American Company Facing Infringement in Japan
In this case, a US company based in Florida, the Plaintiff, was involved in a patent infringement lawsuit in Japan, seeking an injunction and damages. After launching the suit, the Plaintiff moved the case from the original Japanese Patent Attorney to Kimura & Partners.
- The company produces specialized products using very high-speed small air turbines, for example, polishers used for automobiles. They had valid patents in Japan; however, a large Japanese company produced and sold similar products employing similar construction. Therefore, the US company sent warning letters and filed a lawsuit against the Japanese company in the Tokyo district court.
Interestingly, the CEO of this company was originally a British lawyer. When I received the case from the previous patent attorney in charge, the case was pending in the Tokyo District Court, and the CEO came to Tokyo to meet with me. He said that “Our case is clearly superior to the defendant’s, and the court will be in our favor. We are in the discussion of the infringement now; however, the discussion will finish shortly”. The amount of damages sought was over JPY 1 billion (approx. USD 10 million), so the case was not small.
- We were referred to the client by a Japanese Law Firm. The CEO did not inform me of the reasons for changing attorneys and moving the case to our firm. I was stunned when I first received and read all of the case materials and files: in short, I determined that the client’s case was not, in fact, superior to the defendant’s.
The reasons for my conclusions were as follows:
First, the defendant filed for a patent invalidation trial according to Article 123 of Japanese Patent Law in the JPO (Japan Patent Office)—surprisingly without it being reported to the CEO by their Patent Attorney. Generally, in patent infringement lawsuits, when patent holders (plaintiffs) sue an infringer in the courts, infringers file patent invalidation petitions in the JPO. If the infringer wins the trial in the JPO, the lawsuit loses the essential basis of the case, and the suit is dismissed.
In this connection, the most common grounds for patent invalidation is the lack of “Inventive Step.” Inventive Step is the general patentability requirement, or hurdle, in every country’s patent system, in addition to the Novelty requirement. Inventive Step means that the invention has progressed remarkably. However, this is a sensitive patentability requirement since the hurdle level is different in each country. Even in Japan, there is a possibility that the hurdle level varies depending on the technology area and the examiner in the Patent Office.
Furthermore, patent law in each country adopts the principle that novelty must be proven in every country. The Inventive Step examination is based on information on every country’s prior art, in principle. Namely, in examining a patent’s invalidation, every published document in every country could be evidence.
The evidence submitted in this trial was a copy of a book on the mechanical apparatus, found in a library in rural London. Specifically, the structure of the apparatus depicted was very similar to the patent. Thus, the evidence would be instrumental in invalidating the patent.
Second, the original Patent Attorney representing the client did not inform the Plaintiff about the invalidation trial nor its fundamental negative impact on the lawsuit, correctly or promptly. As a result, the CEO had wishful thinking and was unduly optimistic.
- Under these circumstances, upon becoming the Plaintiff’s Patent Attorney, I soon filed an appeal “for correction,” according to section 134-2 of Patent Law, to limit the patent’s scope to avoid the invalidation attack. I also asked a local lawyer, with whom we are associated, to file a petition to halt the lawsuit. This was because I knew there was a strong possibility of the case being dismissed due to a finding of non-infringement likely to have resulted from the invalidation trial.
- I informed the CEO repeatedly of the lawsuit’s factual circumstances: that the invalidation trial would likely result in the patent being deemed invalid, leading to a loss of the case. Initially, the CEO believed the previous attorney’s optimistic outlook, and it was a challenge to convince him of the realities of the situation. I strongly recommended making an amicable settlement of the suit, with conditions suitable to both Plaintiff and defendant, and without risking the patent being invalidated. Again, this was due to the robust evidence supporting the defendant, which had already been submitted to the Japan Patent Office, and our knowledge of how best to minimize the risks and possible damages to the Plaintiff.
Finally, I was able to convince the CEO to try settling with the defendant. I met the defendant’s attorney outside of the court several times and was able to settle. The settlement’s essence was the Plaintiff withdrawing the lawsuit, and the defendant withdrawing the invalidation trial and paying a lesser settlement amount. As a result, we were able to complete and end this dispute.
The lessons from this case were as follows:
1. The importance of the client-attorney relationship:
Unfortunately and clearly, the previous attorney did not fulfill the responsibility of effective communication with his client. This is the most crucial point for legal representatives.
2. The importance of communication in English:
In this case, the client was a US company, so of course, the attorney had to communicate effectively with them in English, writing, and orally. Correspondence by email is standard and straightforward. However, we routinely have direct phone calls and online meetings with clients to ensure clear communication between us and guide them to the solution. I suppose that another reason the CEO wanted to change attorneys was the initial attorney’s English ability.
3. The risk of the invalidation trial in infringement lawsuits:
An invalidation trial in the Patent Office is an effective strategy for infringers as a defense against an infringement lawsuit. So patent holders must conduct thorough research for any potential invalidation evidence, thereby confirming the patent’s value before filing lawsuits against potential infringers.
4. The risk of invalidation evidence:
The grounds for invalidation trials are usually the lack of inventive Step (un-obviousness). As referred to earlier, evidence can be collected from anywhere in the world. An old book stored in a local library in Britain was submitted to the Patent Office as evidence. If the defendant is a big company, they will use their substantial financial resources and connections to search for evidence to invalidate the patent. This is very common in Patent infringement matters. Plaintiffs need to take this point seriously into account.