Tokyo District Court Awards Extraterritorial Damages for Domestic Patent Infringement
On September 24, 2020, the Tokyo District Court rendered a decision which awarded extraterritorial damages for domestic patent infringement (Ajinomoto v. CJ Japan, Case No. 2016 (Wa) 25436).
The facts of this case are as follows: The plaintiff Ajinomoto sued defendant CJ Japan (a Japanese entity being part of the Korean CJ company group) for infringement of Ajinomoto’s Japanese patents over products related to L-glutamic acid. The defendant’s products were all manufactured in Indonesia by non-defendant CJ Indonesia (an Indonesian entity belonging to the same Korean CJ company group), and were sold to Japanese customers through two sales channels: (1) CJ Japan would purchase the products from CJ Indonesia, import them into Japan and sell them to Japanese customers (“Japanese Channel”), and (2) CJ Indonesia would sell the products directly to Japanese customers from Indonesia (“Indonesian Channel”).
The Tokyo District Court found that CJ Japan’s activities in the Japanese Channel infringed Ajinomoto’s patents. Further, the court found that, although the sale of the products in the Indonesian Channel was completed in Indonesia and thus outside the scope of the Japanese patents, the activity of jointly making an “offer for sale” of the products in Japan with CJ Indonesia constituted infringement of Ajinomoto’s patents.
In calculating the damages caused by the offer for sale in the Indonesian Channel, the court applied Japanese Patent Act, Article 102(2), which presumes the amount of profits earned by an infringer to be the amount of damages sustained by a patentee. What was special in this case was that the court awarded damages based on even the profits earned by CJ Indonesia in Indonesia, which has an extraterritorial nature. The court held that, under the Indonesian Channel, all products were sold to Japanese customers and imported into Japan, so it was reasonable to find that the profits made by CJ Indonesia were profits made from the “offer for sale” carried out in Japan.
Extraterritorial damages is one of the hot issues in the IP field, and the US Supreme Court will also render its judgement in Abitron Austria GmbH v. Hetronic International, Inc. Closer attention is needed to the trends of the extraterritorial nature of patent infringement, especially in this IoT era.