9Measures for Smooth Use of Patented Inventions

The use of patented inventions has been discussed as a general subject, focusing especially on technicalstandards and upstream technologies in life science. However, it has been pointed out that measures thereof
should be further examined based on a more specific understanding of the current situations. In this research,specific cases relating to that subject in question and the current situations in the industry and academic sector
are investigated, and studies on measures thereof is developed.
With respect to technical standards, the investigation of the current situations was focused on patent poolsthat are formed to efficiently conduct the licensing of essential patents, identification of essential patents, andpatent statements in international standardization. With respect to upstream technologies in life science, theinvestigation reveals the current situations that patented inventions are not necessarily used smoothly. For
example, a license on another’s patent is not obtainable, and thereby, the relevant patented invention is notaccessible, and subsequent research is thus blocked.
Possible measures including compulsory licenses should be further discussed based on the current
situations and specific cases investigated in this research.

Ⅰ Introduction
Recently, a lot of discussions have been heldon use of patented inventions in specific technicaland industrial fields. In particular, many of them
have been given so far to technical standards andupstream technologies in life science. However, it
has been pointed out that more specificunderstandings of the current situations thereof
and further discussion on measures thereto areneeded.
Patent licenses essential for a technicalstandard may be collected at a patent pool. Thereis concern that the owners of essential patents
who do not participate in patent pools may claim
or enforce against the users of standards.
Participants in standardization, owners ofessential patents, patent pools, participants inpatent pool, and users of standards may be
intricately involved in standards, and their views
on standardization with patent licenses are varied.
Possible measures to solve issues on patents
regarding standards include compulsory license,
the Antimonopoly Law and guidelines.
Options for measures to solve issues onpatents regarding upstream technologies in life
science include compulsory license, guidelines
for licensing and the Antimonopoly Law. On theother hand, although no case law has been
established with respect to the scope of
exceptions for experiment or research, it isgenerally accepted at the moment that researchwith the subject matter of the patented invention
is outside the scope of that exception and falls

IIP Bulletin 2006

into an infringement of the relevant patent,
regardless of the entity that uses the invention(university, company, etc.) and the purpose of
research.
However, only a few cases concerning theissues in question have been identified, and thus,
it can be hardly said that current situations havebeen studied to the extent necessary andsufficient to consider measures to solve theissues. Therefore, in this reserach, specificexamples of relevant issues and the current
situations in the industry and academic sector
were investigated, and measures for the smoothuse of patented inventions were further
examined.
The outcomes of the research is summarized
as follows.

Ⅱ Issues on Patents Concerning
Technical Standards(General) Major issues on standards and patents
have already been considered from various angles.
In this research, these issues were arranged inthree stages.
With respect to the standardization stage,
firstly, the major issues include the developmentof patent policies of standardization bodies/organizations, patent statements, patent search,outflow of technical information, adequacy ofroyalty-free patent licenses and preference ofstandardization bodies/organizations in anticipationof a prompt and smooth formulation of a standard.
With respect to the stage of establishing● 70 ●

patent/license pools
after
standardization,
secondly, major issues include location andoperating entity suitable for the management ofpatent/license pools, evaluation of essential
patents, divisions or amendments of patentapplications, nonparticipation of patentees inpatent pools, situations where several patentpools exist separately for one standardized
technology, income distribution of patent pools,
Antimonopoly Act-related guidelines recently
published, capping of license fees to be paid topatent pools, and cumulative license fees due tothe use of many standardized technologies for one
product to be on market.
Major “holdup” issues after standardization
include the possibility to apply compulsory
license to solve, the possibility to apply the
Antimonopoly Act-related guidelines, reasonable
license fees for parties concerned, andprocedures for restarting standardization after
holdup occurs.
(Specifics) Firstly, this report introduces thefollowing as specific cases in the standardization
stage: attempts to seek ways to establish a patentpool covering a hypothetical standard; the current
trends in China of their own standardization; acase where a concern has arisen in the smoothuse of standardized technology due to an
unexpected patent statement made at the final
stage of standardization; the situation where apatent search cannot be officially performed
despite concern about unidentified essential
patents; and royalty-free patent licensing andbackgrounds thereof.
Next, the following are introduced as thecurrent situations in the stage of establishingpatent pools after standardization: the actual
circumstances and problems relating toframeworks for collective licensing (such as
patent pools) in terms of major standards in theinformation and communications or electricalfields,especially,
standards
relating
tothird-generation mobile communications, DVD
and MPEG; bodies or organizations for theevaluation of essential patents, processes toevaluate essential patent, and problems thereof tobe solved; and the recognition of the present
essential patents evaluation from companies’
viewpoints.
Subsequently, the following are introduced ascases in relation to holdup issues after
standardization: a case where a licensing
conditions offered by a patent pool wasreconsidered taking into account public interest;

