IP High Court Admitted US$1.3 M Damages as Reasonable Royalty
Japanese Patent Attorney, Japan
Attorney at law, California, USA
Koei Tecmo Games Co., Ltd. has been sued for infringing CAPCOM Co., Ltd’s patents in their game series, such as “Sengoku Musou (Samurai Warriors)” and ”Shin Sangoku Musou (Dynasty Warriors 2).” The IP High Court admitted that Koei should pay 144 million Japanese yen (about US$ 1.3 M) of damage compensation to CAPCOM, mainly as equivalent to the license fee. [September 11, 2019, IP High Court]
Key Points of the Decision
In principle, the damage compensation equivalent to the license fee
(Japan Patent Act Art. 102(3)) is calculated as:
Sales of the infringing product x License rate
In deciding the license rate, the Court considered whether the patentee and the infringer are competitors and admitted that the license rate should be no less than 3.0%. In comparison, the average rate was 2.5% in the industry because the license rate should be higher than the average if it is determined after the infringement.
☞ Japan Patent, Utility Model, Design, and Trademark Acts were amended in 2020 to adopt this calculation.
Infringing patents now have a greater risk because the damage compensation is higher. Therefore, preliminary searches are more important. It will also be essential to obtain patents that enable you to cross-license as a defense plan.
The Court also looked into the contribution of the patented technology to the sales of the infringing product. The damage compensation could be calculated lower if you have obtained patents on the technologies of your products because the relative contribution of other company’s patented technology in your product becomes smaller. In this aspect as well, we recommend obtaining patents for your products.