Japan Japon Japan. Report Q174. in the name of the Japanese Group

Transcription

1 Japan Japon Japan Report Q174 in the name of the Japanese Group Jurisdiction and applicable law in the case of cross-border infringement (infringing acts) of intellectual property rights I. The state of applicable law: Introduction Before addressing the specific questions posed in Q174, the Japanese Group would like to make a general explanation about private international law (law of conflicts; choice of laws) in Japan. (1) In Japan, private international law (PIL) is governed by a statute entitled the HOREI ("HOREI" means Law concerning Application of Laws in General). In addition, there have been several court decisions issued by the Supreme Court, as well as lower court decisions. (2) (i) The HOREI has no specific provision that governs PIL issues regarding infringement of intellectual property (IP). In general, a claim for damages based on IP infringement can be and has been treated as a matter of tort law. However, a claim for injunction is not be considered as a matter of tort law and is decided by the law of the country where the IP right was granted. (ii) In principle, under Article 11(1) of the HOREI, a claim for tort is governed by the law of the place where an act constituting a tort (unlawful act) was committed. (iii) However, even when an alleged unlawful act constitutes a tort under the law of that foreign country, if such an act is not considered as a tort under Japanese law, the relevant foreign law shall not be applied. Therefore, it can be said that the Japanese law and the foreign law will apply in an overlapping manner for such an international case. (Art. 11(2), HOREI). (iv) Similarly, compensation for damage and other remedies that may be allowed under the foreign tort law shall be awarded only to the extent that they are also allowed under Japanese law. Therefore, even to the damages, Japanese law and the foreign law will be also applied in an overlapping manner even when the foreign law is found to be the governing law. (Art. 11(3), HOREI). (v) Finally, the HOREI contains the provision, which is known as the "public order exception". Article 33 of the HOREI provides that, in the case that the application of the provisions of the governing foreign law is contrary to public order or good morals in Japan, such provisions of foreign law shall not apply. (3) As for a claim for injunction based on an IP infringement that occurred in a foreign country, the Supreme Court held that it is reasonable to conclude that the applicable law shall be the patent law of the country where the allegedly infringed 1

2 patent was registered, because (i) there is no provision in the HOREI that can be applied to such a case, (ii) such a claim cannot be treated as a claim based on tort law, instead it should be treated as a special issue based on the underlying patent right. This conclusion seems to be based on the long standing Japanese doctrine under Japanese tort law that the remedy for tort does not include a claim for injunction. However, when the result of application of the foreign IP law is contrary to public order in Japan, application of the foreign IP law will be again, excluded by operation of Article 33 of the HOREI. (4) In Japan, there exist only limited number of court decisions regarding the relationship between IP and applicable law. Please note that when we refer to court decisions in Japan in the following answers, we will discuss those in relation to the interpretation and application of the aforementioned statutory provisions. I.1.1 Do the domestic Courts assume jurisdiction to decide on infringements of intellectual property rights which are committed abroad? In Japan, a domestic court seems to be allowed to assume jurisdiction to decide on infringements of foreign IP rights which are committed abroad, when the court has general jurisdiction over the case under the Code of Civil Procedure (CCP). Namely, in the famous case in which the plaintiff claimed for an injunction order and also for damages by alleging that the defendant's act in Japan constituted an act of contributory infringement of the plaintiff's U.S. patent, the Supreme Court did not dismiss the case by reason of lack of jurisdiction, and held that the governing law for this case was the U.S. Patent Act (FM Signal Demodulator case, September 26, 2002), although the Supreme Court finally dismissed both claims based on the public order exclusion provisions of Article 11 and Article 33 of the HOREI. As the general rule, Japanese court shall perform ex officio examination on whether or not it has jurisdiction over an action filed before it even when no party contests its jurisdiction. Therefore, holding by the Supreme Court in said case, which did not dismiss the claims by reason of lack of jurisdiction, has been generally interpreted as indicating the Supreme Court's recognition that Japanese court may have international jurisdiction over infringements of foreign IP right which are committed abroad. Until the FM Signal Demodulator decision was made, the Tokyo District Court's Manchurian Patent decision (June 12, 1953, a.k.a. the Multipolar Vacuum Tube case) had long been the single case which considered this issue. In this Manchurian Patent case, the Court, without expressly discussing the issue of subject matter jurisdiction, directly proceeded to examination on merits, applied both the foreign tort law and Japanese tort law pursuant to Article 11(2) of the HOREI, and concluded that the alleged unlawful act did not constitute a tort under Japanese law, and thereby dismissed the case. Regarding the implication of this decision, there were some controversies, in that some interpreted this case as the judicial precedent for affirming Japanese courts' jurisdiction over infringement of foreign IP rights, and others denied the precedential value of the decision. However, the FM Signal Demodulator decision seems to have finally settled such controversies. With respect to copyright infringement in foreign countries, the Supreme Court judgement of June 8, 2001 is interesting. In this case, a Japanese author (plaintiff) sued a Thai company (defendant) before the Japanese court for a declaratory judgement that the plaintiff-japanese company (and not the defendant-thai company) is the owner of the copyright in Japan. This case became famous as the Supreme Court held that the Japanese court has the jurisdiction over such a case for the reason that the place of the alleged tort by the defendant was committed in Japan, regardless of the facts that the 2

