October 1997
Dr. Shoichi OKUYAMA
Izumi SATO
Alan J. KASPER
In June 1996, a legislation to reform the civil procedure in Japan passed the Diet and became law. The reform will be the first comprehensive change in the civil procedure since 1926 and will involve extensive amendments to the entire Code and related laws. The reform should take effect January 1, 1998. In this paper, a summary is given for several of the more important changes, with an emphasis on those coming changes which are particularly relevant to intellectual property disputes and the main elements in the new rules set by the Supreme Court.
CONTENTS
1. Background
2. Process toward the Realization of the Reform
3. Major Changes in the New Code
3.1 Jurisdiction
3.2 Court Hearing and Preparation Therefor
3.2.1 Preparation for Formal Hearings
3.2.2 Time Limits on Producing Offensive or Defensive Evidence
3.2.3 Use of Modern Technology
3.3 Expanded Measures for Collection of Evidence
3.3.1 Extended Duty to Produce Documents
3.3.2 Examination of Documents by Judges under Secrecy
3.3.3 Inquiries
3.4 Protection of Secrets in Civil Cases
4. Brief Summary of Other Changes
4.1 Parties
4.2 Witness Examination
4.3 Recorded Tapes as Evidence
4.4 Procedural Matters
4.5 Cases for Small Claims
4.6 Appeals
5. Supreme Court Rules Implementing the Reform
5.1 Specific Requirements for Complaint
5.2 Procedural Simplification
5.3 Discussions on the Progress of the Proceedings
5.4 Expert Opinions and Documentary Evidence
6. Conclusion
1. Background
In 1890, shortly after the feudal system of domains and local lords was abandoned in 1871, the first Code of Civil Procedure was promulgated as part of an intensive effort to build a modern Japan. The Code was modeled after the German Code which was enacted only thirteen years earlier in 1877. Since then two important reforms occurred, both influenced by the conclusion of a world-wide conflict. One took place in 1926, as the result of an effort by the Japanese Government to follow the lead set by a post World War I Austria in adopting a new Code of Civil Procedure. The other reform occurred after World War II under the occupation of the Allied Forces. The first reform was truly comprehensive and covered almost all aspects of the Code. While the second added some elements of American jurisprudence and placed an emphasis on the adversarial system, the basic approach to the Code that had been taken in the 1926 reform remained unchanged.
In recent years, numerous problems with the Code have surfaced, having been shaped by the occurrence of dramatic social and economic changes over nearly 70 years, and revealed by a trend toward greater transparency in the judicial process. While considerable efforts have been made by the courts and members of the bar to streamline procedural practice in Japan, the Code has provided severe limitations on those efforts. What concerned many in the legal profession has been the general unwillingness of the public to go to the court to obtain civil remedies. Disputes inevitably occur and when they do, if the court is not an option in the mind of the public, the parties involved may opt for ad hoc and uncertain alternatives. Certainly, the effective and user-friendly court system that is viewed accessible by the public is a very important part of a healthy society.
2. Process toward the Realization of the Reform
In July 1990, a group was formed within the Legislative Council in order to reexamine the civil procedure in its entirety. The charter of the commissioned group was "to make the civil procedure easier to use and more understandable for the people." Originally, the group set out to identify problems with the existing civil procedure and to gather opinions from the business, community and legal organizations, concerning needed changes. The group's efforts resulted in a first draft of a proposed revision to the Code. What is called the "Preliminary Draft Outline of Amendments concerning Civil Procedure" was published in December 1993 to gather public opinion, and after further discussions, the Outline in its final form was approved on February 26, 1996 at a general assembly of the Legislative Council. The Ministry of Justice prepared the original bill based on this Outline.
The legislation was introduced before the Diet in March 1996. During the consideration of the bill by the Judiciary Committee of the House of Representatives, an issue concerning the exclusion under certain circumstances of government officials from the general duty to produce documents was strongly opposed. In Article 220 of the original bill, it was provided that against the general duty of document production, the holder of a document does not have to produce the document if "the document is related to a professional secret of a government official and if the relevant competent authority does not approve its production." Professional groups, such as the Federation of Japanese Bar Associations, and civil activists protested these provisions because the executive branch will be able to prevent the judicial branch from considering some evidence if they decide not to approve the production of certain documents and also because the provisions are against the recent movement toward an open government. A compromise was then reached at the Committee to revise Article 220(4) of the original bill. With a target date of two years from the publication of the new law, it was stated in an addendum to the new law that the provisions of Article 220(4) will be reviewed in conjunction with current discussions concerning the availability of more information held by government offices to the public.
