Japan drops plan to allow arbitration of SEP disputes, taking cue from US regulators

5 December 2017 6:48pm
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🔊 Podcast: Reversal of fortune: A worldwide win for innovators as patent policy pendulum swings back in their favor

A recent policy U-turn on standard-essential patents in the United States could set the tone for how intellectual property issues are handled by regulators and courts around the world. Listen in as Managing Editor for Asia, David Plott, MLex Chief Global Antitrust Correspondent Leah Nylen, Brussels-based Senior Correspondent Matthew Newman and Senior Correspondent Toko Sekiguchi from Tokyo weigh in on this fundamental rethink of IP rights and its impact around the world.

28 November 2017. By Toko Sekiguchi.

Just months after the Japanese government began rallying for the need for patent regulators to rule on disputes involving the licensing of standard-essential patents, the Japan Patent Office, or JPO, will be shelving the idea in favor of drafting guidelines to help determine licensing fees, MLex has learned.

One of the main reasons given for the unusually sharp change was what JPO Commissioner Naoko Munakata called a “fluctuation in the US thinking on SEPs.”

In a speech earlier this month, Makan Delrahim, the US Department of Justice’s new assistant attorney general for antitrust, called for “fresh thinking” as he expressed worry that “enforcers have strayed too far in the direction of accommodating the concerns of technology implementers who participate in standard-setting bodies”. This is a concern that the JPO is taking to heart.

MLex reported in April that the JPO, an extra-ministerial agency of the powerful Ministry of Economy, Trade and Industry, was taking the unconventional step of introducing administrative arbitration for disputes over SEPs. In the succeeding weeks, expanding the JPO’s authority to arbitrate was outlined in multiple key government economic policies as an important part of the national IP strategy.

However, the JPO is now drafting guidelines to clarify its position on SEP licensing instead, as criticism mounted at home and abroad on what patent officials themselves acknowledged was a “drastic move.”

One issue was how the threat of patent trolls and the problem of “hold-up” – where patent holders withhold licenses until excessive royalties are met – were overstated, MLex was told. The idea of administrative arbitration was introduced as a way to protect non-litigious Japanese companies as they navigate the age of the so-called Internet of Things, where cross-industrial patent negotiations are expected to give rise to licensing disputes.

As antitrust discussions in the US increasingly challenge the degree of patent hold-up, Japanese patent officials say they need to take into account policy changes favoring licensors in order to remain in line with global SEP trends for the sake of Japanese businesses.

The JPO’s endorsement of criticisms against patent hold-up runs counter to a recent statement from a former commissioner of the Japan Fair Trade Commission and current special advisor to the antitrust regulator, who took the traditional view of naming it as one of the key competition risks in SEPs.

JPO Commissioner Munakata also cited the difficulty of balancing a non-legally binding arbitration system with the courts and private sector IP arbitration centers.

The guidelines being drafted in place of the scrapped arbitration system – which could be released for public comment as early as January –  will not be legally binding but will offer the JPO’s thoughts on key issues, such as whether patent royalties should be based on the smallest saleable unit or the entire market value, MLex understands.

While patent regulators acknowledge that issues involving SEP licensing and injunctions are intertwined with antitrust policies, the JFTC will not take part in drafting the guidelines, in order to prevent it from becoming a “heavy-handed scheme providing the basis of antitrust regulation,” MLex was told.

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