3 copyright in issue was a foreign (Thai) copyright and that the defendant's address is abroad. However, considering the implication of this judgement, it seems that the Supreme Court weighed the place (Japan) of the alleged tort by the defendant's sending warning letters to Japanese people (which was alleged to violate the Unfair Competition Prevention Act), rather than the infringement case in Thailand. Further, it should be noted that the Thai copyright in issue was originated from the work created in Japan by a Japanese author. Similarly, the Tokyo District Court of November 18, 2002, which was handed down shortly after the September 26, 2002 Supreme Court decision, also did not deny its subject matter jurisdiction over a case where a U.S. copyright was infringed in the territory of the United States (the so-called Tetsujin 28 Go (Gigantor) Case). In this case, before the copyright holder (Japanese party) sued a U.S. corporation against its infringement before the Tokyo District Court, the U.S. corporation filed a suit for declaratory judgment of no infringement against said Japanese copyright holder (who did not reside in the United States) and the U.S. court dismissed the case by reason of forum inconvenience. Then, the copyright holder brought the case before the Tokyo District Court against the said U.S. Corporation, who was the plaintiff in the U.S. but did not have any business address in Japan. The Tokyo District Court dismissed the case by stating that the court could not assume jurisdiction over this case because Japan was neither the place of domicile of the defendant nor the place where the tort occurred, and that assumption of jurisdiction in such a case would run contrary to the principle of fairness and justice and the objective of appropriate and expeditious legal proceeding. The court also pointed out that the fact that the suit for declaratory judgment had been dismissed by the U.S. Court could not be a reason for the Japanese court to assume jurisdiction. This is a doctrine that was established by the Supreme Court in the Malaysia Airline Accident case (October 16, 1981). In short, Japanese court seems to find the jurisdiction on the claim based on the infringement of a foreign IP right when a part of the defendant's act is committed in Japan; (i) when the defendant has the domicile in Japan; (ii) when the court finds a special circumstances where to assume Japanese court's jurisdiction will meet with the principle of fairness, justice and swiftness, even if it does not meet general rule to find domestic jurisdiction of the Japanese Civil Procedure Law. I.1.2 If the Courts assume jurisdiction to decide on intellectual property infringements committed abroad, what are the criteria which allow jurisdiction to be attributed to the Courts of the country (e.g.: nationality of one of the parties, concomitant existence of IP infringements in the country of the Court, domicile of the defendant, etc.)? Although Japan has no specific statute providing the rule for jurisdictions over cases having international nature, a Japanese court is allowed to find jurisdiction or international cases when the case satisfies one of the statutory conditions for establishing its domestic jurisdiction under the Code of Civil Procedure: namely, when (i) a defendant has his/her domicile in Japan, (ii) when a defendant is a corporation, it has its principal office or place of business in Japan, (iii) when a defendant is a corporation, its representative or principal officer has his/her domicile in Japan, or (iv) when the defendant appears to defend before the court. In addition, (v) when a tort was committed within Japan, a Japanese court has the jurisdiction on the case. However, the court denied the jurisdiction when the act of tort itself was committed in a foreign country and only the result of the tort occurred in Japan or place where the damage occurred as the plaintiff has its domicile in Japan, by stating that the court could not find such special circumstances 3

