AIPLA Mid-Winter Institute January 26 -27 2016 How

AIPLA Mid-Winter Institute January 26 -27, 2016 How different or similar? - Japanese Patent litigation in Major Asian countries Kaoru KURODA Japan Patent Attorneys Association AIPLA-JPAA Project member

Table of contents n Patent litigation at a glance n Average length of patent litigation n Level of damages awards in patent litigation n Success rate? n Fee shifting – who bears attorney fees? 2

Patent litigation at a glance - Japan (“JP”) Supreme Court Defendant can raise an invalidity defense. Very limited discovery No jury. 3 rd instance 2 nd instance IP High Court (1 court) 2 nd instance 1 st instance Tokyo/Osaka District Court JPO (Board of Appeal) 1 st instance Patent Infringement Lawsuit 3 Invalidation Trial

Patent litigation at a glance - South Korea (“KR”) - before 2015. 12 Supreme Court Defendant can raise an invalidity defense if there exist obvious grounds for invalidation. Very limited discovery No jury. 4 3 rd instance 5 High Courts 2 nd instance 18 District Courts (and 40 branches) Supreme Court 2 nd instance Patent Court (1 court) 1 st instance KIPO (IP Tribunal) 1 st instance Patent Infringement Lawsuit Invalidation Trial

Patent litigation at a glance (KR) after 2016. 1 Supreme Court Defendant can raise an invalidity defense if there exist obvious grounds for invalidation. Very limited discovery No jury. 5 3 rd instance 2 nd instance Patent Court (1 court) 2 nd instance 5 District Court 1 st instance International justice department will be established in Feb 2016. KIPO (IP Tribunal) 1 st instance Patent Infringement Invalidation Trial Lawsuit Source: “Response manuals for patent infringement”, JETRO; Seoul Lawyers (http: //lawinseoul. com/? tag=english-court)

Patent litigation at a glance - China (“CH”) - after 2014. 11 -12 Higher People‘s Court Defendant cannot raise an invalidity defense. Very limited discovery No jury 2 nd instance IP Court (3 courts) / Intermediate People’s Court 1 st instance IP Courts were established in Beijing, Shanghai and Guangzhou in 2014 E. 6 Patent Infringement Lawsuit Higher People‘s Court 2 nd instance IP Court (3 courts) / Intermediate People’s Court 1 st instance SIPO (Patent Reexamination Board) Invalidation Trial

Average length of patent litigation Average length of patent/IP litigation in 1 st instance Note JP Average of all IP litigations KR around 16. 6 months (2000 -2009) Average of Patent litigations CH 7 around 15 months (2014) Court should complete the adjudication within 6 months after accepted. (foreign-related party: around 8 months) Specified by the Civil Procedure Law Source: [JP] IP High Court web site , [KR] KLP IP Firm, [CN] Linda Liu Group, Zhongzi law office.

Level of damages awards in patent litigation (JP, KR) Damages may be calculated in three ways. i. A lost profit: (A) multiplying number of products that the infringer sold with (B) profit per piece that the patentee can obtain from the sales of the patentee’s product but for the infringement; ii. Benefits acquired by the infringer through the infringement; or iii. A reasonable royalty amount. 8

Level of damages awards in patent litigation (CN) • Damages may be calculated in three ways: i. Patentee's actual losses caused by the infringement; ii. Benefits acquired by the infringer through the infringement; iii. Reasonably multiplied amount of the royalties of that patent; or • If all the above are difficult to assess, statutory damages may be awarded in the following range: CN10, 000 - CN1, 000 • 9 ($1, 500 - $151, 000) [$1 = CN6. 6]

Level of damages awards in patent litigation (CN) • Chinese patent law will be revised in the near future. • According to the current draft (Dec. 2015): 10 – Punitive damages for willful infringements will be introduced (for willful patent infringement, the amount of compensation will be raised to two to three times). – The range of statutory damages will be CN100, 000 - CN5, 000 ($15, 000 - $755, 000) [$1 = CN6. 6]

Top five largest damages (JP): 19982014 Defendant Technical field 1 Aruze* Sammy slot machines 2 Smith. Kline Fujimoto Pharmaceutical chemistry 3 Nikon SIGMA machinery Fulta Electric Machinery machinery Net slot machines Plaintiff 4 Shinwa Seisakusho 5 Aruze* 11 Awarded Damages 7, 416 M** ($ 63 M) 3, 059 M ($ 26 M) 1, 518 M ($ 13 M) 1, 244 M ($ 11 M) 988 M** ($ 8 M) [$1 * N/K/A Universal Entertainment **The appellate court reversed this decision because the patent was found to be invalidated in the invalidation trial. = 118]

