10Issues Affecting Smooth Use of Intellectual Property:
Applicability of the Statutory Exception for"Experiment or Research"

If the smooth use of an upstream technology is hampered in the case where a patent is granted to an
invention covering an upstream technology that has a wide range of uses, has little or no substitute, and isdifficult to be designed around, and the owner of such a patent refuses to give license at all or requests overly
excessive royalty, it is feared that it may cause a significant negative impact on research and development(R&D) of downstream technologies or other related R&D. In this study, in order to contribute to promotion ofsmooth use of intellectual property as required by the Strategic Program for the Creation, Protection and
Exploitation of Intellectual Property, a government-sponsored program, we examine various possible measures
to be taken for enabling smooth use of a patented invention that is difficult to be designed around including"research tool" patents in the life science field. Although Article 69 (1) of the Patent Law stipulates the exemptionof "experiment or research" from infringement and it has not been formally defined what acts cannot be
exempted as "experiment or research," it seems that, in most cases, this exemption cannot apply to an act that is
conducted in the course of trade. Accordingly, as an attempt to contribute to the smooth use of such patented
inventions, we have examined the possibility of resorting to compulsory licensing, application of the
Antimonopoly Law, formulation of license guidelines, and introduction of patent pools.

Ⅰ Background and Objectives
In technological fields that are characterized bycumulative innovation, many discussions have been
made regarding problems that have arisen and mayarise from basic patents that cannot be designed
around. However, in recent years, such problems
have emerged with regard to not only patents thatcover final commodities but also patents that are to
be used mainly in the stage of experiment anddevelopment, and thus we decided to examine thisparticular subject in this article. Problems involved
with the latter kind of patent may be viewed as aserious problem because they may affect not only
industries but also universities and public research
institutions.
In the field of life science, these problems havemainly occurred in relation to what is known as"research tool patents" (i.e. patents that coverresearch tools that are used in the phase of R&D).
There is concern that, if the owner of a patent thatcovers an upstream technology, when requested byothers who want to use the technology by entering
into a licensing agreement with the owner, rejects
granting a license or requests a very high royalty,
which is tantamount to a refusal, such a refusal or
royalty request would precluded the wide use ofsuch patents and therefore hamper progress oftechnology and development of industries. Based on
this concern, the Government-sponsored Strategic
Program for the Creation, Protection and Exploitationof Intellectual Property (hereinafter called "IP
Strategic Program") states that "the smooth use ofpatented inventions in research activities by

IIP Bulletin 2004

persons other than patentees" should be promoted
in order to realize an appropriate "balance between
smooth research activities and protection of
intellectual property," and "the use of intellectual
property concerning upstream technology (e.g.
gene-related technology and research tools in thelife science field) also should be promoted.
The goal of this study is to discuss various
issues concerning smooth use of intellectual
property, including specific measures to be taken forthis purpose, focusing on the life science field andaiming at contribution to discussions to be
conducted in response to the IP Strategic Program.

Ⅱ Various
IssuesConcerning
Smooth Use of Patented Invention
1

Research Tool Patents

In this chapter, with a focus on research tool
patents (the most notable example being genepatents used in the life science field), we try toclassify such patents and examine various issues
that may arise from them.
A research tool can be defined as any resourcethat a scientist may use as an experimental tool in
his laboratory. It is used only as a means to achieve
particular purposes and cannot be regarded as a final
product. Among research tool patents, especiallycontroversial are patents related to the so-called
upstream technology, which is a basic technologythat have a wide range of uses and cannot be easily
replaced by other technologies (alternativetechnologies). These types of patents can become● 78 ●

very powerful and extensive, significantly blocking
future R&D and R&D in downstream areas. In thefield of life science, we can identify gene patents andrelated patents as such controversial patents. A
patent on a gene related to a particular disease andits proteome can cover both gene diagnostic
methods for the disease and screening methods for
its curative medicines.
Research tool patents can be divided into two
categories: (i) those directed to upstream

technology that have a wide range of uses and havelittle or no substitute, thereby affecting the whole
field of life science and (ii) those directed to anarrower aspect of technology that are directly
linked to a certain final product (e.g. a medicine for a
specific disease). For example, in efforts to makegenome-based drug discovery, various research tool
patents are involved at every stage of research (seethe figure below).

