9Appropriate Use of Intellectual Property

For the appropriate protection of licenses on intellectual property rights, Japan has a system
for registering licenses held by licensees of patent rights and other industrial property rights, andhas adopted a system that requires registration for countering third parties. However, there areindications that the current registration system does not comply with actual business conditions,and the system is not being fully utilized. Without registration, licensees risk facing difficulties incontinuing their business activities after the licensor goes bankrupt or transfers the rights to athird party, and as such there have been calls for institutional measures to deal with suchproblems. Therefore, in this study, we have summarized the contract practices and demands ofthe industrial sector, surveyed the systems in place in foreign countries, and examined the legal
nature of non-exclusive licenses, etc. as a basis for designing a new system. Based on thesesurveys and examinations, we have formulated two system proposals: (1) protection of licensees
by way of a new registration system (a licensing contract registration file system); and (2) adesirable non-exclusive license registration system.

Iof the current system.

Introduction

1

Background of This Study
Intellectual property not only needs
protection, but also the effective use thereof
needs to be promoted. One of the important
methods aimed at such use is the licensing ofintellectual property. Since there are cases
where licensees face difficulty continuing
their business as a result of dissolution of thelicensing relationship, some legal protection
is required for intellectual property licenses.
In this regard, Japan has a system underlaw for registering licenses (or rights of use)held by licensees and achieves protection oflicenses by adopting a system that requires
registration for countering third parties.
Nevertheless,
there
have
been
indications
that
thecurrent
patentregistration system is not sufficiently
responsive to actual business conditions.
Indeed,thesystemforregistering
non-exclusive licenses on patent rights andother industrial property rights is not being
sufficiently utilized.
Although such problems have yet tobecome notable in Japan, licensees face therisk of difficulty in continuing their businessunder the current system. Thus, there arecalls for discussion of an institutional review

2

Purpose and Outline of This Study
The purpose of this study is to review the
non-exclusive license registration system
under the current Patent Act and to examine
a new registration system or method ofprotection other than the registration system(a system of requirements for countering
third parties) based on the current conditions
and needs in the industrial sector, thereby
enhancing the protection of licensees.
First of all, as a premise for designing a
new system, we have summarized thecurrent contract practices and demands ofthe industrial sector (specifically the
IT/electronics
industries
andthepharmaceutical/biotechnology industries). In
addition to a questionnaire survey targeting
Japanese companies, we carried out a surveyof overseas systems. Furthermore, we
examined the legal nature of non-exclusive
licenses, etc. and have formulated proposals
for a new system.

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II

harmonized with those in place in foreigncountries

Industrial Needs and Current
Status of Licensee Protection
Systems2

Practices Concerning Transfer ofIntellectual Property
To date, the transferring of patent rights
and other types of intellectual property rights
has not been particularly widespread interms of actual business. There have beencases where control over certain business has
been transferred or where patents no longer
in use have been transferred individually,
but patents are not frequently transferred asbusiness tools. The average number oftransfers per patent right totaled 0.03 times(with the average number of transfers forpatent rights that have been transferred atleast once being 1.1 times).
However, the number of transfers may
increase as the distribution and flow ofintellectual property becomes more active inthe future. In addition, we cannot overlook
the fact that there have been actual cases ofcompulsory execution through the seizure ofintellectual property rights, although suchcases remain small in number.

Problems concerning the protection oflicensees of non-exclusive licenses have yet tosurface in the industrial sector, but there is
obviously a potential risk of such problems.
Therefore, we have discussed the need forlicensee protection and proposed a desirable
protection system for each license category
involving such potential risks, and haveconducted statistical analyses of industrial
needs based on the results of a questionnaire
survey. In addition, we conducted an
overview of practices pertaining to thetransfer of intellectual property rights andthe current non-exclusive license registration
system. Moreover, we summarized results ofthe survey of registration systems and legal
systems concerning licensee protection inforeign countries.

