Unmatched potential

There has been much speculation in recent months over the potential of various jurisdictions around the world to become the next big marketplace for patent value creation. But while China is almost always mentioned and India often gets a nod, Japan is typically left out of such discussions.

This is despite the fact that Japanese companies boast some of the largest, highest-quality portfolios in the world, as well as a deep font of IP expertise and a longstanding patenting tradition. In other words, Japan has many of the things that China and India do not. However, it remains a challenging market for foreign entities to penetrate – particularly when they are seeking collaborative partners or IP licence fees – and the perception from the outside often seems to be that the Japanese are stuck in their ways and incapable of significant change. At the same time, the country’s major companies are facing overseas competition and cost pressures of an intensity never experienced before. While Japan can undoubtedly be a conservative country, it is also one with an almost unmatched commercial track record – and IP executives there are well aware that things cannot continue as they are in terms of IP management and strategy.

Moreover, there have been signs of late that traditional attitudes towards IP management and ownership are changing – at least inside some boardrooms. For example, Renesas Electronics has maintained a long-term licensing partnership with US non-practising entity (NPE) Acacia Research; while more recently Panasonic, Rohm and Funai have all dipped their toes in the water by teaming up with WiLAN. The Japanese government has also made moves to promote and encourage strategic exploitation of IP assets, including through its part-funding of IP Bridge, the entity set up to manage Japan’s first sovereign patent fund. On the flipside, Japanese corporates have increasingly assumed leadership roles on initiatives aimed at curbing NPE litigation; in one notable example, Canon allied itself with Google, Dropbox and SAP to launch the License On Transfer Network, whose members commit to granting other members a licence to patents that they transfer to third parties.

Figure 1. Distribution of patent families of top 100 applicants by applicant origin

Source: World IP Organisation

Newer business models that incorporate elements of IP-based collaboration and open innovation are also increasingly in evidence. Panasonic and Toyota have both ‘opened’ portions of their patent portfolios in specific technological areas by making them available to license on a royalty-free basis; while NTT DoCoMo is just one of several Japanese companies to have embraced open innovation and launched collaboration centres worldwide.

Another sign of the times is the fact that Japanese entities are filing substantially fewer patents today than they have done in the past at the Japan Patent Office (JPO), while their share of overall global patent ownership is decreasing (see Figures 1 to 5). Many point to this as a signal that the focus in corporate IP departments is shifting from quantity to quality; although some observers are concerned at the trend. Last year’s amendments to Japanese patent law which give employers stronger ownership rights in their employees’ inventions had a mixed reception; likewise the IP High Court’s headline-grabbing decision in a standard-essential patent (SEP) spat between Apple and Samsung in 2014. However, everyone can likely agree that all of these developments are, at the very least, indicative that Japan’s IP ecosystem is evolving.

To discuss these events and more, IAM assembled a panel of key players in the Japanese high-tech industry to discuss the current state of the national IP marketplace. They include senior executives at some of Japan’s most widely recognised companies, as well as individuals with responsibility for IP management and strategy at some of the country’s most promising start-ups, representatives of foreign corporates licensing their patents in Japan, market intermediaries and members of the investment community. The panel comprises:

• 

  Kenichi Nagasawa

  Head of IP and legal headquarters, Canon

  “We must adopt IP strategies that enable us to conduct business from a perpetually advantageous position relative to a large number of industry players”

  Kenichi Nagasawa (KeN), director, head of IP and legal headquarters, Canon, Tokyo;
• 

  Hideo Toyoda

  Director, IP centre, Panasonic

  “There is a limit to getting involved in new business and technology developments within a single company, and the use of open innovation is now more common”

  Hideo Toyoda, director, IP centre, and president, Panasonic IP Management, Panasonic, Osaka ;
• 

  Toshimoto Mitomo

  Senior vice president and corporate executive, Sony

  “Although patent applications in China by Japanese companies have been increasing, effectively utilising these can still often be difficult”

  Toshimoto Mitomo, senior vice president and corporate executive, Sony, New York;
• 

  Hideyuki Ogata

  Executive vice president and chief IP officer, IP Bridge

  “The decreased value of patents has a big impact on innovation in Japan”

  Hideyuki Ogata, executive vice president and chief IP officer, IP Bridge, Tokyo;
• 

  Koichi Narasaki

  Chief operating officer, Midokura

  “Invention for the sake of invention makes no sense; invention should be made towards great new products and services”

