1 The Exercise of Essential Patents for Standards
If the holder of a patent that is essential for a standard (“essential patent”) seeks an injunction on the
grounds that the patent was infringed, it would make it practically impossible for the companies that have been
conducting business in compliance with the standard to continue their business despite the capital investmentthat they have made so far. The exercise of such right would place those companies in a highly disadvantageous
position against the patent holder, negatively affecting the future company management and the diffusion of thestandard itself in some cases. In the field of telecommunications, in particular, there have been some pending
lawsuits over the issue of whether the holder of an essential patent should be permitted to seek an injunction. In
this technical field, there is an urgent need for determining the approach to these cases over essential patents.
Some people started arguing that the exercise of the right to seek an injunction should be limited in certain
cases. Previous research has shown that opinions have been divided over whether such limitations should be
imposed or not. In order to explain the current situation in Japan, I will (1) present the results of a study on
domestic cases and the results of a domestic questionnaire survey and a domestic interview survey, (2) identify
the issues that could arise when the holder of an essential patent seeks an injunction in the field of
telecommunications, etc., (3) examine the relationships between patent rights and the competition law(antimonopoly law) in the field of telecommunications, etc., and (4) analyze various issues pertaining to the
management of standards bodies.

I

Introduction

1

Background and purpose of this study

If the holder of an essential patent (patents
that are essential for the production of goods or
the provision of services in compliance withstandards) seeks an injunction on the grounds
that the patent was infringed, it would make itpractically impossible for the companies that havebeen conducting business in compliance with thestandard to continue their business despite thecapital investment that they have made so far.
The exercise of such right would place thosecompanies in a highly disadvantageous position
against the patent holder, negatively affecting thefuture company management and the diffusion of
the standard itself in some cases.
In the field of telecommunications, inparticular, there have been some pending lawsuits(judgments were already handed down for someof them) over the issue of whether the holder ofan essential patent should be permitted toexercise the right to seek an injunction. In thistechnical field, there is an urgent need for
determining the approach to these cases overessential patents.
Some people argue that the exercise of theright to seek an injunction should be limited incertain cases. Previous research has shown that
opinions have been divided over whether such

limitations should be imposed or not.
In order to explain the current situation in
Japan, I will (1) present the results of a study on
domestic cases and the results of a domestic
questionnaire survey and a domestic interview
survey and (2) identify the issues that could arise
when the holder of an essential patent seeks an
injunction in the field of telecommunications, etc.
2Current situation in Japan

According to the results of the domestic
questionnaire survey, many respondents repliedthat certain limitations should be imposed on theability of the holder of an essential patent to seek
an injunction. In particular, many respondents
commented that such limitations would bedesirable if the patent holder commits a wrongfulact (e.g., keeping some patent applications secret)or changes the licensing conditions (e.g., changes
in non-discriminatory terms) in the course ofstandardization process.
When asked about the scope of the FRAND
declaration, the respondents were divided into
three groups by answering: (1) only the member
companies of the standardization body, (2) the
member companies of the standardization bodyand the companies that were involved in thestandardization process (member companies aswell as non-member companies), or (3) any andall companies.

(*) This is an English translation of the summary of a FY2011 Institute of Intellectual Property (IIP) research study
report.
●

IIP Bulletin 2012 Vol.21

1 ●Ⅱ Issues
Pertaining
tothe
Exercise of Essential Patents
1

Introduction

In Chapter II, based on the information
presented in Chapter I, each Section examines
the issues pertaining to the exercise of essential
patents. As a basis for discussions in this Chapter,the deliberations at the research committee weresummarized. These summaries were preparedfrom the following five perspectives: (1) the
benefits of the exercise of essential patent rights(a need for limitations on patent rights), (2) the
principle of limitations on patent rights(permissibility of the limitations on patent rights),(3) the means of limiting injunctive relief (thetheory of requirements), (4) the effect of the
FRAND declaration (the relationships between
the FRAND declaration and the limitations on theexercise of the right to seek an injunction), and(5) the relationships between the limitations on
the injunctive relief and a monetary claim. In each
Section of this Chapter, detailed discussions weremade from these five perspectives.
2Standardization from the perspective ofcorporate benefits and national policies