The Committee approved the bill with the above-mentioned revisions. The bill passed the Diet and became law in June 1996.
3. Major Changes in the New Code
Several of more important changes which appear to directly affect intellectual
property practitioners will be summarized in the following.
3.1 Jurisdiction
As provided in the new law, a plaintiff will be able to choose between the Tokyo or Osaka District Court and a District Court that would otherwise have jurisdiction under the old Code. Each of the Tokyo and Osaka District Courts offers the advantage of a specialized intellectual property division. The new provisions will provide parties who cannot, under the current system, bring actions before the Tokyo or Osaka District Court with an option to have judges with more specialized experience consider their cases. The new provisions are applicable only to cases related to patents, utility models, registrations of integrated circuit layouts, and copyrights involving computer software.
For disputes concerning intellectual property matters, there currently exist three bases for determining which district court has jurisdiction over an intellectual property dispute. One basis is the residence or principal place of business of the defendant. Another basis is the location where the infringing act took place. Finally, the court which has jurisdiction over a geographical area that includes the residence or principal place of business of the plaintiff can try the action.
3.2 Court Hearings and Preparation Therefor
The Japanese court system has been criticized because the extended periods of time that are required to finish civil cases at the district court level. For rather complicated cases, such as those involving patent infringement disputes, it normally takes two to five years to go through district court proceedings. One reason for this is that there are no strong incentives for parties to identify the issues in dispute and the relevant evidence at an early stage of the proceedings. Pertinent information is sometimes withheld until later stages of the proceedings. Also, by comparison to practice in the U.S., the court hearings are quite formal, and a spontaneous and effective exchange of arguments is rare due to a heavy emphasis on written pleading and replies. Moreover, each hearing, which normally lasts less than one-half hour, takes place at intervals of one to three months. To alleviate these problems, the new law provides several measures, the more notable ones will be discussed below.
3.2.1 Preparation for Formal Hearings
The new law provides several redefined and new measures so as to make the elucidation of issues to be considered during Formal Hearings more concentrated within shorter periods of time. The court and the parties will be able to choose to use one or more of these diverse tools to make the proceedings faster and more effective. The new law strongly encourages speedier proceedings. For example, Article 182 of the new law newly provides that: "The examination of witnesses and parties shall be done intensively, wherever possible, after issues in dispute and evidence have been sorted out."
Three types of procedures are currently provided for clarifying facts and contesting issues: Formal Hearings or simply "hearings" or "oral arguments" (Koto Benron), Preliminary Hearings (Junbiteki Koto Benron), and Pretrial Hearings (Junbi Tetsuduki). In the new law, a more definite structure is given to Preliminary Hearings to make them more effective. Also, a new procedure called "Pretrial Preparatory Hearing (Benron Junbi Tetsuduki)" will be established and will replace the current Pretrial Hearing. This new type of hearings will allow the judge and the parties to meet informally in private in preparation for Formal Hearings. Further, another new procedure which is called "Preliminary Procedure by Documents (Shomen-niyoru Junbi Tetsuduki)" is provided in the new law.
Under the old Code provisions, a series of brief Formal Hearings take place during which parties present the merits of their claims and defenses and produce evidence in support of their positions. Witnesses may appear and are examined by one or more of the parties or their counsels before a judge or judges. Ordinarily, there is an opportunity for both direct and cross examination of witnesses.
In addition, the old Code provides for Pretrial Hearings (Junbi Tetsuduki) which are intended to promote efficiency at the Formal Hearings. Each party is asked to identify the issues in dispute, the evidence that should be produced, and all offensive and defensive "means" it wishes to use. Pretrial Hearings are currently used in only a small percentage of all district court cases, and are most often used in patent infringement actions and invalidity suits. Since there is no mandatory requirement to produce information, it is unusual for both parties to agree to produce all necessary evidence at Pretrial Hearings. Moreover, since the courts currently do not have an effective power to set a deadline for raising new allegations, it has proven difficult to achieve the intended goals through the Pretrial Hearing. Nonetheless, the Pretrial Hearing has been used with some success in patent-related suits, particularly in appeal cases from Patent Office decisions.
