2

Institutional Issues Regarding Distribution and
Securitization of Intellectual Property

In this research study, in light of the development of systems relating to the distribution and securitizationof intellectual property (IP), we aim to discuss (1) how to protect the non-exclusive licensee against the effects of
the licensor’s bankruptcy or the transfer of the IP rights from the licensor to a third party in cases where thelicense is not registered, and (2) how to solve problems arising from IP trusts in order to promote IP
management and utilization by way of IP trusts.
Regarding the issue mentioned in (1), we propose a new system under which a statutory license shall be
granted to the licensee within the scope of the existing non-exclusive license if the licensee is exploiting or
preparing to exploit the IP rights at the time of the licensor’s bankruptcy or the transfer of the IP rights. We
discuss the requirements, effects, and legal relationships under the statutory license system as well as therelationship of the statutory non-exclusive license system with the Bankruptcy Law and with the existingregistration system.
Regarding the issue mentioned in (2), we discuss the applicability of Section 102(1) and (2) of the Patent
Law in cases where the holder of the patent rights in trust (trustee) seeks to claim damages for patent
infringement, and showed directions of solution.

Ⅰ Introduction

Ⅱ Survey on Present Status of IP
Management and Utilization

In recent years, as intellectual property (IP)has become increasingly important in thecorporate management context, the necessary
legal framework for IP utilization has been put inplace through the revisions to the TrustBusiness Law and the Bankruptcy Law in 2004
and the enforcement of the Limited Liability
Partnership Law in 2005. Meanwhile, in FY2003,
the Institute of Intellectual Property (IIP)
conducted research studies on “Practical Issues
Arising from the Introduction of the Trust
System for Intellectual Property” and “TheAppropriate Protection of Intellectual Property
License Agreements”, and extracted practicalproblems concerning the use of IP trusts andlicensee protection.
Against this background, the IIP conducted
this research study with the aim to explore amethod and design a system to protect the
non-exclusive licensee against the licensor’s
bankruptcy or the transfer of the IP right (e.g.
patent right) from the licensor to a third party incases where the license is not registered, anddiscuss solutions to problems arising from IP
trusts in order to promote IP management andutilization by way of IP trusts.

IIP Bulletin 2006

1

Current Status and Problems
Administration of IP Trustsin(1) Problems in using management-type IP
trustsIn their early stage of development after theestablishment of their business, small- andmedium-sized enterprises (SMEs) and venturecompanies raise funds from various subsidies andventure capital funds invested in their stocks.
They release new products as their businessexpands, and price competition and IP risk
intensify significantly as their products penetrate
the market. From the early post set-up stage
through to the middle stage, SMEs and venturecompanies need funds to cover IP risk, but
venture capital firms tend to delay investment
until the target companies reach the late stage intheir preparations for a new listing. Thus, SMEs
and venture companies have only limited options
for financing in the middle development stage
when they need funds to establish IP portfoliosthat will have a significant influence on business
management after those firms are listed. Thisphenomenon occurring in the course of thecreation of the business is called “second deathvalley”. A management-type IP trust is one of themost effective means to solve this problem, and if
it is established as a standard means, it will
enable companies to raise funds in a straight line