4 that, unless the court find the jurisdiction, the outcome will conflict with the principle of fairness or justice and the objective of appropriate and expeditious legal proceeding (the aforementioned Tetsujin 28 Go case). I.1.3 I.2.1 I.2.2 I.2.3 Is this assumption of international jurisdiction specific to the civil law courts, or does it also apply to the criminal law courts? The above discussion regarding international jurisdiction pertains only to civil actions. In Japan, civil actions are treated as the procedures completely separated from criminal actions. For example, a private individual cannot prosecute a criminal action in Japan and no private action incidental to the criminal action filed by the public prosecutor is allowed in Japan. If the domestic Courts may assume jurisdiction to judge IP infringements committed in another country (cross-border infringements), what are the sanctions imposed by the domestic Courts? Generally in Japan, compensation for damage and injunction can be ordered as civil remedies (it should be noted, however, that only compensatory damages can be awarded and the civil courts are prohibited from awarding punitive damages). So far, there is no court decision that actually awarded injunction or damages in a Japanese case where infringement of a foreign IP right was committed in a foreign country. All of the abovementioned cases - despite the fact that the jurisdiction of Japanese courts was seemingly admitted - were dismissed on merits. However, judging from the position that the Supreme Court taken in the FM Signal Demodulator case where indirect infringement of a foreign IP right was committed in Japan, it may be concluded that Japanese courts can award an injunction and damages in accordance with the foreign law in a case where infringement of a foreign IP right was committed in a foreign country; however, such award can only be made to the extent commonly allowable under both of the governing law and the Japanese law. Can the domestic Courts only award compensation for loss (damages) or do they also assume jurisdiction to impose injunction with effects abroad? There have been no court decisions in Japan in which an injunction was ordered to prohibit infringement of a foreign IP right in a foreign country. However, judging from the holdings of the aforementioned Supreme Court decision, it seems theoretically possible for a Japanese court to order an injunction that contains extraterritorial effects. In fact, there has been a case where a Japanese court ordered attachment of debt against a third party debtor residing outside Japan (Osaka High Court, Kinyu Homu Jijyo vol p.64). However, distinction should be made between issuing an injunction order with extraterritorial effect and enforcing it in a foreign country. There are some doubts about the Japanese judicial authority's ability to enforce its extraterritorial injunction orders in foreign countries. Although it seems theoretically possible to use indirect enforcement measures such as imposing monetary penalty through a separate court order against a non-complying party, there are no actual examples of this measures having been done. Also, Japanese courts do not have strong measures for enforcement such as contempt of court in the United States - a court in the United States can keep in custody a person who does not comply with its order. Therefore, the only approach seems to have a foreign court recognize the Japanese court's decision and execute it in such a foreign country. Is there a difference between final sanctions and provisional sanctions from the point of view of international territorial jurisdiction? 4

5 Yes. To have international jurisdiction, the same conditions as those for being allowed domestic jurisdiction under the CCP will apply for both final judgement on regulation and provisional or preliminary order (such as jurisdiction rule based on the domicile of the defendant or occurrence of a tort in Japan). To have jurisdiction to issue a provisional or a preliminary order such as for assets, the existence of the targeted asset in Japan is also a basis for jurisdiction. I.3.1 I.3.2 I.3.3 I.3.4 Which law is applied by a court, which assumes jurisdiction to judge IP infringements committed in another country? With respect to claim for the injunction, in the FM Signal Demodulator case where both the plaintiff (patentee) and the defendant (alleged infringer) were Japanese nationals and had their respective domiciles in Japan, the Supreme Court accepted the U.S Patent Act as the governing law for deciding whether or not an injunction order could be issued in the circumstance, even though the alleged contributory infringement under U.S law was committed in Japan. However, as the conclusion, the Supreme Court refused to issue the injunction order for the reason that it would run contrary to public order in Japan which patent law does not allow such an extraterritory contributory infringement. With respect to claim for damages, the Court decided that it was not appropriate to apply the U.S Patent Act to a tort that occurred in Japan by reason of the territoriality principle and the Court then decided to apply Japanese law (law of the place where the tort was committed) as the governing law for the plaintiff's claim for damages and dismissed the claim by stating the act of the defendant could not constitute a act of tort in Japan because Japanese law did not have a provision prohibiting contributory infringement. Judging from this Supreme Court decision, it can be concluded that regarding claims for injunction, the governing law would be the IP law of the country where the IP right was granted; and regarding claims for damages, the governing law would be the law of the place of tort (although, Supreme Court decision decided that Japanese law was the governing law because the tort had occurred in Japan if the tort had occurred in the foreign country, the Court would find that law of that country would be the governing law). In addition, for injunction to be granted, it would be required that such an injunction did not conflict with public order in Japan (Art. 33, HOREI), and for damages to be awarded, it would be required that the underlying infringing act also constituted a tort under Japanese law (Art. 11(2) and 11(3), HOREI). Is it the law of the forum, or is it the law of the country in which the infringement has been committed? In principle, as discussed in the answer to I.3.1, the law of the country where the tort was occurred (lex loci delicti) would be applied. What is the scope of the foreign law: defining infringing acts, proof of infringement or sanctions for infringement? As a matter of governing law, the law of the relevant foreign country where the patent was issued will be applied to determination of the validity of the existence of infringement, and the amount of damages. However, it is doubtful whether or not a Japanese court would decide on validity of an IP right (there is no precedence of a Japanese court doing so.). Regarding civil court procedure (including rules of evidence), the Code of Civil Procedure is applied as the law of court, lex fori. What is the role of the parties in determining the content of the foreign law: does the burden of proof of the content of this law lie with the parties or is it for the Court, ex officio, to seek the content of the foreign law? 5