1

Industrial Needs
We identified the following industrial
needs in regards to licensee protection, based
primarily on practices in the IT/electronics
industries and the pharmaceutical industry:(i) A system that can protect non-excusive
licenses under comprehensive licensing
agreements without imposing any additionalburden on users (a new system that serves as
an alternative to the current registration
system rather than a system thatcomplements it)(ii) A system that can protect sub-licenses(iii) A system that can deal with licenses thatinvolve multiple parties, such as patent pools
related to standard technology (i.e. a systemthat can secure the use of technology the useof which is needed by multiple parties andsecure the stability of such use)(iv) A system that can also protect licenses
on rights that arise in the future based on
patent applications(v) A system that can protect licenses thatare not suitable for registration, such as
licenses for computer programs and licenses
on trade secrets such as know-how(vi) A licensee protection system that is3

Results of the Questionnaire Survey
We carried out a questionnaire survey inorder to gain an accurate understanding of
the actual situation of the industrial sector
and to acquire materials for consideration indesigning a new system. Organizations
surveyed were corporate members of theJapan Intellectual Property Association(JIPA), corporate members of the Japan
Institute of Invention and Innovation (JIII),and companies whose number of patentfilings exceeded a certain number (total
number of companies: 3,012; return rate:
25%).
Licensing contracts have been concluded
actively in the industrial sector (58.2%). Such
activity has been particularly widespread in
the automotive, construction, nonferrous
metal, and pharmaceutical industries. About
200 companies had concluded licensing
contracts with overseas companies.
In addition, nearly 40% of the companies
responded that they had concluded
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opinions were relatively prevalent in thenonferrous
metal
industry,
inthecommunications/electronic/electricmeasuringequipment
industries,
theinformation and communications industry,
and the pharmaceutical industry.
Not many companies (9.9%) responded
that the lack of a sub-license registration
system was inconvenient. However, this was
regardedasaproblembythecommunications/electronic/electricmeasuring equipment industry and thebuilding industry.
Besides patent rights, the rights toobtain patents, trademark rights, and trade
secrets were being licensed. Copyrights werealso being licensed.
Most companies were in favor of
introducing a new registration system that
does not register part of the current
registered matters, stating that “theregistration system is expected to become
more accessible.” There were also many
companies in favor of introducing a systemthat allows provisional registration oflicenses for rights related to applications thatare still pending before the JPO, indicatingthat such system would promote use of theregistration system and conclusion oflicensing contracts.
Regarding the introduction of a systemfor countering persons in bad faith and asystem for unconditionally countering third
parties (a justified-protection system), many
companies responded that such systems were
expected to promote licensing contracts, but
at the same time, concerns were indicatedabout how bad faith should be proved and thestability of rights.

comprehensive licensing contracts. By
industry, such contracts were particularlycommonplace in the electric machinery andequipment industry. The number of patentrights (estimated) included in a single
comprehensive licensing contract was lessthan 20 for most companies, but that number
reached 100 or more for 15% of the
responding companies.
About 40% of the companies had
acquired patent rights, etc. from third parties
in the past and had carried out surveys of
published information such as the patentregister and conducted due diligence reviewsin such cases.
Under the current non-exclusive license
registration system, the most frequently
mentioned reason for not registering a
non-exclusive license was that licensees do
not become subject to patent enforcement in
actual practice, followed by the need to keep
the existence of licensing contracts secret.
The troublesome procedures required forregistration and the registration fees werealso mentioned as reasons for not registeringa non-exclusive license.
Since applications for the registration of
non-exclusive licenses need to be filed jointly
by the parties to the license, more than halfof the companies were cooperating in theregistration of licenses, while slightly morethan 40% of the companies were notcooperating in such registration.
When asked what kinds of merits
companies gained from inspecting theregistered matters concerning non-exclusive
licenses under the current system, nearly
60% of the companies responded that they
did not gain any merits from such registeredmatters. The companies that gained merits
seemed to use the information for strategic
purposes. With regard to disclosure of theregistered matters, a strong desire fornon-disclosure, particularly in regards toinformation on the royalties, was expressed.
About 13% of all companies responded
that the lack of infrastructure for protecting
rights while applications were pending before
the Japan Patent Office (JPO) was
inconvenient. By type of industry, such