Level of damages awards in IP litigation (KR) Total estimated amount of damage awards & settlement payment in IP litigation Number of companies Total amount Average amount per company 2012* approx. 350 ₩ 56, 700 M ($ 46. 7 M) ₩ 160 M ($132 K) 2013* * 353 ₩ 76, 400 M ($ 62. 9 M) ₩ 220 M ($ 181 K) [$1 = ₩ 1, 213] 12 Source: * Kim&Chang website, Survey on IP-related Activates in Korea (KIPO&KTC) ** KLP IP Firm, Survey on IP-related Activates in Korea (KIPO&KTC)

Largest damages in countries …except for the US (in $M) 13 Source: Excerpted from a “handout No. 5” for a meeting of a Task Force on Intellectual Property Strategy held in Tokyo on December 15, 2015

Success rate? (JP) The tendency of patent litigation cases in 1 st instance court. 14 Source: “Study Research Report on Actual Resolution of Patent Disputes” (2015), Institute of Intellectual Property.

Success rate? (KR) The tendency of IP litigation cases in 1 st instance court. 15 Source: KLP IP Firm, Korean Judicial Year Book. * “Lose” means “dismissal”, “dismissal without prejudice” and “withdrawal”.

Success rate? (CN) Beijing No. 1 Intermediate Court Shanghai No. 1 Intermediate Court Beijing No. 2 Intermediate Court Shanghai No. 2 Intermediate Court 16 Source: “Statistics Investigation Report on IP Dispute” (2009 -2011), JETRO Beijing

Fee shifting (JP) – who bears attorney fees? • Upon request, a court may order a losing infringer to pay some portion of the prevailing patentee’s attorney fees as a portion of damages incurred to the prevailing patentee. • The amount of awarded attorney fees is usually, at most, 10% of the damages award. • The greater the damages award, the lower the percentage of that amount the court would order the losing party to pay. 17

Fee shifting (JP) – who bears attorney fees? (in K) (in $K) Awarded Attorney fees (in K) (in $K) 1 1, 518, 000 $12, 860 50, 000 $420 2 1, 244, 000 $10, 540 30, 000 $250 3 729, 000 $6, 180 72, 000 $610 4 713, 000 $6, 040 69, 000 $580 5 382, 000 $3, 240 38, 000 $320 Awarded Damages [$1 = 118] 18 Around 10%

Fee shifting (KR) – who bears attorney fees? • According to the Korean Civil Procedure Law, costs of a lawsuit shall be borne by the losing party. • A fee paid or to be paid by a party to an attorney shall be admitted as the costs of lawsuit within the limit of the amounts as prescribed by the Supreme Court Regulations. 19

Fee shifting (KR) – who bears attorney fees? Amount in controversy ～ ₩ 10 M ($ 8 K) Rate of attorney fees included in litigation cost 8% ₩ 10 M ($ 8 K) ～ ₩ 20 M ($ 16 K) [₩ 0. 8 M + (Amount in controversy - ₩ 10 M) x 7/100] ₩ 20 M ($16 K) ～ ₩ 30 M ($ 24 K) [₩ 1. 5 M + (Amount in controversy - ₩ 20 M) x 6/100] 6% ₩ 30 M ($ 24 K) ～ ₩ 50 M ($ 41 K) [₩ 2. 1 M + (Amount in controversy - ₩ 30 M) x 5/100] 20 7% 5% ex) ₩ ($ 41 K) ($ ₩ 70 M ($-> ₩ 0. 8 M ($ 0. 6 K) ₩ 50 M 10 M ～ 8 K) 58 K) [₩ 3. 1 M + (Amount in controversy -9. 8 M ($ 8 K) ₩ 500 M ($ 400 K) -> ₩ ₩ 50 M) x 4/100] [$1 = ₩ 1, 213] 4%

Fee shifting (CN) – who bears attorney fees? • According to the Chinese patent law, the damages amount may include the reasonable cost which is incurred by the patentee to prevent the infringement activity. • “Reasonable cost” usually includes: – Attorney fees, – Fees for collecting evidence, and – Legal costs. 21 [$1 = CN6. 6]

Fee shifting (CN) – who bears attorney fees? • The reasonable cost is calculated based on evidence such as contracts, receipts. • According to some practitioners, the CN50 K to CN100 K ($7, 550 - $15, 000) is usually awarded as the reasonable cost. And the total amount of awarded damages including the reasonable cost is usually within the statutory damages, i. e. , CN100, 000 - CN5, 000 [$1 = CN6. 6] ($15, 000 - $755, 000) 22 Source: attorneys at Linda Liu Group, China Pat Intellectual Property Office

Conclusion n Patent litigation system p Three-tiered structure. p 1 appellate court n Relatively slow comparing to Chinese practice. n Relatively high damages awards among Asian countries but not enough. n Low success rate. n A losing party pays a portion of attorney fees. No “exception” requirement.

Thank you for your attention Abe, Ikubo & Katayama Kaoru KURODA kaoru. kuroda@aiklaw. co. jp AIPLA Mid-Winter Institute 2016