This material was first presented at the 1996 AIPLA Fall Meeting held in
Washington, D.C.
Dr. Kondo was asked to speak on the impact that the
Japanese New Code of Civil Procedures
was expected to have on Japanese intellectual property law litigation.
He was also asked to report on a case in which
the preservation of evidence procedure
had resulted in a favorable settlement for some copyright owners that
had alleged illegal copying of such software as "Word" and "Lotus 1-2-3."
A. Background
This is a result of a series of civil procedure reform projects. Preceding
the Code of Civil Procedures, two laws had been already amended as follows:
i. Civil Execution Law (1979); and
ii. Civil Provisional Measures Law (1989)
The first Japanese Civil Procedure Law, which was an importation of the
German law, was enacted in 1890. It was once amended in 1926, but it had
continued to be effective since then without any major changes. The amendment
which became effective as of January 1, 1998 was a full amendment that
totally changed all the wording of the law.
Among the laws yet to be amended are:
i. Arbitration Law; and
ii. Bankruptcy Law.
B. Policies Underlying the Amendment
It is mentioned in various articles that the present amendment has been
intended to achieve the following goals:
i. Expedition of Litigation
ii. Provision of Measures to Collect Evidence
iii. Establishment of a Summary Process for Cases Involving Only a Small Amount of Money
iv. Reduction of the Burden of the Supreme Court
v. Adaptation to Technology Innovation
C. Major Points of Interest from the Viewpoint of IP Litigation
1. Jurisdiction / Venue
We have fifty judicial districts each of which has a district court. A
district court has jurisdiction over a case if at least a contact resides
in the judicial district in which that district court is located. In addition,
either the Tokyo District Court or the Osaka District Court will have overlapped
jurisdiction over patent cases and certain other IP cases under the new
law if one of the district courts located respectively in the eastern or
western Japan has jurisdiction. These two district courts, unlike other
district courts, have special civil divisions exclusively handling IP cases.
2. Pleading
The new law will require much detailed pleading even in the complaint.
Even under the current law, pleading in a complaint is fact pleading in
Japan. This sometimes places burden on counsel for the plaintiff in a patent
infringement case in which the plaintiff is required to specify, for example,
an accused manufacturing process. Preparation of a complaint under the
new law will probably require more time than under the current law. At
the same time, the new law will also require detailed pleading in the answer.
Mere denial to the allegations in the complaint would not be given much
weight. Although the burden of proof to show infringement would not shift
to the defendant, denial without reason could practically affect the impression
of the judges. Considering the impact on both sides, the new law would
probably benefit the plaintiff.
3. Inquiries to the Opponent
During pendency of litigation, a party may send written inquiries to the
opponent under the new law. The scope of the inquiries includes any information
necessary to prepare argument of the inquiring party. However, the following
questions are not allowed:
i. questions that are too abstract or not specific;
ii. questions insulting or harassing the opponent;
iii. questions that are substantially the same as those already asked;
iv. questions asking for an opinion of the opponent;
v. questions that would require the opponent to spend too much cost or time to answer; and
vi. questions that a witness would be allowed to refuse to answer because of his/her secrecy obligation (e.g. attorney-client privilege), or to protect trade secrets.
4. Court Order for Production of Documents
Even under the old law, court orders for production of documents was available.
However, the scope of documents subject to such an order was relatively
small. Moreover, such an order was often violated under a pretext that
it would reveal confidential information. Practically, there was no sanction
against such violation.
The new law will provide the following three improvements.
i. Expansion of the scope of documents subject to the order;
ii. Adoption of a so-called "in-camera" procedure to determine whether the document to be produced contains confidential information; and
iii. Court's authority to find a fact in favor of the requesting party in the event that the opponent violated the order.
The above three improvements are discussed below:
a. Scope of Documents
Under the old law, the scope of documents to be produced under a court
order was limited to the following three categories.
i. documents cited by the opponent in the litigation and being in the possession
of the same;
ii. documents that the requesting party is entitled to delivery or perusal of; and
iii. documents that have been prepared for the benefit of the requesting party or in relation to legal relationship between the requesting party and the party possessing them.
