International report - Government requests guideline suggestions for standard-essential patent licence negotiation 18 Oct 17
On September 29 2017 the government held a meeting to discuss issues involving standard-essential patent licensing in accordance with the Intellectual Property Strategic Programme 2017, which was published in May 2017. The strategic programme included an examination of the alternative dispute resolution system, which is expected to determine appropriate standard-essential patent licensing fees in view of the fact that standard-essential patents are becoming more influential and Internet of Things (IoT) technologies are growing more popular.
In the meeting, three economic groups – the Japan Electronics and Information Technology Industries Association, the Japan Business Federation and the Japan Intellectual Property Association – gave presentations on standard-essential patent licensing. The presentations covered the following issues:
- Problems relating to patent holdup (ie, forced payments of excessive licensing fees) and patent holdout (ie, free-riding patents) – the presenter remarked that patent holdout problems are prevalent.
- Approaches to standard-essential patent injunctions in the United States and the European Union – Panasonic was introduced as a supporter of the safe harbour approach.
- The different approaches of good-faith and bad-faith parties (ie, support for good-faith parties; negotiations by the parties should be respected; and support against bad-faith parties such as non-practising entities (NPEs), for which some sort of quick, binding and transparent solution system should be prepared).
- Problems relating to NPEs – while the presenter stated that this is not a serious problem in Japan today, Japanese companies were concerned about potential problems ahead.
Finally, the Japan Patent Office (JPO) explained its guidelines for standard-essential patent licence negotiation, which are scheduled for publication next year. The guidelines cover issues such as licensing negotiation methods and reasonable royalty levels.
The tentative outline of the guidelines is as follow:
- Purpose of guidelines.
- Issues in licensing negotiations involving standard-essential patents (eg, the difficulty of assessing all related patents and finding solutions based on cross-licensing agreements; and the gap in parties’ respective perceptions of reasonable royalties).
- Appropriate licensing negotiation methods:
- Elements of good-faith negotiations (eg, negotiation periods, attitudes and histories).
- Factors in conducting negotiations effectively and efficiently (eg, which parties are supposed to be at the forefront of licensing negotiations; end-product manufacturers and suppliers; the allocation of burden in assigning royalties; and information to be provided by rights holders and implementers).
- Reasonable royalty levels:
- Royalty base (eg, the contribution of a standard to product sales: entire market value or the smallest salable patent-practising unit?).
- Factors and methods for calculating royalties (eg, royalty rates of patent pools or other licences; relative values of standard-essential patents under negotiation to other standard-essential patents; cumulative royalty rates; total numbers of standard-essential patents; patent portfolio strength; R&D costs; and negotiation histories).
In light of criticism for its lack of licensing expertise, the JPO wants to develop a world-class set of guidelines and has requested suggestions from home and abroad. The submission deadline for suggestions is November 10 2017.
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