Introduction

On January 16 2015 Suntory Holdings KK – which owned the patent for a non-alcoholic beer-flavoured drink with a low-extract adjusted pH solution – brought proceedings against Asahi Breweries, Ltd, alleging that its manufacture and sale of the non-alcoholic beer Dry Zero constituted patent infringement. Suntory Holdings requested an injunction against the manufacture and sale of Dry Zero under Articles 100(1) and (2) of the Patent Law (121/1959), as amended.

On October 29 2015 the Tokyo District Court rejected Suntory Holdings' petition. Suntory Holdings subsequently appealed to the IP High Court.

Background

Article 100 of the Patent Law provides as follows:

"(1) A patentee or exclusive licensee may demand a person who infringes or is likely to infringe the patent right or exclusive license to stop or prevent such infringement.

(2) In making a demand under the preceding paragraph, the patentee or exclusive licensee may demand measures necessary for the prevention of such infringement including the disposal of products constituting such act of infringement (including, in the case of a patented invention of a process of producing products, products produced by the act of infringement; the same shall apply in Article 102(1)) and the removal of facilities used for the act of infringement."

Article 36(6) of the Patent Law provides as follows:

"The statement of the scope of claims as provided in paragraph (2) shall comply with each of the following items:

(i) the invention for which a patent is sought is stated in the detailed explanation of the invention."

Article 36(4) of the Patent Law provides as follows:

"The statement of the detailed explanation of the invention as provided in item (iii) of the preceding Paragraph shall comply with each of the following items:

(i) in accordance with the Ordinance of the Ministry of Economy, Trade and Industry, the statement shall be clear and sufficient as to enable any person ordinarily skilled in the art to which the invention pertains to work the invention."

Article 17-2(3) of the law provides as follows:

"Except in the case where the said amendment is made through the submission of a statement of correction of an incorrect translation, any amendment of the description, scope of claims or drawings under paragraph (1) shall be made within the scope of the matters described in the description, scope of claims or drawings originally attached to the application (in the case of a foreign language written application under Article 36-2(2), the translation of the foreign language documents as provided in Article 36-2(2) that is deemed to be the description, scope of claims and drawings under Article 36-2(4) (in the case where the amendment to the description, scope of claims or drawings has been made through the submission of the statement of correction of an incorrect translation, the said translation or the amended description, scope of claims or drawings))."

Article 29 of the Patent Law provides as follows:

"(1) An inventor of an invention that is industrially applicable may be entitled to obtain a patent for the said invention, except for the following:

(ii) inventions that were publicly worked in Japan or a foreign country, prior to the filing of the patent application.

(2) Where, prior to the filing of the patent application, a person ordinarily skilled in the art of the invention would have been able to easily make the invention based on an invention prescribed in any of the items of the preceding paragraph, a patent shall not be granted for such an invention notwithstanding the preceding paragraph."

Article 29-2 of the Patent Law provides as follows:

"Where an invention claimed in a patent application is identical to an invention or device (excluding an invention or device made by the inventor of the invention claimed in the said patent application) disclosed in the description, scope of claims or drawings (in the case of the foreign language written application under Article 36-2(2), foreign language documents as provided in Article 36-2(1)) originally attached to the written application of another application for a patent or for the registration of a utility model which has been filed prior to the date of filing of the said patent application and published after the filing of the said patent application in the patent gazette under Article 66(3) of the Patent Act (hereinafter referred to as "gazette containing the patent") or in the utility model bulletin under Article 14(3) of the utility Model Act (Act No. 123 of 1959) (hereinafter referred to as "utility model bulletin") describing matters provided for in each of the paragraphs of the respective Article or for which the publication of the patent application has been effected, a patent shall not be granted for such an invention notwithstanding Article 29(1); provided, however, that this shall not apply where, at the time of the filing of the said patent application, the applicant of the said patent application and the applicant of the other application for a patent or for registration of a utility model are the same person."

Article 123(1) of the law provides as follows:

"Where a patent falls under any of the following, a request for a trial for patent invalidation may be filed. In the event of two or more claims, a request for a trial for patent invalidation may be filed for each claim:

(ii) where the patent has been granted in violation of Articles 25, 29, 29-2, 32, 38 or 39(1) to 39(4)."

Article 104-3(1) of the Patent Law provides as follows:

"Where, in litigation concerning the infringement of a patent right or an exclusive license, the said patent is recognized as one that should be invalidated by a trial for patent invalidation, the rights of the patentee or exclusive licensee may not be exercised against the adverse party."