The new law will add a fourth category, which is more general than the
three categories that were available under the old law. Any document will
be subject to a court order for production of documents unless it falls
into one of the following exceptions:
i. documents that would lead to indictment, criminal conviction or defamation of the person possessing them, or his/her relatives;
ii. documents that would reveal confidential information that should be protected as trade secret, or under the attorney-client privilege, or the like; and
iii. documents that have been prepared exclusively for personal or internal use of the party possessing them.
b. In-Camera Procedure
Before issuing a court order for production of documents under the new
law, the court may examine the documents in question to determine whether
they fall one of the exceptions discussed above. No one other than the
judge(s) and the party possessing the documents are permitted to see them.
c. Sanction
If a party
(a) did not follow a court order for production of documents, or
(b) estroyed a document that would be subject to a court order for production
of documents or otherwise made it impossible for that document to be used,
the court would have the authority to deem the allegation of the requesting
party concerning the content of that document to be true, even under the
old law. The new law will provide the court with further sanction. If the
document held, destroyed or otherwise made impossible to be used by a party
is so crucial that the other party would not be able to prove a fact without
using it and that the other party has no way to allege specifically its
content, the court may find that fact which the requesting party intended
to prove with that document.
In order to understand what will be provided by the new law, we have to
recognize the difference between the "content of a document" and the "fact
to be proved by a document." To illustrate it, let's assume that a patent
claim contained a limitation "a temperature of 1500C or higher." If the requesting
party guessed that there should be a document in which, for example, the
temperature of 1650C is shown, this could be alleged as content of that
document. In contrast, if the requesting party was unable to specify the
temperature that is actually shown in that document, without alleging its
content, he/she could simply allege that it should prove, for example,
that the process used by the defendant meets the limitation "a temperature
of 1500C or higher."
As illustrated by the above example, under the old law, it was rare that the sanction actually worked because it was usually impossible for the requesting party to allege a specific content of the requested document. Under the new law, however, if the requesting party successfully shows that he/she is unable to specify the content of the requested document and that there is no other way to prove a certain fact, he/she may be successful in convincing the court that the sanction be imposed on the opponent.
5. Protection of Privacy and Trade Secrets
The new law will not provide any resolution to the dilemma that a plaintiff
seeking trade secret protection may lose confidentiality of the trade secret
itself. The only measure that was not available under the old law but will
be available under the new law is the authority of the court to restrict
access by third parties to a court record that contain information concerning
privacy of a person or trade secrets.
As already mentioned, a witness may refuse to answer questions that would
lead to disclosure of trade secrets. By the same token, a court order for
production of documents would not be available if the court is convinced
that the requested documents would reveal trade secrets. Hence, if a process
used in the defendant's factory is alleged to infringe a patent owned by
the plaintiff, the defendant would argue that its process uses certain
parameters that are trade secrets. If the court is convinced by such argument,
it would be probably reluctant to issue a court order for production of
documents that may contain such parameters.
Under such a situation, the court may examine the documents in camera to
determine whether they actually contain trade secrets. However, without
any protective order available in Japan, counsel for the requesting party
would not be allowed to see the documents. Hence, the requesting party
would be unable to rebut the allegation that the documents contain trade
secrets. Then, it would be likely that the court is persuaded by the requested
party not to issue a court order for production of documents.
6. Attorney-Client Privilege
As under the old law, both Bengoshi and Benrishi have the attorney-client
privilege under the new law. Article 197 of the new law, which is the same
as Article 281 of the old law, in its pertinent part, reads as follows:
A witness may refuse to testify when:
...
he is a medical doctor, ..., bengoshi, benrishi, ..., or a person of a
profession of religion or prayer, and he is asked a question on a matter
that he has come to know through hes business and he has obligation to
keep confidential.
