2Further Exploitation of Intellectual Properties

In recent years, the number of the transferring of the patent right has been increasing as activating
the company recognition across the border, and so on. Against this background, the Patent Act was revised
from a licenser’s standpoint. The registration system of license to the right to obtain a patent is established,
and the disclosure of the registration for non-exclusive license is limited, and so on. In the discussion ofthis revision, two points of the argument was left. One issue is the patent law system for exploitation of theright to obtain a patent, and the other is of the monopolistic non-exclusive license.

Because of these factors, this research and study was executed about the patent law system for
exploitation of the right to obtain a patent, and of the monopolistic non-exclusive license. This study andresearch was executed through the establishing a committee, the questionnaire surveys, the interview
surveys, and the overseas surveys.

Ⅰ License System1

improve the situation, the monopolistic license
system needs to be revised in order to adapt tothe actual business practices.

Introduction

In recent years, open innovation has becomea growing trend. Against this background, theimportance of licensing has increased as a meansof exploitation of intellectual properties. In manycases, a patented invention licensed to a company,
etc., forms the foundation of its business. If the
exploitation of the patented invention becomes
impossible, it would greatly damage the company,
etc. Therefore, it is important to ensure legal
protection for licenses.
Under the current system, a non-exclusive
license of a patent cannot be asserted against athird party without registration with the Patent
Office. However, in view of the actual businesspractices, some people point out that suchregistration would be very difficult. The system
to perfect non-exclusive licenses needs to berevised in order to provide proper protection to
non-exclusive licensees.
In some cases, a license is granted only to a
specific licensee. This is generally called
monopolistic licensing. There are two types ofmonopolistic licenses: (1) an “exclusive license”
defined in the current Patent Act as a type ofmonopolistic license and (2) a “monopolistic
non-exclusive license,” which is a type of
non-exclusive license defined in the Patent Act
but granted only to a specific licensee under alicense agreement. Both types of licenses havetheir own limitations. It has been pointed out thatan exclusive license is inconvenient because it
does not take effect without registration and thata monopolistic non-exclusive license does not
ensure sufficient protection for the licensee. To

IIP Bulletin 20092

Outline of the current system

The Patent Act specifies two types oflicenses: exclusive license and non-exclusive
license.
(1) System to perfect a non-exclusive
licenseA non-exclusive license takes effect uponconclusion of a license agreement. However,registration is required to assert the license
against a third party.
This means that, in a case where anon-exclusive license of a patent is licensed, if
the patent is assigned to a third party, the third
party could exercise the right to request an
injunction against the licensee unless thelicensee has registered the non-exclusive license.
(2) Monopolistic license system(i) Exclusive license
An exclusive license of a patent entitles aperson
other
than
the
patenteetomonopolistically and exclusively exploit thepatented invention.
An exclusive license does not take effectupon conclusion of a license agreement. It takes
effect only upon registration.
The exclusive licensee may assert theexclusivity against a third party. It is explicitly
stipulated that the exclusive licensee is entitled
to exercise the right to demand damages and theright to request an injunction against a third
party.

● 12 ●

The information about an exclusive licensethat is required to be registered includes the“name of the exclusive licensee,” the “scope ofthe exclusive license,” etc. The registeredinformation will be open to the public.
(ii) Monopolistic non-exclusive license
A monopolistic non-exclusive license isregarded as a non-exclusive license under the
Patent Act. It takes effect upon the conclusion ofa license agreement.
The holder of a monopolistic non-exclusive
license is not entitled to assert the exclusivity
against a third party. There is no explicit
provision stipulating that the holder of amonopolistic non-exclusive license has the rightto demand damages and the right to request an
injunction. In reality, (1) there have been manycases where the court recognized the licensee’s
right to demand damages, while (2) there havebeen few cases where the court recognized thelicensee’s right to request an injunction. However,there have been a few cases where the court
recognized that the holder of a monopolistic
non-exclusive license was entitled to exercise theright to request an injunction on behalf of theright holder.
3

