5

Exceptions to and Limitation of the Effectof Patent Right

This study investigated and examined the current situations in twelve countries regarding exceptions toand limitations of exclusive rights based on a patent right, especially focusing on the exception of "experiment or
research" and the compulsory licensing system (equivalent to arbitrary license in Japan). The primary purpose ofthis study is to study how these countries cope with the situations where patent rights granted for inventions of
upstream technology that is highly versatile and less substitutable are likely to cause adverse effect oncommercial activities of others or R&D activities of the next generation, and where the owner of a patent rightfor the technology indispensable to standardization, without participating in the standardization process, claims
excessive royalties or alleges patent infringement. From an international perspective, revision of the TRIPS
Agreement is being discussed, because, even if a WTO Member allows a patented product that is necessary forthe protection of public health in other countries to be used without the authorization of the patent owner, theprovisions of the TRIPS Agreement prevent the use or export of the patented product. This study focused on the
progress in discussion and measures taken by WTO Members on this issue.

Ⅰ Introduction
In recent years, there has been an issue as
to what extent inventions of upstream technologythat is highly versatile and less substitutable,
such as gene-related technology and researchtools in the life science fields, should beprotected under patent rights. In such fields thatare characterized by the cumulative nature oftechnology innovation and the broad range ofapplications of individual patented inventions,abuse of intellectual property rights is likely tohave a significant adverse effect on R&D of thenext generation (in this report, issues
concerning such significant adverse effects ofpatents granted for inventions of upstream
technology shall be collectively referred to as"blocking patent / research tool patent issues," or"research tool patent issues" when specificallyaddressing the issues concerning research tool
patents).
In the course of promoting technicalstandardization through the formation of patentpools, as seen in more and more industrial fields
led by the electronics industry, concerns arebeing raised about the situation in which theowner of a patent right for the technology that is
indispensable to the formation of a patent pool, as
an outsider who does not participate in thestandardization process, claims excessive royalties
or alleges patent infringement (hereinafterreferred to as the "outsider issue"). In most cases,
it is difficult to cope with such exercising of apatent right, for it has reasonable grounds. Whilesome people call for discussion about responding
to this issue by the granting of an arbitrary
license under the Patent Law, others point out thepossibility of alleging such action to be in

IIP Bulletin 2005

violation of the competition law.
Regarding these issues, various legal
theories on exceptions to and limitations of theeffect of a patent right are being studied at home
and abroad, in particular, the exception of"experiment or research," the compulsory license,
and the application of the competition law.
In FY2003, the Institute of Intellectual
Property (IIP), commissioned by the JPO,
conducted a study under the title of "Issues
Affecting Smooth Use of Intellectual Property"
with the objective of finding solutions to theissues concerning the exception of "experimentor research." The FY2004 study examined andanalyzed the situations in foreign countries basedon the information obtained from the overseas
survey conducted in FY2003 targeting major
European countries and the United States, andthe follow-up survey thereof, as well as theoverseas survey conducted in FY2004 targeting
five Asian countries, aiming to consider what
measures Japan should take.
From an international perspective, it has
been pointed out that even if a WTO Member
allows a patented product that is necessary forthe protection of public health in other countries
to be used without the authorization of the patent
owner, the requirements for such use as provided
in the TRIPS Agreement Article 31 prevent theuse or export of the patented product. On thisargument, the IIP also conducted a study under
the title of "Desirable Form of Rights in the
Pro-Patent Era" in FY2001. The FY2004 study
also investigated the subsequent progress in thecircumstances and the responses of WTO
Members.