Since the Pretrial Hearing had not been effectively used, a concept of so-called Preliminary Hearing was later introduced by exercise of the discretionary powers of the courts, as a hearing within the statutory framework of the Formal Hearing. However, precisely because the Preliminary Hearing falls in the statutory category of Formal Hearing before the court, the distinction between Formal and Preliminary Hearings has eventually become blurred and, at present, there is no practical significance to calling a proceeding a Preliminary Hearing.
The new three types of procedures were proposed, and are incorporated in the new Code. We will discuss them in the following.
i) Well-defined Preliminary Hearing (Junbiteki Koto Benron)
Under Articles 164-167 of the new law, a more definite structure is given for the Preliminary Hearing, so that it will be clearly separate from the Formal Hearing. For example, its timing and duration will be set by the judge. If a party wishes to introduce new offensive and defensive means after the conclusion of the Preliminary Hearing, it has to explain the reasons for not being able to produce them earlier upon request from the other party. More significantly, these proceedings will have a definite focus on the early identification of issues and relevant evidence by both parties. The Preliminary Hearing will be conducted in an informal setting where, for example, the parties and a judge can engage in a constructive dialog, so as to determine what issues are to be argued and which witnesses are to be examined during Formal Hearings. The Preliminary Hearing will be held in public.
ii) Pretrial Preparatory Hearing (Benron Junbi Tetsuduki)
Also established is a new procedure called "Pretrial Preparatory Hearing" that will replace the current Pretrial Hearing. This new type of hearing will provide an opportunity for the judge and the parties to meet informally in private and examine documentary evidence and discuss what evidence or witness should be examined during Formal Hearings. While Pretrial Preparatory Hearings will basically be held in private with only the judge and both parties present, third parties can also be present with the permission of the court. Also, the new law acknowledges the advantages of current and future technology, such as video or telephone conferences, and supports its use in speeding up the preparation and conduct of court hearings.
iii) Preliminary Procedure by Documents (Shomen-niyoru Junbi Tetsuduki)
Yet another new procedure called "Preliminary Procedure by Documents (Shomen-niyoru Junbi Tetsuduki)" is provided in the new law. This procedure is intended to accelerate the preparation for Formal Hearings, particularly where one or more parties reside at a great distance from the court. Under this procedure, the preparation for a Formal Hearing is done relying on an exchange of written pleading and replies, on telephone conference systems or on other means. The preparation can be concluded without a personal appearance by any or all of the parties.
3.2.2 Time Limits on Producing Offensive or Defensive Evidence
The new Code provides that a court can set specific time limits during which each party is required to submit all of its arguments and supporting evidence that are relevant to the disputed issues. Article 156 of the new Code provides that: "Means for attack or defense have to be produced with appropriate timing in accordance with the progress of court proceedings." Willful or negligent delays may result in the rejection of newly produced offensive or defensive means. At present, as a rule, the parties can bring any offensive and defensive means before the court at any time before the conclusion of the Formal Hearings with only a few exceptions.
This new principle of timely production of offensive and defensive means is manifested in many provisions in the new law. As mentioned above, after the conclusion of the Preliminary Hearing, some constraints are placed upon the further production of offensive and defensive means. The same essentially applies to the Pretrial Preparatory Hearing and Preliminary Procedure by Documents. Also, as provided in Article 301(1) of the new Code, during appeal proceedings, "the presiding judge may set, upon consultation with the parties, a term for production of new offensive or defensive means, change of claims or causes of claims, counterclaims, and addition of new claims concerning appointing parties."
3.2.3 Use of Modern Technology
Throughout the Code, new provisions are introduced for the use of modern technology in order to make court proceedings more efficient. For the Pretrial Preparatory Hearing and the Preliminary Procedure by Document, some provisions are provided for the use of telephone or video conference systems. Also, Article 204 of the new Code provides for the possibility of using such modern technology for examination of a witness if sound and image are both available. In addition, summary procedures for claims on monetary payments can be processed using computer systems.
