Intellectual property law
Under what statutes, regulations or case law are intellectual property rights granted? Are there restrictions on how IP rights may be enforced, licensed or otherwise transferred? Do the rights exceed the minimum required by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)?
Intellectual property rights are granted under the following acts:
- the Patent Act (No. 121 of 1959);
- the Utility Model Act (No. 123 of 1959);
- the Design Act (No. 125 of 1959);
- the Trademark Act (No. 127 of 1959);
- the Plant Variety Protection and Seed Act (No. 83 of 1998);
- the Act on the Circuit Layout of Semiconductor Integrated Circuits (No. 43 of 1985);
- the Copyright Act (No. 48 of 1970); and
- the Unfair Competition Prevention Act (No. 47 of 1993).
For patent, utility model, design and trademark rights to be granted, registration at the Patent Office is required. For the registration of breeders’ rights under the Plant Variety Protection and Seed Act, registration at the Ministry of Agriculture, Forestry and Fisheries (MAFF) is required, and for the right to the layout of semiconductor integrated circuits, registration is required at the Software Information Centre as designated by the Ministry of Economy, Trade and Industry (METI). As for copyrights and trade secrets, no registration is required.
Licensing of IP rights generally becomes effective upon agreement between a licensor and a licensee, without registration with governmental authorities. However, the relevant acts state that an exclusive licence of the registrable rights described above shall not become effective without registration with the competent authorities. In reality, many licensees refrain from registering exclusive licences to save registration costs. An exclusive licensee with registration may claim the licence against third parties (for example, an infringer), while an exclusive licensee without registration may only claim the licence against a licensor.
The transfer, waiver or restriction on disposability of the registrable rights must be registered with the relevant authorities. The creation, transfer, change, extinction or restriction on disposability of the registered exclusive rights must also be registered. Unless so registered, no such transfer etc, will be effective against third parties.
If two or more people share the registrable rights described above, the transfer or licensing of such rights requires the consent of all holders.
The protection of IP rights in Japan exceeds the minimum requirement by TRIPs.
Which authorities are responsible for granting, administering or enforcing IP rights?
The Patent Office, an extra-ministerial bureau of the METI, is the responsible authority for administering (including granting relevant registrable IP rights) the Patent Act, the Utility Model Act, the Design Act and the Trademark Act. The MAFF is responsible for administering (including granting relevant registrable IP rights) the Plant Variety Protection and Seed Act. The METI is responsible for administering (including granting relevant registrable IP rights) the Act on the Circuit Layout of Semiconductor Integrated Circuits and the Unfair Competition Prevention Act. The Agency for Cultural Affairs, an extra-ministerial bureau of the Ministry of Education, Culture, Sports, Science and Technology, is responsible for administering the Copyright Act. All of these IP rights are ultimately enforced through judicial proceedings conducted by the court.
Proceedings to enforce IP rights
What types of legal or administrative proceedings are available for enforcing IP rights? To the extent your jurisdiction has both legal and administrative enforcement options for IP rights, briefly describe their interrelationship, if any.
In legal proceedings, civil lawsuits are available (see question 4). An appeal to the court of second instance against the final judgment of the court of first instance on a civil action relating to a patent right, utility model right, right of layout designs of integrated circuits or an author’s right over a computer program shall be subject exclusively to the jurisdiction of the Tokyo High Court (article 6, paragraph 3 of the Code of Civil Procedure) (specifically, the Intellectual Property High Court, a special branch of the Tokyo High Court, handles the cases). In administrative proceedings, the holders of a patent, utility model, design, trademark, copyright, or neighbouring or breeders’ rights may request the customs director to initiate administrative proceedings to prohibit the importation of goods that they believe infringe their rights. If a person finds that a certain indication (such as trade names, registered or unregistered trademarks or packaging) or shape of goods to be imported are identical or similar to his or her own, that person may also make the same request (article 69-13, paragraph 1 of the Customs Act). When such goods are being imported, the customs director may confiscate and discard them, or may order an importer to reload them (article 69-11, paragraph 2). The holder of the relevant IP rights may choose which proceedings described above to take first and there is no procedural interrelationship between them.
What remedies are available to a party whose IP rights have been infringed? Do these remedies vary depending on whether one utilises judicial or administrative review or enforcement?
Available civil remedies include compensation for damages, injunctions and preliminary injunctions. An injunction may include the destruction of the objects that have been created by the act of infringement, the removal of the machines and equipment used for the act of infringement, or other measures necessary to suspend and prevent the infringement. Administrative remedies are also available (see question 3). An infringer may be criminally punished, but in some cases only if the holder of relevant rights files a criminal complaint with the investigative authorities in a timely manner.
Nexus between competition and IP rights
Do any statutes, regulations or case law in your jurisdiction address the interplay between competition law and IP law?
The Intellectual Property Basic Act (No. 122 of 2002) (IPBA) refers to competition. Article 10 (consideration of promotion of competition) of the IPBA stipulates that, in promoting measures regarding the protection and use of intellectual property, ensuring fair use and the public interest shall be taken into consideration, and the promotion of fair and free competition shall also be considered. However, because this is just a general statement about the relationship between IP rights and competition, specific interpretation of IP law or competition law is unlikely to be affected by this provision. See question 11.
Patent cooperation treaties and other agreements
Does your jurisdiction participate in any patent cooperation treaties or other similar agreements?
Japan participates in, among others, the following patent cooperation treaties or other similar agreements:
- the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks;
- the Nice Agreement Concerning the International Classification of Goods and Services for Purposes of the Registration of Marks;
- the Trademark Law Treaty;
- the Singapore Treaty on the Law of Trademarks;
- the Paris Convention for the Protection of Industrial Property;
- the Convention Establishing the World Intellectual Property Organization;
- the Strasbourg Agreement Concerning the International Patent Classification;
- the Patent Cooperation Treaty;
- the Patent Law Treaty;
- the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure;
- the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations;
- the Berne Convention for the Protection of Literary and Artistic Works;
- the Universal Copyright Convention;
- the Convention for the Protection of Producers of Phonograms Against Unauthorised Duplication of their Phonograms;
- the World Intellectual Property Organization Copyright Treaty;
- the World Intellectual Property Organization Performances and Phonograms Treaty; and
- the Agreement on Trade-Related Aspects of Intellectual Property Rights.
Remedies for deceptive practices
With respect to trademarks, do competition or consumer protection laws provide remedies for deceptive practices?
Remedies against certain deceptive practices are provided for in the Unfair Competition Prevention Act (UCPA) with respect to trademarks. Where the UCPA is applicable, the person whose business interest is damaged may invoke its provisions regarding injunction rights and compensation for damages, in addition to remedies under civil law. Certain acts of this type also give rise to criminal liability.
Technological protection measures and digital rights management
With respect to copyright protection, is WIPO protection of technological protection measures and digital rights management enforced in your jurisdiction? Do statutes, regulation or case law limit the ability of manufacturers to incorporate TPM or DRM protection limiting the platforms on which content can be played? Has TPM or DRM protection been challenged under the competition laws?
Both TPMs and DRM are enforced in Japan under the Copyright Act (CA). Regarding the protection of TPMs, a person who assigns, leases or develops devices or programs that are solely designed to circumvent TPMs or who on a regular basis circumvents TPMs upon the request of the general public may be sentenced to a maximum of three years’ imprisonment or a fine of ¥3 million, or both (article 120-2, items 1 and 2 of the CA). A person who intends to privately copy those copyrighted works that are protected by TPMs must obtain the consent of a copyright holder, which is an exception to the general rule that private copying is permitted without the copyright holder’s consent (article 30, paragraph 1, item 2). Regarding the protection of DRM, intentionally attaching false information as DRM, or removing or altering DRM, is deemed infringement of copyright (article 113, paragraph 3), and a person who commits such an act with the intention of making a profit may be sentenced to a maximum of three years’ imprisonment or a fine of ¥3 million, or both (article 120-2, item 3).
No legislation or case law limits the ability of manufacturers to incorporate TPM or DRM protection limiting the platforms on which the content can be played. TPM or DRM protection is not generally considered anticompetitive, and we understand that mere employment of TPM or DRM would not be challenged under competition laws. Further, we understand that TPM or DRM protection has not been challenged under the competition laws.
