Jacob Schindler

A public comment period is now open on a number of IP system reforms being considered by Japanese policymakers, including a new alternative dispute resolution (ADR) system for SEP disputes. If adopted by Japan’s legislature, the proposal would see a mediator appointed by the Japan Patent Office (JPO) set licence rates in SEP cases at the request of implementers. One patent owner is characterising the system as “compulsory licensing for SEPs”.

The Prime Minister’s Office included the ADR proposal in its 2017 IP Promotion Plan. The document calls for the necessary amendments to the Patent Law to be submitted at the next ordinary session of the Diet, which is in January 2018. The plan states that the legal structure of the new system, which it maintains will not ‘abuse patent owner rights’, should be determined by March 2018.

The ADR proposal rose out of a study group convened to consider IP responses to the so-called Fourth Industrial Revolution – a term often used in Japan to refer to developments in technologies including artificial intelligence, robotics, the Internet of Things, autonomous vehicles and 3D printing. The study group’s report, released in April, notes that with the convergence of communications technology with other fields, the number of standards implementers is set to increase, potentially leading to complex disputes. In these patent owner/implementer disputes, the report implies that Japan’s domestic interests lie with the implementer, pointedly noting:

When looking at the breakdown of patent holders related to LTE that declared FRAND terms, Chinese or Korean manufacturers and NPEs, which are entities that do not implement the patents they own, rank high on the list.

The prospect of NPE assertion looms large in the report, which calls NPE litigation a “systemic problem” in the United States. It notes that there are increasing reports of NPE activity in Japan, including in the SEP field. Other materials on the ADR system distributed by the Ministry of Economy, Trade and Industry (METI) warn of abuse of rights by “patent trolls”, a term it defines very broadly as “a person or company who abuses patent rights to obtain excessive license fees or huge settlements”.  

The government should be concerned, the report continues, that a large number of patent disputes over standards that “form the basis of public infrastructure” will be harmful to the economy and industry. The solution, it concludes, is to introduce a new mechanism that provides for the “quick and reasonable” settlement of SEP disputes. It outlines the system as follows:

[T]he government will consider introducing an ADR system (licensing award system for SEPs) designed to deal with disputes on licensing of SEPs, which have a significant influence on society. Under this system, government will work on disputes between patent holders and possible licensees based on request by the latter, when the parties cannot reach agreements on licensing, deciding appropriate licensing fees of SEPs with due care of not unfairly harm the interests of the patent holders. In designing the system, the government will need to conduct studies with due consideration for problems related to PAEs, on which standards other than de jure standards and which SEPs other than declared 22 SEPs with FRAND terms should be in the scope of the system, and on what requirements to be appropriate for establishing the licenses.

An executive from a major patent owning company tells IAM: “In our understanding, and as confirmed privately by JPO officials, this is in practice compulsory licensing for SEPs”. It would be, he notes, the first system of its kind in the world. “A leading developed country is planning to introduce compulsory licensing to help their local industry without realising all the consequences it might introduce at the same time”, he concludes.

If the ADR system is to be implemented, it will come before the Diet in 2018. However, a public comment period is running until September, after which the JPO will continue the work of drafting the proposed legislation. Patent owners can have their say by clicking the link in the grey box at the bottom of this webpage.