- Method for recombination of DNA- Method for expressing proteins- Method for transferring a gene
- Gene cloning method- PCR process- DNA chips-Screening method using recombined
cells (a basic screening technology)- ES cells-Transgenic animals (cancerous mouse,etc.)- Humanized antibody technology

Research Tool Patents

Patents concerning upstream
technologies (that have a wide
range of uses and for which there are
no or few alternative technologies)

The Whole Field of Life ScienceAs a claim
directedtoDNA(genesrelatedMedical/Medicine Sectortoaspecific disease)

Specific Diseases
Gene patents(the target of genome-based drug
discovery)

As a claim
drafted to aproteome
How- Gene diagnosis-Gene-transferring vector,
transgenic
cells
and
transgenic animals

arethe claims
drafted?

(receptor

proteins
involvedin- Antibody- Agonist- Antagonist-Screening method
therapeutic medicine

ofaspecific disease)● 79 ●IIP Bulletin 2004

As a situation that hampers the smooth use of
research tool patents, there is the well-known
theory of the "tragedy of the anticommons."(*1)
However, even when there is only one patent in aparticular technological field (the tragedy ofanticommons is caused by the existence of multiple
patents), if that patent is related to upstream
technology and cannot be replaced by anothertechnology, it may give overwhelming power of
influence to a patent owner and thereby may
hamper the smooth use of research tool patents.
When such a patent is one that covers a researchtool, the problem may become more serious,
because it may hamper not only development of
new products by businesses but also all research
activity including that conducted by universities or
research institutes. Since the subject matter of a
research tool patent is not a product but a "tool to be
used in research," the kind of act that may beprohibited by its owner is an "act of a researcher in
his/her laboratory," and therefore this type of patent
may have an extensive effect over various research
activities conducted by researchers.
In this chapter, we have examined the following
four anecdotal evidences as examples that depictedissues regarding research tool patents: (i) the
Cohen-Boyer patent (an example in whichdevelopment of the related technology was
accelerated due to its moderate licensing
conditions), (ii) the Patent for the PCR process (anexample in which stringent licensing conditions set
by a patent owner caused various problems), (iii) the
OncoMouse patent (an example where the patent
owner attempted to enforce the patent even against
nonprofit organizations including universities,
thereby resulting in intervention from the U.S.
National Institute of Health (NIH) to solve alicensing problem), and (iv) the Hamamatsu
University School of Medicine case (which is Japan's
first patent infringement litigation involving a
research tool patent on experimental model
animals).(*2) The first two cases are related toresearch tools concerning upstream basic
technology, and the last two cases are related toresearch tools concerning experimental animals.
2

Recent Cases Where Problems Related to
Utilization of Research Tool Patents Were
Observed

We have examined details of problems related
to use of patents concerning research tools, bymaking distinction between (i) problems arising out
of attempts of a patent owner to make the most outof his/her patent, and (ii) those inherent in the

biology field in which analysis of a biological reactionin its entirety cannot be achieved without using two
or more patents. A representative example ofproblems falling under category (i) is the increase of
market prices arising due to the monopoly on gene
information or use of genes, as exemplified bycontroversies concerning the Myriad Genetics
patents on breast-cancer genes BRCA1 and BRCA2
and its monopoly over BRCA 1/2 diagnosis business.
As an example of category (ii), we can take notice ofthe effective patent strategy Genentech employed
to overcome conflicts with another party's
monoclonal antibody medicine related patents.
As recent examples of problems involving
unreasonable licensing conditions and request for areach-through royalty imposed by a patent owner,
we have taken notice of the following opinions orcases: (a) the opinion that the BRCA1/2 genepatents should be made freely available for publicwelfare and science development, (b) a case where a
U.S. district court held that Housey Pharmaceuticals'
patents on a screening process for animal cells
cannot be regarded as covering final products thatwere discovered by the screening process (andCAFC affirmed this holding), (c) a plan of Eli Lilly
and its partner universities for filing hundreds oflitigations for a patent that is getting closer to
expiration, (d) an attempt of Columbia University toextend the term of license agreements on a patent
for an invention of a process to introduce a gene into
an animal cell by obtaining a new patent that covers
virtually the same invention as the already licensed
patent covers, and (e) a case where CAFC decided
that Rochester University's basic patent concerning
the COX2 inhibitor screening process should beinvalidated because it did not identify chemicalcompounds that would be inhibited or promoted by
the process, and therefore Celebrex, a curative
medicine for rheumatoid arthritis provided by
Pharmacia and Pfizer, did not infringe the patent.
3

