Japan Fair Trade Commission Seeks Public Comments on Proposed FRAND Policy

Professor Masabumi Suzuki just called to my attention the following matter that will be of interest to readers of this blog.  On July 8, the Japan Fair Trade Commission (JFTC) published a press release seeking public comments on the partial amendment of its Guidelines for the Use of Intellectual Property Under the Antimonopoly Act.  Here is a link to the press release, which provides directions for interested parties to submit comments.  The Guidelines with the proposed amendments (Tentative Translation) are available here, and the Survey Report on Issues related to Essential Patent (Tentative Translation) is available here.  The proposed amendments would add the following subpart (e) to Part 3 ("Viewpoints from Private Monopolization and Unreasonable Restraint of Trade"), paragraph (1) ("Viewpoints from Private Monopolization"), subparagraph (1) ("Inhibiting the Use of Technology") (see pp. 10-11):

The standard setting organization or trade association (hereinafter referred to as the "SSO") generally specifies in the document (IPR Policy) describing principles for license of patents (including the other intellectual property rights) essential for implementation of the functions and effects prescribed in the standards (hereinafter referred to as the “Essential Patent”) that, in order to prevent exercise of right in respect of Essential Patents from impeding research & development, production or sale of the products adopting the standards and to broadly diffuse the standards, it makes the participants in standard setting clearly show whether they hold any Essential Patent (including those pending) and their intention for licensing for fair, reasonable and non-discriminatory conditions (such conditions are generally called “FRAND conditions”). An Essential Patent (including those pending) holder’s declaration in writing to show that it is willing to grant licenses under FRAND conditions to the SSO is referred to as the “FRAND Declaration”. According to the IPR policy, the SSO will study change of the standards to exclude the technology protected by such if such declaration is not made. Since it can be considered that those who research & develop, produce or sell the products adopting the standards can access all Essential Patents under FRAND license conditions, they can positively make investments required for research & development, production or sale of the products adopting the standards.

Essential Patent is essential for realization of the functions and effects prescribed in the standards, and its use is indispensable in the market of the products adopting the standards diffused broadly.

Under such circumstances, refusal to license or claim for injunction to a party who is willing to take a license by a FRAND-encumbered Essential Patent holder, or refusal to license or claim for injunction to a party who is willing to take a license by a FRAND-encumbered Essential Patent holder when the standard which includes the Essential Patent had already been set and subsequently, the FRAND declaration for that Essential Patent was withdrawn, generally makes it difficult to research & develop, produce or sell the products adopting the standards diffused broadly. Therefore, such acts may fall under the exclusion of business activities of other entrepreneurs.

The description above shall be applied no matter whether the act is taken by the party which has the Essential Patent at the of the standard setting or by the party which accepts assignment of Essential Patent or is entrusted to manage the Essential Patent after standard setting.

Regarding the fact that an exercise of the right in respect of Essential Patent against FRAND declaration makes it difficult to research & develop, produce or sell the products adopting the standard diffused broadly, whether a party is not a “willing licensee (who willing to take a license on FRAND terms)” should be strictly judged based on the situation of each case. Therefore, for example, in case the parties do not reach an agreement of license conditions even after a certain period of negotiations, a party which shows its intention to determine the license conditions at court or through arbitration procedures is deemed to be the “willing licensee”. Even if a party which intends to be licensed challenges dispute validity, essentiality or possible infringement of the Essential Patent, the fact itself should not be considered as grounds to deny that the party is a “willing licensee”.

Second, they would add the following subparagraph (iv) to Part 4 ("Viewpoints from Unfair Trade Practices"), paragraph 2 ("Inhibiting the Use of Technology") (p.17):

The acts described in Part3-(1), (i), (e), that is, refusal to license or claim for injunction to a party who is willing to take a license by a FRAND-encumbered Essential Patent holder, or refusal to license or claim for injunction to a party who is willing to take a license by a FRAND-encumbered Essential Patent holder when the standard which includes that Essential Patent had already been set and subsequently, the FRAND declaration for that Essential Patent was withdrawn, generally makes it difficult to research & develop, produce or sell the products adopting the standards diffused broadly. As the entrepreneurs who research & develop, produce or sell the products adopting the standards will be deprived of trading opportunities or impeded the ability of the party to compete, such acts adversely affect the competition in the market of the products adopting the standards and tend to impede fair competition.

Therefore, such acts are considered to be Unfair Trade Practices (Paragraph (2) and (14) of the General Designation), even if the acts do not substantially restrict competition in the product market described above and are not considered to be Private Monopolization. 

Interested readers may want to read the Guidelines with proposed amendments and the survey carefully to see how everything fits together.  In addition, here is a link to the Antimonopoly Act, and here is a link to the Designation of Unfair Trade Practices (Fair Trade Commission Public Notice No. 15 of June 18, 1982).

It will be interesting to see if the Guidelines are adopted.  Meanwhile, we await the CJEU's judgment in Huawei v. ZTE, which is due to be released next Thursday, July 16.