How different or similar? - Japanese Patent litigation in Major Asian countries Kaoru KURODA Japan Patent Attorneys Association AIPLA-JPAA Project member AIPLA Mid-Winter Institute January 26-27, 2016

2 Table of contents Patent litigation at a glance Average length of patent litigation Level of damages awards in patent litigation Success rate? Fee shifting – who bears attorney fees?

IP High Court (1 court) Tokyo/Osaka District Court JPO (Board of Appeal) 2 nd instance Patent Infringement Lawsuit Invalidation Trial Supreme Court 1 st instance 3 rd instance2 nd instance 1 st instance Patent litigation at a glance - Japan (“JP”) - 3 Defendant can raise an invalidity defense. No jury. Very limited discovery

5 High Courts Supreme Court 18 District Courts (and 40 branches) KIPO (IP Tribunal) 2 nd instance Patent Infringement Lawsuit Patent Court (1 court) Invalidation Trial Supreme Court 1 st instance 3 rd instance 2 nd instance 1 st instance Patent litigation at a glance - South Korea (“KR”) - before Defendant can raise an invalidity defense if there exist obvious grounds for invalidation. No jury. Very limited discovery

Patent Court (1 court) 5 District Court KIPO (IP Tribunal) 2 nd instance Patent Infringement Lawsuit Invalidation Trial 1 st instance 3 rd instance2 nd instance 1 st instance Patent litigation at a glance (KR) after No jury. Very limited discovery Defendant can raise an invalidity defense if there exist obvious grounds for invalidation. Supreme Court International justice department will be established in Feb Source: “Response manuals for patent infringement”, JETRO; Seoul Lawyers (

IP Court (3 courts) / Intermediate People’s Court Higher People‘s Court SIPO (Patent Reexamination Board) 1 st instance Patent Infringement Lawsuit IP Court (3 courts) / Intermediate People’s Court Invalidation Trial Higher People‘s Court 2 nd instance 1 st instance Patent litigation at a glance - China (“CH”) - after Defendant cannot raise an invalidity defense. No jury Very limited discovery IP Courts were established in Beijing, Shanghai and Guangzhou in 2014E.

Average length of patent litigation Average length of patent/IP litigation in 1 st instance Note JParound 15 months (2014) Average of all IP litigations KRaround 16.6 months ( ) Average of Patent litigations CH Court should complete the adjudication within 6 months after accepted. (foreign-related party: around 8 months) Specified by the Civil Procedure Law Source: [JP] IP High Court web site, [KR] KLP IP Firm, [CN] Linda Liu Group, Zhongzi law office. 7

Level of damages awards in patent litigation (JP, KR) Damages may be calculated in three ways. i.A lost profit: (A)multiplying number of products that the infringer sold with (B)profit per piece that the patentee can obtain from the sales of the patentee’s product but for the infringement; ii.Benefits acquired by the infringer through the infringement; or iii.A reasonable royalty amount. 8

Damages may be calculated in three ways: i.Patentee's actual losses caused by the infringement; ii.Benefits acquired by the infringer through the infringement; iii.Reasonably multiplied amount of the royalties of that patent; or If all the above are difficult to assess, statutory damages may be awarded in the following range: CN\10,000 - CN\1,000,000 ($1,500 - $151,000) [$1 = CN\6.6] 9 Level of damages awards in patent litigation (CN)

Chinese patent law will be revised in the near future. According to the current draft (Dec. 2015): –Punitive damages for willful infringements will be introduced (for willful patent infringement, the amount of compensation will be raised to two to three times). –The range of statutory damages will be CN\100,000 - CN\5,000,000 ($15,000 - $755,000) 10 Level of damages awards in patent litigation (CN) [$1 = CN\6.6]

Top five largest damages (JP): PlaintiffDefendant Technical field Awarded Damages 1 Aruze*Sammyslot machines \ 7,416M** ($ 63M) 2 SmithKline Fujimoto Pharmaceutical chemistry \ 3,059M ($ 26M) 3 NikonSIGMAmachinery \ 1,518M ($ 13M) 4 Shinwa Seisakusho Fulta Electric Machinery machinery \ 1,244M ($ 11M) 5 Aruze*Netslot machines \ 988M** ($ 8M) [$1 = \118] 11 * N/K/A Universal Entertainment **The appellate court reversed this decision because the patent was found to be invalidated in the invalidation trial.