Direction of the system to perfect a
non-exclusive license(1) Issues(i) Issues related to the registration-required
perfection system
Companies have pointed out that theregistration of a non-exclusive license is difficultin reality for the following practical reasons: (1) A
license agreement often licenses a package ofmany and a variety of intellectual properties suchas a patent and related know-how without
specifically describing each of them, (2) Since
license registration imposes certain monetaryand procedural burdens on a licensee, it isburdensome to register a license every time alicense agreement is concluded because theconclusion of such an agreement takes placefrequently, (3) It is also burdensome to register alicense every time a license agreement isrenewed or otherwise modified, (4) A license
agreement itself is a subject of secrecy obligation
in some cases, (5) It is sometimes difficult toobtain cooperation from the other party inregistering a license or deleting it, and (6) Sincemany other countries do not require registrationof a license for the perfection thereof, it issometimes difficult to obtain cooperation fromanother party in registering an international
license.
In fact, a non-exclusive license is notregistered in most cases. Companies havepointed out that most licenses are unregisteredexcept for cases where the licensor’s risk ofbankruptcy is high.
In practice, however, any person who
requests transfer of a patent is expected toexercise due diligence. The person needs todirectly check with the patentee whether thepatent has been licensed to another party and, if
yes, under what conditions. In principle, atransferee of a patent is expected to respect theexisting
licenses
includingunregistered
non-exclusive licenses.
(ii) Necessity to revise the registration-required
perfection system
In recent years, an increasing number ofpatents have been licensed or transferred. Under
the current registration-required perfection
system, which is rarely used in practice due tothe difficulty in registration, a non-exclusive
licensee could find itself unable to continue itbusiness if the company that has purchased thepatent exercises the right to request an
injunction against the licensee.
In order to provide proper protection to therights of a non-exclusive licensee, such a systemthat required registration needs to be revised. It
would be appropriate to adapt the system to theactual business practices and introduce a new
system that is in line with the corresponding
systems in other countries.
(2) Major systems of other countries
In the United States and Germany, a licensee
is entitled to assert its license against a third
party as long as the licensee can prove theexistence of a license agreement. No official
public notification by such means as registrationneeds to be made.
In France, the United Kingdom, and China, alicensee is entitled to assert the license against athird party in bad faith even if the license isunregistered.
In South Korea, a licensee is not entitled toassert the license against a third party unless thelicense is registered.
(3) Possible new systems
In view of the fact that registration isdifficult in practice, a new system that does not● 13 ●IIP Bulletin 2009

require registration should be introduced.
Possible new systems are as follows.
System of automatic perfection
Under this system, a non-exclusive licensee
is entitled to assert the license against a third
party as long as the licensee can prove theexistence of a license agreement even if thelicense is unregistered.

of automatic perfection is considered to beappropriate from the legal and practicalperspectives as follows.

(i)(ii) System of perfection against a third party
in bad faith
Under this system, a non-exclusive licensee
is entitled to assert the license against a third
party in bad faith even if the license isunregistered.
(iii) Relaxed requirements for perfection
Under this system, a non-exclusive licensee
is entitled to assert the license against a third
party as long as the licensee satisfies therequirements that are relaxed in the sense that
registration is not required.
(4) Direction of the system(i) Basic principle
Under the system of perfection against athird party in bad faith or the system that
imposes relaxed requirements for perfection, if a
blanket license agreement is concluded, which isoften the case in practice, it would become
impossible to distinguish a perfected license fromthe one not perfected. Under the system of
perfection against a third party in bad faith,
whether a license is perfected or not would bedetermined by a third party’s subjective decision.
On the other hand, in order to adopt relaxed
requirements, it would be necessary to newly set
other requirements that are clear and open to the
public. In either case, a non-exclusive licensee
and a third party would find itself in a precarious
position. In contrast, under the system of
automatic perfection, all non-exclusive licensees
are equally protected. Therefore, this system
would provide higher predictability in comparison
with the system of perfection against a third
party in bad faith and the system that imposes
relaxed requirements.
The system of automatic perfection
conforms to the actual business practices where
any person who requests transfer of a patent is
expected to exercise due diligence and where anytransferee of a patent is expected to respect any
existing licenses.
Furthermore, the introduction of the system

IIP Bulletin 2009(ii) Safety of transactions
In practice, when a person exercises due
diligence, the person is always expected to check
not only the registry but also directly with thepatentee. Therefore, the introduction of thesystem of automatic perfection would notincrease the burden of due diligence. Moreover, it
has been pointed out that the patentee is
expected to provide correct information to any
person who is exercising due diligence. The
authenticity of information provided to such aperson can be guaranteed by contract liability or
criminal liability as well. Therefore, theintroduction of the system of automatic
perfection would not unreasonably damage thesafety of transactions conducted by third parties.
(iii) General principles of the Civil Code
Although the system of automatic perfection
would be interpreted as an exception to thegeneral principles of the Civil Code, there aresufficient needs and capacities for the
introduction of the system especially inconsideration of the facts that (1) the use of thecurrent registration system is extremely rare, (2)there is a great need for appropriate protection
for non-exclusive licensees, and (3) incomparison with the right to use a tangible object
defined in the Civil Code, a non-exclusive right
imposes relatively relaxed restrictions on therights of others.
(iv) Bankruptcy of a patentee, etc.
In a case where a patentee, etc., that has
granted a non-exclusive license becomesbankrupt, if the non-exclusive licensee has a“record or registration or is otherwise entitled toassert the license against a third party,” the rightof the bankruptcy trustee to cancel the license
agreement, etc., would be restricted.
In a case where the system of automatic
perfection is introduced, if the Patent Act
specifies that a non-exclusive licensee may assert
the license to a third party as long as “thelicensee satisfies the requirements to be entitledto assert the license against a third party,” theright of a bankruptcy trustee to cancel anon-exclusive license agreement, etc., may be
restricted.