● 10 ●

along with growth right through from the earlystage to the middle stage and the late stage.
However, although SMEs and venturecompanies, facing the second death valley, havehigh expectations from IP trusts, they cannot
easily introduce this scheme, while financial
institutions that are to undertake IP trusts only
perceive risks with this scheme, without seeing
any advantages. Specific factors that prevent
SMEs and venture companies from introducing
management-type IP trusts are as follows.
(I) Most SMEs and venture companies thathave the possibility of employing this scheme
have filed or are planning to file patentapplications. Pending patents can be specified
in trust contracts but it is difficult to specify
patent applications before they are filed. Lackof funds might lead to the failure to fileapplications. Such uncertainty must be solved.
As the prerequisite for establishing an IP trust,at least prior art search or patent search should
be conducted.
(II) In the case of a management-type trust, thetrustor should pay commission fees in addition
to management costs. Considering thatinternational patent applications should also be
filed, the trustor would have to incur
considerable costs.
(III) Where the trustor is the beneficiary, thetrustor only obtains a beneficial interest in
trust, and needs to sell it in order to raise funds.
In this case, the trustor should pay costs for
economic evaluation of the entrusted IP by athird party entity. Furthermore, the sale of abeneficial interest in trust is regarded as a bondtransfer instead of a stock transfer, andtherefore taxable. The trustor would be
required to pay royalties when using theentrusted IP for its own business.
Although most problems that may arise fromthe introduction of IP trusts can be solved under a“trust contract,” practical problems that cannot
effectively solved under a trust contract or otherrelated contracts still remain. Also, the following
issues should be taken into consideration, though
they are not specific to a trust scheme alone.
(I) Earning royalty income from the trustor
and the existing licensees under a licensing
contract is an important method to secure
cash flow for trust operations, and this will
have an influence on the evaluation of theentrusted IP.
(II) It is desired for a development contract tobe concluded between the trustor and thetrustee. In this respect, it is necessary toconsider whether the trustee can commission
development to the trustor under the contract.
(III) The value of SMEs and venture companies
will also increase when they transfer their IP
into trust. IP trusts should be designed so thatthey will be used as a favorable factor in thescreening for a listing.
(2) Awareness of practical issues on IP
trusts among trust companies andproblems to be solved(i) Upon the establishment of a trust
The first action to be taken by a trust
company upon accepting IP rights into trust is to
identify the IP rights to be placed in the trust, andat this point, due consideration should be given toconflicts of interest. Since patent rights and otherindustrial property rights become effective
against a third party through registration, they
can be isolated from the bankruptcy of the rights
holders if the transfer of such rights is ensured.
On the other hand, it is difficult to ensure thetransfer of copyrights because there is no
registration system for copyright licenses. In
accounting and taxation procedures, in the case ofa management-type IP trust, the trustor(beneficiary) is regarded as retaining theentrusted IP. In the case of a securitization-type
IP trust, no problem occurs if the entrusted IP is
recognized as assets, but accounting and taxation
would be difficult if it is included in unlisted
assets. Furthermore, the transfer of rights
requires a registration and license tax, which will
be a considerable amount where a business groupplaces in trust a number of rights in bulk.
(ii) During the trust period
Where a conflict of interest occurs during thetrust period between the trust property and thetrustee’s own property or other property
entrusted to the trustee, the trustee would haveextreme difficulty in dealing with such a conflict.
(iii) Upon the termination of the trust
Upon the termination of a management-type
trust, the trust property is delivered to thetrustor (beneficiary) as in the current status. In
the case of a securitization-type trust by which
the beneficiary invests in the IP purely for the
purpose of obtaining cash flow, such delivery inthe current status would not be assumed, andtherefore it would be difficult to finally dispose of
the trust property unless the property is finallybought by the trustor or licensee or converted
into money in the market.

● 11 ●IIP Bulletin 2006

Drafts and scenarios can be placed into trust
as works, but registration procedures would
be complicated because the contents ofpossible copyrights will change as the works
come near to completion. Another problem
relates to the requirements for setting up a
defense against third parties. Confusion may
also occur in practice because a non-exclusive
license based on patent rights cannot be
claimed as effective against third parties
unless it is registered, whereas thisrequirement is not applicable at all to a
copyright in terms of authenticity.

(3) Current status and problems regarding
administration of IP trusts(i) Current status regarding administration of
IP trusts
One basic financing scheme involving theuse of an IP trust is to entrust movable property
in combination with IP. Another scheme is toplace IP into trust for investment purposes in thesame way as placing money into trust, which has
become possible as a result of the revision to theTrust Business Law. In addition to these basic
schemes, it may also be possible to transfer IP
into trust via a special purpose company when thedevelopment of the IP reaches completion.
(ii) Problems regarding administration of IP
trusts(Ⅰ) Problems in taxation
1) Where a trust is established for IP rights
per se, the principle of pass-through taxation
applies and therefore the trust necessarily
causes losses, which cannot be reported as
losses in an individual’s accounting
statement. Since in the case of individual
investors income from IP is regarded as
taxable income, they would be treatedunfavorably in taxation. To avoid thissituation, where an IP trust is established toraise funds from individual investors, thetrust should be treated as a joint money trustor financial instrument.
2) Where the senior-subordinate structure isapplied to beneficial interests in trust,
taxation procedures would be extremely
difficult, making it impossible to deal with IP
trusts under the present conditions.
3) Where patent rights with no book value or
beneficial interest therein is transferred into
trust, it is necessary to clearly determine
whether the transfer is taxable.
(Ⅱ) Problems in distribution
In order to use IP as an investment target for
institutional investors, the IP must be of acertain size and distributable. Large
securities companies seek to deal with IP,
but in reality, they have to compile an IP
package because the value of each IP item issmall. It would be more convenient if there
was an IP trust market. The existingprocedures for transferring claims payable toa specific person are cumbersome.
（Ⅲ) Problems in registration
An operational problem with the registration
system arises for unfinished works for which
copyrights have not yet come into existence.

