Understanding Indirect Patent Infringement in Japan: Implications for U.S. Component Suppliers

Direct patent infringement typically involves making, using, selling, or importing a product or process that falls squarely within the literal scope of a patent's claims. However, patent rights can also be infringed indirectly through acts that contribute to or facilitate direct infringement by others. In Japan, these "acts deemed to be infringement" are specifically defined in Article 101 of the Patent Act. For U.S. companies and others supplying components or materials that may end up in products marketed in Japan, understanding the nuances of Japanese indirect patent infringement law is crucial for risk assessment and compliance.

The Purpose and Framework of Indirect Infringement in Japan

The primary purpose of indirect infringement provisions under Japanese Patent Act Article 101 is to enhance the effectiveness of patent rights. It achieves this by prohibiting certain preparatory or contributory acts that, while not constituting direct infringement themselves, have a high likelihood of inducing or enabling direct infringement by a third party. This framework allows patentees to take action against entities further up the supply chain whose activities are intrinsically linked to the ultimate infringement of the patent.

Article 101 categorizes several types of acts that are "deemed to be infringement." These can broadly be divided based on the nature of the act and the mental state of the actor. For component suppliers, the most relevant provisions concern the supply of articles used in the creation of patented products or in the practice of patented methods.

Objective Indirect Infringement: The "Exclusively Used" Criterion

The first category, often termed "objective" indirect infringement, does not require the actor to have any specific knowledge or intent regarding the patent or the subsequent infringement. Liability arises from the objective nature of the supplied article.

• For Patented Products (Article 101(i)): It is deemed an act of infringement to produce, assign (sell, lease, etc.), import, or offer for assignment, in the course of trade, any article that is used exclusively (or "only" - のみ nomi) for the production of the patented product.
• For Patented Methods (Article 101(iv)): Similarly, it is deemed an act of infringement to produce, assign, import, or offer for assignment, in the course of trade, any article that is used exclusively for the working (use) of the patented method.

The interpretation of "exclusively used" is critical. Japanese courts and practice have established that this does not mean absolute, physical impossibility of any other use. Rather, it's a practical and commercial assessment. If any other potential uses of the article are not economically, commercially, or practically feasible, or are merely theoretical or incidental, the "exclusively used" requirement can be met. For instance, in a notable Osaka District Court decision on February 16, 1979 (related to decorative wall panels, often referred to as the Keshōban Jiken), special nails designed for a patented construction method were found to satisfy the "only use" criterion because their alternative uses were impractical or even dangerous.

The burden of proving that an article is "exclusively used" for the infringing purpose lies with the patentee. For injunctions, if a substantial non-infringing use for the article arises before the conclusion of oral arguments, the claim for an injunction against supplying that article might be denied. However, for damage claims, the assessment is typically based on whether the "exclusively used" condition was met at the time the contributory acts occurred.

Subjective Indirect Infringement: "Indispensable" Articles and Knowledge

Recognizing that the "exclusively used" criterion could be overly restrictive, particularly with the rise of multi-functional components, Japan amended its Patent Act in 2002 to introduce provisions for "subjective" indirect infringement. These provisions impose liability even if the supplied article has other uses, provided certain conditions, including the actor's knowledge, are met.

• For Patented Products (Article 101(ii)): It is deemed an act of infringement to produce, assign, import, or offer for assignment, in the course of trade, any article (excluding those widely available and generally distributed in Japan) that is used for the production of the patented product AND is indispensable (fukaketsu na mono) for solving the problem addressed by the patented invention, knowing that the invention is patented and that the article is used for working that invention.
• For Patented Methods (Article 101(v)): A parallel provision applies to articles indispensable for using a patented method, again requiring knowledge.

Key elements of subjective indirect infringement are:

