While we have previously
covered the topic of “Damages for Infringement in
As numerous Japanese companies are
multi-national and other countries’ companies operate in Japan, it is essential
that Japan’s IP enforcement measures and compensation for violations be at a
level which best facilitates global commerce and fosters the image of Japan as
an active participant and global business partner.
The latest principles by which damage
awards are determined and how they are assessed against the infringing party
will be examined in this article.
Generally, such compensation is determined
based on the fact that an infringement has occurred and the financial effect(s)
of that infringement is compared to the hypothetical situation had no infringement
had occurred. For example, if Company B marketed
an item which had been deemed to infringe on an item which Company A had
protected, the extent to which Company A’s market share, profits, reputation,
etc., was adversely affected by Company B’s infringement must be calculated. The
long-term effects may be difficult to calculate, as it may involve Company A attempting
to clarify the infringement to the public which may have developed apprehension
in terms of using Company A’s products due to the infringement.
One can imagine Company B marketing a
medicament which infringes on Company A’s product, only Company B’s product has
a deleterious (or perhaps even deadly) effect.
This would cause a lasting impact to Company A, as it would take an
inordinate amount of time for the public to feel confidence that they were
indeed purchasing and using Company A’s safe product and not Company B’s infringing
and dangerous product.
In order to adequately address the
short-term and long-term costs associated with intellectual property right
infringement, the manner in which investigations for proving infringement and establishing
financial damage amounts required revamping.
II.
Investigation Methods
Investigations and evidence gathering is
necessary in order to prove infringement and calculate the damages resulting
therefrom. An investigator (neutral third party) may be dispatched to
investigate the company accused of infringement. These investigations include the
conventional accumulation of documents (largely seen as being ineffective), but
also now include onsite investigations.
This should increase the amount of information available to the court
regarding the alleged infringement.
At the same time, numerous firms have
expressed that such investigations would potentially allow access to their
trade secrets. If the neutral investigator
deemed some aspects of the obtained information to fall into the realm of a
trade secret, that information could be withheld from any public tribunal.
III.
Calculating Damages Based on Production Capacity
Profits lost due to infringement make up part
of the damages awarded as a result of infringement. This amount was
traditionally based on the production limitations of the IP rights holder
(plaintiff), assuming the infringer sold more products than could be reasonably
produced by the plaintiff. Traditionally, if the infringing party sold 10,000
more of the item than could have been produced by the plaintiff, it was unclear
as to whether the profits from the sale of the additional 10,000 items would be
included in the damages awarded. The IP rights holder may seek damages on the
amount of infringing items sold equivalent to the plaintiff’s production
capacity and royalties on all of the items sold exceeding the plaintiff’s
production capacity.
IV.
Calculations Based on Assumed Royalties
The court may consider adding royalties
(reasonable royalty) which the plaintiff would have received had a licensing
agreement been in effect to the awarded damages. This calculates the royalties
based on the assumption that an infringement has occurred and is generally
higher than the licensing fee alone, and thus, the damages are higher than the
prior system in which damages were calculated royalties without any assumption
that an infringement had occurred. This is aimed at increasing the amount of damages
awarded (via direct financial damages and the establishment of licensing
agreements).
V.
Patentee Not Directly Selling Protected Product in
A foreign company which does not directly
sell its protected goods and services in
Sources:
Celniker,
et al., (2019) “Litigation and Enforcement in