Q&A: key IP issues affecting licensing agreements in Japan

Intellectual property issues

Is your jurisdiction party to the Paris Convention for the Protection of Industrial Property? The Patent Cooperation Treaty (PCT)? The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)?

Japan is a signatory country of both international treaties and the agreement, and has ratified them.

Can the licensee be contractually prohibited from contesting the validity of a foreign licensor’s intellectual property rights or registrations in your jurisdiction?

In general, the licensee can be contractually prohibited from contesting the validity of a foreign licensor’s intellectual property rights (IPRs) or registrations in Japan. Yet this contractual prohibition may constitute an unfair trade practice when it is found to impede fair competition by continuing rights that should be invalidated and by restricting the use of the technology associated with those rights. On the other hand, when the licensee contests the validity of IPRs, the Antimonopoly Law in general allows the licensor to terminate the licence contract.

What is the effect of the invalidity or expiry of registration of an intellectual property right on a related licence agreement in your jurisdiction? If the licence remains in effect, can royalties continue to be levied? If the licence does not remain in effect, can the licensee freely compete?

The invalidity of an IPR registration makes a licence agreement void, and the licensor may be required to pay back to the licensee the royalty that has already been paid. To practically avoid this, in some cases, both a licensor and a licensee will conclude the agreement with a provision regarding the right of the licensor to retain the royalty that has already been paid.

On the other hand, the expiry of an IPR registration terminates a licence agreement. The licensor can retain any royalty that has already been paid, but loses the right to receive any future royalty. The agreement with a provision regarding the right of the licensor to continue receiving the royalty even after expiry can be illegal under the Antimonopoly Law, depending on the situation.

If the licence does not remain in effect, the licensee can freely compete when registration of an IPR is invalid or has expired.

Is an original registration or evidence of use in the jurisdiction of origin, or any other requirements unique to foreigners, necessary prior to the registration of intellectual property in your jurisdiction?

No. However, it should be noted that being the first to file, even via the Paris Convention 1883, Patent Cooperation Treaty 1970 or Madrid Protocol 1989, is a common requirement, especially for patents, utility models, designs and trademarks in Japan.

Can unregistered trademarks, or other intellectual property rights that are not registered, be licensed in your jurisdiction?

Yes. However, non-registered trademarks can only be protected by contract, as full protection under the Trademark Law is not provided before the registration is completed at the Japanese Patent Office (JPO). Only trademarks that are famous or well known among consumers and traders may enjoy certain protection under the Unfair Competition Prevention Law.

A patent right that is not registered at the JPO is treated as ‘the right to obtain a patent’ under the Patent Act and as such can be licensed. The patent law provides for a provisional statutory exclusive licence and a provisional statutory non-exclusive licence. On the other hand, the Utility Model Law and Design Law only provide for a provisional statutory non-exclusive licence.

A copyright can be created without any registration, thus unregistered copyrights can be licensed as registered copyrights can.

Are there particular requirements in your jurisdiction to take a security interest in intellectual property?

Any type of licensed right can be subject to a pledge or contract-based mortgage as collateral. These must be registered at the JPO to be effective and opposable to third parties.

Can a foreign owner or licensor of intellectual property institute proceedings against a third party for infringement in your jurisdiction without joining the licensee from your jurisdiction as a party to the proceedings? Can an intellectual property licensee in your jurisdiction institute proceedings against an infringer of the licensed intellectual property without the consent of the owner or licensor? Can the licensee be contractually prohibited from doing so?

Licensors and the licensee of a statutory exclusive licence can institute proceedings against a third party for infringement if their rights are still effective and existent in Japan. On the other hand, a contract-based exclusive licensee cannot institute proceedings against a third party except claiming damages against an infringing third party according to higher court precedents.

There is no direct rule, regulation or precedent regarding contractual prohibition from licensees instituting those proceedings, but it may be construed that a licensee’s capacity to institute such proceedings is based on the contract, namely, the intent of both parties hereof, and so licensees can be contractually prohibited from doing so.

Can a trademark or service mark licensee in your jurisdiction sub-license use of the mark to a third party? If so, does the right to sub-license exist statutorily or must it be granted contractually? If it exists statutorily, can the licensee validly waive its right to sub-license?

Yes. However, the licensee must be granted the right to do so by the consent of the licensor. No statutory grant of a sub-licence exists in Japan.

If intellectual property in your jurisdiction is jointly owned, is each co-owner free to deal with that intellectual property as it wishes without the consent of the other co-owners? Are co-owners of intellectual property rights able to change this position in a contract?

A co-owner of a patent, utility model, design, registered trademark or copyright may not assign its own share the intellectual property right to any third party or use it as security without the consent of all of the other co-owners. A co-owner of a patent, utility model, design, registered trademark or copyright may not license the intellectual property to any third party without the consent of all of the other co-owners. In addition, a co-owner of a copyright may not utilise the copyrighted work without the consent of all of the other co-owners.

Is your jurisdiction a ‘first to file’ or ‘first to invent’ jurisdiction? Can a foreign licensor license the use of an invention subject to a patent application but in respect of which the patent has not been issued in your jurisdiction?

Japan is a ‘first to file’ jurisdiction. However, a patent application that is pending at the JPO can be licensable, because a right to obtain a patent for such a patent application is protected under the Patent Law. An invention contained in such a patent application that is pending can also be considered technical know-how and the subject of a licence.

Can the following be protected by patents in your jurisdiction: software; business processes or methods; living organisms?

If they satisfy the general requirements for patentability (novelty, inventive step and capability of industrial application), all of these are patentable. However, software programs and business processes or methods need to show in their patent claims and specifications how they can be applied to a hardware resource. Living organisms, such as microorganisms and animal organisms, are patentable, but human organisms are not.

Is there specific legislation in your jurisdiction that governs trade secrets or know-how? If so, is there a legal definition of trade secrets or know-how? In either case, how are trade secrets and know-how treated by the courts?

The Unfair Competition Prevention Law prohibits some types of conduct related to unfair transactions, including obtaining, disclosing or using certain trade secrets in bad faith or with gross negligence. The definition of ‘trade secrets’ to be protected covers any confidential methods of manufacturing and sales and other technical or trade information useful for business activities.

Any person may make a request to a court clerk for the inspection of a case record, but to ensure that any trade secrets or know-how stated or recorded in the case record are not disclosed to any person except for the parties to the case, the persons allowed to inspect the case records may be limited by the courts.

Does the law allow a licensor to restrict disclosure or use of trade secrets and know-how by the licensee or third parties in your jurisdiction, both during and after the term of the licence agreement? Is there any distinction to be made with respect to improvements to which the licensee may have contributed?

A licensor can restrict disclosure or use of trade secrets and know-how even after the term of the licence agreement with a survival clause hereof. However, if a confidentiality agreement with a long term appears excessive when applied against the ‘former’ licensee, it can be illegal under the Antimonopoly Law.

With respect to improvements, the same applies, and in addition, if there is no reasonable reason for the licensor to restrict disclosure or use of the improvements by the licensee, it can also be illegal under the Antimonopoly Law.

What constitutes copyright in your jurisdiction and how can it be protected?

A copyrightable work is any thought or sentiment that is expressed in a creative way and falls within the literary, scientific, artistic or musical domain. The Copyright Law provides a detailed definition of copyrightable ‘works’, including software programs.

Law stated date

Give the date on which the information above is accurate.

20 January 2021