What consideration has been given in statutes, regulation or case law to the impact of the adoption of proprietary technologies in industry standards?
Neither statutes nor regulation have given special consideration to the impact of proprietary technologies in industry standards.
There is no compulsory licensing of technologies in industry standards; however, the Guidelines for the Use of Intellectual Property under the Anti-Monopoly Act (IP Guidelines 2007) published by the Japan Fair Trade Commission (JFTC) do provide such consideration, and stipulate that refusal of a licence can be deemed a violation of the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (No. 54 of 1947) (Anti-Monopoly Act (AMA)) under certain circumstances. Further, the JFTC amended the IP Guidelines in January 2016 to address the situation where a refusal to grant a licence or claim for injunction to a party who is willing to take a licence, by a FRAND-encumbered standard essential patent (SEP)-holder, can be deemed a violation of the AMA. In short, the amended guidelines provide that the following may be considered private monopolisation or an unfair trade practice:
- refusal to grant a licence or claim for an injunction by a FRAND-encumbered SEP-holder to a party who is willing to take a licence; or
- refusal to grant a licence or claim for an injunction by a FRAND-encumbered SEP-holder who has withdrawn its FRAND declaration for that SEP to a party who is willing to take a licence.
The amendment further states that the determination that a certain party is willing to take a licence on FRAND terms should be judged based on the situation of each case in light of the behaviour of both sides in licensing negotiations etc. For example, 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 licence on the conditions specifying its reasonable basis; 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 normal business practice. The amendment also notes that the mere fact that a potential licensee challenges the validity, essentiality or infringement of the SEP would not be considered as grounds to deny that such party is a ‘willing licensee’ as long as the party undertakes licensing negotiations in good faith in light of normal business practice. The above would be applied regardless of whether the conduct is taken by the SEP-holder, by a party that accepted the assignment of the SEP or by a party that was entrusted to manage the SEP.
While it is not necessarily clear, the language used in the amendment suggests that the JFTC had taken into account the Intellectual Property High Court decision (May 2014), concerning an injunction claim brought by Samsung against Apple, which ruled that a patent holder that had made FRAND declarations in relation to an SEP is not permitted to seek injunctive relief against a manufacturer that intends to obtain the relevant licence from the patent holder under FRAND terms and conditions. As this court decision was not based on competition law grounds, it is yet to be determined whether a competition law-based approach (as suggested by the amendment) would be accepted by the courts.
Another example of a violation arising from refusal of a licence is where many companies are jointly developing a standard for certain products, and one of the companies has its technology adopted as a part of the standard by inappropriate measures (such as misrepresentation of possible terms and conditions of a licence of such technology after it is adopted as the standard); and after successfully having the technology adopted, it then refuses to license the technology to other companies. Such refusal of a licence may constitute private monopolisation or an unfair trade practice. See question 10.
On the other hand, it seems logical to interpret the IP Guidelines to mean that mere refusal to license technologies cannot be a violation of the AMA, even if such technologies have been adopted in certain standards, unless the owner of such technologies has employed inappropriate measures in doing so.
What statutes set out competition law?
The AMA sets out the basic rules of competition law. Broadly, the AMA prohibits three types of activity, as follows:
- private monopolisation (activities to exclude or control the business activities of other entrepreneurs);
- unreasonable restraint of trade (activities to restrict or conduct business activities mutually with other entrepreneurs in such a manner as to fix, maintain or increase prices, limit production or products, or other similar matters); and
- unfair trade practices (boycott, unjust price discrimination, predatory pricing, resale price maintenance, abuse of a superior bargaining position and other practices).
It should be noted that while private monopolisation and unreasonable restraint of trade require the level of restriction on competition to be substantial, a tendency to impede fair competition would be considered sufficient for the purpose of unfair trade practices. It can be said that private monopolisation corresponds largely to the abuse of a dominant position under EU competition law, and unreasonable restraint of trade includes almost all illegal cartels.
Other important acts with aspects of competition law include the Act against Unjustifiable Premiums and Misleading Representations (No. 134 of 1962), which prevents unjustifiable premiums and representations regarding the trade of goods and services, and the UCPA, which provides for measures to prohibit unfair competition and special rules regarding compensation for damages.
