IP High Court Grand Panel Case: Beauty Device Case: Presumption of Damages
Mar. 24, 2020
February 28, 2020; Case 2019 (ne) No. 10003: Lawsuit seeking injunction et al. against patent infringement
1. Criteria for Determining the Amount of Damages
The IP High Court decision established criteria for determining the amount of damages as stipulated in Article 102(1) of the Patent Law of Japan. Article 102(1) of the Patent Law stipulates that the amount of damages attributable to patent infringement can be presumed equivalent to loss of profit as calculated by the following criteria.
Article 102(1) of the Patent Law
Where a patentee or an exclusive licensee claims, against an infringer, compensation for damages incurred as a result of the intentional or negligent infringement of the patent right or exclusive license, and the infringer transferred products that constitute the act of infringement,
the amount of the damages incurred in the patentee or the exclusive licensee may be presumed to be the amount of profit per unit of the products which would have been able to be sold by the patentee or the exclusive licensee if there had been no act of infringement, multiplied by the number of products transferred by the infringer (hereinafter referred to in this article as the "number of transferred products"),
the maximum of the amount being the amount attainable by the patentee or the exclusive licensee in light of the capability of the patentee or the exclusive licensee for the conduct;
if any circumstance exists under which the patentee or the exclusive licensee would have been unable to sell all of or a part of the number of transferred products, the amount corresponding to the number of products that would not have been able to be sold due to such circumstance shall be deducted.
In short, the calculation of the amount of damages according to this article takes the following factors into consideration.
i) (Number of transferred products) × (amount of profit per unit of product that would have been able to be sold by the patentee/exclusive licensee if there had been no infringement)
ii) Maximum amount actually attainable by the patentee/exclusive licensee
iii) Number of products corresponding to a circumstance under which the patentee/exclusive licensee would have been unable to sell the products
2. Case Overview
This case consisted of a lawsuit in which the plaintiff requested an injunction et al. and damages over infringement of two of their patents (Japanese Patent Nos. 5356625 (Patent 1) and 5847904 (Patent 2)) embodied by the plaintiff's product, a beauty roller.
The court decision of the first instance acknowledged an injunction on sales of the defendant's products and part of the damages claimed by the plaintiff (approx. 107 million yen) based on Patent 2, against which both the plaintiff and the defendant filed an appeal. The appeal court found infringement based on Patent 2, but found no infringement based on Patent 1, and provided detailed bases for calculating damages.
Patent 2 is directed to a beauty device having a rotating body supported in a rotatable manner against a support shaft (see the drawings below), the main technical features of which are found in the bearing member (25) disposed inside the rotating body (27).
The beauty device described in the specification of Patent 2
3. Gist of the Judgement
(1) Criteria for the "amount of profit per unit of the products"
The appeal court held that the "amount of profit per unit of the products" set forth in Article 102(1) of the Patent Law refers to a "marginal profit" obtained by subtracting the expenses, additionally required for and directly related to the manufacture and sales of the products, from the sales of the products that would have been earned by the patentee etc.; i.e., fixed costs such as employment costs of the administrative department, transportation costs, communication costs and the like are not subtracted. This judgement is in line with many other recent judicial cases.
Further, it was held that, even if the characteristic feature of the invention lies only in part of the product of the patentee, the whole marginal profit that would have been obtained by sales of the patentee's product is factually presumed to be the lost profit of the patentee.
However, the court held that it is the configuration of the rolling part that is most appealing to consumers in the patentee's product, and that, given a situation in which a solar panel, provided in addition to the rolling part to generate a small current, is also appealing to consumers, it cannot be deemed that the entire "marginal profit" corresponds to the lost profit of the plaintiff since the characteristic part of the invention cannot be deemed to contribute to all the profit that would have been earned by sales of the patentee's products, thereby negating a part (approximately three fifths) of the damages calculated based on the foregoing factual presumption.
(2) Examples of a circumstance under which the patentee/licensee would have been unable to sell the number of transferred products
The court held that "a circumstance under which the patentee would have been unable to sell the number of transferred products" refers to a circumstance that impedes a reasonable and probable causation between the act of infringement and a decrease in sales of the patentee's product, and listed the following examples.
(i) Differences in the types of business, prices etc. between the patentee and the infringer; i.e., non-identicality of market
(ii) Presence of competing products in the market
(ii) Sales efforts made by the infringer (branding, advertisements etc.)
(iv) Differences in quality between the product(s) of the infringer and of the patentee (other than the characteristic of the patented invention such as the function or design of the product(s))
Based on these criteria, the court found a circumstance corresponding to example (i) based on the fact that the defendant's products were sold at cheaper prices that were from one eighth to one fifth of the price of the patentee's product, and reduced the amount of damages to be awarded to the plaintiff by approximately half.
(3) Consideration of Contribution Percentage
The court held that there are no legal grounds for asserting that the contribution percentage should be considered, and the defendant's argument that the damages should be reduced based on consideration of the percentage of the invention that contributed to the sales of the defendant's products was dismissed.
Based on these considerations, damages of approximately 440 million yen were awarded.
The present case determined that the percentage of contribution of the invention to the feature of the patentee's product that is appealing to consumers should be taken into account, whereas the idea of the contribution percentage of the invention to the infringing products was deemed to have no legal basis. The case is worth noting given that there have been many cases in which the contribution percentage of a patented invention to an infringing product was taken into account when determining damages.
Summary prepared by Yuko Miyazawa, International Information Group
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