● 14 ●

4

Direction of the monopolistic license
system(1) Issues(i) Issues related to exclusive licenses
The monopolistic license system is usedmostly by universities, which rarely exploit theirown patented inventions, and pharmaceuticalcompanies, etc.
Although an exclusive license is explicitly
defined in the Patent Act as a type ofmonopolistic license, monopolistic non-exclusive
licenses are more often granted than exclusive
licenses. As the reasons, it has been pointed outthat exclusive licenses, which take effect only
upon registration, are inconvenient (1) because
the registration of an exclusive license is difficult
for the same reasons as those that make theregistration of non-exclusive licenses difficult inpractice and (2) because the public disclosure ofsuch registered data as the “name of the
exclusive licensee” and the “scope of the
exclusive license” is highly disadvantageous
because they are corporate trade secrets.
(ii) Issues related to monopolistic non-exclusive
licenses
Monopolistic non-exclusive licenses, whichtake effect without registration, are moreconvenient than exclusive licenses. However,since monopolistic non-exclusive licenses are
regarded to be the same as non-exclusive
licenses under the Patent Act, the holder of amonopolistic non-exclusive license may notassert the exclusivity to a third party.
Furthermore, while there have been many court
decisions where the court recognized that themonopolistic non-exclusive licensee’s right todemand damages, the court often denied thelicensee’s right to request an injunction.
Consequently, the monopolistic non-exclusive
license system cannot meet the needs of theholders of monopolistic licenses for theperfection of the exclusivity of the license and forthe right to request an injunction.
(iii) Necessity to review the monopolistic
license system
As described above, the monopolistic license
system has failed to satisfy the practical needs
regardless of which type of monopolistic license
is granted, either (1) an exclusive license, whichtakes effect only with registration or (2) amonopolistic non-exclusive license, which does
not allow the holder of the license to assert theexclusivity or to request an injunction. Therefore,
it is necessary to review the current system andcreate a new monopolistic license system thatwill fulfill the practical needs.
(2) Major systems of other countries
In the case of an exclusive license granted in
the United States, Germany, France, and theUnited Kingdom, and an exclusive right to exploit
a patent granted in China, a license takes effectupon conclusion of a license agreement.
Registration is not necessary for a license to takeeffect. On the other hand, an exclusive license inSouth Korea takes effect upon registration.
Furthermore, the holder of any of theaforementioned licenses is entitled to demanddamages and request an injunction.
(3) Direction of the system(i) Basic principles
In view of the facts that (i) few Japaneseregistration or recording systems requireregistration as a prerequisite for the registeredsubject to take effect, (ii) few monopolistic
license systems of other countries requireregistration as a prerequisite for the registeredlicense to take effect, (iii) there are needs among
the holders of monopolistic licenses to be entitledto assert the exclusivity and to request an
injunction, a new system should not requireregistration as a prerequisite for a monopolistic
license to take effect and should grant the holder
of an unregistered monopolistic license certain
rights exercisable against a third party.
In the case of the holder of a registeredmonopolistic license, in view of the facts that (i)the difficulty of registration and the demerits of
information disclosure have been recognized and(ii) there are needs among the holders ofmonopolistic licenses to be entitled to assert theexclusivity and to request an injunction, it would
be appropriate to entitle the holder of such alicense to assert the exclusivity and request an
injunction. With regard to registration, only theminimum amount of information should be
required for registration and subject todisclosure.
(ii) Proposed new system
It would be reasonable to abolish the current
exclusive license system and establish a newmonopolistic license system (“monopolistic
licenses (tentative name)”).
Under the new system, a monopolistic
license should take effect without registration.