IP rights in competition legislation
Do the competition laws make specific mention of any IP rights?
Article 21 of the AMA provides that the AMA shall not apply to such acts recognisable as the exercise of rights under the Copyright Act, Patent Act, Utility Model Act, Design Act or Trademark Act. However, holders of IP rights should not rely on this provision without careful consideration of competition law, as this provision is quite general. See question 5.
Review and investigation of competitive effects from exercise of IP rights
Which authorities may review or investigate the competitive effect of conduct related to exercise of IP rights?
The JFTC, an independent administrative committee responsible for competition-related matters, has general jurisdiction to review and investigate the competitive effects of certain conduct, including those related to IP rights. For this administrative process, the Tokyo District Court is the court of first instance for reviewing the JFTC’s orders upon an appeal filed by a recipient. The courts may also review the competitive effect of business practices if civil or criminal lawsuits filed with the court contain issues involving an effect on competition.
Competition-related remedies for private parties
Can a private party recover for competition-related damages caused by the exercise, licensing or transfer of IP rights?
Private parties can claim for competition-related damages caused by the exercise, licensing or transfer of IP rights under the Civil Code, article 709, or AMA, article 25, whereby a defendant may not be discharged even if his or her act was not intentional or negligent, which is contrary to general rules under the Civil Code, article 709. However, this claim under AMA, article 25 is not always useful because it may not be made unless the JFTC’s formal finding of violation becomes final and conclusive.
Have the competition authorities, or any other authority, issued guidelines or other statements regarding the overlap of competition law and IP?
The JFTC has issued three guidelines and one report regarding the overlap of competition law and IP rights (and no other authority had issued such guidelines until June 2018 (see ‘Update and Trends’)), except for comparative or industry-specific researches.
The IP Guidelines discuss how to analyse legal issues arising from the interaction of competition law and IP rights. See question 9.
The Guidelines concerning Joint Research and Development under the Anti-Monopoly Act (1993) provide that joint research activity itself is normally lawful if the total market share of participants is not more than 20 per cent, but further provides that whether covenants ancillary to joint research activities are lawful or not shall be determined by taking various relevant facts into consideration, not limited to the total market share. The Guidelines on Standardisation and Patent Pool Arrangements (2005) specify the circumstances where the formation of patent pools or licensing for standardisation through patent pools may give rise to antitrust concerns.
Views on Software Licensing Agreements etc, under the Anti-Monopoly Act (2002), which is an interim report, not guidelines, covers various issues arising from software licensing agreements, including abusive conduct by developers of operating systems software and restrictive covenants in software licensing agreements.
Exemptions from competition law
Are there aspects or uses of IP rights that are specifically exempt from the application of competition law?
Generally not, except that resale price maintenance of copyrighted works between entrepreneurs is exempt from the AMA (article 23, paragraph 4). The JFTC’s interpretation is that ‘copyrighted works’ for the purpose of this article include only the following six items: books, magazines, newspapers, music records, music tapes and music CDs. DVDs, for example, are not exempt.
Does your jurisdiction have a doctrine of, or akin to, ‘copyright exhaustion’ (EU) or ‘first sale’ (US)? If so, how does that doctrine interact with competition laws?
The CA explicitly lays down a doctrine of exhaustion (article 26-2, paragraph 2). The Act on the Circuit Layout of Semiconductor Integrated Circuits (article 12, paragraph 3) and the Plant Variety Protection and Seed Act (article 21, paragraph 4) have similar provisions. Notably, the CA specifically refers to ‘international exhaustion’, but the certain import of records lawfully sold outside of Japan for the purpose of resale in Japan is deemed copyright infringement (article 113, paragraph 5).
In practice, the doctrine of exhaustion has been disputed mainly in respect of patents and trademarks, particularly in the field of parallel import (or ‘grey market’). Regardless of the lack of specific provision on the exhaustion doctrine in the Patent Act and Trademark Act, domestic exhaustion has been taken for granted. As to international exhaustion, the courts have recognised the doctrine and rejected claims of injunction by patent holders or trademark holders (or their licensees) against parallel importers that import genuine products (regarding patents, BBS Kraftfahrzeugtechnik v Racimex Japan ; regarding trademarks, NMC v Shriro Trading ).