This Section, “Standardization from theperspective of corporate benefits and national
policies,” examines the political factors ofstandards with reference to a recent report issued
by the Information and Communications Council.
This report proposes the future direction of theJapanese standardization policy in considerationof the recent trends such as rapid technicaldevelopment including digitalization, a change inthe “platform” of standardization as shown in thetransition from de jure standards to forum
standards, rising awareness of the so-called
Galapagos effect,
andchanges inthestandardization policies of other countries.
This Section explains and addresses the four
issues that were discussed in the process of the
preparation of this report. These four issues are:(1) the need for taking consumer interests into
consideration in the course of the standardization
process, (2) the importance of ensuring thatJapanese technologies (developed by Japanesecompanies) are adopted as standards, (3) a shift in
the primary layer of standardization from
infrastructures to applications and content, and

●

(4)
the
government’s
involvementinstandardization activities.
Based on the results of the examination ofthese four issues, this Section points out thatstandardization policies should be devised toserve as both competition policies and industrial
policies. The goal of standardization policies ascompetition policies is to create competition by
setting technical standards in order to benefit
consumers (users). On the other hand, the goal ofstandardization policies as industrial policies is totake political initiative in leading standardization
activities in order to ensure the benefits ofJapanese companies. The government of eachcountry is trying to find an appropriate balance
between competition policies and industrial
policies, by limiting or promoting standardization
activities. This Section argues that it is necessary
to recognize and evaluate these politicalperspectives before determining the future
direction of the intellectual property laws inconnection with essential technologies.
(Soichiro KOZUKA)
3

Standardization and patent rights
Legal issues concerning the applicationof the RAND provisions

Standardization organizations use the RAND
provisions (Reasonable And Non-Discriminatory)or the FRAND provisions (Fair, Reasonable And
Non-Discriminatory) in order to ask eachcompany hoping to participate in thestandardization process to contribute thetechnologies for which they have obtained or willobtain patents and to license them underreasonable and non-discriminatory terms. In
other words, the purpose of these provisions is tominimize the risk of the occurrence of thetragedy of the anticommons.
In many cases, standardization activities
involve companies from all over the world.
Consequently, the issue of governing law has
arisen, i.e., which country or jurisdiction has legal
authority to settle disputes over legal issues suchas the effect of RAND provisions adopted by astandardization
organization.
The
generalcontract adopted by standardization organizations
designates the governing law applicable to suchdisputes. However, it is still controversial
whether the governing law designated by astandardization organization is effective against
any person.
If a trial is held in Japan, a judgment would
be made under the Japanese law as to what kind
2 ●IIP Bulletin 2012 Vol.21

of effect the RAND provisions would have on theusers of the standardized technologies, who arethird parties to the contracting parties, and underwhat conditions those provisions have such effect.
In this case, the applicability of Article 537 of theJapanese Civil Code should be carefully examinedbecause this is the provision regulating contracts
for the benefit of third parties. The RAND
provisions are countermeasures against problems
accompanying any standardization process, e.g.,
the tragedy of the anticommons and the problem
of hold-up in particular. and are indispensable forsmooth transactions.
On the other hand, the RAND provisions do
not impose any additional burdens on thebeneficiaries, i.e., the users of standardized
technologies. The RAND provisions areinterpreted as an agreement concluded for third
parties. Such an agreement is concluded between
the patent holder (promisor) and the standardizedorganization (promisee) for the users ofstandardized technologies (beneficiaries).
Even if this interpretation is adopted, it isstill controversial whether the RAND provisions
grant each beneficiary a non-exclusive license or
merely oblige the patent holder to have good faithnegotiations with beneficiaries. Under the 2011
revision of the Patent Act, it is important todetermine whether the RAND provisions should
be interpreted as an agreement that is concluded
for third parties in order to grant them anon-exclusive license or as an agreement thatmerely obliges the patent holder to have goodfaith negotiations with beneficiaries. If a
non-exclusive license is granted to a beneficiary,
the beneficiary is entitled to assert the license
against a new assignee. If only regular contractual
relationships such as the one involving theobligation for good faith negotiations are
established, such contractual relationships cannot
be asserted to a new assignee. Therefore, this
distinction is crucial.
(Yoshiyuki TAMURA)
4

