Japanese Court awards record damages in Patent Infringement suits

Aruze Corp. vs. Sammy Corp. and Aruze Corp. vs. Net Co.
Tokyo District Court (March 19, 2002)

The Tokyo District Court has awarded patentee Aruze Corp. , a record JPY8.4 billion (approximately US$63.5 million) in damages for patent infringement. Defendants, Sammy Corp. and Net Co were ordered to pay approximately JPY 7.4 billion and JPY1 billion, respectively. In both lawsuits, Aruze had sought to enforce its Japanese patent no. 1,855,980, relating to a controller system for slot machines. The annual turnover from Pachinko and slot machines in Japan is the highest turnover from any single gaming activity in the world.

In the Aruze decisions, the Tokyo District Court took an expansive interpretation of the legislative provision governing the calculation of damages in patent infringement lawsuits. Using production costs and advertising and promotional expenses as a guide, the Court calculated damages to about 56% of the selling price of the infringing products. The Court essentially reached this amount by multiplying the profit per machine of Plaintiff's products which corresponded to the subject patent right with the actual sales volume of Defendants' products, where Sammy was ordered to pay damages on 39,000 infringing units sold and Net was ordered to pay damages on 5,000 infringing units sold.

Aruze had originally claimed about JPY10 billion and JPY1.8 billion from Sammy and Net respectively for infringements that commenced from March 1998 to the date of filing of complaints (October 1999 for Sammy and June 1999 for Net).

The Aruze decisions are part of the Japanese Court's developing pro-patentee stance adopted against infringers of patent and other intellectual property rights. In fact, this flexibility was already demonstrated in an earlier Tokyo District Court decision SanSui KK v. Lintec K.K. dated July 17, 2001, which adopted a flexible interpretation of the term "working capability" in Section 102(1) of Japan's Patent Law to include "potential capabilities" and "the amount of profit per unit quantity" not to be calculated precisely and but approximately. The Court's view was reflective of the legislative intent of the revision of Section 102(1) which was to expand the protection of patentees' rights.