Monday, April 2, 2018

Japan's downward trend in patent application filings is about to end?

The Japan Patent Office (JPO) released an annual report "JPO Status Report 2018". According to the report, 318,479 patent applications were filed in 2017, that remains the same level as the previous year (increase by 161 applications, to be more exact). Hopefully it finally ends the downward trend.

As always, the most of patent applications (81.7%) were filed by Japanese companies, and the top 10 list to get Japan patents are monopolized by Japanese companies.

By the way, the number of trademark applications steadily increases. I'm just wondering if trademark is a better easy-to-use tool than patent to protect users' businesses.

Saturday, March 24, 2018

Local government provides strong support for patent licensing between large companies and SMEs

After having posted the article regarding Fuji Xerox's patent licensing business, I received inquiries on the model. So, I would like to explain it in a little more detail here, based on the material received from a local government.

It's called "Kawasaki model" in Japan, because Kawasaki, a city in Kanagawa Prefecture,  started a project under this model as a pioneer in 2007 to revitalize local industry while involving large companies successfully, and attracted attention from other local governments.

The basic concept of this model is patented technology transfer from large companies to small and medium-sized enterprises (SMEs). It could be a win-win solution for both large companies and SMEs. Large companies desire to monetize their unused patents. More than half of Japanese patents have not been utilized. On the other hand, SMEs desire seed technologies to develop their own products which should be protected by patents, aiming to move away from subcontractors.

Many large companies have been participating in this project, - e.g. Fujitsu, Toshiba, NEC, Hitachi, Nissan, Pioneer, Ajinomoto, NTT, Canon, Chugoku Electric Power, Sharp, Kyocera, Fuji Xerox, Toyota, Panasonic, Mitsui Chemical, KDDI, Honda Motor, Siemens and others. Since 2007, 29 deals have been closed and 20 new products have been created under this project, as of the end of February 2018. The success of the model depends to a large extent on strong support from the local government, i.e. Kawasaki-City. 

For example, the local government provides SMEs with the following services; 
  • Assist new product and business plan development
  • Provide matching opportunities with large companies  (symposium, small meeting, one-on-one)
  • Conduct contract negotiation with large companies
  • Introduce development partners, public experiment and research institute etc. 
  • Help obtain public subsidy

In addition, the local government provides services for large companies. In fact, there have been not so many large companies that actively participated in this project, due to small return considering cost to identify seed technologies for SMEs. Therefore, the local government provides services for large companies, - e.g. screening seed technologies among their patents which fit for particular SMEs by conducting a search using the title and abstract of patented inventions, arranging closed meetings with selected SMEs for a particular large company, arranging one-on-one meeting when they find a good fit licensee candidate, and the like.

From their previous experiences, good fit seed technologies for SMEs are like below.
  • Clear use applications
  • Directly contributive to product development
  • Easily add value to existing products
  • Not require big effort and cost for product development and facility
  • Prototyped, or experiment data available
  • Not fit for large businesses

Certainly, there is a need for such a patent licensing model. However, it seems that this model does not succeed without strong support of the local government at this moment, considering cost and information about SMEs that the local government owns. Also, it is surely beneficial to SMEs, but it may be not so attractive to large companies, considering the expected return. Maybe, it needs something to turn this model into a more successful business beyond regional or social contribution.

Thursday, March 15, 2018

Japan releases SEP licensing negotiation guide and reveals plan for establishing International Arbitration Center in Tokyo

The Japan Patent Office (JPO) has released the draft of “Guide to Licensing Negotiations involving Standard Essential Patents” to hear public comments. The English translation is also available. As previously reported, before developing this Guide, the JPO asked for public comments from home and abroad last year. So, the comments the JPO received should be reflected in this Guide.

The JPO commissioner Naoko Munakata introduced this Guide at the international symposium “Toward Solving Disputes over Standard Essential Patents: Licensing 5G SEPs” which was held in Tokyo on March 13 2018 and asked the audience to make sure that “it is not legally binding”, and also “it does not present “recipes” which can be used to automatically calculate the appropriate royalty rate – rather, it is meant to present factors to be considered when determining what a reasonable royalty is.”

It remains simply a summary document containing domestic and foreign court precedent, decisions by competition authorities, and issues in licensing negotiation. But it looks well summarized and could be a good reference especially for small and medium sized companies which don’t have enough resources with patent licensing expertise. It is expected to serve as one of the tools for solving SEP-related disputes as well as "HANTEI" on SEP.