Limitations on the right to seek an injunction--- the conclusion of a theoretical study andpossible solutions for practical issues
pertaining to standardized technologies

The exercise of a patent right that isessential for a technical standard raises some
practical issues. It is unfortunately the case thatsome patent holders commit a wrongful act orchange or waive licensing conditions in the
middle of the standardization process. Against●

IIP Bulletin 2012 Vol.21

this background, deeply concerned about issues
that tend to arise when a patent holder exercises
the patent right, especially the right to seek an
injunction, which could have the greatest effecton third parties, I examined, from a theoreticalperspective, the possibility of limiting theexercise of such a right. Furthermore, on theassumption that it is theoretically possible toimpose such limitations, I examined what kinds oflegal grounds those limitations have and how thelimitations should be implemented.
A theoretical study on the limitations on the
injunctive relief was conducted from the following
two perspectives: the perspective of economic
efficiency and the perspective of patent history.
The conclusion drawn from the study is that,even if infringement of a valid patent right has
occurred from the perspective of formality, it istheoretically impossible to completely permit, on
the mere grounds that the patent right exists, theexercise of the right to seek an injunction. This isfundamentally different in nature from the view
that, even though the right to seek an injunction
is exercisable against any act of patent
infringement in principle, the right to seek an
injunction may be limited under certain
circumstances as long as the doctrine of "abuse ofright" is found applicable.
The exercise of the right to seek an
injunction in the context of the establishment oftechnical
standards
has
thefollowing
characteristics. First, the patent holder has somerelationship with the standardization group or
activities in many cases. Second, from theperspective of whether the patented invention or
any related technology has ever been worked, it
is impossible to conclude, with absolute certainty,
that it has never been worked. These
characteristics should be taken into considerationin the course of the establishment of therequirements for imposing limitations on the
injunction.
The last issue that has to be addressed is
how the system of limiting the injunction shouldbe implemented within the framework of law.
From the perspective of interpretation of thecurrent Act, such implementation would be rather
difficult if the Act is literally interpreted. Even if
such implementation is theoretically possible, it
is still necessary to discuss how specificrequirements or other factors should bedetermined. From the perspective of legislation,
options seem to be limited to the following two
approaches:
stipulating
highlyabstract
requirements for the exercise of the right to seek3 ●

an injunction or stipulating, with a certain level ofclarity, the factors that should be taken into
consideration when the exercise of the right toseek an injunction is permitted. I have come tothe conclusion that, at least, it would bereasonable to further consider the idea that two
factors, i.e., the extent of damage that the
infringement has caused to the patent holder andthe balance of burdens between the patent holder
and the infringer, should be taken into
consideration.
It takes a long time to establish a legal
theory to limit the exercise of the right to seek an
injunction. It would be beneficial to explore
different approaches to solve practical issues
concerning technical standards.
(Ryuta HIRASHIMA)
5