1. Indispensable Nature: The supplied article must be essential for achieving the core inventive solution of the patent. This often means it corresponds to a key, novel feature of the claimed invention, distinguishing it from generic or peripheral components. The concept of an "indispensable element" is generally understood to refer to a part that embodies an essential aspect of the patented invention's technical idea. For example, in a patent for an erasable ballpoint pen where the specific erasable ink formulation is the core innovation, supplying that unique ink (if it's not a common commodity and other conditions are met) might constitute subjective indirect infringement. Conversely, supplying a standard pen cap or barrel, even if part of the patented pen's overall structure, would likely not qualify if those parts are not "indispensable" to solving the inventive problem targeted by the patent.
2. Not Widely Available General-Purpose Goods: The provisions explicitly exclude articles that are "widely and generally distributed within Japan" (日本国内において広く一般に流通しているもの - Nihon kokunai ni oite hiroku ippan ni ryūtsū shiteiru mono). This means that common staples of commerce, or general-purpose components like standard screws, generic chemicals, or basic electronic components readily available on the open market, typically do not trigger subjective indirect infringement liability, even if they are technically indispensable and the supplier has knowledge. The IP High Court Grand Panel, in a decision on September 30, 2005 (the Ichitaro case, concerning software functionality), reinforced this principle that widely available commodities are outside the scope of these subjective indirect infringement provisions.
3. Knowledge (Subjective Element): This is the defining feature of these provisions. The actor must know (shirinagara) two things:
   • That the end product or process for which their article is used is covered by a patent.
   • That their specific article is being used (or will be used) for working that patented invention.
     The burden of proving this knowledge rests with the patentee. In practice, patentees often send warning letters to potential indirect infringers, detailing the patent and the infringing use of the component. Receiving such a letter can make it difficult for the supplier to subsequently deny knowledge for acts committed thereafter.

Acts of Possession for Assignment or Export

Amendments in 2006 introduced further categories of deemed infringement related to the possession of infringing items:

• For Patented Products (Article 101(iii)): Possessing the patented product for the purpose of assigning or exporting it, in the course of trade.
• For Products of Patented Methods (Article 101(vi)): Possessing a product manufactured by a patented method of production for the purpose of assigning or exporting it, in the course of trade.

These provisions target acts at the pre-distribution stage of the directly infringing product itself, rather than the supply of components. They are somewhat analogous to "deemed infringement" provisions found in copyright law concerning the possession of infringing copies for distribution.

The "Independent" vs. "Dependent" Nature of Indirect Infringement: A Theoretical Debate with Practical Consequences

A long-standing theoretical debate in Japanese patent law concerns the legal nature of indirect infringement under Article 101:

• Independent Theory (Dokuritsu-setsu): This theory posits that Article 101 defines acts that are, by themselves, deemed to be a form of patent infringement, independent of whether an act of direct infringement by a third party has actually occurred or is imminent. The infringing nature stems directly from the statute's "deeming" provision.
• Dependent Theory (Jūzoku-setsu): This theory views Article 101 as targeting preparatory or contributory acts that are inherently linked to, and dependent upon, an actual or potential act of direct infringement. Under this view, if direct infringement is impossible or legally excused, then indirect infringement should not arise.

While the statutory language ("deemed to be infringement") might lean towards the independent theory, the practical application by courts and the prevailing academic views have often incorporated elements of dependency, especially in specific scenarios:

1. Components for Export for Foreign Assembly: If components are supplied in Japan but are intended solely for export and assembly into a final product abroad, where that final product might infringe a foreign patent but not the Japanese patent (due to territoriality), Japanese courts have been reluctant to find indirect infringement under the Japanese patent. Decisions like the Osaka District Court case of October 24, 2000 ("Automatic Bread Maker case") and the Tokyo District Court case of February 27, 2007 ("Multi-joint Conveyor Device case") support the view that such acts do not constitute indirect infringement in Japan. This aligns with the dependent theory, as there is no corresponding direct infringement of the Japanese patent.
2. Components for Statutorily Exempted Direct Infringement: If components are supplied for a direct working of the invention that is itself exempted from patent rights (e.g., experimental use under Article 69(1) of the Patent Act), the prevailing view is that indirect infringement should not be found. To hold otherwise would frustrate the public policy behind the statutory exemption for direct infringement.
3. Components for Non-Commercial (e.g., Domestic) Use: This scenario is more debated. If an invention is designed such that its direct working would only occur in a private, non-commercial setting (which is generally outside the scope of patent enforcement that targets acts "as a business"), should the commercial supply of components exclusively for such use constitute indirect infringement? Some commentators, even those generally favoring a dependent view, argue for finding indirect infringement here due to the significant commercial impact on the patentee by the component supplier, effectively undermining the patent. However, this represents a policy-driven modification to strict dependency.

The debate reflects the tension between a literal interpretation of Article 101 and the underlying purpose of preventing culpable contributions to unauthorized exploitation of patented technology while respecting the defined limits of patent rights (e.g., territoriality, experimental use).

