Import Suspension Applications before the Japanese Customs Office
Updated: Apr 22, 2021
...Similar to actions before the U.S. International Trade Commission, Japanese import suspension proceedings provide abbreviated and expedited procedures for enjoining the importation of products that infringe registered patents, designs, trademarks, and copyrights...
Japan’s Custom’s Law gives the nation’s Customs Office jurisdiction over the adjudication of import suspension requests brought by intellectual property rights owners. Similar to actions before the U.S. International Trade Commission, Japanese import suspension proceedings provide expedited procedures for enjoining the importation of products that infringe registered patents, designs, trademarks, and copyrights. See generally Japanese Customs Law, Law No. 61, Article 69-11(ix).
Japan’s economy is one of the world’s largest, and each year, the Customs Office busily polices the nation’s imports for infringing goods and other imports that violate Japan’s Customs Law. The Customs Office publishes statistics each year, reporting the number of adjudicated cases and the number of seized articles.
The following table provides the latest published statistics on adjudicated cases and the number of articles seized by the Customs Office from 2015 to 2019—broken down by the type of intellectual property right invoked in each case.
During the most recent reporting period, Japan’s Customs Office adjudicated a low of 5 patent cases in 2015 and a high of 83 patent cases in 2019. By comparison, the following table provides the number of investigations adjudicated by the U.S. International Trade Commission during the same period and the number of violations determinations—the majority of which involved patent issues.
Although Section 337 Investigations are well known for their procedural speed, the import suspension procedures before Japan’s Customs Office are much more abbreviated. The abbreviated procedures enable the Customs Office to deal with large case loads, while affording accused importers and aggrieved intellectual property owners the opportunity to present evidence and expert analyses.
Import suspension proceedings before the Japanese Customs Office offer an excellent alternative to district court litigation. Despite reforms in recent years that dramatically streamlined patent litigation in Japan, it still takes an average of 12 months to obtain an infringement verdict in district court. See York Faulkner, A Brief Overview of Patent Litigation in Japan, YMF Law Tokyo (2021). Even preliminary injunction proceedings consume an average of 6 months to complete. Unlike district court litigation, importation may be quickly and preliminarily enjoined during the pendency of the suspension determination proceedings.
Although the Japanese Customs Office may proactively initiate its own investigation of infringing imports, such instances are infrequent. See Japanese Customs Law, Law No. 61, Article 69-12 (investigations initiated by Customs Office). Almost all suspension determination proceedings are initiated by application of the IP owner. See id., Article 69-13 (investigations initiated by application of IP owner). In addition to import suspension proceedings, the Customs Act also provides a similar set of procedures for the suspension of exports from Japan that infringe intellectual property rights. See id., Articles 69-2 to 69-10 (export suspension).
The Import Suspension Application
Each import suspension application results in a preliminary “mini-determination” of the merits of the suspension request bearing on the Customs Office’s decision to: (1) accept the application and conduct a full determination of the merits, (2) withhold the application until the IP issues are resolved by the courts or Japanese Patent Office (“JPO”), or (3) reject the application. Article 69-14 of Japan’s Customs Act permits the Director General of Customs to retain disinterested technical advisors to assist in determining “whether the evidence produced [by the applicant] is sufficient to prove prima facie infringement. . . .” If the Customs Office is satisfied that the applicant has made a prima facie showing of infringement, it will accept the application. See, id., Article 69-13. Acceptance results in the preliminary seizure and suspension of the accused imports, upon the applicant’s payment of a security deposit against the importer’s potential injury. See id., Article 69-15.
If the Director General of Customs finds that the applicant’s evidence demonstrates prima facie infringement, the applicant is given a notice of acceptance of the application and a schedule for completing the ensuing determination proceedings. See, id., Article 69-13(3). Where the Director General of Customs finds that the applicant’s evidence does not show prima facie evidence, the application is given a notice of rejection, including the reasons for the rejection. See id.
As a further alternative, the Director General of Customs may “withhold” an application where he determines that the issues presented are of a complex nature and should be resolved by an infringement action in district court or invalidation trial before the Japanese Patent Office. Because this latter option gives the Director General of Customs a relatively easy way to avoid making difficult determinations, most practitioners advise against seeking an import suspension order in matters involving complex issues of patent infringement, since the parties are likely to end up in district court anyway after spending time and resources on the application for determination proceedings. See generally York Faulkner, Procedural Aspects of Patent Infringement Litigation in Japan, YMF Law Tokyo (2021).