and a case where a licensee complained against
licensing conditions fixed by owners of essential
patents, as well as the classification of“outsiders” and examples thereof.
As a reference material, this report includes
comments and opinions by practitioners fromvarious fields on some issues in these threestages.

Ⅲ Issues on Patents Concerning
Upstream Technologies in Life
Science(General) Upstream technologies in life science
include materials such as genes, multi-purpose
equipments, processes such as drug screening,
the process of manufacturing biologicalmacromolecules, and databases and programs
relating to gene sequence information. These
technologies can be generally divided into three
categories: multi-purpose technologies usedirrespective of the research subject; thosespecific to a particular research subject and used
only in R&D stage; and those specific to aparticular research subject and related to relevant
end products.
General issues include: the current
situations where distribution of experimental
materials and patent licensing are not necessarilysmooth; difficulty in detection of patent
infringement;difficultyinjudgingthepatentability of inventions; low predictability of
final commercialization; non-substitutability;
cumulative license fees; and difference in theposition between patentee/licensors and licensees.
In particular, specific issues have arisen in
relation to: licenses solely for research purposes;
reach-through royalties; label licensing; ambiguousboundary between commercial purpose andresearch purpose; market prices of license fees;
license agreement; industry-academia cooperation;
and R&D particularly relating to pharmaceuticals.
According to an accepted theory on exceptionof “experiments or research,” furthermore, one of
the requirements for the exception is that apatented invention itself is the object ofexperiment or research. However, it is difficult todistinguish “research on” the subject matter ofthe patented invention with “research with” thesubject matter of that invention in the relevant
field.
(Specifics) On upstream technologies with low or
no substitutability, in particular, genetic
inventions including genes, proteins encoded● 71 ●IIP Bulletin 2006

thereby and various processes using them, thisreport reveals the characteristics of patentexamination in the relevant field in comparison to
the chemical field; backgrounds for difficulty inobtaining licenses in the relevant field; a casewhere a patent license was not obtainable and thedownstream R&D was inhibited; a case regarding
R&D for gene therapy and enforcements bypatentee of inventions crossly relating to the
R&D; a non-substitutable technology essential for
R&D of antibody medicines; and the viewpoints ofpatentees/inventors of genetic inventions.
Through these, it may be possible to see a portionof the current situations where the use ofpatented inventions is not necessarily smooth andthe subsequent research is blocked, andbackgrounds thereof.
Moreover, regarding multi-purpose upstream
technologies, cases in relation to: R&D andpatent strategies for ES cell-related technologies;
multi-purpose technologies used for geneengineering including vectors; a license wasn’t
obtainable on a gene expression-regulating tool,and research using that tool was significantly
delayed; an experimental animal and the use
thereof in research, a basic invention essential forthe production of recombinant monoclonal
antibodies; R&D and litigations regarding system
tools such as DNA chips and real time PCR; andcomputer programs for bioinformatics are reported
as well as viewpoints of a biotechnological venturecompany. These reveal a portion of the current
situations in the relevant research field, in whichsome of multi-purpose technologies can be hardly
accessed, regardless of whether or not they canbe substituted by the others.
Furthermore,thecurrent
situations
regarding upstream technologies at universities
and companies are reported herein. They may
reveal various issues which researchers face withand have to deal with.
As a reference material, comments/opinions
on some regulations and guidelines in relation to
those issues are provided.

