United States: JFTC Publishes Final Guidelines Concerning Use Of Intellectual Property

On September 28, 2007, the Japan Fair Trade Commission ("JFTC") published new "Guidelines Concerning the Use of Intellectual Property" (Chiteki Zaisan no Riyo ni Kansuru Dokusenkinshiho Jo no Shishin) (the "IP Guidelines").1

The IP Guidelines provide insight into how the JFTC views intellectual property licensing practices, and particularly provides insight into the circumstances under which certain types of licensing practices might run afoul of Japan’s Antimonopoly Act (the "AMA"). While the JFTC recognizes in the IP Guidelines that intellectual property licenses and licensing practices are generally procompetitive, the IP Guidelines also contain cautionary language that potentially could have a significant impact on certain common licensing practices:

  • Refusal to License Intellectual Property & Excessive Royalties – The IP Guidelines equate a refusal to license intellectual property with a demand for an "excessive" royalty, and indicate that even a unilateral refusal to license intellectual property may give rise to issues under the AMA if the technology is in widespread use or it would be difficult for potential licensees to switch to a competing technology.
  • Agreements Not to Challenge Validity of Licensed IP – In a notable reversal from draft guidelines circulated months ago, the IP Guidelines preserve the JFTC’s historic and relatively unusual skepticism of license provisions that prohibit the licensee from challenging the validity of the underlying intellectual property.
  • License Provisions Relating to "Platform Functionality" – The IP Guidelines suggest that licenses covering basic platform technologies (such as an operating system or communications standard) may give rise to issues under the AMA if the license to the platform also covers enhanced additional functionality that many competitive firms seek to provide.

Background

The JFTC’s final IP Guidelines are effective immediately, and replace the JFTC’s previous guidance in this area, the "Guidelines for Patent and Know-How Licensing Agreements under the Anti-Monopoly Act" (also referred to as the "Patent and Know-How Licensing Guidelines").

The JFTC first published a draft of the new guidelines in April 2007, and invited public comment on the proposed revisions. The final IP Guidelines follow approximately four months after the close of public comment on previously released draft guidelines.2

Highlights of the IP Guidelines

As a general matter, the IP Guidelines treat intellectual property licensing agreements, and restrictions imposed in IP licenses, in a manner that is consistent with the other major competition law regimes around the world. Among other things, the JFTC recognizes in the IP Guidelines that license agreements are often procompetitive, and restrictions imposed in licenses should be evaluated in the light of the positive incentives to R&D and competition, in addition to the reasonableness of the specific restriction. This statement declares, for the first time, that the JFTC would engage in a comprehensive balancing of the effects of the agreement at issue (a process the IP Guidelines describe as "total consideration of the factors having pro-competitive effect and anti-competitive effect").

Treatment of Refusals to License and "Excessive" Royalties

The JFTC’s previous guidelines focused principally on conditions or restrictions imposed in licenses. The new IP Guidelines cover much of the same ground, but also discuss for the first time the treatment under the AMA of refusals to license and demands for "excessive" royalties.

The IP Guidelines are particularly noteworthy in two respects for their treatment of refusals to license. First, the IP Guidelines state that a unilateral refusal to license intellectual property may be an "unfair trade practice" under the AMA if it would be "difficult" for potential licensees to switch to another technology or would create a circumstance where the rights of potential licensees are "unjustly offended." Second, the IP Guidelines indicate for the first time that, under the AMA, a demand for an "excessive" royalty may be viewed and analyzed as a refusal to license.

These two elements of the IP Guidelines represent the biggest change in guidance from the JFTC and potentially reduce the risk of patent "hold-up" in the context of technology standard-setting. However, the IP Guidelines continue to leave many questions unanswered even as to this narrow context, so continued careful monitoring of developments will be essential.

Agreements Not to Challenge Validity of Intellectual Property
The IP Guidelines preserve the JFTC’s previous guidance that license agreement provisions that impose an obligation not to contest the invalidity of the licensed intellectual property are "gray clauses," meaning that the provision raises concern and may be unlawful under the AMA, depending on the circumstances.

Notably, the JFTC’s draft IP Guidelines did not contain this language and therefore would have marked a change in the JFTC’s position on such provisions. The draft IP Guidelines indicated that provisions of this sort would generally be considered "white clauses," meaning they are unlikely to be illegal. It appears the JFTC may have decided to maintain its previous guidance in response to criticism it received during the public comment period on the draft.

Licensing Agreements Relating to Platform Functions
The IP Guidelines add a new section that discusses licensing agreements relating to "platform functions," which the IP Guidelines define as a standard technology to which related products or services can be added. (The addition of new functions to a cellular phone would be an example.) The IP Guidelines indicate that where there is competition to apply various subsequent technological applications to an original platform, a new license that expands the basic "platform" to include certain favored new applications may be an unfair trade practice, or a "gray clause," under the AMA.

Footnotes:

1 For a Japanese-language update regarding the JFTC’s new IP Guidelines, (pdf). please see our Japanese website

2 Please see Japan Fair Trade Commission Publishes Draft Guidelines Concerning Use of Intellectual Property, http://www.mofo.com/news/updates/files/12424.html

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions