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.