Actual States of Utilization of Research
Tool Patents in the Biotechnology andPharmaceutical Industry

Based on published questionnaire survey
results, we have studied actual states of utilizationof research tool patents in Japan's biotechnology andpharmaceutical industry.
It is difficult to reasonably assess the value of a
research tool patent, because this type of patent isprimarily used at a research stage and has no direct
influence on a product. The most serious problem
that may arise in a licensing negotiation is thepatentee's request of unreasonable royalty.

(*1) M.A. Heller and R.S. Eisenberg, Can Patents Deter Innovation? The Anticommons in Biomedical Research, Science 280,698-701 (1998).
(*2) Tokyo District Court Decision of December 20, 2001 (Tokyo District Court 1999 (wa) No.15238), Hanrei Jiho vol. 1787, 145

IIP Bulletin 2004

● 80 ●

Businesses using a research tool patent do not want
to reject payment of a royalty for the research tool
patent, and are willing to pay for it as long as theyfind it reasonable.
In the U.S., according to the Walsh Report(*3) (asurvey as to whether research tool patents are
actually causing a problem such as the one indicatedin "the Tragedy of the Anticommons"), most
respondents answered that there were no cases inwhich an important project was cancelled due toexistence of a blocking patent, though there weresome worrying problems like restriction imposed on
use of a gene patent in relation to a target protein
needed in the study of a certain disease. It also
reports a case in which a university that committed
a patent infringement in its research was forgivenby the patentee under the condition that theuniversity conducted the research for nonprofit
purposes. This may be regarded as an informal"research exemption."

Ⅲ Measures to Facilitate the Smooth
Use of Patented Inventions
1

Background of Discussion

Regarding a situation where smooth use of a
research tool (upstream technology) that has a wide
range of uses or a gene critical for drug discovery ishampered due to existence of a patent that covers
the technology or the gene, we examined somepossible measures to be taken to cope with such asituation, by following the discussion made in the IP
Strategic Program.
2

Applicability of Article 69 (1) of the Patent
Law

Article 69 (1) of the Patent Law states that "theeffects of the patent right shall not extend to theworking of the patent right for the purposes ofexperiment or research." According to the prevailingtheory, the scope of "experiment or research" ofArticle 69 (1) should be considered as being limited
to acts aimed at "progress of technology"(experiments for examining whether the patented
invention actually has patentability or not, forascertaining functions the patented invention isintended to play, or for improving, innovating ordesigning around the patented invention). Regarding
research tool patents, it is considered thatapplication of Article 69 (1) is likely to be denied

except in the case that the patented invention itself
becomes the subject of "research". In addition,although Article 68 stipulates that the scope of
exclusive right granted to a patent does not extend
to an act that does not amount to an act of"commercially" working the patented invention, it ishighly possible that experimentation or research
conducted in a university or other research
institution would be regarded as "commercial"working of a patented invention. Therefore, if a
research institution needs to work a patented
invention owned by another, it is necessary for the
institution to be granted license by the patent
owner.
There was another question as to whether
clinical research needed for regulatory approval for ageneric drug falls under the category of "experimentor research" against which a patent right cannot be
enforced. In the past, academic theories and rulingson this question were divided into two groups: onethat favored the inclusion of clinical research into
the category and another that denied it. Recently,
however, the Supreme Court, in its decision on alitigation involving a generic drug,(*4) held that suchclinical research falls under the category of"experiment or research" exempt from liability ofpatent infringement under Article 69 (1), putting an
end to the controversy over this issue. In addition, it
should be noted that, in Japan, there has been only
one case so far in which it was disputed whether
academic activities in a university or other research
institution fall under the category of "experiment or
research" for the purpose of applying Article 69 (1)(i.e. the above-mentioned Hamamatsu University
School of Medicine case). In this case, however, thedistrict court did not provide any opinion on theissue of whether the working of the patented
invention could be regarded as "experiment or
research."
In the U.S., although the Patent Act does notprovide general "experimental use exception," it has
been recognized that an act conducted for the mere
purpose of philosophical experiment, or to ascertain
the verity and exactness of the specification is
exempted from the liability of infringement under
the common law. This doctrine of "experimental use
exception," however, is construed very narrowly as
only applicable to conduct undertaken "foramusement, to satisfy idle curiosity, or for strictly
philosophical inquiry," and courts have rigorously
followed this narrow construction. In 2002,
existence of the doctrine of "experimental use
exception" was confirmed by the CAFC's Madey v.

