Authored by York M. Faulkner
Japan, as one of the world's largest economies, is an attractive market for exporters. And, as a country with nearly 400,000 annual domestic patent applications, Japanese IP owners have a potentially formidable IP arsenal arrayed against infringing imports. Litigants in Japanese courts, however, face challenges in enforcing that IP. Although recent reforms have dramatically streamlined patent litigation in Japan, it still takes an average of 12 months to obtain an infringement verdict in district court. Even preliminary injunction proceedings consume an average of 6 months to complete. Import suspension proceedings before the Japanese Customs Office are an excellent alternative to district court litigation.
Similar to actions before the U.S. International Trade Commission, Japanese import suspension proceedings provide abbreviated and expedited procedures for enjoining the importation of products that infringe registered patents, designs, trademarks, and copyrights.1 Significantly, importation may be quickly and preliminarily enjoined during the pendency of the suspension determination proceedings. Although the Japanese Customs Office may proactively initiate its own investigation of infringing imports, instances are infrequent.2 Almost all suspension determination proceedings are initiated by application of the IP owner.3
The Import Suspension Application
Each import suspension application results in a preliminary "mini-determination" of the merits of the suspension request bearing on the Customs Office's decision to: (1) accept the application and conduct a full determination of the merits, (2) withhold the application until the IP issues are resolved by the courts or Japanese Patent Office ("JPO"), or (3) reject the application. If the Customs Office is satisfied that the applicant has made a prima facie showing of infringement, it will accept the application.4 Acceptance results in the preliminary seizure and suspension of the accused imports, upon the applicant's payment of a security deposit against the importer's potential injury.5
Given the divergent consequences of these Custom Office decisions, a great deal of up-front work goes into the application process itself. Before submitting an application, the applicant must consult with the Customs Office to confirm its ownership of the IP rights at issue, identify the accused product, and receive instructions for completing the application, including the scope of prima facie evidence required to support the application.6 After receiving the application, the Customs Office publishes a notice of the suspension request, inviting comment from interested parties. Depending on the complexity of the issues, the Customs Office typically makes its decision to accept, withhold, or reject the application within a 4 to 10 week period.7
During that time, the Customs Office receives written submissions from interested parties and, at its discretion, may appoint a panel of three disinterested expert advisors to assist in reviewing the application.8 Both technical and legal experts may be selected for service as advisors. The panel considers the parties' submissions and typically conducts an informal hearing during which the parties present their arguments and respond to the panel's questions. Following the hearing, each expert advisor independently drafts a written opinion on whether a prima facie showing of infringement has been made and whether the IP rights are likely valid. The Customs Office then considers both the parties' submissions and the expert advisors' opinions in deciding whether to accept the application and conduct a full determination of the merits.9
Suspension Determination Proceedings
The commencement of the suspension determination proceedings triggers a series of short deadlines. Depending on the complexity of the case, the parties have between 10 to 20 days to submit additional evidence in support of their arguments. As part of the proceedings, the applicant has an opportunity to supplement its infringement evidence by physically inspecting the accused product.10 Before 2005, the applicant was only permitted to observe the visible features of the accused product. The Customs Act was amended in 2005 and now permits the applicant to disassemble and test the accused product, greatly enhancing the usefulness of inspections in gathering evidence of infringement.11
Ordinarily, the Customs Office must complete the suspension determination proceeding within 30 days of commencement.12 However, that deadline may be extended if one or more of the parties request a formal infringement opinion from the JPO Commissioner. If the request is granted, the parties are given 5 days to prepare their written submissions to the JPO Commissioner, who then has 30 days to issue a formal opinion.13 The Customs Office may also reconvene the panel of expert advisors to address any new technical or legal issues that arise during the determination proceedings.14
The Customs Office makes its final determination of infringement by considering the parties' submissions, the opinions of the expert advisors, and the opinion of the JPO Commissioner. If the Customs Office finds infringement and is satisfied that the IP rights are likely valid, the imported goods will either be confiscated or destroyed, unless the importer takes mitigating remedial steps.15 The importer can avoid confiscation or destruction by settling with the applicant and obtaining its consent to import, by altering the accused product to avoid infringement, or by waiving ownership of the goods.
The Japanese Customs Office provides an abbreviated procedure for resolving IP disputes over imported goods and a blunt remedy of import suspension. The suspension determination proceedings, therefore, give IP owners significant potential leverage over accused infringers who must respond, for example, to potentially complex issues of patent validity and infringement on an aggressively short timetable. The abbreviated schedule and import suspension remedy are not without risks to the IP owner. A final determination of infringement by the Customs Office does not preclude the importer from initiating, for example, patent invalidation proceedings in the JPO. Nor does the Custom Office's determination shield the patent owner from liability to the importer for damages resulting from a subsequent JPO ruling that the patent is invalid. Initiating Customs Office import suspension proceedings, therefore, requires resourceful advance planning to meet the demanding deadlines and due care in considering the risks of success. Despite those demands and risks, the Customs Office proceedings provide IP owners an enormously useful tool in enforcing their rights in the Japanese market against infringing imported goods.
1 See generally Japanese Customs Law, Law No. 61, Article 69-11.
2 See id., Article 69-12 (investigations initiated by Customs Office).
3 See id., Article 69-13 (investigations initiated by application of IP owner).
4 See id.
5 See id., Article 69-15.
6 See id., Article 69-13.
7 See id.
8 See id. Amendments to the Customs Law in 2006 permitted the retention of expert advisors. Until then, the Customs Office had experienced significant difficulty in dealing with the complex technical and legal issues inherent in many of the suspension applications. The expert advisors have added significant vitality and predictability to the process. See also id., Article 69-15.
9 See id., Article 69-13.
10 See id., Article 69-16.
11 See id.
12 See id., Article 69-12.
13 See id., Article 69-17.
14 See also id., Article 69-19 (advisors may comment on nontechnical issues such as patent right exhaustion).
15 See id., Article 69-12.
Originally printed in The Federal Circuit Bar Association Bench & Bar Newsletter. Reprinted with permission. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.