● 32 ●

Ⅱ Exception of "Experiment or
Research"
Firstly examined was the international legal
frameworks concerning the exception of"experiment or research" under the Paris
Convention and the TRIPS Agreement, and thenreviewed the trends in laws and regulations, caselaws, academic theories, practices, legal revisions,and government policies in foreign countries,
focusing on: (1) general exception of "experimentor research"; (2) exception of "experiment or
research" that is only applicable to clinicalexperiments of generic drugs; (3) exception of"experiment or research" at universities andresearch institutes.
The trends regarding these exceptions canbe summarized as follows.
As for the general exception of "experimentor research," the major countries in Europe haveadopted the provision on experiment or research
exception under the Community Patent
Convention (CPC), although the convention has
yet to be put into force, aiming at equalizing therelevant provisions of national laws in thesecountries with the provision of the CPC. With
respect to the interpretation of this provision, thetheory presented by German Federal Supreme
Court in two cases in the 1990s is being widely
accepted, which argues that the experiment or
research shall be exempted from liability forpatent infringement if it contributes to an
improvement of the patented invention per se orsome other technical progress, whereas it shallnot be exempted if it does not contribute to any
special technical progress, for instance, it isconducted only for the purpose of obtaining
information to be submitted to the regulatory
authorities in order to obtain approval for the
production or sale of the patented invention. In
this theory, whether or not the experiment or
research is conducted by a profit-making entity
and whether or not it is conducted for commercial
purpose are no longer questioned. The core ofthis theory is technical progress and industrial
development, which is the primary purpose of thepatent law. If this theory is applied when
determining whether the clinical experiment of ageneric drug constitutes patent infringement, theexperiment shall be deemed to be patent
infringement if it is conducted only for the
purpose of obtaining approval for the production
or sale of the generic drug. For this reason, in
Europe, a special exemption of clinicalexperiments of generic drugs has been includedin the European Community (EC) Directive
2004/27/EC, with the intention of achieving theobjective of increasing the competitiveness ofEuropean companies in the development ofgeneric drugs.

In Japan, on the other hand, according to thetheory advocated by Professor Someno, the scopeof "experiment or research" should be
distinguished in line with the object and purpose,and exception should be allowed only when theexperiment or research is conducted targeting thepatented invention per se for the purpose ofcontributing to "technical progress." Also in thistheory, whether or not the experiment or
research is conducted by a profit-making entity
and whether or not it is conducted for commercial
purpose shall not be questioned. In 1999, theSupreme Court judged the working of thepatented invention conducted in the course of theclinical test necessary for applying for approval of
the production of a pharmaceutical product, to fallunder the category of "experiment or research"
provided in Section 69(1) of the Patent Law, on
the grounds that, should it not be allowable toconduct, during the term of the patent right, any
clinical experiment necessary for applying for
approval of the production of a generic drug, it
would in effect prevent a third party from using
the patented invention freely even after the
expiration of the term of the patent right,
whereas the patent owner would have been able
to acquire economic benefit by exclusively
working the patented invention even if such
experiment were allowed. This theory presented
by the Supreme Court, which compares, in lightof the purport of the Patent Law, the interest of
the patent owner and that of the third party whoworks the patented invention, has also been
adopted in the report by the panel on the
Canadian case on the patent protection ofpharmaceutical products in the WTO disputesettlement procedure (WT/DS114).
In the United States, there is no statute lawthat limits the scope of effect of a patent right toacts conducted "commercially," and case laws
have established the theory that exempts
experiment or research from liability for patent
infringement as an "exception of experimental
use" only if it is conducted merely for the purposeof solving a philosophical issue or ascertaining
the truthfulness and correctness of the patentdescription. Thus, the United States differs fromJapan and Europe in that the concept of the
exception of "experimental use" is understoodvery narrowly in the United States. In the Madey
vs. Duke University Case, the CAFC, while
confirming the existence of the theory of"exception of experimental use," pointed out that
where the university worked the patented
invention in the course of conducting
experimental research as its justifiable duty, suchwork should not be regarded as falling under the
exception of "experimental use" and therefore
should not be exempted from liability if it was notconducted "for amusement, to satisfy idle