(*3) John P. Walsh, Ashish Arora and Wesley M. Cohen, Effects of Research Tool Patents and Licensing on Biomedical Innovation,
285-340, Patents in the Knowledge-Based Economy (W.M. Cohen and S. Merrill, editors, The National Academies Press,
2003)
http://www.nap.edu/books/0309086361/html/285.html(*4) The Supreme Court Decision of April 16, 1999 (the Second Petty Bench) (1998 (ju) No. 153), Minshu, Vol.53, No.4, at 627● 81 ●IIP Bulletin 2004

Duke University(*5) decision, but the CAFC also heldin the same decision that its applicable scope shouldbe very narrow. This decision turned out to be anepoch-making one in U.S. patent law because before
Madey v. Duke University, use of a patented
technology for experiment was regarded as being
exempted when conducted for a nonprofit purpose.
In addition, the CAFC, in its decision on Roche
Products, Inc. v. Bolar Pharmaceutical Co.(*6) in 1984,held that experiment for applying for regulatory
approval for a generic drug constitutes aninfringement. In response to this decision, theCongress passed legislation to exempt from patent
infringement the working of a patented invention forthe purpose of regulatory approval for medicine(Bolar provision(*7)). In the U.K., Germany, andFrance, it is currently provided that patent rights
cannot be enforced against (a) any acts conductedprivately and non-commercially, or (b) any activities
conducted for experiment on the subject of thepatent concerned.
3

Possibility of Resorting to Compulsory
Licensing System

The compulsory licensing system allows a third
party to obtain a right (compulsory license) to worka patented invention owned by another without his
permission or despite his refusal, througharbitration decision by the Commissioner of the JPO
or the Minister of Economy, Trade and Industry. The
Patent Law has the following provisions related toarbitration: Article 83 (Arbitration decision on grantof non-exclusive license in case of non-working),
Article 92 (Arbitration decision on grant of
non-exclusive license on one's own patented
invention that uses another party's patented
invention or other right) and Article 93 (Arbitration
decision on grant of non-exclusive license in public
interest).
Concerning Article 92, such a relation withanother party's right is usually not found in workingof a research tool patent. Regarding Article 93,
development of medical technology might serve
public interest; however, there is no saying that useof a research tool patent in general research
activities is particularly needed for public interest.
Therefore, it is unrealistic to apply this article toapproving use of a research tool patent in ordinary
research activities.

4

Antimonopoly Law's
License Agreements

Implicationin

Article 21 of the Antimonopoly Law provided
that the provisions of this Law shall not apply tosuch acts recognizable as the exercise of rights
under the Patent Law. It is widely accepted,
however, that there is an exceptional case in whicheven a license agreement on a patent conflicts with
the Antimonopoly Law, when such an agreement is
not judged to amount to the "exercise of rights"
stipulated in the article. On the other hand, theJapan Fair Trade Commission published Guidelines
for Patent and Know-how Licensing Agreements
under the Antimonopoly Law in 1999 and the Reportof the Study Group Examining Issues on Patents in
New Fields from the Viewpoint of the Competition
Policy in 2002. In these documents, the Commission
presents its views on, and provides some examples
of, the relationship between the Antimonopoly Law
and licensing agreements concerning gene-related
inventions as well as research tool patents. The
Study Group Report states that the so-called"reach-through license agreement" might fall under
the category of unfair trade practice as a dealing on
restrictive terms. Now, it is expected that results ofdiscussions in the Study Group Report may be
included in the guidelines under the Antimonopoly
Law in the near feature.
5

