2 of the Japanese Code of Civil Procedure. Such a restriction is often applied especially to a case which is already pending in the second instance. (2-1-3) Practical meaning of withdrawal of action. In a patent infringement action, withdrawal is used, if the parties make an amicable agreement outside the judicial procedure. For example, it is not rare that several litigations are filed with several courts in the world at the same time. In such a case, parties often try to settle the dispute exjudicially in considering advantageous or disadvantageous situations of all judicial procedures, in particular that of the procedure in the USA that is often the main market for products infringing a patent allegedly. If the dispute is settled with an ex-judicial agreement, the plaintiff of an infringement action is obliged to withdraw the infringement action, while the defendant has to consent to the withdrawal of the infringement action. If a procedure rescinding a trial decision of the Japanese Patent Office to the effect that a patent is to be invalidated is also pending besides an infringement action, the plaintiff of the rescinding procedure, namely a patent holder, is obliged to withdraw the rescinding procedure and to consent the withdrawal of a request for the trial for patent invalidation, while the defendant of the rescinding action, namely an alleged infringer, 170

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has to withdraw the request for the trial and to consent the withdrawal of the rescinding action. The order of withdrawal of the rescinding action and the request for the trial is important. The request for the trial has to be withdrawn before the rescinding action is withdrawn, because, in the reversed order of withdrawals, the trial decision to the effect that the patent is to be invalidated could become final and binding because of withdrawal of the rescinding action. If a procedure rescinding a trial decision of the Japanese Patent Office to the effect that a patent is to be maintained is also pending, the rescinding procedure has to be withdrawn by the plaintiff of the rescinding procedure, namely an alleged infringer, with the consent of the defendant, namely the patent holder. As a result of the withdrawal of the rescinding procedure, the trial decision to the effect that a patent is to be maintained becomes final and binding. (2-2) Waiver of claim. If a plaintiff waives a claim on the date for oral proceeding or submits a document stating the waiver of the claim without appearing on the date for oral proceeding, the waiver has the same effect as a final and binding judgement dismissing the claim, according to Article 266 and 267 of the Japanese Code of Civil Procedure. The waiver of claim, therefore, has no disadvantages for the defendant. Consequently, a consent of the defendant is not necessary for the waiver. The court costs do not include attorneys’ fee which is born by each party, apart from the result of the procedure. The court costs, the main parts of which are litigation fee, are ca. 0.1–0.3 percent of the value of the subject matter of the action, and therefore do not mean serious economical disadvantages for the plaintiff who normally has to bear the court costs in the case of waiver, according to Article 61 of the Japanese Code of Civil Procedure. Furthermore, the plaintiff has already paid most court costs as litigation fee at the time of filing an action. Such costs could hardly affect the decision about waiver. In the practice, it is quite rare that a plaintiff waives a claim, because the plaintiff rather should not have filed an action at all, if the plaintiff has to waive a claim afterward. It is, however, thinkable that a plaintiff waives his claim, if the patent being infringed allegedly becomes invalid by a final and binding decision of a trial board of the Japanese Patent Office. In such a case, the infringement court can also dismiss the action by a judgement based upon the invalidation decision. However, it might sometimes be convenient for all participants to waive the claim. (2–3) Acknowledgment of claim. If a defendant acknowledges a claim on the date of oral proceedings or submits a document stating the acknowledgement of the claim without appearing on the date of oral proceedings, the acknowledgement has the same effect as a final and binding judgement which upholds the claim of the plaintiff, according to Article 266 and 267 of the Japanese Code of Civil Procedure. Because the acknowledgement of claim has the same effect as a final and binding judgement upholding the claim and has no disadvantages for the plaintiff, a consent of the plaintiff is not necessary for the acknowledgement. If, for example, the defendant acknowledges the claim of the plaintiff immediately after the filing of the action, the plaintiff has to bear the court costs, according to Article 62 of the Japanese Code of Civil Procedure. Court costs, however, do not include attorneys’ fee, and is ca. 0.1–0.3 percent of the value of the subject matter of the action. There is little incentive for the defendant to acknowledge the claim at once after the filing of the action in order to avoid the risk of court costs. As to patent infringement cases, usually a patent holder sends a warning to an alleged infringer before filing an action, and the parties often begin to negotiate before a judicial 171

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procedure. In a case in which an action is filed, the opinions of both parties are so opposing. It is unimaginable that a defendant would acknowledge the claim based on a patent infringement. It is, therefore, quite rare that a patent infringement procedure comes to end because of the acknowledgement of claim by defendant. (2-4) Amicable settlement within a judicial procedure. The court may attempt to arrange a settlement in any phase of a judicial procedure, according to Article 89 of the Japanese Code of Civil Procedure. When an amicable settlement is reached and stated in a judicial record, such a statement shall have the same effect as a final and binding judgment, according to Article 267 of the Japanese Code of Civil Procedure. Amicable settlements play an important role in patent infringement procedures. Almost half of patent infringement actions are finished by a judicial amicable settlement or withdrawal because of an ex-judicial amicable settlement. According to a statistical analysis, most cases settled by an amicable settlement are favourable for patent holders42. If an infringement court assesses the case as being favourable for the patent holders, the court usually recommends an amicable settlement. If an alleged infringer chooses to avoid the risk of injunction rather than to continue the disputes, the alleged infringer often agrees the proposal of the court for an amicable settlement. An alleged infringer chooses an amicable settlement, if, for example, it is difficult to avoid the infringement by changing the design of products, or if the alleged infringer is afraid of damages for reputation caused by an infringement judgement. In an amicable settlement, the parties normally agree that the court costs are born by each party. Court costs do not include attorneys’ fee, and is, therefore, not so high that parties have to be concerned about the burden of court costs. If, at the same time as an infringement procedure, an invalidation trial of the Japanese Patent Office is pending, or a judicial procedure for rescinding a trial decision of the Japanese Patent Office is pending, the parties also agree to withdraw these procedures (see 2(2-1-3)). If a plaintiff and a defendant do not reach an agreement for an amicable settlement, the court continues the proceeding to a final judgement.

3. Principle of party presentation A civil procedure is a continuation of a civil dispute between parties. It is at the disposal of parties to start and finish a civil procedure (see 2(2) above). Parties also may determine what the parties claim with a civil procedure (see 2(1) above). It is, furthermore, the responsibilities and authorities of parties to decide which facts should be stated or which proofs should be submitted. It is the principle of party presentation in the civil procedure. (1) Responsibilities of parties to state facts and to submit proofs. The principle of party presentation in the civil procedure is also applied to infringement actions. In an infringement action, the parties also may decide facts to be proven and proofs to be submitted to prove the facts. A court should not, in principle, consider main facts establishing the claims without assertion of parties. Furthermore, facts admitted by both parties before a court shall not 42 Misao Shimizu, tokei-suji-to ni motozuku Tokyo-chisai-chizai-bu no jitsujyo ni tsuite (actual situations of the chambers for intellectual properties in the Tokyo District Court on the basis of statistical figures etc.), 2010, Hanrei-Times No. 1324, pp. 52, 58, Table 7: “Tokyo-chisai-minji-dai-29-bu chitekizaisan-kankei-minji-tsujyo-jiken shinjyu-kensu oyobi kisai-kensu ni okeru shukyoku-kubun no naiyo (the civil cases of intellectual properties in the civil chamber No. 29 of the Tokyo District Court: the number of new cases and the itemized number of concluded cases as to the reason for conclusion)”.

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be required to be proven, according to Article 179 of the Japanese Code of Civil Procedure. The court has to start with such undisputed facts as a basis for a judgement. (2) Exceptions to the principle of party presentation. There are some exceptions for the principle of party presentation. (2-1) Interpretation and application of laws. The factual matters are at the disposal of parties. Courts, however, have an exclusive authority to interpret laws and to apply laws to the recognised facts. Such distribution of roles as to matters of facts and laws between courts and parties are generally assumed, even though there is no clear statutory provision which directly stipulates such distribution of roles. Some provisions, however, assume this distribution. For example, Article 179 of the Japanese Code of Civil Procedure stipulates that facts asserted by a party and admitted by another party are not required to be proven. It means that courts are bound by the facts admitted by both parties. A converse interpretation from this provision indicates that courts are not bound with the interpretation of laws presented by parties, even if the parties do not dispute the interpretation. In an infringement action, it is in question whether interpretation of words in a patent claim is a matter of law or matter of fact. A patent claim expressed by words is in itself a fact. The interpretation of words in patent claims to define the protective scope of a patent is, however, assumed to be a matter of law. An infringement court is not bound with an interpretation of words in patent claims presented by the parties, even if both parties admit such an interpretation. An infringement court is not bound even with an assertion of an alleged infringer that products fulfilled some elements of a patent claim. Such an assertion, under certain circumstances, could be a ground for estoppel to prevent the alleged infringer from later, contradictory assertion43. (2-2) Procedural requirements for filing an action. Courts should deal only with such disputes which are suitable for the solution by the application of law. All procedural requirements for filing an action, therefore, have to be examined by the court without assertion of parties. Procedural requirements are, for example, international and national jurisdiction (see Part 6, II. 1.). The necessity and suitableness for the solution by a judgement is also a procedural requirement for filing an action. Courts, however, usually begin to examine the necessity and suitableness for judicial solution, only if a party asserts the lack of such necessity and suitableness of the party or the other party. In an infringement action, such necessity and suitableness sometimes comes into consideration, especially in a case where an alleged infringer claims a declaratory judgement for non-infringement (see 2(1-1-2) above). If, for example, a warning letter is sent to an alleged infringer, such necessity and suitableness is affirmed normally. It is, however, in question, whether such necessity and suitableness could be affirmed, if a generic pharmaceutical company has just made an application for approval to manufacture generic drugs which could fall within the scope of a patent of a brand-name pharmaceutical company, because it is still uncertain yet that the Minister of the Japanese Health and Labour Ministry would approve such an application. If, furthermore, the generic pharmaceutical company has made an entry of generic drugs in the Japanese National Health Insurance’s Reimbursement Price List, such necessity and suitableness could be affirmed, because the generic pharmaceutical company is obliged to supply the generic drugs in the market after such an entry. 43 A judgment of the Osaka District Court on 16th July 2013, Case No.: Heisei 23 (wa) 10590 – kagu noashi toritsuke-kozo jiken (furniture leg attaching structure case).

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(2-3) Progress of proceedings. The progress of proceedings is directed by courts, while substantial matters of civil disputes are at the disposal of parties. Courts should endeavour to ensure the fairness and expeditiousness of the proceedings, according to Article 2 of the Japanese Code of Civil Procedure. Parties have to obey the procedural authority of courts, insofar as the parties want to make use of the civil procedure to settle their civil disputes. There are some provisions of the Japanese Code of Civil Procedure which are related to the authority of courts for the progress of proceedings. For example, according to Article 148 of the Japanese Code of Civil Procedure, oral proceedings shall be directed by the presiding judge who may discretionally permit a person to speak or prohibit a person from speaking. According to Article 120 of the Japanese Code of Civil Procedure, courts may revoke an order or a direction concerning control of court proceedings at any time. According to Article 168 of the Japanese Code of Civil Procedure, courts, if necessary, to arrange issues and evidences, may refer a case to preparatory proceedings. Patent infringement cases are often referred to preparatory proceeding, because infringement cases are related to technical matters which require detailed explanations and the confidentiality. Preparatory proceedings are also directed by the presiding judge, according to Article 170, Paragraph 5 in conjunction with Article 148 of the Japanese Code of Civil Procedure. In an infringement case of the first instance, the presiding judge discretionally divides preparatory proceedings into two phases, namely the first half of preparatory proceedings for recognising infringement, and the second half for calculating damages (see Part. 6, II. 3(5)). (2-4) Subsidiary authority of courts to collect evidences. Some measures for evidences are available for courts by their own authority. For example, courts may examine parties by its own authority, pursuant to Article 207 of the Japanese Code of Civil Procedure. An expert witness is designated by courts to state his opinion with the relevant knowledge and experiences, according to Article 213 and 215 of the Japanese Code of Civil Procedure. According to Article 237 of the Japanese Code of Civil Procedure, courts, if necessary, may make an order of preservation of evidence by its own authority. Courts also may commission a government agency or public office, a foreign government agency or public office, or school, chamber of commerce, exchange or any other organization to conduct a necessary examination, according to Article 186 of the Japanese Code of Civil Procedure. These measures are subsidiary to the responsibility of parties who should submit necessary evidences. In a patent infringement action, a court does not make use of his discretion usually. For example, it is very seldom that infringement courts designate an expert for technical matters. Instead of such an expert, infringement courts are supported as to technical matters by judicial research officials who are stationed in infringement courts (see Part 6, II. 2(2-5)).