Under the old law, since no general obligation of production of documents
was recognized, Article 281 was only applied to testimony of witnesses.
As far as production of documents was concerned, even Bengoshi had no explicit
attorney-client privilege because they had no obligation to produce documents
even without such privilege.
Under the new law, however, a broad scope of documents may be subject to
document production orders. Hence, the new law now stipulates that the
holder of a document is not compelled to produce it if it contains a matter
that is subject to Article 197.
The amendment of the Code of Civil Procedures has not affected the criminal
sanction imposed on illegal disclosure of clients' secret by Bengoshi or
Benrishi. Disclosure by Bengoshi is a crime under the Criminal Code, while
disclosure by Benrishi is a crime under the Benrishi Law. The degrees of
penalty under the two laws are about the same, though they are slightly
different for technical reasons.
A. Outline of the Reported Case
On March 13, 1996, the Osaka District Court inspected the offices of a
company in Osaka City under a court order for preservation of evidence.
The purpose of the inspection was to preserve evidence of illegal copying
of such software products as "Word" or "Lotus 1-2-3."
Half a year later, on September 10, 1996, the company inspected by the
court agreed with Microsoft, Lotus and another Japanese software manufacturer
to settle the case with the settlement money totaling 140,000,000 yen to
be paid to the three companies. It is reported that a certain number of
illegal copies were found in the March inspection and the company later
admitted existence of more than one thousand illegal copies.
B. Court Order for Preservation of Evidence
A court order for preservation of evidence may be issued if use of the
evidence would be difficult at a later stage of litigation. It is available
before the filing of a complaint as well as during pendency of a lawsuit.
A typical situation requiring preservation of evidence may be a situation
in which a production line making the allegedly infringing product is about
to be scrapped. In such a situation, it would be impossible to inspect
the procuctin line in a normal course of litigation because it would not
exist when the case becomes mature enough for the court to inspect it.
The court order is available not only for inspection of articles or premises
but also for witness examination and production of documents. Hence, if
it is likely that a key witness will leave Japan soon and will not be back
until the lawsuit is over, a court order may be issued to examine him/her
before he/she leaves Japan. By the same token, if a document is about to
be destroyed for some reason, a court order may be issued to examine that
document.
C. Practice Under the Current Law and the New Law
The language in the article authorizing the court to issue a court order
for preservation of evidence remains about the same in the new law as in
the old law. Hence, the situation in which an order is available will be
the same.
However, effectiveness of the order may be different. Even under the old
law, we are aware of several cases in which the court issued a court order
for preservation of evidence. However, it was usually the case that the
order had no substantial effect because the respondent to the order usually
refused to allow the court to inspect its premises, etc. The refusal was
based on the belief that there would be no sanction.
Under the Code of Civil Procedures, whether it is the old one or the new
one, the sanction against violation of a court order for preservation of
evidence is the same as that against violation of a court order for production
of documents, for inspection of articles and premises, or for examination
of witnesses depending on the type of evidence for which preservation is
necessary. In addition, the provisions concerning production of documents
mutatis mutandis apply to inspection of articles and premises. Hence, as
discussed in the first half of this material with respect to the amendment
to the Code of Civil Procedures, there was no practical sanction under
the old law unless a very specific fact was alleged to be found by the
procedure of preservation of evidence.
The reason for the success of the petitioner of the reported Osaka District
Court case resides in the fact that it was a copyright case. We would easily
imagine that the petitioner easily specified what the court would see on
the display of a personal computer. Hence, even under the old law, the
respondent probably realized the risk of imposition of sanction.
In other cases, however, preservation of evidence may not always provide
an effective weapon. As discussed with respect to the court order for production
of documents under the new law, in summary, we should note the following
two points:
(a) under the new law, mere refusal to allow the court to conduct inspection
may result in application of the sanction that the court finds facts in
favor of the petitioner; and
(b) the respondent may still persuade the court not to issue a court order
for inspection if there is a reasonable possibility that the inspection
would reveal trade secret.