In this case, the Court determined the calculation of damages based on Article 102, Paragraph 2 (an amount corresponding to profit made by an infringer) and Article 102, Paragraph 3 (an amount corresponding to a reasonable royalty) of the Patent Act.
Regarding Article 102, Paragraph 2 of the Patent Act, the Court found that “expenses which may be deducted from the sales of infringing products in order to calculate marginal profit is only an additional cost that was necessitated in direct relation to manufacture and sales of infringing products by an infringer”, and that “there should be a presumption under the paragraph for a total amount of profit” made by the infringer. Further, the Court indicated, as a fact for the rebuttal to presumption, the following facts “circumstances which could disprove a reasonable causal relationship between profit gained by the infringer and damage caused to the patentee”, for example, “(i) a difference between the patentee’s business and the infringer’s business (difference of the subject market); (ii) the presence of competing products in the market; (iii) marketing efforts of the infringer (brand power and promotion activities); and (iv) performance of infringing products and the patentee’s product (functions, design, and other features different from those of the patented invention)”, and further, a “case where a patent invention is implemented for only a part of the infringing products”.
Regarding Article 102, Paragraph 3 of the Patent Act, the Court found, based on Article 102, Paragraph 4 of the future Patent Act Amendment of 2019, that “a reasonable royalty rate for a patent infringement as determined post facto for a person who has committed the infringement should inevitably be a higher rate compared to a usual royalty rate”, and as a method to determine a reasonable royalty rate, specifically indicated that a reasonable royalty rate for the infringement should be determined by comprehensively taking into account various circumstances that appeared in a lawsuit such as: (i) a royalty rate set in an actual license agreement for the patented invention, or if it is indefinite, an average royalty rate in the industry; (ii) the value of the patent; i.e., the technical content or significance of the patent invention, and the substitutability with alternative technology; (iii) contributions to sales and profit when the patented invention is used for products, and a manner of the infringement; and (iv) the competitive relationship between a patentee and an infringer as well as the business policy of the patentee.
Since damages to be paid for the infringement by the appellants excluding the appellant Chiara Macchiato which was calculated based on Article 102, Paragraph 2 of the Patent Act exceeded the amount calculated based on Article 102, Paragraph 3 of the same Act, the Court awarded a higher amount of damages calculated based on Article 102, Paragraph 2 of the Patent Act. Regarding the appellant Chiara Macchiato, damages to be paid for the infringement by which it was calculated based on Article 102, Paragraph 3 of the Patent Act exceeded the amount calculated based on Article 102, Paragraph 2 of the same Act, therefore the Court awarded a higher amount of damages calculated based on Article 102, Paragraph 3 of the Patent Act.
This is the IP High Court Grand Panel Decision which expressed the IP High Court’s opinion regarding Article 102, Paragraphs 2 and 3. Therefore, the decision is considered to be extremely significant in practice in the future.
Writer: Hideki TAKAISHI
Supervising editor: Kazuhiko YOSHIDA
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Hideki TAKAISHI (The person in charge of this Article)
Attorney at Law & Patent Attorney
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