6 Courts have the ultimate authority for discovery and application of applicable foreign law. Under the Japanese adversary system, however, there are practical needs for parties to demonstrate and establish the contents of the relevant foreign law. For this reason, parties usually argue and establish with evidence the content of the relevant foreign law and the result of its application, by use of foreign or domestic experts. I.3.5 I.4.1 I.4.2 I.4.3 Does the international public order exception, which allows some countries to exclude the application of foreign law, apply for the infringement of intellectual property rights? As mentioned in the answer to question I.3.1, Article 33 of the HOREI generally allows exclusion of application of the applicable foreign law when it would be contrary to public order in Japan. In the FM Signal Demodulator case, the Supreme Court, as a condition for injunction under the foreign applicable law (U.S. Patent Act) to be awarded, required that such a injunction did not conflict with public order in Japan. In addition, although this Supreme Court decision dismissed the claim for damages by reason that the defendant's act was not illegal under Japanese law (in other words, by applying Article 11(2) and (3) of the HOREI), it seems possible in some cases to dismiss the claim for damage under Article 33 of the HOREI (public order exception). What are the conditions for the enforcement of a foreign judgement against an infringing party for IP infringement committed in another country? Article 118 of the Code of Civil Procedure stipulates that a final and conclusive judgment by a foreign court shall be valid only when the following conditions are satisfied: (1) The jurisdiction of the foreign court is admitted by Japanese laws or ordinances or international treaties. (2) The defeated defendant had received service of summons or orders (excluding service by publication or other similar means) necessary to commence court proceeding, or had responded to the action without receiving such service. (3) The contents of a judgment and the procedure against public order or good morals of Japan. (4) There exists reciprocal guaranty between Japan and the foreign country. Are there specific procedures? Yes. It is necessary to obtain judgment from a Japanese court for a recognition and enforcement of a foreign judgment (Art. 24, Law of Civil Execution). It should be noted that, during its examination on whether or not such a recognition or enforcement judgment can be issued, Japanese court is refrained from review the appropriateness of the merits of the foreign judgment (Art. 24(2)) and Japanese court shall only perform examination regarding whether or not said requirements of Article 118 of the CCP are satisfied. What are the practical difficulties, which complicate the enforcement of foreign court decisions in intellectual property infringement matters? The first barrier to obtain judgment for approval or enforcement of a foreign judgment is the public order requirement stipulated in Article 118(3) of the CCP. In its decision of July 11, 1997, the Supreme Court held that "Even when a foreign judgment has an element that is based on a system Japan does not adopt, we cannot automatically conclude that because of this, the foreign judgment does not satisfy the requirement (of Art. 118(3) of the CCP). However, if such an element is against the basic principles or basic policies of Japanese laws, we should conclude under said provision that the foreign judgment is against the public order in Japan." By stating so, this Supreme Court decision denied the 6

7 enforcement in Japan of the foreign judgment that awarded punitive damages under the U.S. Law. As mentioned above, the Supreme Court decision in the FM Signal Demodulator case dismissed the claim for injunction to prohibit the defendant's acts performed in Japan that was asserted based on a U.S. patent right, by reason that the grant of such an extraterritorial injunction is public order in the Japanese law, which adopts the principle of territoriality. Judging from this, it seems that a foreign judgment injunction order which prohibits a defendant to do a certain act in Japan, based on a patent right in a foreign country, would not be recognized by a Japanese court. On the other hand, a foreign judgment that orders payment of damages based on infringement of the foreign IP right, enforcement of such a judgment will not be rejected only by reason that the judgment is involved with a foreign IP. The second barrier is "reciprocal guaranty" as required by Article 118 (4) of the CCP. Reciprocal guaranty is thought to exist when there is a bilateral agreement for mutual recognition and enforcement of court judgment between Japan and such a foreign country, (i) when the foreign country has the past record of recognizing or enforcing the judgement by a Japanese court, or (ii) when the foreign country, in response to an inquiry made by Japan, undertakes to respect the principle of reciprocity. It may be considered to satisfy the "reciprocity" requirement, when the foreign country's law has provisions similar to the Japanese Code of Civil Procedure with respect to recognition and enforcement of foreign judgments. I.5.1 I.5.2 Are there rules governing lis pendens and related actions for cases where infringement proceedings are pending in parallel before the courts of different countries? In Japan, there is no clear rule regarding international concurrent jurisdiction, and when the case is co-pending before a foreign court the Japanese court decides on case-bycase basis whether or not the Japanese court should continue proceedings before it. So far, judicial precedents regarding international double suits are limited only to decisions made by lower courts, and therefore, we cannot foresee a clear direction of Japanese court regarding this issue. Do the rules on lis pendens and related actions require the court to decline jurisdiction in favour of another court, or do they merely allow it to stay proceedings while awaiting the result of the pending dispute in another country? The Japanese Code of Civil Procedure has no provision that will allow the suspension of court proceedings in case of international co-pendency, that the court has the options (i) to dismiss such a case by reason that the court does not have international jurisdiction over the case or, (ii) to dismiss it by reason that the plaintiff has no standard for the case even when the court may find jurisdiction of the case. In the Tetsujin 28 Go case, before the copyright holder (Japanese party) sued a U.S. corporation against its infringement before the Tokyo District Court, the U.S. corporation filed a suit for declaratory judgment of no infringement against said Japanese copyright holder (who did not reside in the United States) and the U.S. court dismissed the case by reason of forum inconvenience. Then, the copyright holder brought the case before the Tokyo District Court against the said U.S. Corporation, who was the plaintiff in the U.S. but did not have any business address in Japan. The Tokyo District Court dismissed the case by stating that the court could not assume jurisdiction over this case because Japan was neither the place of domicile of the defendant nor the place where the tort occurred, and that assumption of jurisdiction in such a case would run contrary to the principle of fairness and justice and the objective of appropriate and expeditious legal proceeding. 7

