United States: Do Japanese Products Sold in The United States Infringe a US Patent Under ´Festo´?-A Tokyo District Court Decides

By David Hill and Shinichi Murata

Reprinted with permission from the IP Litigator, March/April 2004

Published by Aspen Law & Business

In October 2003, the Tokyo District Court decided whether Japanese products sold in the United States infringe a US patent under the Festo Rules and declared that the patentee does not have the right to an injunction based on the US patent.

Plaintiff, a Japanese company, exports and sells fossil coral powder as a health food in the United States, and defendant, another Japanese company, has a US patent relating to a composite that includes coral sands. Plaintiff sought several declaratory judgments, asserting that the accused product does not infringe the US patent. One of them was a declaratory judgment that defendant does not have the right to an injunction against the accused product based on the US patent. Defendant argued that the Tokyo District Court does not have international jurisdiction over this case, and that plaintiff does not have standing even if the court could have international jurisdiction. Further, defendant argued that the accused product infringes the US patent literally or under the doctrine of equivalents, and that the patent is valid.

First, citing several Supreme Court decisions, the court held that Japanese courts have international jurisdiction if the Code of Civil Procedure provides the jurisdiction unless it contradicts equality of the parties, justice, or speed of the trial. Then the court decided that Japanese courts have international jurisdiction because defendant’s principal office is located in Japan and it would not be inexpedient for defendant to be sued in Japan compared with being sued in the United States. The court also stated that the principle of territorial jurisdiction, which is applied to patents, is not related to jurisdiction of patent litigation but to the substantive effect of patents.

Next, the court held that defendant has standing because a decision made by a court with international jurisdiction should be approved and executed in other countries even if the patent is not granted in the country where the decision is made. The court mentioned that Japan and the United States mutually guarantee the execution of decisions and that the Code of Civil Procedure in the State of Nevada, the place where the infringement occurred, provides that every district court in the state deal with foreign decisions in the same way as the decisions made by the district courts in the state.

On the issue of infringement, the court first held that the governing law is US patent law because the patent at issue has the closest relationship with the United States, which is where the patent is registered. In deciding the issue of infringement, the court pointed out all-elements rule and the doctrine of equivalents, referring to Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co. Ltd., [62 U.S.P.Q.2d 1705, 122 S. Ct. 1831 (2002).] After examining the way of deciding infringement of patents in the United States, the court decided that the accused product did not infringe the patent literally or under the doctrine of equivalents. Concerning the infringement under the doctrine of equivalents, the court examined whether the equivalent was unforeseeable at the time of the application, whether the rationale underlying the amendment bears but a tangential relation to the equivalent, or whether one skilled in the art could not reasonably be expected to have drafted a claim that would have literally encompassed the alleged equivalent.

According to this case, it is possible for a Japanese subsidiary of a foreign corporation to file a patent infringement suit against a Japanese company or a Japanese subsidiary of another foreign corporation based on foreign patents in Japan. Further, any resulting judgment could be executed in the foreign country. Because most Japanese patent litigations require only one year for completion, Japan could provide one venue of choice in a global IP strategy for foreign companies to file patent infringement suits in Japan.

In November 2003, the Tokyo District Court held that a title of a movie does not fall under "indication of goods and the like" protected by Unfair Competition Prevention Law and dismissed a motion for a preliminary injunction.

The movant, a Japanese company planning and producing movies, filed a motion for a preliminary injunction against respondent, a Japanese company planning and producing visual contents for TV, theaters, or videos. The movant sought the injunction to prevent the use of "MACROSS," a title of an animation, on DVD software or video cassettes, claiming that the use of the title constituted unfair competition under the Unfair Competition Prevention Law.

Clause 1, Article 2 of the Unfair Competition Prevention Law provides that:

The term "unfair competition" shall mean any act under the following in this law:

The court held that a title of a movie does not fall under "indication of goods and the like" provided by the Clause 1, Article 2, stating that a title of a movie specifies the movie itself, a copyrighted work, but does not specify goods, the origin of the goods, or a business entity, and, therefore, the fame of a title of a movie does not mean the fame of certain goods or a business entity. The court, then, dismissed the motion for preliminary injunction.

Prosecution History Estoppel in Korea

In September 2002, the Korean Supreme Court reversed the Patent Court decision that prosecution history estoppel is triggered by any amendment made during prosecution and provided the rules for applying the doctrine of prosecution history estoppel.

In September 1998, the Patent Court had held that when an element of claim is substituted with another element in the accused device, the accused device infringes the patent if: (1) the technical principle of the patented invention and the accused device are the same; (2) the substituted element in the accused device or process performs substantially the same function in substantially the same way to provide substantially the same results; and (3) such substitution is obvious to person skilled in the art at the time of infringement. Further, the Patent Court held that the doctrine of equivalents is not applicable if: (1) the accused device was known at the time of the filing of the application for the patent or could have been easily derived from the technology known at the time of filing of the application for the patent by a person skilled in the art; or (2) the substituted element of the accused device was intentionally excluded from the claims of the patent during patent prosecution. The Patent Court’s decision was affirmed by the Supreme Court in July 2000.