4. Judicial information obligation The progress of proceedings is directed by courts (see 3(2-3) above). The substantial matters of civil disputes are, however, at the disposal of parties. The principle of party disposition (see 2. above) and the principle of party presentation (see 3. above) are, therefore, applied to the civil procedure. Courts principally leave it to parties what the parties claims, assert and prove in the civil procedure. Courts, however, should ensure the fairness and expeditiousness of civil procedure, according to Article 2 of the Japanese Code of Civil Procedure. The presiding judge may 174

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ask a party, or encourage a party the submission of evidences to clarify factual or legal matters, according to Article 149, Paragraph 1 of the Japanese Code of Civil Procedure. Courts should make use of such an authority to avoid unnecessary assertions or evidences, or to achieve necessary assertions or evidences for fair judgements. The Japanese Code of Civil Procedure allows parties to appear and to make assertion in oral proceedings without an attorney at law. If a party is not represented by an attorney at law, the court should make use of such an authority positively. There are sometimes also infringement cases where a party, often an individual inventor of a patent, is not represented by an attorney at law44. In most cases, however, both parties are represented by attorneys at law with enough experiences. Courts are obliged to point to parties a certain fact to be proven or legal aspect which could influence the result of judgement, even though there is no provision to admit such an obligation clearly45. With respect to infringement actions, however, a case of the Japanese Supreme which has acknowledged a violation of such an obligation could not be found.

5. Legal judges According to Article 32 of the Japanese Constitution, any person has the right of access to the courts. The courts consist of the Japanese Supreme Court and courts of lower instances, according to Article 76, Paragraph 1 of the Japanese Constitution. The judges of the supreme courts are appointed by the Japanese Cabinet, while judges of courts of lower instances are appointed by the Japanese Cabinet from a list of persons nominated by the Supreme Court. The independency of judges is guaranteed constitutionally. After the appointment, all judges of lower instances shall hold their position as judges for ten-years’ term with privilege of reappointment, according to Article 80, Paragraph 1 of the Japanese Constitution, unless the judges reach the age for retirement as fixed by law. In the course of exercising their judicial power, Article 76, Paragraph 3 of the Japanese Constitution guarantees all judges independency of anything other than the Japanese Constitution and the laws. In the practice, the judges of the Japanese Supreme Court are appointed from those who have experiences as judges, prosecutors, attorneys at law, diplomats or administrative officers. Most judges of lower instances are appointed, after graduation of the Legal Training and Research Institute of Japan, as assistant judges. These judges have mostly been educated in law faculties of a university, and have passed the state examination for legal trainees. It is seldom that a judge has been educated in a faculty of natural sciences. As to technical matters, judges in chambers for intellectual property cases are supported by judicial research officials who have specialised knowledge in the field of natural sciences (see Part. 6, II. 2(1)). 44 For example, a judgement of the Osaka District Court on 5th February 2009, Case No.: Heisei 19 (wa) 11490 – tanitsu-ayamari-teisei oyobi tajyu-ayamari-kensyutsu BCH-fugo no fukugo-sochi jiken (decoding device for single-error-correcting and double-error-detecting BCH-code case); a judgement of the Tokyo High Court on 26th February 2004, Case No.: Heisei 15 (ne) 5689, – jittai-shi doga hyoji-sochi jiken (display for three-dimensional moving pictures case). 45 For example, a judgment of the Japanese Supreme Court on 14th October 2010, Case No.: Heisei 20 (jyu) 1590, Hanrei-Jiho No. 2098, pp. 55 = Hanrei-Times No. 1337, pp. 105 – gakko-hojin Anjyo-gakuen kyojyu kaiko jiken (dismissal of a professor by school-society Anjyo-gakuen case), where the judgement of the Nagoya High Court admitted an obligation of the school-society to make a one-year prior notice to the dismissed professor, and ordered payment of one-year wage, although such an obligation was neither asserted nor discussed by the parties. The Japanese Supreme Court held that the Nagoya High Court should have made an indication to the parties in order to discuss such an obligation before a judgement.

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The judges have authority to deal with civil cases as well as criminal cases. In the practice, however, most judges are specialised for either civil cases or criminal cases. Patent infringement cases are a kind of civil cases, even though patent infringement cases have more special, complex features in compare with other civil cases. It is, therefore, not so rare that a judge is specialised in cases of intellectual properties, and has more than ten years experiences in chambers for intellectual properties. There are four chambers in the Tokyo District Court and two chambers in the Osaka District Court as the first instance for patent infringement cases (see Part. 6, II. 1(2-1)). Patent infringement cases, which belong to the exclusive jurisdiction of the Tokyo District Court, are distributed to the four specialised chambers according to the order of filing date. If, however, two or more cases are related each other, those cases are concentrated into one chamber so that the court deals with the cases more speedy and effectively. The Japanese Code of Civil Procedure stipulates some statutory provisions to avoid the suspicion of impartiality of judges. According to Article 23, Paragraph 1 of the Japanese Code of Civil Procedure, a judge shall be disqualified from his duty, if, for example, the judge has a personal relation with a party. The violation of this provision for disqualification of judges could be a reason for a final appeal, according to Article 312, Paragraph 2, No. 2 of the Japanese Code of Civil Procedure. If there are circumstances that would prejudice the impartiality of a judge, a party may challenge such a judge, according to Article 24, Paragraph 1 of the Japanese Code of Civil Procedure. The provisions for disqualification of judges are also applied mutatis mutandis to a judicial research official in cases relating to intellectual properties, according to Article 92-9, Paragraph 1 of the Japanese Code of Civil Procedure. Most judicial research officials are dispatched from the Japanese Patent Office. Even if, however, a research official, as an examiner, has granted the patent infringed allegedly, the fact would not be the reason for the disqualification, because there is no direct relations between the grand of the patent and the infringement case. The research officer should, however, avoid the designation for the infringement case to avoid the suspicion of impartiality, because a infringement court may also judge the patentability of the patent, and a research officer, supposedly, has an influence to a judgement from the technical point of view.

6. Principles of orality and publicity (1) Principles of orality and publicity for civil procedures. Parties’ arguments in an action, which shall be concluded by a judgement, have to be asserted in an oral proceeding, according to Article 87, Paragraph 1, Sentence 1 of the Japanese Code of Civil Procedure. As to a matter which may be concluded by a decision, the court may choose whether parties’ arguments should be asserted in an oral proceeding or just in a hearing, according to Article 87, Paragraph 1, Sentence 2 of the Japanese Code of Civil Procedure. Once an action is filed, the presiding judge has to designate a date for an oral proceeding, according to Article 139 of the Japanese Code of Civil Procedure. If, however, an action does not satisfy the formal prerequisites, and if the defect cannot be corrected, the court may dismiss the action without opening an oral proceeding, according to Article 140 of the Japanese Code of Civil Procedure. If once an action is filed, the complaint is served upon the defendant with the summons to an oral proceeding on the designated date, according to Article 138 and 139 of the Japanese Code of Civil Procedure. An oral proceeding has to be opened to the 176

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public. The violation of the provision for the opening of oral procedure to the public could be a reason for a final appeal, according to Article 312, Paragraph 2, No. 5 of the Japanese Code of Civil Procedure. (2) Exceptions in the practice of patent infringement cases. (2-1) Suitableness for preparatory proceedings. In the practice of infringement procedures, however, oral proceedings often take place just in the beginning and the end of an infringement procedure. In the beginning of an infringement procedure, the court refers a case to preparatory proceedings, according to Article 168 of the Japanese Code of Civil Procedure. Preparatory proceedings are not opened to the public. It is supposed that oral proceedings should not be suitable to explain technical matters, and especially to deal with confidential technical information, because oral proceedings have to be opened to the public. That is why preparatory proceedings are chosen almost in all infringement cases. An examination of a witness or a party has to take place in an oral proceeding. It is, however, very seldom to examine a witness or a party in an infringement action. After the conclusion of preparatory proceedings, an oral proceeding takes place to state the outcome of preparatory proceeding, declare the conclusion of oral proceedings, and to designate the date for rendering a judgement. (2-2) Limitation of opening records containing trade secrets to the public. Records of civil cases, in principle, have to be opened to the public for inspection, according to Article 91, Paragraph 1 of the Japanese Code of Civil Procedure. Parties may make a request that records containing trade secrets shall not be opened to the public for inspection or copying, according to Article 92, Paragraph 1, No. 2 of the Japanese Code of Civil Procedure. The term “trade secret” is defined in Article 2, Paragraph 6 of the Unfair Competition Prevention Act. According to the definition, “trade secret” means “technical or business information useful for business activities, such as manufacturing or marketing methods, that is kept secret and that is not publicly known”. The prerequisites to limit the opening of documents to the public are: (1) the usefulness of technical or business information for business activities, for example, so called know-how indispensable for manufacturing products, (2) the secrecy of the information, namely opened only to the limited persons who are obliged to keep a secret, and (3) the enough control to keep the information in secret, for example, by limiting an access to the information with password or keeping the information in a place with lock and key. The prerequisites are shown with prima facie evidences. The parts to be kept in secret should be specified in a request. If a document includes a secret only partially, courts often hesitate to admit the limitation of opening the whole document to the public, and encourage the party to specify the parts of secret in the document. In an infringement action, especially an allegedly infringer makes assertions or submits evidences including some trade secrets in order to prove non-infringement of a process. In such cases, the limitation of the opening of records to the public is often requested to the court, and empirically recognised by the court, if the secret parts are rationally enough specified. (2-3) Protective order. The provisions for protective order were introduced in the Japanese Patent Act by the amendment of the Japanese Court Act in 2003. In an infringement case, the court may, upon a request of a party, issue a protective order for trade secrets of the party, if the provisional prerequisites are satisfied, according to Article 105-4 of the Japanese Patent Act. 177

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The number of infringement cases, in which a protective order has been admitted, is increasing gradually. An article of a judge of the Intellectual Property High Court disclosed the recent statics of the Tokyo District Court as shown in the following Table46. It is, however, necessary for courts to take long time for examining the prerequisites for a protective order. An ordered protective order prevents the procedure from progressing smoothly. Disadvantageous effects from protective orders are regarded unignorable gradually. Table: Number of approved or dismissed requests between 2005 and 2012. Year

2005

2006

2007

2008

2009

2010

2011

2012

Requested

0

1

0

4

5

4

4

8

Approved

0

1

0

1

3

1

3

5

Dismissed

0

0

0

1

1

0

0

0

Withdrawn etc.

0

0

0

1

1

3

1

2

(2-3-1) Prerequisites for protective order. The first prerequisite is the necessity to examine the trade secrets as evidence, because courts are not required to examine evidence that courts consider unnecessary, according to Article 181, Paragraph 1 of the Japanese Code of Civil Procedure. Until the decision to issue a protective order, courts and another party cannot know the details of trade secrets. The party requesting a protective order, therefore, should specify enough the facts to be proven by the trade secrets, according to Article 180, Paragraph 1 of the Japanese Code of Civil Procedure, and explain enough the reasons for the necessity to examine the trade secrets as evidences. Secondly, the party requesting the protective order shall prove that evidences to be examined should contain “trade secrets” in the meaning of Article 2, Paragraph 6 of the Unfair Competition Prevention Act, according to Article 105-4, Paragraph 1, No. 1 of the Japanese Patent Act. “Trade secrets” mean the information which is useful for business activities, unknown to the public, and under enough control to keep in secret (see 6(2-2) above). Courts have to decide whether the evidences contain trade secrets without having a chance to take the evidences at a glance. Just exceptionally, the court may take documents containing trade secrets at a glance, on the basis of a request of another party for submitting documents, according to Article 105, Paragraph 1 and 2 of the Japanese Patent Act (see 7(3-3) below). The party requesting a protective order, therefore, should make courts convinced of it that the evidences actually contain trades secrets. Finally, the party requesting a protective order has to explain enough that the disclosure of his trade secrets without protective order could cause harmful interference in the business activities of the requesting party, provided that the trade secrets were misused for other purposes, or disclosed by another party, according to Article 105-4, Paragraph 1, No. 2 of the Japanese Patent Act. (2-3-2) Legal results from protective order. A protective order is issued to a party, party’s employees, attorneys at law, and/or patent attorneys who are designated for the disclosure of trade secrets of another party. The designated persons shall neither misuse 46 Shinji Oda, himitsu-hoji-meirei no unyo no jitsujyo (protective order in the practice), 2013, Law & Technology, No. 59, pp. 3, 5.

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the trade secrets for other purposes nor disclose the trade secrets to any other persons, according to Article 105-4, Paragraph 1 of the Japanese Patent Act. Those who violate a protective order shall be punished by imprisonment for five years or less, according to Article 200-2, Paragraph 1 of the Japanese Patent Act. The punishment for a violation of a protective order seems to be quite heavy, in comparison with the one year or less imprisonment for an official of the Japanese Patent Office who has divulged a secret relating to an invention in a pending patent application, according to Article 200 of the Japanese Patent Act. Trade secrets of a party are often related to technical matters. It would be necessary for another party to designate an employee with technical knowledge for understanding such matters. The employee, however, could be prevented from further development for another party, because, otherwise, the employee could violate a protective order. Such harmful effects for ordered party are also unignorable. (2-4) Suspension of opening the examination of parties to the public. Oral proceedings have to be opened to the public, according to Article 82 of the Japanese Constitution. The examination of parties or witnesses also has to be opened to the public, because such an examination also takes place in oral proceedings. The provision for suspending the opening of the examination of parties in a patent infringement action was introduced in the Japanese Patent Act by the amendment of the Japanese Court Act in 2003. In an infringement action, judges, with an unanimous decision, may suspend the opening of the examination of parties or witnesses to the public, if an opening examination could prevent parties or witnesses from stating necessary facts for fair and proper judgement, for example, because parties or witnesses were afraid of harmful effects for the business activities caused by disclosing trade secrets to the public, according to Article 105-7, Paragraph 1 of the Japanese Patent Act. In infringement actions, empirically, the examination of parties or witnesses is quite seldom. Accordingly, the cases where the opening of the examination has to be suspended also would be seldom.