Remedies for Indirect Infringement

Acts deemed to be infringement under Article 101 generally expose the actor to the same types of remedies as direct infringers, albeit with some nuances:

• Injunctions (Article 100): A patentee can seek an injunction to stop acts of indirect infringement. For objective indirect infringement involving "exclusively used" components (Art. 101(i), (iv)), a comprehensive injunction against making or selling those components, and potentially their destruction, may be ordered. For subjective indirect infringement involving "indispensable but multi-use" components (Art. 101(ii), (v)), the scope of the injunction might be more tailored. For example, it might prohibit the supply of the component for the specific infringing purpose or require the destruction of only those components clearly identifiable or marked for such infringing use. However, the Osaka District Court, in a decision on February 21, 2013 (the "Particulate Matter Mixing Device case"), granted a full injunction and order for destruction of components found to fall under Article 101(ii) where it was shown that the vast majority were, in fact, being used for the infringing purpose.
• Damages (Article 102): The applicability of Article 102, which provides for presumptions and methods for calculating damages in patent infringement cases, to indirect infringement has been debated but is generally affirmed by case law (e.g., Osaka District Court, April 24, 1989, "Sand Making Machine Hammer case"; Tokyo High Court, May 23, 1996, "Alignment Mounting Method case"). Damages would typically be calculated based on the profits derived from the sale of the infringing components or a reasonable royalty attributable to those components. For provisions like Article 102(1) (based on patentee's lost profits) or Article 102(2) (based on infringer's profits), it's generally considered that the patentee must be working the patented invention, though not necessarily producing the specific components themselves, for these presumptions to apply effectively.
• Presumption of Negligence (Article 103): This statutory presumption of negligence applies to objective indirect infringement (Art. 101(i), (iv)) and the possession-based acts (Art. 101(iii), (vi)). It does not apply to subjective indirect infringement (Art. 101(ii), (v)) because "knowledge" (a higher mental state than negligence) is already an explicit requirement for these provisions.
• Criminal Penalties: Following a 2006 amendment, acts falling under Article 101 are subject to specific criminal penalties under Article 196-2 of the Patent Act. These penalties are slightly less severe than those for direct infringement under Article 196, but demonstrate the serious view taken of such contributory acts.

"Indirect-of-Indirect" Infringement: Drawing the Line

There is a general reluctance in Japanese patent law to extend the concept of indirect infringement to "indirect-of-indirect" acts. For example, supplying a machine or tool that is used to manufacture a component, where that component itself is then supplied and constitutes an indirect infringement, is typically considered too remote to attract liability. This is to prevent an unbounded expansion of patent rights far up the supply chain.

Implications for U.S. Component Suppliers

For U.S. companies supplying components or materials that might be incorporated into products sold in Japan or used in processes practiced in Japan, understanding Japanese indirect infringement law is crucial:

1. Assess "Exclusive Use": If a component has no substantial, commercially viable non-infringing uses in Japan and is used to make a product patented in Japan, supplying it carries a high risk of objective indirect infringement under Article 101(i) or (iv), regardless of the supplier's knowledge.
2. Evaluate "Indispensable" Nature and Knowledge for Multi-Use Components: If a component has multiple uses but is indispensable for a Japanese patented invention and is not a widely available commodity, liability under Article 101(ii) or (v) hinges on the supplier's knowledge. Receiving a cease-and-desist letter or a warning from a Japanese patentee detailing the patent and the component's infringing use can be critical in establishing such knowledge for subsequent supplies.
3. Territorial Limits: Generally, supplying components in the U.S. that are then exported by a third party for assembly into an infringing product outside Japan would not trigger indirect infringement of a Japanese patent. However, if components are supplied within Japan, even if for subsequent export and assembly abroad that results in direct infringement of a Japanese patent (e.g., if the act of export itself is deemed part of a direct infringement in certain contexts, or if the assembled product is re-imported), indirect liability could arise. The more common scenario of components supplied in Japan for assembly in Japan into products that infringe a Japanese patent clearly falls within the potential scope of Article 101.
4. Due Diligence and Contractual Safeguards: Suppliers may wish to conduct due diligence regarding the potential end-uses of their components in Japan and consider seeking contractual indemnities or representations from their buyers concerning patent clearance for the final products.

Conclusion

Japan's indirect patent infringement provisions under Article 101 of the Patent Act provide patentees with significant tools to combat contributory acts that undermine their exclusive rights. The law distinguishes between "objective" infringement based on the exclusive nature of a supplied article and "subjective" infringement requiring knowledge and the supply of an indispensable, non-commodity article. While theoretical debates about the doctrine's nature continue, the practical effect is a broadened scope of potential liability for those in the supply chain. For U.S. component suppliers and other businesses interacting with the Japanese market, a proactive understanding of these rules is essential for navigating the patent landscape and mitigating potential infringement risks.