8 The court also pointed out that the fact that the suit for declaratory judgment had been dismissed by the U.S. Court could not be a reason for the Japanese court to assume jurisdiction. This is a doctrine that was established by the Supreme Court in the Malaysia Airline Accident case (October 16, 1981). II. Proposals for the future: Introduction Regarding "proposals for the future," the Japanese Group believes that a distinction should be made between (i) problems peculiar to transactions in cyber-space, (ii) problems peculiar to international distribution of counterfeits and (iii) problems of patent infringements that occur concurrently in two or more countries through more traditional types of importation/exportation transactions. First, transactions in cyber-space (including electronic commerce via the Internet) seem to be conducted, intentionally or unintentionally, in a cross-border manner. In particular, as to intentional cross-border transactions, it is urgently necessary to establish international rules that are suitable for addressing the peculiarities of cyber-space and can therefore protect IP rights effectively Second, in the field of the traditional importation/exportation transactions of goods, there is an increased need to harmoniously resolve IP infringements that concurrently occur plural countries, because the number of the countries, to which IP products are destinated, have increased more than ever. In addition, due to the global integration of world economies on one hand and development of an international division of labor on the other hand, it is observed that the respective partial works conducted in each of plural countries by themselves can not be regarded as infringing acts (at least from the traditional viewpoint), but a series of works made by these plural countries as a whole can be seen as an infringing act. We believe that IP laws should change so that they can address the series of acts of this type. Third, in addition to very much contemporary issues, we should point out that even in more traditional circumstances any harmonized litigation system for cross-border infringement will have its limitations under the present principle of territoriality (territoriality of legislative jurisdiction), where IP laws vary from country to country, reflecting each country's specific needs in economic and industrial policies. Therefore, without a higher level of harmonization of the substantive IP laws of all concerned countries, any harmonized system for cross-border litigation will not be able to fully achieve its purpose. The Japanese Group therefore believes that, before considering a harmonized system for cross-border litigation, the harmonization of a substantive IP laws (including, rules regarding claim interpretation, rule of evidence) should be first achieved. Here, the section II of Q174 was unclear for the Japanese Group what image the questioner has in mind for a "harmonized system for cross-border litigation", in this Question, which requested each Group to submit their opinions at this "proposals for the future" section. If the questioner has in mind a system similar to Article 14 of the draft Convention on Jurisdiction and Recognition of Foreign Judgments in Civil and Commercial Matters, which was proposed by the Hague Conference on Private International Law in June 2001, it should be noted that over 220 corporate members in our Japanese Group have expressed their objection to that Article. In this regard, our attitude has not changed since we last answered Q153. 8

9 II.1.1 Do the Groups think that it is possible and desirable to seek a harmonised system for cross-border litigation, while intellectual property rights are currently, in the majority of cases, solely of national scope? (1) Electronic commerce via the Internet have often been carried out as virtually borderless transactions. Such virtually cross-border transactions have often been made with the intention of avoiding the charge of IP infringement, because IP rights generally have only territorially limited effects. If we continue to allow such circumvention, IP protection would become a mere name. In order to prevent this and to ensure the effectiveness of IP protection, we believe that we should strive to establish a certain harmonized system for cross-border litigation against IP infringement made by such a cross-border Internet transaction, for example, the establishment of a multilateral agreement that includes provisions regarding: (i) a new jurisdictional rule for civil actions against such a cross-border Internet transaction that, regardless of the domicile of the person who offers such a transaction, will enable courts of the countries targeted by such a transaction scheme to assume jurisdiction over the case; (ii) alternative measures for a service of complaint that can be made available in case that the court cannot serve the complaint to the defendant by traditional service method; and (iii) a rule that will enable the recognition and enforcement of default judgments at the country of the defendant's domicile or the country of the defendant's property, in case that the measure mentioned in the paragraph (ii) was taken. However, even such an agreement would not have sufficient effect, unless tax heaven countries, and other countries that have not established an IP law system, also participate in such as agreement. (2) In the Japanese Group, there is an opinion-particularly, among experts on trademark issues- that, despite the territorial nature of IP laws, it will be possible and desirable to seek a harmonized system for cross-border litigation against counterfeits (or, so-called dead-copying) of well-known registered trademarks, wellknown unregistered trademarks or well-known trade names because countries seem relatively easy to reach an international agreement. This opinion is, however, not unanimously supported by the Japanese Group. In fact, there remains a dissenting opinion that it will not be easy to reach a consensus among countries on a harmonized system even in such field, because there remain large gaps among each country's substantive IP laws and that, again, harmonization of substantive IP laws is initially required before beginning discussions on a harmonized system for cross-border litigation. (3) Regarding patent litigation, there remain large gaps in court proceedings among countries as well as substantive IP and tort laws. Such gaps have originated from each country's specific need in economic policies and IP laws, including, but not limited to, gaps regarding the claim interpretation, construction, acceptability and conditions for doctrine of equivalents and file-wrapper estoppels, method for identifying damage (due to the difference in general tort law), the discovery system and concept of injunction (due to the difference in general civil procedure law), and defense based on antitrust laws (due to the difference in economic policies). Consi-dering these gaps, even in a case in which some products are found to infringe several corresponding patents in several countries (having literally identical claims), to confirm that one court may apply plural relevant foreign IP laws as the 9