7. Burden of demonstration and burden of proof The principle of party disposition (see 2. above) and the principle of party presentation (see 3. above) are applied to the civil procedure. These principles are related to the distribution of roles between parties and courts, and do not mention the distribution of roles between parties. The burden of demonstration and the burden of proof are related to the distribution of the responsibility to assert and prove the facts between parties. The burden of demonstration is born by a party who suffer such disadvantage from non-assertion of advantageous facts. The burden of proof is born by a party who suffer such disadvantage from non-proof of advantageous facts. Such a disadvantage from non-assertion and non-proof corresponds to each other. The distribution of the burden of demonstration and the burden of proof between parties, therefore, correspond to each other. Such distribution of burden of demonstration or proof should be clearly stipulated in statutory provisions. Japanese substantial laws are, however, not necessarily coded in consideration of the burden of demonstration or proof. Interpretation of provisions for substantial laws is necessary to distribute the burden of demonstration or proof between parties properly. (1) Burden of demonstration. Facts necessary to admit claims or objections are demonstrated by parties (see 2. above). If a necessary fact is not demonstrated, in a judgement, one party has to suffer a disadvantage from denial of an advantageous claim or objection. A party, who has to suffer a disadvantage from short of demonstration, has 179

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to take a responsibility to demonstrate such a necessary fact. The distribution of the burden of demonstration corresponds to that of the burden of proof. Such distribution is, therefore, explained as to the burden of proof (see (2) below). (2) Burden of proof. The distribution of the burden of proof corresponds to that of the burden of demonstration. Sometimes, however, the proof is not required pursuant to Article 179 of the Japanese Code of Civil Procedure, if the assertion of both parties corresponds to each other. In such a case, the burden of proof does not come into consideration. The burden of proof plays a role, if parties dispute the existence of a fact. (2-1) Burden of proof for literal infringement. In an infringement action, in order to give reasons to a literal infringement (see Part 2, II. 1(1)), the patent holder has to prove the following facts: (1) the existence of a valid patent; (2) acts of an alleged infringer, for example, manufacturing products or using processes; (3) elements of products or processes corresponding to each feature of a patent claim. The interpretation of wording of a patent claim and the definition of protective scope of a patent are not matters of facts, but matters of laws (see 3(2-1) above), so that assertions for such matters are not necessary. Against a claim on the basis of a literal infringement, an alleged infringer may assert, and has to prove the facts which give reasons to the objections (see Part 4, II. 2). (2-2) Burden of proof for equivalent infringement. With respect to an equivalent infringement (see Part 2, II. 2(2)), the burden of the demonstration for the prerequisites of an equivalent infringement is distributed between a patent holder and an alleged infringer47. The requirements which give positive reasons to an equivalent infringement have to be proven by a patent holder. Such requirements are (1) replacement of unessential elements, (2) identical function and effect with the patented invention despite replacement, and (3) obviousness of replacement for a skilled person in the art at the time of infringement. On the contrary, the requirements which give negative reasons to an equivalent infringement have to be proven by an alleged infringer. Such requirements are (1) embodiments of the alleged infringer within the scope of free technologies and (2) intentional exclusions of such embodiments from the patented technical ideas by the patent holder in the course of examination of the patent application. (2-3) Burden of proof for compensation of damages. A patent holder firstly has to prove the facts for a literal or equivalent infringement (see (2-1) and (2-2)). Besides the facts for an infringement, a patent holder has to prove the existence of damages caused adequately by the infringement and the monetary amount of damages. A patent holder does not have to prove that an alleged infringer infringes his patent knowingly or negligently, because the negligence of an alleged infringer is presumed pursuant to Article 103 of the Japanese Patent Act. (3) Procedural measures easing the burden of proof related to infringement. There are some procedural provisions which stipulate some measures for easing the burden of proof, especially for a patent holder, or for enhancing the procedural progress. 47 For example, a judgement of the Tokyo District Court on 7th October 1998, Case No.: Heisei 3 (wa) 10687, Hanrei-Jiho No. 1657, pp. 122 = Hanrei-Times No. 987, pp. 255 fuka-sochi system jiken (load equipment system case); a judgement of the Intellectual Property High Court on 23rd June 2011, Case No.: Heisei 22 (ne) 10089, Hanrei-Jiho No. 2131, pp. 109 = Hanrei-Times No. 1397, pp. 245 – shokuhin no tsutsumi-komi-seikei-hoho oyobi sono sochi jiken (process and device enveloping and moulding foods case).

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(3-1) Obligation of an alleged infringer to present the exploiting forms. In an infringement action, a patent holder has to prove the facts of infringement. The patent holder at least makes enough efforts to convince the judge of possibility of an infringement. Such efforts are, for example, the presentation of a product of an alleged infringer itself, or the analysis of the product by the patent holder himself or by a technical institute etc. (see Part 3, II. 1. and 2.). If the patent holder has made such efforts, an alleged infringer is obliged to present his actual exploiting forms, insofar as the alleged infringer denies his infringement, according to Article 104-2 of the Japanese Patent Act. If the alleged infringer cannot present such forms, the assertion of the patent holder is, as a matter of fact, presumed to be proven. An alleged infringer, because of various reasons, tries to make the progress of infringement procedure slower only by denying the infringement without clear reasoning. In such a case, courts may presume the infringement of the alleged infringer, as a matter of fact, because the alleged infringer does not fulfil his obligation. The obligation has also a function to make the procedure progress more smoothly. (3-2) Presumption of exploiting patented process from identification of products. According to Article 104 of the Japanese Patent Act, it is presumed that a product is produced by a patented process, if the product is identical with a product produced by a patented process, insofar as the product was publicly unknown in Japan on the date of filing the patent application. Before the amendment of the Japanese Patent Act in 1975, pharmaceutical or chemical substances were not allowed to be patented pursuant to Article 32, No. 2 or 3 of the Japanese Patent Act in the old version until the amendment 1975. In such cases, the provision presuming the infringement of a process patent from the identification of products had a meaning to make easier the burden of proof of the holder of a process patent. The meaning becomes less after the amendment 1975, because, nowadays, pharmaceutical or chemical substances are allowed to be patented, and the proof for identification of a substance with a patented substance is enough to prove the infringement. In the case of a product-by-process patent claim, the provision could still have a meaning, if the structure of a product manufactured by a process was not identified on the date of filing the patent application, but has become clear afterward. Such cases are empirically quite rare. (3-3) Order to submit documents related to infringement. Courts may order the submission of a document of an alleged infringer, if the documents are necessary to recognise the facts related to the alleged infringement, according to Article 105, Paragraph 1, Sentence 1 of the Japanese Patent Act. A patent holder often confronts difficulty to prove the infringement facts. It would be expected that Article 105, Paragraph 1, Sentence 1 of the Japanese Patent Act makes the burden of proof of such a patent holder easier. Article 105 of the Japanese Patent Act is a special provision of Article 223 of the Japanese Code of Civil Procedure. Some other conditions are necessary for an order on the basis of Article 223 of the Japanese Code of Civil Procedure. An order on the basis of Article 223 assumes the existence of an obligation of the document holder to submit the document pursuant to Article 220 of the Japanese Code of Civil Procedure. Such an obligation is recognised, if, for example, the party holding such a document has cited the document in the action, according to Article 220, No. 1 of the Japanese Code of Civil Procedure. There are, however, some exceptions for the obligations submitting a 181

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document stipulated in Article 220, No. 4 of the Japanese Code of Civil Procedure. Such an exception is, for example, the secrecy of a document. Some procedural provisions, for example, Article 221, 224 of the Japanese Code of Civil Procedure could also be applied mutatis mutandis to the order based on Article 105 of the Japanese Code of Civil Procedure. In the practice, it is rare that courts order an alleged infringer to submit a document in order to recognise the facts related to the alleged infringement, because an alleged infringer may reject the submission of the document, if there are reasonable grounds to refuse, according to Article 105, Paragraph 1, Sentence 2 of the Japanese Patent Act. A typical reasonable ground is the secrecy of the document. If a court has some doubt the secrecy of the document, a court makes an order to present the document only to the court, according to Article 105, Paragraph 2 of the Japanese Patent Act. It is, however, not always easy for the court to decide if the documents contain some trade secrets. If necessary, the court may disclose the documents to another party or its representative in order to hear the opinion of the other party, according to Article 105, Paragraph 3 of the Japanese Patent Act. In such a case, the alleged infringer might make a request of a protective order (see 6(2-3) above). A proceeding for a protective order, however, makes the infringement procedure delayed. That is also a reason why courts rarely order the submission of a document for the facts related to the alleged infringement. (3-4) Order to submit a subject matter of observation. According to Article 232 and 233 of the Japanese Code of Civil Procedure, civil courts may order to submit a subject matter of observation on the request of a party. According to Article 232 of the Japanese Code of Civil Procedure, the holder of the subject matter is basically obliged to submit the subject matter. Otherwise the holder of the subject matters could be punished by non-penal fine according to Article 233 of the Japanese Code of Civil Procedure. These provisions would be expected to make the burden of proof of a patent holder easier. There is, however, a special provision for observation by courts of the Japanese Code of Civil Procedure in the Japanese Patent Act, namely Article 105, Paragraph 4 of the Japanese Patent Act. According to Article 105, Paragraph 4 in conjunction with Paragraph 1, Sentence 2 of the Japanese Patent Act, the holder of the subject matter may reject the submission of the subject matter, if there is a reasonable ground. For example, if it concerns the secrecy of the holder, a reasonable ground is normally admitted. In most cases the subject matter for observation, which is related to a patent infringement, often concerns to the secrecy of the alleged infringer. It is, therefore, very rare that courts for infringement cases order the submission of a subject matter of observation to prove the actual manner of an accused product or process. (4) Procedural measures easing the burden of proof related to calculation damage. (4-1) Order to submit documents related to damages. Courts also may order the submission of documents of an alleged infringer, if the documents are necessary to calculate the amount of damages from the infringement, according to Article 105, Paragraph 1, Sentence 1 of the Japanese Patent Act. If once a court recognises the infringement and the patentability of relevant inventions, the court often requests the infringer to submit the accounting data necessary for calculating of damages as a matter of fact. The infringer usually submits such date spontaneously. If the infringer rejects the submission of the date, courts may order the submission of the accounting documents necessary for calculating the damages, based upon Article 105 of the Japanese Patent Act. Once an infringement is recognised by a court, the court tends not to admit the secrecy of the accounting documents as a reasonable ground to reject the submission. 182

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If, nevertheless, the infringer does not obey the submission order, the court may regard the assertion of the patent holder for the amount of damages as truth, according to Article 224 of the Japanese Code of Civil Procedure. The court also may admit an adequate amount of damages, if there is a difficulty to recognise the facts to calculate the amount of damages, according to Article 105-3 of the Japanese Patent Act (see 7(4-4) below). (4-2) Presumption of the amount of damages. The actual amount of damages is not clear, because it depends on various factors, for example, goodwill or business efforts of the patent holder and the infringer, the number of other competitors in the market, economical situations of the whole market, and so on. It is not easy for a patent holder to prove the actual amount of damages caused by a patent infringement. Article 102, Paragraph 1 to 3 of the Japanese Patent Act presents three alternatives which presume the amount of damages caused by a patent infringement in order to make the burden of proof of a patent holder easier, as to the amount of damages caused by infringement. A patent holder may choose to prove the amount of damages using such an alternative, instead of proving the actual amount of damages. Article 102, Paragraph 1, Sentence 1 of the Japanese Patent Act presumes that the amount of profit per unit of products of a patent holder multiplied by the quantity of products of an infringer should be the amount of damages caused by infringement (see Part 4. I. 2(2-2)). A patent holder, therefore, may assert (1) the amount of profit per unit of products of a patent holder, and (2) the quantity of products of an infringer. According to Article 102, Paragraph 1, Sentence 2 of the Japanese Patent Act, other various factors, which could reduce such presumed amount of damages, have to be proven by an infringer. As a result, the burden of proof for the amount of damages is partially transferred from the patent holder to the infringer. Article 102, Paragraph 2 of the Japanese Patent Act presumes that the amount of profit obtained by an infringer from infringement activities should be the amount of damages caused by infringement (see Part 4. I. 2(2-3)). A patent holder, therefore, may usually assert (1) the amount of marginal profit per unit of the product of the infringer, and (2) the quantity of the products of the infringer to calculate the total amount of profits of the infringer. Other various factors, which could reduce such presumed amount of damages, have to be proven by an infringer. Accordingly, the burden of proof for the amount of damages is partially transferred from a patent holder to the infringer. Article 102, Paragraph 3 of the Japanese Patent Act presumes that the amount of licence fee for infringing products or processes should be the amount of damages caused by infringement (see Part 4. I. 2(2-4)). A patent holder, therefore, may assert (1) the adequate licence ratio, and (2) the amount of the sales of infringing products or products produced by infringing processes. The presumed amount of damages is supposed as the minimum amount of damages caused by infringement, so that the infringer hardly revoke such presumption. (4-3) Obligation of infringer to explain the facts for the calculation of damages. A infringement court may designate an expert with knowledge and experiences of accounting to calculate the amount of damages caused by infringement, according to Article 213 of the Japanese Code of Civil Procedure (see Part 6. II. 2(2-5)). In such case, the infringer has to explain to the expert the matters necessary for composing an expert opinion, according to Article 105-2 of the Japanese Patent Act. If an infringer rejects to explain the necessary matters to the expert, such an attitude is also considered to calculate the amount of damages in the frame of free determination

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of courts as to evaluation of evidences and recognition of facts, pursuant to Article 247 of the Japanese Code of Civil Procedure. (4-4) Recognition of reasonable amount of damages. If it is very difficult for a patent holder to prove the facts necessary to calculate the amount of damages, because of the type of facts, the court may determine a reasonable amount of damages on the basis of the entire results of oral proceedings and the results of the examination of evidences, insofar as some damages are recognised, according to Article 105-3 of the Japanese Patent Act. In the practice, the provision is sometimes used to determine a reasonable amount of damages, if, for example, an infringer rejects the submission of accounting documents48.