License Guidelines

For a party who wishes to use a patented
research tool owned by another, the only option it
can take at present is to obtain license from theowner by conducting negotiation for it. Under such asituation, it is desired to prepare appropriate
guidelines that would enable solving various issues
involved in the exercise of research tool patents.
This chapter has introduced NIH guidelines as apossible model for such guidelines and the various
efforts being made in Japan and other OECD
countries.
The U.S. National Institute of Health (NIH)
formulated the NIH Guidelines for recipients of NIH
funds under and within the legal framework of theBayh-Dole Act.(*8) The NIH Guidelines are intended
to support recipients of the NIH funds who aregoing to transfer a research tool by enabling them tosecure reasonable transfer conditions, and also tofurther bring forward research in biology and(*5) Madey v. Duke University, 307 F.3d 1351 (Fed. Cir. 2002)(*6) Roche Prods., Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858 (Fed. Cir. 1984)(*7) 35 U.S.C. §271(e)(1)(*8) Department of Health and Human Services, Principles and Guidelines for Recipients of NIH Research Grants and Contracts
on Obtaining and Disseminating Biomedical Research Resources: Final Notice, 64 FEDERAL REGISTER 72090 (1999)(Federal Register Notice published on Thursday, December 23, 1999 [64 FR 72090])(http://ott.od.nih.gov/NewPages/RTguide_final.html)

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● 82 ●

medical science, which makes the Guidelines
consistent with the requirements set by the
Bayh-Dole Act.
The Guidelines lists the following four
principles: (1) to ensure academic freedom andpublication,(2)
toensureappropriate
implementation of the Bayh-Dole act, (3) tominimize administrative impediments to academic
research, and (4) to ensure dissemination ofresearch resources developed with NIH funds.
Recipients are required to take every reasonablemeasure to simplify the process of transferring theirown research tools to other research bodies. An
example of such a measure is to adopt a Simple
LetterAgreement.
The
Guidelines
for
Implementation provide specific information,
strategies, and model language for patent andlicense professionals and sponsored researchadministrators at Recipient institutions to assist in
implementing the above-mentioned principles.
The NIH Guidelines have no binding force overtools that have been developed by using only funds
in the private sector and without using any
government funds. Nonetheless, there have been
several cases in which NIH intervened, though
there was no funding by NIH, for the reason thatthey were regarded as very important cases since
they might affect advancement of science inacademic fields. For example, regarding the license
on OncoMouse patents, a memorandum of
understanding (MOU) was entered between the U.S.
Public Health Service and the right holder to agree
that a license agreement is not required for use of
the patents in non-profit research activities.(*9)
In Japan, the Ministry of Education, Culture,
Sports, Science and Technology issued the "Reportof the Study Group on Handling of Results of
Research and Development" that presents
fundamental ideas on the handling of results of R&Dfrom the viewpoint of a public agency as is the casewith the NIH Guidelines. The report states thatfacilitating use of results of R&D requires
enhancement of administrative systems in publicresearch institutions so as to provide appropriate
protection for intellectual property contained in
R&D results they have generated. And, when athird party wants to use R&D results covered by an
intellectual property right of a public research
institution, it should obtain license from, or should
be assigned the right by, the research institution,and then the third party should pay to it aremuneration appropriate to such license or
assignment.
OECD countries are also currently considering
guidelines on licensing of gene-related inventions
including research tools. Basic principles ofguidelines were already agreed upon at an OECD
expert meeting called the "Expert Meeting on Best
Practice Guidelines for the Licensing of Genetic
Invention" (held in Munich, Germany, 17-18
November 2003). It is expected that such efforts
will result in adoption of effective guidelines
supported by globally shared understanding.
In the United States, the National Academy of
Sciences, mainly in its Board of Science, Technology,
and Economic Policy (STEP Board), has alreadystarted related work by establishing a "Committee
on IP in Genomic and Protein Research andInnovation.”
Such discussion is also in progress in Japan. For
example, a working group established within acouncil that provides advices to the Ministry of
Economy, Trade and Industry (Working Group of
Issues Related to Patent Strategic Plan, Patent
System Subcommittee, Intellectual Property Policy
Committee of Industrial Structure Council) has held
several meetings in order to clarify what could be
exempted from patent infringement liability as"experiment or research." In addition, study on how
to revitalize use of intellectual property that belongs
to universities is also going on in the Special
Research Committee on Management of Intellectual
Properties (a section of the Council for Science andTechnology Policy, Cabinet Office). Moreover,discussions on smooth use by universities or similar
research institutions of patented inventions owned
by other parties have been conducted in theCommitteeonIndustry-Academia-Public
Partnership of the Technology and Research
Infrastructure section in the Council for Science andTechnology under the Ministry of Education,
Culture, Sports, Science and Technology.
6