Use of the compulsory license system

While the Japanese Patent Act has provisions
concerning compulsory licenses (Articles 83, 92,
and 93 of the Patent Act), there have been nocases where a ruling for a compulsory license washanded down. So far, any request for such a rulingwas withdrawn before a ruling was made.
In the case of an essential patent for atechnical standard, the most likely scenario is the
grant of a compulsory license for the publicbenefits (Article 93 of the Patent Act). However,it should be noted that the public benefits of thegoods, etc., involved in a particular case are not
the same as the public benefits of mandatory
standards or voluntary standards. The case where
an injunction is handed down against the
production, sale, etc., of the goods disputed in aparticular case does not necessarily fall under acase where “the working of a patented invention
is particularly necessary for the public interests”
as specified in Article 93, paragraph (1) of the
Patent Act. Another issue would be how to
calculate the royalty as compensation for the
grant of a compulsory license.
In many cases, the owner of an essential
patent is a non-practicing entity (NPE). Therefore,
it is possible to use a compulsory license for an
invention that is not worked by the right holder(Article 83 of the Patent Act). However, if apatented invention is not worked because thepatent holder has made a business decision towithdraw from the business, it would be
impossible to consider that “reasonable grounds”
specified in Article 85, paragraph (2) of the Patent
Act do not exist.
Under the Japanese law, administrative●

organs (the JPO Commissioner or the Minister of
Economy, Trade and Industry) are entitled to
grant compulsory licenses. In some othercountries, judicial organs are entitled to grantcompulsory licenses. In China, there were some
infringement lawsuits where the court that foundpatent infringement ordered payment of a certain
amount of fee instead of granting an injunction.
As described above, some other countries
have a system that permits the filing of a request
with a judicial organ to seek a ruling for acompulsory license. In light of the fact that thecompulsory license system is rarely used in Japan,
it would be beneficial to study such system from alegislative perspective.
(Kotaro KIMURA)

Ⅲ Abusive exercise of a patent
right
in
the
courseofstandardization
processfortelecommunications
technologies
The purpose of the antimonopoly law is toprevent and remove the adverse effects ofmonopoly, and create and maintain a competitive
economic environment. On the other hand, thepurpose of the intellectual property systems is topermit the monopoly of information in order toprotect the interests of the information creator,
and thereby increase the incentive for invention
and creation, and promote industrial development.
The creation of a competitive environment andthe protection of creative activities such as
invention are both aiming to further develop thenational economy. For this reason, these two
approaches are compared to the two wheels at theends of an axle, heading in the same direction.
In reality, however, the direction is different
between the two approaches in many cases.
Sometimes, they conflict each other. This raises
the issue of how they should be adjusted. Thisissue has recently emerged in the form ofwhether it is possible to raise a defense of
violation of the antimonopoly law against the
party exercising an IP right and to limit theexercise of the right.
The Japanese antimonopoly law specifies
that, “The provisions of this Act shall not apply tosuch acts recognizable as the exercise of rights
under the Copyright Act, the Patent Act, theUtility Model Act, the Design Act, or the
Trademark Act” (Article 21 of the antimonopolylaw). If the circumstances of a particular casesatisfy the requirements specified in an
4 ●IIP Bulletin 2012 Vol.21

intellectual property law, it would be regarded asa case of the “legitimate exercise of a right,”
which is exempted from the antimonopoly law.
While this provision has been interpreted invarious ways, it is not always easy to find adelicate balance between the value principle of
the antimonopoly law and that of the IP systems.
In recent years, the U.S. has been trying to
restrict the formation, maintenance, andreinforcement of an unlawful monopoly by misuseof a patent right because there has been an
increasing number of cases where a patent rightis exercised in a wrongful way in the course of thestandardization process for telecommunications
technologies. In light of this situation in the U.S.,
I
examinedtherelationships
betweentelecommunications
technologies
andthecompetition law (antimonopoly law), more
specifically, between patent rights and thecompetition law.
(Shuya HAYASHI)

Ⅳ Issues
ConcerningtheManagement of Standardization
Organizations
This Chapter, “Issues Concerning theManagement of Standardization Organizations,”
examines the Association of Radio Industries andBusinesses (ARIB) as an example, explaining theoutline of the activities and management of thestandardization organization, the policy ofintellectual property rights pertaining tostandards, and the declaration process.
This
Chapterclassifies
thetelecommunications standards into three groups:
de jure standards, forum standards, and de facto
standards, and shows into which group the ARIB
standards are categorized.
Regarding the activities and management of
the standardization organization, this Chapter
covers the history and the recent developmentsof the ARIB, the outline of the standardization
projects and activities of the ARIB, theorganizational structure, the workflow ofstandardization, the outline of the ARIB voluntarystandards and their relationships with the national
mandatory standards. This Chapter describes
what kind of intellectual property policy anddeclaration process the ARIB Standard Assembly
has adopted for voluntary standards. This Chapter
also presents the history of the intellectual
property policy jointly adopted by ITU, ISO, andIEC.
Lastly, this Chapter addresses various issues●

