Copyright and Unfair Competition Claims in Japan: Valuation Strategies for U.S. Businesses

Japanese Attorney at Law - Bengoshi L.L.

• 10 min read

In today's global marketplace, intangible assets such as copyrighted works, brand reputation, and fair competitive practices are invaluable. For businesses, including U.S. companies operating in or with Japan, protecting these "soft intellectual property" rights is a critical concern. When infringement or unfair competitive acts occur, litigation in Japanese courts may be unavoidable. A key procedural step in initiating such actions is the determination of the "Sogaku" (訴額) – the value of the subject matter of the action. This valuation directly influences which court has jurisdiction and, more commonly, the calculation of initial court filing fees. This article examines how "Sogaku" is assessed for various claims arising under Japan's Copyright Act and Unfair Competition Prevention Act.

Japanese copyright law, like that of many other jurisdictions, recognizes two distinct types of rights for authors: moral rights and economic rights. This duality has direct implications for "Sogaku" calculation. It's also important to note that the general term of copyright protection in Japan is currently the life of the author plus 70 years (following amendments related to the TPP11 agreement in 2018), a change from the previous 50 years post mortem auctoris.

A. Author's Moral Rights (著作者人格権 - Chosakusha Jinkakuken)

Moral rights are personal to the author and are designed to protect their personality and reputation as expressed in their work. Key moral rights under the Japanese Copyright Act (著作権法 - Chosakuken Hō, Act No. 48 of 1970) include:

  • Right of Making the Work Public (公表権 - kōhyōken, Article 18): The right to decide whether and how to publish an unpublished work.
  • Right of Determining the Indication of the Author's Name (氏名表示権 - shimei hyōjiken, Article 19): The right to decide whether to use their real name, a pseudonym, or remain anonymous.
  • Right to Integrity (同一性保持権 - dōitsusei hojiken, Article 20): The right to protect the work against derogatory alteration or modification.

"Sogaku" for Claims Involving Moral Rights:

  • Injunctive Relief: When an author seeks an injunction to stop or prevent an infringement of their moral rights (e.g., to halt the distribution of an offensively modified version of their work under Article 112 of the Copyright Act), such a claim is considered a claim not concerning property rights (hi-zaisanken-jō no seikyū). This is because the primary interest being protected is personal and reputational, rather than directly economic. Consequently, the "Sogaku" for such an injunctive claim is the deemed value of 950,000 yen, as stipulated by Article 4, Paragraph 2 of the Act on Costs of Civil Procedure (Minji Soshō Hiyō tō ni Kansuru Hōritsu, "Costs Act").
  • Disposal of Infringing Articles: If, alongside an injunction for moral rights infringement, the author also requests the court to order the disposal of infringing articles or implements used for infringement (Copyright Act, Article 112, Paragraph 2), the "Sogaku" for this ancillary claim is considered absorbed into the "Sogaku" of the primary injunction claim and is not calculated separately.
  • Monetary Claims (Solatium/Damages for Moral Harm): If an author claims monetary damages for the mental distress or harm to reputation caused by the infringement of their moral rights, this part of the action is treated as a claim concerning property rights. The "Sogaku" for this portion is simply the specific amount of damages claimed by the plaintiff.
  • Measures to Restore Honor or Reputation: Authors can also demand measures to restore their honor or reputation (Copyright Act, Article 115), such as the publication of an apology or correction.
    • If the cost of implementing such specific measures is reasonably calculable (e.g., the known cost of publishing an apology in a particular newspaper), then that calculable cost becomes the "Sogaku" for this claim.
    • If the cost is not readily calculable or is extremely difficult to determine at the outset, the claim is treated as one where the "Sogaku" is extremely difficult to value, leading to the application of the deemed "Sogaku" of 950,000 yen.