Ⅳ Measures for Smooth Use of
Patented Inventions
1

Possibility to Grant Compulsory LicenseThis consideration is premised on provisions
on compulsory licenses under the current Patent
Law, Implementing Guidelines for Compulsory
License, the Paris Convention, and the TRIPS
Agreement. In Japan, nine requests have been

IIP Bulletin 2006

filed for arbitration decision on grant a
compulsory license in case of non-working whilefourteen have been filed for that in case of
dependent patent. However, no arbitration
decision has been rendered yet.
On the grant of a compulsory license, in
generally, there is a concern about the issue ofbalance with patent protection, impacts ondeveloping countries and industries other thanlife science or technical standard-related fields.
When one asks to be licensed on a researchtool patent, the patentee may refuse to license forthe reasons that the patentee wants to
exclusively conduct R&D, or that parties
concerned do not agree on license conditions.
Even though the patentee does not refuse to
license, the basis to calculate license fees may beunreasonable, or unfair conditions may be set.
Whether conditions are “unreasonable” and how
they are judged should be carefully considered.
Since research tools are used for R&D,
compulsory licenses would be meaningless if
procedures would demand a long time. Further, as
companies now become global and tend toconcentrate R&D on particular countries among
all the countries concerned, compulsory license
in case of no-working should be cautiously
examined, taking into account possible impacts ondeveloping countries. Concerning compulsory
license for public interest, as what “the public
interest” means is not very clear now, carefulconsideration would be needed.
Considering the applicable provisions ontechnical standards, there is a question of which
is appropriate, a compulsory license in case of
non-working or one for public interest. In theformer case, as what the patentee requests ispresumably royalty in many cases, the sole
purpose of arbitration decision is to determine areasonable royalty. However, there would be a
prima facie question as to whether granting
compulsory license in case of non-working for the
purpose of determining a reasonable royalty
meets the originally designed purpose of the
Patent Act. With respect to compulsory license
for public interest, whether a compulsory license
is especially necessary for public interest” would
be a certain subject to be examined. If a standard
has been established for a technology that is an
infrastructure in the world, an idea that it could
be safely said that a compulsory license on thestandardized technology is “especially necessary
for public interest” seems to be prima facie
persuasive. In addition, what is a reasonableroyalty would be questioned. Furthermore, there● 72 ●

is another question as to who should be involvedin the procedures for the grant of compulsory
license on technical standards.
2

Problems in the Antimonopoly Law(i) As a base for free competition, companies
retain the freedom to choose their trading
partners, and refusal to trade becomes a problem
under the Antimonopoly Law only in exceptional
cases. On the other hand, it has been pointed outthat in dealings in relation to intellectual property
rights, refusal to license (refusal to trade) may
have a significant impact on the formulation oftechnical standards and in the field of researchtools.
However, the current situations of such
refusal to license are not yet necessarily clarified
in Japan. Consequently, it is urgently necessary to
firstly collect cases of refusal to license when
discussing the issue of refusal to license with the
Antimonopoly Law.
(ii) Moreover, it is necessary to define themarket where an anticompetitive effect arises
when considering the issue of refusal to licensewith the Antimonopoly Law. In terms of technicalstandards (in particular, those that are not directly
connected to products) or research tools, where apatented invention is a basic technology andsubsequent research of the related field cannot be
carried out without using the relevant patented
invention, it is necessary to define the market,
which incurs adverse effect due to refusal tolicense, from the standpoint of whether or not
subsequent R&D are inhibited.
Until now, application of the Antimonopoly
Law in technology-related cases has covered“product market” or “technology market.”
However, in order to deal with cases in which
subsequent R&D are inhibited, it is necessary toconsider whether the “technology market”
includes subsequent R&D, or whether a newconcept of a “technology development market”
should be introduced into Japan.
(iii) Furthermore, in considering the issue ofrefusal to license with the Antimonopoly Law,
there is the question of substitutability of a
relevant patented invention. That is, it isnecessary to determine the impact of refusal tolicense, the existence of alternative technology,
the impact of refusal to license on subsequent
R&D, and the possibility of alternative R&D inorder to decide whether the refusal to license
becomes a problem under the Antimonopoly Law.
And high-level technological knowledge isrequired to determine any of these. Consequently,
it may be useful for participants instandardization to improve predictability andensure transparency if the Fair Trade
Commission of Japan prepares frameworks for
obtaining an objective and neutral evaluation.
(iv) Acts of forcing participants in standardization
to disclose their patents or agree on the RAND
terms, or acts by technical standardization bodies
of negotiating license fees or other conditions
with those who refused to license may fall into
the category of cartel under the Antimonopoly
Law (unfair restraint of trade). On that basis,
voluntary pre-agreement on the disclosure ofpatents among participants, to an extent notconflicting with the Antimonopoly Law, seems to
be useful in formulating and implementing
technical standards.
(v) In the case where refusal to license wasdetermined to constitute a violation of the
Antimonopoly Law, an order for one who violates
the Antimonopoly Law to license is within thescope of necessary measures to eliminate
violating acts. On this occasion, it would beappropriate to give a moderate order like one to
grant a nonexclusive license to who wants toobtain that under reasonable conditions.
3