IIP Bulletin 2006

(4) Current status and problems regarding
IP activities
In recent years, proactive approaches havebeen carried out toward IP activities. Under suchcircumstances, the essential concept and thepractical understanding of IP activities have been
established, and such activities are now at atransitional stage. Companies promote IP
activities more intensively and selectively from afurther strategic perspective in relation to theirown businesses, while universities face a major
challenge of how to secure resources for IP
activities.
Along with such proactive trends in IP
activities, various IP services such as patentevaluation have come onto the market but not yetachieved as impressive results as expected, being
unable to gain a high reputation. In this respect,
the development of IP service providers is also ata critical stage. They need to acquire thecapability to provide high-level services so as tosatisfy the needs of companies and universities.
One major objective of IP activities is toobtain royalty income or commercial benefits
through distribution of IP. Unless a certain process
is established for this dynamic activity,“distribution,” it will be impossible to satisfactorily
carry out static activities, such as patentevaluation and analysis as well as IP securitizationand establishment of trusts or security rights for IP.
SMEs and universities also need to use external
support services for distribution.
2

Questionnaire
SurveyManagement and Utilizationon

IP

We conducted a questionnaire survey, targeting
4,982 companies chosen from among companies
that filed in the past year two or more
applications to obtain industrial property rights,
such as patent rights, which would be managed● 12 ●

and utilized after they are registered. We obtained
responses from 1,245 companies (response rate:
25.2%), and conducted an analysis with respect to1,243 companies that provided valid responses.
Regarding the image of the IP trust system,
40% selected “have no knowledge” or “difficult tounderstand the system,” suggesting the level ofunderstanding of the system is low. Among theadvantages of IP trusts, “raise funds,” “reduce
costs for IP management and utilization,” and“outsource the affairs of the IP department” werechosen by slightly less than 20% respectively.
Meanwhile, among the disadvantages of IP trusts,“have a resistance to transfer IP to a third party”
and “find no advantages in IP trusts” were chosen
by more than 30% respectively. Regarding theobjectives of IP trusts, about 20% had an interestin “centralized management within the businessgroup,” “management and utilization by the
management company,” and “fund raising throughsecuritization.” Meanwhile, 44% showed nointerest in IP trusts. Regarding legal factors
preventing promotion of the use of IP trusts, “theright to obtain rights” “presumption of theamount of damages,” and “IP trusts establishedunder foreign laws” were chosen by less than
20% respectively, whereas 73% chose no option.
Regarding cost issues, a “high registration andlicense tax” and “high commission fees” werechosen by less than 20% respectively, while 75%
chose no option.
79% of the valid respondents had experienceof concluding a licensing contract. In response to
the question on the registration of a non-exclusive
license based on patent rights, by which thelicense can be claimed as effective against a third
party in the event of the licensor’s bankruptcy or
the transfer of the patent rights, 155 of the 957
companies chose “have registered a non-exclusive
license” and 51 companies chose “will register a
non-exclusive license.” Among those companies
that had experience of concluding a licensing
contract, 20% chose “include no particularprovision to ensure protection of the license under
the licensing contract” whereas about 70% took
some protective measures. Among problems
concerning a licensing contract and therequirements for setting up defenses against third
parties, each option was chosen by less than 20%,
while 67% chose no option.