Distinct from moral rights, copyright also encompasses a bundle of exclusive economic rights that allow the copyright holder to exploit the work financially. These include rights of reproduction, public transmission, distribution, adaptation, etc. (Copyright Act, Articles 21-28). Claims involving these economic rights are treated as claims concerning property rights.

"Sogaku" for Claims Involving Economic Rights:

  • Confirmation or Transfer Registration of Copyright:
    • The "Sogaku" for an action seeking confirmation of copyright ownership or an order for procedures to register a transfer of copyright is, in principle, the economic value of the copyright itself.
    • If a known transaction price for that specific copyright exists, it may be used.
    • More commonly, especially for works actively generating revenue, influential court guidelines (e.g., from the Tokyo and Osaka District Courts) suggest a formula based on recent earnings. A typical approach considers one year's profit as representative, often calculated as:
      Sogaku = (Plaintiff's Annual Sales/Revenue from the Copyrighted Work) x (Plaintiff's Profit Margin)
      The rationale for using a one-year profit figure, even with the long duration of copyright, is often based on the observation that a significant portion of a work's earnings may be concentrated in the period relatively soon after its initial publication or release.
  • Injunctions Against Infringement of Economic Rights (Copyright Act, Article 112, Paragraph 1):
    • The "Sogaku" for an injunction to stop future infringement of economic rights represents the economic benefit the plaintiff expects to gain by preventing such future infringement (i.e., future damages averted).
    • Again, court guidelines often suggest basing this on an estimated one-year impact, using one of the following methodologies:
      1. Plaintiff's Lost Profits: (Plaintiff's Estimated Annual Sales Reduction Due to Infringement) x (Plaintiff's Profit Margin)
      2. Defendant's (Infringer's) Profits: (Defendant's Estimated Annual Sales of Infringing Works/Products) x (Defendant's Estimated Profit Margin)
      3. Reasonable Royalty: (Estimated Annual Reasonable Royalty that Would Have Been Payable for a License for the Copyrighted Work)
  • Disposal of Infringing Articles (Ancillary to Economic Rights Injunction): As with moral rights, if disposal of infringing items is sought alongside an injunction protecting economic rights, its "Sogaku" is absorbed by that of the main injunction claim and not separately calculated.
  • Monetary Damages for Past Economic Harm: For claims seeking compensation for actual financial losses suffered due to past copyright infringement (e.g., lost sales, unpaid royalties), the "Sogaku" is simply the specific amount of monetary damages being claimed by the plaintiff.

C. Publication Rights (出版権 - Shuppanken)

The Japanese Copyright Act also provides for "publication rights" (Copyright Act, Article 79 et seq.), which can be granted by a copyright holder to a publisher, giving the publisher an exclusive right to publish the work in documentary or pictorial form for distribution. These are treated as property rights. The "Sogaku" principles for claims concerning the confirmation, registration, or infringement (injunction) of publication rights largely mirror those applicable to copyright (economic rights), typically focusing on projected annual sales, profits, or royalty equivalents derived from the publication right.

Valuing Claims Under the Unfair Competition Prevention Act (不正競争防止法 - Fusei Kyōsō Bōshi Hō)

Japan's Unfair Competition Prevention Act (UCPA) (Act No. 47 of 1993, as amended) is a crucial piece of legislation for protecting business goodwill, trade secrets, preventing misleading representations, and combating other forms of unfair market practices. It has been significantly updated over the years, and it is important to refer to the current article numbering, as older references may exist in historical commentaries. For the "Sogaku" of claims seeking injunctive relief under the UCPA, specialized courts like the Tokyo and Osaka District Courts have developed influential guidelines, often involving formulas.

General Approach for Injunctive Relief: The "Sogaku" aims to quantify the economic interest being protected by the injunction or the economic loss that the injunction seeks to avert.

"Sogaku" for Specific Types of Unfair Competition (Injunctive Claims):
(Note: The following article numbers from the UCPA reflect common categories and may have been subject to renumbering in later amendments. The principles of valuation generally hold, but specific current article references should always be verified.)

