In Japan, the act regulating antitrust is the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade2 (the Japanese Antimonopoly Act (JAA)). The purpose of the JAA is 'to promote fair and free competition . . . by prohibiting private monopolisation, unreasonable restraint of trade and unfair trade practices, preventing excessive concentration of economic power and eliminating unreasonable restraints on production, sale, price, technology etc.'3 For that purpose, the JAA provides legal remedies such as surcharges, injunctions and damages. The acts regulating patents, copyright and trademarks are the Patent Act, Copyright Act and Trademark Act, respectively. The purpose of the intellectual property laws is to protect those intellectual properties by giving a right holder the exclusive right to control such rights. For that purpose, those acts also provide legal remedies such as injunctions and damages. From the perspectives of those purposes, the JAA and the intellectual property laws might conflict. Accordingly, the tension between the JAA and intellectual property should be paid attention to and be addressed. In this respect, the JAA recognises such potential tension between the JAA and the exclusivity of the intellectual property under Article 21.
Article 21 of the JAA provides: 'The provisions of this Act do not apply to acts found to constitute an exercise of rights under the Copyright Act, Patent Act, Utility Model Act and Trademark Act.' It is generally interpreted that this does not mean that the exercises of the intellectual properties are always released from the antitrust regulations. However, the JAA does not provide details of how to draw a line between acts to be found as exercises of the rights and acts not to be found as exercises of the rights. Also, unfortunately, case law regarding Article 21 is extremely limited.
Instead, the Japanese Fair Trade Commission (JFTC) provides the Guidelines for the Use of Intellectual Property under the Antimonopoly Act (the Guidelines for Intellectual Property) to clarify how to handle such tensions between antitrust concerns and the exclusivity of the intellectual property. As to Article 21 of the JAA, the Guidelines for Intellectual Property provide as follows: 'This means that the Antimonopoly Act is applicable to restrictions pertaining to the use of technology that is essentially not considered to be the exercise of rights.'4 Thus, the practical issues are whether exercises of the rights may, under certain circumstances, constitute private monopolisation,5 unreasonable restriction of trade6 or unfair trade practice, which is not considered to be the exercise of rights.7
II YEAR IN REVIEW
As mentioned above, in 2005, the JFTC published the Guidelines for Intellectual Property8 to articulate the tension between the JAA and intellectual property laws. The Guidelines were partially amended to clarify the JFTC's views on the relationship between a fair, reasonable and non-discriminatory (FRAND) declaration and possible limitations on the exercises of patents. This amendment could be thought to reflect situations where, as illustrated by Apple Japan Godo Kaisha v. Samsung Electronics Co, Ltd,9 standard-essential patent (SEP) holders increasingly exercise their exclusive rights against potential licensees, and the features of SEPs have posed antitrust concerns as well as in the United States and the European Union. In particular, as discussed in Section III, the Special Division of the Intellectual Property High Court handed down a decision on limitations on the exercise of an SEP including a brief reference to antitrust concern.
The JFTC published a draft amendment to the Guidelines for Intellectual Property on 8 July 2015 and requested public comments on it by 6 August 2015. Based on feedback from the public, the JFTC finally published the amendment to the Guidelines for Intellectual Property on 21 January 2016.
Under the amendment to the Guidelines for Intellectual Property, it is clearly recognised that, under specific circumstances, an exercise of a patent may be restricted as an act to inhibit the use of technology, which may constitute private monopolisation10 or unfair trade practices11 under the JAA.
The JFTC published the 'Guide to Licensing Negotiations Involving Standard Essential Patents'12 on 5 June 2018 to provide the information on case laws arising from SEPs in various jurisdictions and to promote reasonable negotiations between relevant parties. Further, in October 2018, International Arbitration Center in Tokyo (IACT), an arbitration centre that focuses on SEP-related disputes was established. It is expected that the IACT may provide a new venue where any SEP dispute could be addressed in a cost-effective manner.13
i Private monopolisation
In the event an SEP holder who commits to a FRAND declaration under an intellectual property policy to be set by a standard-setting organisation refuses to license the patent or files a patent suit against 'a willing licensee', such action may constitute an action to exclude a third party's business activities under the JAA because it may cause difficulties in research, development, manufacture or sales of products adopting such standard. In this case, it does not matter whether such action is taken by the party who committed to a FRAND declaration, an assignee or an agent consigned to handle such essential patent with a FRAND declaration. Whether a third party is a willing licensee or not shall be respectively determined case by case based upon situations between the parties, including, but not limited to, a showing of actual infringement or infringement manner of an SEP, communications between parties such as a proposal of licence terms and explanation why such terms are necessary and a prompt reasonable counterproposal to it, and whether they are commercially acting in good faith or not.
Also, the Guidelines for Intellectual Property make it clear that the fact a third-party disputes validity, essentiality or non-infringement of an SEP does not always disqualify that party from being a willing licensee to the extent that it is commercially acting in good faith in licence negotiations.
ii Unfair trade practices
Further, even if the action described above by an SEP holder does not constitute private monopolisation owing to failure to substantially restrict competition in the market of the product adopting such standard, such action still may constitute unfair trade practice for its tendency to impede fair competition.14 In this case, the interpretation of a willing licensee is handled in the same manner as discussed in subsection i.
iii Recent case
After the amendment to the Guidelines for Intellectual Property, the JFTC investigated conduct by One-Blue, LLC, which offers licences of Blu-ray disc (BD) SEPs based on product categories such as recordable BDs, BD players and BD recorders (the SEP licences).15 Since around 2012, One-Blue had been engaged in negotiations regarding licence of the BD SEPs for recordable BDs with Imation Corporation Japan (Imation Japan), which is located in Japan and engages in the manufacture and sales of recordable BDs, and its US parent company (Imation US). While Imation Japan and Imation US expressed the intention to One-Blue that they were willing to pay a fair and reasonable licence fee, requesting grounds for the proposed licence fee, One-Blue did not respond to the request and, finally, parties were not able to agree terms and conditions for the SEP licences. Imation Japan then filed a lawsuit in Japan because, around June 2013, One-Blue sent notice to Imation Japan's major customers, informing them that Imation Japan's product infringed the patents held by One-Blue and thus its customers should stop making sales of Imation Japan's products or risk injunction orders against them.
On 18 November 2016,16 the JFTC found that Imation Japan was willing to take a licence of the BD SEP on the FRAND terms, that One-Blue unjustly interfered with the recordable BD transaction between another entity who was in a domestic competitive relationship that fell under Paragraph 14 of the Designation of Unfair Trade Practices and that One-Blue was in violation of Article 19 of the Antimonopoly Act. However, at that point, One-Blue had already stopped and corrected this conduct and, accordingly, the JFTC did not take any further action against One-Blue, considering the situation one where One-Blue is unlikely to repeat such illegal conduct.
Also, the JFTC clearly mentions that:
it will continue to closely watch in the future years competition situation in the field of technology and products relating to intellectual property from the viewpoint of promoting fair and free competition in the use of intellectual property. Moreover, the JFTC will strictly address any problematical issue occurring in relation to the AMA in connection with the use of intellectual property by entities or trade associations.
Taking the situation above, it could be assumed that the JFTC will play a role in balancing interests of SEP holders and prospective licensees based upon the Guidelines for Intellectual Property.
III LICENSING AND ANTITRUST
In the Guidelines for Intellectual Property, the JFTC makes it clear that, under certain circumstances, the exercise of the intellectual property may not contravene the antitrust regulations under Article 21 of the JAA. The Guidelines for Intellectual Property provide guidance on various situations with respect to intellectual property. Specifically, the Guidelines state:
An act by the right holder to a technology to block other parties from using its technology or to limit the scope of use may seem, on its face, to be an exercise of rights. The provisions of the Antimonopoly Act apply to this case even if it cannot be recognised substantially as an exercise of a right. In other words, any act that may seem to be an exercise of a right cannot be 'recognisable as the exercise of the rights' provided for in the aforesaid Article 21, provided that it is found to deviate from or run counter to the intent and objectives of the intellectual property systems, which are, namely, to motivate entrepreneurs to actualise their creative efforts and make use of technology, in view of the intent and manner of the act and its degree of impact on competition. The Antimonopoly Act is applicable to this kind of act.17
The Guidelines further analyse such boundaries of an exercise of a right, as well as other antitrust issues, from the perspectives of (1) substantial restraint of competition, (2) unreasonable restraint of trade, and (3) unfair trade practice.
i Anticompetitive restraints
In connection with anticompetitive restraints in licensing, the Guidelines for Intellectual Property confirm that limiting the scope of the use of technology may not be considered to be the exercise of rights, which is out of scope of the exception to the antitrust regulations under Article 21 of the JAA, and provides guidance on illustrative cases as follows:18
- function-specific licensing: in the event a licensor licenses a patent only to produce, use, assign or export, it does not, in principle, constitute an unfair trade practice;
- limitation on the licence period: in the event a licensor sets the period for the use of the licensed technology, it does not, in principle, constitute an unfair trade practice;
- limitation on the field in which the technology may be used: limiting the scope of the licence to the manufacturing of a specific product does not constitute an unfair trade practice;
- limiting the area in which manufacturing is allowed: in the event a licensor limits the area in which licensees may use the technology to manufacture products it does not, in principle, constitute an unfair trade practice;
- limiting the quantity of products: in the event a licensor imposes a limit on the minimum quantity of products manufactured using the technology or the minimum number of times the technology is used, it does not, in principle, constitute an unfair trade practice unless such restriction excludes the use of other technologies. On the contrary, where a maximum quantity of products or numbers of the uses of the technology is set, such restriction may constitute an unfair trade practice to the extent that the restriction attempts to impede fair competition;19
- restrictions pertaining to export: in the event a licensor prohibits licensees from exporting the product incorporating the licensed technology, it does not principally constitute an unfair trade practice;
- sublicensing: in the event a licensor limits parties to which licensees may grant a sublicence, it does not principally constitute an unfair trade practice;
- restrictions on raw materials and components: in the event a licensor imposes limits on licensees as to the quality or suppliers of raw materials, components and other items needed to supply the product using the licensed technology to the extent that such limits could be considered necessary to ensure the functions and effect of the technology, to maintain safety and to prevent the disclosure of confidential information, it may constitute an unfair trade practice if the licensor exceeds the necessary extent from the above viewpoint and may impede fair competition;20
- restrictions on selling and resale prices: in the event a licensor imposes a restriction on licensees on the selling or resale prices of products incorporating licensed technology, it certainly reduces competition. Accordingly, it is, in principle, recognised as an unfair trade practice;21
- restrictions on selling and resale prices: in the event a licensor imposes a restriction on licensees on the selling or resale prices of products incorporating licensed technology, it may, in principle, constitute an unfair trade practice;22
- restriction on transaction with competitors: in the event a licensor imposes a restriction on licensees in relation to the manufacture or selling of any product that competes with the licensor's products or the acquisition of a licence for a competing technology from a competitor of the licensor, such a restriction may constitute an unfair trade practice if it has the potential to impede fair competition with the exception that such restriction would be necessary to protect the licensed properties or know-how;23
- imposition of the best efforts obligation: in the event a licensor imposes the obligation to make the best efforts to use the technology, in principle, it may not constitute an unfair trade practice because it would not have an adverse effect on the licensee's business;
- imposition of confidential obligation of know-how during the term of and after termination of contract;
- no-contest obligation: in the event a licensor imposes a restriction on the right to challenge the validity of licensed patents, it may not constitute unfair trade practice because such prohibition may promote patent licensing except for in extreme cases where such prohibitions may impede fair competition;24
- unilateral termination provisions: it is an unfair trade practice to set forth termination terms that are unilaterally disadvantageous to licensees in a licensing agreement if the provision is made in combination with any other restrictive activities that infringe the JAA to ensure the effectiveness of the restrictions (e.g., terms that authorise the licensor to terminate the licensing agreement either in a unilateral manner or without allowing for an appropriate grace period);25
- establishment of royalties without relation to the use of technology: because of such royalties, licensees cannot use any competing product or technology, leading to an unfair trade practice if it tends to impede fair competition;26
- restrictions after the extinction of rights: this generally impedes the free use of technology and may constitute an unfair trade practice if it tends to impede fair competition;27