8. Maxim of concentration of examination of witnesses and parties According to Article 182 of the Japanese Code of Civil Procedure, the examination of witnesses and the parties shall be conducted as intensively as possible after the arrangement of issues and evidence has been completed. The maxim is also applied for patent infringement actions as a kind of civil cases. In infringement actions, however, it is empirically quite seldom that an examination of witnesses or parties takes place. There is, therefore, little room for the provision to be applied.

9. Liability of the losing party to pay the costs The losing party is liable to pay the court costs, according to Article 61 of the Japanese Code of Civil Procedure. Details of courts costs are regulated in the Civil Procedure Costs Act. Courts costs do not, however, include attorneys’ fee. Attorneys’ fee has to be burdened by each party, apart from the result of an action. If, however, some damages caused by infringement are recognised, attorneys’ fee is often recognised not as a court costs, but just as a part of damages. The amount of attorneys’ fee as a part of damages is, however, normally within around 10 percent of the total amount of damages49. The amount is usually much less than the amount of the actual attorneys’ fee which the patent holder has to pay. An alleged infringer cannot claim the payment of attorneys’ fee against a patent holder even in the case of dismissal of an infringement action, unless the filing of an action itself could exceptionally be regarded as a tort act. The main part of courts costs is, therefore, the litigation fee. The litigation fee is gradually increasing according to the value of subject matters in dispute, and amounts to ca. 0.1 to 0.3 percent of the value. The value of subject matters in intellectual property cases is calculated by the formulae which are shown in the website of the Japanese Courts in consideration of various factors, for example, the remaining duration of a patent right, the amount of sales of products of an alleged infringer, and so on50. A plaintiff has to pay the litigation fee with the submission of the complaint. Insofar as the claims of the plaintiff are admitted, the plaintiff can demand the payment of the litigation fee from the losing defendant. The amount of the litigation fee is ignorable in 48 A judgement of the Osaka District Court on 28th January 2010, Case No.: Heisei 19 (wa) 2076, Hanrei-Jiho No. 2094, pp. 103 – kumi’awase-keiryo-sochi jiken (combined weighing apparatus case). 49 For example, a judgement of the Tokyo District Court on 30th January 2014, Case No.: Heisei 21 (wa) 32515 – denwa-bango-jyoho no jido-sakusei-sochi jiken (device for producing automatically the information of telephone numbers case) has admitted 2.5 million yen of attorneys’ fee as damages. The amount means just 10 percent of the total amount of other damages, 24,985, 556 Yen. 50 The formulae to calculate the value of subject matters in intellectual property cases are found in the website of the Japanese Courts: http://www.courts.go.jp/tokyo/saiban/sinri/ip/index.html.

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comparison to the the value of subject matters in dispute. It is, therefore, quite seldom that the winning party demands the payment of the litigation fee from the losing party.

III. USA 1. All matters before the court The Court has jurisdiction to rule on all substantive as well as procedural motions. These matters are heard by the judge (or if assigned, Magistrate judge). All proceedings are public except for matters filed or heard under seal in accordance with a Confidentiality Order entered by the court. (1) Substantive motions. Substantive motions are motions that entirely resolve one or more claims of a party. In general, these are either motions to dismiss on some procedural or jurisdictional basis or summary judgment motions. In addition to the Federal Rules of Civil Procedure which establishes rules for content and timing of motions, district courts have established local rules relating to motion practice and judges often have individual rules regarding the procedures to follow in the filing of motions. Summary judgment motions seek to have the court dispose of an issue, or the entire litigation on the basis that there are no disputes about the operative facts necessary to make a determination of the issue and based upon those facts one party or the other is entitled to the relief it seeks as a matter of law. (FRCP Rule 56) A summary judgment motion will be denied if it can be demonstrated that a disputed factual issue exists or that a party has not had a reasonable opportunity to take discovery about a factual issue. (FRCP Rule 56 (e)) It is therefore unusual for summary judgment motions to be filed before the end of fact discovery – or the end of fact and expert discovery. Summary judgment motions are generally the last major applications made to the court prior to the final pre-trial filings and the setting of the trial date. Motions to dismiss generally for the lack of venue must be filed early in the litigation. Motions to dismiss for lack of subject matter jurisdiction over a party or jurisdiction or personal jurisdiction can be filed at any time it can be demonstrated that the court lacks jurisdiction. (2) Procedural motions. There are a wide ranging number of procedural issues that affect the litigation, but are not dispositive. Many relate to disputes over the propriety of or the extent of discovery requests. In general, whenever a party seeks to deviate from the Federal Rules of Civil Procedure a motion is required. Even stipulated understandings between counsel about modifying schedules need to be presented to the court for approval. One of the more common procedural motions are in limine motions. An in limine motion seeks to prevent one or more of the other party’s witnesses – generally one of the experts from testifying. The judge has an obligation as a gate keeper to prevent experts from testifying when they either lack the qualifications to testify about or the science or premises upon which they are offering opinions are not generally accepted. As a general principle judges are reluctant to exclude an expert witness and believe that the credibility of the expert can be challenged during the cross examination process at trial. Nonetheless, given the significant influence that an expert may have on a lay jury, the courts are sensitive to the prejudice that can result in having a jury exposed to witnesses who are identified as experts, but who are not truly qualified to opine on the issues or whose basis for reaching conclusions is not scientifically sound. 185

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2. Adversarial system Litigation in the United States is an adversarial procedure. Each party represents its position before an impartial person or persons (judge or jury) with the objective of determining in an impartial manner the party who has established its position with admissible evidence to the degree necessary to satisfy its burden of proof. Therefore the admissibility of evidence is a critical element because the trier of the facts must reach its determination based upon admissible evidence. Admissibility is based upon the Federal Rules of Evidence which establishes the type of evidence that is admissible.

3. Discovery One of the more significant features of United States litigation practice is the very extensive pre-trial discovery. Each party must provide initial disclosures to the other about persons likely to have knowledge of the operative facts. (FRCP 26) Each side generally demands from the other: – Requests to answer in writing, under oath, written interrogatories. – Requests to admit or deny the existence of facts. – A requirement to make at least one corporate representative available who will testify under oath on behalf of the corporation or entity about the knowledge of the entity. (FRCP 30(b)(6)) The witness has an obligation to make inquiry within the company for relevant information on the topics enumerated by the other party as being the subjects of inquiry. If multiple witnesses are needed to address the topics they need to be made available to provide sworn deposition testimony. – Unless otherwise agreed to or ordered by the court, each witness has to be available for at least 7 hours to be deposed under oath by adversary counsel. A record of the deposition is made by a court reporter and it is becoming common for the depositions to be videotaped. Possibly the most significant discovery burden relates to document production. Discovery requested can include not only relevant evidence, but evidence that is likely to lead to relevant evidence. (FRCP 34) Each side presents the other with a listing of categories of documents that they wish produced. There are often disputes about the appropriateness and scope of the requests, but eventually the types of documents that need to be produced is established. Documents can be requested on the full range of known or potential defenses including the conceptualization and derivation of the invention; the prosecution of the patent application; documents from the inventors regarding the invention; documents regarding knowledge of prior art; and documents about knowledge of the accused infringer’s activities; documents about the first sale or offer for sale and documents relating to damages. Both physical and electronically created and stored documentation (e-discovery) must be searched and if responsive produced. E-discovery has become particularly burdensome. If it can be demonstrated that documents have been destroyed sanctions can be awarded. This can result in instructions to the jury that they can draw the inference that the documents were damaging. In egregious situations the dismissal of the entire action is possible. Once litigation is contemplated or can reasonably be expected, it is the obligation of a potential party to suspend all document destruction procedures. For large corporations this can be a significant burden as many have adopted procedures which automatically delete emails after a reasonable period of time and procedures to overwrite or destroy backup or other storage devices after a stated period of time. 186

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Once produced, the task of reviewing e-discovery documentation can be significant. A number of software programs have been created and businesses established to provide assistance in document review. These permit automated scanning and culling of the data to eliminate duplication and permit coding to render the documents searchable by word, phrase, date or other criteria. In many patent cases the cost of e-discovery can easily exceed $100,000 and is often higher. As well, given the subpoena power of the parties in a civil action which permits the obtaining of information from third parties, rules have been created to prevent discovery abuses and to compensate third parties for the significant costs that may be incurred in complying with discovery requests.

4. The Court and the judge and their roles In cases where there are no juries a single judge conducts the trial and decides both issues of fact and law. The judge conducts the trial (whether with or without the jury) and makes decisions regarding the admissibility of evidence and the conduct of the proceedings.

5. The jury and their role Juries are selected from the local population. Although the phrase often used is that a jury is “selected”, in reality a jury is “deselected”. A panel of prospective jurors well in excess of those who will ultimately be chosen, is assembled. By random selection a group of prospective jurors is initially seated in the jury box for questioning. Each prospective juror is questioned to assess whether he or she can decide the case in an unbiased manner or otherwise has some impairment that would prevent the juror from serving. The questioning process is known as voir dire. In federal court it is customary for the judge (provided with suggestions from counsel for the parties) to conduct the questioning of the prospective jurors. If a prospective juror is dismissed for cause or for another reason, he or she is replaced by another prospective juror, who is then questioned. Each of the parties has a number of preemptoral challenges which permits the party to have the prospective juror removed from the jury panel without cause. However, once its number of preemptoral challenges is exhausted, the party will have to accept a prospective juror unless the prospective juror can be challenged for cause. Thus the process is a de-selection process. Once a jury is empanelled the other prospective jurors are dismissed and the jury is sworn in. Each juror swears to be unbiased and to decide the matter solely upon the evidence provided at trial. The jurors are cautioned not to discuss the matter outside the courtroom or even among themselves until all the evidence has been presented. After all the evidence is presented the jury receives detailed instructions regarding the law and the factual issues they need to decide. The jury is provided with a verdict sheet which sets forth particular questions relating to contested issues, usually validity, infringement and damages. It is unethical and subject to sanctions including the declaration of a mistrial for any of the parties, attorneys or witnesses to have any contact with a juror during the trial. Jury deliberations are held in secret. The exhibits that were entered into evidence at trial are provided to the jury in the jury room. Some judges permit the jury to take notes during the trial. If the jurors have questions during the deliberations, they need to put them in writing and presented to the judge. The judge is required to share them with counsel for the parties before the judge provides an answer. The parties can either agree on the answer or express an objection on the record if it believes the response is inappropriate. 187

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If the jury cannot reach a verdict the court is required to order a mistrial and a new trial will be required with a new jury, unless the parties agree that the judge can decide the matter.

6. Public trials and right to be heard All trials in the United States are open to the public. There are, however, certain witness exclusionary rules. Each party is authorized to have a party representative at counsel table (whether a prospective witness or not). This party representative hears all the evidence. However, if either side requests (and generally this is customary) a witness exclusion rule is ordered-Federal Rules of Evidence (FRE) Rule 615. Under the rule, prior to his or her being called to testify the witness cannot listen to the testimony of other witnesses. Generally expert witnesses are permitted to observe the testimony of the fact and expert witnesses. This is because the fact witness and adversary expert’s testimony relates to opinions that the experts will be offering. As well, the expert are in attendance to provide technical guidance to trial counsel. Although company confidential and sensitive material may have been exchanged during discovery on a confidential attorney’s eyes only basis, confidentiality may be lost at trial. The court has discretion to seal the courtroom and prevent the public from being in the courtroom when certain sensitive subjects are being offered in evidence, but the jury will hear the testimony and the jury is under no obligation to maintain it in confidence after the trial. Although judges are sensitive to the need to protect confidential information, judges are also sensitive to the public’s right to observe trials. As a consequence, courts are less inclined to restrict public access to even parts of trials and from hearing all the evidence.

7. Publicity Unless the court orders that the parties not make any public comments about the proceedings (generally referred to as a “gag” order) the parties are free to issue press releases, make public statements or otherwise comment about ongoing litigation. Nonetheless, care needs to be taken about what is said. Although jurors are told not to read anything in the papers about the case or listen to any television reports or the like, it is rare in a patent case for a jury to be sequestered – that is prevented from going home to their families each evening and having their newspapers, internet and television access monitored. In general, the more prudent approach is to keep publicity to a minimum and restrict comments to general statements regarding a party’s faith in the judicial system and the common sense and wisdom of the court and the jury.

