Japan Fair Trade Commission Issues Guidelines on Use of Intellectual Property

On September 28, 2007, the Japan Fair Trade Commission issued "Guidelines for the Use of Intellectual Property under the Antimonopoly Act" to specify the principles for the application of the Antimonopoly Act to restrictions in relation to the use of technology. The tentative translation identifies several "Cases where restrictions may have major impacts on competition":

(1) Activities between competitors

If restrictions in relation to the use of technology are imposed on activities 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 restriction imposed on activities among non-competitors. This type of conduct is thought to be relatively influential on competition.

(2) Influential technologies

Restrictions in relation 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, whether or not it is difficult to develop any detour or difficult to switch to any technical substitute and the position of the right holder of 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.

The document also identifies "Cases where restrictions are deemed to have negligible effect of lessening competition":

In principle, restrictions in relation to the use of technology are deemed to have a minor effect on competition when the firms using the technology in the business activity have a share in the product market (hereinafter referred to as “product share”) of 20% or less in total. This is not applicable however to conducts of restricting sales prices, sales volume, market share, sales territories or sales customers for the product incorporating the technology (Note 9) or to the conduct of restricting research and development activities or obliging firms to assign rights (or grant exclusive licenses) for improved technology.

The impact of a particular conduct on the technology market is also deemed to be insignificant if the product share is 20% or less in total. And where the product share is unavailable or the product share is not sufficient to justify examining the effect on the technology market, the effect on competition is confirmed to be minor provided that there are at least four firms holding rights to alternative technologies available with no outstanding obstacles to business activities. (The viewpoints shown in this section are not applicable, however, when restrictions should be examined from the viewpoint mentioned in Part 4-1-(3) found below.)

Note 9: Restrictions by the licensor against licensees on the sales quantity and the sales area of the product incorporating the licensed technology are seen to be an exercise of rights to limit the scope of use of technology. However, if multiple parties reciprocally impose such restrictions on one other, they are not recognizable as an exercise of rights, as is discussed below in Part 3-2 .

According to the section on "Viewpoints from Private Monopolization and Unreasonable Restraint of Trade":

Where a technology is found to be influential in a particular product market and is actually used by numerous firms in their business activities it may correspond to the exclusion of business activities of other firms if any one of the firms obtains the rights to the technology from the right holder and refuses to license the technology to others, preventing them from using it. (Interception)

For instance, this could apply to a case in which a number of parties participate in a patent pool and accept licenses to use technologies that are essential to their business activities and some of the party in the pool purchase a pooled technology from the pool administrator to block other participants in the pool from using the technology in their business activities.

In a case in which a firm operating in a particular technology or product market collects all of the rights to technology that may be used by its actual or potential
competitors and refuses to license them to prevent the competitors from using the technology, this activity may correspond to the exclusion of business activities of other firms. (Concentration of rights)

An example might be a situation in which the right holder of technology A and the right holder of technology B are competing with each other to make their technology the de fact standard, and the right holder of technology A purchases the rights to a
technology that is essential only for the use of technology B but not required for the use of technology A and then refuses to license to any firm using technology B in the product market.

Under circumstances in which a product standard has been jointly developed by several parties, it may correspond to the exclusion of the business activities of firms when the right holder refuse to grant licenses so as to block any development or manufacturing of any product compliant with a standard, after pushed for establishment of that standard, which employs a technology of the right holder, through deceptive means, such as falsification of the licensing conditions applicable in the event the technology is incorporated into the standard, to oblige other firms to receive a license to use the technology.

This will also apply to a case in which a firm holding rights to a technology refuses
to grant licenses so as to prevent other firms from participating in the bidding after deceiving a public institution into setting out specifications of the product it will be purchasing through bidding that can be satisfied solely by the use of the technology, to create a situation in which no bidder can manufacture any product meeting the provisions, and the activity was recogniza as possibly violating the provision in Section 8 of the Antimonopoly Act. (Warning issued on February 17, 1994)