LESSONS WE CAN LEARN FROM PRIOR USER RIGHTS IN JAPAN

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1 Finnegan, Henderson, Farabow, Garrett & Dunner, LLP 2012 AIPLA Mid-Winter Institute IP Practice in Japan Committee Pre-Meeting LESSONS WE CAN LEARN FROM PRIOR USER RIGHTS IN JAPAN Naoki Yoshida

2 Topics Article 79 of Japanese Patent Law Requirements for Prior User Rights Prior User Rights in Japan and the U.S. 2

3 Article 79 of Japanese Patent Law A person who, without knowledge of the content of an invention claimed in a patent application, made an invention identical to said invention, or a person who, without knowledge of the content of an invention claimed in a patent application, learned the invention from a person who made an invention identical to said invention and has been working the invention or preparing for the working of the invention in Japan at the time of the filing of the patent application, shall have a non-exclusive license on the patent right, only to the extent of the invention and the purpose of such business worked or prepared. p 3

4 Article 79 by NY Translation A person who, without knowledge of the content of an invention claimed in a patent application, made an invention identical to said invention, or a person who, without knowledge of the content of an invention claimed in a patent t application, learned the invention from a person who made an invention identical to said invention and [has been working the invention or preparing for the working of the invention] has actually been conducting business by practicing the invention or has actually been preparing for such business in Japan at the time of the filing of the patent application, shall have a non-exclusive license on the patent right, only to the extent of the invention and the purpose of such business worked or prepared. p 4

5 Closer Look at Article 79 (WHO) A person who made an invention identical to said invention or a person who learned the invention from a person who made an invention identical to said invention, without knowledge of the content of an invention claimed in a patent application (WHAT) has been working the invention or preparing for the working of the invention (WHERE) in Japan (WHEN) at the time of the filing of the patent application 5

6 Closer Look at Article 79 (WHAT RIGHTS) shall have a non-exclusive license on the patent right, (LIMITATION) only to the extent of the invention and dthe purpose of such hbusiness worked or prepared. 6

7 Policy Behind Prior User Rights in Japan Tries to balance patent rights under the first-to-file system and equitable rights of those who had been practicing the invention before the filing of the patent application Japan views prior user rights as an exception to the first-to-file t fil system Prior user rights are applicable to utility patents as well as utility models and design patents 7

8 Prior User Rights Requirements at the time of the filing of the patent application Will evaluate if business was said to be at the stage of being conducted or prepared for, at the time the application was filed General steps for conducting or preparing for business 1. Research and development 2. Perfection of the invention 3. Preparation for business by practicing the invention 4. Start of such business Needs to show 3 or 4 at the time of the filing of the patent application, and 1 and 2 are insufficient Actual proof of conducting or preparing for business at the time of filing is not required It is possible to prove 3 indirectly by proving 1, 2, and 4 8

9 in Japan Prior User Rights Requirements Business must be conducted or prepared for in Japan If all acts of conducing or preparing for business took place outside Japan, then no prior user rights A part of the acts can take place outside Japan Found prior user rights when the invention was made in Japan by a Japanese company and the company subcontracted a US company to manufacture the invention to be imported in Japan Radio case by Japanese Sup. Ct. in 1966 But the invention can be made outside Japan 9

10 Prior User Rights - Requirements preparing for the working of the invention Satisfied if two criteria are met: Has an intent to practice immediately Such an intent is objectively recognized immediately does not necessarily means a very short time Walkingbeam type furnace decision by Japanese Supreme Court in 1986 Facts: August 31, 1966 Specification and design drawings were submitted February 26, 1968 Effective filing date of the patent application May 1971 Furnace was manufactured for the first time The Supreme Court found an intent to practice immediately despite the fact that the actual manufacture actu took place more than 5 years after the specification cat and design drawings had been submitted The Court reasoned that it normally takes a long time from bidding proposals, receiving an order, and delivering this type of furnace. Moreover, the furnace is made upon receiving an order and is not mass-produced. The Court also considered the fact that the prior user, after the submission of the specification, requested its subcontractor an estimate for parts in case they receive an order, and the prior user participated in request for proposals every year. 10