● 33 ●IIP Bulletin 2005

curiosity, or for strictly philosophical inquiry."Thus, due to the very narrow concept of the
exception of "experimental use," the UnitedStates took legislative measures earlier thanother countries to allow clinical experiments ofgeneric drugs, in the form of the Bolar provision(35 U.S.C. §271(e)(1)).
In Asia, all countries targeted in this study
have provisions on the exception of "experimentor research," and they are also developing
provisions exempting clinical test of genericdrugs from liability of patent infringement.
However, as there are very few case laws oracademic theories relating to these provisions,the development of the interpretation of theseprovisions will depend on the future progress inthis field.
Under such circumstances, the question iswhether or not the exception of "experiment or
research" can be a solution to the blocking patent /research tool patent issues. In the first place,there is significant difference between countries
including Japan, the United States, and European
countries, both in industries and academia, interms of the understanding as to whether or notthese issues exist or are likely to occur. Should
these issues be recognized at all, the parties
concerned including those engaging in research
activities have different understandings of theconcept of the exception of "experiment or
research" in their countries. For instance, somepeople regard experiment or research conductedat the universities or research institutes as being
exempted from liability for patent infringement,
and patent practices are being conducted based onsuch understanding. Furthermore, the concept of
the exception of "experiment or research" per sediffers among countries. For these reasons, weshould say that it is very unlikely under thecurrent circumstances that the parties involved in
the blocking patent / research tool patent issues
will predict, in particular before they launchresearch and development on a global scale, theconsequence of the application of the concept of
the exception of "experiment or research." Now is
the time for us to promote discussion so as to fillin the gaps of each country and between countries
in the understanding and the concept of the
exception of research and experiment.

Ⅲ "Other Use Without Authorizationof the Right Holder" Including
Arbitrary (Compulsory) License
The scope of Article 31 of the TRIPS
Agreement entitled "Other Use Without
Authorization of the Right Holder" includes
various ways of using a patented invention, suchas the use under compulsory (arbitrary) license
and the use by the government. After presenting

IIP Bulletin 2005

international legal frameworks under the Paris
Convention and the TRIPS Agreement, first of all,reviewed the trends in twelve countries regarding
legal grounds and procedures for granting license
to a third party for "other use," as well as caselaws, academic theories, practices, and legal
revisions on this issue. Next, it examined
whether or not reference was made to "other use"when solving the blocking patent / research tool
patent issues, and outlined such reference, if any.
Lastly, it indicated characteristic arguments andcases addressing basic understandings of therelationship between competition law andintellectual property law as well as the connection
with technical standardization.
The trends in the foreign countries can besummarized as follows.
As for the types of and requirements for"other use without authorization of the rightholder," although many countries still adopt theprovisions of Article 5(A) of the Paris Convention
as they are, harmonization is going on toward
establishing an international framework based on
the TRIPS Agreement as a result of the efforts tostrongly promote compliance of the TRIPS
Agreement. However, some countries appear to
be developing national laws according to a false
understanding of the purport of the TRIPS
Agreement. For instance, the Republic of Korea iscriticized as having overlooked the fact that
Article 31 of the TRIPS Agreement adopts"conditional approach" instead of "grounds
approach," and introduced in its national law afalse understanding that Article 31(b) specificallymentions the case of a national emergency orother circumstance of extreme urgency or casesof public non-commercial use, as cases in whichsome requirements may be waived including therequirement of efforts to obtain authorizationfrom the right holder prior to use, with theintention of allowing the waiver only in the cases
listed in this article. On the other hand, Singapore
has moved in the direction of narrowing the scopeof acceptable grounds, through conclusion of FTA
with the United States, compared with the scope
under the TRIPS Agreement. Also, according to
the provision of Article 28 of the TRIPS
Agreement, the act of importing the patented
product or the product manufactured by thepatented process can be understood as theworking of the patented invention. In India,
consistency with this understanding is uncertain.
As for the operation, it was rare, except inseveral countries, that compulsory license wasapplied for or granted or the use by thegovernment of the patented invention was
publicly announced or notified to the patent owner,
and after the conclusion of the TRIPS Agreement,
it became even rarer. This trend is also seen incountries where compulsory license or use by the● 34 ●