Further, Munakata also stated that international arbitration is an effective solution for global dispute resolution, and it is planning to hold mock arbitrations with Randall Rader, the former chief judge of the Court of Appeals for the Federal Circuit, on June 29 2018. Then, Rader mentioned “International Arbitration Center in Tokyo (IACT)” in his speech at the conference, and explained IACT will gather leading expert judges from around the world, and its rules will be similar to ICC rules. It seems the JPO has been discussing IACT with Rader, and he is likely to play a key role in the development of IACT. 

It was a surprise. The JPO deferred the originally intended JPO ADR system just last December, because of being questioned about its ability to set out appropriate license conditions and other reasons, as reported. This might be plan B for the JPO. The details are unknown yet. Let's keep a close eye on the developments.

Saturday, March 10, 2018

Baidu document-sharing site discloses corporate confidential documents

It is reported that Japanese companies’ internal documents marked “CONFIDENTIAL” are posted on Baidu document-sharing site. 186 companies’ confidential documents which includes a product diagram have been reportedly posted on this site between June 2017 and February 2018. 

Japanese companies today carefully review and select their technologies to be filed patent applications, considering cost and risk of unnecessary technology disclosure, and therefore reduce patent application filing. At the same time, they are attracted to trade secret protection and its related services such as  timestamp service which is used to prove existence of a particular electrical data at a specific date.

Once trade secret or know-how is leaked to the outside, it loses its value. In case of patent-protected technology, patent holders can remove violative products from the marketplace by enforcing patent right. Actually, according to the Japanese government data, IP holders could successfully suspend imports of 30,627 cases in which 92.2% of them came from China in 2017.

I have no idea how the leakage of confidential information on the Baidu document-sharing site impacted the victim companies. Certainly, there are doubtlessly circumstances when it makes sense to protect it as trade secret. However, we should fully recognize the risk of the leakage of trade secret. It is important to make employees aware of the seriousness of information leakage through signing a confidentiality agreement or providing confidential information trainings. Before that, it is more important to avoid disclosing confidential information beyond necessity even within a company.

Sunday, February 18, 2018

Japanese government publishes the draft of user’s guide for HANTEI on SEP

As mentioned before, the Japan Patent Office (JPO) is going to provide the following two measures to promote the dispute resolution on standard essential patents (SEPs).

・Guidelines on SEP licensing negations
It will cover trend of legal precedent on SEP disputes worldwide and also show elements to consider in determining reasonable royalty rate to improve predictability. It will be published next month or so.

It is an expansion of existing JPO’s advisory opinion service (HANTEI) to indicate whether or not a particular patent is a standard essential patent. The existing HANTEI service provides advisory opinion, which is non-binding, on whether or not a particular patent covers a particular product or service. The decision is available to the public. For more information on existing HANTEI service, please see here.

On February 16 2018, JPO published the draft of user’s guide for "HANTEI on SEP" to invite public opinion until March 11. Then, JPO will start the operation of the new service from April this year. The English translation of the user’s guide is regrettably not available at this moment. However, foreign companies also should know this service as a tool, since they may have a dispute on SEP in Japan. In fact, Apple had such a dispute with Samsung in Japan before

The requirements for "HANTEI on SEP" are as follows.

  1. Existence of dispute about standard essentiality of a patent between the parties is required.
  2. A demander is required to identify a virtual subject matter in dispute consisting only of integral components specified in a document developed by a standards body or the like.
  3. The demander is only permitted to claim that the virtual subject matter in dispute is within the technical scope of the patent, but not permitted to claim that it is out of the technical scope.  
The demander needs to make an element-by-element comparison between the patent and the virtual subject matter in dispute to prove that it is within the technical scope of the patent, while the demandee is allowed to make a counter argument. Then, when the demander successfully proves that the virtual subject matter in dispute is within the technical scope of the patent, the patent is deemed to be a standard essential patent. As described above, the virtual subject matter in dispute is identified by the demander. Therefore, it should be noted that there could be a lot of virtual subject matter in dispute which depends on how the demander identifies, and it could arrive at a different judgement.

Monday, February 12, 2018

Fuji Xerox rolls out patent licensing business to SMEs

On February 7 2018, Fuji Xerox announced that it will roll out the patent licensing business to SMEs.

In Japan, a business model for large companies to license their unused patents to SMEs to help such SMEs develop new products or create new business is getting a lot attention lately. Fuji Xerox has been participating in intellectual property business matching between SMEs and large companies since 2016 which is a local government project. Now it has signed a patent license agreement with a company in Yokohama, and made this announcement. This is the first success case in the IP business matching for Fuji Xerox.

This business model brings the following advantage:
• Large companies can monetize their unused patents.
• Large companies can expect advertising effect by contributing to SMEs and regional community.
• SMEs can gain the chance of development of new products.