- package licensing: such licence may constitute an unfair trade practice if a technology other than the technology that licensees wish to use is not necessary for or does not relate to the effective implementation of the main technology;28
- addition of functions to technology: if a technology company that provides platform services in which any apps can operate, and for which many different app technology companies have been developing apps, introduces an updated platform incorporating functions that only its own apps can run on, this may constitute an unfair trade practice to the extent that licensees are prevented from using competitors' apps;29
- obligations of the non-assertion of rights: if a licensor imposes on licensees an obligation to refrain from exercising, in whole or in part, the rights owned by them against the licensor or any third party designated by the licensor, this may constitute an unfair trade practice if it tends to impede fair competition except for where licensees are merely obliged to grant a non-exclusive licence for improved technology developed by them;30,31
- restrictions on research and development activities: restrictions by the licensor relating to free research and development (R&D) activities on the part of licensees (e.g., prohibition of licensees from independently or jointly working with any third party to conduct R&D activities concerning the licensed technology or any technology that competes with it) may constitute an unfair trade practice as it has the tendency to impede fair competition;32
- obligations to assign improved technology or to grant exclusive licences for improved technology: if a licensor imposes on licensees an obligation to assign to the licensor, or any third party designated by the licensor, the rights for improved technology developed by them, it may constitute an unfair trade practice;33
- obligations to grant non-exclusive licenses for improved technology: if a licensor imposes on licensees an obligation to grant the licensor non-exclusive licences for improved technology attained by licensees, it may not constitute an unfair trade practice, in principle, as long as the licensees may still freely use their own improved technology because such obligation has little impact on licensees' business activities and is not recognised as being likely to discourage the licensees from undertaking R&D;34 and
- obligations to report knowledge and experience obtained by the implementation of technologies: imposing on licensees an obligation to notify the licensor of knowledge or experience they obtain in the process of using the licensed technology may not constitute an unfair trade practice because it may enhance the incentive for the licensor to offer licences and may not reduce the motivation of licensees to undertake R&D.
ii Refusals to license
The freedom to refuse to license is an essential aspect of the exclusive rights to the intellectual property. However, under certain circumstances, the refusal to license may pose antitrust violation concerns.
The Guidelines for Intellectual Property state that private monopolisation may be considered a substantial restraint of competition where: (1) right holders participating in a patent poll jointly refuse to license a technology to any third party that is not member of the patent pool;35 (2) businesses that have obtained promising patents used by many businesses in a market refuse to license such technology to other businesses;36 (3) businesses that have collected and concentrated technologies that may be used by competitors refuse to license those technologies to other competitors;37 and (4) a right holder refuses to license a patent that was adopted as a standard technology in an fraudulent manner to competitors.38
The Guidelines for Intellectual Property also state that refusal to license may constitute a violation of the JAA from the viewpoint of unreasonable restraint of trade in cases where: (1) a patent pool that is essential to a certain product is formed and then members of the pool refuse to license such technologies to their competitors through the patent pool without any reasonable justification;39 or (2) businesses that involve cross-licensing refuse to license their technologies to competitors to the extent that the market share of products adopting cross-licensed technologies is high.40
Moreover, the Guidelines for Intellectual Property state that refusal to license may constitute a violation of the JAA from the perspective of unfair trade practices in cases where: (1) a licensor refuses to license its technologies to other businesses after the technologies were initially adopted by them and then it became very hard for them to replace them with other technologies;41 (2) a member of a technology standard setting organisation refuses to license its technologies to other businesses after its technology was adopted as the standard subject to its commitment to license them on preferable terms;42 or (3) a licensor discriminately refuses to license its technologies to other businesses to the extent that the technologies have provided a foundation for business activities in a certain product market and many businesses have done business in that product market.43 To constitute unfair trade practices, those activities must have a tendency to impede fair competition.
iii Unfair and discriminatory licensing
Discriminatory licensing itself may constitute an unfair trade practice to the extent that such licensing practice has a tendency to impede fair competition, regardless of whether other aspects of the licence would pose any antitrust concerns. The Guidelines for Intellectual Property clearly state that 'Restrictive conduct of the kinds . . . are also examined not only from the perspective of the impacts that they themselves have on competition but also from the perspective of the influence of their discriminatory aspect, if any, on competition'.44
iv Patent pooling
The JFTC promulgated the Guidelines on Standardisation and Patent Pool Arrangements (the Guidelines on Patent Pools) in 2005 (amended in 2007).45 Before it, the JFTC had promulgated the 'Guidelines on patent and know-how licence agreements' (1999) and patent pools were also covered by the former Guidelines. However, considering that situations involving patent pools have received increasing attention since the former Guidelines were published, the JFTC specifically promulgated the Guidelines on Patent Pools. The Guidelines define a patent pool as an organisation to which multiple holders of patents and other rights delegate the authority to grant licences.46
Formation of patent pool
Where patents included in a standard are essential to the standard, the formation of the patent pool would not pose a violation of the JAA. However, where non-essential patents are included in a patent portfolio with essential patents, competitive patents that are out of the standard may have difficulty competing with the patent included in the standard, thereby resulting in restraint of competition. In such case, the formation of the patent pool may not cause antitrust concerns to the extent that potential licensees could take the licence they actually need separately from the patent pool itself.47 In this respect, the Guidelines on Patent Pools specifically present two illustrative examples: (1) 'When a number of patents on interchangeable technologies are pooled and licensed with fixed conditions, because the patents on these technologies are competing based on their licensing conditions, competition among these interchangeable technologies is restricted;' and (2) 'When there are a number of patents on interchangeable technologies and some of them are pooled and licensed as a package with essential patents, the interchangeable technologies outside of the pool are hardly adopted by licensees of the pool and are excluded from the technology market.'48
Joining a patent pool
It is reasonable to restrict participants in a patent pool because such restriction would enable the patent pool to work more effectively and produce pro-competitive effects. Accordingly, restriction on participants does not pose any antitrust concerns. Also, to control the patent pool effectively, it is, in principle, reasonable to impose internal restrictions on participants in the patent pool (e.g., an internal rule to distribute loyalties) with the exception of cases where participants are prohibited from licensing their own patent separately from the patent pool.49
Licensing through a patent pool
In practice, a patent pool is used to grant licences effectively. However, under certain circumstances, licensing through a patent pool may pose antitrust concerns. The Guidelines on Patent Pools refer to antitrust concerns in the following five categories:
- differentiating licence terms that reflect the natures of each deal (e.g., quantity of products, licensed areas), in principle, does not constitute a violation of the JAA; however, where a right holder imposes a much higher royalty on a licensee or refuses to license a technology to a specific licensee without any reasonable justification, may pose antitrust concerns;
- restriction on R&D may pose antitrust concerns where a patent pool licence restricts a licensee's own R&D or the R&D of third parties and, as a result, such restriction may interfere with the potential development of interchangeable technologies with the pooled ones;
- grant-back of any improvement of the pooled technologies may not impose antitrust concerns to the extent that improvement is a constituent of an essential patent, the grant-back is non-exclusive and the fair distribution of the royalty of the pooled patents to the licensee is warranted;
- a non-contest obligation imposed on a licensee may pose antitrust concerns where a patent pool licence provides that the pool participants shall jointly terminate the licence if a licensee challenges the validity of licensed patents; and
- a restriction on the exertion of whole or a part of patents against other licensees of pooled patents may pose antitrust concerns except in very limited cases where such patents to be obtained by such licensee are constituents essential to the pooled patents.
v Software licensing
The Guidelines for Intellectual Property are applied to software licensing but do not explicitly mention this. In the past, it was unclear whether, under the Copyright Act of Japan, the distribution right to computer software is exhausted once it is sold to consumers in the market. When a copyright holder of certain game software, Sony Computer Entertainment Inc (SEC), claimed that it held the exclusive right to control repurchasing of the used game software, SEC prohibited retailers from repurchasing and reselling the used game software. The JFTC held50 that SEC's imposed restriction constituted an unfair trade practice defined in Paragraph 13 of the General Designation. In the area of copyright, the Supreme Court of Japan held that the right to distribute a copyrighted work is exhausted once it is lawfully sold in line with the result of the JFTC's ruling. This is an illustrative case where the Japanese court held that an action taken by a copyright holder was not found to be an exercise of the copyright. The Guidelines for Intellectual Property state that, owing to the exhaustion of intellectual property, after a product protected by intellectual property was lawfully put on the market by a right holder, restrictions imposed by the right holder would be handled in the same way in the case of products without intellectual property from the antitrust perspective.
vi Trademark licensing
Trademark licensing is also covered by Article 21 of the JAA and the Guidelines for Intellectual Property. At the time of writing, no particular topics warrant discussion.
IV STANDARD-ESSENTIAL PATENTS
In Japan, holding an SEP has not been found to directly yield dominance in those patent-related markets. In the JFTC's proposed amendment to the Guidelines for Intellectual Property in 2015, it seemed to have taken the position that holding an SEP would, in principle, lead to dominance in that technology-related market. The proposed draft mentions that the refusal to license SEPs to, or file an injunction against, a willing licensee after FRAND declaration constitutes an action to exclude other business activities because such actions would make it harder to conduct research on, develop, manufacture and sell products adopting a standard that has been widely accepted. However, the JFTC's initial view was heavily criticised by the public comments on the draft, and the JFTC finally changed its position, with the amendment to the Guidelines for Intellectual Property clearly stating that the refusal to license SEPs to, or file an injunction against, a willing licensee after FRAND declaration 'may' constitute an action to exclude other business activities.
However, dominance is not always a deciding factor under the Japanese antitrust analysis. If an SEP does not mean dominance in a certain market, the patent holder is regulated by the JAA from the unfair trade practice perspective. As discussed above, without dominance (private monopolisation), there is a possibility that the exercise of the right constitutes an unfair trade practice subject to a tendency to impede fair competition.
The two court decisions handed down by the Intellectual High Court, Special Division (the IP High Court) in Apple Japan Godo Kaisha v. Samsung Electronics Co, Ltd have currently provided a basic legal framework regarding FRAND declaration and limitations on exercises of an SEP.
Actions against a willing licensee
In the event an SEP holder commits to a FRAND declaration, the patent holder is not entitled to an injunction against a willing licensee, regardless of any violation of the obligations to negotiate in good faith (stated below). The underlying idea is that the right holder, by committing to a FRAND declaration, has accepted that its patent will be widely used without injunction relief in exchange for being a part of a standard-essential technology. The request for injunction by a right holder will be held to be abuse of the right under Article 1 of the Civil Code.51
Actions against an unwilling licensee
On the contrary, the IP High Court states that an SEP holder may request an injunction against an unwilling licensee regardless of FRAND declaration.
iii Licensing under FRAND terms
Under Japanese law, a commitment to FRAND declaration does not definitively constitute a licence agreement with a willing licensee. Some commentators argue that a commitment to FRAND terms may constitute a contract for the benefit of third parties under Article 537 of the Civil Code. The IP High Court has not, however, taken such position. It states that, owing to FRAND declaration, the parties shall have obligations to negotiate in good faith to enter into a licence agreement, in addition to licensing obligations defined by the FRAND declaration to be provided by standard-setting organisations.
iv Anticompetitive or exclusionary royalties
Under the IP High Court framework, the request for damages or payment of royalties, either FRAND rate royalties or the normal rate, shall be handled as below.
Damages against a willing licensee
An SEP holder is entitled to damages calculated by FRAND rate even if that patent holder violates an obligation to negotiate in good faith. The underlying idea is that the patent holder should be at least entitled to FRAND rate royalties in the event the patent holder is not entitled to an injunction as abuse of right. Provided, however, that the IP High Court held that in the event the right holder's actions are found to be extremely unfair 'under specific circumstances', no damage remedy is available. While the IP High Court does not specifically explain what circumstances would constitute extremely unfair practice and whether this notion has something to do with an unfair trade practice under the JAA, it would be assumed that the patent holder's fraudulent seeking for anticompetitive or exclusionary royalties could lead to such denial of damage remedy.
Damages against an unwilling licensee
Where it is clear that a potential licensee does not intend to take a licence from an SEP holder, the patent holder is entitled to damages to be calculated at the commercially normal royalty rate, which is usually higher than the FRAND royalty rate.
V INTELLECTUAL PROPERTY AND MERGERS
i Transfer of IP rights constituting a merger
Neither the Guidelines for Intellectual Property nor the Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination (Guidelines for Review of Business Combination)52 provide any specific guidance on intellectual property and mergers. Part II(3) of the Guidelines for Intellectual Property, however, provides general guidance on the method of analysing the effects in reducing competition as follows:
Whether or not restrictions pertaining to the use of technology reduces competition in the market is determined by fully considering the nature of the restrictions, how they are imposed, the use of the technology in the business activity and its influence on it, whether or not the parties pertaining to the restrictions are competitors in the market (Note 7), their market positions (such as market share (Note 8) and rank), the overall competitive conditions that prevail in the markets (such as the number of companies competing with the parties concerned, the degree of market concentration, the characteristics and the degree of differentiation of the products involved, distribution channels and difficulty in entering the market), whether or not there are any reasonable grounds for imposing the restrictions, as well as the effects on incentives of research, development and licensing.
Further, Part II(4) of the Guidelines for Intellectual Property provides illustrative cases having major impacts on competitions as follows.
Acts between competitors
If restrictions pertaining to the use of technology are imposed among competitors, they are more likely to result in evasion of competition among them or more likely to be used to exclude other competitors than restrictions imposed among non-competitors. This type of conduct is thought to have a relatively strong influence on competition.
Restrictions pertaining to the use of technology are likely to have a greater effect on competition when the technology is influential than when it is not. Generally whether or not particular technology is influential is determined, not by the fact that the technology is deemed to be superior, but through a comprehensive consideration of how the technology is used in the product market, whether or not it is difficult to develop any alternative technology or difficult to switch to any technical substitute and the position of the right-holder to the technology in the technology or product market. For instance, if any technology becomes a de facto standard in the technology or product market, it is likely to be determined as influential.
In addition, Part II(5) of the Guidelines for Intellectual Property provides illustrative cases having minor impacts on competitions as follows:
In principle, restrictions pertaining to the use of technology are deemed to have a minor effect in reducing competition when the entrepreneurs using the technology subject to the restrictions in the business activity have a share in the product market (hereinafter referred to as 'product share' in this section) of 20% or less in total. This is not applicable however to conduct of restricting selling prices, sales quantity, market share, sales territories or customers for the product incorporating the technology (Note 9) or to the conduct of restricting research and development activities or obliging entrepreneurs to assign rights or grant exclusive licences for improved technology. The impact of a particular restriction on competition in the technology market is also deemed to have minor effect in reducing competition if the product share is in principle 20% or less in total. Where the product share is unavailable or the product share is found to be not appropriate to determine the effect on the technology market, the effect in reducing competition is considered to be minor provided that there are at least four parties holding rights to alternative technologies available with no outstanding detriment to business activities.
The Guidelines above are not mentioned in the context of mergers and acquisitions but the guidance on the analysis of effects in reducing competition and illustrative cases above should be consulted and would be applicable.
ii Remedies involving divestitures of intellectual property
As mentioned above, the JAA and the Guidelines for Intellectual Property do not provide specific provisions regarding divestitures of intellectual property. Generally, the antitrust remedies for mergers are to be given in accordance with the JAA and the Guidelines for Review of Business Combination. Intellectual property would be considered in interpreting 'combined business' or 'competing product' under the Guidelines for Review of Business Combination.
VI OTHER ABUSES
i Sham or vexatious IP litigation
Article 32 of the Constitution of Japan provides that no person shall be denied the right of access to the courts. In practice, under extremely limited situations, filing a lawsuit would constitute a tort or claims based upon on-the-face right would be rejected as abuse of right. There have been no cases of sham or vexatious IP litigation in Japan thus far.
ii Misuse of the patent process
Unlike other jurisdictions, misuse of the patent process has not yet been recognised clearly in Japan, and therefore no Supreme Court or IP High Court cases are available at the time of writing.
VII OUTLOOK AND CONCLUSIONS
As stated above, in 2014, the IP High Court Special Division articulated a legal framework around an SEP and in 2016, the JFTC amended the Guidelines for Intellectual Property to cover the limitations on the exercise of an SEP from the perspective of antitrust law. In Japan, the JAA still does not seem to drastically affect the area of intellectual property law. However, after the IP High Court decision in Apple Japan Godo Kaisha v. Samsung Electronics Co, Ltd, the situation may be changing as the One-Blue case mentioned above illustrated. In March 2018, the Japan Patent Office published a guideline instructing SEP licence negotiations.53 The Japan Patent Office is willing to be flexible regarding the factors to be considered for negotiations to be deemed reasonable and is supportive of the promotion of reasonable negotiations. Further, the IACT was created as a new venue dedicated to SEP disputes. The future landscape of SEP negotiations in Japan will be shaped not only by the courts but also by the Japan Patent Office and the newly created IACT.
1 Tomoki Ishiara is counsel at Sidley Austin Nishikawa Foreign Law Joint Enterprise.
3 Article 1 of the JAA.
4 Part 2(1) of the Guidelines for Intellectual Property. English translation is available at www.japaneselawtranslation.go.jp/common/data/notice/h19g00100je.3.0.htm.
5 Article 2(5) of the JAA.
6 Article 2(6) of the JAA.
7 Article 2(9) of the JAA.
8 The first version was published on 28 September 2005.
9 Judgment rendered on 16 May 2014, 2013 (Ne) 10043; Appeal case seeking declaratory judgment of absence of obligations (judgment in prior instance: Tokyo District Court 2011 (Wa) 38969), available at www.ip.courts.go.jp/eng/vcms_lf/25ne10043full.pdf (English translation).