4

Current Status of the Non-Exclusive
License Registration System
A non-exclusive licensee may counter athird party as long as he/she has registered
the license, even when the licensor of said
non-exclusive license goes bankrupt or the
licensed right is transferred (with the 2004
revision of the Bankruptcy Act, thebankruptcy trustee’s right of rescission
became limited in regards to “contracts
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well.
Therefore, we carried out an overseas
survey to gain a detailed understanding of
thenon-exclusive
licenseregistration
systems and licensee protection systems offoreign countries and to use these findings asusefulmaterials
forexaminingtheestablishment of a new system.

aimed at establishing rights for the purposeof use or profit” when requirements forcountering third parties, such as registration,
are satisfied with regard to said right [Article
56(1) of the Bankruptcy Act]).
A non-exclusive license is registered foreach patent number, and the registeredmatters are made public (Article 186(1) of the
Patent Act). Since registration of certain
matters in the patent register has thefunction of making public the status of thepatent right and other rights and allowing
the general public to presume that theregistered matters are true, it is naturally
regarded as necessary to allow for perusal of
those matters by the general public and torespond to requests for transcripts thereof.
Specifically,required
information
includes the names of the non-exclusive
licensee and the licensor (patentee), the scopeof the non-exclusive license (geographicalarea,
period,andcontents),
andarrangements regarding the amount to be
paid in royalties, payment method, and timeof payment (Article 10(4) and Form 10 of theOrdinance for Enforcement of the Cabinet
Order on Patent Registration), and thesematters are to be disclosed to the public.
Nevertheless, it has been pointed outthat the current non-exclusive license
registration system has a number ofcharacteristics that make the system difficult
to use in practice, and furthermore that thesystem is not being sufficiently used (theestimated license registration rate is only
3%).

(1) United States- Registration system
Registration of a licensing contract does
not have any legal effect. Registration of alicense is recognized in terms of public
interest as a means of letting third parties
know about equitable rights and othermatters relevant to patent ownership.
The submitted information is fully
disclosed, but registration of mattersconcerning royalties is not required. A license
cannot be registered without specifying theapplication or patent number. A license canbe registered for a patent application. Either
party to the license may register the license
unilaterally.
- Licensee protection system
A licensee has to prove the existence ofan effective license in order to claim rights
based on the license in question, but thetransferee is not required to be aware of thecontract. There is no requirement to registera license either. The transferee does not
succeed the licensor in terms of contractual
status under the licensing contract.
(2) Germany- Registration system (exists only for
exclusive licenses)
In principle, registration does not havesubstantial effects. Registration of mattersconcerning royalties is not required. Among
the registered matters, the name of thelicensee is not disclosed. A license cannot beregistered without the specification of thepatent number, but even when a patent has
yet to be granted, an application forregistration can be filed as long as the patentapplication has already been filed. The
consent of the other party to the contract isrequired for registration.

5

Systems in Foreign Countries
Licensees who are granted licenses on
intellectual property in foreign countries areprotected by the protection systems of therespective countries, but the protection
systems currently differ between countries,
and there have been indications that theJapanese licensee protection system isinsufficient. Since discussions are currently
being held on the harmonization of
intellectual property protection systems, it isnecessary to examine the systems in place inforeign countries from such a viewpoint as
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either party to the contract. An extra fee ischarged for all patents or patent applications
within a single licensing contract up to a totalof ten, but no extra fees are charged for any
further patents or patent applications
covered by the contract.
- Licensee protection system
In the case where a license is registeredor when the transferee of the patent rightsubject to the contract was aware of theexistence of the license, the licensee canclaim the license against the transferee.
The transferee succeeds the licensor interms of contractual status under the
licensing contract. The new patentee willassume the obligations entailed by said
status in place of the previous owner of thepatent.