Recommendations to Companies onStandardization and Licensing Activities

Standardization activities have been
intensifying in industrial fields such as informationand communications as well as electric appliancesand electronics since businesses have come to be
run on the layer structure.
Not exclusively using a patented invention
but allowing other companies to use has strategic
value. First of all, in a market with network
externality, utility on both the supply side anddemand one will rise through an increase in thevariety of products in cooperation with othercompanies, and the market will expand. Secondly,
if a company constantly outputs new products into
the market ahead of others and allows others toship alternative products subsequently after
undermining the others’ willingness to develop a
substitutable technology by promising them the
granting of patent licenses, the company cancontrol the market. Thirdly, in the informationand communications, and electric appliances andelectronics fields, as many companies carryforward R&D in parallel on a global basis tocreate inventions, they possess many patents
separately. In addition, these fields are● 73 ●IIP Bulletin 2006

characterized by the point that many components
and subsystems using patented inventions
integrated and then constitute one product orservice. Thus, cross-licensing is indispensable.
Therefore, Japanese companies should lead themarket by utilizing their patents throughlicensing.
In international standardization activities, itis necessary for companies to increase partners
and actively work to incorporate their own
technologies but patents into standards.
International standardization activities arepolitical negotiations but are not opportunities todetermine the superiority of technologies.
Companies should let employees who are good at
negotiation participate in relevant activities.
It is risky to expect patent pools too muchsince high costs are required in negotiation toform patent pools. However, if a common
understanding that “there is a possibility oforganizing a patent pool in the future” is sharedby participants of the standardization in theprocess of their activities, negotiations may
become easier. Japanese companies should
actively encourage foreign companies to form
patent pools, while looking into future, if
necessary.
4

Trends toward Improving Standardization
Procedures at International Standardization
Bodies or Organizations

Among the major international standardization
bodies, ISO, IEC and ITU-T, ITU-T has the finest
procedures for handling intellectual property.
Specifically, ITU-T has established IPR policy
guidelines, and patents for which patentstatements have to be submitted to declare are
restricted to essential ones according to theguidelines. Contrary to this, ISO/IEC is behind
ITU-T in the development of IPR policy. However,Japanese Industrial Standards Committee: JISC)
continued active proposal at ISO/IEC Joint
Technical Committee 1 (JTC1), and then SC29 of
JTC1 adopted submission of a proposal to use acommon format for patent statements to the JTC1
in 2004. With this as a turning point, thediscussions have been expanded into entire
ISO/IEC. Consequently, in February 2005,
discussions on patent policy started at the WSC,
which was established as a organization forcollaborative activities among the ISO, IEC and
ITU.
The JISC decided to actively provide input tothese activities through the secretariats of the

