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Damages in Japan


Aruze v Sammy

Tokyo District Court ruled in favor of Aruze. Ordered Sammy to pay damages
of 7,400,000,000 yen to the patent owner. Sammy has appealed to the Tokyo High Court, and this judgment is not determined.

Aruze requested damages based on Japan Patent Law Art 102(1) presumption,
etc. of amount of damage.

Summary of Main Points:

(1) Damages can be calculated based on lost profit that is calculated within a patent
owners working capability, therefore even if Sammy sold a high volume of the product, damages can only be calculated on the working capability of Aruze. This is the standard method followed by Japanese Courts.

However, in this case working capability is interpreted to mean potential capability and the number of infringed articles was not reduced. When damages are calculated by profit per unit x number of infringed articles, the number of articles must be within a working capability of a patent owner. If there are any special circumstances of a patent owner being prevented from the sale of the infringed product number, then those circumstances shall be considered.

(2) The 'circumstances that prevents' the patent owner from sale have been conventionally considered to include product promotion availabilities and the existence of competitive non-infringing products. In this case the Court said these circumstances do not prevent the patent owner from the sale, since the patent owner could do the same as the infringer with possibly borrowed money.

(3) Profit per unit is the amount of sales which exceed costs of production. The question is how to determine the costs. The Court said costs are usually determined by not including advertising, development, etc. This approach results in awarding more damages.

The admitted damages would be larger than the profit of Sammy. Although Japan does not have the punitive damages system, this judgment shows that the damages awarded act punitively against Sammy. This is a reform of damages in Japan and warns infringers that the courts are adopting a stance of awarding significantly larger damage amounts.

Note:

The Japanese Patent Office (JPO) issued an invalidity notice for the Aruze patent the same day the Tokyo District Court passed judgment.

Aruze can amend the patent in response to the notice, but only to reduce scope of the right. Even if the patent is amended and the invalidity notice is overcome, there is a possibility that the judgment will be reversed because of the reduced scope.


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