Responding to patent infringement allegations concerning API supply and contract manufacturing

1 Matching the patent at issue with each company's acts

Matching the claims with the steps each company performs

First, the claims identified in the warning letter are reviewed to establish what they protect. The analysis that follows differs depending on whether the patent covers the API itself as a product, a formulation, an invention characterized by its medical use, or a manufacturing process.

The next step is to identify which activities the company performs, such as API synthesis, intermediate manufacture, formulation, packaging, importation, storage, and shipment. Where several companies are involved, the activities performed by each company need to be identified.

Claim types and the acts at issue

Whose acts are at issue, and which acts require consideration, depend on what the claims protect. The general relationships are outlined below.

Claim type	Principal acts at issue	Focus of the analysis
Product invention covering the API itself	Manufacture, supply, and importation of the API	Whether the API supplied falls within the technical scope defined by the claim
Product invention covering a formulation or composition	Production and transfer by the party carrying out formulation	How the supply of the API is characterized in relation to production of the formulation
Product invention characterized by a medical use	Production, transfer, importation, and offers for transfer of pharmaceuticals falling within the technical scope defined by the claim, including its use limitation	The relationship between the use specified in the claim and the approved particulars, package insert, explanations given to supply recipients, and actual supply arrangements
Invention covering a manufacturing process	Use of the process; transfer and importation of products produced by that process	Who uses the process, and how a party that only supplies materials is treated

The right-hand column of this table corresponds directly to the issues discussed in the sections below. The first step is to check which type of claim the warning letter identifies. Misidentifying the claim type also misdirects the collection of materials.

The starting point remains interpretation of the claims. If a claim includes limitations concerning a disease, patient population, or dosage and administration, the corresponding facts need to be checked. The conclusion is not determined solely by the approved indications or the wording of the package insert. For the act of supplying an API, direct infringement and acts deemed to constitute infringement are considered separately.

Organizing deadlines

The response deadline, contractual notification deadlines, and shipment plans are considered together to identify what needs to be decided and in what order. Contractual notification clauses may require notice when an infringement allegation is received, so the company should check them at an early stage.

2 Whether contract manufacturing, API supply, or importation constitutes working a patented invention

Analysis by type of patent

For a product invention, working the invention includes producing, using, transferring, and importing the product. If a patent covers the API itself, manufacture and supply of that API are the acts to be considered.

Where a patent covers a formulation, whether supplying the API constitutes production of that formulation requires separate consideration.

For a process invention, using the process constitutes working the invention. In the case of an invention of a process for producing a product, working the invention also includes using, transferring, and importing products produced by that process. Accordingly, importing a product manufactured outside Japan also requires consideration of any relevant manufacturing process patent.

Analysis based on the acts actually performed

The analysis focuses on the acts actually performed, rather than the labels used in the contract or the industry.

Where manufacturing is performed under a contract, the contract manufacturer is the party performing the act of manufacture. Its manufacturing therefore needs to be assessed by reference to the technical scope defined by the claims, the acts actually performed, and whether a license exists. For the commissioning company, its sales and other acts, together with the nature of its involvement in manufacturing, need to be checked. For either party, the conclusion is not determined by how the commissioning relationship is described.

3 Claims against suppliers that do not manufacture the finished product

Direct infringement is considered first

The assumption that supplying only an API cannot constitute direct infringement is an incorrect starting point. The first issue is whether the company's acts, such as production, transfer, or importation, concern a product falling within the technical scope defined by the asserted claims.

If the API supplied itself falls within the technical scope of the product invention, its production or transfer raises an issue of direct infringement. By contrast, where the patent covers a particular composition or formulation and the API supplied alone does not satisfy its constituent features, the analysis moves to the provisions discussed below in relation to production of the formulation. Classification as an API does not, by itself, determine whether direct or indirect infringement is at issue.

Two categories of acts deemed to constitute infringement

The Patent Act provides that certain acts are deemed to constitute infringement even if they do not amount to direct infringement. For product inventions, there are the following two categories. Their requirements differ, and they cannot be treated as interchangeable.

The first category concerns production, transfer, and other specified acts performed in the course of business in relation to an item used "only" to produce the patented product. The issue is whether the supplied item can be regarded as one used exclusively for that production—a so-called dedicated item. This category does not include the knowledge requirement discussed below.

The second category concerns production, transfer, and other specified acts performed in the course of business in relation to an item used to produce the patented product and essential to the invention's solution of the problem. Items in wide and general circulation in Japan are excluded. This category applies only where those acts are performed with knowledge both that the invention is patented and that the item is used to work that invention.

The significance of other uses also differs between the two categories. Under the first category, the existence of other uses directly affects whether the item qualifies as a dedicated item. Under the second category, which requires knowledge, the existence of another use does not, by itself, exclude application of the provision.

