WORLD TRADE
ORGANIZATIONWT/WGTCP/W/147
11 September 2000
(00-3499)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM JAPAN
The following communication, dated 9 August 2000, has been received from the Permanent
Delegation of Japan with the request that it be circul ated to Members.  This replaces the version that
was circulated as an advance copy at the Working Group's meeting of 15-16 June.
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IPR/Competition Policy and Development
I. INTRODUCTION
At the sixth meeting held in November 1998, the Working Group studied the topic regarding
the relationship between the TRIPS Agreement and competition policy.  At that meeting, delegations
discussed the importance of economic development in developing countries in view of taking thenecessary policy measures for a proper protection and prevention of abuse in the field of intellectual
property rights.  Both economic globalization and technological innovation have made intellectual
property rights a much more important issue in the trade and competition policy of all governments,
including those of developing countries.
In view of the above, this paper aims at de aling with the issues regarding the relationship
between intellectual property rights and trade/competition policy, and at discussing the recentdevelopments in this field, together with their imp lications, in terms of the merits and demerits for
developing countries.  It is to be noted that this paper is drafted for discussion purposes only, and in
no way is the Government of Japan bound by the contents therein.
II. HIGHLY ADVANCED TECHNOLOGY AND THE IMPORTANCE OF
INTELLECTUAL PROPERTY RIGHTS, THE CHANGE OF ITS PROTECTION
AND THE IMPACT ON ECONOMIC ACTIVITIES
The systems of technology protection, such as  patents, can stimulate the motivation for
research and development, and can be a driving force towards creating new technology and markets.
In recent years, economic globalization and technological innovation have increased the importanceof a proper protection for intellectual property rights in connection with economic activities.  The
statistics provided by the WIPO show that the numbe r of applications for patents in the world rapidly
increased from about 1.2 million in 1985 to about 3.5 million in 1996.
Parallel with the progress of technology, the coverage of the protection of intellectual property
rights is expanding.  The extent of such covera ge has influenced the possibility of retaining any
exclusive possession of information, and has had a great impact on the incentives for
research/development, as well as on the forms/conditions for the transaction of technology.  For
example, if the range of the protection coverage, or the use of intellectual property rights, are not
appropriate in such areas as biotechnology and any new types of computer software having a largeWT/WGTCP/W147
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potential for future development, this can create a negative influence on economic activities.  In this
regard, appropriate measures from the viewpoint  of competition policy would be required.
III. GUIDELINES OF THE JAPAN FAIR TRADE COMMISSION RELATING TO
INTELLECTUAL PROPERTY RIGHTS
In July 1999, the Japan Fair Trade Commission (JFTC) released the "Guidelines for Patent
and Know-how Licensing Agreements under the Antimonopoly Act", in order to clarify the
interpretation of the various sections of the Antimonopoly Act relating to patent licensing agreements,
etc.  These "Guidelines" were the revision of the same guidelines released in 1989, with the new
edition reflecting the increasing importance of intellectual property rights in economic activities over
recent years, as well as the importance of addressing related issues under competition policy.
Compared with the old guidelines, the revise d edition reflects the complexity of economic
activities with the enhanced utilization of intellectual property rights, and explains, with concrete
examples, which licensing agreements, or licensing rejection, would be a problem under competition
policy.  In the 1999 Guidelines, the interpretations of the Antimonopoly Act applied to concrete cases
are explained in detail:  it is explained in which cases cross-licensing agreements, patent pools,
multiple licensing agreements, etc., would be a violation;  and which restrictions or obligations to beimposed in licensing would be illegal.  By introdu cing such an interpretation, the Guidelines enable
companies to utilize intellectual property rights more effectively, without the risk of violation under
the Antimonopoly Act.