Especially for large companies, since they provide their unused and non-core technologies, it is unlikely to affect their business and it would be easily approved in the company. Also, the litigation risk is probably not high, because there is a big gap between large companies and SMEs in internal resources (e.g. IP staff, financing) and maybe few SMEs will challenge the patents of large companies or try to use the ideas without infringing the patents. On the other hand, the license revenue depends on future success of the new products implementing the patented ideas. It is unpredictable and maybe cannot expect huge revenue.

Therefore, it is a low-risk, low-return business for large companies. Fuji Xerox clearly states in the announcement that it will promote this type of licensing business. However, it should consider the cost of matching with SMEs, in addition to unpredictable revenues. If an SME is looking for a specific technology and it approaches to a large company which has such a patented technology through its own effort, that’s fine for the large company. However, it would be challenging for large companies to identify their unused patents which potentially contribute to the business of a SME and make a proposal for it, considering the cost. Currently, a local government is playing the important role as an middleman in the  transactions. It should be watched whether Fuji Xerox can grow this licensing business successfully.

Friday, January 26, 2018

GREE sues Supercell for patent infringement while considering reputation risk

Here is another news story of patent litigation between game companies in Japan, following my previous report.

On January 23 2018, Finnish game developer Supercell made an announcement, on  Twitter and in its game application, that it got sued by Japanese mobile game company GREE for patent infringement in Japan on May 18, May 25, July 13, and July 27 in 2017, and it will delete specific features in the Japanese version of “Clash of Clans” and “Clash Royale” until the lawsuits become settled, though it firmly believes that it doesn’t infringe the GREE’s patents in question.

In response to this announcement, some of game users started to deliver complaints against GREE with a hashtag of “グリーを許すな (Don’t allow GREE)” and the like on social media.

Maybe GREE has been concerned damage to its reputation among game users. Next day, on January 24, GREE made a comment on the Supercell’s announcement, which interestingly includes the expressions of regret for any inconvenience the users of the Supercell’s games may experience, in addition to the backgrounder of the case. According to the GREE’s comment, GREE filed lawsuits against Supercell at Tokyo District Court for damages and an injunction against “Clash of Clans” and “Clash Royale”, because Supercell has infringed more than 10 GREE’s patents and also refused to have a discussion GREE has proposed since September 2016 to resolve the dispute in an amicable manner.

On the other hand, Supercell issued a brief statement again on January 25 in response to the GREE’s comment of the previous day, arguing that Supercell didn’t refuse the meeting, and actually the management team flied to Tokyo to have a meeting, seeking a “fair, reasonable and amicable solution”. After that, GREE counter-argued on the same day that it was in late December 2017 and after we filed lawsuits, when Supercell’s management visited us to have a meeting.

GREE and Supercell are spending time to argue not only in court but also outside court. It looks like that they are arguing before a jury of game users. Enforcing patent rights is legitimate right for patent holders. However, especially for game companies, it seems to be a serious problem to earn a bad reputation among game users, from a business perspective. Therefore, when taking legal action, an appropriate communication strategy could be a key factor for them to obtain understanding from the users.

By the way, GREE seems to be battling against Supercell also in the US.

Saturday, January 13, 2018

Nintendo plays a patent game with COLOPL for $40 million

On January 10 2017, a Japanese mobile game company COLOPL announced that it got sued by Nintendo for patent infringement. Nintendo seeks JPY 4.4 billion (approximately $40 million) in damages and an injunction to stop operation of “Shiro Neko (White Cat) project” which is COLOPL’s most profitable smartphone game. Nintendo reportedly filed a lawsuit at Tokyo District Court on December 22 2017 after the negotiation for over a year since September 2016. This is the first time Nintendo has filed a patent infringement lawsuit in Japan. Nintendo alleges the COLOPL’s game infringes on Nintendo’s 5 patents relating to touch panel operation and other technologies.

Responding to this announcement, COLOPL’s stock price plummeted 22% at one point from the day before. It seems the stock market concerns about the impact on its performance, though COLOPL has boosted sales since 2014 when COLOPL released “Shiro Neko project”, and also has increased patent filing sharply with sales (See chart; Please note that all patent application filed in 2016 and beyond are not yet published.).

In a separate case, COLOPL signed its first patent cross-licensing agreement with another Japanese video game company CAPCOM for patents relating to multiplayer functionality in November 2017. CAPCOM is actively utilizing its patent portfolio. It also successfully signed a patent cross-licensing agreement with BANDAI NAMCO in June 2017, as previously reported in this blog. Japanese game companies might be beginning to be concerned about game of patents.