To what extent can an IP rights holder prevent ‘grey-market’ or unauthorised importation or distribution of its products?
As explained in question 16, an IP rights holder cannot prevent a ‘grey market’ by exercising his or her IP rights against parallel importers. Moreover, the Guidelines concerning Distribution Systems and Business Practices under the Anti-Monopoly Act (Distribution Guidelines 1991) stipulate that it may be a violation of the AMA for an authorised general agent of imported products or a foreign manufacturer (who may or may not be an IP rights holder) of the products, to maintain the price of the authorised products to do the following:
- prevent foreign distributors from selling products to the grey market;
- prevent domestic distributors from handling products imported through the grey market;
- prevent wholesalers from selling the products to retailers handling products imported through the grey market;
- defame by stating that products imported through the grey market are not genuine products;
- buy up the products imported through the grey market; and
- prevent newspapers or other media from carrying advertisements of parallel importers.
The Distribution Guidelines also stipulate that it would be a violation of the AMA for an authorised general agent, in order to maintain the price of the authorised products, to refuse, or have distributors refuse, to repair products imported through the grey market or to supply repair parts for products imported through the grey market when it is extremely difficult for people or companies other than an authorised general agent or a retailer to repair the products or procure repair parts for the products.
Jurisdictional interaction between competition laws and IP rights
Are there authorities with exclusive jurisdiction over IP-related or competition-related matters? For example, are there circumstances in which a competition claim might be transferred to an IP court to satisfy subject matter jurisdiction? Are there circumstances where the resolution of an IP dispute will be handled by a court of general jurisdiction?
An appeal to the court of second instance against the judgment on a civil action relating to a patent right, utility model right, right of layout-designs of integrated circuits or an author’s right over a computer program shall be subject exclusively to the jurisdiction of the Tokyo High Court, specifically, the Intellectual Property High Court, a special branch of the Tokyo High Court (see question 3). This exclusive jurisdiction equally applies regardless of whether the case involves a competition claim or not. Additionally, cases (regardless of whether the cases involve a competition claim or not) over which the Tokyo High Court has jurisdiction may be transferred to the Intellectual Property High Court if the cases require specialised knowledge on intellectual property for examination of the major points at issue.
Powers of competition authority
Does the competition authority have the same authority with respect to reviewing mergers involving IP rights as it does with respect to any other merger?
The JFTC has the same authority with respect to reviewing mergers involving IP rights as in any other mergers.
Analysis of the competitive impact of a merger involving IP rights
Does the competition authority’s analysis of the competitive impact of a merger involving IP rights differ from a traditional analysis in which IP rights are not involved? If so, how?
The standard for review by the JFTC of the competitive impact of a merger is always the same (whether or not the merger ‘may be substantially to restrain competition’), irrespective of whether the mergers involve IP rights. Practically, such a test is whether the party after a merger can increase the price at its own will, and the Herfindahl-Hirschman Index before and after the merger plays an important role in terms of review by the JFTC (although the role of this index has become less significant and limited to the application of safe harbour recently, as shown in some cases where the JFTC did not object despite a very high post-merger figure). IP rights are one of the other relevant factors, and could play a significant role, depending on the case.
Challenge of a merger
In what circumstances might the competition authority challenge a merger involving the transfer or concentration of IP rights? Does this differ from the circumstances in which the competition authority might challenge a merger in which IP rights were not a focus?
For a general analysis, see question 20. We understand that the JFTC has never challenged a merger solely because the parties have IP rights resulting in a strong competitive edge.
Remedies to address the competitive effects of mergers involving IP
What remedies are available to address competitive effects generated by a merger when those effects revolve around the transfer of IP rights?
The JFTC may order any measures necessary to eliminate acts in violation of the provisions regarding mergers (AMA, article 17-2, paragraph 1). Therefore, theoretically, compulsory licences may be ordered as a remedy.