  • Acts Causing Confusion with Another's Goods or Business Indication (e.g., current UCPA Article 2, Paragraph 1, Item 1 (source confusion); Item 2 (dilution of famous indications)):
    • These claims address passing off, use of similar well-known marks, or dilution of famous indications.
    • The "Sogaku" is often calculated using formulas analogous to those for trademark infringement injunctions. This might involve:
      • (Plaintiff's Estimated Annual Sales Reduction of products using the indication x Plaintiff's Profit Margin x Standard Projection Period (e.g., 10 years) x Reduction Rate (e.g., 1/10))
      • Alternatively, it could be based on the defendant's estimated sales/profits from the confusing indication, or an estimated reasonable annual "usage fee" for the indication, similarly projected and reduced.
    • If a claim for trademark infringement under the Trademark Act is joined with a UCPA claim for the same conduct (e.g., use of a confusingly similar mark), the economic interest is considered common, and the "Sogaku" would be determined by the higher of the two individual calculations, not aggregated (absorption rule).
  • Misappropriation of Another's Product Configuration/Trade Dress (e.g., current UCPA Article 2, Paragraph 1, Item 3):
    • This concerns the unauthorized copying of the external appearance or design of another's product (if not protected by design rights, or in addition to them).
    • The "Sogaku" for an injunction might be based on:
      • (Plaintiff's Estimated Annual Sales Reduction of the original product x Plaintiff's Profit Margin x "Claimable Years" x Reduction Rate (e.g., 1/6))
      • Or similar calculations based on the defendant's sales/profits from the copied configuration, or a reasonable annual usage fee.
      • The "Claimable Years" for configurations not protected by other IP rights typically refers to the period from the lawsuit filing until three years after the plaintiff's product featuring that configuration was first sold (reflecting a specific protection window in the UCPA for certain configurations).
  • Acquisition, Use, or Disclosure of Trade Secrets by Improper Means (e.g., current UCPA Article 2, Paragraph 1, Items 4-10):
    • The valuation of injunctive claims for trade secret misappropriation can be complex.
    • If the economic impact is calculable, formulas similar to those for patent injunctions might be adapted: based on plaintiff's sales reduction, infringer's profits derived from the trade secret, or a reasonable royalty for the trade secret, often projected over a standardized period (e.g., 8 years) and adjusted by a reduction rate (e.g., 1/8).
    • However, if such a calculation is not feasible or is deemed extremely difficult at the outset (e.g., the trade secret's precise market value or the impact of its misuse is highly speculative), the deemed "Sogaku" of 950,000 yen is applied.
  • Making Misleading Representations Concerning Quality, Origin, etc. (e.g., current UCPA Article 2, Paragraph 1, Item 20): (False Advertising)
    • For an injunction against false advertising, the "Sogaku" is typically based on the estimated economic loss to the plaintiff (or gain to the defendant) resulting from the misrepresentation, often calculated as:
      • (Plaintiff's Estimated Annual Sales Reduction due to the misrepresentation x Plaintiff's Profit Margin x Standard Projection Period (e.g., 8 years) x Reduction Rate (e.g., 1/8))
  • Acquisition or Use of a Domain Name Identical or Similar to Another's Specific Indication for an Illegitimate Purpose (Cybersquatting) (e.g., current UCPA Article 2, Paragraph 1, Item 19):
    • The "Sogaku" for an injunction against cybersquatting may be calculated using formulas based on the plaintiff's estimated sales reduction due to the domain name misuse, or the defendant's profits, projected over a period (e.g., 10 years) with an appropriate reduction rate.
    • If such a calculation is not reasonably possible or is extremely difficult, the deemed "Sogaku" of 950,000 yen is applied.
  • Acts Damaging the Business Reputation of a Competitor by Disseminating False Facts (Trade Libel) (e.g., current UCPA Article 2, Paragraph 1, Item 21):
    • For an injunction to stop the spread of false and damaging information about a competitor, the direct economic benefit to the plaintiff (i.e., the value of reputation preserved or future losses averted) is considered extremely difficult to calculate in precise monetary terms.
    • Therefore, such claims are typically assigned the deemed "Sogaku" of 950,000 yen.