Concerning the relationship between joint research/development and the Antimonopoly Act,
the JFTC released the "Guidelines for Joint Research and Development under the Antimonopoly Act"
in April 1993.  These Guidelines were aimed at clarifying the general views of the JFTC on its
collaboration regarding research/development and the agreement on its operation, so that joint
research/development could be conducted in a manner that would not be restrictive to sound
competition, but rather to further enhance it.  Su ch clarification prevents anti-competitive activities
through joint research/development in technology or in the products' market.  (N.B.  An English
version of the Guidelines can be accessed at:  http://www.jftc.admix.go.jp/e-paper/f_home.htm )
IV. THE TRIPS AGREEMENT AND ITS IMPLICATION ON DEVELOPING
COUNTRIES
In some developing countries, the protection of intellectual property rights is often
insufficient.  For example, developing countries often limit protection to a narrow subject area,provide protection for only a short period of time, or lack strict enforcement.  On the other hand, some
developed countries have a problematic intellectual property regime that, for example, discriminates
against foreign nations, provides excessive protection, or is so different from other regimes of the
world that the effect turns out to be discriminatory.  Such an inadequate protection of intellectual
property rights has a direct, adverse impact on the sound economic activities of any property holder.Furthermore, such inadequate protection not only reduces the incentives and the allocation of
resources for new product development, but also impedes and impairs investment and technology
transfers from other countries, thereby reducing domestic technological development and, ultimately,
having a detrimental effect on the countries involved, as well as on the world economy.
The WTO "Agreement on Trade-Related Aspects of Intellectual Property Rights", which took
effect on 1 January 1995 as a result of the Uruguay Round, has since expanded with the development
of protection for intellectual property rights at  worldwide level.  The Agreement lays down the
minimum standards of protection in the broader areas of intellectual property, and prescribes detailed
rules, including the procedures for the use of intellectual property rights.  The fact that the Agreementapplies to all the Member countries has brought about its great impact on world economy.  The
Agreement provides for transitional arrangements:  the developing countries and transition economiesWT/WGTCP/W/147
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have a five-year transition period (i.e. until January 2000) and the least-developed countries have an
11-year period (i.e. until January 2006) ( cf. Articles 65 and 66).
In response to the above circumstances, it is necessary for the developing countries to adopt
more positive policy measures, including the estab lishment and the strengthening of rules, together
with their enforcement, in regard to the protection of intellectual property rights.  Furthermore, the
protection of intellectual property rights, which allows a limited, exclusive use of certain technology,
should not, while aiming to enhance competition, result in restraining actual competition.  From such
a perspective, proper policy measures, having an appropriate balance between protection and the use
of intellectual property, would be applicable.
V. REINFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS IN DEVELOPING
COUNTRIES AND COMPETITION POLICY
There could be various types of anti-compe titive activities with regard to the use of
intellectual property rights.  All such abuses fall under the existing category of anti-competitive
activities.  For example, if a patent cross-licensing agreement includes mutual restrictions on the sales
price or manufacturing volume of a patented product, and substantially restricts competition in themarket for such products, that agreement will be considered illegal under the Antimonopoly Act, due
to the unreasonable restraint of trade, for example, price fixing or an output restriction on goods or
services.  In addition, there may be the situation where a patent pool is formed, making it difficult to
manufacture a certain product without first obtaining a licence of the patent necessary for the product.
In this kind of situation, if a right holder refuses to grant a licence to a new-comer, or to a particular
existing firm, without a justifiable reason in order to impede entry by other firms, or to make it
difficult for existing firms to conduct business, this could be considered illegal under the
Antimonopoly Act, due to private monopolization.  Therefore, while reinforcing the protection of
intellectual property rights, developing countries also need to enhance the transparency of rules and to
accumulate a certain experience of policy implementation with respect to competition.
VI. IMPLICATION OF THE EMERGING PROBLEMS CONCERNING
INTELLECTUAL PROPERTY RIGHTS
The recent rapid progress of e-commerce enhances the possibility of having easy access to the
world economy by those developing countries having just a small accumulation of economic capital.
To maximize the benefits of e-commerce developmen t, it is very important to take the appropriate
policy measures both nationally and internationally.  The "Business Method Patent" is one of thetopics that gathers interest in connection with intellectual property policy as a result of the
development of e-commerce.  While business and other stakeholders believe that the "Business
Method Patent" promotes the innovation of technology and enhances the development of
e-commerce, there is a concern that its inappropriate protection could restrain competition and prevent
economic growth based on the IT revolution.  Consequently, the issue of the patent system forbusiness methods should be addressed in an appropriate manner from an international standpoint.
In this regard, given the magnitude of the impact on the worldwide economic activities of
e-commerce, and the protection of its intellectual property rights, it would be useful to examine its
effects and to take the necessary measures bearing in mind the overall international competitionpolicy.
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