Translated by Takeo HAYAKAWA*
BBS Kraftfahrzeugtechnik, A. G.
Welschdorf 220 Schiltach Baden-Wuertemberg,
The Federal Republic of Germany
represented by Heinrich Baumgartner, President
BBS Japan, K. K.
Shiba-Nichome Building, F. 14
2-28-8 Shiba, Minatoku, Tokyo
represented by Kotaro Ono, Representative Director
Washimayor, K. K.
Mitsui Seimei Fukui Building, F. 8
4-3-1 Hoei, Fukui City
represented by Kotaro Ono, Representative Director
Sumio Takeuchi, Attorney at Law
K. K. Racimex Japan
4-14-3 Nishirokugo, Otaku, Tokyo
represented by Shinichi Inoue, Representative Director
K. K. Jap Auto Products
1-13-7 Meguro, Meguroku, Tokyo
represented by Shinichi Inoue, Representative Director
Yoshikazu Ohara, Attorney at Law
With reference to the Tokyo High Court case, l994(ne) No.3272, in which an injunction was sought against a patent infringement, inter alia, the judgment that court rendered on March 23, l995 was appealed for a reversal in toto. Now the Court decides as follows:
The appeal in the instant case is dismissed.
Costs of appeal shall be paid by the appellant.
Concerning the reason for appeal of Sumio Takeuchi, counsel for the appellant, and the reason for appeal of Sumio Takeuchi, counsel for the appellant and the subordinate interveners:
I. In the instant case, the appellant, on the strength of the patent it owns in Japan, brought an action for injunctive relief and damages against the appellees who are importing by means of so-called parallel importation and selling the products which the appellant manufactured and sold in the Federal Republic of Germany. The facts lawfully determined by the court below are as follows:
(1) The appellant has a patent for an invention entitled "Automobile Wheel," application filed in Japan on October 29, l983 (priority claimed on the basis of application to the European Patent Office on May 27, l983), public notice of application given on January l2, 1990, registration of establishment made on December 20, l99l, patent no. l629869)(the said patent hereinafter called "the present patent" and the said invention "the present patented invention").
(2)The appellant has in the Federal Republic of Germany a patent for the same invention as the present patented invention (applied for to the European Patent Office naming, inter alia, the said country as the designated country on May 27, l983, patent application no. 83105259.2, registration made on April 22, l987)(the said patent hereinafter called "the corresponding German patent").
(3) The appellee Jap Auto Products was importing, up to at least about August l992, automobile aluminum wheels BBB.RS described in the product catalog attached to the judgment of the court of the first instance as exhibit A and automobile aluminum wheels Rolinzer RSK described in the product catalog attached to the same judgment as exhibit B for sale to the appellee Racimex Japan, which company was selling the said several products up to at least the aforesaid month. Now there is a likelihood that the appellees will continue to import and sell the several products (the said several products including those already sold and those expected to be sold in the future hereinafter called "the present several products").
(4) The present several products fall within the technical scope of the present patented invention.
(5) The present several products, after the corresponding German patent came into force, were manufactured and sold by the appellant as embodiments of that patent in the Federal Republic of Germany.
II. In the instant case, the appellees argue that, insofar as the present several products are concerned, the present patent has been forfeited by reason of their lawful distribution by the appellant in the Federal Republic of Germany, with the result that the appellees' act of importing the present several products into, and selling them in, Japan does not constitute an infringement of the present patent, ---in short, they rely on the so-called international patent exhaustion doctrine.
The court below found that the appellant manufactured and sold the present several products in the Federal Republic of Germany as embodiments of the corresponding German patent it owned, that evidently a single opportunity was thus guaranteed for the appellant to secure recovery of compensation for public disclosure of the invention, and further that there was no recognizable legal restriction upon its opportunity to secure recovery of compensation at the time of its distribution. The court concluded that the present patent has been exhausted in respect of the present several products due to the lawful distribution in that country, and consequently it denied injunctive relief and damages the appellant sought against the appellees on the strength of the present patent.