10 governing law will not lead sufficient and appropriate final solution. Except for a region like the EU, which has made efforts for the unification of patent law and economic laws, we believe that, litigations in plural countries would be needed in the end unless the international harmonization of substantive law (including laws on damage and evidence as well as antitrust law) are achieved among all concerned countries. Therefore, it is considered that the unification of rules on jurisdiction, recognition and executions alone is not sufficient. So, more careful examination is required. Therefore, the Japanese Group in principle, does not accept the approach to establish a harmonized system for cross-border litigation without the harmonization of substantive laws, and in the following questions and the Japanese Group will address each of the following questions of Section II hypothetically on the assumption that "if consider about a harmonized system for cross-border litigation", maintaining the principles shown in the above (1) to (3). II.1.2 Do the Groups think that such a harmonised system requires the existence of intellectual property rights which have the same effect in various countries (e.g. at least a regional right)? It is also unclear for the Japanese Group what is implied by the term "a harmonised system" and what type of "same effect" is assumed when this question refers to "intellectual property rights which have the same effect in various countries." If this question asks whether we think that such a harmonized system cannot exist without a global single patent or such a regional single patent right like the European Community patent, our answer is negative. Under the aim of this question --i.e. to resolve the various issues raised by Q174 by "a harmonized system for cross-border litigation"-we consider that the existence of corresponding IP rights in plural countries (for example, patents having substantially the same claims) is a prerequisite for answering this question. However, we believe that the conclusions of plural courts may be different even if an IP right had substantially the same effect in plural countries, unless other aspects for IP Law (including claim interpretation, doctrine of equivalent and estoppel) and laws on evidence and damages) are not substantially harmonized. Without harmonization of such other aspects, when an IP infringement case of patents of several countries is heard by a court of one of these plural countries, the legal system as well as interpretation rules of the country of the court would inevitably affect the judge's decisions on the interpretation and application of other foreign patent laws, and thus, the decision on the same cross-border case would vary depending which country's court tries the litigation. In addition, even if the court tries to apply each foreign country's IP law as the governing laws for such cross-border case, it cannot deny the possibility that public order provision in law of the forum country would prevent the application of these foreign IP laws as a governing law, and, again, decisions on the same cross-border case would vary depending on which country's court tries the litigation. Accordingly, we believe that harmonization of each country's IP laws and related legal system is required as an antecedent condition before the harmonization of cross-border litigation. If, without the harmonization of IP laws and related legal systems, we introduce a system which allows a court of one of the countries to hear the case of plural countries and issues judgment on such case covering all affected countries, it will inevitably lead serious international forum shopping and even litigation-hunting, resembling to ambulance chasing. By the way, to establish a regional IP right that has the same effect 10

