Jacob Schindler

Japan’s Fair Trade Commission last week announced changes to the document which governs how its antitrust regulators look at actions taken by IP owners, particularly those who own standards-essential patents (SEPs), in the context of the country’s Anti-Monopoly Act. The amendments appear little changed from those which were released for comment last summer, which generated divisions in industry and even, some observers said, the government. Their adoption confirms Japan as just one of the increasing number of Asian jurisdictions in which SEP owners will have to tread more carefully.

The amendments were drafted to address the fact that Japan’s “Guidelines for the Use of Intellectual Property under the Antimonopoly Act”, released in 2007, did not specifically address the issue of patents encumbered by the declaration of a fair, reasonable and non-discriminatory (FRAND) commitment. This question reached the spotlight in Japan during the dispute between Apple and Samsung in the country’s High Court – and the guidelines appear to owe much to the verdict handed down in that case in 2014. The most recent version of the guidelines holds that refusal to grant a licence or the seeking of an injunction against a willing licensee over a FRAND-encumbered patent may constitute either “Unfair Trade Practices” or “Private Monopolisation”, both offences under the Antimonopoly Act.

Assessing the previous draft of the amendments and industry response to them, Kentaro Hirayama of Ito & Mitomi told IAM that some of Japan’s many standards-setting participants felt the new rules were too restrictive of patent owners, and did not include enough explanation: “The guidelines are not detailed at all and I know that some companies are requesting clearer, more concrete guidelines as to the conduct of negotiations.” The revisions contain further elaboration on some of these points, such as what factors will be used to determine whether a licensee is willing: “The presence or absence of the presentation of the infringement designating the patent and specifying the way in which it has been infringed, the presence or absence of the offer for a license on the conditions specifying its reasonable base, the correspondence attitude to the offers such as prompt and reasonable counter offers and whether or not the parties undertake licensing negotiations in good faith in light of the normal business practices”. On the whole though, these rules are not significantly longer or more detailed than the ones they are replacing.

Japan is home to both many standard setters and many standards implementers. One concern that is common to a large swath of these companies, though, is patent infringement by manufacturers in both mainland China and Taiwan. In Hirayama’s view: “It may become easier for such infringers to escape enforcement if Japanese standard-essential patent owners cannot request or enforce injunctions against these companies.” The regulations laid out in last week's release, however, reiterate that contesting a patent’s validity, essentiality or infringement are all consistent with being a willing licensee. If local companies do choose to pursue infringers in Japan, they may have a lengthy fight on their hands. 

Another fault line which emerged after the previous draft’s release was reportedly within the Japanese government itself. The country’s Ministry of Economy, Trade and Industry has devoted a significant amount of resources to encouraging Japanese companies to take part in standards-setting activities. Word has it that the ministry worried the guidelines might go too far in the other direction, disincentivising the important work of contributing toward standards. The new guidelines make the case in more direct language than before that this won’t be the case, arguing that because FRAND declarations entitle SEP owners to reasonable compensation, they still “promote research and development investment”, injunction or no injunction.

The upshot is that whatever your opinion of the new guidelines in Japan, there is a good chance they will not increase the value of the JPO-issued patent. In an article which will appear next week in Issue 76 of IAM, Hideyuki Ogata, executive vice president and chief IP officer of IP Bridge, pointed toward the Samsung v Apple case as a prime example of the “low economic value” of Japanese patents, noting that Samsung was not able to recoup its litigation costs. Ogata and his colleagues at the country’s SPF operator are concerned that this low value is contributing toward what he terms a “vicious circle” in which innovation is disincentivised. If that comes to pass, Japan Inc, too, will have reason to worry.