  Koichi Narasaki (KoN), president and chief operating officer, Midokura, Tokyo;
• 

  Norishige Hayakawa

  Deputy general manager, Mitsui & Co

  “Japanese companies continued to make products, but the biggest profits in the value chain – the technology licence fees – were paid to US companies”

  Norishige Hayakawa, deputy general manager, Mitsui & Co, Tokyo;
• 

  Minoru Kato

  Vice president of R&D and intellectual property, Kao

  “As many Japanese companies go through restructuring of their businesses, valuation of IP assets may become more important”

  Minoru Kato, vice president of R&D and intellectual property, Kao Corporation, Tokyo;
• 

  Takashi Komoro

  Managing director, IP department, NTT DoCoMo

  “In general, Japanese companies regard licensing as a valuable tool in business activities rather than a revenue source”

  Takashi Komoro, managing director, IP department, NTT DoCoMo, Tokyo;
• 

  Ichiro Nakatomi

  President and CEO, NanoCarrier

  “There are very few exits of venture companies… such as through M&A”

  Ichiro Nakatomi, president and CEO, NanoCarrier, Tokyo;
• 

  Jari Vaario

  Head of patent licensing, Asia-Pacific, Nokia Technologies

  “New business models are more challenging to integrate in conservative organisations”

  Jari Vaario, head of patent licensing, Asia-Pacific, Nokia Technologies, Nokia, Tokyo; and
• 

  Steve Joroff

  Director of Asia-Pacific IP licensing, IBM

  “If there is something holding them back [from collaboration], it’s likely due to risk mitigation”

  Steve Joroff, director of Asia-Pacific IP licensing, IBM, Tokyo.

The panellists shared their personal insights on the topics under discussion; their views do not necessarily reflect those of their companies or firms.

Q: One of the main issues facing Japanese companies is the need to develop new technologies and products so that they can compete in new product and service markets. What challenges and opportunities does this present from an IP perspective?

KeN: To compete in new product and service markets, as the technology is becoming more sophisticated, we need to shift from being consumer oriented (B2C) to being industry oriented (B2B). However, the structure of B2B business is becoming increasingly complex and it has become difficult to cover a single business with the technology and know-how of just one company. In the Internet of Things environment – given that the overlaps in IP will occur not just with existing competitors, but also with enterprises in other industries – we must adopt IP strategies that enable us to conduct business from a perpetually advantageous position relative to a large number of industry players and other parties.

HT: With respect to current business, market share and patent strengths are somewhat more fixed, which enables us to predict patent risks and how to deal with them. However, with respect to new business involving new technologies and products, I believe there are many risks – but also opportunities. Patents, in some cases, could be one of the major factors of success. This means that, from an IP perspective, IP departments may play a bigger and more important role. In order for the IP department to capitalise on this opportunity, I believe it is important to develop a more creative IP strategy and to be professional and agile in responding to new business environments.

TM: We need to recognise the trends for new technologies from an IP perspective and identify the companies that own IP in the fields where we have interests. To compete in new product and service markets, we need to file patents to protect those products and services as fast as we can; and if other companies already own patents in the field, we may need to make design-arounds. We can also take our existing patent applications and develop the claims to more effectively cover these new businesses; and sometimes we can try to acquire IP or collaborate with others in the business. Our IP group informs our corporate management team, R&D team and business units of these strategies so that we can work cooperatively with them.

HO: Japanese companies struggle to find many M&A targets that have valuable technologies. There is no real environment where start-ups or small and medium-sized enterprises are born and venture capital is willing to invest in them. As such, Japanese companies have to create new technologies themselves or search the world for them.

KoN: Though I cannot speak for typical Japanese leading operating companies, such as hardware and system vendors, I think the game has changed. It is now about open innovation, open source software and supply chain management, rather than proprietary development of your own products only. So naturally, the IP tends to be more difficult to build in that collaborative and ‘coopetitive’ environment.

IN:In the case of companies such as Sharp and Toshiba, they misread the market trends and lacked a strong long-term product strategy. In some other fields of industry, however, this is less of a problem, relatively speaking.