12 Source: * Kim&Chang website, Survey on IP-related Activates in Korea (KIPO&KTC) ** KLP IP Firm, Survey on IP-related Activates in Korea (KIPO&KTC) Number of companies Total amount Average amount per company 2012*approx. 350 ₩ 56,700M ($ 46.7M) ₩ 160M ($132K) 2013* * 353 ₩ 76,400M ($ 62.9M) ₩ 220M ($ 181K) Total estimated amount of damage awards & settlement payment in IP litigation [$1 = ₩ 1,213] Level of damages awards in IP litigation (KR)

Largest damages in countries …except for the US (in $M) 13 Source: Excerpted from a “handout No. 5” for a meeting of a Task Force on Intellectual Property Strategy held in Tokyo on December 15, 2015

Success rate? (JP) Source: “Study Research Report on Actual Resolution of Patent Disputes” (2015), Institute of Intellectual Property. 14 The tendency of patent litigation cases in 1 st instance court.

Source: KLP IP Firm, Korean Judicial Year Book. * “Lose” means “dismissal”, “dismissal without prejudice” and “withdrawal”. 15 Success rate? (KR) The tendency of IP litigation cases in 1 st instance court.

Source:“Statistics Investigation Report on IP Dispute” ( ), JETRO Beijing 16 Success rate? (CN) Beijing No. 1 Intermediate CourtBeijing No. 2 Intermediate Court Shanghai No. 1 Intermediate CourtShanghai No. 2 Intermediate Court

Fee shifting (JP) – who bears attorney fees? Upon request, a court may order a losing infringer to pay some portion of the prevailing patentee’s attorney fees as a portion of damages incurred to the prevailing patentee. The amount of awarded attorney fees is usually, at most, 10% of the damages award. The greater the damages award, the lower the percentage of that amount the court would order the losing party to pay. 17

[$1 = \118] Awarded Damages Awarded Attorney fees (in \K)(in $K)(in \K)(in $K) 1 \1,518,000$12,860\50,000$420 2 \1,244,000$10,540\30,000$250 3 \729,000$6,180\72,000$610 4 \713,000$6,040\69,000$580 5 \382,000$3,240\38,000$ Around 10% Fee shifting (JP) – who bears attorney fees?

According to the Korean Civil Procedure Law, costs of a lawsuit shall be borne by the losing party. A fee paid or to be paid by a party to an attorney shall be admitted as the costs of lawsuit within the limit of the amounts as prescribed by the Supreme Court Regulations. 19 Fee shifting (KR) – who bears attorney fees?

20 Fee shifting (KR) – who bears attorney fees? Amount in controversy Rate of attorney fees included in litigation cost ～ ₩ 10M ($ 8K) 8% ₩ 10M ($ 8K) ～ ₩ 20M ($ 16K) [₩ 0.8M + (Amount in controversy - ₩ 10M) x 7/100] 7% ₩ 20M ($16K) ～ ₩ 30M ($ 24K) [₩ 1.5M + (Amount in controversy - ₩ 20M) x 6/100] 6% ₩ 30M ($ 24K) ～ ₩ 50M ($ 41K) [₩ 2.1M + (Amount in controversy - ₩ 30M) x 5/100] 5% ₩ 50M ($ 41K) ～ ₩ 70M ($ 58K) [₩ 3.1M + (Amount in controversy - ₩ 50M) x 4/100] 4% [$1 = ₩ 1,213] ex) ₩ 10M ($ 8K) -> ₩ 0.8M ($ 0.6K) ₩ 500M ($ 400K) -> ₩ 9.8M ($ 8K)

According to the Chinese patent law, the damages amount may include the reasonable cost which is incurred by the patentee to prevent the infringement activity. “Reasonable cost” usually includes: –Attorney fees, –Fees for collecting evidence, and –Legal costs. 21 Fee shifting (CN) – who bears attorney fees? [$1 = CN\6.6]

The reasonable cost is calculated based on evidence such as contracts, receipts. According to some practitioners, the CN\50K to CN\100K ($7,550 - $15,000) is usually awarded as the reasonable cost. And the total amount of awarded damages including the reasonable cost is usually within the statutory damages, i.e., CN\100,000 - CN\5,000,000 ($15,000 - $755,000) 22 Fee shifting (CN) – who bears attorney fees? [$1 = CN\6.6] Source: attorneys at Linda Liu Group, China Pat Intellectual Property Office

Patent litigation system  Three-tiered structure.  1 appellate court Relatively slow comparing to Chinese practice. Relatively high damages awards among Asian countries but not enough. Low success rate. A losing party pays a portion of attorney fees. No “exception” requirement. Conclusion

Thank you for your attention Abe, Ikubo & Katayama Kaoru KURODA AIPLA Mid-Winter Institute 2016