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Hot issues shelved for future agenda in Japan's SEP negotiation guidelines
08 April 2022 05:15 by Sachiko Sakamaki
Amid patent disputes around the world for connected cars, Japan recently published negotiation guidelines between the holders and users of standard essential patents. While experts praised the project as the country's first attempt to bridge the conflict between two important sectors in Japan's auto and electronics manufacturing industries, they said some controversial issues were shelved as future agenda items.
The Ministry of Economy, Trade and Industry, or METI, disclosed last week guidelines for good-faith negotiations for standard essential patents, or SEPs, with a commitment to provide fair, reasonable and non-discriminatory, or Frand, terms, in response to disputes between different industries that have risen globally in recent years.
The urgency of SEP-negotiation rules has intensified, with Japan’s top automakers Toyota and Honda facing lawsuits in the US, and demand for royalty payments from patent pool Avanci last year.
Narrow but rational
Toshifumi Futamata, visiting researcher at the Institute for Future Initiatives, the University of Tokyo, told MLex that the final outcome was reasonable, after initial fears that implementers’ interests might be overemphasized.
“If you carefully read the footnotes, the final guidelines are rational and presentable to the world, although the scope of application is somewhat limited,” said Futamata, who also chairs an independent research group called the SEP Research Group Japan.
The guidelines apply to licensing negotiations of SEPs subject to Frand commitments, and to two-party negotiations between a SEP holder and implementer, meaning that non-SEP licenses and negotiations with patent pools, such as Avanci, aren’t included.
While it’s commendable that METI published a “timely” guidance when the EU and the US are also working on rules over SEPs, using guidelines with only superficial understanding could backfire, he cautioned, as it could face counterarguments based on existing patent laws and rules.
Autos vs electronics
MLex reported last year that the Japanese auto industry and the electronics, information industry had sharply conflicting views over SEPs, similar to the battle between Daimler and Nokia.
The final version of METI guidelines seems fairly well balanced, with a slight bent in favor of the implementers, by allowing the SEP users to talk with their suppliers in licensing negotiations, which may benefit the auto and auto parts makers.
However, MLex was told by sources that the auto industry was disappointed that it wasn’t made clear under which condition a licensor’s injunction would be prohibited, while the electronics industry was relieved that the licensors weren’t required to disclose more detailed information.
Kentaro Hirayama, who took part in the METI study group, told MLex that some key items were left unaddressed in the guidelines, including issues specific to negotiations with patent pools and antitrust implications of joint licensing negotiations. In-depth discussions about these issues will likely be held in the future, he added.
“The guidelines have shown Japan’s stance over this globally important topic and have taken into consideration Japanese companies’ greatest common divisor, but METI will need to continue its study to address remaining key issues,” said Hirayama, an antitrust lawyer and associate law professor at Kyushu University.
Serina Matsuda, an antitrust lawyer with expertise in intellectual property, told MLex the METI guidelines are a compilation of globally-accepted practices, but are also meaningful as Japan’s first attempt to build common ground between licensors and licensees, given Japan’s dearth of legal precedence in recent years.
Hot topics such as which party of a value chain should become a licensee — automaker or component maker— should be addressed in the future, she said.
She also said that Japan should consider ways to give incentives for companies to develop more globally important SEPS and to exercise their patent rights.
In the past two decades, Japanese technology and telecom companies experienced a bitter defeat in SEP battles with US chipmaker Qualcomm. In 2019, the Japanese competition enforcer nullified its corrective order against the patent giant, after a decade-long appeal procedure.
Now, in 5G-related SEP holdings, Japanese companies have fallen behind Korean and Chinese rivals. China’s patent policies and court practices to issue anti-suit injunctions are also threatening Japanese licensors.
“Once a company loses its cutting edge and a market share, it’s very difficult to recover. It’s important for the government to support SEP holders, so they will be motivated to continue to innovate,” said Matsuda, a partner at Abe, Ikubo & Katayama law firm.
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