NH: Japanese companies should shift their focus from product sales to IP utilisation in order to make money, just as US companies have done since the mid-1980s. The US government recognised that the domestic manufacturing industry had been overtaken by its Japanese counterpart in the early 1980s; its strategy was to create a more pro-patent business environment. Japanese companies continued to make products, but the biggest profits in the value chain – technology licence fees – were paid to US companies. In the 21st century, profiting from product sales is even more difficult, due to higher supply and lower demand, and the fact that the Internet directly connects suppliers with end users. Some Japanese companies are now focusing their business strategy more on IP utilisation, but it is still only a few. I believe that ongoing education of management people, rather than IP guys, will change this.

Q: Do you think the recently implemented inventor remuneration legislation will ultimately be beneficial to Japanese industry? Or could it restrict innovation, R&D and patent filing activities by disincentivising inventors?

MK: The new law gives Japanese companies greater flexibility with regard to how to remunerate inventors. Whether it will promote or restrict innovation will depend on how companies adopt and implement its recommendations and requirements.

HT: The newly revised legislation on inventor remuneration has received much attention in the economic world; and I believe, to a certain extent, that we can expect it to be beneficial to Japanese industry. However, at Panasonic, we have always tried to value our inventors with sufficient inventor remuneration; thus, the new law should not affect our current inventor remuneration systems. I believe that inventors are not motivated by how much remuneration they can obtain, but rather by the importance of their R&D projects and overall compensation.

KeN: We do not think that the new law will restrict innovation, R&D and patent filing activities by disincentivising inventors, since companies will pay a reasonable amount of money (the total amount of money paid to inventors will not change) following the procedural guidelines to ensure the incentive of invention between the company and its inventors. The new provision stating that the company will own any patents will enable companies to patent smoothly and with certainty, and to develop IP strategy speedily.

HO:No – it does not change things much. The new law has changed the original owner of an invention made by an employee inventor, but it will have little influence on companies’ actual practices. Nor will it restrict innovation. We do not think it will change companies’ or inventors’ activities. In the past, some non-Japanese companies avoided setting up R&D centres in Japan due to the inventor compensation law; this attitude will not change following its revision.

TK: We believe that the latest amendment will help Japanese companies to reduce the subsequent litigation risks regarding whether an employee invention belongs to the company or the individual, and will be beneficial to Japanese industry as a whole. What is more, even after the adoption of the new law, remuneration for inventors will not change dramatically and negotiations between employers and inventors are still required to avoid putting inventors at a disadvantage.

KoN: I think the more fundamental problem here is the absence of an objective evaluation or appraisal system for engineering talent and achievements. If they were properly equipped, engineers would work on inventing, knowing that they would be rewarded by promotions and better jobs – even without considerable remuneration. Invention for the sake of invention makes no sense; invention should be focused on developing great new products and services. Success in business is the best way to honour and reward inventors.

Q: One way of acquiring new technologies and products is through M&A. However, some commentators have suggested that Japanese companies are not involved in enough M&A, tech transfer and venture funding activities. Should they be doing more to invest in and acquire promising start-ups?

IN: Yes, I would think so. There are very few exits of venture companies which are bought by large companies, such as through M&A.

KoN: There are too few M&As because post-merger integration tends to be very difficult and Japanese companies typically do not have the right management resources to do this successfully.

JV: M&As are the quickest way of acquiring new technologies, and in today’s technology market speed is everything, but M&A activity is tremendously disruptive: companies that engage in frequent M&A activity are in a perpetual state of flux. Employees and managers need to become comfortable with uncertainty. They must be able to operate without a clearly established reporting and management structure, and without commonly agreed procedures and processes. Companies with more traditional cultures and rigid organisational structures may find it difficult to deal with the aftermath of M&A transactions. This may be why they are reluctant to embrace the changes and opportunities that M&A may bring.

TM: Generally, we agree that many Japanese companies are not presently involved in enough M&A, tech transfer and venture funding activities compared to companies in other countries. Acquiring technologies in these ways can be the fastest way to expand or begin a new business. Actually, Sony has been quite active in this regard.

HT: Japanese companies have, in fact, invested in M&A activities in the past; but there may have been issues over the speed of decisions and the diversity and flexibility of such investments. Today, I believe that there is a limit to getting involved in new business and technology developments within a single company, and the use of open innovation is more common than before. In light of this, I believe that we will see more active involvement and flexibility in investments of Japanese companies.

Q: On that note, would you agree that Japanese companies are becoming more willing to engage in open innovation and collaboration in order to meet the challenge of developing new technologies?

MK: I believe so, although the change in this direction may be rather gradual.

