Today we are in the midst of the Fourth Industrial Revolution (4IR), where technology is affecting almost all aspects of life. We are seeing proliferation of the internet of things (IoT), big data analysis, 3D printing and artificial intelligence (AI), among other technologies, and progress itself is becoming faster and faster.
As the World Economic Forum so aptly states: “Today, radical system-wide innovation can happen in only a few years.” With such rapid technological advancements occurring all around us, legal platforms must also revolutionize to remain effective. Japan is tackling 4IR head on. Various proactive efforts are being made by its government, and by public organizations, to provide an efficient legal platform to continue to effectively protect intellectual property (IP).
Fourth Industrial Revolution
From a legal standpoint, we are seeing industries that had no competition to each other 20 years ago competing and negotiating with each other for the application of internet technology and analysis of big data by AI, to name a few.
We can take the example of the automobile industry in Japan to see how its interest has broadened to encompass the fields of IoT and AI technologies in recent decades.
According to the Nomura Research Institute, in 1997, five major Japanese automobile manufacturers (Toyota, Nissan, Honda, Mazda and Mitsubishi Motors) had 1,966 patent publications in IPC class B60 (vehicles in general), and 398 patent publications in electronic and telecommunication-related IPC classes H01-H04 (basic electric elements, generation, conversion, or distribution of electric power, basic electronic circuitry, and electronic communication technique).
In 2017, the numbers of publications in B60 increased by 50.3% to 2,955. However, at the same time, the number of publications in H01-H04 increased by 578% to 2,698. In short, research and development (R&D) focus of automobile manufacturers has rapidly changed in the past 20 years to reflect 4IR.
Practically, this means that disputes and licence negotiations are arising between companies that have different technical knowledge, and also different corporate cultures, regarding IP. Since the attitudes towards IP rights, for example the royalty rate and tolerance to violation of rights, are not the same for different industrial sectors, there is a demand for common ground for negotiation and licensing.
JPO’s licensing guide
In a response to the proliferation of IoT, the Japan Patent Office (JPO) published a Guide to Licensing Negotiations Involving Standard Essential Patents on 5 June this year.
Its purpose is to “enhance transparency and predictability, facilitate negotiations between rights holders and implementers, and help prevent or quickly resolve disputes concerning the licensing of standard essential patents (SEPs), which are the patents essential in implementing standards in the field of wireless communications and the like”. It is non-binding and is intended to have an international influence.
The guide describes typical steps of licence negotiations such as an offer of licence negotiation, expression of willingness to obtain a licence, FRAND (fair, reasonable and non-discriminatory) offer, and counter-offer to FRAND, and offers commentaries as to whether particular practices in each step are likely to be considered in good or bad faith.
By citing relevant decisions by European, US, Chinese and Japanese courts, it tries to draw a picture of global understanding regarding licence negotiations and enforcement of patent rights in connection with SEPs and a FRAND declaration. The guide also covers more practical aspects of licence negotiation such as the handling of confidential information, transparency of SEP, geographical limitation of licence, etc.
A large portion of the guide is spent discussing the calculation of royalties. Since its primary purpose is to provide basic information to the parties to enable equal and efficient licence negotiations, the guide provides the factors to be considered to determine the royalty, and various methods to calculate the royalties, but does not provide an opinion on which methodologies should be favoured.
JPO’s Hantei opinion
For some time, the JPO has offered the opinions of its board of examiners on the question of whether a patent claim reads on a product in question, known as the “Hantei” system.
In another reaction to the current technological age we are in, the JPO expanded the scope of this system in April 2018, so that it can also provide an opinion as to whether a patent is essential for standards, although the system is far from perfect.
The board examines the arguments filed by both parties and follows inter partes proceedings, although the procedure is a lot more simplified than lawsuits in court. Notably, the opinion of the board has no legally binding effect, but can be influential on future court cases, in certain instances.
According to the user’s guide published in March 2018, the basic requirements to request a Hantei on essentiality are as follows:
- There must be standards in written form;
- There must be a dispute between two parties regarding essentiality of a patent; and
- A hypothetical product that has all the features necessary to meet the standards’ requirements must be determined by the requester.
It should be noted that the board of appeals of the JPO does not directly answer the question on whether or not a patent is essential for standards. Instead, the board decides whether the thus determined hypothetical product or process belongs to the claim scope of the patent in question.
If the answer is yes, the patent is standard essential. However, even if the answer is no, it does not necessarily mean that the patent is not standard essential, because standards may have more than one option and the patent may cover the other option.
Of course, the JPO is providing just one more option to obtain an essentiality opinion, besides the options provided by standard setting organizations. The advantages of the Hantei system include lower costs (about US$400) and the complete neutrality/independence of the evaluators. Accumulation of experience is awaited to evaluate whether this new system will provide a useful option for the evaluation of essentiality. For comprehensive information on this system, please contact the authors.
Foundation of IACT
In anticipation of a predicted further increase in international patent infringement disputes as a result of IoT and other such technologies, the Japanese government believes that there is a strong need to provide an infrastructure for efficient dispute resolution in addition to the courts. As such, a specialized Intellectual Property International Arbitration Centre (IACT) will open in Tokyo in the coming months, being the first of its kind in Asia.
Internationally renowned lawyers such as Randall R Rader, a former chief judge of the US Court of Appeals for the Federal Circuit, as well as judges from Europe, China, South Korea, Japan, Australia and South America will be registered as arbitrators so that parties have the option of selecting their arbitrators out of a list.
One of the expected characteristics of the new organization is speed: a conclusion must be achieved within one year from the filing of the case. The arbitration centre can be used not only for disputes between Japanese and foreign companies, but also for disputes between non-Japanese companies. More information is available at www.iactokyo.com.
Anti-Monopoly Law and IP
The Japan Fair Trade Committee (JFTC), responsible for the application of Anti-Monopoly Law and Unfair Competition Prevention Law, has also been playing an important role in the enforcement of IP rights in 4IR. The JFTC recently amended its Guidelines for Use of Intellectual Property Rights under the Anti-Monopoly Act in 2016, with regard to the enforcement of patents, especially injunctions, when the patent is standard essential and FRAND licence has been declared.
Although the guidelines very prudently avoid immature conclusions, the possibility of depriving companies of business opportunities and deteriorating their competitiveness by refusing licence negotiations and filing a lawsuit despite a FRAND declaration is mentioned, and it is warned that such conduct may be deemed a violation of the Anti-Monopoly Law.
In a situation where this provision is applied, if a patentee files a lawsuit against an infringer despite a FRAND declaration, the demand will be rejected, and furthermore, there will be a risk of counter-claim that the act of the patentee is a violation of Anti-Monopoly Law. The JFTC’s view is in line with the Japanese IP High Court decision of Apple v Samsung of 16 May 2014, where the court denied the injunction and damage compensation, although it admitted that the defendant’s products fell in the scope of the plaintiff’s patent.
The above-mentioned measures demonstrate that Japan is evolving its IP protection to meet the needs of this new technological era we are in.