- Licensee protection system
A licensee can claim the license against
the patent transferee by proving theexistence of the licensing contract, regardlessof whether or not the transferee is aware of
the licensing agreement or whether or not
the licensee is aware of the transfer.
Registration of the license is not required
either. The transferee does not succeed thelicensor in terms of contractual status under
the licensing contract.
(3) United Kingdom- Registration system
Registration of the license is not arequirement for countering third parties.
However, when a license is registered, a third
party who acquires the right is deemed tohave been aware of the existence of thelicensing contract. A license cannot beregistered without specifying the patent
number. Registration of matters concerning
royalties is not required.
Licenses can also be registered for patentapplications. Registration applications can be
filed by either party to the contract, andthere is no fee required.
- Licensee protection system
In the case where the transferee wasaware of the license, the licensee can claim
thelicenseagainstthetransferee.
Registration of the license creates the legal
fiction that the transferee was aware of thelicense. The licensee can claim all of theregistered matters against the transferee.
The contractual relationship between thelicensee and the licensor does not expire.

(5) South Korea- Registration system
A licensee can claim the license against
the transferee only when the license has beenregistered and when the transfer has takenplace after the registration.
There
are
provisions
requiringstatements about royalties if any, but inpractice this is optional. Registration can
only be made for individual patent rights,
and the patent number must be specified. A
licensing contract cannot be registered for an
invention that has yet to be patented.
Registration applications must be jointly
filed by both parties to the contract.
- Licensee protection system
As mentioned above, a licensee can claim
the license against the transferee only when
the license has been registered and when thetransfer has taken place after theregistration. When the license has beenregistered, the licensee can claim theregistered matters against the person towhom the patent right was transferred after
the registration, but the licensee cannot
make a claim against the patent transferee inregards to any matters under the contract
between the licensee and the patenttransferor that are not registered.
The transferee succeeds to all mattersunder the licensing contract that are(4) France- Registration system
Registration has the result of rendering
patent licenses effective against third
parties.
Registration of matters concerning
royalties is not required. Registration can bemade for individual licenses, but the patents
covered by the licensing contract must be
clearly specified in the contract by way of theapplicationor
publication
number.
Registration applications can be filed by
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be a legal title aimed at preventing thepatentee, etc. from seeking abatement of
nuisance or claiming damages against thelicensee’s commercial exploitation of apatented invention - in other words, the rightto request that the patentee, etc. not exercise
these two claims.
On the other hand, a licensing contract
can be considered to center on the granting ofsuch non-exclusive licenses but also include
ancillary contents. The contents of theancillary component can be determined at
the discretion of the parties under the
principle of freedom of contract. Therefore,
there is a difference between a non-exclusive
license and a licensing contract.
We have summarized the legal
characteristics of non-exclusive licenses by
way of comparison with lease contracts, therelationship between non-exclusive licenses
and licensing contracts, and legal issues
concerning comprehensive cross-licensing
contracts.

registered. Matters that are not registeredremain effective between the transferor andthe licensee.
(6) China- Registration system
A licenser can claim the license against
the transferee without registering the license,
and there is no need to satisfy any other legal
requirements.
Among the registered matters, mattersconcerning the scope of the license and theroyalties are not externally disclosed.
Registration can be made for each license,
and when multiple patent rights are coveredby the licensing contract, the patent numbers
will be listed on the licensing contract
registration certificate. (The patent numbers
need to be specified as a precondition.) A
licensing contract for application rights canalso be registered. A party to a patent
licensing contract cannot register thecontract unilaterally. There is no need to pay
any fee for registration.
- Licensee protection system
There are provisions that patent or
trademark right transfers do not have any
legal effect on licensing contracts that werealready in effect at the time of the transfer.
Whether or not the patent licensing contract
is registered and the scope of the externallydisclosed matters do not have any effect on
the licensee’s claim of rights against thetransferee. The transferee succeeds to thecontractual status of the licensor.