3

Overseas Surveys on IP Trusts(1) United States(*1)(i) Procedures for dealing with trusts, requirements
for establishing a trust, requirements forsetting up a defense against third parties
No special requirement for the registrationof IP trusts under U.S. federal law. In the State ofCalifornia, under the US Patent Act, the State
Trust Act, and the Uniform Commercial Code
(UCC), there are typically three requirements
when transferring a patent to a trust:(Ｉ) Change the Assignee Record with the
USPTO(Ⅱ) Register the Trust with the State(Ⅲ) Register the transfer and the trustee’s
perfected interest under the UCC.
(ii) Where patent rights granted under U.S.
law are placed into trust under U.S. law
The trustee’s obligations and rights arisingfrom a trust are specified by a contract concluded
between the trustor and the trustee under theState Trust Act. The U.S. system of assessing
damages for IP infringement, like Japan, relies
heavily on the profits of the infringer. In patent
cases, damages are provided by statute.
Trustees are typically empowered by trust
agreements to defend the IP in the trust.
(iii) Where patent rights granted under U.S.
law are placed in trust under Japanese law
A Japanese trust could own U.S. IP assets.
Because there is no national IP registration
system, a U.S. patent transferred to the Japanesetrust would only have to follow the transfer ofassignee rules. The rules governing therelationship among the involved parties would bedetermined according to Japanese law. All foreign
owners of IP involved in patent litigation in the
U.S., including foreign trusts owning U.S. patents
or other IP, are governed by the same laws
regardless of their country of origin.
(iv) Where patent rights granted under Japanese
law are placed in trust under U.S. law
Foreign IP assets could be placed in trusts
just liked any other assets. There is no
registration of IP trusts in the federal law, butmany trusts must be registered with the state
government in which they are located. The
relationships among the parties would bedetermined by the state law. It can be inferred(*1) The survey targets the State of California to investigate specific state laws.
● 13 ●IIP Bulletin 2006

that Japanese law will recognize the foreign trustat the owner of the IP. The provisions relating
to damages would be determined by the Japanese
IP laws.
(2) United Kingdom(*2)(i) Procedures for dealing with trusts, requirements
for establishing a trust, requirements for setting
up a defense against third parties
Patent rights can be held in trust. There is
no registration system either for trusts generally.
In the case of a patent trust, the trustee should be
registered as the owner.
(ii) Where patent rights granted under UK law areplaced in trust under UK law
A trustee is the legal holder of the IP rightplaced in trust and has fiduciary duties towards
beneficiaries under a trust and has certain rights
under a trust. Section 61 Patents Act 1977
provides that the owner of a patent may bringproceedings against a patent infringer. Anydamages that are assessed will be paid to thetrustee. The trustee will continue to be subject tofiduciary obligations, however, and so cannot
profit personally from the damages which must be
applied for the best purposes of the trust.
(iii) Where a patent right granted under UK law isplaced in trust under Japanese law
If a UK patent were placed under a Japanesetrust, the legal owner of a patent should beentered on the register at the Patent office. The
rights of trustor, trustee and beneficiary would begoverned by the terms of the Japanese trust.
Damages shall be handled as in the case where a
UK patent is placed in trust under UK law.
(iv) Where patent rights granted under Japanese
law are placed in trust under UK law
There is no system for trust registration
under UK law. The relations between trustee,
trustor and beneficiary would be governed
throughout the world by the terms of the English
trust. The English court could adjudicate theinfringement of a Japanese patent, which is aquestion of Japanese national law, only if either
the parties agreed that it should do so, or the
defendant was domiciled in the United Kingdom.
(3) France
The concept of “trust” does not exist underFrench law, and therefore it is impossible to place