Supplying materials for an invention of a manufacturing process

Where the allegation concerns a manufacturing process patent, the provisions governing process inventions need to be checked. The order of the analysis remains the same.

The first step is to identify who uses the process. If the contract manufacturer uses it, the issue concerns that manufacturer's own working of the invention. The acts of a party that only supplies materials or other items are considered separately.

As with product inventions, two categories apply to the supply of materials and other items. One concerns items used only to use the process. The other concerns items used to use the process and essential to the invention's solution of the problem. For the latter category, the Patent Act similarly excludes items in wide and general circulation in Japan and requires knowledge both that the process is a patented invention and that the supplied item is used to work that process.

The difference from product inventions is whether the relevant reference point is "production of a product" or "use of a process." Both categories presuppose that the specified supply or other acts are performed in the course of business.

Facts to check

Three factual issues need to be clarified. The first relates to the first category—whether the item is a dedicated item. The second and third relate to the second category—whether the item is essential to the invention's solution of the problem. Which category is asserted affects which facts should be checked first.

First, whether the API supplied is also used for purposes other than producing the product covered by the patented invention, and whether those uses are realistic. Court decisions state that an abstract or experimental possibility of use is insufficient: the other use must be recognized as economically, commercially, or practically viable by generally accepted social standards.

This assessment depends on the specific circumstances. Courts have considered factors such as uncertainty in the evidence about whether an alternative use is technically possible, and the limited feasibility of an alternative use because recovery or processing is required and the associated costs are prohibitive. Accordingly, checking for other uses involves determining whether the item can actually be used for that purpose, what would be needed, and how much it would cost.

Second, whether the supplied item can be regarded as being in wide and general circulation in Japan. This is not determined solely by distribution volume. The analysis considers the standards and specifications of the item actually supplied, the accompanying explanations of its uses, and its availability in the market. Although a court has held that widespread distribution alone does not bring an item within the exclusion, it is also inappropriate to generalize that merely adding an explanation of its use takes an item outside general circulation.

Third, how the API relates to the distinctive technical means by which the invention solves its problem. Being an active ingredient or being necessary to manufacture the formulation is not the same as being "essential to the invention's solution of the problem" within the meaning of the law. In a case involving an invention characterized by a combination of existing drugs, the court held that a single-agent formulation of one component did not satisfy that requirement. The reason was that the distinctive technical means newly disclosed by the invention was the combination of drugs, and the single-agent formulation did not, by itself, provide that combination.

However, the same decision reserved the possibility of a different assessment where special circumstances exist, such as the product being manufactured and sold specifically for the invention. In that case, the court found no such circumstances even after considering the package insert and other material. The decision cannot be read to mean either that a product falls outside the provision merely because it is a single-agent formulation, or that special circumstances necessarily bring it within the provision.

Where the asserted category requires knowledge, checking only the date on which the warning letter arrived is insufficient. A chronology needs to establish when, from whom, and what information was communicated about the patent's existence and the use made by the supply recipient, and what the company knew. It cannot be assumed that there is no liability before a warning is received, or that receiving a warning is sufficient to meet the knowledge requirement. This knowledge requirement is also distinct from intent or negligence for purposes of a damages claim.

4 The relationship between the commissioning company's license and manufacturing by the contract manufacturer

Where the commissioning company holds a license from the patent holder, the terms of that license need to be checked. The review covers the licensed parties, acts, and products, together with the provisions governing manufacturing outsourced to a third party.

The fact that the commissioning company holds a license does not automatically mean that manufacturing by the contract manufacturer falls within its scope. However, a license agreement may cover manufacturing by a contractor, so the subject matter of the license, the licensed acts, and the conditions governing outsourced manufacturing need to be checked.

A license agreement is an agreement between its parties, so the commissioning company is ordinarily the party able to check its contents. The contract manufacturer needs to seek confirmation from the commissioning company, although confidentiality obligations may restrict disclosure. The extent to which the relevant matters can be confirmed in those circumstances is also a practical issue.

Matters to confirm with the commissioning company

When the contract manufacturer seeks confirmation from the commissioning company, focusing on the following points instead of requesting disclosure of the entire agreement makes it easier to obtain a response.

• Who holds the license: only the commissioning company, or its affiliated companies as well
• Which acts are licensed: whether manufacture, sale, and importation are included
• The range of products covered
• Whether manufacturing may be outsourced to a third party and, if so, the applicable conditions, such as prior notification, consent, or quantity limits
• The license term and territorial restrictions
• Notification obligations upon receiving an infringement allegation, and allocation of responsibility for the defense

These matters may sometimes be confirmed through explanations limited to the necessary scope, without disclosure of the agreement itself. However, whether confidentiality obligations extend to the contents of the response also needs to be checked. If disclosure or a response cannot be obtained, the company should record that fact and what had been confirmed up to that point. This is relevant to later discussions about the allocation of responsibility.