IIP Bulletin 2012 Vol.21

concerning the management of standardization
organizations, which have been dealing with thediversification of technologies subject tostandardization.
(Kouhei SATO)

Ⅴ Conclusion
This paper examines, from new perspectives,
cases where the holder of an essential patent
exercises the right to seek an injunction. This
paper also identifies issues and proposes possible
solutions from a legal perspective. This Chapter
will supplement the previous Chapters by
analyzing the issues from an economic
perspective and calling for further study on somepoints.
First, it is important to understand why
lawsuits where the holder of an essential patent
exercises the right to seek an injunction are
increasing in importance. As shown in this paper,
cases where the holder of an essential patent
exercises the right to seek an injunction havebeen increasing both in and outside Japan. These
cases have been receiving growing interest fromJapanese companies. The United States
Department of Justice recently (February 2012)
completed a study as to how competition isaffected by the corporate mergers and patentacquisitions conducted by Apple, Microsoft, andGoogle. The primary focus of this study was tofind whether the essential patents of Motorola
Mobility and Nortel, which were chosen as
targets of such mergers, would continue to belicensed under the RAND terms. The study
concluded that the market competition in theradio equipment industry, which manufactures
mobile phones, PCs, tablet computers, etc., would
be greatly affected by whether the holder of an
essential patent is permitted to seek an injunction.
The growing importance of essential patents is
attributable to the facts that the rapid spread of
the Internet has made it very important toaccumulate,communicate,andprocess
information in accordance with standardized
systems, that standard technologies aredeveloped based on the patented achievements ofinnovative activities, and that patent holders,most of which used to be manufacturing
companies, have been diversified into patent
management companies and other non-practicing
entities (NPEs: Companies that own patents but
do not work the patented inventions).
Second, the role and negative side of theright to seek an injunction need to be clarified.
5 ●The right to seek an injunction plays an
indispensable role in having the royalty reflect
the economic value of a patented invention. The
economic value of an invention lies in thediscrepancy between the economic value gained
without the invention and the economic value
gained with the invention. The very existence ofthe right to seek an injunction forces the licensor
and the licensee to have negotiations to reflect
the discrepancy in the royalty. Moreover, theexistence of the right to seek an injunction
encourages a person who hopes to exercise
another person’s patent right to conduct license
negotiations with the patent holder in advance inorder to obtain a license. In this sense, theexistence of the right to seek an injunction
functions as a system to ensure compensation for
inventions. In view of the fact that patentapplications and registered patents are open to
the public, if the system of damages were the only
option, the right holder would be unable toreceive any compensation unless the right holder
demands damages. It would be difficult for theright holder to secure sufficient compensation for
the invention. This function of the right to seek
an injunction is important regardless of whether
the right holder is a company or an NPE.
However, in an environment where thenumber of essential patents is very high, the rightto seek an injunction would not properly function
as a system to reflect the economic value of an
invention in the royalty because of the following
two reasons. First, the exercise of an essential
patent could block the use of a technical standard
as a whole. Therefore, the fact that each patent
holder is entitled to seek an injunction could
make it possible for patent holders to demand an
excessively high royalty relative to the actual
value of the patent. Such excessive royalties foressential patents would, if accumulated,
excessively deter the use of standards as a whole.
Second, it is not always the case that an essential
patent for a standard is recognized and licensed
through negotiations before the user that hopes
to use the standard starts investing in thebusiness that requires the use of the standard. If
the holder of an essential patent for a standard
starts licensing after the standard becomeswidely adopted, there is a risk that the patent
holder could demand an excessive royalty.
Companies tend to consider a license for an
essential patent to be indispensable even if they
have to pay an expensive royalty. This is
attributable to the facts that, even if an injunction
is issued, it is difficult for the company to●circumvent infringement by making technicalchanges and that the company, which has made alarge amount of capital investment for the use of
the standard, does not want to see the investment
become a sunk cost.
In light of this risk, as a custom in thestandardization process, a standard is adopted
only after the holder of an essential patent agrees
to license the patent under the RAND terms.
However, even if each patent holder agrees togrant a license under the RAND terms, it would
not guarantee that the total of the royalties for allof the essential patents is reasonable. It is often
the case that essential patents are not finalized at
the time when the standard is established. In
many cases, some of the companies thatparticipate in the standardization process do notdisclose essential patents. There is also a
possibility that some essential patents are ownedby third parties. In some cases, a patent is notessential even if the patent holder claims it is. In
the case of an essential patent that is included ina cross license pool, the patent holder does notnecessarily designate the essential patent anddemand the conclusion of a license agreement inadvance. Due to these circumstances, it isdifficult for a company hoping to use a technicalstandard to obtain a license for every essential
patent for the standard before investing in thebusiness that requires the use of the standard.
Even if an essential patent is recognized ex
post, the right to seek an injunction would not be
exercised if the patent holder agrees to grant alicense under the RAND terms. However, in
reality, many ex-post lawsuits to seek an
injunction were filed in and outside Japan. Further
study is necessary to find the reasons for thisphenomenon. One of the possible reasons may be
the insufficient information disclosure or
insufficient prior patent searches (e.g., a casewhere a patent holder did not disclose patent
information on purpose in the course of thestandardization process and sought an injunction
ex post or where a third party whose patent was
not found in a patent search sought an injunction).
Other possible reasons are as follows. First, inthe case where an essential patent is transferredfrom one company to another, if the new patent
holder considers that the transferred obligations
do not include the obligation to grant licenses
under the RAND terms, the new patent holder
could exercise the right to seek an injunction asleverage to demand an expensive royalty. Second,
if a patent is transferred from a company using apatent in business to a non-practicing entity
6 ●IIP Bulletin 2012 Vol.21