government is seen rather frequently, such as
France and India.
On the other hand, as a measure to cope withnew problems that have arisen in the pro-patentage when global protection and enforcement ofpatents promote business activities, we can also
see recently movements toward using thecompulsory licensing system and othermechanisms of "other use," or establishing a newframework based on what is learnt from suchmechanisms.
The following movements are seen toward
solving the blocking patent / research tool patentissues. With respect to biotechnology inventions,
Germany and France comprehensively reviewed
eligibility as the subject-matter of patent
protection, exclusive rights based on a patentright, and exceptions to and limitations of
exclusive rights, while taking into consideration
the consistency with the TRIPS Agreement andthe EU law. As a result of the national review,
these countries revised the patent laws in an
attempt to strictly define the subject-matter ofpatent protection and the scope of exclusive
rights based on a patent right. Furthermore, inorder to solve the blocking patent issues while
taking into consideration the adverse effect ofpatents already granted, they revised patent lawswith the aim of facilitating the use of patented
inventions in the private sector by deleting therequirement of public interest from the grounds
for granting compulsory license in case of
dependant inventions. Switzerland is currently
considering revising the patent law for the
purpose of establishing a system for granting
compulsory license for patents relating todiagnosis and research tool.
Amongst academia, scholars suggest not
only a scheme in which a third party shall be
granted compulsory non-exclusive license, butalso a scheme in which a third party shall also beallowed to use know-how necessary for the use ofa patent right, which has not been covered bycompulsory license, or a scheme in which thepatent owner shall be allowed to exercise
exclusive rights for a certain period of time, andthen after the expiration of that period, he shallbe obliged to accept an application for the
granting of license, which appears to be similar tothe conventional license-of-right system. These
schemes are intended to solve issues concerning
both compulsory license and exclusive rights
based on a patent right, by revising theconventional structure of rights based on a patentright.
Furthermore, it is also frequently argued in
EU and other countries that the provisions ofcompetition law on abuse of the dominantposition shall also be applicable. Based on thisargument, Taiwan, India and the Republic ofKorea revised the competition law and developed
guidelines for the purpose of increasing thepractical applicability of the competition law, orrevised both the patent law and the competition
law for the purpose of strengthening the linkage
between these laws in terms of the objects ofregulation and the regulatory authorities
concerned.
The outsider issue in technical standardization
is being discussed as an issue of competition
policy arising from the enforcement of a patentright, in the context of remedying anticompetitive
practice. For this reason, stronger orientation isseen for this issue than for the blocking patent /research tool patent issues, towards a solution by
granting substantive compulsory license or
eliminating anticompetitive practices through theapplication of the provisions of competition law.
Not only in Europe and the United States but alsoin Asian countries where this issue has yet tobecome obvious, some people point out thepossibility of solving this issue by granting
compulsory license for the purpose of remedying
anticompetitive practices under the patent laws,
but objection to this view is also strong. It isnecessary, first of all, to examine and clarify the
relationship between competition law andintellectual property laws including patent law interms of the interest to be protected by law.
Lastly, as for the use by the government,
there were no special arguments concerning theblocking patent / research tool patent issues or
the outsider issue in technical standardization.
These trends shown above have arisen as aresult of the examination of individual issues in
response to the demand for the change of "otheruse" as a measure to cope with the adverse effectof the exclusivity of a patent right, under the
pro-patent policy aimed at affording universal
protection to intellectual property rights asprivate rights.

Ⅳ WTO Decision on the TRIPS
Agreement and Public Healthand Compulsory License Systems
throughout the WorldAs shown in Chapter III above, WTO
Members have been developing national laws inaccordance with their obligations under the
TRIPS Agreement, including the grounds for
granting compulsory license and allowing "otheruse without authorization of the right holder."The Doha Declaration on the TRIPS Agreement
and Public Health adopted at WTO Ministerial
Conference in 20 November 2001 (WT/MIN(01)/DEC/2)
and
the
WTO
Decision"Implementation of paragraph 6 of the Doha
Declaration on the TRIPS Agreement and Public
Health" adopted at WTO General Council in 30● 35 ●IIP Bulletin 2005

August 2003 (WT/L/540) have provided WTO
Members with the opportunity to call fornecessary legislative measures to cope withpublic health crisis in other countries. WTO
Members including Japan have agreed to revise
Article 31(f) of the TRIPS Agreement so as to
avoid legal instability of such legislative measures,and the TRIPS Council is currently discussing a
specific revision method. The WTO General
Council Decision indicates tentative measures forthe period until the revision of the TRIPS
Agreement is effective, so that the Members will,
while complying with the provisions of the TRIPS
Agreement except for Article 31(f), be able torevise their national laws in order to grantcompulsory license and allow "other use withoutauthorization of the right holder" based on new
grounds, i.e. to cope with public health crises inother countries.
It is necessary first to examine the history of
the adoption of the "WTO Decision on the TRIPS
Agreement and Public Health," and clarified the
problems of the existing TRIPS Agreement. Next,
to review the progress in tentative revision ofnational laws conducted in line with the WTO
Decision in WTO Members, namely, Canada,
Norway and India where legal revision wascompleted, EU and the Republic of Korea whererevision bill was submitted to the parliament, andSwitzerland, etc. where revision bill was
reportedly under preparation. All legal revisions
in these countries were intended to improve thegrounds and procedures for granting compulsory
license for the use of the patented invention withthe aim of solving public health problems in othercountries.
In the revision discussion at the TRIPS
Council, there is a sharp division of opinion over
the two revision methods, i.e. addition of afootnote and addition of a new article.
Furthermore, even if consensus were reachedabout how to revise the provisions of the TRIPS
Agreement, the revision of Article 31(f) would
take effect only for the Members that haveaccepted the revision upon acceptance by two
thirds of the Members, because it is of a naturethat would alter the rights and obligations of theMembers (Article 10 of the WTO Agreement).
Therefore, a great deal of time will be required
until the actual enforcement of the revision, andduring such time, individual Members will needto take steps to revise national laws as tentative
measures in line with the WTO Decision.
Taking such steps is not an obligation of the
WTO Members. However, the Doha Declarationand the WTO Decision are based on theconsensus reached through lengthy negotiations
at the Ministerial Conference, General Council
and TRIPS Council. It is necessary to present theoutline of the steps to revise national laws taken

IIP Bulletin 2005

by some Members such as Canada and Norway astentative measures in line with the WTO
Decision, and common points of these steps.
These Members have started taking such steps
with the objective of achieving their own national
policy, i.e. respecting decisions made at the WTO
and providing international cooperation in copingwith global public health issues.
Contrary to these movements abroad, noparticular progress has been made in Japan in
discussing the revision of Article 31(f) of the
TRIPS Agreement or taking steps in line with the
WTO Decision. In future discussion, which is
expected to be focused on these issues, weshould make our intention clear by taking
legislative measures with reference to thecommon points above-mentioned or demonstrating
the reason for not taking such measures.

Ⅴ Conclusion: Significance ofLimitation of Patent in the
Pro-Patent Era
Chapters II to IV reviewed international
agreements and foreign systems in relation to
exceptions to and limitations of the effect of apatent, especially the exception of "experiment or
research," and "use of the patented invention
without authorization of the patent owner," suchas compulsory licenses, and examined how thesesystems would contribute to solving the blocking
patent / research tool patent issues and theoutsider issue in technical standardization, while
presenting characteristic arguments and legal
revisions regarding these issues.
When we review the overall trends inforeign countries involving such legal revisions
and arguments, we must not overlook the fact
that, with respect to biotechnology inventions,comprehensive discussion is underway inaccordancewiththecurrenttechnical
achievements, as seen in the recent legal
revision in Germany or France and the revisionbill in Switzerland, focusing on eligibility as
the subject-matter of patent protection,
appropriateness of the contents of exclusive
rights based on a patent right, andappropriateness of the applicability of various
exceptions to and limitations of exclusive rights
based on a patent right. These countries havetaken a stance, particularly in the discussion on
the eligibility as the subject-matter of patent
protection, to review the existing frameworks ofintellectual property laws, including not only thelaws themselves but also various views andinterests concerned such as morality and ethics
and promotion of academic research. Over a
period ranging from several years, to ten years ormore of comprehensive review on conventional
systems under intellectual property laws, these● 36 ●

countries have chosen to establish a compulsory
licensing system as a measure to solve theblocking patent / research tool patent issues. In
this respect, the compulsory licensing system nolonger gives negative incentives to patent owners
in working patented inventions by themselves or
granting third parties license thereon, but it canbe deemed to have become a scheme under which
the grounds and requirements for granting
license are specified and license will be used toremove obstacles to the actual industrial
activities. Also, some countries such as Germany,
while making every effort to avoid conflict
between national laws and EU law, seem to beready to propose a discussion on reviewing orrevising international agreements if conflict
cannot be avoided. How new systems establishedthrough such revisions will be operated, is very
worthy of note.
Currently, in Japan it is also desired to
examine precise needs and consider specificmeasures to cope with the blocking patent /research tool patent issues. In this process, if wetake a comprehensive approach to consider
appropriateness of individual ideas, such as the
improvement of the compulsory licensing system,
while taking into account the approaches taken inforeign countries, it would enhance the use of
biotechnology inventions. We can also consider, inlight of the trends in international discussion andthe circumstances in particular industries andfields, the possibility of granting compulsory
license or allowing a particular structure of rights
under the patent law, or ascertaining theapplicability of the competition law.
On the other hand, with respect to technicalstandardization, foreign countries do not question
the eligibility of the technology indispensable tostandardization as the subject-matter of patent
protection, and they discuss this issue as an issueof competition policy arising from theenforcement of a patent, in the context ofremedying anticompetitive practice. For thisreason, while the applicability of the compulsory
licensing system for the purpose of remedying
anticompetitive practice under the patent law ispointed out, an approach to directly apply thecompetition law is, of course, also frequently
advocated. Especially in Europe, there wasnoteworthy cases in which the Doctrine of
Essential Facility was applied to the act
conducted by the intellectual property rightholder that could have been regarded as an abuseof right even if it were duly enforced. In Asian
countries, there is also a movement toward taking
administrative steps to stipulate by law thecooperation between the authorities in charge ofintellectual property and those in charge ofcompetition, which has yet to reach a substantive
argument.

When we study these issues in Japan, we
should consider the relevance with the grounds
for granting arbitrary license, such as public
interest under Section 93 of the Japanese Patent
Law, and also promote concrete discussion on theapplicability of the competition law, thestrengthening of the cooperation between theauthorities under the patent law and those under
the competition law, and the measures that can betaken by technical standardization organizations.
The TRIPS Agreement, which provides forthe requirements for "other use withoutauthorization of the right holder," is not
sacrosanct. WTO Members have agreed to revise
Article 31(f) of the TRIPS Agreement, and are
currently taking steps as tentative measures toimprove their compulsory licensing systems,
while discussing how to revise that section.
In light of the purport of the patent law, thebalance between the interest of the patent ownerand that of society arising from the patented
invention, things are coming to a situation inwhich the "interest of the user of the patented
invention" can be deemed to include the publichealth interest of people in other countries, or atleast the interest of people in each country who
intend to protect the public health interest ofpeople in other countries. Although taking
tentative measures is not an obligation for theMembers, the Doha Declaration and the WTO
Decision are based on consensus reached throughlengthy negotiations at the Ministerial Conference,
General Council and TRIPS Council. Now is thetime Japan should discuss such measures widely
while taking this fact into account.
The trends shown above indicate, whenviewed from a different perspective, the current
situation in which harmonization is going onunder the TRIPS Agreement and otherinternational agreements on patent right, and at
the same time, legal revisions are being carriedout or discussed in order to establish national
provisions in response to national, regional or
globalneeds
withinthese
internationalframeworks. In the pro-patent era, issues arealways raised, from social needs of the times,
regarding the establishment of exceptions to andlimitations of exclusive rights based on a patentright. Also, we should always question whether
such exceptions and limitations are acceptable insociety in terms of the meaning and grounds
thereof.

● 37 ●(Researcher: Akiko Kato)IIP Bulletin 2005