2

Legal Nature of Rights to Obtain
Patents
A right to obtain a patent does not bearmonopolistic exclusivity in and of itself, andtherefore the Patent Act does not provide fornon-exclusive licensing for the right to obtaina patent. In practice, however, licensing
contracts are concluded at the stage of rights
to obtain patents. It is therefore necessary to
examine a licensee protection system forlicensing contracts pertaining to rights toobtain patents as well.
As a premise, we compared the legal
nature of the right to obtain a patent withthe effects of the inventor’s right of honor,
and also compared the former with the effectsof patent rights, and summarized mattersconcerning licenses for rights to obtainpatents. We have concluded that a license fora right to obtain a patent enshrines, at its
core, the right to seek non-enforcement of thepatent right with a condition precedent, andthat it maintains different claimant rights for
before and after the laying open of the patentapplication.

III Legal Summary of the Licensee
Protection System
In regards to legal issues concerning thelicensee protection system, we havesummarized the legal nature of non-exclusive
licenses, the legal nature of the rights toobtain patents and the effect of non-exclusive
licenses to counter third parties.

1

Legal
Natureof
Non-Exclusive
Licenses
A non-exclusive license is considered to6

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registration system (a licensing contract
registration file system); and (2) a desirable
non-exclusive license registration system
under the Patent Act, etc.

3

Effect of Non-Exclusive Licenses toCounter Third Parties
It has been indicated that the concept ofthe legal effect of non-exclusive licenses tocounter third parties under the current
non-exclusive license system is unclear.
Therefore, it is necessary to summarize theconcept in regards to what a licensee canclaim against third parties as the effects ofcountering third parties and what will
happen to the licensing contract relations.
We examined these points using thefollowing two approaches: (1) an approachbased on the consideration that thetransferee does not succeed to the licensing
contract; and (2) an approach based on theconsideration that the transferee does
succeed to the licensing contract.
Approach (1) considers that thetransferee of the right cannot deny thelicensee’ non-exclusive license, and, as aresult, cannot enforce the right against thelicensee. However, as for the direct effect ofcountering third parties, the transferee
merely assumes the obligation not to enforce
the patent right against the licensee and does
not succeed to the licensing contract, and assuch the transferee is not bound by thelicensing contract. In contrast, Approach (2)considers that, as the effect to counter third
parties, the transferee not only assumes theobligation of non-enforcement of the patentright, but also succeeds to the claims andliabilities under the licensing contract
between the transferor and the licensee.
Based on these two approaches, wesummarized the legal relations for a casewhere a non-exclusive license has an effect ofcountering third parties and the relationshipwith the Bankruptcy Act, based on theconcept of the effect of a lease interest in
countering third parties under the Civil
Code.

1

Licensing Contract Registration File
SystemWe proposed a “licensing contract
registration file system” wherein licensed
patents can be specified without patent
numbers and part of the registered matterscan be kept undisclosed, and also examinedpractical issues and legal issues related tothis system.
In this system, the patent licensor andlicensee can register a non-exclusive license
established under a comprehensive licensing
contract with the state’s licensing contract
registration file. (Even when the license also
covers patent rights that will take effect after
registration, non-exclusive license for suchpatent rights can also be registered.)
A possible method of specifying subjects
to be registered upon, for example, theregistration of a non-exclusive license
granted under a comprehensive licensing
contract concerning the manufacture, sale,etc. of a specific product could take the formof a requirement that matters pertaining to
the contents of the non-exclusive license,such as the specific product, be disclosed.
A non-exclusive license that has beenregistered in a licensing contract registration
file will have the effect of countering a third
party who later acquires said patent right, tothe extent of the registered mattersconcerning the non-exclusive license (thesame effect as that under Article 99(1) of the
Patent Act). A non-exclusive license for apatent right that has been granted after theregistration is also regarded as having theeffect of countering a third party after the
grant as long as it is included among theregistered subjects.
In this system, the basic idea would be to
publicly disclose all matters with the
exception of the name of the licensee and thecontents of the non-exclusive license (i.e. thename of the licensor, the date of registration,
the registration number, etc. are disclosed),

IV Proposal of a New System
Based on the discussions above, thestudy committee has produced two system
proposals: (1) protection of licensees by a new
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maintaining the secrecy of licensing contracts,
we examined the following measures: (1)limiting matters to be registered; and (2)maintaining confidentiality for certain
registered matters.
As for (1) limiting matters to beregistered, we deliberated on which mattersfor registration are truly necessary in light ofthe purpose and effects of the registration
system. While licensors’ names andaddresses and the scope of the non-exclusive
license should be maintained as the mattersto be registered, matters concerning royalties
for non-exclusive licenses could be excluded
from the matters to be registered or could bemade optional.
In
respectto(2)
maintaining
confidentiality for certain registered matters,
we deliberated over whether or not it would
be possible to keep parts of the registeredmatters undisclosed with a view to achieving
a balance between the demand for
confidentiality and the need to ensure safe
transactions, while making reference to thetwo-step disclosure system adopted in theSpecial Act on Transfer of Movable Property
and Claims.
Next, regarding a non-exclusive licenseunder a comprehensive licensing contract,
there seems to be room for consideration of ameasure to reduce the registration andlicense tax for registration covering a large
number of patent rights, although such ameasure could also be taken by way of
introducing a licensing contract registration
file system.
In
addition,we
also
discussed
registration systems for licenses on rights
related to applications that remain pending
before the JPO, sub-licenses of non-exclusive
licenses, and exclusive licenses, as well as
registration systems for industrial property
rights other than patent rights. We
recommended that continued study be madeon these and other matters.

and to disclose the registered matters only tothe parties to the registration and certain
interested persons such as third parties
countering the licensee.
At the same time, the system will have ascheme that allows for the licensee to defend
him/herself by preventing registered mattersthat are irrelevant to the patent rightacquired by the third party from being
disclosed to said third party. Specifically, thelicensee can register exclusion of the
non-exclusive license for specific patentrights from the registration in the licensing
contract registration file (hereinafter referred
to as an “exclusion registration”) by
specifying the patent numbers. When such aregistration is made, the licensee will not beable to claim the non-exclusive license forsaid patent rights against third parties.
In consideration of such a disclosure
scheme, we examined how said scheme would
function in typical cases where the effect ofcountering third parties becomes relevant(transfer [including compulsory sale] andbankruptcy).
With regard to the overall system, we
conducted examinations with particularattention given to the following points: (i) the
future direction of the licensing contract
registration file system; (ii) transaction
safety; (iii) the method of specifying the
subjects to be registered; (iv) the relationshipwith the Special Act on Transfer of Movable
Property and Claims; (v) matters concerning
exclusion registration; (vi) rights that may
arise in the future; (vii) the relationship withthe current registration system; and (viii)
disclosure of the name of the licensee.

2

Desirable
Non-Exclusive
LicenseRegistration System
We have conducted specific examinations
as to how the non-exclusive license
registration system can be reviewed in
response to the needs of the industrial sector
by taking into consideration the results of theaforementioned questionnaire survey ofcompanies and the survey on the legal
systems of foreign countries.
First, with regard to the demand forV

The study committee was able to propose
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Summarya specific solution to the long-discussed issueof licensee protection by suggesting that alicensing contract registration system beestablished. Although this system does notsatisfy all of the needs that have been
indicated by the industrial sector, we expect
such a system will produce good results.
Energetic discussions were also held on
the subject of the reviewing of the current
non-exclusive license registration system. We
hope that the system will be reviewed with aview to creating a more user-friendly system,
following further efforts to ascertain thespecific needs therein and additional study oflegal theories.
(Researcher: Takuya ASAOKA)

9IIP Bulletin 2007