8. Burden of proof (1) Preponderance of the evidence. The patent owner has to prove infringement by an evidentiary standard known as “preponderance of the evidence.” This requires proof that infringement more likely exists than not. If the evidence tips the scale even slightly in the patent owner’s favor, the patent owner has satisfied its burden.51 “Preponderance of the evidence” is the standard used in establishing infringement irrespective of the basis for the infringement. For example, if the doctrine of equivalents is in issue, the patent owner must prove the equivalency of a structure or actions to a 51

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claim element by a preponderance of the evidence; active inducement of a claim requires proof by a preponderance of the evidence; contributory infringement needs to be established by a preponderance of the evidence; and infringement through the supply of components from the United States for combinations made abroad requires proof by the patent owner by a preponderance of the evidence.52 (2) Clear and convincing. “Clear and convincing evidence” is a much higher standard of proof than “preponderance of the evidence.” It requires that the trier of facts is left with a clear conviction that the fact has been proven. Where validity is challenged, the challenging party must prove invalidity by clear and convincing evidence.53 There are a limited number of instances in which the clear and convincing burden is also applicable to the patent owner. These include willfulness, which requires a determination by clear and convincing evidence that the alleged infringer acted recklessly. Willfulness also requires that the patent owner must prove by clear and convincing evidence that the infringer knew or should have known that its actions constituted an unjustifiably high risk of infringement of a valid enforceable patent.54 (3) Taking of evidence and means of evidence. Litigation is adversarial. The presentation of evidence is subject to the Federal Rules of Evidence (FRE). The FRE is applicable to both testimony and documentary evidence and is detailed and complex. The relevance and admissibility of documents and testimony is often disputed and it is the role of the judge to determine whether evidence offered by a party is admissible. The taking of evidence can be considered from three perspectives, namely, the taking of evidence in pre-trial discovery; the taking of evidence outside the United States; and the taking of evidence at trial in the United States. (3-1) Pre-trial discovery. In general, all evidence to be admissible at trial needs to comply with the Federal Rules of Evidence regarding admissibility. Nonetheless, it is not unusual prior to trial for discovery to be taken and in that process testimony is given which would not be admissible at trial. For example, unless it falls within some exception, hearsay evidence is not admissible at trial. Nonetheless, it is common to ask a witness during depositions what he or she may know about a subject. An answer might recount events described to the witness by a third party. At trial that evidence would be likely inadmissible as hearsay. However, in pre-trial proceedings it is acceptable because it is of assistance in seeking out admissible evidence. Thus the questioning in the context of a pre-trial deposition would be appropriate. Except in unusual circumstances pre-trial deposition testimony is taken by counsel before a court reporter at the offices of one of the attorneys and there is no judicial officer present to make determinations regarding the appropriateness of a question. In general, there is a significant risk if an attorney representing a witness directs a witness not to answer a question. If the attorney is wrong, the attorney and the client can be sanctioned. Therefore, objections generally relating to the form of the question are made to preserve the objection and to demonstrate the lack of clarity in the question. If the witness believes he or she understands the question, a response is required. Generally, objections become the subject of directions not to respond only when requested disclosure implicates privileges such as attorney/client privilege. 52

Bayer AG v. Elan Pharm. Research Corp., 212 F.3 d 1241, 1247 (Fed. Cir. 2000). See Microsoft Corp. v. i4 i Ltd. P’ship, 131 S. Ct. 2238, 2239, 180 L. Ed. 2 d 131 (2011). 54 Id. 53

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Often the judge, or more likely the Magistrate judge is available telephonically to resolve disputes during the deposition, but this is not the usual circumstance and disputes about the appropriateness of questioning generally are resolved by motions to the court seeking remedial action after completion of the deposition. (3-2) Evidence outside the United States. Obtaining testimony from witnesses or documents or other evidence located outside the United States has its own unique issues. In some instances there are special treaties that need to be complied with and there may be significant differences about what is permissible and what can be sought from documentation. If a country is a signatory to the Hague Convention, testimonial depositions may be taken in accordance with that Convention. If the country is not a signatory to the Hague Convention, then a party can ask the American court to issue a request for voluntary assistance of a court or other agency in a foreign country to compel the providing of evidence. In such instances it is up to the foreign country court to decide whether to honor the request. It must be noted that the fact that certain discovery is prohibited under foreign law does not prevent a United States court from requiring a party to a United States action to comply with the demand for it. If a party is properly before the United States court, the judge has the inherent power to order that party to comply with all of the court’s orders. Therefore, the court may impose sanctions for lack of compliance. This will depend upon how a court assesses the party’s good faith in declining to provide the discovery. Among its other roles, the Supreme Court of the United States administratively is the supervisory court for all federal courts. The Supreme Court has cautioned trial judges to be vigilant in protecting foreign litigants from unnecessary or unduly burdensome discovery to prevent discovery abuses. Therefore, in assessing whether to compel foreign discovery courts consider issues such as: 1. the importance of the discovery; 2. the specificity of the request; 3. the nexus of the information as potentially originating in the United States; 4. whether there are alternate means available to obtain the information; and 5. the extent to which non-compliance with the request would undermine important United States interests or compliance would undermine important interests of the country.55 (3-3) Evidence at trial. At trial only relevant evidence is admissible and a proper foundation needs to be established regarding authenticity of a document before it can be admitted. Similarly, witnesses need to testify on the basis of their own knowledge or if they are relying on what might otherwise be considered hearsay evidence, the testimony is only admissible if it is based upon an exception to the hearsay prohibition. To the greatest extent possible, most courts require the parties to meet and confer prior to trial and agree on authenticity and/or provide the court with a list of documents in which authenticity or admissibility is going to be contested. If either party is going to rely upon deposition testimony the party must provide to the court the excerpts that it wishes to rely upon and opposing counsel must identify any objections that it would have to the admissibility of the evidence. Therefore, although deposition testimony does not have to comply with rules relating to the 55 Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court for S. Dist. of Iowa, 482 U.S. 522, 532, 107 S. Ct. 2542, 2549-50, 96 L. Ed. 2 d 461 (1987).

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III. USA

admissibility of evidence, where it is likely that the witness will not be available for trial, it is important that the testimony taken at the deposition comply with evidentiary rules permitting admissibility or the deposition testimony will be excluded from trial. In general, witnesses testify live and under oath. The testimony being offered by a party by its own witness (generally referred to as “direct testimony”) is elicited in a question and answer format with the party’s attorney asking the witness questions and the witness responding. Leading questions are prohibited if directed to a party’s own witness. The questions need to be open ended so that they do not suggest the answer to the witness. Adversary counsel is then given the opportunity to cross-examine. An adverse witness can be cross-examined using leading questions with the examining attorney making a statement and then asking the witness on a yes or no basis whether he or she agrees or disagrees. The judge is permitted to ask questions and often does. However, given the judge’s role as being impartial, most judges refrain from interrupting the questioning of counsel or the use of questioning which might suggest a lack of credibility of a witness. Documents or other physical exhibits need to be introduced into evidence in a proper manner. Unless the admission of the evidence has been stipulated to by counsel, a proper foundation has to be laid for each exhibit. In addition to the exhibits, which are evidence, parties often use “demonstratives”, which are graphic presentations intended to summarize evidence or demonstrate technology. These are not admitted into evidence and the jury does not have access to them during deliberations. The content of demonstratives needs to be agreed upon by the parties and any disputes about the appropriateness of a demonstrative are resolved by the judge. Each side is entitled to an opening statement and a closing argument, but these are not considered evidence and the jury is cautioned to consider them solely as argument.

9. Costs Given the number of issues that can be raised; the complexity of the issues; the consequences to the patent owner and the alleged infringer and the prevalence of electronically stored information discovery, the cost of patent litigation in the United States is very high. Various surveys have indicated that it is not unusual for patent litigation to exceed $1-million U.S. dollars and in cases of greater significance to exceed $5-million U.S. dollars in fees and disbursements through trial. There have been reports that, as a percentage of revenue, multi-national company responding to a survey conducted by Duke University indicated that they spend a disproportionate amount on litigation in the United States relative to their expenditures in foreign jurisdictions. Despite the significant costs, it is only in exceptional circumstances that a successful party will be reimbursed its attorneys’ fees from the losing party. Under the Federal Rules of Civil Procedure 54(d)(1), a prevailing party in a federal court action is entitled to what are called taxable costs. The rule specifically excludes attorneys’ fees (unless the court otherwise directs). Under 28 U.S.C. § 1920, the categories of costs that are taxable are enumerated as follows: (1) Fees of the Clerk and Marshall; (2) Fees of the Court Reporter for all or any part of the stenographic transcript necessarily obtained for use in the case; (3) Fees and disbursements for printing and witnesses; (4) Fees for exemplification and copies of papers necessarily obtained for use in the case; 191

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(5) Docket fees; and (6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees and expenses, and cost of special interpretation services. What is also absent, in addition to the attorneys’ fees is the compensation for expert witness fees incurred by the party. Whether the cost of deposition transcripts is included generally requires a showing that they were reasonably necessary to the party’s case in light of the particular situation existing at the time of taking. Some district courts have specific rules which limit the reimbursement to depositions of persons who testified at trial, depositions admitted into evidence, or depositions which were submitted in summary judgment motions or other proceedings that terminated the litigation. The issue of reimbursement for video depositions is also determined on a case by case basis. Witness fees are based upon statutory witness fees. In general a fact witness is only entitled to $40 a day plus travel expenses and this is generally limited to 100 miles. In general, unless the court finds otherwise, copy costs of discovery documents are not taxable costs. However, many courts have liberalized their view on this issue. Successful litigants are now arguing that fees for exemplification and the costs of making copies of any materials necessarily obtained for use in a case should be reimbursed. They argue that e-discovery vendor services are “highly technical” and thus the costs associated with converting documents to electronic form for purposes of production were recoverable as being the 21st Century equivalent of making copies. The law is still developing and is not necessarily consistent among district courts. Even if the amounts potentially available as taxable costs may be increasing, in general they remain a small fraction of the actual costs of litigation. It is as yet unclear how the recent Supreme Court decision which gives the trial court judge greater flexibility in deciding whether a litigation is “exceptional” and therefore subject to fee shifting will result in a greater number of cases in which the loser pays attorneys fees. Nonetheless, caution would dictate that although pre-filing investigation be conducted and that the tactics employed in litigation are not violative of the Federal Rules.

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Part 8 Comparative aspects of Law and practice1 I. Territoriality In Japan and the United States decisions of infringement and revocation courts have a nationwide effect. In the absence of a Unitary Patent System, at present European patent enforcement is also based on national proceedings with effect limited to the territory of the designated states in which the action is brought. This situation will change after implementation of the Unitary Patent System foreseen in 2016. However, even after implementation of the Unitary Patent applicants will, have during a transitional period of 7 (extendable to 14) years the option to choose national enforcement of their European patents limited to one or more countries of the EU. For patents obtained nationally in the first instance national enforcement proceeding remains obligatory.

1 See Rahn, Patent Infringement Proceedings in Japan and Germany: Similarities and Differences, J. Japan. L special issue No. 3 (2011), 29; Heath, Patent Litigation in Japan and Germany: An introduction, J. Japan. L special issue No. 3 (2011), 13; Mu¨nsterer, Fallstricke und andere Besonderheiten der USPatentpraxis aus deutscher Sicht, MittdtPatA 2010, 332; Mu¨ller-Stoy, Grundzu¨ge des U.S.-amerikanischen Patentverletzungsverfahrens, GRUR Int 2005, 558; Klopschinski, Der Patentverletzungsprozess in Japan ¨ berblick u¨ber und Deutschland, GRUR Int 2010, 309; Koch, Reform des Patentrechts in den USA – Ein U die Vorschla¨ge zur Revision und Modernisierung des Patentgesetzes, GRUR Int 1975, 103; Calvetti/ Venturino, Zur Gu¨ltigkeit von Patenten in den USA: Mitteilungspflichten im Patenterteilungsverfahren und im Verletzungsprozess, GRUR Int 1988, 815; Ruess, Der U.S. Court of Appeals for the Federal Circuit und seine Bedeutung im U.S.-Gerichtssystem unter besonderer Beru¨cksichtigung des U.S. Supreme Court, GRUR Int 2011, 1; Wehr, Die Rechtskraftwirkung von Entscheidungen u¨ber die Nichtigkeit von Patenten in den USA – die Entscheidung in Blonder-Tongue und ihre Auswirkungen, GRUR Int 1973, 131; Pakuscher, Das neue zentrale Berufungsgericht in den USA – ein Schritt in die europa¨ische Richtung – Dem alten und neuen Chef-Richter Howard T. Markey, GRUR Int 1983, 71; Hufnagel, Ausweitung des Versuchsprivilegs in Europa und den USA – Verschiebung der Grenzen zwischen Patentschutz und Versuchsfreiheit bei Arzneimitteln, PharmR 2006, 209; Reitboeck, Das rechtliche Umfeld fu¨r (und gegen) ¨ berblick u¨ber wichtige Entwicklungen der letzten Jahre, nicht operative Patentinhaber in den USA – Ein U GRUR Int 2013, 419; Rahn, Patentstrategien japanischer Unternehmen, GRUR Int 1994, 377; Heath, Erlangung und Durchsetzung von Patentrechten in Japan, GRUR Int 1998, 555; ders., Fallstricke und andere Besonderheiten der US-Patentpraxis aus deutscher Sicht, MittdtPatA 2010, 332; Bodewig, Erscho¨pfung der gewerblichen Schutzrechte und des Urheberrechts in den USA, GRUR Int 2000, 597; Bodewig, Nichtangriffspflichten des Vera¨ußerers im US-amerikanischen Patentrecht, GRUR Int. 2004, 918; Someno, Grundlagen und Probleme des japanischen Patentrechts, GRUR Int 1994, 371; Abe, Ikubo & Katayama, Japanese Patent Litigation, 1st Edition 2009; Kimijima, Das Patentnichtigkeitsverfahren in Japan, GRUR Int 1996, 986; Bergen-Babinecz/Hinrichs/Jung/Kolb, Zum Schutzbereich von US-Patenten: Festo und eine deutsche Sicht, GRUR Int 2003, 487; Rauh, Mittelbare Patentverletzung in Deutschland, Japan und den USA, GRUR Int 2010, 459; Brinks/Fritze, Einstweilige Verfu¨gungen in Patentverletzungssachen in den USA und Deutschland, GRUR Int 1987, 133; Ohly, “Patenttrolle” oder: Der patentrechtliche Unterlassungsanspruch unter Verha¨ltnisma¨ßigkeitsvorbehalt? – Aktuelle Entwicklung im USPatentrecht und ihre Bedeutung fu¨r das deutsche und europa¨ische Patentsystem, GRUR Int 2008, 787; Pagenberg, Die amerikanische Schadensersatzpraxis im gewerblichen Rechtsschutz und Urheberrecht – Mehrfacher Schadensersatz fu¨r Patentverletzungen als Modell fu¨r Europa, GRUR Int 1980, 286.

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II. Collection of evidence and experts2 A major characteristic of United States litigation is its pretrial discovery procedure which is not available in the German and Japanese systems. Based on a “short and plain” statement of claim and the defenses set forth in the initial pleadings of the parties the discovery phase begins within a timeline established in a pre-trial order. The broad scope of disclosure that is permitted is one of the hallmarks of litigation in the United States3. A party may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense- including mandatory disclosure of the existence, description, nature, custody, condition and location of any documents or other tangible things and the documents have to be made accessible to the other party’s counsel. In addition, the parties must disclose the identity and location of persons who know of any discoverable matters with a right to subject them to pre-trial depositions.4 Although a fishing expedition” based on mere speculation is excluded, nonetheless inquiry is not limited to information that is admissible at trial. Rather it extends to information reasonably calculated to lead to the discovery of admissible evidence. Given the costs and what is often disclosed in discovery many United States patent litigations are settled. Only approximately 10 % of the litigations proceed to a full trial on the merits. In contrast to the situation in the United States, the scope of disclosure in Germany is much narrower and limited to inquiries related to missing features in the patent claim. “Disclosure Proceeding” seeking to investigate facts and circumstances (“Ausforschungsbeweise”) are not available in German and Japanese patent litigation. Therefore a party is generally not under an obligation to disclose confidential information to another party that it does not wish to share it. A party is generally free to decide whether information, shall be disclosed to the other party. Depositions in United States proceedings may take place abroad including in Japan or Germany. In many cases “agreed on depositions” have been done in Germany without the need of involvement of German authorities. Such depositions are nonetheless governed by the provisions of the “Hague Convention of March 18, 1970 on the taking of evidence abroad in civil or commercial matters”. According to the Hague Convention formal requirements have to be respected. As a result, the German Ministry of Justice has to pre-approve all requests for depositions which have to be conducted at the United States Consulate General in Frankfurt. Depositions taken without the prior approval of the German Ministry of Justice are considered to be unauthorized and may lead to criminal penalties against the participants. The formal requirements are outlined in the instructions available from the Consulate General of the United States in Frankfurt. According to these instructions a copy of the notice of deposition issued by the United States court has to be provided to the American Consulate General in Frankfurt together with the deposit of an initial scheduling fee in the amount of 1,283.– United StatesD the required information includes: – case name and related docket number – location of the United States court where the case will be adjudicated 2 Maxeiner, Der Sachversta ¨ndige in Patentrechtsstreitigkeiten in den USA und Deutschland, GRUR Int 1991, 85; Henry, Pretrial Discovery in USA: Exterritorialer Einfluss auf Durchsetzung und Benutzung von gewerblichen Schutzrechten, GRUR Int 1983, 82; Scho¨nknecht, Beweisbeschaffung in den USA zur Verwendung in deutschen Verfahren, GRUR Int 2011, 1000; USA – Auslegung von Patentanspru¨chen durch Jury oder Richter, GRUR Int 1995, 915; Pfeiffer, Ha¨tte Columbus gewusst, was aus seiner “discovery” wird – das “discovery”-Verfahren im amerikanischen Patentverletzungsprozess, GRUR Int 1999, 598. 3 American Standard, Inc. v. Pfizer, Inc., 828 FG. 734 (Fed. Cir. 1987). 4 Fed R Civ P 26 (b)(1).

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II. Collection of evidence and experts

– full name(s) of all witnesses, nationality(ies), complete German home address(es) and phone number(s) – brief description of the case with special focus on the appropriate standards of the American procedural and substantive laws – proposed date for the deposition. Depositions in Japan are also very restricted. They must take place at a United States Consulate and are also subject to very strict rules and procedures. It is often very difficult to schedule the deposition in view of the limited availability of the Consulate. Often, the parties therefore agree to conduct the deposition outside of Japan. The results of United States disclosure proceedings may have an impact on parallel infringement proceedings in other non-United States jurisdictions although often, as part of a protective order in the United States litigation, the use of confidential information is restricted to the United States litigation and cannot be used in foreign proceedings. Violation of protective orders may lead to monetary or other sanctions.Nonetheless, knowledge of an adversary’s weakness obtained through discovery in an United States action often leads to settlement negotiations. In addition discovery is also available in United States Courts in aid of non-United States legal proceedings5 The United States district court may order a person to give testimony or statements, or to produce documents or things for use in German or Japanese proceedings. The order may be made pursuant to a request made by a foreign court or upon application of the interested person (28 United StatesC § 1782). Legal advice sought from a professional legal advisor in his capacity as such, are generally protected from disclosure unless the protection is waived either expressly or through an action of a party that caused the privilege to be lost – such as disclosing the communication to another. As a consequence generally between attorney and client are permanently protected based on professional confidentiality obligations in Japan and Germany and the attorney-client-privilege in the United States. In the United States, there is also an attorney Work Product privilege which prevents disclosure of an attorneys’ analysis. Whether communications between clients or United States attorneys and non-United States attorneys are protected by an Attorney-Client Privilege or Work Product in the United States is often the subject of dispute and subject to review by United States courts6. Generally, the privilege is protected. The use of experts7 to provide evidence is admissible in each jurisdiction. In German proceedings private expert statements are often used to support the parties’ arguments. In case of disputed facts the court may nominate ex officio a neutral court expert. The neutral expert is asked to clarify technical issues which are outside of the expertise of the judges. In the United States proceedings private experts are retained by each party. These experts explain technical issues to the jury and the judges. In the United States, a party offering by an expert must establish the witnesses’ expertise. The court decides whether the expert has the suitable qualifications to testify. The trier of the facts (judge or jury) then decides whether to accept or reject the expert’s opinion testimony. In Japanese proceedings judges are assisted by technical research officials. For this reason in Japan experts are only appointed in exceptional cases in infringement proceedings.

633 F. 3 d 591 (7th Cir. 2011) = GRUR Int 2011, 361; Scho¨nknecht GRUR Int. 2011, 1000. Soft View Computer Products Corp. and Ergo View Technologies Corp. versus Haworth, Inc., 2000 U.S. Dist. LEXIS 4254 (S.D.N.Y.); Santrade Ltd. V. General Electric Co., 150 F.R.D. 539, 547 (E.D.N.C. 1993). 7 Cf. Maxeiner, Der Sachversta ¨ndige in Patentrechtsstreitigkeiten in den USA und Deutschland, GRUR Int 1991, 85. 5 6

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III. Courts, jury and judges In Japan and Germany 1st Instance patent litigation proceedings are handled by specialized district court chambers whereas Federal district courts in the US are not specialized to handle patent disputes. However, in the US all patent litigation appeals are heard by the Court of Appeals for the Federal Circuit. The centralized 2nd Instance in Japan is the IP High Court in Tokyo. In Germany the 2nd Instance is not centralized. A major difference between the United States system on the one hand and the German and Japanese system on the other hand is the jury system in the United States. In Germany and Japan decision makers are professional judges deciding both questions of fact and law. In the United States, juries decide issues of fact. The judge decides the legal issues. In contrast to Germany and the United States, there are so-called court research officials at the Japanese infringement courts to advise the judges on the technical aspects of litigation. In Germany technical judges are obligatory in nullity proceedings before the Federal Patent Court. In the United States, the judges need not have any technical training and usually do not. In Japan the legally qualified judges are assisted by technically qualified research officials.

IV. Validity objection One of the fundamental differences between the United States and the German patent litigation system relates to the procedures seeking invalidation of the patent in suit. Under the German “dual system” the alleged infringer has to start separate revocation proceedings before the German patent and trademark office, the EPO or the Federal Patent Court. The defendants in the United States litigation proceedings have the ability to challenge validity within the infringement proceedings. The recently enacted United States Patent Law also permits seeking a parallel prior art validity challenge before the Patent Office. The Patent Office will not accept the validity challenge unless it can be shown that there is a significant likelihood that the challenge is justified. Such a PostGrant-Review is similar to the European opposition proceedings. In Japan the strict separation of infringement and invalidity proceedings was abolished with a landmark decision of the Japanese Supreme Court in 2000. In Japanese patent infringement proceedings the defense of invalidity of the patent can be raised.8 Infringement courts can reject the infringement claim based on defendant’s invalidity objections even prior to the issuance of a final decision on validity granted in revocation proceedings9.

V. Infringement10 The doctrine of equivalence is available in all three jurisdictions, although different standards apply. In the United States the relevant criteria such as “function-way-result8 Rahn, Patent Infringement proceedings in Japan and Germany: Similarities and Differences, I. Japan L, special Issue No. 3 (2011), 29; Heath, The Enforcement of Patent Rights in Japan, IIC Vol. 31 No. 6 (2000) 749) 9 Meier-Beck, The interaction between infringement and invalidation decisions in German patent disputes, I. Japan. L. Special Issue No. 3 (2011), 63 10 Bergen-Babinecz/Hinrichs/Jung/Kolb, Zum Schutzbereich von US-Patenten: Festo und eine deutsche Sicht, GRUR Int 2003, 487; Rauh, Mittelbare Patentverletzung in Deutschland, Japan und den USA, GRUR Int 2010, 459; id.,United StatesA-Auslegung von Anspru¨chen ist Rechtsfrage, GRUR Int 1995, 433;

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test” and “prosecution history estoppels” are defined by case law. In Germany and Japan statutory provisions plus case law are relevant. In all jurisdictions the priority date is decisive to determine the perspective of the person skilled in the art. In the United States, as in Japan and Germany a similar principle restricts the range of equivalence if the infringer was working within the prior art11. These pricnicples are known in the United States as “prior art limitation”, in Germany as “Formstein defence” and as “objection of free technology” in Japan. As in Japan and Germany acts of direct patent infringement in the United States are explicitly enumerated in statutory provisions of the law. “Indirect patent infringement” or “contributory infringement” is provided for in all three jurisdictions. In Germany, there have been an increasing number of indirect infringement cases Indirect infringement is less likely to be established in Japanese and United States proceedings. In the United States the knowledge and intent of the indirect infringer concerning existence and exploitation of a patent is required, which is not the case in Germany. In Japan knowledge and intent of the indirect infringer is required with the exception of cares where the infringing product does not have any other meaningful uses that the production of the patented product, or the use for the patented process. In contrast to the situation in Germany and Japan the judge in United States patent litigation proceedings decides the issue of the interpretation of claims. The United States proceeding is known as a “Markman hearing”. There is no requirement that the Markman hearing take place at a particular time during the litigation, although many judges seek to have the hearing at a relatively early stage of proceedings so that a clear picture about the scope of protection and their respective burden of evidence will be available to the parties well before trial. Nonetheless, this is not always the situation and often significant discovery takes place before the Markman hearing.

VI. Injunctions12 According to United States law (35 United StatesC. 283) a request for permanent injunction after trial is not automatically granted. Rather, it is governed by equity principles. The decision whether to grant an injunction is in the discretion of the court which has to take into account the circumstances of the case. The United States Supreme Court in EBay v. MercExchange held that a four-factor test has to be applied which balances the interests of the parties and the public. According to the Federal Circuit (Spansion v. ITC) the four-factor test for granting permanent injunctions in patent infringement cases does not apply to cases before the ITC13. ITC proceedings only seek an exclusionary order against importation and is often initiated along with a parallel court action. In contrast to the legal situation in the United States the grant of an injunction in German patent infringement proceedings is based on a binding decision, which solely requires an act of infringement (danger of commission or danger of repetition of Fabry, Kein Stoffschutz ohne Verfahrensbenutzung? Zur ju¨ngsten Standortbestimmung des Product-byProcess-Anspruchs in den USA, GRUR Int 2009, 803; Mehler, Das Prosecution History Estoppel im USPatentrecht, GRUR Int 2006, 278; Calvetti/Hughes, Mittelbare Verletzung und Anstiftung zur Verletzung im US-Patentrecht, GRUR Int 1993, 833 11 Wilson Sporting Goods v. David Geoffrey & Associates, Fed. Circuit 1990; 904 F. 2 d 677, 14. 12 Brinks/Fritze, Einstweilige Verfu ¨ gungen in Patentverletzungssachen in den USA und Deutschland, GRUR Int 1987, 133; Ohly, “Patenttrolle” oder: Der patentrechtliche Unterlassungsanspruch unter Verha¨ltnisma¨ßigkeitsvorbehalt? – Aktuelle Entwicklung im US-Patentrecht und ihre Bedeutung fu¨r das deutsche und europa¨ische Patentsystem, GRUR Int 2008, 787. 13 Mitteilungen 2011, 122; Federal Supreme Court, GRUR Int 2006, 782 – Ebay.