IIP Bulletin 2006

standardization bodies. It set up a committee on
establishment of standards including patent rights
within Japanese Standards Association, andpresented concrete opinions on IPR issues anddraft guidelines to the ISO and IEC in December
2005. In this, the JISC sorted out various issues
regarding relationships between standardizationand intellectual property in a comprehensive
manner and made some proposals as immediatetasks while noting that there remain many
problems that standardization bodies should
consider.
The outcomes of the WSC, which werediscussed at the TMB in February 2006, include a
draft code of conduct for a patent policy shared bythose three bodies, and draft guidelines for
implementation of patent policy. ISO and IEC
agreed to handle royalty-free and RAND as
separate patent licensing methods for the firsttime, marking a significant step toward theadoption of a common patent policy with the
ITU-T. Moreover, Japan’s proposals werepositively incorporated in the draft guidelines for
implementation of patent policy, and these newpatent policy and guidelines are highly likely to be
adopted soon.
Asdescribed
above,
standardization
procedures at international standardization bodies
have been significantly improved in the last year.
This can be considered to be the outcome of theactive approach to the secretariats of the bodies
by Japan and other technologically advanced
countries where many licensors operate.
However, since the previous consideration has
been somewhat in a bit favor of licensors, it isnecessary to continue consideration from thelicensees’ viewpoint.
5

Possibility to Apply Exception
Experiment or ResearchofAccording to an accepted theory up in Japan,
the scope of experiment or research should bedetermined on the object and purpose of research.
The object of experiment or research shall belimited to a patented invention itself in question,and the purpose of experiment or research shallbe limited to “advance of technology” The reportof the Working Group of Issues Related to Patent
Strategic Plan (within the Patent System
Subcommittee of the Intellectual Property Policy
Committee of the Industrial Structure Council),titled “Issues Concerning Smooth Use of
Patented
Inventions”(November2004),
concluded that the view of the accepted theory is● 74 ●

not inappropriate. According to the view of thetheory, in many cases on patents claiming
upstream technologies in life science, it seems
that research in question does not fall into
exceptions for experiment or research. In
addition, the scope of a patented invention does
not differ depending on whether research is forcommercial purpose, or whether the entity thatuses the invention is a company. However, nocase law has been established for a relevant
provision, and there are a variety of opinions
thereon.
In the United States, the Supreme Court
held in June 2005 that Section 271(e)(1) of the
U.S. Patent Law, which stipulates immunity fromresearch relating to application for regulatory
approval for the production of medicines, shallapply to all uses reasonably related to thedevelopment and submission of various types of
information under U. S. Federal laws which
regulates pharmaceuticals, etc., and apply toresearch even in the preclinical stage. On theother hand, with respect to the point of view on
the use of patented inventions for research tools,
the Supreme Court did not provide any generalprinciple.
In Belgium, the revision of the Patent Act
was issued in April 2005; thereby the scope of
application of exceptions for use of patented
inventions for research purposes was expanded.
Article 28(1)(b) of the revised Belgium Patent
Law stipulates that the right of the patentee shallnot extend to research on or with the subject
matter of the patented invention for scientificpurpose.
6

RecentMovements
Guidelinesto

Formulate

In Japan, various guidelines relating to thesmooth use of patented inventions have been indevelopment. In June 2005, the Fair Trade
Commission of Japan published guidelines on
standardization and patent pool arrangements. In
addition, the Council for Science and Technology
Policy is carrying forward the formulation ofguidelines for the licensing the intellectual
property rights derived from R&D funded by theGovernment for the purpose of research use.
In industry, the Japan Pharmaceutical
Manufactures Association published in January
2006 the “Guideline for Research Tool Patent
Licensing (proposal).”In the world, the Organisation for Economic
Co-operation
andDevelopment
published“Guidelines for the Licensing of Genetic
Inventions,” which would be applied for humanhealthcare, as the recommendation of the OECD
Council at the end of February 2006.