TM: We have recently seen some movement towards open innovation and collaboration by Japanese companies, such as external start-up technology acquisition, new business incubation programmes and the opening of licensable patented technology in specific technical areas. That said, the successful examples are still few in number. The reasons for this include a corporate mindset that still tends to focus on traditional in-house development of technologies and a reluctance to pursue unproven future technologies.

NH: Most Japanese companies are indeed reluctant when it comes to collaboration, although they will often say that open innovation is very important. One reason is their traditional attitude of ‘jimaeshugi’ – in other words, the belief that they should develop everything they need by themselves.

JV: New business models are more challenging to integrate in conservative organisations. If a company has very precisely designed and defined processes to maximise efficiency, this allows little room for creativity and spontaneity. This may be one reason why some Japanese enterprises, although highly competitive in their existing fields, are slow to adopt new business models. Where an organisation’s corporate culture punishes failure, that culture also discourages the adoption of new business models. It is rare for a new business model to succeed first time, and for every success in the high-technology industry there are many failures. If a company can make a conscious decision to take risks and accept failure as an inevitable part of the learning process, this would open people’s eyes to the opportunities for new cooperations with external parties.

SJ: For many years, IBM has been an open organisation that participates in and often leads collaborative efforts in areas that we are innovating in or have expertise in. Over the past couple of years, we have increasingly seen Japanese technology companies join these consortia. If there is something holding them back, it is likely due to risk mitigation, which relates to what Jari has just said. By definition, participation in an open innovation programme requires the sharing of inventions and know-how with other members. Since the reward of that increased risk is difficult to quantify, some organisations can have a difficult time in accepting that risk.

Q: What opportunities exist for licensing patents in Japan? Can this become a significant source of revenue for Japanese companies?

KeN: We are not in a position to answer this question on behalf of all Japanese companies in a general sense, as strategies will differ for each company depending on its business situation. As regards Canon, we use our patents solely to protect our own businesses and products. Therefore, we do not expect licensing to be a significant source of revenue.

TK: In general, Japanese companies regard licensing as a valuable tool in business activities rather than a revenue source. In terms of the outsourcing of licensing activities, it seems that many Japanese companies have opposed working with intermediaries that seek to secure an outrageous amount of royalties. However, there are now a variety of intermediaries on the market, including publicly funded ones, so we cannot flatly dismiss them all.

MK: Patent licensing per se may not become such a big business in Japan. But as many Japanese companies restructure their businesses, valuation of IP assets may become more important in measuring the value of transactions.

HO: The opportunities are few, in my view. Japanese patents are useful in the sense that injunctive relief can be used; and if a competitor has a sizeable market share in Japan, a patentee can leverage its Japanese patent to stop that competitor’s business. But this does not necessarily result in a significant source of revenue. Damage awards are extremely low – even if a patentee litigates and wins, it cannot secure a big damages award, so think how much harder it is for a patentee to get a royalty based solely on friendly negotiations. Of course, parties that negotiate a global licence agreement do not neglect Japanese patents. But generally this happens only if there are foreign counterparts of the Japanese patents.

KoN: There is potential here, but it will take time before this is generally accepted as the business case, due to Japanese companies’ conservatism and ‘follow the puck’ mentality.

Figure 2. Patent applications to the Japan Patent Office 2004-2013

Source: Japan Patent Office

SJ: I think there are opportunities for many large Japanese technology companies with large patent portfolios. If they were to shift from a passive licensing approach to a more active approach, I believe they could each find a way to generate even modest increases in licensing income.

HT: Japanese companies hold some of the world’s top technology and gigantic patent portfolios. It has normally been their practice to protect their own technology with IP; monetising IP by utilising it against other companies was not so common, as they wished to avoid disputes. However, Panasonic believes that monetisation of patents can be used as a means of collecting returns on investment. Whether to view licensing as a source of revenue or to see it as a way to create value for the business will differ depending on the circumstances surrounding each business. But either way, I believe that we should consider various ways to make use of patents.

JV: Patent licensing poses some challenges in Japan. Creating the required competencies within product companies is hard and it is difficult to get infringing companies to accept patent licences, especially where there may be limitations on the ability to enforce patents. The increase in professional licensing entities that we have seen is perhaps indicative of the challenges of creating profitable patent licensing departments in product companies.