Recommendations on Measures toPromote Use of Biotechnology-related
Patents

In this chapter, we have worked out ourrecommendations on how to solve problems forpromoting more use of biotechnology-related
patents. From the viewpoint of facilitating
development of science and human welfare, we havediscussed mainly the possibility of introducing a freelicense scheme, fair use exemption and patent poolscheme for that purpose. In other words, we
proposed the following three concepts: (1) freelicense of a research tool patent would protect thecommons, (2) as a solution based on efforts ofprivate businesses, use of something that is notother than mere gene information should be treatedas in the case of copyright (including fair use
exemption), and (3) as a possible form of collective(*9) Memorandum of Understanding between E. I. duPont de Nemours and Company and Public Health Service U.S.
Department of Health and Human Services, http://ott.od.nih.gov/textonly/oncomous.htm● 83 ●IIP Bulletin 2004

management, attention should be given to
introduction of a platform-type patent pool that isestablished based on concepts of RAND (reasonable
and non-discriminatory licensing) and MCR(maximum cumulative royalty). Specifically, we haveoffered recommendations on "what fields inbiotechnology and pharmaceutical sectors would
allow for introduction of a patent pool or areappropriate for introducing a patent pool therein"and "what methods or frameworks could and should
be taken if a patent pool can be introduced." We
have also discussed in detail a possible frameworkof a gene patent pool.
7

university or other public institution or a private
business. Moreover such guidelines should coverissues related to sources of finance andmanagement of the research results.
Finally, as a subject of future study, further
examination should be made on the possibility ofusing a compulsory licensing system for the
purpose of achieving the smooth use of researchtool patents. Also, administrative structure andsystems suitable for the same purpose should beestablished.

Approach to Facilitate Smooth Use of
Research Tool Patents: By Using Methods
Employed in the Electronics Industry for
Solving Issues Related to Standard
Technology as a Reference ModelIn this chapter, we have explored what
approach would be effective for facilitating smoothuse of research tools in the field of life science, bycomparing the situation in the life science field withthat in the electronics industry. Private remarks
have been also included in the discussion. Morespecifically, we compared the industrial structure of
the electronics industry and the pharmaceuticalindustry and examined whether licensing through apatent pool or a consortium could also be used forthe purpose of promoting smooth use of researchtools. We have also proposed establishing an open
market for transactions in the biotechnology-related
market.

Ⅳ Conclusions
Use of another party's patented research tool in
research activities is unlikely to be regarded as
falling under the category of "experiment or
research" that is exempted from infringement
liability under Article 69 (1) of the Patent Law. Even
when such a patent is used in a university or otherresearch institution, such use will be regarded as"commercial" working of the patent under Article 68of the Patent Law, and accordingly will be held asconstituting patent infringement.
Therefore, in order for a researcher to use
another party's patented research tool patents in his
or her research activities, it is necessary for him or
her to secure a licensing agreement on the patentthat has little or no terms that might hamper theintended research activities. For enabling it, it isnecessary, for example, to establish specificguidelines that would make clear distinction
between research for academic purposes and thatfor commercial purposes and that would take into
account whether the patentee/licensee is a

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● 84 ●（Senior Researcher: Toshihiko Asano）

● 85 ●IIP Bulletin 2004