Facts

Competition in the Japanese non-alcoholic beer market has recently intensified. Suntory Beer Limited, a subsidiary of Suntory Holdings KK, held the largest share in the market with its famous All-Free drink (a non-alcoholic beer-flavoured drink with a low-extract adjusted pH solution), for which Suntory Holdings owned a patent (Figure 1).

Suntory Holdings filed a lawsuit at the Tokyo District Court requesting an injunction to stop the manufacture and sale of the non-alcoholic beer-flavoured drink Dry Zero (Figure 2). Dry Zero was manufactured and sold by the defendant, Asahi Breweries, Ltd, which held the second largest share in the non-alcoholic beer market. Suntory Holdings asserted that Dry Zero infringed the All-Free patent under Articles 100(1) and (2) of the Patent Law.

 

Tokyo District Court decision

On October 29 2015 the Tokyo District Court denied Suntory Holdings' claim under Articles 100(1) and (2) of the Patent Law.

The All-Free patent was for a "non-alcoholic beer-[flavoured] drink with a total volume of extract solution of no less than 0.5 weight percent and no more than 2.0 weight percent with a pH of no less than 3.0 and no more than 4.5 and with a volume of sugar of no more than 0.5 g/100 ml".

Asahi did not deny that its products fell within the technical scope of the All-Free patent. However, it asserted that the patent should be invalidated because:

  • it violated the following Patent Law articles:
    • Article 36(6)(i) (the supporting requirement);
    • Article 36(4)(i) (the requirement to work the invention);
    • Article 17-2(3) (the amendment requirement); and
    • Article 29-2 of the law (the requirement for an expanded prior application); and
  • it lacked inventiveness based on:
    • the All-Free publicly worked invention;
    • the Double-Zero publicly worked invention (another Asahi non-alcoholic beer);
    • US Patent 3717471; and
    • the denial of the priority right assertion.

The Tokyo District Court decided that only the patent's lack of inventiveness regarding the All-Free and Double-Zero publicly worked inventions required examination.

Lack of inventiveness regarding All-Free publicly worked invention Since Suntory Holdings had started selling All-Free on August 3 2010, which was earlier than the patent's priority date, it was not considered particularly difficult to ascertain its ingredients. Therefore, the All-Free product was considered a publicly worked invention in Japan (Article 29(1)(ii) of the Patent Law). In light of this, Asahi asserted that a patent should not have been granted as the All-Free recipe could easily be invented based on the publicly worked invention (Article 29(2) of the Patent Law).

The All-Free patent and the publicly worked invention were identical except in regards to their total volume of extract solution:

  • the patented recipe contained between 0.5 weight per cent and 2.0 weight per cent extract solution; and
  • the publicly worked invention had a total volume of 0.39 weight per cent extract solution.

On this point, Suntory Holdings asserted that the technical ideas included in the patent were:

  • the total volume of extract solution;
  • the pH and sugar parameters; and
  • the connection between taste and the correct amount of acidity.

The publicly worked invention did not disclose the above technical specifications. Further, it was impossible to differentiate the publicly worked invention and the patent by examining only the total volume of extract solution and the pH and sugar levels of the various analysed All-Free products. Suntory Holdings thus asserted that the differences should be ascertained from the total extract solution volume structure and the pH and sugar levels as a whole.

However, in view of the evidence, the court determined that analysed results other than the total volume of extract solution and the pH and sugar levels of the publicly worked invention should not be required to evaluate the patent's inventiveness. Therefore, Suntory Holdings' above assertion could not be adopted.

Further, at the time of the patent's priority date, consumers considered the publicly worked invention to have a weak taste (although its sales figures were nonetheless the highest among non-alcoholic beers in Japan). In light of this, it was evident that:

  • the industry recognised that the publicly worked invention's taste was an issue; and
  • it would be easy to rectify this simply by increasing the amount of extract solution from 0.39 weight per cent to 0.5 weight per cent, which was an instinctive step.

Therefore, the patent could easily be invented by a person with ordinary skill in the art.

Suntory Holdings alleged that:

  • there was no problem with taste, as customer satisfaction regarding the publicly worked invention was high;
  • there was no incentive to adjust the total volume of extract solution to improve taste;
  • it was difficult to adjust the volume of the extract solution, as the concept of All-Free was 'triple zero' (ie, zero alcohol, calories and sugar) and its key feature was therefore its small quantity of extract solution; and
  • the All-Free patent was distinct and could not be invented based on the publicly worked invention; therefore, it met the inventiveness threshold.