(NPE) such as a patent management company, theNPE would have greater bargaining power thanks
to the right to seek an injunction and may
therefore exercise the right in order to have theroyalty reflect the increased power. Third, even if
a patent holder agrees to grant licenses under the
RAND terms, since the details of the license forthe patent are unclear, the patent holder could
demand a royalty that is expensive from theviewpoint of users.
There are many other issues that needfurther research. First, it is necessary to examine
how much royalties a user of a technical standard
has to pay in total and whether the accumulated
total of royalties is excessive or not. The patentpool system and the cross license system havebeen used in an effort to lower the accumulated
royalties. Therefore, it is also important toexamine what effect these systems have on theroyalties. Second, it is also important to examine
cases that are subject to legal proceedings andfind when essential patents were recognized, inparticular, whether essential patents wererecognized in the course of the standardization
process and were made available for licensing
under the RAND terms. Third, further
clarification of the RAND terms is necessary.
Some cases currently subject to legal proceedings
seem to have been attributable to the difference
between the patent holder and users in terms of
the interpretation of the RAND terms. A clear
understanding of the RAND terms is
indispensable for the court and administrative
agencies to determine whether the patent holder
is demanding an excessive royalty. The
importance of the clarification of the RAND terms
has long been pointed out. Fourth, it is necessary
to examine whether a patent holder whose rightto seek an injunction is limited can obtain an
adequate amount of compensation by using asystem of damages, and if not, then what systemshould be established instead.
In the preceding Sections, I examined various
issues and proposed some future research topics,
hoping to see further study on these topics.
(Sadao NAGAOKA)(Researchers: Masahiro SHIMIZU,
Tsuyoshi UCHIDA)●

IIP Bulletin 2012 Vol.21

7 ●