Trends Relating to Patent Infringement Litigation in JAPAN - Five Good Reasons to File Lawsuits in Japan - January 27-28, 2015 AIPLA Mid-Winter Institute IP Practice in Japan Committee Pre-Meeting Seminar Shimako Kato

Contents Background Current Status Five Good Reasons to File Lawsuits in Japan

1. Background

Court system in Japan (for patent cases) Supreme Court Supreme Court Final instance Final instance IP High Court IP High Court 1st instance 2nd instance Osaka Tokyo Tokyo/Osaka District Court JPO (Board of Appeal) Patent Infringement Lawsuit Appeal/ Invalidation Trial

IP Divisions in Courts Court Division Judge IP High Court 4 18 11 Judicial Research Official (Chosa-kan) IP High Court 4 18 11 Tokyo District Court 16 7 Osaka District Court 2 6 3 At the date of January 1, 2015

Characteristic 1 - Technical support for patent cases   Judicial research official (Chosa-kan) Technical adviser Expert witness Status Full-time court official Part-time court official Not a court official Term of office No statutory term in general 　 Two years No term Remuneration Salary paid for full-time official Allowance paid for each case Fee for an expert opinion Nature of explanation or opinion Carry out research on necessary matters as ordered by the court and report the research results. The research results may not be adopted as evidence. Provide easy-to-understand explanations on scientific matters as the court’s adviser. The explanation may not be adopted as evidence. Provide expert opinion on specific matters as requested by the court. The opinion may be adopted as evidence and relied on in the judgment. Source: http://www.ip.courts.go.jp/eng/documents/expert/index.html

Characteristic 2 – Validity Challenge Validity Challenge is possible both before the infringement courts and JPO (invalidation trial). Infringement court JPO Invalidity defense Invalidation trial So called “Double track system”

Characteristic 3 – Procedure (More rely on written argument) Technical Presentation Model timeline of patent infringement lawsuits (Based on the Osaka district court’s model) Settlement Preparatory Hearing (5) Technical Presentation Preparatory Hearing (3) Preparatory Hearings for settlement Preparatory Hearing (1) Oral Hearing (1) Preparatory Hearing (4) Preparatory Hearing (2) Preparatory Hearing (6) Judges opinion revealed Oral Hearing (2) Complaint Filed Judgment 40days 40days 40days 40days 50days 40days 30days Defendant -Answer Plaintiff -Infringement argument Defendant-Rebuttal to Infringement Invalidity defense Plaintiff Rebuttal to Invalidity Infringement arguments ……. Preparatory Hearing (7) Preparatory Hearing (8) Damage Calculation Stage 30days

2. Current Status

Patent litigation filings (1997-2009) [JAPAN] Filed　　　 2,789 Decided　 730 [US] Filed　　　34,214 Decided　 1,269 [GERMANY]※ Filed　　　 9,200 Decided　 3,660 ※ Estimate of invention patent infringement litigation filings. Total for 2009 estimated at 1400, including utility model and inventorship/ownership Source :”Where to win – Patent friendly courts revealed –” Managing Intellectual Property , www. Managingip.com September 2010

How do cases end? Japan (2013) Judgment (43%) Settlement (38%) Patentee’s Winning Rate (District Court) Withdrawal (13%) Others (4%) US (2009) (2004-2013) (1995-2008) (2006-2009) Trial Judgment (3.5%) Source: JPO Summary Judgment (8%) Settlement (88.5%) Source: JPO

3. Five Good Reasons to File Lawsuits in Japan

1st Reason: Reliable Factual Finding on Technical Matters Research result Judicial research official: Full-time support Opinion of experts, examined by jury. Explanation Technical Advisor : Mostly at technical presentation Judge Expert Opinion Expert Opinion (Paper) Written opinion of expert, examined by Judges

2nd Reason: Climate Change (1) (1) Changes in courts Actual winning rate of patentee (29th division of the Tokyo District Court) Increasing Source: Hanrei Times No.1324 (2010) p.58 Upholding rate by the IP High Court regarding Invalidation Trial Decisions Pro-patent tendency : : Source: JPO

2nd Reason: Climate Change (2) (2) Discussion for enhancing stability of patents Recent discussion in the government (Intellectual Property Strategy Headquarters) - How to undermine effects of challenging validity of the patents?- Proposed ideas: - Introduction of “the clear and convincing evidence” standard - Restriction of reasons for invalidity - Introduction of “clarity requirement” in case of judging validity of the patents before infringement courts. - Abolishment of Art.104 ter of the Patent Act (Abolishment of double track system)

3rd Reason: Speed (1) Average duration of IP cases in district courts Number of incoming cases Average duration (month) Incoming cases Average duration 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source:”Report for study on acceleration of proceedings” Supreme Court of Japan

3rd Reason: Speed (2) Duration of IP cases in district courts within 6 months from 6months to 1 year from 1 year to 2 years from 2 years to 3 years from 3 years to 5 years more than 5 years 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source:”Report for study on acceleration of proceedings” Supreme Court of Japan

4th Reason: Reasonable Cost Source: AIPLA “Report of the Economic Survey 2013” Cost for a small to medium-scale patent litigation in the 1st instance Cost for a small to medium-scale patent litigation in the 1st instance Around $ 80,000 to $250,000 (by supposition) Around $ 59,000 to $236,000 Source: EPO "Assessment of the impact of the European patent litigation agreement (EPLA) on litigation of European patents" February 2006

5th Reason: Attractive Market Size of the market ＄953 billion ＄ 1,010 billion Mobile communication (2012) Pharmaceutical products (2011) Source: “White paper on Information and Communications in Japan 2013” , Ministry of Internal Affairs and Communications, Japan Source : “DATABOOK 2013”, Japan Pharmaceutical Manufacturers Association

E-mail: shimako.kato@aiklaw.co.jp Thank you! Shimako Kato Patent Attorney Abe, Ikubo & Katayama E-mail: shimako.kato@aiklaw.co.jp 20