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IP High Court Admitted $1.3 Million Damage Compensation as Equivalent to License Fee

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November 14, 2019
Aki Ryuka
Japanese Patent Attorney, Attorney at Law, California, USA
Jun Nakagawa
Japanese Patent and Trademark Attorney

IP High Court Admitted $1.3 Million Damage Compensation as Equivalent to License Fee

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 shall pay 144 million Japanese yen (1.3 million US dollars) of damage compensation to CAPCOM mainly as equivalent to the license fee.

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

Here, in deciding the license rate, the Court considered whether the patentee and the infringer are competitors and admitted that the license rate shall be no less than 3.0% while 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.

The same concept was reflected in the amendments of Japan Patent Act, Utility Model Act, Design Act and Trademark Act, which will be in force by May 17, 2020.

RYUKA’s Suggestions
After the amended Acts go into force next Spring, infringing patents will have greater risk because the damage compensation will be calculated higher. Therefore, preliminary searches will be more important. It will also be important 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 main 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 own products.

If you have any questions, please feel free to let us know.


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