In regards to the above arguments, the court ruled as follows:

  • The publicly worked invention had a reputation among customers for having a weak taste; as such, there was an incentive to develop a stronger tasting non-alcoholic beer.
  • Adding various extract solutions to increase the taste of non-alcoholic beer was a well-known industry technique. Further, adjusting the total volume of extract solution was an instinctive technique.
  • All-Free's 'triple zero' concept meant that its extract solution did not rely on sugar. Thus, Suntory Holdings' argument that an increase in the total volume of extract solution would destroy this concept could not be accepted.
  • As mentioned above, adding various extract solutions to increase the taste of non-alcoholic beer was a well-known industry technique. Therefore, the argument that the All-Free patent could not be invented based on the publicly worked invention could not be accepted.

In short, as a person skilled in the art could easily invent the All-Free patent, the court found that it should be invalidated by a patent invalidation trial (Article 123(1)(ii) of the Patent Law).

Lack of inventiveness regarding Double-Zero publicly worked invention Asahi had started selling Double-Zero at an earlier date than the All-Free patent's priority date and it was considered a publicly worked invention in Japan. As such, Asahi argued that the All-Free patent should not have been granted as it lacked inventiveness.

The All-Free patent and Double-Zero were identical, except in regards to sugar levels: the All-Free patent contained no more than 0.5 grams of sugar per 100 millilitres (ml), whereas Double-Zero contained no more than 0.9 grams per 100 ml.

In this regard, Suntory Holdings asserted that it was impossible to examine only the total volume of extract solution and the pH and sugar parameters of Double-Zero to identify the differences between it and the patent. However, in view of the evidence, the court held that other elements were unnecessary to evaluate the patent's inventiveness.

Further, the court held that the differences between the All-Free patent and Double-Zero could easily be arrived at by a person skilled in the art.

Suntory Holdings argued that the All-Free patent met the inventiveness threshold because:

  • its main feature was the use of a sugary malt extract and adjusting the volume of sugar would have a negative effect; and
  • it was distinct and could not be invented based on Double-Zero.

However, the court rejected Suntory Holdings' arguments based on the following reasons:

  • In view of the customer support regarding All-Free's zero sugar concept, there was an incentive in the relevant industry (that was not limited to Asahi) to reduce the amount of sugar, even if the amount of malt extract was reduced.
  • The total volume of the extract solution and the pH and sugar levels of Double-Zero were substantially the same as those of Inventive Product 4, which was disclosed in the description of the All-Free patent. When comparing Inventive Product 4 and Inventive Product 3 (ie, the sample worked product of the patented invention), the court could not identify the effect of Inventive Product 3 as being conspicuously superior to Inventive Product 4, even in light of the average taste values and the variety of taste perceptions achieved by adjusting the pH levels.

In sum, the court ruled that the All-Free patent could easily be invented based on Double-Zero and, as such, the patent should be invalidated by a patent invalidation trial.

In light of the above, the court concluded that Suntory Holdings could not exercise its patent rights against Asahi (Article 104-3(1) of the Patent Law), as its petitions were found to be baseless.

IP High Court settlement

Suntory Holdings appealed the Tokyo District Court's decision before the IP High Court on November 12 2015.

Conversely, on April 14 2016 Asahi filed a petition for an invalidation trial hearing with the Patent Office.

On July 20 2016 it was reported that an amicable settlement had been reached based on the IP High Court's advice. According to the settlement report, Suntory Holdings had withdrawn its appeal and Asahi had withdrawn its petition for a patent invalidation trial hearing, which was pending with the Patent Office.

It was further reported that under the settlement, Asahi could continue to sell Dry Zero and no further proceedings would be brought regarding the matter. It was also reported that other details of the settlement terms would be treated as confidential and not disclosed to third parties. As such, the IP High Court's advice is unknown. However, the general understanding is that the settlement was favourable to Asahi, on the basis of the following points:

  • The report made it clear that Asahi could continue to sell Dry Zero without any restriction in the non-alcoholic beer market. Although there was no clear announcement or record on this point, it appears that Asahi paid no licence fee or other remuneration to Suntory Holdings.
  • Asahi released an official press release on the settlement. However, Suntory Holdings released only one statement through its lawyers.
  • It was generally understood that the content and result of the Tokyo District Court decision meant that it would have been difficult for the IP High Court to overturn.

Comment

Patent disputes rarely arise between major Japanese companies (except in the pharmaceutical industry, where there is intense competition in the development of new medicines). Although the beer industry itself is rather stable in Japan, the small non-alcoholic beer market has recently become extremely competitive, although Suntory continues to enjoy the greatest market share, followed by Asahi. As Japanese consumers grow accustomed to this new taste and concept, the market continues to develop and expand. It will be interesting to see how patent litigation develops in other new food and drink fields.

For further information on this topic please contact Eiichi Fukushima at Nishimura & Asahi by telephone (+81 3 6250 6200) or email ([email protected]). The Nishimura & Asahi website can be accessed at www.jurists.co.jp.

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