Challenging Patent Validity in Japanese Infringement Litigation: The 'Invalidity Defense' (Article 104-3)

In patent infringement lawsuits, one of the most potent defenses an accused infringer can raise pertains to the validity of the asserted patent itself. If a patent was granted for an invention that did not actually meet the requirements for patentability (such as lacking novelty or inventive step), then enforcing such a patent would be unjust. Historically, the procedural mechanisms for addressing patent validity within infringement proceedings have varied across jurisdictions. In Japan, the approach has evolved significantly, moving from a strict separation of validity and infringement issues to a system that allows for a more direct confrontation of validity within the infringement lawsuit itself.

The Traditional Dichotomy: Infringement Courts and the JPO

For a long time, Japanese patent law maintained a fairly strict separation: courts hearing infringement cases were generally considered not to have the authority to rule directly on the erga omnes (against the world) validity of a patent. The power to invalidate a granted patent was exclusively vested in the Japan Patent Office (JPO) through specialized invalidity trial proceedings.

This system meant that a defendant in an infringement suit who believed the patent was invalid had to initiate a separate, often lengthy and costly, invalidity trial before the JPO to formally nullify the patent. Simply defending against the infringement claim in court by arguing invalidity was not a direct path to having the patent struck down for all purposes. To mitigate potentially harsh outcomes where a patent appeared to cover known technology, courts sometimes resorted to narrowly construing the patent claims to "exclude prior art," thereby finding non-infringement. However, this approach had its limitations, especially if a patent was fundamentally based on prior art and could not be reasonably interpreted to exclude it.

The Kilby Case: A Judicial Turning Point (Supreme Court, April 11, 2000)

A landmark shift occurred with the Supreme Court of Japan's decision in what is often referred to as the "Kilby case" (Judgment of April 11, 2000). This case concerned a patent related to semiconductor devices. The Supreme Court broke from the stricter traditional view and held that even before a formal invalidity decision by the JPO, if a patent clearly and obviously possesses grounds for invalidation, then the patentee's attempt to enforce such a patent (e.g., by seeking an injunction or damages) would constitute an abuse of rights and should not be permitted by the infringement court.

In the Kilby case itself, the patent was found to have clear grounds for invalidation, specifically for violating the first-to-file principle (Article 39(1) of the Patent Act) and lacking an inventive step (Article 29(2)). The Court reasoned that allowing enforcement of a patent that is so evidently flawed would be contrary to public policy and fairness. The ruling did, however, allow for an exception if "special circumstances" existed, such as the patentee having already initiated proceedings to correct the patent (e.g., through a trial for correction at the JPO).

The Statutory Invalidity Defense: Article 104-3 of the Patent Act

The Kilby decision was pivotal, but its "clear and obvious" standard for invalidity could still be seen as a high bar, and there was continued interest from industry and legal practitioners for a more straightforward mechanism to address validity issues directly within infringement litigation, aiming for a more efficient, "one-stop" resolution of disputes.

This led to the introduction of Article 104-3 into the Japanese Patent Act through an amendment in 2004. This provision establishes a statutory "invalidity defense" (mukō no kōben).

• How it Functions: Article 104-3 allows a defendant (or plaintiff in a declaratory judgment action of non-infringement) in a patent infringement lawsuit to argue that the patent right asserted against them should be deemed invalid through an invalidity trial at the JPO. If the court hearing the infringement case is convinced that the patent indeed has grounds for invalidation, it can effectively render the patent unenforceable against the party raising the defense in that particular litigation.
• Scope of Grounds: This defense can be based on any of the grounds for patent invalidation as stipulated in Article 123, Paragraph 1 of the Patent Act. These grounds largely overlap with the reasons for which a patent application can be rejected during examination (e.g., lack of novelty, inventive step, enablement, or clarity).
• Effect of the Defense: It is crucial to understand that a successful invalidity defense under Article 104-3 in an infringement court leads to the patent being unenforceable inter partes (between the litigating parties in that specific case). It does not result in the erga omnes invalidation of the patent right itself. The patent remains formally registered and potentially enforceable against other parties unless and until it is officially invalidated by a final and binding decision from the JPO in an invalidity trial.
• Procedural Aspects: The defense can be raised by any party against whom the patent is asserted (Article 104-3(3)). However, to prevent misuse, the court has the discretion to dismiss the defense if it determines that it has been raised primarily for the purpose of unduly delaying the proceedings (Article 104-3(2)).