Figure 3. Patent applications filed at select offices by Japanese entities 2009-2013

	2009	2010	2011	2012	2013
US Patent and Trademark Office (USPTO)	81,982	84,017	85,184	88,686	84,429
China State IP Office (SIPO)	30,302	33,882	39,231	42,278	41,193
European Patent Office (EPO)	19,863	21,767	20,538	22,659	22,554
Korean IP Office (KIPO)	14,168	14,346	15,234	16,004	16,298
Total	146,315	154,012	160,187	169,627	164,475

Source: Japan Patent Office

Q: Domestic patent filings at the JPO have been falling for the past few years. Do you believe this is a worrying trend for the nation and its industry?

HO: We are worried about the trend. It stems from the low economic value of the Japanese patent. This in turn is a result of the very low damages awards rendered by Japanese courts, including the IP High Court. A case in point is Samsung v Apple. The IP High Court decided that Samsung’s SEP was valid and infringed by Apple’s iPhone 4, whose sales we believe were at least a couple of billion dollars. Nevertheless, Samsung was awarded only ¥9.95 million (around $83,000). Samsung could not recover its litigation costs, which may have run into several million dollars. Other issues are the win rate for patentees, which is less than 30%; and official fees for litigation, which are calculated based on the amount of damages sought by a patentee and can be much higher than in the United States. The decreased value of patents has a big impact on innovation in Japan. It disincentivises people from creating new technologies and innovations. And even when they do so, they often prefer to conceal their creations through trade secrets rather than filing a patent application. Investors do not invest in start-ups – even those with good technologies or products – if they have not obtained patent protection or, where they do own patents, if they have been poorly rewarded in case of infringement. We are very worried about this vicious circle.

KeN: As to whether this is a concern for Canon, the answer is no. Although the number of patent applications has gradually been falling over the past few years, the number of requests for examination and the number of foreign applications have not changed. Therefore, we do not think it is a worrying trend for the nation and its industry.

TM: We likewise understand that while patent filings from domestic companies are falling, patent filings at the JPO from foreign filers have remained steady. As domestic companies are shifting their focus from the quantity of patent filings to the quality of patent filings, we think that this trend will continue for some time and is not alarming.

TK: Indeed – focusing only on high-quality inventions, and taking measures such as increasing international filings while reducing Japanese ones, is a reasonable IP strategy. Thus, it is not necessarily appropriate to regard this trend as negative.

JV: I think that all companies are more cautious in filing patent applications today, with fewer applications filed where there is no obvious route for value creation. It is likely that foreign companies favour filing in China, India and other emerging markets as these markets expand and more product manufacturing becomes concentrated there. This may in part explain the reduced filings in more established economies such as Japan.

Q: What changes would you like to see in the Japanese patent system?

TK: Following on from what Ogata-san said above, since the IP High Court decision in Samsung v Apple, injunctive relief relating to infringement of SEPs has been settled to a certain extent. It was a landmark decision, as the issue had caused long-term concerns for the industry. However, we still have reservations regarding injunctive relief where SEPs are used without a commitment to fair, reasonable and non-discriminatory (FRAND) licensing. There is no case law on the issue, but we do not think that an injunction should be granted against willing licensees that use patents in the absence of a FRAND obligation. In Japan, patent assertion entities are free to harass operating companies with the threat of an injunction; it can cost a lot of money to deal with them. Restrictions on injunctive relief (like those resulting from the US eBay case) and a system which allows operating companies to seek attorneys’ fees (like that resulting from the US Octane Fitness case) are needed. On the other hand, recent arguments in the government which would make it easier for patent holders to seek higher damages awards should be carefully reviewed, since it is doubtful that such a system would be beneficial for Japanese companies that are exposed to global competition.

KeN: We expect that the Japanese patent system will give companies which invest in R&D and promote innovation strong rights to enforce their patents in case of infringement; and on the other hand will curb the abuse of patent rights if the patents do not meet a certain level of novelty and non-obviousness.

IN: For certain patents filed in the biotech, pharmaceutical and chemical fields, I believe the patent term should be increased to something in the region of 25 to 30 years.

HO: The judicial system may be changed and damage awards increased. The processes for collecting evidence in infringement cases may become more favourable for patentees. The Japanese government set up a special committee to discuss revamping the judicial system; we expect that this committee will establish a new system that will be much friendlier towards patentees and will stimulate more innovation in Japan.