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infringing activities). Equitable principles do not play a role. As a consequence permanent injunctions have to be granted automatically. The situation is different in case of preliminary injunctions14. In what many consider a surprising decision, the District court of Du¨sseldorf15 held that a non-practicing entity should not be entitled to a preliminary injunction and must await a decision in main proceedings, but that decision does not bind the other German courts. In contrast to German law in the United States it ispossible to obtain a preliminary injunction at the beginning of a lawsuit or at any time through trial16. A preliminary injunction is, however, only granted in extraordinary circumstances in cases where the patent owner can show a high likelihood of success and that the balance of hardship between the patent owner and the infringer tips in favor of the patent owner and that the preliminary injunction would not be contrary to the public interest. Even if the requirement of “irreparable harm” exists, United States courts have a broad scope of discretion in preliminary injunction proceedings. In Germany, the difference in court practice between Du¨sseldorf, Mannheim, Munich and Hamburg has to be taken into account – especially in view of the urgency requirement. “Irreparable harm” is not required in order to get a preliminary injunction in Germany, but there are high requirements concerning the validity of the patent in suit. The preliminary injunction proceeding in Japan is an independent and separate proceeding from the ordinary infringement proceedings. Nonetheless, preliminary injunction requests are often filed in parallel with main actions. In such cases it is the practice to have preparatory hearings for both proceedings at the same time. A hearing of the alleged infringer is obligatory. In contrast to the German system – there is no time limit for filing an injunction request. Whereas “ex parte” preliminary injunctions without hearing the alleged infringer are principally excluded in Japan and the US, they are available in Germany in urgent cases of clear cut infringement of a valid patent. This is why protective letters are quite common in Germany but not relevant in Japan and the United States.

VII. Damages17 The prominent way to calculate damages in Germany is based on the infringer’s profits. In the United States an infringer’s profits is only available for design patent infringement. In Japan an infringer’s profits can even be claimed if the rights holder does not commercialize patent protected products. Whereas under German law damages claims based on lost profits play a minor role, it is the predominant way of calculation in Japan. In the United States, lost profits of the patent owner and (in the absence of proof of lost profits) reasonable royalty play a major role in the litigation. Lost profits are not limited to the decrease of expectable profits of the patent holder but cover incremental profits that the patent owner would have made. In contrast to the principles in Germany infringer’s profits can be taken into account in Japan in order to calculate lost profits. The calculation of royalties in the United States is based on similar principles to those in Germany and Japan. The calculation is based on “established” or “reasonable” 14

Fitzner/Lutz/Bodewig/Pitz, § 139 No. 74. LG Du¨sseldorf GRUR 2000, 692 – NMR Kontrastmittel. 16 Vgl. Brinks/Fritze, Einstweilige Verfu ¨ gungen in Patentverletzungssachen in den United StatesA und Deutschland, GRUR Int 1987, 133. 17 Pagenberg, Die amerikanische Schadensersatzpraxis im gewerblichen Rechtsschutz und Urheberrecht – Mehrfacher Schadensersatz fu¨r Patentverletzungen als Modell fu¨r Europa, GRUR Int 1980, 286. 15

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royalties. “Punitive damages” and/or “treble damages” are available in cases of wilfullness in the United States but these remedies are not available in Europe and Japan.

VIII. Costs Patent litigation in the United States is in general far more expensive rather than litigation in Germany and Japan. Average costs of United States litigation proceedings are in the range between one and four million dollars, whereas costs in Germany and Japan usually do not exceed E 500,000. The greater costs in the United States are primarily related to the discovery proceedings. In Japan attorneys fees are not be remunerated, but only court costs. However, courts costs are almost ignorable in comparison with the value in dispute. Attorneys fees are not fully, but sometimes partially recognised as a part of damages. Whereas in Germany the losing party has to remunerate attorney fees and court costs calculated on basis of fee regulations, parties in United States proceedings principally have to bear their own attorney fees. However, in the United States in cases of willful patent infringement or abuses in the litigation process a party may be ordered to pay the reasonable attorney fees of the patent owner.

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Index Abuse of patent rights (J) – Objections in patent litigation 84 Active inducement (USA) – US patent litigation system 38 Administrative Law Judge (ALJ) 15 Adversarial system – Germany 156 f. – USA 186 AIA procedures (USA) – Contested Business Methods (CBM) 97 f. – equitable estoppel 99 f. – experimental use 98 f. – IPR 96 f. – Laches 99 – Post Grant Review (PGR) 97 – prior use rights 98 – prosecution laches 100 – statute of limitation 99 – supplemental examination 96 – unclean hands 100 Alleged infringer (G) 124 f. American Inventions Act (USA) 15 Anti-trust defence – Germany 67 f. – USA 87 f. Appeal (J) 12, 142 Assignation of judge (USA) 13 Attorneys of record (G) 126 „Ball Sprine“ judgment (J) Begin of oral proceedings (J) 140 Bolar exemption (G) 72 f. Burden of demonstration and burden of proof (G) 159 f. Burden of demonstration and burden of proof (J) – burden of demonstration 179 f. – burden of proof 180 ff. see Burden of proof (J) Burden of proof (J) – for compensation of damages 180 – for equivalent infringement 180 – for literal infringement 180 – procedural measures easing burden of proof related to calculation of damages 182 ff. – procedural measures easing burden of proof related to infringement 180 f. Burden of proof (USA) – clear and convincing evidence 189 – evidence at trial 190 f. – evidence outside the USA 190 – preponderance of the evidence 188 f. – pre-trial discovery 189 f. – taking of evidence and means of evidence 189 ff. Calculation of damages (G) – hypothetical license fee 53 f.

– infringer’s profit 53 f. – lost profit 52 Calculation of damages (J) – hypothetical license fee 53, 57 – lost profit 57 f. Claims of patent holder (G) 51 ff. – costs 54 – damages 52 f. – destruction 54 – disclosure of source of origin and of purchaser 54 – injunctive relief 51 – legal basis 51 ff. – removal of infringed goods 54 – rendering accounts 51 f. Claims of patent holder (J) 54 ff. – damages 55 ff. – injunctive relief 54 f. Claims of patent holder (USA) 62 ff. – accounting and monetary relief 63 ff. – attorney’s fees 67 f. – costs 66 – damages 65 – destruction 66 – disclosure of source of origin and of purchaser 65 f. – injunctive relief 62 ff. – removal of infringed goods 66 Collecting information (J) 44 ff. Collection of evidence and experts 194 f. Complaints (J) 10 Compulsory licence (G) 67 see also Objections in patent litigation (G) Concentration of examination of witnesses and parties (J) 184 Conclusion of oral proceedings (J) 141 Contested Business Methods (CBM) (USA) 97 f. Contributory infringement (USA) 38, 191 f. Costs 163 ff., 199 Costs (G) 3 see also Liability of loosing party to pay the costs (G) Costs (USA) 14 Counter-warning (G) 115 Counter-warning (J) 115 ff. – based on patent 115 f. – based on unfair competition 116 f. Counter-warning (USA) 118 f. Course of proceedings (J) 10 f. Court experts (G) 126 f. Court system – Unitary Patent 6 see Unitary patent Cross-border enforcement (G) 4 Damages 198

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Index Damages (G) 52 f. – basic principle 52 – calculation 52 f. – hypothetical license fee 53 – infringer’s profit 53 – lost profit 52 f. – obligation to pay 52 Damages (J) 55 ff. – calculation 57 – claimant for damages 55 f. – compensation for the use of the opened invention before grant of patent 61 – costs 62 – judicial practice 56 – legal basis 55 – prevention of further infringement 62 – procedural claims 61 f. Damages (USA) 65 Damages and account of profits (G) 3 Description and drawings (J) 26 f. Destruction – Germany 54 – USA 66 Direct patent infringement (G) 23 f. – product patent 23 – process patent 23 – product by process patent 23 f. Direct patent infringement (J) 32 ff. Direct patent infringement (USA) 36 ff. – equivalency and file history estoppel 37 – equivalency and the prior art 37 – requirements of equivalents 36 – time of equivalents determination 37 Disclosure of source of origin and of purchaser – Germany 54 – USA 65 f. Discovery (USA) 14, 186 f. Doctrine of equivalents (G) – basic principles 20 – emphasis in description 21 – file history 20 – Formstein Defence 19 f. – German patent litigation system 18 – Gillett defence 20 – numerical data and ranges in patent claim 22 – person skilled in the art 20 – requirements of equivalents 18 f. – time of equivalence determination 22 f. Doctrine of equivalents (J) – „Ball Sprine“ judgment 28 f. – identical function and effect despite replacement 30 – Japanese patent litigation system 28 ff. – numerical data and ranges in patent claim 32 – objection of free intentional exclusion 31 – objection of free technology 31 – obviousness of replacement at the time of infringing 31 – replacement of unessential elements 29 f. „Double Track“ system (J) 165 ff. Dual system (G) 2 f., 151 f

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Enforcement – Unitary Patent 6 see Unitary patent system Equitable estoppel (USA) 99 f. Equivalency and file history estoppel (USA) 37 Equivalency and the prior art (USA) 37 European patent litigation system 1 ff. – forum shopping 1 – German system 1 ff. see also German patent litigation system – unitary patent system 5 ff. see Unitary Patent system Exclusionary order (USA) 15 Exhaustion of patent rights – Germany 73 f. – Japan 82 ff. Experimental use (USA) 98 f. Experts – Germany 126 f. – USA 14 f. Fact finding (G) 41 ff. – information claim 43 – inspection claim 41 f. – investigation by public prosecutor 43 – private expertise 41 – product analysis 41 – professional confidentiality obligation 43 f. – seizure by customs authorities 42 f. – test-purchase 41 Fact finding (J) 44 ff. – collecting information 44 ff. – investigation by public prosecutor 46 f. – preservation of evidence 45 – product analysis 44 – seizure by custom authorities 46 – test-purchase 44 Fact finding (USA) 47 ff. – government participation 49 – pre-filing discovery 48 – pre-filing investigation 47 – product analysis 47 – seizure by custom authorities 48 File history (G) 20 Filling of complaint – Germany 128 – Japan 138 – (USA) 147 Final remedies (G) 3 Formstein Defence (G) 19 f. Forum shopping 1 FRAND (J) – Objections in patent litigation 84 f. General guidelines for patent litigation (USA) 13 ff. Gillett defence (G) 20 Government participation (USA) – fact finding 49 see Fact finding (USA) Identical function and effect despite replacement (J) 30 see Patent litigation system (J)

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Index Indirect patent infringement (G) 23 f. – general principles 24 – material requirements 25 f. Indirect patent infringement (J) 33 ff. – new types of provisions 34 f. – old types of provisions 34 Indirect patent infringement (USA) 38 ff. – active inducement 38 – contributory infringement 38 – supplies from U.S. for combinations made abroad 38 f. Indirect patent infringement (USA) by sale, offer for sale, use or importation of a product made outside the USA by patent process 39 Information claim (G) 43 Infringement 196 f. Infringement by sale, offer for sale, use or importation of a product made outside the USA by patent process (USA) 39 Infringement matter (G) 17 ff. – scope of protection 17 ff. see Scope of protection (G) Infringement matter (J) 26 ff. – scope of protection 26 ff. see Scope of protection (J) Infringement matter (USA) 35 ff. – scope of protection 35 ff. see Scope of protection (USA) – types of patents 39 f. see Types of patents (USA) Infringement proceedings (G) 123 ff. – jurisdiction and courts 123 – parties and participants 123 f. see Parties and participants to infringement proceedings – procedure 128 ff. see Procedure of infringement proceedings (G) Infringement proceedings (J) 230 ff. – jurisdiction 130 ff. see Jurisdiction in infringement proceedings (J) – parties and participants 133 ff. see Parties and participants to infringement proceedings (J) – procedure 138 ff. see Procedure of infringement proceedings (J) Infringement proceedings (USA) 143 ff. – jurisdiction 143 f. – parties and participants to infringement proceedings 144 ff. see Parties and participants to infringement proceedings (USA) – procedure 147 ff. see Procedure of infringement proceedings (USA) Injunction 197 f. Injunctive relief – Germany 3, 51 – Japan 54 f. – USA 62 ff. Inspection claim (G) 41 f. International Trade Commission (ITC) (USA) 15