11 throughout a certain region will not be a final solution, because the traditional problems will continue to occur in relation to countries outside the region. However, as mentioned in our answer to II.1.1, we believe that, regarding counterfeits of famous trademarks, etc., there is a necessity and possibility to achieve substantially the same protection among plural countries, and, it will not be impossible to make countries adopt a common anti-counterfeit law (as a prerequisite for the harmonized system for cross- border litigation). For the time being, therefore, we believe that it would be advisable to place greater focus on efforts to establish a harmonized cross-border litigation system against counterfeits. II.2.1 II.2.2 If the Groups consider that it is desirable to seek a harmonised system of litigation in cases of cross-border infringement, it would thus be necessary to organise such litigation. We feel that the intention of this question is also unclear. Consequently, the Japanese Group, tries to answer the following questions on the assumption that we are being asked to submit our opinions on what should be taken into account for designing a harmonized system for cross-border litigation if such a harmonized system is useful order to solve problems. The Japanese Group will answer separately for (i) the cases in which more than one country are affected by an infringing act made via the Internet; (ii) the cases in which counterfeit goods of famous brand name products are sold in more than one country, and; (iii) the cases in which corresponding patents are infringed in more than one country. What should be the preferred criteria for choice of forum? (i) Infringement caused by transactions on the Internet In principle, jurisdiction should be granted to court of the country where the infringed IP right exists. Court of the country where the defendant obtained the profit and court of the country where the damage occurred should also be allowed to assume the jurisdiction. The place of the server or place of the defendant's domicile should not necessarily required as the forum for this type of case. However, in a case where the litigation is brought before a court of the country to which the defendant could not expect the occurrence of sales or damage, a rule to deny the jurisdiction of courts of such a country may be considered when some conditions (for example, when the defendant has reasonably controlled distribution of the goods) are satisfied. (ii) Cases in which the counterfeit goods of famous brands are sold in more than one country The country of manufacture, export and shipment can be deemed as the place of tort (locus delicti,) while the country where the manufacturer or seller has its domicile can be recognized as the place of the defendant's domicile. No jurisdiction shall be found by the country in which the infringing goods were distributed against the intention of the manufacturer regardless of a reasonable effort to prevent the distribution of the goods to that country. In reality, however, there would be few countries in which the manufacturers and the sellers of counterfeit products have not expected the occurrence of sales of counterfeits. (iii) Cases where corresponding patents are infringed in plural countries The Japanese Group's majority opinion is that only the country where the patent is granted should assume jurisdiction over this type cases. This rule seems to be still reasonable, because court of the country that granted the patent can construe 11

12 the scope of right and evaluate its validity in the most appropriate manner, and because the parties' burden to file and defend the cases and to collect evidence will not become too overwhelming when the litigation is heard in the country of grant of patent. However, the Japanese Supreme Court seems to be of opinion that courts of the country where the defendant's domicile exists can assume the jurisdiction over this type of case, even when the patent in issue is not granted in that country. If it is necessary to allow jurisdiction to courts of countries other than the one where the patent was granted, it should be the country where the defendant has domicile. However, such a country should be allowed jurisdiction only if the litigation is brought by the patent holder or its licensee. In other words, in order to prevent forum-shopping by alleged infringers and also in order to prevent the patent holder from being forced to respond in an inconvenient forum, the alleged infringer should be prohibited from bringing the litigation in the country of his or her domicile for declaration of non-infringement. The place of occurrence of injury will not be sufficient to find the jurisdiction if the only reason is that the patent holder has its domicile or business address in the country. Since the patent holder may, at its discretion, change its domicile or the business address, such jurisdiction will be against the principle of fairness, justice and appropriateness of litigations. In such cases that a part of the series of acts is conducted in Country A and other part of acts when observed as a whole is conducted in Country B and that, if the series of these acts constitute infringement of such a patent, some harmonization between the substantive laws of both countries is required to solve such cases in an appropriate manner. (Under the current law system where concepts of indirect infringement and contributory infringement vary among countries, patent holders have difficulty to get sufficient remedies.) II.2.3 II.2.4 What then should be the applicable law to organise the infringement proceedings? In principle, the law for procedures of infringement proceedings (procedural law) should be the law of the forum country (lex fori). It should be noted, however, that there are some areas in which it is not so clear whether procedural law or substantive law should be applied. Such areas of laws include rules for collecting evidence (for example, the obligation of the defendant to disclose the method of manufacturing and the obligation of the defendant to produce documents necessary for calculating the amount of damage), rules for deciding who should bear attorney fees and court fees, and rules related to late payment interests. Any harmonized system should clarify which procedural issues should be governed by the law of the forum country and which issues should be governed by the applicable substantive law. What extent would the power of the judge have: merely assessing the infringement, or also assessing the validity of the foreign right with the possibility of invalidating it? When a litigation is heard by a court of the country where the IP right is granted or registered, the judge may have the authority not only to decide on whether or not an infringement exists, but also to consider the validity of the right. Even when courts are allowed to hear a case involving a foreign IP right, the judge should not be allowed to assess the validity issue of foreign right. If a significant doubt exists regarding validity of the right, the infringement court should suspend its proceedings and wait for the decision of the country in which the right was granted or registered. This principle should be applied to trademark cases, because there may be a conflict between the trademark right in issue and 12