In the course of a merger review, sometimes antitrust concerns are dealt with by the parties who promise to take certain measures to alleviate such concerns. Some of these remedies are IP-specific. The Guidelines to Application of the Anti-Monopoly Act Concerning Review of Business Combination (the Merger Guidelines) issued by the JFTC in 2004 provide that parties to business combinations may be able to alleviate antitrust concerns if they grant the licence of their patents to competitors or new entrants on appropriate terms and conditions. In one case, the JFTC refrained from objecting to a merger on the understanding that one of the parties would transfer or license certain rights regarding research and development, manufacturing and sales of overlapping products (in re Kirin Holdings and Kyowa Hakko Kogyo, 19 December 2008).
Specific competition law violations
Can the exercise, licensing or transfer of IP rights create price-fixing or conspiracy liability?
Yes. The guidelines referred to in questions 9 and 14 introduce a number of useful examples. As to patent pools, because they have a pro-competitive effect, the ‘rule of reason’ test would be applied. Patent pools can constitute an unreasonable restraint of trade if members of the patent pools share the understanding that they have accepted common restrictions on trade conditions such as sales prices and sales areas, and such restrictions substantially restrict competition in a market, or if the members mutually restrict the area of research and development or prospective licensees of the IP rights and such restrictions substantially restrict competition in a market.
It should be noted that patent pools may also be regarded as private monopolisation or unfair trade practices. For example, if members of patent pools refuse to grant a licence and effectively exclude competitors, such a refusal may constitute private monopolisation.
It will not be considered as cartel conduct for competitors to jointly license their IP rights to a certain licensee. On the other hand, if competitors jointly refuse to license their IP rights without reasonable grounds, it may be considered as illegal cartel conduct.
In this context, the exercise of IP rights is treated no differently from non-IP conduct.
Reverse payment patent settlements
How have the competition laws been applied to reverse payment patent settlements in your jurisdiction?
We understand that the JFTC has never officially applied the competition laws to reverse payment patent settlements in Japan. Reverse payment patent settlements do not seem to be very common in Japan. This is because there are no regulations in Japan similar to the US Hatch-Waxman Act, whereby a patent holder is practically forced to bring an infringement lawsuit upon notice from a generic manufacturer. It is difficult to predict the result of application of the competition laws to reverse payment patent settlements in Japan, because it may be difficult to define the relevant market and determine whether any restraint on competition is substantial (see question 10). Having said that, as it is also pointed out that the JFTC may be interested in applying ‘unfair trade practices (dealing on restrictive terms)’, which only requires a tendency to impede fair competition and does not necessarily require a substantial restraint of competition, it is advisable to carefully consider the pro-competitive and anticompetitive effects arising from the contemplated arrangements (see question 31).
The JFTC and the Competition Policy Research Center published a joint research report titled ‘Competition and R&D Incentives in the Pharmaceutical Product Market - Based on the analysis of the effect on the market by the entry of generic pharmaceutical products’ on 7 October 2015. The report concludes that while a reverse payment situation that has raised significant competition law issues in the EU and the US is unlikely to arise in Japan under the current regulatory system and market structure for pharmaceutical products, the incentives to engage in a reverse payment scheme might increase in the event that the market share of generic pharmaceuticals further increases in the near future, and suggests that the JFTC should continue to monitor the situation and be prepared to proactively enforce the AMA as necessary.
(Resale) price maintenance
Can the exercise, licensing or transfer of IP rights create liability under (resale) price maintenance statutes or case law?
Yes. If a licensor sets minimum resale prices for its licensees, the licensor’s act is, in principle, considered to be an unfair trade practice (dealing on restrictive terms). It should be noted that such vertical restraint is not generally regulated as an unreasonable restraint of trade in Japan (see question 10). In this context, the exercise of IP rights is treated no differently from non-IP conduct.
Exclusive dealing, tying and leveraging
Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to exclusive dealing, tying and leveraging?
Yes. An IP rights holder that restricts a licensee from manufacturing or using competing products or adopting competing technologies may be considered to have committed unfair trade practices (dealing on exclusive terms or dealing on restrictive terms), if such a restriction tends to impede fair competition in a market. In particular, if such a restriction is imposed after the expiry of the licensing agreement, it is highly likely that such a restriction will constitute an unfair trade practice.