10 Part III(1)(e) and (i) of the Guidelines for Intellectual Property.
11 Part IV(2)(iv) of the Guidelines for Intellectual Property.
12 www.jpo.go.jp/system/laws/rule/guideline/patent/document/seps-tebiki/guide-seps-en.pdf (English translation).
14 Article 2(6), Paragraphs 2 and 14 of the General Designation, available at www.japaneselawtranslation.go.jp/common/data/notice/120704.htm. ('(2) Unjustly refusing to trade, or restricting the quantity or content of goods or services for trade with a certain enterprise, or causing another enterprise to engage in any conduct that falls under one of these practices; (14) Unjustly interfering with trade between another enterprise that, domestically, is in a competitive relationship with oneself or with a company in which one is a shareholder or an officer, and its transacting party, by preventing the conclusion of a contract, by inducing a breach of a contract, or by any other means whatsoever.')
15 The details of the case are available (in Japanese) at www.jftc.go.jp/houdou/pressrelease/h28/nov/16111802_files/161118honbun.pdf.
16 Prior to the JFTC's action, the Tokyo District Court ruled on 18 February 2015 that One-Blue licensors were not allowed to exercise the right to seek injunction because it constituted an 'abuse of rights' and that notifying retailers that the One-Blue licensors were entitled to exercise such right should be deemed to be making a false allegation, which may constitute unfair competition set forth in Article 2(15) of the Unfair Competition Prevention Act.
17 Part 2 (Basic Principles on Application of the Antimonopoly Act), (1) of the Guidelines for Intellectual Property.
18 This section is based on Part 4 of the Guidelines for Intellectual Property.
19 Article 2, Paragraph 12 of the General Designation.
20 Paragraphs 10, 11 and 12 of the General Designation.
21 Paragraph 12 of the General Designation.
23 Paragraphs 2, 11 and 12 of the General Designation.
24 Paragraph 12 of the General Designation.
25 Paragraphs 2 and 12 of the General Designation.
26 Paragraphs 11 and 12 of the General Designation.
27 Paragraph 12 of the General Designation.
28 Paragraphs 10 and 12 of the General Designation.
30 Paragraph 12 of the General Designation.
31 It had been alleged that Qualcomm Incorporated violated the JAA by coercing its licensees to provide their intellectual property rights related to code division multiple access technologies free of charge; however, on 15 March 2019, the JFTC held that this obligation does not constitute an unfair trade practice as restrictive conditional trade (Paragraph 12 of the General Designation) because it could be regarded as a cross-licence, rather than a free licence.
32 Paragraph 12 of the General Designation.
35 Part 3(1)(a) of the Guidelines for Intellectual Property.
36 Part 3(1)(b) of the Guidelines for Intellectual Property.
37 Part 4(1)(c) of the Guidelines for Intellectual Property.
38 Part 3(1)(d) of the Guidelines for Intellectual Property.
39 Part 3(2)(i)(d) of the Guidelines for Intellectual Property.
40 Part 3(2)(iii)(b) of the Guidelines for Intellectual Property.
41 See Paragraphs 2 and 15 of the General Designation.
42 See footnote 11.
43 Part 4(2)(iii) of the Guidelines for Intellectual Property.
45 An English translation is available at www.jftc.go.jp/en/legislation_gls/imonopoly_guidelines_files/Patent_Pool.pdf.
46 See Part 1, Note 1 of the Guidelines on Patent Pools.
47 See id., Part 3(2)(1)(a).
48 See id., Part 3(2)(1)(b).
49 See id., Part 3(2)(2)(b), 'imposing on participants restrictions on the use of their pooled patents such as prohibiting them from licensing their patent without going through the pool is generally not recognised as reasonably necessary to manage the activity and is likely to have a significant impact on competition'.
50 Judgment of the JFTC regarding Sony Computer Entertainment (1 August 2001).
51 Article 1(3) of the Civil Code provides that no abuse of rights is permitted. This clause is practically used to deny an excise of a right under specific circumstances notwithstanding that exercising a right is valid on its face.
52 An English translation is available at www.japaneselawtranslation.go.jp/common/data/notice/h16Zzn00000101je2.0_h19Z0.htm.
53 See footnote 12.