3.3 Expanded Measures for Collection of Evidence
Japan does not have "discovery," unlike Anglo-American countries which have adopted this system of evidentiary sleuthing to varying degrees. The obligation to produce documents is quite limited, often making it very difficult to gather sufficient documentary evidence to assist the court in considering cases. The court may order the production of only limited types of documents, but such order is often ineffective. This is in clear contrast to the provisions concerning witnesses in which a person has a general duty to testify and can refuse testify only under limited circumstances provided in the old Code.
3.3.1 Extended Duty to Produce Documents
The new law provides for an expanded scope of duty to produce documents. The duty to produce documents will go to nearly the same extent as for the current duty of a witness to appear and testify in the court. The duty will be more general. Specific circumstances under which there is no duty will be listed. Those who are not parties in a particular dispute also have this duty.
Article 220 of the new Code provides as follows:
"A holder of a document shall not refuse the production thereof in the following cases:
(1) In case the party himself is in possession of the document to which he has referred to in the litigation;
(2) In case the person going to prove is entitled to require the holder of the document the delivery thereof or to demand the perusal thereof;
(3) In case the document has been drawn for the benefit of the person going to prove or for the legal relations between him and the holder thereof;
(4) Besides the three cases mentioned above, in case the document (excluding a document which a government official or a person who used to be a government official takes custody of or possesses) does not fall in any one of the following cases:
a) A document which describes matters that are provided in Article 196 concerning a holder of the document or a person who has one of relationships listed in Article 196 with the holder of the document;
b) A document which describes facts provided in Article 197(1)(ii) or matters provided in Article 197(1)(ii), concerning which the duty to keep secret is not exempted; and
c) A document which is solely for the use of the holder thereof.
In the above, paragraphs (1) to (3) are essentially the same as in the old law. Paragraph (4) is new and provides for the general duty of document production. A holder of documents generally has a basic obligation to produce them when ordered by the court. The exclusion concerning government officials stems from the concession made during the deliberation before the Judicial Committee of the House of the Representatives as mentioned in Section 2 above and will be discussed below in more detail. In paragraph (4), item a) is for preventing self-incrimination and incrimination of close family members, and item b) is for the maintenance as secret of facts which certain professionals, such as doctors and attorneys, obtained during his or her professional duties. Item c) means that the holder of, for example, personal diaries or memos for internal use within a company can refuse to produce them.
If the duty exists, the failure to comply with court orders to produce documents may attract court sanctions. If one of the parties does not produce documents despite court orders, the assertion made by the other party in connection with the content of such documents, as well as the facts to be supported by the documents, may be regarded as true by the court. This assumption of facts would represent a significant expansion of the sanctions that could be used to encourage full production. In the case of violation of discovery orders against a third party, one who violates the order is expected to face a fine of up to 200,000 yen, which is higher than the current maximum penalty of 100,000 yen for not testifying as a witness.
When requesting the production of certain documents, a party has to file a petition identifying the documents. However, if it is very difficult to identify a particular document at the time of filing the petition, the requesting party need only provide some clues which would enable the holder to identify the document.
As noted above, some part of these provisions were intensely debated at the Judicial Committee after introduction before the Diet. Article 220(4)(ii) of the original bill provided that against the general duty of document production, the holder of a document does not have to produce it if "the document is related to a professional secret of a government official and if the competent authority does not approve its production." These provisions were attacked during deliberation in the Diet. Subsequently, as part of the above-mentioned compromise, the disputed provisions were removed from the bill and new provisions were added to exclude documents possessed by government officials in relation to his or her professional duties from the definition of "documents" in Article 220(4). Now the court may order the production of government documents, not under new Article 220(4), but applying a broader interpretation of old provisions now set forth in Article 220(1) through (3) as it has done previously, or using its discretionary power. The competent authority will not have a basis, as specifically stated in the Code, to refuse the production of ordered documents. Within two years from the publication of the new law, the provisions of Article 220(4) will be reviewed in conjunction with current discussions on the opening of more information held by government offices to the public.
3.3.2 Examination of Documents by Judges under Secrecy
The new law empowers the court to order the presentation of requested documents so that the court can independently determine if secrecy is justified, and what should be produced before the court. In such cases, the court's examination will be in camera. Only judges will have access to the produced documents and neither the opposing parties nor their counsels will be able to examine them.