An IP rights holder that obliges a licensee to obtain a package licence for more than one IP right may be considered to have committed unfair trade practices (tie-in sales), if such an obligation may have an adverse effect on competition in a market. For instance, in 1998, the JFTC provided a recommendation decision to Microsoft Co, Ltd, a Japanese subsidiary of Microsoft Corporation, that it should not tie its MS Word and Outlook software with its MS Excel software with regard to its licensing arrangements with PC manufacturers.
In this context, the exercise of IP rights is treated no differently from non-IP conduct.
Abuse of dominance
Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to monopolisation or abuse of dominance?
Yes. Private monopolisation under the AMA is similar to abuse of dominant market position under EU competition law. If an entrepreneur or a combination of entrepreneurs in a dominant position excludes or controls the business activities of other entrepreneurs and thereby causes a substantial restraint of competition, such an abusive act will constitute a private monopolisation. In the Paramount Bed case (1998), a dominant manufacturer of beds for medical use approached an official of the Tokyo metropolitan government and made it adopt a specification for beds that contained its IP rights by misrepresenting that the specification somehow could also be reasonably satisfied by its competitors, effectively excluding the business activities of its competitors. The JFTC held that the activities of Paramount Bed Co, Ltd constituted private monopolisation (exclusionary type).
In addition, it is becoming more likely than before that even where the level of restriction on competition is not substantial, ‘exploitation’-type conduct taking advantage of a predominant bargaining position will be considered ‘abuse of superior bargaining position’, which is one of the ‘unfair trade practices’ (see question 10). Although there has been no precedent in which the JFTC declared its policy to take such an approach with regard to IP rights, caution should be used in a potential patent hold-up case, for example, particularly given that a surcharge (a type of administrative fine) shall be imposed on an ‘abuse of superior bargaining position’ if it occurs on a regular basis.
In this context, the exercise of IP rights is treated no differently from non-IP conduct.
Refusal to deal and essential facilities
Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to refusal to deal and refusal to grant access to essential facilities?
An entrepreneur’s mere refusal to license IP rights is generally thought to be beyond the scope of the AMA unless the entrepreneur has purchased and collected IP rights or has employed inappropriate measures; no court judgment or JFTC decision has ever held a genuine unilateral refusal to license as being against the AMA. Moreover, no JFTC decision or court judgment has ever explicitly mentioned the essential facilities doctrine. Theoretically, however, if an IP rights holder singularly refuses to provide a licence to another entrepreneur and the entrepreneur faces difficulty in doing business because of the essential nature of the refused IP, the possibility that such a refusal to license could constitute private monopolisation or unfair trade practices (other refusal to deal) cannot be ruled out (see questions 9 and 29). In this context, the exercise of IP rights is treated no differently from non-IP conduct.
Remedies for violations of competition law involving IP
What sanctions or remedies can the competition authorities or courts impose for violations of competition law involving IP?
In cases of violation of competition law involving IP, the JFTC may issue a cease-and-desist order to take any measures necessary to eliminate such violation. However, while the term ‘necessary measures’ suggests that such drastic measures as compulsory licensing or divestiture of IP rights are possible, whether or not the JFTC is of the view that such aggressive enforcement policy is needed is unclear; to date, the JFTC has not ordered compulsory licensing or divestiture of IP rights. If the violation is private monopolisation whereby a violator controls other enterprises’ business activities, subject to some additional requirements, the JFTC should impose a surcharge (a type of administrative fine) on the violators. In addition, if the violation is private monopolisation whereby a violator excludes other enterprises’ business activities or certain types of unfair trade practices, the JFTC will impose a surcharge on the violators. Private parties who have been harmed by such acts of violation may seek an injunction, compensation for damages or report the alleged violation to the JFTC, or any combination of the foregoing, subject to certain other requirements.
Competition law remedies specific to IP
Do special remedies exist under your competition laws that are specific to IP matters?
Article 100 of the AMA lays down special sanctions that are specific to IP matters. That is, when the court pronounces a criminal sentence on people who have committed private monopolisation or unreasonable restraint of trade, it may order that the patents exercised for the relevant offence be revoked. However, this sanction has never previously been declared.