13 another local trademark that has been used by the other person in the country of registration. II.3.1 II.3.2 II.4.1 What is the applicable law for judging infringement and sanctions applicable to it? When the allegedly infringed right is a right that needs to be registered (such as patent), the applicable law for assessing infringement should be the law of the country of registration. However, when application of such law is regarded to contravene the public order of the forum country, the court of the forum country should be allowed to reject the application of the foreign law. For example, in the event that the IP law of Country A has the provisions for an extraterritorial application or treble damages but Country B's IP law does not have such provisions, a court of Country B should be allowed to exclude the application of Country A's IP law for infringement proceedings that involve IP rights granted in Country A, if the court of Country B considers that the application of extraterritorial provision or treble damage provision of Country A's IP law will contravene the public order of Country B. On the other hand, if the allegedly infringed right is a right that does not need to be registered (such as a copyright), the applicable law should be the law of the country regarding which the right holder seeks protection of his right. Courts should also be allowed to reject the application of applicable law when it is considered to be against the public order of the forum country. And what scope should the application of this law have (defining infringing acts, proof of infringement or sanctions for infringement)? Subject to the above-mentioned public order exclusion, assessment of the allegedly infringing act and decision on infringement and on sanctions should be regarded as issues to be decided by substantive law, and therefore, should be made under the law of the country of registration. Presumption of negligence and presumption of the amount of damage, although they seem to be have the character of evidence law or procedural law, these issues also should be decided under the law of the country of registration, because these provisions for presumption are provided under each country's policy for enforcement. However, the law of the forum country should be applied to more general issues common to all types of civil procedures, such as assessment of evidence and collection of evidence. Should the rules on lis pendens and related actions apply in the event of infringement proceedings, which are pending before the courts of the various countries? We understand that the purpose of establishing "a harmonized system" as discussed in Q174 is to resolve cross-border IP disputes by one single litigation. If this understanding is correct, the rules on lis pendens and related actions should apply to infringement actions pending before the courts of plural countries. Further, the procedures and conditions therefor should be clarified by a treaty or malti- or bilateral agreement. When these rules are applied, only one court shall continue its proceeding and actions before other courts shall be suspended or stayed. However, which court should continue its proceeding should not be decided only by the criteria of to which court the litigation was first filed. Also, the alleged infringer's litigation for declaratory judgement should not be given too much importance. However, such factors as fairness, justice, appropriateness of trial, ease collection of evidence, convenience of defense should be taken into consideration. 13

14 II.4.2 II.5.1 II.6.1 II.6.2 II.6.3 Should it be provided that it is mandatory for courts to decline jurisdiction in favour of the court first seized of the case, or should there be a rule for a stay of proceedings? It will not be a desirable the rule that courts are always required to decline jurisdiction in favor of the court first seized of the case, because such a rule may be to the advantage of the party who first filed the case to a court and may urge each party to start litigation before the other party files the case. Again, the court that is allowed to or continue the proceeding should be the court of the most reasonable place to resolve the case, but not the court that first received the case. In addition, when the dispute may result in an appropriately balanced resolution, different courts hear the issue of the validity of right and the issue of infringement respectively. Accordingly, when an issue of validity is disputed as a part of the infringement litigation, the infringement court should apply the rule for a stay of proceedings and wait for the decision by the invalidity court even at the sacrifice of a speedy trials. As the result of such an approach, invalidity proceedings will be started at every country of registration, but it should be an inevitable sacrifice for achieving proper resolution to disputes. Should there be provisions for the automatic enforcement of court decisions which are made in such a system or should these decisions always be the object of a procedure for exequatur as normally used to give effect to foreign judgements? Normal procedures for exequatur will be more desirable. As execution of judgement is an exercise of sovereignty and therefore the sovereign of any other countries should be respected. However, in normal procedures for exequatur, an assessment by another court of the merit of a foreign decision shall be limited, unless the foreign decision does contravene the public order of the country of exequatur. In the harmonized system, what elements peculiar to IP litigation the court of exequatur can review should be clearly defined. What is the scope of sanctions which may be imposed by a Court deciding on infringement committed in various countries: can the Court be empowered to judge on the validity of intellectual property rights existing in each of these countries? The authority to decide on the validity of IP rights should be exclusive to the court of the country where the right was registered. Other courts should not be allowed to decide on the validity of foreign rights. Can the Court impose measures of prohibition applicable wherever this right is valid? When the law of the country of registration allows courts to award injunctive remedies, a court having jurisdiction over the infringement should issue an injunction order, provided that its scope and contents cannot go beyond those allowed under the law of the country of registration. Needless to say, such an injunction order can be executed only under the procedure for exequatur in the countries where execution of the injunction order is requested. Could the Court order the infringing party to compensate for loss suffered in all countries? Under a harmonized litigation system that enables a court to decide infringement of foreign IP rights in plural countries, such a court should be allowed to award damages according to such applicable foreign law. However, even when a court is allowed to decide on all claims regarding the infringements in plural countries, it should examine and decide on a country-by-country basis infringement, damages and causation between them. It will be also a possible approach to allow such a court only to decide on infringement, and after finding infringement, to make each country of registration decide an appropri- 14