Given the divergent consequences of these Custom Office decisions, a great deal of up-front work goes into the application process itself. Before submitting an application, the applicant must consult with the Customs Office to confirm its ownership of the IP rights at issue, identify the accused product, and receive instructions for completing the application, including the scope of prima facie evidence required to support the application. See id., Article 69-13. After receiving the application, the Customs Office publishes a notice of the suspension request, inviting comment from interested parties. Depending on the complexity of the issues, the Customs Office typically makes its decision to accept, withhold, or reject the application within a 4 to 10 week period. See id.
During that time, the Customs Office receives written submissions from interested parties and, at its discretion, may appoint a panel of three disinterested expert advisors to assist in reviewing the application. See id. Both technical and legal experts may be selected for service as advisors. The panel considers the parties’ submissions and typically conducts an informal hearing during which the parties present their arguments and respond to the panel’s questions. Following the hearing, each expert advisor independently drafts a written opinion on whether a prima facie showing of infringement has been made and whether the IP rights are likely valid. The Customs Office then considers both the parties’ submissions and the expert advisors’ opinions in deciding whether to accept the application and conduct a full determination of the merits. See id., Article 69-13.
Suspension Determination Proceedings
The commencement of the suspension determination proceedings triggers a series of short deadlines. Depending on the complexity of the case, the parties have between 10 to 20 days to submit additional evidence in support of their arguments. As part of the proceedings, the applicant has an opportunity to supplement its infringement evidence by physically inspecting the accused product. See id., Article 69-16. Before 2005, the applicant was only permitted to observe the visible features of the accused product. The Customs Act was amended in 2005 and now permits the applicant to disassemble and test the accused product, greatly enhancing the usefulness of inspections in gathering evidence of infringement. See id.
Ordinarily, the Customs Office must complete the suspension determination proceeding within 30 days of commencement. See id., Article 69-12. However, that deadline may be extended if one or more of the parties request a formal infringement opinion from the JPO Commissioner. If the request is granted, the parties are given 5 days to prepare their written submissions to the JPO Commissioner, who then has 30 days to issue a formal opinion. See id., Article 69-17. The Customs Office may also reconvene the panel of expert advisors to address any new technical or legal issues that arise during the determination proceedings. See also id., Article 69-19 (advisors may comment on nontechnical issues such as patent right exhaustion).
The Customs Office makes its final determination of infringement by considering the parties’ submissions, the opinions of the expert advisors, and the opinion of the JPO Commissioner. If the Customs Office finds infringement and is satisfied that the IP rights are likely valid, the imported goods will either be confiscated or destroyed, unless the importer takes mitigating remedial steps. See id., Article 69-12. The importer can avoid confiscation or destruction by settling with the applicant and obtaining its consent to import, by altering the accused product to avoid infringement, or by waiving ownership of the goods.
The suspension determination proceedings, therefore, give IP owners significant potential leverage over accused infringers who must respond, for example, to potentially complex issues of patent infringement on an aggressively short timetable. The importation of infringing goods also imposes the risk of potential criminal liability under Japan’s Customs Act. A person found guilty of importing IP infringing goods into Japan faces up to ten years of imprisonment and/or a fine up to ten million yen. See Article 109(2). These criminal penalties also apply to incomplete or attempted importation. See Article 109(3).
The abbreviated schedule and import suspension remedy are not without risks to the IP owner. A final determination of infringement by the Customs Office does not preclude the importer from initiating, for example, patent invalidation proceedings in the JPO. See generally York Faulkner, Patent Invalidation Trials at the Japanese Patent Office, YMF Law Tokyo (2021). Nor does the Custom Office’s determination shield the patent owner from liability to the importer for damages resulting from a subsequent JPO ruling that the patent is invalid. Initiating Customs Office import suspension proceedings, therefore, requires resourceful advance planning to meet the demanding deadlines and due care in considering the risks of success. Despite those demands and risks, the Customs Office proceedings provide IP owners an enormously useful tool in enforcing their rights in the Japanese market against infringing imported goods.