JV: The Japanese patent system is well established and in many ways leads the world. So rather than changes to the system itself, I would like to see more discussion and understanding of patent licensing in general, and especially of SEPs. We need more discussion on this topic – especially given the negative impact on innovation and contributions to standard development which will result if SEP licensing is further complicated in Japan. Many Japanese companies have been actively involved in the creation of some of the world’s leading technology standards, which have benefited not only Japanese industry, but also Japanese consumers. Right now, there is a real risk that Japan – along with other major economies – will adopt measures that will curtail this innovation, harming both local industry and consumers.

NH: The motivation for filling patents should change, so that patent protection is obtained not only for defensive purposes, but also for other forms of utilisation. The JPO should educate corporate management on such utilisation. If companies find that these strategies make them money, they will be keen to continue filing patents and invest even more in R&D.

Q: Improvement of patent quality has become a major issue – not just in Japan, but globally. What measures has your company taken to try to ensure that it creates or acquires high-quality patents that will prove valuable to the business?

MK: There is no simple answer. Patent owners need to combine various factors, considering the prevailing business situations in their markets.

TM: To create high-quality patents, we have taken various measures at several stages of the patenting process. At the filing stage, we try to include various embodiments in the patent specification to prepare for a change in the scope of claims in future. Also, in view of global patent filings, we prepare patent specifications that fit the patent prosecution practices of each country. At the patent prosecution stage, we evaluate each patent application at various times and focus our resources on highly ranked patent applications. When those highly ranked patent applications receive a notice of allowance, we review the allowed claims and then consider whether we should take further steps such as divisional patent filings. In addition, we sometimes involve both patent prosecution attorneys and patent litigation attorneys in patent prosecution, in order to obtain strong, high-quality patents which can be deployed in patent litigation and negotiations against opponents.

HT: IP departments in Japanese companies previously placed a major emphasis on determining how to obtain patent protection for an invention and how best to deal with the JPO in order to be granted a patent. This has now shifted to developing a clearer vision of strategies on how best to use patents; increasingly, patents are then filed based on this strategy. However, I believe it is most important for this strategy to be harmonised with the company’s overall business strategies. I would like to see the IP department more involved in various business decision-making processes from the beginning, and more involved in the business itself.

Figure 4. Patent applications to top 10 offices 2014

Note: In general, national offices of European Patent Office (EPO) member states receive lower volumes of applications because applicants may apply via the EPO to seek protection within any member state.

Source: World IP Organisation

Figure 5. Contribution of resident and non-resident patent applications at top 10 offices to worldwide application growth 2013-2014

Note: Figure 5 shows total growth or decreases in applications broken down by the respective

contributions of resident and non-resident applications. ‘Worldwide total growth’ relates to the top 20 offices in terms of applications handled

Source: World IP Organisation

Q: Another jurisdiction that is growing in importance for IP owners is China. What opportunities does China present for Japanese businesses, including in patent terms? And how can Japanese companies use their intellectual property to respond to the challenge of stronger Chinese competitors?

KeN: China is the world’s second biggest market and is an important market for manufacturing competitors in patent terms. We believe it is important to establish our experience and accumulate legal precedent in China.

TM: Not only is China an important market, but in recent years Chinese companies have been growing their R&D capabilities. Although Japanese companies have increasingly been patenting in China, effectively utilising these patents can still be difficult. Fair judgments from Chinese courts are on the increase, but litigation can still be an uncertain prospect for foreigners. We think that Chinese IP law still needs time to mature. In the meantime, we need to use patents strategically. For example, to assist with entering the Chinese market, which can be difficult for foreign companies, we can utilise strong patents supported by advanced technologies to facilitate collaboration with Chinese enterprises.

HT: China is a very important country for IP matters and I believe this importance will continue to grow. However, China has various political and business rules and regulations which restrict foreign companies’ expansion in China. I believe it is important to cooperate with local Chinese companies. When doing so, strength both in technology and patents and in strategy will be an important factor to expand successfully in China.

HO: Big Japanese companies already own many Chinese patents, so they are in a good position in that sense. They have enjoyed some success in Chinese courts against alleged infringers and counterfeiters. The three IP courts that were established in China recently are an interesting development. Japanese companies may use these courts to fight against non-Chinese competitors. However, using these IP courts to fight against Chinese companies might not be wise – at least for the moment.

NH: China is a threat for Japanese companies because R&D budgets in Japan are decreasing. This is their last chance to license their IP assets, including know-how, as US companies did in the 1990s and 2000s.