Ⅴ Conclusion
In this research, current situations were
investigated and analyzed with respect to issues
on technical standards with patents, particularly
focusing on issues concerning patent pools which
are organized to license efficiently on patents
essential for technical standards. Since R&D iscarried out in advance of the standardization oftechnologies, a time lag often arises between
grants or issues of essential patents andstandardizations. Seeking to organize a patentpool based on a hypothetically presumed technicalstandard could be useful as an attempt to bridge
such a temporal gap. Moreover, if the object of atechnical standard is too broad when organizing aframework for collective licensing (such as apatent pool), the number of essential patents
thereof will increase accordingly, that may lead toa problem under the Antimonopoly Law. On theother hand, the problem of escalating cumulative
license fees should also be avoided. Therefore, itis necessary to continue trying to organize
frameworks for collective licensing in more
preferable manner. Regarding the evaluation of
essential patents, it is important to try to achieve
prompt and precise evaluation procedures
through further encouragement of training
candidates who evaluate patents and fixing theprocedures. Furthermore, for the capping oflicense fees paid in using standardized
technologies, adequacy of the capping tends to bea problem, so it is necessary to cap taking into
account manufactures and sales. A complaint
about the license conditions set by the owner ofan essential patent becomes a problem
particularly in the case where the patentee is a
R&D-based company but does not manufacture orsell products. If a market expands, however, theincome from license fees increases, which is also
advantageous to R&D companies. Therefore, it isexpected for parties concerned to hold positive
discussions.
With respect to upstream technologies in life
science, so far as investigated in this study, no
one denied the necessity of patent protection.
However, there have been cases where the use of
upstream technology was inevitably abandoned
due to the difficulty in obtaining a relevant patent
license, and it has become clear through the● 75 ●IIP Bulletin 2006

present research that R&D is and could be
disturbed actually. In terms of exceptions forexperiment or research, the majority of uses on
upstream technologies patented in life science are
not considered to fall into such exceptions,according to an accepted theory. However, a caselaw thereon has not yet been established, and avariety of opinions have been provided. For
example, some point out that the exceptions are
not sufficiently based on natures specific to therelevant field since the accepted theory had been
established before those issues became obvious.
Therefore, it would be necessary to continue
consideration from the viewpoint of globalizationof R&D, taking into account international scene
such as the U.S. Supreme Court decision and therevision of the Patent Act in Belgium.
As for the adequacy of granting a compulsory
license by an arbitration decision for smooth useof patented inventions, the first institutional
problem is which one can be applied to uses ofpatented inventions relating to technicalstandards and upstream technologies in life
science. “Non-working of patented invention,”“dependent patent” or “public interest”? Of these,“non-working of patented inventions” should be
carefully examined taking into account possible
impacts on developing countries, since companies
now become global and tends to concentrate their
R&D on particular countries among all thecountries concerned. As “dependent patent” isapplied to only the cases in which a patented
invention cannot be practiced without using
another patented invention that the former
depends, a request for an arbitration decision canbe filed if the requirements are fulfilled.
Consequently, there seems to be no other way but
to use “public interest.” However, the“Implementing Guidelines for the Compulsory
License” illustrates only two occasions where a“compulsory license is especially necessary for
public interest.” One of them is the following:“where proper development of the relevant
industryisinhibitedwithout
granting
non-exclusive license on the relevant patent, andconsequently, substantial adverse effect on
people’s livings is observed.” However, noconcrete directions has been provided withrespect to the requirements of “inhibition ofproper development of the industry” and“substantial adverse effect on people’s livings.”
Therefore, it is not clear what should be provenwhen a request for an arbitration decision is filed.
For these requirements, a more specific andconcrete directions should be given in the

IIP Bulletin 2006

“Implementing Guidelines for the Compulsory
License.” Moreover, some have pointed out
concerns as to how the compulsory license isoperated. Patentees may refuse to license when
they want to exclusively conduct R&D or when
they cannot agree on license conditions. Since
standards on which arbitration decisions are madehave not been established at all in Japan, it haveto be said that how adequacy of arbitration
decision is judged and how license fees are
determined are totally unpredictable. There hasarisen concern that the grant of compulsory
license by arbitration decision will become
meaningless if arbitration decision procedures
demand a long time or if the license fee
determined is too expensive. It’s very importantto secure prompt decision procedures andadequacy of judgment or determination.

● 76 ●(Senior Researcher: Toru WATANABE)