Invalidation an parallel patent office proceedings (USA) anticipation and other sec. 102 statutory bars 90 ff. Invalidation an parallel patent office proceedings (USA) anticipation and sec. 102 statutory bars 89 ff. Invalidation an parallel patent office proceedings (USA) obviousness and person of ordinary skill 92 ff. Investigation by public prosecutor – Germany 43 – Japan 46 f. Investigative principle (G) 157 f. IPR (USA) 96 f. Judges and attorneys – Unitary Patent 7 see also Unitary patent system Judgment and appeal – Germany 129 – Japan 11, 141 f. – USA 149 f. Judicial information obligation – Germany 157 f. – Japan 174 f. Jurisdiction in infringement proceedings (J) – claims for compensation of damages 132 – injunction claims 131 f. – international jurisdiction 130 f. – national jurisdiction 132 f. Jury (USA) 187 f. Jury and judges 196 Laches (G) – Germany 73 – USA 99 Legal judge – Germany 158 – Japan 175 f. Legal licenses (J) – based on prior use 75 f. – objections in patent litigation 75 f. – types 75 Liability of loosing party to pay the costs (G) 163 f. – value of the matter in dispute 164 f. Liability of the loosing party to pay the costs (J) 184 License agreement (G) – objections in patent litigation 67 see also Objections in patent litigation (G) License agreement (J) – objections in patent litigation 74 ff. see also Objections in patent litigation (J) License agreement (USA) – objections in patent litigation 88 f. see also Objections in patent litigation (USA) Literal scope of claim (J) 26 f. Litigation costs (J) 9 f. Managing director as defendant (G) 126 f. Medical treatment (J) – objections in patent litigation 82 see also Objections in patent litigation Non-Practising-Entities (NPE) (USA) 14

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Index Numerical data and ranges in patent claim – Germany 22 – Japan 32 Objection of free intentional exclusion (J) 31 Objection of free technology (J) 31 Objections in patent litigation (G) 67 ff. – anti-trust defence 67 f. – compulsory licence 68 – exhaustion of patent rights 73 f. – laches 73 – licence agreement 67 f. – prior use right 69 f. – revocation action 69 – statute of limitation 73 – test privilege 70 Objections in patent litigation (J) 74 ff. – abuse of patent rights 84 – exhaustion of patent right 82 ff. – experimental purpose 80 f. – expiration of patent rights 79 f. – FRAND 84 f. – legal licenses 75 – license 74 ff. – license granted by Commissioner 74 f. – medical treatment 82 – parallel import 83 f. – passing vessels or aircrafts 81 f. – private use 80 – restriction of patent rights 79 ff. – statute of limitation 85 – validity of invention 76 f. Objections in patent litigation (USA) 85 ff. – AIA procedures 96 ff. see also AIA procedures(USA) – anti-trust defence 87 f. – challenges outside the US court system 94 ff. – defenses 85 ff. – enablement 86 – FRAND 87 f. – inequitable conduct 86 f. – invalidation an parallel patent office proceedings 89 ff. – inventorship 86 – license 88 f. – prior art 94 – written description requirement 85 Obviousness of replacement at the time of infringing (J) 31 Oral hearing – Germany 129 – USA 148 f. Parallel import (J) – Objections in patent litigation 83 f. see also Objections in patent litigation (J) Parties and participants to infringement proceedings (G) – alleged infringer 124 f. – attorneys of record 126 – court experts 126 f. – defendant 124 f. – experts 126 f. – licensee 124

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– managing director as defendant 126 f. – parties 123 – party- appointed expert 127 – registered patent holder 123 – right to sue 123 f. – several patent owners 123 f. – third party intervention 127 – two or more infringers 125 Parties and participants to infringement proceedings (J) – courts 133 – defendants 135 f. – experts 137 – plaintiffs 133 ff. – representative of civil procedure 136 f. – third parties 137 Parties and participants to infringement proceedings (USA) – adding of additional parties 145 – court 144 – experts 146 – necessary and permissible parties 144 f. – representatives 145 f. – rights of action 145 – third party participation 146 f. Party- appointed expert (G) 127 Passing vessels or aircrafts (J) – Objections in patent litigation 81 f. see also Objections in patent litigation (J) Patent infringement procedure – Germany 2 – Japan 7 ff. Patent litigation system – European System 1 ff. see European patent litigation system Patent litigation system (G) 1 ff. – costs 3 – cross-border enforcement 4 – damages and account of profits 3 – direct patent infringement 23 f. see Direct patent infringement – dual system 2 f. – final remedies 3 – indirect patent infringement 23 f. see Indirect patent infringement – injunction 3 – matter of infringement 17 ff. – patent infringement procedure 2 – removal and destructions 3 – time to trial 3 – torpedo actions 4 f. Patent litigation system (J) 7 ff. – Appeals 12 – complaints 10 – course of proceedings 10 f. – direct patent infringement 32 ff. – „double track“ system 7 f. – indirect patent infringement 33 ff. see Indirect patent infringement – infringement matter 26 ff. – judgments 11 – litigation costs 9 f.

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Index – patent infringement procedure 7 ff. – statistics 9 Patent litigation system (USA) 12 ff. – Administrative Law Judge (ALJ) 15 – American Inventions Act 15 – assignation of judge 13 – costs 14 – direct patent infringement 36 ff. see Direct patent infringement – discovery 14 – exclusionary order 15 – experts 14 f. – general guidelines 13 ff. – indirect patent infringement 38 ff. see Indirect patent infringement – Infringement matter 35 ff. – International Trade Commission (ITC) 15 – judicial system 13 – jurisdiction 12 f. – matter of infringement 35 ff. see Infringement matter – Non-Practising-Entities (NPE) 14 – „preponderance of evidence“ 13 – right to sue 14 Person of ordinary skill (USA) 92 ff. – level of ordinary skill 94 Person skilled in the art (G) 20 Post Grant Review (PGR) (USA) 97 Pre-filing discovery (USA) 47 f. Preliminary injunction (G) 102 ff. – damages 105 – enforcement and remedies 104 f. – infringement 103 – procedural principles 102 f. – proportionality 104 – summary proceedings 102 – urgency 104 – validity of the patent of disposal 103 Preliminary injunction (J) 106 ff. – dismissal 111 – hearing 109 f. – immediate appeal 111 – issue of an order for preliminary injunction 112 – jurisdiction 108 – nature as provisional measure 106 f. – petition 108 f. – prerequisites 107 ff. – prima facie evidence 110 f. – procedure 108 ff. – reasons 106 – relation to ordinary injunction 109 – revocation 112 f. Preliminary injunction (USA) 114 Preparatory proceedings (J) 140 f. Preponderance of evidence (USA) 13 Pre-procedural measures (G) – infringer 115 ff. see Pre-procedural measures of infringer (G) – patent holder 101 ff. see Pre-procedural measures of patent holder (G) Pre-procedural measures of infringer (G) – counter-warning 115

– negative declaratory action 115 – protective letter 115 – request for injunctive relief due to unauthorized patent claim 115 Pre-procedural measures of infringer (J) – counter-warning 115 ff. see Counter-warning (J) – declaratory judgment 118 – protective letter 117 Pre-procedural measures of infringer (USA) – counter-warning 118 f. – declaratory judgment 120 – opinions of counsel 119 f. – protective letter 118 f. – request for injunctive relief due to unauthorized patent claim 120 f. Pre-procedural measures of patent holder (G) 101 ff. see Pre-procedural measures of patent holder (G) – Warning letter 101 ff. see Warning letter (G) Pre-procedural measures of patent holder (J) 105 f. see Pre-procedural measures of patent holder (J) – preliminary injunction 106 ff. see Preliminary injunction (J) – Warning letter 101 ff. see Warning letter (J) Pre-procedural measures of patent holder (USA) 113 ff. see Pre-procedural measures of patent holder (USA) – injunctive relief 114 – warning letter 113 f. Preservation of evidence (J) 45 Principle of binding natures of the application (G) 153 Principle of concentration (G) 163 Principle of oral presentation and publicity (G) 159 Principle of party control (G) 152 ff. – acceptance 154 – changes in facts or law 154 f. – commencement and termination of proceedings 153 f. – invalidation or restriction of the patent-in-suit 155 f. – principle of binding natures of the application 153 – settlement 154 – substantive motions 152 f. – withdrawal of action 153 f. Principle of party disposition (J) 168 ff. Principle of party disposition (J) – acknowledgment of claim 171 f. – amicable settlement 172 – discretion of the patent holder to specify claim 168 – initiative of alleged infringer 168 f. – party discretion regarding ending of procedure 170 ff. – specification of objects of claim 169

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Index – specification of parties 169 f. – waiver of claim 171 – withdrawal of action 170 f. Principle of party presentation (J) 172 ff. Principles of orality and publicity (J) 176 ff. – definition 176 f. – exceptions 177 – limitations 177 – protective order 177 ff. – suspension of opening the examination of parties to the public 179 Prior art (J) 27 Prior use rights (USA) 98 Private expertise (G) 41 Procedural guidelines (G) 129 f. Procedural principles (G) 151 ff. – adversarial system 156 f. – burden of demonstration and burden of proof 159 f. – dual system 151 f – investigative principle 157 f. – judicial information obligation 157 f. – legal judge 158 – liability of loosing party to pay the costs 163 ff. see Liability of loosing party to pay the costs(G) – principle of concentration 163 – principle of oral presentation and publicity 159 – principle of party control 152 ff. see Principle of party control (G) – right to be heard 159 f. Procedural principles (J) 165 ff. – burden of demonstration and burden of proof 179 ff. see Burdenof demonstration and burden of proof (J) – concentration of examination of witnesses and parties 184 – „Double Track“ system 165 ff. – principle of party disposition 168 ff. see Principle of party disposition (J) – principle of party presentation 172 ff. – judicial information obligation 174 f. – legal judge 175 f. – liability of the loosing party to pay the costs 184 – principles of orality and publicity 176 ff. see Principles of orality and publicity (J) Procedural principles (USA) 185 ff. – adverserial system 186 – all matters before the court 185 – burden of proof 188 ff. see Burden of proof (USA) – costs 191 f. – discovery 186 f. – jury 187 f. – procedural motions 185 – public trials 188 – publicity 188 – right to be heard 188 – role of judge 187 – substantive motions 185 Procedure of infringement proceedings (G) – filling of complaint 128

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– judgment and appeal 129 – oral hearing 129 – procedural guidelines 129 f. – reply to complaint 129 f. Procedure of infringement proceedings (J) – appeal against decision 142 – begin of oral proceedings 140 – conclusion of oral proceedings 141 – filling of complaint 138 – final appeal 142 f. – judgment 141 f. – judgment denying infringement 141 f. – judgment recognizing infringement 141 – preparatory proceeding for calculation of damages 141 – preparatory proceeding for recognizing infringement 140 – preparatory proceedings 140 f. – reply to complaint 139 – service of complaint 138 f. Procedure of infringement proceedings (USA) – filling of complaint 147 – judgment and appeal 149 f. – oral hearing 148 f. – proceedings leading to decision 147 f. – reply to complaint 147 Proceedings leading to decision (USA) 147 f. Process patents (USA) 39 Product analysis – Germany 41 – Japan 44 – USA 47 Product by process patents (USA) 39 Product patents (USA) 39 Professional confidentiality obligation (G) 43 f. Prosecuting – Unitary Patent 5 f. see Unitary patent system Prosecution history (J) 27 f. Prosecution laches (USA) 100 Protective letter – Germany 115 – Japan 117 – USA 118 Public trials (USA) 188 Publicity (USA) 188 Removal and destructions (G) 3 Removal of infringed goods – Germany 54 – USA 66 Removal of infringed goods (G) 54 Replacement of unessential elements (J) 29 f. Reply to complaint – Germany 129 f. – Japan 139 – USA 147 Request for injunctive relief due to unauthorized patent claim – Germany 115 – USA 120 f. Requirements of equivalents (USA) 36

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Index Research privilege (G) 70 – legal basis 70 – reach and limitations 70 f. – requirements 70 f. Right to be heard – Germany 159 f. – USA 188 Right to sue (USA) 14 Role of judge (USA) 187 Scope of protection (G) – doctrine of equivalents 18 see also Doctrine of equivalence – equivalent infringement 18 – literal and non-literal infringement 17 f. Scope of protection (J) – description and drawings 26 f. – doctrine of equivalents 28 ff. see Doctrine of equivalencs – literal scope of claim 26 f. – prior art 27 – prosecution history 27 f. Scope of protection (USA) – claim interpretation 35 f. – wording of the claim 35 Seizure by customs authorities – Germany 42 f. – Japan 46 – USA 48 Service of complaint (J) 138 f. Statistics (J) 9 Statute of limitation – Germany 73 – Japan 85 – USA 99 Supplemental examination (USA) 96 Supplies from U.S. for combinations made abroad (USA) 38 f.

Territoriality 193 Test privilege (G) 68 f. – Objections in patent litigation 68 f. – research privilege 70 see Research privilege (G) – Bolar exemption 72 f. Test privilege (J) 80 f. – Objections in patent litigation 80 f. Test privilege (USA) 98 f. Test purchase – Germany 41 – Japan 44 Third party intervention (G) 127 Time of equivalence determination – Germany 22 f. – USA 37 Time to trial (G) 3 Torpedo actions (G) 4 f. Two or more infringers (G) 125 Types of patents (USA) – product patents 39 – process patents 39 – product by process patents 39 Unclean hands (USA) 100 Unitary Patent system – court system 6 – enforcement 6 – judges and attorneys 7 – prosecution 5 f. – status of reforms 5 Validity objection 196 Warning letter (G) 101 ff. – exhaustion period 102 – meaning 101 – unauthorized warning 101 f. Warning letter (J) 105 f. Warning letter (USA) 113 f.

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