IP into trust in France.
(4) Germany(i) Procedures for dealing with trusts, requirements
for establishing a trust, requirements forsetting up defenses against third parties
Patent rights can be held by a “trust”. In
German law, a “trust” is no precise legal institute.
Instead, under German law a “trust” can carryvery different characteristics, depending on theindividual case. Registration systems neither
exist for trusts in general nor specially for patent
trusts. The only registration that may take placein regard to a trust is that the Patent Officeregister shows the registered owner of thepatent.
(ii) Where a patent right granted under German
law is placed in trust under German law
The trustee is the legal holder of the patents
transferred to him, and has fiduciary duties
towards the trustor and also has the right to be
reimbursed and indemnified for the expenses thathave arisen in relation to the administration andexercise of the transferred rights. The generalprovisions applicable also to patent infringements
are Section 249 German Civil Code. As legal
owner, the trustee is then entitled to claim
damages for the patent infringement. This has asa consequence that any damages that the
infringer of the patent will be ordered to pay
these damages to the trustee. In relation to thetrustor, however, the trustee will continue to be
subject to his fiduciary obligations. In general, thetrustee will therefore in most cases not be
entitled personally to the paid damages, but will
be obliged towards the trustor to use the payment
in the trustor’s interest. As German law does notprovide a specific contract type and regulations
for trusts, the details will depend on the terms of
the specific contract between the trustor and thetrustee establishing the trust.
(iii) Where a patent right granted under German
law is placed into trust under Japanese law
Where a German patent is placed into trust
under Japanese law, the trustee should be
registered with the German patent office as the
new legal owner of the patent. Where a German
patent is owned under the conditions for theJapanese trust, the legal relationships between
the parties concerned shall be ruled by such(*2) Section 209(3) of The Law of Property Act 1925 establishes that the Act extends only to England and Wales; thelaw shall not be applicable in Scotland.

IIP Bulletin 2006

● 14 ●

conditions. The calculation method for damages
under the German Patent Law shall also apply
where a German patent is legally owned by thetrustee under Japanese law.
(iv) Where a patent right granted underJapanese law is placed into trust under
German law
The legal relationships between the parties
concerned with a trust established under German
law shall generally be governed by the conditionsof the trust contract and German law. In general,
Japanese law shall be applicable for infringementof a Japanese patent and claim of damages
therefor.
(5) South Korea(i) Procedures for dealing with trusts, requirements
for establishing a trust, requirements forsetting up defenses against third parties
In order to place patent rights into trust andregister the patent trust, it is necessary to file anapplication for registration of the patent rights
and trust, and at the same time, also file anapplication for registration of transfer of thepatent rights (registration) so as to authorize thetrustee to manage and dispose of the patentrights. The transfer of patent rights into trust
cannot be claimed as effective against third
parties unless it is recorded in the patent trust
register.
(ii) Where patent rights granted under Korean law
are placed in trust under Korean law
The trustee shall be regarded as the holderof the entrusted IP rights, and therefore
authorized to grant a license, claim damages, anddemand injunctive relief based on the entrusted
IP rights. The trustee’s duties are stipulated
under the Trust Law and the Trust Business Law.
Section 128 of the Patent Law shall apply todamages, which is also applicable to the trustee
dealing with an IP trust.
(iii) Where patent rights granted under Korean law
are placed in a trust under Japanese law
In accordance with the procedures for patent
trusts under Korean law, a patent trust
established under Korean law becomes effective
when it is registered, and rights and obligations
arising from such a trust shall come into
existence under Korean law. Where a patent trust
is registered in South Korea, the trustee may
claim presumption of damages under Section 128
of the Patent Law.

(iv) Where patent rights granted under Japanese
law are placed in trust under Korean law
A trust contract may be concluded withrespect to Japanese patent rights in South Korea
in accordance with Korean law. In this case, inorder for the trust to become effective,
registration of the patent trust should be validly
made in Japan. The legal relationships shall begoverned by Japanese law.
(6) China
In China, patent rights may be placed in trust
under the Trust Law. A trust established withrespect to patent rights shall not become
effective unless the transfer of the patent rights
is registered.