III. The finding of the court below that the appellant's claim for an injunction and damages is unfounded can be supported in its conclusion for the following reasons:
(1) The Paris Convention for the Protection of Industrial Property of March 20, 1883, as revised at Brussels on December l4,1900, at Washington on June 2, 1911, at The Hague on November 6, 1925, at London on June 2, 1934, at Lisbon on October 31, 1958, and at Stockholm on July 14, 1967 (hereinafter called the Paris Convention) provides in Art. 4bis, "(l) Patents applied for in the various countries of the Union by nationals of countries of the Union shall be independent of patents obtained for the same invention in other countries, whether members of the Union or not; (2) The foregoing provision is to be understood in an unrestricted sense, in particular, in the sense that patents applied for during the period of priority are independent, both as regards the grounds for nullity and forfeiture, and as regards their normal duration." This provision denies the interdependence of patents, and lays down that patents of various countries are mutually independent as regards establishment, change and extinction; in other words, that the integrity of a patent as such is not affected by the nullity, forfeiture, duration, etc. of a patent of another country. It is, therefore, outside the scope of the above quoted Article whether or not a patentee is allowed to exercise his patent right in certain circumstances.
The principle of territoriality as applied to patents means that patents of various countries are governed by the law of the respective countries as regards establishment, transfer, validity, etc., with the result that the validity of those patents is recognized only within the territory of the respective countries.
Suppose a patentee is going to exercise a patent right of Japan within its territory, and that a product subject to the exercise of that right was assigned by that patentee et al. outside Japan. How to consider these circumstances in determining whether or not the patentee can be allowed to exercise his patent right is properly a question of interpretation to be solved with exclusive reference to the Japanese Patent Law. This question has nothing to do with the Paris Convention or the principle of territoriality. From the foregoing it would be obvious that such interpretation, whatever conclusion it may reach, will not contravene Art. 4bis of the Paris Convention or the principle of territoriality.
(2) Now a patentee is a person who has an exclusive right to commercially work a patented invention (Patent Law, Sec. 68), and in the case of an invention of an article, acts such as using, assigning, leasing a product of such an invention fall within the definition of the working of a patented invention (Sec.2-3-1). It follows that if a patentee's assignee or his licensee's assignee of a product of a patented invention (hereinafter called "patented product") commercially uses it himself or reassigns it to a third person, or if that third person reassignee of the patented product commercially uses it himself or reassigns or leases it, their acts would appear as a matter of form to come within the definition of the working of a patented invention and thus to constitute patent infringements. But where a patentee or a licensee has assigned a patented product within Japan, we should consider that the patent, having fulfilled its purpose, is exhausted, so that the effect of a patent does not extend to acts such as using, assigning, leasing that particular patented product. The reasons follow: (1) The protection of an invention by the Patent Law should go in harmony with the social and public interest. (2) As a general rule, an assignor by his act transfers all his rights to the object to the assignee, and the assignee acquires all the rights the assignor had to the object. So also, where a patented product is placed in a stream of commerce on the market, transactions are made on the assumption that an assignee acquires the right to commercially use or reassign the object free from the patentee's exercise of his right to it. If a patentee's permission were required before each assignment of a patented product, the free flow of commerce on the market would be obstructed, to the hampering of a smooth distribution of patented products. It would turn out to be prejudicial to the interest of patentees themselves, and would eventually defeat the Patent Law's purpose of "encouraging inventions by promoting their protection and utilization so as to contribute to the development of industry" (Sec. l). (3) On the other hand, seeing that a patentee for assigning a patented product is paid its price including compensation for public disclosure of the patented invention, or for licensing the working of a patented invention is paid a royalty, it may be said that an opportunity is guaranteed for him to recover compensation for public disclosure of his patented invention. Therefore, there is no need to allow a patentee to gain a profit a second time in the process of distribution for the patented product the patentee or his licensee assigned.
