Japan's patent system was described by the Japanese Patent Office Commissioner in the following terms:

"The Japanese market is dishonourably regarded as 'lenient towards infringement'. It is sometimes said that one may as well infringe on whatever patents he likes in Japan, because court proceedings are slow and compensation insignificant."
Takeshi Isayama, Commissioner, JPO

However, there has been sea change with statutory amendments to Japanese patent law in regard to the calculation of damages. While Japanese courts have not interpreted these new amendments, the purpose is to ease the plaintiff's burden in damage calculation and increase the amounts awarded in patent infringement cases.

Proof of the amount of damages suffered by the patent owner According to Article 709 of the Civil Code, any infringer should compensate for the damages caused by the act of infringement. The requirements for such compensation are: (1) an act of infringement, (2) the intention or negligence of the infringer, (3) damages suffered by the patent owner, and (4) the relation of cause and effect between the act of infringement and the damages.

Under the Patent Law, it is stipulated with respect to the amount of damages, in light of difficulty of proof, that "the amount of profit earned by the infringer is presumed to be the amount of damages suffered by the patent owner", or, "the amount that is normally to be received by the practice of a patented invention".

However, because of the difficulty of proving the relation of cause and effect between the act of infringement and the damages, namely the aforementioned requirement (4), there were many cases in which the amount equivalent to royalties was determined to be the amount of damages.

Because of this, the following two statutory amendments (1998 and 1999) will greatly reduce the plaintiff's burden in proving damages in patent litigation.

1. The word "normally" was deleted from the "amount that is normally to be received by the practice of a patented invention" (revised 1998, effective as of January 1, 1999): as a result, it has become possible to calculate the amount of damages to reflect the actual conditions of the case, without being fettered by the word "normally".
2. Simplification of the calculation of the amount of damages (revised 1998 , effective as of January 1, 1999): amount of damages = (sales quantity of infringer) x (unit profit that could have been earned by patent owner).
   
   Under these 1998 amendments, the patent owner has only to prove the sales quantity of the infringer and the unit profit and is not required to prove the relation of the cause and effect. This implies that the burden of proof of the patent owner is significantly lessened especially when the patent owner practices its patented invention for itself. For any deduction from the amount of damages as calculated by the above formula, the defendant assumes the burden of proof, and thus the burden of proof is divided between plaintiff and defendant.
3. CPA appointed by the court (revised 1999, effective as of January 1, 2000): under the amendments, the court can now appoint an appraiser for any matter necessary for the calculation of the amount of damages at the request of either party (Section 105(2)). The parties have to explain necessary matters to the appraiser, like a qualified CPA.
   
   In the past, the court had an expert calculate the amount of profit and/or damages in some cases, but the parties have had no obligation to cooperate with the expert. However, under the amendment, it has now become obligatory for the parties to give an explanation. Because of this, it is expected that more accurate calculation will be made of the amount of damages.
4. Determination of the amount of damages by the court (revised 1999, effective as of January 1, 2000): in litigation, when infringement is acknowledged but it is extremely difficult to prove the facts necessary for the proof of the amount of damages, the court can determine an appropriate amount of damages as stated above. This is believed to have made proof easier and divided the burden of proof as to the infringement and the amount of damages, thus lightening the burden of proof on the part of the parties.

Will the Amount of Damages change?

Increased damages, such as US-style treble damages or attorneys' fees were not introduced into the recent amendments. However, it may be said that since it has now become easier than before to prove the amount of damages as described above, there is now a higher possibility that the court can award an amount of damages that is higher than that equivalent to royalties. Even before the amendments, if the damages, like lost profits, were proved, it was possible for a considerable sum to be awarded as damages.

This has been seen from recent infringement verdicts, including: the record-making decision of SmithKline Beecham v. Fujimoto, Heisei 7 (wa) 11876, dated October 12, 1998, when the Tokyo District Court ordered Osaka-based Fujimoto Pharmaceutical Co., Ltd., to pay a 3059 million yen (approximately $25.6 million) damages award and interest for infringing SmithKline Beecham's successful anti-ulcer drug-TagametR.

In the Temperature-Indicating Material Case, Heisei 4 (wa) 474, dated March 6, 1998, the Nagoya District Court awarded 162 million yen (approximately $1.37 million) in damages. In The Plastic Cast Material Case, Heisei 7 (wa) 10353, dated March 30, 1998, the Tokyo District Court awarded a 7% royalty date and awarded 273.4 million yen (approximately $2.33 million) damages against the infringer.

We believe that the recent amendments will reduce the burden of proof of infringement and increase the amount of damages for a plaintiff in patent litigation.