Patent Exhaustion in Japan

1. AIPLA Mid-Winter Institute IP Practice in Japan Committee Pre-Meeting Seminar Patent Exhaustion in Japan JPAA International Activities CenterKaoru Kuroda

2. BBS Supreme Court Case (1997) adopted the domestic exhaustion in dicta. Exhaustion Cases in Japan Once a patentee assigned a patented product in Japan, the patent right will not be effective against activities such as using, assigning or leasing this patented product because the patent right for this product is exhausted by achieving its purpose. 2

3. BBS Supreme Court Case (1997) stated following rationales for domestic exhaustion. Exhaustion Cases in Japan (1) Protection of security of transaction: When the patented product is placed on the market, the product is assigned to the assignee on the premise that the assignee will obtain the rights to use and reassign the product. Otherwise, free circulation of products in a market would be obstructed ; (2) Preventing double recovery: There is no need for the patentee to receive a double recovery during the course of distribution of the product. 3

4. Exhaustion Cases in Japan BBS case (Sup. Ct., 1997) Products are processed or replaced by third party 4

5. Disposable Camera (1) & (2)(Tokyo Dist. Ct., 2000) Fact (Konica case and Fujifilm case) Plaintiff has utility model rights or patent rights relating to a disposable camera. Defendant was accused of refilling the used plastic housings of disposable cameras with new film and batteries and selling the refilled product. “Disposable Camera” = only pre-equipped film is supposed to be used. 5

6. Disposable Camera –Konica(Tokyo Dist. Ct., 2000) Holding (“Exhaustion” approach) By judging from the nature of the product, the character of the transaction, and utilization form of the product in accordance with social convention, the right holder may not necessarily grant the assignee unqualified rights to reassign the assigned product free from being accused. In that case, the right holder may exercise his right if the assignee’s activity exceeds the qualified scope of activity. Not exhausted (=infringe) because the accused activity was beyond the scope of activity foreseen by the right holder as of the assignment. 6

7. Disposable Camera –Fujifilm(Tokyo Dist. Ct., 2000) Holding (“Exhaustion” approach) • A patent right would not be exhausted when • A third party reuse or reassign after the function of the patented product has been depleted; or • A third party replaces an element of a patented product that corresponds to the essential part of the patented invention, and thus the resulting product is not equivalent to the original patented product. Not exhausted (=infringe) because the function of the disposable camera at issue was depleted when it was used up. 7

8. Acｙclovir case (Tokyo Dist. Ct., 2001, Tokyo High Ct., 2001) Fact The defendants bought a pharmaceutical compound containing the patented drug “acyclovir” as an active ingredient. They extracted and purified the acyclovir, then produced and sold a new pharmaceutical compound containing the resulting acyclovir as an active ingredient. 8

9. Acyclovir (Tokyo Dist. Ct., 2001) Holding (“Exhaustion” approach) same as Fujifilm case • Exhaustion is denied when: • a functionally depleted patented product is reused; (for the same purpose as the original use) or • an element of a patented product corresponding to the substantial part of the patented invention is replaced. The situation in this case did not fall into either category. Exhausted (=not infringe) because the fact in this case did not fall into either category. 9

10. Acyclovir (Tokyo High Ct., 2001) Holding (“Manufacturing” approach) A patent right may be exhausted with respect to the assignee’s activities, such as using and assigning, but may not be exhausted with respect to the assignee’s manufacturing activity. Therefore, if the assignee’s activity is evaluated as manufacturing a new product, it constitutes infringement of the patent right. Exhausted (not infringe) because the defendants’ activity did not yield any chemical reaction with regard to the acyclovir, nor did this activity produce any new acyclovir by some chemical reaction (not manufacturing). 10

11. Ink Cartridge(Tokyo Dist. Ct., 2004, IP High Ct., 2006,Sup. Ct., 2007) Fact The plaintiff, an owner of a patent right relating to an ink tank for an inkjet printer, produced an ink cartridge as a patented product and sold it. The defendant’s accused infringement, in relevant part, was washing the used ink tanks and refilling it with ink, and selling the products thus obtained. 11

12. Ink Cartridge(Tokyo Dist. Ct., 2004) Holding (“Manufacturing” approach) same as Acyclovir case A patent right may not be exhausted with respect to the assignee’s manufacturing activity. Therefore, if the assignee’s activity is evaluated as manufacturing a new product, it constitutes infringement of the patent right. Exhausted (=not infringe) because refilling the used ink tank with ink does not constitute manufacturing a new ink tank. 12

13. Ink Cartridge(IP High Ct., 2006) Holding (“Exhaustion” approach) A patent right is not exhausted in the following situations: (1) where the patented product is reused or recycled after its function has been depleted due to the expiration of the original life span of the product (1st Category), or (2) where a third party processes or replaces the whole or a part of the patented product which corresponds to the essential part of the patented invention (2nd Category). Not Exhausted (=infringe) because refilling the used ink tank constituted processing or replacing the essential part of the patented products (2nd Category). 13

14. Ink Cartridge(Sup. Ct., 2009) Holding (“Manufacturing” approach) If a patented product transferred by the patentee in Japan is processed or partially replaced, and by those actions it is recognized that a non-identical patented product is freshly manufactured, the patentee should have the right to enforce the patent right with regard to the freshly manufactured product.. Not Exhausted (=infringe) because when ink is used up, the essential function of the ink tank is blocked, however, when Defendant washed the used tank and refilled it with ink, the essential function was revived, which constitutes manufacturing a non-identical patented product. 14

15. Thank you! Abe, Ikubo & Katayama Kaoru Kuroda kaoru.kuroda@aiklaw.co.jp