5 Comparing the scope of the requested cessation with the scope of the patent right

The scope of the cessation requested by the patent holder needs to be checked against the scope of the asserted patent right. Once the relevant steps, products, and supply activities have been identified, the following responses are considered.

Whether a process change can avoid working the patented invention, whether supply of products outside the patent's scope can continue, and whether obtaining a license can be negotiated.

In each case, the procedures under the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices (the "PMD Act") need to be checked separately from the patent assessment. When approved particulars of a marketing approval are changed, the PMD Act distinguishes cases in which approval of a partial change is required from those in which notification of a minor change is sufficient. Which category applies to a change in the manufacturing process or API supplier depends on the nature of the change. Whether an act constitutes working an invention under the Patent Act and which procedures apply under the PMD Act are separate determinations.

Matters primarily concerning testing or manufacturing for clinical trials or applications for approval are addressed in a separate article (Responding to patent infringement allegations concerning testing and manufacturing for clinical trials or approval applications).

6 Arrangements between the parties based on the patent assessment

The following matters are clarified in light of the patent assessment.

Who responds to the patent holder? Which party leads the defense, and how does the other party cooperate? How are investigation and litigation costs allocated? How are losses from suspending or continuing supply treated? How do the force majeure, indemnification, and termination clauses in the supply agreement apply?

These matters depend on the contract. However, allowing indemnification negotiations to proceed first without assessing the patent issues may result in the loss of opportunities to take necessary defensive measures.

How we can assist

• We review how the claims identified in the warning relate to the steps performed by each company.
• We consider whether contract manufacturing, API supply, or importation constitutes working a patented invention, according to the type of patent.
• We first review direct infringement, then organize and assess the facts concerning the uses of the supplied items and knowledge against the requirements for each of the two categories of acts deemed to constitute infringement.
• We check the scope of the commissioning company's license and the treatment of contract manufacturing against the agreement.
• We review the options for responding to the patent holder, changing the process or supplier, and negotiating a license.
• We consider the allocation of responsibility, costs, and notification obligations between the commissioning company and the contract manufacturer.

Key legislation and official sources

English translations of legislation are provided for reference. The Japanese texts are authoritative.

Article topic	Legislation or official source	Source type and English version reviewed
Claim interpretation, acts constituting working a product or process invention, direct infringement, and the two categories of acts deemed to constitute infringement	Patent Act— Japanese text on e-Gov	Legislation. English translation (earlier version). The translation's version labels differ (Act No. 48 of 2022 in the Japanese label; Act No. 48 of 2024 in the English label).
Economically, commercially, or practically viable alternative uses	Tokyo District Court, judgment of February 25, 1981, 1975 (Wa) No. 9647	Court judgment.
Items essential to the invention's solution of the problem, single-agent formulations, and the reservation concerning special circumstances	Tokyo District Court, judgment of February 28, 2013, 2011 (Wa) Nos. 19435 and 19436	Court judgment.
Intent or negligence in damages claims, as distinct from the knowledge requirement	Civil Code— Japanese text on e-Gov	Legislation. English translation (earlier version). The translation identifies its last version as Act No. 37 of 2021.
Approval of partial changes and notification of minor changes to approved particulars	Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices— Japanese text on e-Gov	Legislation. English translation (earlier version). The translation identifies its last version as Act No. 50 of 2015.

Legal information reviewed: September 27, 2026

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You can consult us about patent infringement allegations concerning API supply or contract manufacturing, including how the claims relate to each company's activities, the distinction between direct infringement and acts deemed to constitute infringement, confirmation of the commissioning company's license, and whether to continue supply. If you bring the warning letter and copies of the supply and manufacturing agreements, we can consider the specifics at the initial consultation.

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Related information

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Responding to patent infringement allegations concerning testing and manufacturing for clinical trials or approval applications

Patent infringement alleged against testing and manufacture for clinical trials or approvals: the research exemption, each party's acts, and records.

Responding to IP Infringement Warning Letters

Where a warning letter alleging infringement of a patent, trademark, design or copyright is received from another company: the initial response, considering non-infringement, invalidity and prior user rights, design changes and license negotiations, and handling litigation.

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This page provides links to articles on different scenarios involving pharmaceutical patent disputes and sets out matters to check at each business stage and across scenarios.

Legislation and case law reviewed: September 27, 2026. For matters primarily concerning indemnification amounts or the interpretation of limitation of liability clauses, please contact us separately regarding the manufacturing or supply agreement.

This article is provided for general informational purposes only and does not constitute legal advice on any specific matter. Please consult us regarding your specific situation. The content is based on the laws and regulations in effect as of the date of the last update.