Japan’s antitrust guidelines on intellectual property rights start to permeate corporate Japan

30 June 2016. By Sachiko Sakamaki.

Five months after Japan’s competition authority announced new antitrust guidelines for intellectual property rights, companies have begun to digest their implications for potential future IPR disputes. While a new patent-related antitrust violation that would test the new guidelines has not yet surfaced, antitrust attorneys are watching to see how the thinking behind the guidelines might play out in an ongoing administrative hearing between US chipmaker Qualcomm and the regulator.

The focus on the guidelines, released by the Japan Fair Trade Commission, or JFTC, on Jan. 21, comes at a time when Japanese companies find themselves trying to balance a situation where they are, on the one hand, frequent licensees of standard-essential patents, or SEPS, held by Western companies, and are also, on the other hand, increasingly asserting SEPs to companies in emerging markets, especially in Asia.

Among the key points in the JFTC’s IPR guidelines is that holders of SEPs who seek an injunction against a willing licensee despite its expressed commitment to share their essential patents with others on fair, reasonable and non-discriminatory, or Frand, terms may be found guilty of violating Japan’s Antimonopoly Act. The guidelines also state that Frand terms promote innovation, research and investment, bringing positive benefits to competition and the economy.

Louse C. Stoupe, a partner at Morrison Foerster in Tokyo, says Japan is now at the forefront in setting antitrust guidelines with regard to Frand principles. The JFTC’s guidelines are in line with the European Court of Justice’s stance on the issue, which the court made clear last year, while in the US, a Frand violation in itself is not necessarily an antitrust violation. Meanwhile, in China and South Korea — where IT companies are increasingly tangling with Western SEP holders over IP licensing issues — regulators have also indicated their preference to restrict injunctions sought by SEP holders against willing licensees.

“Japan has been a country to watch for developing Frand law, including these guidelines,” Stoupe told MLex in an interview. “The impact on practical business is quite significant. And the issue is, [that] nobody has fully tested the limits.” She added that her firm is receiving increasing numbers of queries from companies on how to develop their patent programs and terms of negotiations.

One way to test the limits of the JFTC’s guidelines is to see how they are applied to a new patent dispute. But so far, no such dispute has yet emerged.

“Japanese companies usually avoid litigation, so we haven’t yet seen the effects [of the guidelines],” said Kazuhiro Ajisaka, a patent attorney and lawyer at Soei Patent & Law Firm. According to data cited in the firm’s internal newsletter, 552 patent-related civil disputes were filed in Japan in 2014 compared to 5,010 in the US and 9,648 in China.

One case that antitrust lawyers are watching closely for clues to the possible implications of the JFTC’s guidelines is a challenge by Qualcomm to a cease-and-desist order issued by the JFTC in 2009. The JFTC found Qualcomm’s licensing agreements with Japanese mobile phone manufacturers to be a violation of the Antimonopoly Law Act, because they included non-assertive clauses that barred the manufacturers from claiming royalty on the relevant patents they owned. Administrative proceedings are continuing at the JFTC over the patents related to 3G technology.

Prior to the publication in January of the JFTC’s guidelines, patent attorneys and lawyers, in seeking to determine what is allowed or not in patent practices, referred for guidance to a decision in May 2014 of the Grand Panel of Japan’s Intellectual Property High Court.

In this dispute between Apple and Samsung over patents used for Apple’s iPhone 4, the IP High Court sided with Apple, ruling that Samsung, which has made Frand commitments, could not seek an injunction, citing this as an abuse of its rights. The court also granted Samsung’s claim that its patent was used for the iPhone 4 and awarded the company 9.95 million yen ($97,000) in damages, an amount that didn’t exceed the amount of patent royalties.

The JFTC guidelines add a new legal basis and a new guide on this specific issue in patent disputes, patent and antitrust attorneys say.

While the IP High Court decision used the abuse of rights as a ground to find an injunction illegal, the JFTC guidelines show that the Antimonopoly Act can be applied as well, said Ikumi Sato at Yabuki Law Offices, who wrote an article on the issue in the monthly magazine Kosei Torihiki [Fair Trade, in English].

Kei Iida, a patent attorney and lawyer at Nakamura & Partners, said that the JFTC’s guidelines also clarify the issue of what happens when SEPs are sold to new owners — an important issue, given that companies such as Google, Microsoft and Chinese mobile phone maker Xiaomi have in recent years bought telecom-related IP assets from other companies. While the IP High Court’s Grand Panel decision didn’t clarify this issue, the JFTC’s guidelines stipulate that licensees are allowed to use a Frand defense against a new SEP owner — that it cannot issue an injunction and cannot demand damages higher than the amount of royalties.

“This is one step forward and the biggest impact of the guidelines,” Iida said, adding that he and other patent attorneys are now practicing based on these aspects of the JFTC’s guidelines.

“This is an area where the JFTC guidelines were ahead of the EU and the rest of the world,” said Tsuyoshi Ikeda, an antitrust and IP lawyer at Mori Hamada & Matsumoto.

However, Ikeda said it’s up to Japanese companies how to use the JFTC’s guidelines. Some companies have concerns about unfavorable licensing terms in contracts with SEP holders, but are often reluctant to bring the issues to the JFTC.

Iida, the patent attorney and lawyer, said that Japanese companies are under demands from SEP owners in Western countries, while they themselves want to exercise their SEP rights to South Korean, Chinese and Taiwanese competitors. “Japan is in a delicate position,” he said.

	Eliot Gao