The old Code has no provisions for determining whether a holder of documents requested by one of the parties to a litigation has an obligation to produce those documents, particularly where the documents may contain trade secret or confidential information. The new law provides a new tool to discover documents held by the other party.
It is necessary to note that, even if great care is taken to preserve secrecy before a document production order is issued, once produced before the court, under the current or new system, it may not be possible to keep the documents secret and free from public access during hearings. Protection is available at the court's sole discretion.
3.3.3 Inquiries
Article 163 of the new law defines a new procedure in which the parties can directly exchange inquiries, termed as Shokaisho, requesting information and documents without intervention of the court. When a party needs to support its argument or showing, this new procedure will allow it to directly request the other party to answer certain questions or requests. No penalties are specifically provided against a party who refuses to answer proffered inquiries; however, it is possible for the court to form an adverse impression of the case or use its discretionary power if a party does not respond to the court's urging to answer inquiries.
Article 163, which does not have any corresponding provisions in the old Code, reads:
The parties, during pendency of a litigation, may make inquiries concerning matters that are necessary for the preparation of proof and arguments to an opposing party in writing with a reasonable term for a reply, provided such inquiries do not fall under any one of the categories listed in the following:
i) inquiries that are interrelated and not specific;
ii) inquiries that insult or embarrass the opposing party;
iii) inquiries that overlap with inquiries that have already been made;
iv) inquiries asking the opposing party for opinions;
v) inquiries that require undue cost and time for the opposing party to answer; and
vi) inquiries that relate to similar matters as those concerning which the party can refuse to testify under the provisions of Article 196 or 197.
3.4 Protection of Secrets in Civil Cases
Article 92 of the new law includes provisions which would limit access to case records to the parties only A party will be able to request a ruling made to restrict the public's access to certain parts of the case records which, if disclosed, would be significantly harmful to its interests. If the requested order for protection is granted, only the opposing party will be able to request an inspection or copies of the particular parts of the case records covered by the order. A third party will be able to request the cancellation of such a ruling.
The old Code provides that, as a rule, any person can inspect all case records. An interested person may even obtain copies of those records, albeit under somewhat limited circumstances. This is certainly a problem when a litigation involves trade secret or privacy issues. For example, the Unfair Competition Prevention Law was amended in 1990 to provide protection for trade secrets. However, in order to obtain effective protection, a company may have to disclose some or even all of its secrets during court proceedings. Such secrets will be described in the case record which will become open to the public. This may in effect deprive the company of long term protection for its valuable trade secret rights and opportunities to seek remedies before the court.
During the deliberation toward the present reform, the commissioned group considered whether the court hearings can be held in private under limited circumstances. This is a difficult issue because Article 82 of the Constitution sets out the principle of open courts. Using the same principle, some advocates argue that the Constitution guarantees access to the courts to everyone, and if the judicial system does not permit hearings in camera, such constitutional guarantee would not be assured where trade secret protection must be maintained. Because it was not possible to have a broad consensus on this issue, provisions with respect to the possibility of making the court hearings closed to the public have not been included in the new Code.
4. Brief Summary of Other Changes
A brief summary is given below on some of other changes made in the new law.
4.1 Parties
It will become possible to become a party to a given litigation at a later stage of the proceedings by appointing one of the current parties with common interests as the appointed party. This will be useful, for example, for product liability or environmental pollution cases involving a large number of plaintiffs.
4.2 Witness Examination
The procedure for the examination of witness will become more flexible, and use of television systems will become possible.
4.3 Recorded Tapes as Evidence
The admission of recorded tapes or other non-paper items as evidence is provided in the new law. They are treated in much the same way as paper documents.
4.4 Procedural Matters
Various procedural changes are included with respect to numerous aspects of courts proceedings, such as summons, service procedure, settlements, timing of rendering judgements, and contents of written decisions.
4.5 Cases for Small Claims
Special, detailed procedures are provided for small claim cases for 300,000 yen (or about 2,800 US dollars) or less before summary courts, so as to make it easier for the public to utilize the court system. The entire proceedings, including a final decision at the end, are expected to finish within a single day. No examination of third party witnesses is allowed. Also, it is not possible to appeal a decision made under the new provisions to a higher court. Instead an opposition can be filed with the same court within two weeks from the initial decision.