Ⅲ Licensee Protection System
In accordance with Section 99(1) of the
Patent Law, a non-exclusive license shall not beeffective against third parties unless it isregistered. As a result of the revision to the
Bankruptcy Law, the non-exclusive licensee may
maintain the license in the event of the licensor’s
bankruptcy if the license is registered. However,in reality, contracts for licensing IP rights areoften concluded behind closed doors, and it has
become a common practice in some industries toconclude a blanket cross-licensing contract
without specifying the patent number. Therefore,
it is very rare that a non-exclusive license isregistered when a licensing contract is concluded.
Thus, the existing registration system is notsatisfactorily
used,
and
protectionofnon-exclusive licensees is still insufficient evenfollowing revision of the Bankruptcy Law. A new
system to protect unregistered non-exclusive
licensees is needed.
From this viewpoint, the research study
committee proposed a new protection system anddiscussed
legal
matters
regardingtherequirements and effects of this system. We
designed a new protection system under which
the licensee would be able to claim a statutory
non-exclusive license to the new rights holder
while the new rights holder would be prevented
from exercising the right, so as to enable thelicensee to continue his business by exploiting
the patented invention.
The results of the discussion at the researchstudy committee are as follows.
(i)● 15 ●

Interest to be legally protected
The interest to be legally protected, which

IIP Bulletin 2006

will provide the ground for the new licensee
protection system, is the business that the
non-exclusive licensee conducts by exploiting thepatented invention. There may be two directions
for designing a system that will enable thelicensee to continue such business, (I) secure theopportunity for negotiation and (II) secure thelicense.
(ii) System designing
As a basic framework for the new system, it
is desirable to design a statutory license system
under which the non-exclusive licensee obtains astatutory license upon the change of the holder ofthe patent rights. The major requirements under
this system would be as follows.
<Transfer of rights>(a)Transfer of the rights(b)Agreement on the establishment of anon-exclusive license (licensing contract)(c)Document stating the agreement with a dateof notarial effect prior to the date of thetransfer of the rights (written contract)(d)Unregistered non-exclusive license* “Exploitation of the patented invention or
preparation for the exploitation” and “thenew rights holder’s knowledge of thetransfer” may be included.
<Cancellation of the contract due to bankruptcy>(a)Bankruptcy(b)An agreement on the establishment of anon-exclusive license (licensing contract)(c) Cancellation of the contract by the trustee
in bankruptcy(d)A document stating the agreement with adate of notarial effect prior to the date of thecancellation of the contract (written contract)(e)An unregistered non-exclusive license* “Exploitation of the patented invention or
preparation for the exploitation” and “thenew rights holder’s knowledge of thetransfer” may be included.
The details of a statutory license shall be as
follows.
- Scope of license: Same as the scope of theexisting non-exclusive license- Period: Fixed as a certain period (Direction 1)
or same as the period of the existing
non-exclusive license (Direction 2)- License fee: Same as the fee for the existing
non-exclusive license, decided by the patentoffice, or determined by the court- Succession: Only together with the business
in which the patented invention is exploited,

IIP Bulletin 2006

and in the case of inheritance and othergeneral succession cases
We will further discuss the compatibility ofthe statutory non-exclusive license system with
the Patent Law and its relationships with theexisting registration system, with the hope that
this new license system will be considered as animportant option for the reform of the nonexclusive license system along with the
improvement and drastic review of the registration
system.

Ⅳ

Problems in Relation to IP Trusts

1

Relationship between IP Trusts andSection 102(1) and (2) of the Patent Law

In accordance with Section 102 of the Patent
Law, where the patent holder, exclusive licensee
or non-exclusive license claims damages for lostearnings due to patent infringement by the
infringer, they may estimate the amountcalculated by the prescribed formula as theamount of losses (Paragraph 1) or presume theamount of profits obtained by the infringer as theamount of losses (Paragraph 2). However, sincesuch a claim is based on the precondition that lostearnings should exist, it is construed that theclaimant must be actually exploiting the patented
invention.
Where patent rights are placed in trust, thetrustee becomes the patent holder in legal terms.
However, due to the difficulty in exploiting thepatented invention, the trustee cannot argue theexistence of lost earnings and therefore cannot
claim damages under Section 102(1) or (2). On
the other hand, the trustor becomes thebeneficiary and no longer holds the patent rights
in legal terms. After the patent rights have beenplaced in trust, the trustor needs to obtain alicense to exploit the patented invention. If thelicense is a non-exclusive one, the amount oflosses may not be calculated (Paragraph 1) or
presumed (Paragraph 2). The provisions of theseparagraphs shall apply where the trustor isactually exploiting the patented invention as the
exclusive licensee or non-exclusive licensee.
However, if it is impossible to regain lostearnings unless the trustor takes an action toclaim damages from the infringer even though thetrustee has been entrusted with the management
and utilization of the patent rights, problems
arising from the relationship between IP trusts
and Section 102 of the Patent Law cannot beeffectively solved.