Scrutiny of settlement agreements
How would a settlement agreement terminating an IP infringement dispute be scrutinised from a competition perspective? What are the key factors informing such an analysis?
Even a settlement agreement terminating IP infringement litigation will be scrutinised in the same manner as any other agreement. For example, an agreement whereby a defendant agrees not to compete in respect of the patented product of a plaintiff may violate the AMA, especially if the plaintiff is ‘influential’ in the relevant market (namely, with a market share exceeding 20 per cent). See also question 24.
Economics and application of competition law
What role has competition economics played in the application of competition law in cases involving IP rights?
Economics has so far played a limited role in the application of competition law to specific cases by the JFTC. IP-related cases are no exception to this.
Recent cases and sanctions
Have there been any recent high-profile cases dealing with the intersection of competition law and IP rights?
On 16 September 2008, the JFTC held that Microsoft Corporation had engaged in unfair trade practices (dealing on restrictive terms) by entering into agreements with PC manufacturers to license Windows OS. Such agreements included a ‘non-assertion of patents’ (NAP) clause, which prevented licensees from asserting patent infringement claims against Microsoft Corporation and other PC manufacturers. Microsoft did not challenge the decision and it became final and binding.
As discussed in question 9, the May 2014 decision of the Intellectual Property High Court (see question 3) in the Samsung v Apple Japan litigation was one development that we believe led to the JFTC introducing amendments to its IP Guidelines, although the court rendered its decision on grounds other than competition law.
The JFTC’s recent investigation, which closed on 18 November 2016, concerning patents that are essential for the use of the Blu-ray Disc standard, basically followed the framework set by the Samsung v Apple Japan decision. In this case, One-Blue, a patent pool that manages patents that are essential for the use of the Blu-ray Disc standard, sent a notice to some customers of a potential licensee informing them that One-Blue licensors had the right to seek injunction for infringement of its patent rights to advance licence negotiations. The JFTC found that such notice, which is incorrect, falls under unfair trade practices (interference with a competitor’s transactions). The investigation was closed without any orders issued, because the JFTC concluded that there was no need to issue a cease-and-desist order as the relevant violation had already ceased to exist and other circumstances did not otherwise warrant a cease-and-desist order.
Remedies and sanctions
What competition remedies or sanctions have been imposed in the IP context?
In the Microsoft case referred to in question 33, the JFTC ordered Microsoft not to use the NAP clause when dealing with PC manufacturers as a part of the cease-and-desist order.
Update and trends
Update and trends
Are there any emerging trends or hot topics in the law of IP and antitrust policy? Have changes occurred recently or are changes expected in the near future (through either legislation or court decisions) that will have an impact on the application of competition law to IP rights? (For example, has there been any development with regard to assessment of the appropriate basis for royalty determinations (eg, ‘smallest-saleable unit’ versus total cost of product?)
Regarding FRAND-encumbered standard essential patents (SEPs), on 5 June 2018 the Japan Patent Office (JPO) released the ‘Guide to Licensing Negotiations involving Standard Essential Patents’. This guide is not binding law, and is only intended to summarise issues concerning licensing negotiations as objectively as possible based on items such as the current state of court rulings from various jurisdictions, the judgment of competition authorities and licensing practices. That said, the JPO also states that this guide aims to enhance transparency and predictability, facilitate negotiations between rights holders and implementers, and help prevent or quickly resolve disputes concerning the licensing of SEPs. The JPO also states that the guide aims to offer an explanation of what actions companies can take to make it more likely for them to be recognised as ‘negotiating in good faith’, helping implementers to avoid an injunction and rights holders to secure appropriate compensation. Therefore, it is possible that future licensing negotiations, relevant court disputes and competition law cases could evolve around this guide. The JPO further appreciates that the environment surrounding SEP licensing negotiations continues to transform, and as such states that it plans to review and revise this guide as appropriate to keep it updated with the evolving laws and regulations. Therefore, it is worth keeping an eye on this from an IP and antitrust perspective.
The JPO’s press release, which includes links to unofficial English translation of the guide and the results of public comments, is available at: www.meti.go.jp/english/press/2018_06/0604_001_00.html.