4.6 Appeals
The new law includes changes in the applicable procedures and policies governing appeals to higher courts including Supreme Court, in order to relieve the congestion and delays currently existing in the judicial system. For example, the Supreme Court will be able to dismiss inadmissible appeals from lower courts with simpler procedures. Also, the grounds for appeals to the Supreme Court will essentially be limited to cases where the decision has been made based on a wrong interpretation of the Constitution or otherwise it violates the Constitution. The Supreme Court may or may not accept the review of decisions which seriously violate law and precedent set by the Supreme Court or its predecessors. Currently the Supreme Court, which consists of 15 judges, has about 4,000 new civil and criminal cases each year.
5. Supreme Court Rules Implementing the Reform
The Supreme Court has drafted new rules for implementing the new Code of Civil Procedure. Some of important elements in the overall reform which were discussed before the introduction of the bill have been removed from the Code and relegated to rules. In the following we will summarize several important aspects of the new rules.
5.1 Specific Requirements for Complaint
Under the new rules a greater description of facts and evidence will be required in an initial complaint filed with a competent court, so that issues in dispute will become clear at a very early stage. A complaint should include, in addition to claims and facts necessary to define the claims, detailed descriptions of facts that support the claims, and discussions of evidence and important facts that are related to such facts and need to be proved. If the presiding judge does not believe that a complaint contains sufficient information he or she can have a court clerk ask the plaintiff to amend the complaint. These are additional to the minimum requirements needed to start a litigation. Article 133 of the new Code requires that a complaint include the names of the parties, their legal representatives and the object of the claim and the cause therefor.
5.2 Procedural Simplification
The new rules allow the court clerk to make recording on tapes, etc. in leu of paper records. Under the old Code, court records have to be made on paper, and normally stenographers record arguments made during Formal Hearings. The courts have already stopped recruiting new stenographers. Also, papers can be filed with the court through facsimile unless papers has to accompany fees. Further, some papers such as pleading, replies and other briefs, have to be directly sent to the opposing party without going through the court.
5.3 Discussions on the Progress of the Proceedings
The court can set up a meeting for discussing the progress of the court proceedings. The parties and the judge can meet and discuss various matters that are necessary for smooth progress of the litigation.
5.4 Expert Opinions and Documentary Evidence
Several measures provided toward more flexible use of expert opinions and documentary evidence. For example, the testimony of an expert could be presented in declaration form and the expert need not attend a Hearing. This is particularly important in intellectual property cases where the expert's written non-infringement opinion previously had been given and relied on by a party, and is to be offered in support of the party's position. Under current practice, the expert must appear since a witnessed declaration by the expert would be unacceptable. An expert witness, with the permission of the judge, will be able to ask questions directly to an opponent's witness during a Hearing in order to elicit information relevant to issues in the case. Declarations may be attested by notaries.
6. Conclusion
After more than five years of continuous and open efforts, the new Code of Civil Procedure became law in June 1996. Significant changes are likely to have an impact on intellectual property litigation. The Supreme Court rules for implementing the new Code are now being drafted and discussed. The new Civil Procedure and related changes are now expected to become effective in 1998.
Under the new law, it is expected that litigations will move much faster. Of course, to what extent this will happen depends on the judges and parties and is difficult to predict. However, the new Code rules repeatedly put emphasis on speedy proceedings. For example, the new Code has entirely new directory provisions in Article 2 that state: "The court has to endeavor to conduct civil litigations fairly and expeditiously, and the parties have to carry out civil litigations in good faith with candor." If attorneys are willing to cooperate with the court, more litigations will be finished in much shorter periods of time for complicated cases such as those involving patents.
As a result, faster court proceedings will require manpower concentrated in shorter periods of time on the parts of the parties and attorneys. The reform in the civil procedure appears to be coupled with recent increases in the number of new bar members. The number of those who annually pass the National Bar Examination has been increased to 700 in recent years from traditional 500 a year. This number has been proposed to increase to 1,500 in the near future.
In short, these changes to the Code are signaling the beginning of a major shift in Japan's judicial procedures and practice toward a harmony with those already adopted in the Anglo-American legal systems as well as with the reality of the modern Japanese society. It will be necessary, and interesting, to monitor the realization of the reform.
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