● 16 ●

From this viewpoint, with the aim to clearly
indicate the possibility that damages for patent
infringement may also be claimed under Section
102(1) and (2) of the Patent Law even after thepatent rights have been placed into trust, we tried
to clarify the purport of these provisions andconducted an analysis of hypothetical cases. The
purport of Section 102(1) and (2) of the Patent
Law is to calculate (Paragraph 1) or presume(Paragraph 2) the amount of lost earnings as theamount of losses arising from infringement of theinterest based on the exclusive market
opportunity vested by the patent rights, so as toreduce the burden of proof of the amount oflosses borne by the rights holder who claims
damages. Therefore, the important requirement
for applying Section 102(1) and (2) is that “lostearnings” based on the exclusive market
opportunity vested by the patent rights do exist,
or in other words, that the patented invention is
actually being exploited. From this reasoning,where patent rights have been placed in trust,
Section 102(1) and (2) should apply if it ispossible for the parties involved in the trust to
substantially confirm the status of the interest
arising from the trust property, and the existenceof “lost earnings” based on the exclusive market
opportunity vested by the patent rights is
recognized.
Through discussion using five example casesof management-type trusts and financing-type
trusts, we confirmed the applicability of Section
102(1) and (2) to patent rights trusts dependingon the methods for establishing trusts or thecontents of licensing contracts. In particular, inthe case of a management-type trust that is
exclusively aimed at managing the patent rights
in trust, few people challenge the applicability ofSection 102(1) and (2) because the beneficiaryand the trustee can be deemed as an integrated
party and the trust does not substantially change
the status of the trust property or the property
holder. Also in the case of a financing-type trust,the applicability of Section 102(1) and (2) can besupported by the purport of these provisions if
the existence of lost earnings is recognized on
the part of the beneficiary. Although we wereunable to hold a sufficient discussion on specificcircumstances where the existence of lostearnings can be conceived, we at least clearly
discovered the inappropriateness of the argumentthat it is impossible to claim lost earnings due topatent infringement that occurs after a patentrights trust has been established and that thiswould eventually encourage infringement.

We hope that the trust system will be used
more actively as a means to utilize patent rights
and other IP rights.
2

Reduction of Patent Fees

“Reduction of patent fees” is applicable toindividuals and corporations with limited funds,
R&D-type SMEs, and university researchers ifthey satisfy relevant requirements. Where suchparties eligible for fee reduction place a “right toobtain a patent” in trust, the title of the rights
holder is transferred to the trustee or the trust
company that might not be eligible for a fee
reduction. This problem never happens in cases
where patent rights are placed in trust, and todeal with this problem, it is necessary tounderstand the need to establish a trust withrespect to the right to obtain a patent.
On this issue, two opinions were heard in the
research study committee: “at present, it has
never been heard that SMEs eligible for a fee
reduction seek to establish a trust with respect tothe right to obtain a patent,” and “some SMEs
eligible for a fee reduction have no IP department
and their president him/herself is engaged in IP
management; such SMEs may seek to entrust a
trust company with management of the right toobtain a patent.” Another opinion argued that inorder to further discuss this issue, we should firstunderstand and sufficiently examine “to what
extent the use of the trust system is sought” and“how often companies actually receive a fee
reduction,” and then discuss the main issue again.

Ⅴ

Conclusion

Obstacles in the legal framework to the useof the trust system have been got rid of to asignificant degree. We hope that efforts will bemade to spread the use of the trust system while
improving the market and other related
environments and gaining the understanding of
the public.
We also hope that discussion on licensee
protection will be developed based on our
proposal, while taking into consideration thecompatibility with the existing laws and theperspective of international harmonization ofprinciples and stimulating participation in thediscussion from a wider range of researchers andpractitioners, with the aim to implement specificmeasures necessary to achieve this objective.

● 17 ●(Senior Researcher: Seiji UCHIYAMA)IIP Bulletin 2006