11 Prior User Rights - Requirements Cases finding preparing for the working of the invention was met: A company asked a subcontractor to make a proto-type of a sweatband, received the proto-type, and shipped it to a customer. After a design patent application was filed, the company received an official order from the customer, asked the same subcontractor to make the same sweatband. Sweatband case decided by Tokyo District Court in 1991 Prior to the filing of an utility model application, a company completed a drawing for a die cast, ordered materials to make the die cast, and started to make the die cast. After the filing, the company completed the die cast, tested it, and started to sell the die casts. Monkey wrench case decided by Osaka District Court in 2005 Cases finding preparing for the working of the invention was not met: A company made some general drawings for calendar rolls, but no documents or detailed drawings were presented to show its manufacturing process. When compared with past activities related other designs by the company, one could only conclude that there was a general business plan and nothing was concrete. Calendar rolls case decided by Tokyo District Court in

12 Prior User Rights - Requirements the extent of the invention and the purpose of such business worked or prepared Try to determine if the invention that has been worked or prepared for the working thereof at the time of the filing of the patent application is the same as the invention a patent right is being asserted against now Can you make a product that is different from the ones at the time of the patent application filing? Yes, prior user rights are not limited to the invention being practiced at the time the patent application was filed. It extends to any modification that is still within the same scope of the invention embodied in the practiced invention. 12

13 Prior User Rights - Requirements Modifications unrelated to the scope of the patented claim should be allowed, and found that the same scope requirement was met. Fork claw case decided by Osaka District Court in 1999 Modifications that provide remarkable effects should not be allowed, and found that the same scope requirement was not met. Substrate inspection machine case by Osaka District Court in

14 Prior User Rights - Requirements Can you conduct a new business act after the filing of the patent application? No, you cannot change or add a new business act after the application was filed Pallet loading machine case decided by Nagoya District Court in 2005 No prior user right for a subcontractor, but a prime contractor t who hires the subcontractor t has a prior user right and can change to another subcontractor t for the same work. 14

15 Prior User Rights Rights Granted Royalty free non-exclusive license Can you transfer prior user rights? Yes, so long as the business involving the working of the relevant invention is also transferred, without a consent by the patentee. t Article 94 (1) Except for a non-exclusive license granted by an award under Article 83(2), 92(3), 92(4) or 93(2) of the Patent Act, Article 22(3) of the Utility Model Act or Article 33(3) of the Design Act, a non-exclusive license may be transferred only where the business involving the working of the relevant invention is also transferred, where the consent of the patentee (or, in the case of non-exclusive license on the exclusive license, the patentee and the exclusive licensee) is obtained and where the transfer occurs as a result of general succession including inheritance. 15

16 What Do You Need to Prove? Evidence that supports working the invention or preparing for the working of the invention is critical In many cases, Japanese courts appear to consider a series of events It is critical to generate and maintain records to support your prior user rights Labnotes, design drawings, specification Engineering reports, business plans Samples, catalogues, cost estimates, order sheets, invoices 16

17 Prior User Rights in Japan and U.S. Both have geographical limitations working the invention or preparing p for the working of the invention vs. commercial use at the time of the filing of the patent application vs. at least 1 year before [the effective filing date or disclosure date] Allows transfer of rights if a certain condition, including a transfer of business involving the working of the relevant invention, is met vs. transfer limited to a good- faith assignment or transfer for other reasons of the entire enterprise or line of business No restriction on sites upon transfer in Japan No express reference to abandonment of use in Japan 17

18 References Prior user rights guideline published by JPO on June Strategic IP Management published by JPO Cases related to Prior User Rights published by JPO on September 2006, summarizing ninety cases between 1961 and y n.htm 18

19 THANK YOU Naoki Yoshida Tokyo Office Managing Partner Finnegan, Henderson, Farabow, Garrett & Dunner, LLP Shiroyama Trust Tower, 33rd Floor 3-1, Toranomon 4-chome Minato-ku, Tokyo Japan Tel: (81)