In this case, the Supreme Court reversed the Patent Court decision that prosecution history estoppel is triggered by any amendment made during prosecution and provided the following principles on applying the doctrine:

Although the Supreme Court did not provide specific guidelines about whether certain subject matter was intentionally deleted from the scope of the claim, the court did clarify that it should be determined by reviewing the overall file history (the specification, examiner’s opinions, and applicant’s intent) of each claim separately.

Since the early l900s, Anheuser-Busch, brewer of Budweiser Beer and owner of the BUDWEISER and BUD trademarks, has been involved in more than 40 lawsuits throughout the world with the Czech brewer Budejovicky Budvar, claiming that its name "Budvar" infringes Anheuser-Busch’s trademarks.

A Korean Court has now decided that "Budvar" is not confusingly similar and does not infringe Anheuser-Busch’s marks and that Budvar’s registration in South Korea is valid.

In December 2002, Beijing High People’s Court upheld the Beijing First Intermediate People’s Court decision against Tianjin Kegao Toy Co. Ltd. (Tianjin Kegao) for copyright infringement of toy blocks made by Interlego AG (Lego).

In 1999, Lego, a Swiss toy company, filed a lawsuit against Tianjin Kegao for copyright infringement of 53 Lego toy blocks with Beijing First Intermediate People’s Court. The court held that, among the 53 Lego toy blocks, 50 were protected by Chinese Copyright Law as works of applied art, and 33 were infringed by Kegao’s COKO toy blocks. Therefore, the court ordered Tianjin Kegao to stop infringing acts immediately; to turn over the molds for the infringing toy blocks to the court for destruction; to make a public apology in a newspaper, The Beijing Daily; and to pay monetary damages to Lego.

This case has been called "a landmark case" for at least two reasons. First, a Chinese court, for the first time, affirmed that works of applied art such as Lego toy blocks can be protected under Chinese copyright laws. According to the Berne Convention for the Protection of Literary and Artistic Works, to which both Switzerland and China are contracting countries, a work of applied art is protectable under copyright if it (1) has industrial application; (2) has artistic quality; (3) has novelty; and (4) can be reproduced in a certain physical form. In addition, according to the Regulations on Implementing International Copyright Treaties issued by the Chinese government in 1992, works of applied art created by citizens of the member countries of the Berne Convention shall be protected under Chinese laws and regulations for 25 years starting from the date when the works were created in China. As 50 out of 53 Lego toy blocks satisfied the four elements of the "works of applied art," they were protectable under the Chinese copyright laws.

Second, the Beijing High People’s Court affirmed that dual protection of patent and copyright is available in China. Specifically, Tianjin Kegao alleged that because Lego’s toy blocks are protected by design patents in China, they should not enjoy the dual protection of both patent and copyright laws. The court, however, disagreed, holding that Lego’s toy blocks, which have been granted patent protection, can also enjoy protection under Chinese copyright laws.This case has been hailed by commentators as a big step by the Chinese government in improving protection of intellectual property in China. But criticism persists, especially on the prevalence of piracy activities in China involving video and audio products, such as DVDs and VCDs, and recently auto parts.

The Chinese legal system lacks the doctrine of stare decisis, so this decision is not binding on all courts in China. But the persuasiveness of Beijing High People’s Court’s decision is significant. As a result of this case, legal counsels, at minimum, should advise their clients to obtain multiple intellectual property protections in China for a specific product.

In August 2003, the Shanghai Second Intermediate People’s Court held against two Shanghai DVD companies: (1) Shanghai Hezhong Enterprise Development Co. and (2) Shanghai Yatu Film Culture Broadcasting Co.—for copyright infringement and piracy of Hollywood movies. According to The China Daily, the court ordered the two Shanghai DVD companies to stop the infringement activities immediately; to pay monetary damages of US$ 12,200, US$ 4,200, and US$ 4,200 to copyright holders, 20th Century Fox Film Corp., Walt Disney Corp., and Universal Studios, respectively; and to make a public apology in the local Chinese newspaper, The Xinmin Evening News.

This case was filed by the Motion Picture Association of American (MPAA) on behalf of 20th Century Fox Film Corp., Walt Disney Corp., and Universal Studios for copyright infringement and piracy of several films, including X Files, Moulin Rouge, and Jurassic Park III. The court held that, under the Berne Convention, the three US film companies enjoy copyrights of those movies in China and the accused defendants infringed the copyrights by selling pirated DVDs of those movies.

This case marks the first time that US film makers joined together with the MPAA’s support to sue local Chinese DVD sellers. Fighting piracy in China poses a great challenge for all foreign companies. Although Chinese governmental agencies have launched some campaigns against piracy in the video and audio market, "piracy is far from being eradicated." ["US Film Giants Win DVD Lawsuit," The China Daily (August 8, 2003).] Cases like this one will undoubtedly help strengthen intellectual property protection in China.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.