III. We cannot say, however, that the above remark automatically applies to a case where a patentee of Japan has assigned his patented product outside Japan. For he does not necessarily have in the country of assignment a patent for the same invention as the patent he owns in Japan (hereinafter called "corresponding patent"). Even if he has a corresponding patent, and if he has exercised his patent right in Japan on a product subject to the corresponding patent, he cannot always be said to have gained a double profit, since the patent he owns in Japan and the corresponding patent he owns in the country where the assignment that has taken place are distinct from each other.
IV. Now let us give some thought to the harmonization of a patentee's right with the flow of goods in international trade. In view of vastly expanding and highly developing international trade in modern society, a free flow of goods including importation is a thing to which primary importance should be attached.. This is also true where our trader imports products sold outside Japan and place them in a stream of commerce on the market. In overseas commercial transactions an assignee acts on the assumption that he transfers to his assignee all his rights to the object while the assignee acquires all the rights the other had. In the state of international trade in modern society as stated above, it is naturally foreseeable that a patentee assigns a patented product, and that the assignee or a third person reassignee will commercially import the product into Japan, and commercially use it or assign it to another person.
The foregoing statement taken into consideration, it would stand to reason to consider that if a patentee of Japan or an entity identifiable with him has assigned a patented product outside Japan, the patentee with regard to the product is not allowed to exercise his patent right in relation to the assignee, except where he agreed with the assignee that with regard to the product Japan be excluded from the areas of sale or use, and in relation to the assignee's third person reassignee and subsequent reassignees of the product, except where there is an agreement to the same effect and it is clearly shown on the product. Otherwise stated, (1) In view of the foreseeability of possible subsequent importation into Japan of a patented product assigned outside Japan as stated above, a patentee who has assigned a patented product outside Japan without any reservation should be deemed to have implicitly granted to the assignee and subsequent reassignees the right to control that product free from the restraints of the patent right the original assignor owns in Japan. (2) On the other hand, if we turm our attention to the right of a patentee, we cannot deny that a patentee, in assigning a patented product outside Japan, should be allowed to make a reservation that enables him to exercise his patent right inside Japan, for where at the time of such assignment he agrees with the assignee that Japan be excluded from the areas of sale or use of the patented product, and it is clearly shown on the product, then a prospective reassignee or any other person to be involved in the flow of the product can take notice of the restriction on the product and can freely decide whether to buy or not under the said restriction. (3) Assignment of a patented product outside Japan by a subsidiary or affiliated company or the like that is identifiable with the patentee should be treated just like the patentee's own as signment of the patented product. (4) The faith an assignee of a patented product places in a free flow of goods should not be betrayed, whether or not the patentee owns a corresponding patent in the country where the patented product was first assigned.
V. Let us examine the instant case in the light of the foregoing. The facts as determined by the court below are as follows: The present several products were both sold in the Federal Republic of Germany by the appellant itself that owns the present patent. The appellant failed to allege or prove that at the time of sale of the present several products it agreed with the assignee that Japan be excluded from the areas of sale or use, or that it was clearly shown on the present patented products. From this it follows that the appellant is not entitled to injunctive relief or damages on the strength of the present patent.
The judgment of the court below can be affirmed because it agrees in its conclusion with our opinion above stated. The arguments of the appellant are untenable, because on the basis of a view all its own it challenges the conformity of that judgment to the laws including the Constitution, or else condemns the explanatory part that does not affect the conclusion of the judgment.
Accordingly, the Court decides as in the formal judgment in accordance with Arts. 401,
95 and 89 of the Code of Civil Procedure. This decision is the unanimous opinion of all the Justices.
The Third Petty Bench of the Supreme Court
Presiding Justice Masao Ono
Justice Itsuo Sonobe
Justice Hideo Chigusa
Justice Yukinobu Ozaki
Justice Shigeru Yamaguchi
* Attorney at law, Professor Emeritus, Kobe University