"Sogaku" for Other Remedies under the UCPA:

  • Measures to Restore Business Reputation (UCPA Article 14): Similar to the Copyright Act provision, if specific measures like corrective advertising are sought, and their cost is calculable, that cost forms the "Sogaku." If the cost is not calculable or extremely difficult to ascertain, the deemed "Sogaku" of 950,000 yen applies.
  • Monetary Damages: Claims for monetary damages resulting from acts of unfair competition are valued at the specific amount of damages claimed by the plaintiff.

It is not uncommon for a single act of misconduct to potentially infringe rights under both the Copyright Act and the Unfair Competition Prevention Act. For example, the unauthorized reproduction and sale of product packaging that includes original artwork could constitute copyright infringement of the artwork and also an act of unfair competition (e.g., copying product configuration or causing source confusion).

If claims under both statutes are joined in a single lawsuit based on the same essential wrongdoing and aiming to protect the same core economic interest (e.g., preventing loss of sales for that specific product), the "absorption rule" for "Sogaku" would likely apply. This means the "Sogaku" for the combined claims would be determined by the higher of the "Sogaku" values calculated individually for the copyright claim and the UCPA claim, rather than a simple aggregation of both.

Strategic Considerations for U.S. Businesses

Understanding these valuation rules is crucial for U.S. businesses seeking to protect their copyrights, brands, and goodwill in Japan:

  • Budgeting for Litigation: The valuation approaches, especially those for injunctive relief under copyright (economic rights) and the UCPA, which often involve projections of profits or royalties over several years (albeit with reduction rates), can still result in substantial "Sogaku" figures. This directly impacts the initial filing fees and should be factored into litigation budgets.
  • Predictability for Certain Claims: The consistent application of a 950,000 yen deemed "Sogaku" for claims involving author's moral rights injunctions, or for certain types of unfair competition claims where value is hard to quantify (like trade libel or some trade secret cases), offers a degree of predictability for initial costs.
  • Evidence Gathering: If litigation is contemplated, businesses should proactively gather and maintain data that would be relevant for "Sogaku" calculations, such as sales figures for relevant products/services, profit margins, licensing or royalty information (if any), and any available information on the infringer's activities and sales.
  • Appraisal Evidence: For copyrighted works or other intangible assets where a transaction history or direct income stream is not clear, obtaining an expert appraisal of value might be a consideration, as courts may accept such evidence.

Conclusion: Tailored Valuation for Intangible Assets

The determination of "Sogaku" for copyright and unfair competition claims in Japan reflects a sophisticated attempt to assign procedural value to often intangible yet economically vital assets. For copyright, a clear distinction is made between the personal, non-economic nature of moral rights (often attracting a deemed "Sogaku") and the financial nature of economic rights (valued based on profit/royalty projections, typically for a limited period). Claims under the Unfair Competition Prevention Act utilize a range of approaches, from detailed formula-based valuations mirroring those in industrial IP for acts like passing off, to a deemed value for claims where the economic harm is particularly diffuse or difficult to quantify, such as trade libel or certain trade secret misappropriations.

These tailored valuation strategies, significantly influenced by the guidelines and practices of specialized courts, are crucial for litigants to understand. They not only govern the initial procedural steps of filing a lawsuit but also provide a framework for how Japanese courts approach the economic dimensions of these "soft IP" disputes. Given the complexities involved, particularly in applying the various formulas and assessing the "extremely difficult to calculate" threshold, businesses are well-advised to seek expert Japanese legal counsel when contemplating or facing litigation in these areas. Such guidance is essential for accurate "Sogaku" determination, effective cost management, and strategic case presentation.