The Patentee's Response: The Argument of Curative Correction

When a defendant raises an invalidity defense under Article 104-3, the patentee is not without a counter-move. The patentee can argue that the alleged ground for invalidation can be eliminated through a correction (amendment) of the patent specification or claims. This is often referred to as a "rejoinder of correction" (teisei no saikōben) and essentially mirrors the "special circumstances" (such as a pending trial for correction) that were contemplated in the Kilby decision as a reason why enforcing a seemingly invalid patent might not be an abuse of rights.

For this counter-argument to be effectively considered by the infringement court, case law has generally indicated that the patentee should typically have already initiated a formal correction proceeding at the JPO—either by filing a request for a trial for correction or by requesting correction during an ongoing JPO opposition or invalidity trial concerning the patent. However, there have been judicial opinions suggesting that an actual JPO filing might not always be an absolute prerequisite if the patentee can convincingly demonstrate to the court that a valid, curative correction is indeed possible and would remedy the alleged invalidity, particularly to avoid unnecessary procedural delays (see, e.g., concurring opinion in Supreme Court judgment of April 24, 2008). Similar to the invalidity defense itself, this counter-argument of correctability can also be dismissed by the court if found to be raised for the purpose of undue delay.

The Interplay: Kilby Doctrine and Article 104-3

An interesting question is whether the judicially created "abuse of rights" doctrine from the Kilby case retains any independent utility now that Article 104-3 provides a specific statutory basis for raising an invalidity defense. While Article 104-3 is the more direct route, the Kilby doctrine might still theoretically apply in very specific situations not perfectly covered by the statute, although Article 104-3 has largely become the standard mechanism.

The "Double Track" and Post-Judgment Developments: Article 104-4

The introduction of Article 104-3 effectively created a "double track" system where patent validity can be assessed by two different bodies: the infringement court (for the purpose of enforceability between the parties) and the JPO (for the purpose of erga omnes invalidation). This can lead to complex situations, particularly if the outcomes diverge.

For example, an infringement court might find a patent enforceable (rejecting an invalidity defense), only for the JPO to subsequently invalidate that same patent in a separate trial. Historically, such a subsequent JPO invalidation could serve as a ground for requesting a retrial of the earlier infringement judgment (based on Article 338(1)(viii) of the Code of Civil Procedure, which allows retrial if a judicial decision forming the basis of the judgment has been altered by a later binding decision). One IPHC decision (July 14, 2008) acknowledged this possibility.

However, allowing finalized infringement judgments to be easily reopened based on later JPO decisions was seen as detrimental to legal stability and the finality of litigation. To address this, Article 104-4 was introduced into the Patent Act by a 2011 amendment.

Article 104-4 generally prevents a party from seeking a retrial of a finalized and binding infringement judgment (or a judgment in a declaratory action of non-infringement, etc.) on the grounds that the patent in question was subsequently invalidated by a JPO decision (or cancelled in a patent opposition proceeding) that became final and binding after the court's judgment was finalized (Article 104-4(1)).

The implications of Article 104-4 are significant:

• Damages: If a patentee won an infringement suit and collected damages, they generally do not have to return those damages even if the patent is later invalidated by the JPO.
• Injunctions: If an injunction was granted, the judgment itself might not be overturned through retrial based on the JPO's subsequent invalidation. However, the erga omnes effect of the JPO's invalidation means the invention is now in the public domain. Consequently, the previously enjoined party (and everyone else) would effectively be free to practice the invention, as the underlying patent right no longer exists to support the injunction's continued enforcement.

This provision aims to bring greater finality to infringement litigation outcomes, even if it means that, in some instances, a party may have paid damages for infringing a patent that is later found to have been invalid from the outset. The same principles would apply if a patent's scope is altered by a JPO correction decision after an infringement judgment, which also raises complex questions about the finality of the initial judgment.

Conclusion

Japan's system for challenging patent validity within infringement litigation has undergone a significant evolution. The introduction of the statutory invalidity defense under Article 104-3, building on the principles articulated in the Kilby case, allows courts to directly consider patentability issues for the purpose of determining enforceability between litigating parties. This, coupled with provisions like Article 104-4 aimed at ensuring the finality of court judgments, reflects an ongoing effort to balance the need for robust patent enforcement with fairness to accused infringers and the public interest in ensuring that only valid patents are asserted. For businesses involved in patent disputes in Japan, a clear understanding of these provisions and their strategic implications is indispensable.