Introduction

Competing companies are often very similar, and commonly co-exist in relative harmony. What should you do then if a competitor applies for a patent in Japan on something essential to your business, and something for which you have discovered prior art?
The existence of prior art for a patent application obviously has serious ramifications for the validity of a patent. The issue of whether or not prior art should be submitted to the Japanese Patent Office (JPO) prior to the issuance of a patent is a decision that has no clear right or wrong answer. There are a multitude of issues which need to be considered in order to provide the best possible outcome and protect the interests of the party under threat (hereinafter referred to as the challenger).
There are essentially three stages at which prior art can be submitted to the JPO. These are:

1. Information submission before registration of a patent.
2. Opposition after registration of a patent.
3. Invalidation of a patent.

Information Submission Prior to Registration of a Patent

The option exists to submit prior art to the JPO prior to the registration of a patent. If this is done, the patent applicant becomes aware that someone else is interested in the application, the possible results of which include:

1. The applicant may try to accelerate examination.
2. The applicant may investigate markets/competitors to assess what competitors are doing in areas related to the invention. The claims in the patent might then be amended to ensure inclusion of all relevant competitors activities in their application.
3. Once the applicant knows the application is important to someone else (a competitor for example), they may divide the application into a number of separate applications covering different aspects of the invention. The applicant can register certain aspects of the invention while keeping other aspects pending at the JPO. Since pending applications can be significantly altered and amended, it increases the freedom of the applicant to incorporate aspects of the invention previously thought unimportant, though possibly relevant to competitors. It therefore gives the applicant greater opportunity to make changes that might disadvantage their competitors. This makes challenging a patent at this stage of the process very difficult as you are in effect forced to aim for a moving target. Any changes made by the applicant cannot be anticipated, thus the strength of any challenge cannot be assured.

An applicant does not normally undertake the above three actions unless they know that there is another party interested in the application. Based on this, it is not recommended that a challenger submit prior art to the JPO prior to registration of a patent.

Information Disclosure Statement (IDS)

Although an IDS is not required in Japan, we suggest our clients to submit citations of foreign prosecutions to the JPO. When the patent is to be used, another party investigates the citations of foreign prosecutions for evaluating the validity of the patent. By letting the JPO consider the citations of foreign prosecutions before granting the patent, the patent becomes practical.

The Effect of Registration of a Competitors Patent on an Invention of Mutual Value

Any patent application relating to common business areas has the potential to affect not only a challenger holding prior art, but their competitors as well. This may offer a challenger some protection by excluding competitors from use of similar inventions. If there are few competitors in the area or the challenger is the market leader, this aspect of the issue becomes less relevant as the threat posed from the challenger is less significant.

One reason for considering the relative market shares of companies is that a patent owner cannot enforce their patents rights in Japan easily. It is necessary to embark on a costly and time-consuming court action,which is beyond the resources of many patent owners. Once a patent owner becomes aware that their patent rights are being infringed, they will send a warning letter informing the infringer of their intent to enforce their rights. On receipt of the warning letter, it may be possible for the infringer to respond by opening negotiations based on discovered prior art. The infringer may threaten the patent owner with disclosure of the prior art in an effort to invalidate their patent, thus providing the basis for possible negotiations.

It is preferable that the patent be kept alive rather than invalidated, not only for the patent owner, but for the challenger as well. Keeping the patent alive provides increased protection for the challenger as the patent may be enforced against other competitors also wishing to utilize the invention. A successful negotiation will therefore aid the challenger in possession of prior art by allowing the continuation of their activities whilst excluding competitors.

If a challenger decides not to submit prior art to the JPO, but rather move to the negotiation table with the owner of the patent rights, disadvantages also exist. This approach would be slow and may be expensive in terms of compensation payments. A favorable conclusion cannot be assured, so a high degree of uncertainty exists regarding the outcome.

Opposition after Registration of a Patent

This approach relates to submission of prior art to the JPO under opposition, after registration of the patent. The successful result of this would be invalidation of the patent.

In Japan, significant changes can be made to claims during patent prosecution. After patent registration, however, the application cannot be divided, and the applicant is restricted to deleting or narrowing the registered claims only. This enhances any challenge launched, as certainty now exists regarding the scope of the final claims of the patent. A challenger is therefore able to study the claims in the patent to produce a stronger opposition document.

Following registration of a patent, two things must be undertaken:
1. Assessment and study of the patented claims to strengthen the opposition / invalidation documents.
2. Comprehensive computer and manual searches for further prior art based on the registered and fixed patent.

Filing opposition can be undertaken anonymously which can have significant advantages. Parties are given six months after the date of registration of a patent to file opposition.

Lodging an opposition to the patent is a less risky and more cost effective option than invalidation.

Invalidation

Invalidation of a patent is normally initiated after the infringer of a patent right is issued with a warning letter informing of the infringement. In the event that an infringer receives a warning letter, prior art can be submitted to the JPO in order to attempt to invalidate the patent.

Prior to submission of prior art to the JPO and possible invalidation of a patent, negotiations with the patent owner in order to obtain licensing should be considered. Ideally, the patent in questions would be licensed to the challenger and kept alive, thereby providing some protection for the Licensee from other parties wishing to utilize the invention.

Negotiations, however, have a large degree of uncertainty and risk regarding the outcome. If it is likely that in the future the scale of a challengers business related to this patent will be very large, then the value of the patent to the owner obviously increases. This therefore increases the risk and potential cost.

Counter Patent

It is also recommended that a challenger apply for counter patents related to common business areas. This is possible by patenting any improvements the challenger will make to the invention. A counter patent may cover aspects of the invention valuable to the owner of the original patent and is certainly good preparation in anticipation of a future infringement warning letter. Those aspects of the system covered by the challengers patent and useful to the owner of the original patent provide the basis for a cross licensing agreement.

Summary

In summary, the safer option is to file prior art as Opposition, after the registration of a patent. Negotiation for licensing is also a good option to consider because of the benefits in excluding other competitors. There are obviously large risks and uncertainties associated with this. In addition, a counter patent should be filed by a challenger as soon as possible, covering other novel aspects of the invention and ideally a cross licensing agreement should be made based on this.