Episode 24

Toray filed a lawsuit against Sawai Pharmaceutical and Fuso Pharmaceutical for damages for infringement of the generic drug patent based on the use patent for an oral antipruritic agent (Patent No. 3531170, extension registration: Patent Application No. 2017-700154, Patent Application No. 2017-700310, hereinafter "the Patent Right", expiring in November 2022). In the appeal trial (Intellectual Property High Court, Reiwa 3 (Ne) No. 10037, judgment dated May 27, 2025), it was found that the manufacturing and sales of generic drugs by Sawai Pharmaceutical and Fuso Pharmaceutical constituted an infringement of the Patent Right, and a judgment was handed down ordering Sawai Pharmaceutical to pay 14,290,930,000 yen in damages and delay damages to Fuso Pharmaceutical of 7,472,870,000 yen. This is the highest amount in an intellectual property lawsuit.
The Intellectual Property High Court's ruling has not been published on the Supreme Court's case law search site. It is unusual that the ruling has not been published on a case law search site, despite the fact that it has attracted so much social attention. There must be some reason for this.
Sawai Pharmaceutical and Fuso Pharmaceutical have appealed the Intellectual Property High Court's ruling to the Supreme Court. The Supreme Court will hear the case from a political perspective.
The government is promoting the use of generic drugs to reduce ever-increasing medical and pharmaceutical costs (https://www.mhlw.go.jp/jigyo_shiwake/dl/h30_jigyou01a_day1.pdf). The Intellectual Property High Court's ruling goes against government policy. For this reason, the Ministry of Health, Labor and Welfare, which has jurisdiction over medical and pharmaceutical costs, and the Ministry of Finance, which has jurisdiction over the government budget, must have filed complaints with the Supreme Court Secretariat's Civil Affairs Bureau. The Civil Affairs Bureau will examine the ruling and consider measures to address the complaints from the Ministry of Health, Labor and Welfare and the Ministry of Finance.
The Supreme Court Research Officer in charge of this appeal will consider the reasons for the appellate court's judgment in line with the Civil Affairs Bureau's response measures. At the Supreme Court, elite judges called Supreme Court Research Officers review the case for appeal and prepare a draft judgment, which is then amended by the Supreme Court judges to make the judgment.
In this case, at the first instance (Tokyo District Court, Heisei 30 (Wa) No. 38504, No. 38508, judgment of March 30, 2021), the claim amounted to 10 million yen as a partial claim of 622.1 million yen against Sawai Pharmaceutical, and 10 million yen as a partial claim of 321.05 million yen against Fuso Pharmaceutical, but the appeal court allowed an expanded amendment to the claim.
At the first instance, literal infringement was not found, and equivalent infringement was also not found due to conscious exclusion (requirement 5). The presiding judge of the first instance was Judge Tanaka Koichi. In the Supreme Court's decision in the Maxacalcitol case, he presented a judgment on the method of judging the fifth requirement of equivalents as a Supreme Court researcher, and later became the presiding judge of the Intellectual Property Division of the Tokyo District Court. He is a typical intellectual property judge, and an expert in judging whether the doctrine of equivalents should be applied to pharmaceutical patents.
In contrast, the presiding judge of the appeal court is Judge Hibiki Shimizu, who specializes in labor-related litigation. In recent years, judges who are not intellectual property specialists have been appointed as presiding judges of the Intellectual Property High Court. The Supreme Court Secretariat, which has the authority to appoint judges, has a policy of not cultivating so-called intellectual property judges in a pure form. What is important in civil litigation is the conclusion, not the reasoning. If intellectual property judges were cultivated in a pure form, they would be more concerned with the reasoning than the conclusion.
Intellectual property litigation is an economic case that has a large impact on society. For this reason, in intellectual property litigation, it is necessary to make judgments that place more importance on the impact on society than the reasoning.
Toray, the appellant (plaintiff) in this case, is in the red in its pharmaceutical business due to the penetration of generic drugs and drug price revisions. If Toray loses this case, generic drugs will become increasingly prevalent, and Toray will be forced to consider withdrawing from its pharmaceutical business or selling it to another company.
The Patent Act stipulates that "The purpose of this Act is to encourage inventions by promoting the protection and utilization of inventions, thereby contributing to the development of industry" (Article 1). Making Toray lose the case would go against the legal purpose of the Patent Act and would discourage pharmaceutical development.
However, making Sawai Pharmaceutical and Fuso Pharmaceutical lose the case would go against the government's policy of promoting the use of generic drugs and reducing medical and pharmaceutical costs.
In general, civil lawsuits attempt to resolve the matter through settlement. A settlement is "an agreement between the parties to make concessions to each other and end the dispute that exists between them" (Civil Code Article 695). In claims for damages, it is common for the defendant to settle by paying a settlement to the plaintiff. In this case before the Intellectual Property High Court, settlement solicitation must have been conducted taking into consideration the circumstances of both the appellant (plaintiff) and the appellee (defendant). However, from the perspective of Sawai Pharmaceutical and Fuso Pharmaceutical, despite having won the first instance case, the idea of ​​settling by paying a settlement money was unacceptable, and it is possible that they refused.
Therefore, as a way to achieve settlement, they changed sides and forced Toray to make concessions and agree to a settlement. To do this, they first had to make Toray win the case.
So the Intellectual Property High Court came up with the idea of ​​ordering Sawai Pharmaceutical and Fuso Pharmaceutical to pay a large amount of damages, causing them to lose the case and forcing them to appeal whether they wanted to or not. For this reason, the Intellectual Property High Court's decision this time was based on the assumption that it would be overturned by the Supreme Court, and so it may have been quite poorly reasoned.
In the appeal hearing, oral arguments are held first (opposite interpretation of Article 319 of the Civil Procedure Law), and the Supreme Court reverses the original judgment and remands the case to the Intellectual Property High Court (Article 325 of the same law).
In the remand hearing, the Intellectual Property High Court will again encourage a settlement, but this time Toray will be the one to make concessions. One possible settlement proposal is for Sawai Pharmaceutical and Fuso Pharmaceutical to pay Toray a settlement equivalent to the amount claimed in the first instance. If Toray can obtain a settlement equivalent to the amount claimed in the first instance, it will achieve its original objective, and Sawai Pharmaceutical and Fuso Pharmaceutical will be able to reduce the amount of compensation to 1/23 of what it was before the remand. The court will not have to issue a judgment, and the information will not be made public. It is a win-win-win settlement proposal. When presenting the settlement proposal, the court will threaten to dismiss the claim if Toray does not accept it. This is a common tactic used by the courts.
The above is the significance of this Intellectual Property High Court ruling and expected future developments. If presiding judge Shimizu Hibiki was able to foresee that far before making his ruling, he must be quite a strategist.