● 15 ●IIP Bulletin 2009

The holder of a registered monopolistic license
should be entitled to assert the exclusivity
against a third party and also entitled to exercise
the right to demand damages and the right torequest an injunction against any third party
including a third party that is in a competitive
relationship with the licensee. On the other hand,
the holder of an unregistered monopolistic
license should not be entitled to assert theexclusivity against a third party and should beentitled to exercise the right to demand damages
and the right to request an injunction only against
a third party that is not in a competitive
relationship with the licensee.
When a monopolistic license is registered,
only the “name of the licensee, etc.” should be
registered. The “scope of license” should not be
required for registration. Regarding information
disclosure, only the information on whether amonopolistic license has been “granted or not”
should be disclosed to the public. The “name of
the licensee, etc.” should be disclosed only to theinterested parties.
5

Direction of the sublicense system(1) Outline of the current system
The Patent Act explicitly permits an
exclusive licensee to grant a non-exclusive
license to a third party if the patentee’s consent
is obtained. On the other hand, the Patent Act
does not explicitly permit a non-exclusive
licensee to grant a non-exclusive license to athird party. However, in practice, it is common fora non-exclusive licensee to grant such a license
to a third party.
(2) Issues(i) Issues related to the registration system
Under the Patent Act, a sublicense granted
by a non-exclusive licensee is regarded as a
non-exclusive license granted by the patentee tothe sublicensee. Therefore, under the current
registration-required perfection system, in order
for a sublicensee to assert its non-exclusive
license against a third party, the sublicensee has
to register its license jointly with the patentee,
with which the sublicensee often has no direct
relationships. It would be unrealistic to require
such registration.
(ii) Necessity to review the registration-required
perfection system
Under the current registration-required
perfection system, it is difficult for a sublicensee

IIP Bulletin 2009

to satisfy the requirements to be entitled toassert the sublicense against a third party.
Therefore, it is necessary to review theregistration-required perfection system andintroduce a new perfection system.
(3) Direction of the system
If the current registration-required perfection
system for non-exclusive licenses is replaced witha system that perfects such licensees without
registration, a sublicensee would be able to assert
its non-exclusive license against a third party
even if the sublicensee has not registered thelicense jointly with the patentee.
Therefore, the system of automatic
perfection should be introduced in order toprovide proper protection to sublicensees as well.

Ⅱ Further Exploitation of the Rightto obtain a patent, etc.
1

Introduction

In recent years, there has been an increasein the economic and proprietary value of not only
a patent, which is a registered intellectual
property right, but also the right to obtain apatent, which is an unregistered intellectual
property right. Against this background, there areneeds for exploiting such right as security in fundraising activities or as a subject matter of alicense or trust.
However, under the current system, (1) it isprohibited to establish a pledge on the right toobtain a patent and (2) there is no system toregister or publicly notify the right to obtain apatent. Therefore, the current system should be
reviewed in order to promote the exploitation of
the right to obtain a patent.
2

Direction of the system to establish apledge on the right to obtain a patent(1) Outline of the current system
There are two types of security right thatcan be established on intellectual properties: apledge or mortgage. While a pledge may beestablished on a patent, it is explicitly prohibitedto establish a pledge on the right to obtain apatent regardless of whether or not the patentapplication has been already filed.
Therefore, the right to obtain a patent may
be used as subject matter of security under the
mortgage system.

● 16 ●

(2) Issues
It has been pointed out that there is a certain
level
of
needs
for
the
intellectual
property-secured financing system because it
would facilitate fundraising activities ofcompanies with advanced technology. These days,
there are many projects that take advantage ofthe right to obtain a patent. In some cases, theright to obtain a patent is the key factor in project
evaluation. These trends suggest that there has
been a rise in the needs for funds secured by theright to obtain a patent.
As mentioned above, under the current
system, when the right to obtain a patent is usedas security, a mortgage is established on said
right. When a mortgage is established on theright, the ownership of the right will betransferred to the creditor. Consequently, thecreditor will be in a position to follow theapplication procedure, conclude a license
agreement, get involved in a dispute over thepatent, etc. as the right holder. This is why the
mortgage system is considered to beinconvenient in practice.
In reality, a complicated procedure is carriedout as follows. First, a mortgage is established on
the right to obtain a patent. The ownership will
be returned to the debtor after the patent isregistered. Then, a pledge is established on thepatent.
Therefore, it is necessary to review thecurrent provision that prohibits the establishmentof a pledge on the right to obtain a patent.
(3) Major systems of other countries
Under the systems concerning the use of an
intellectual property right as security in the
United States, Germany, France, and the United
Kingdom, the possibility of the use of an
intellectual property as security does not depend
on whether or not the intellectual property has
been registered. Under those systems, nosecurity right is required to be registered inorder to take effect.
On the other hand, in China and South Korea,
a pledge may be established on a patent. However,regarding the issue of establishing a pledge on
the right to obtain a patent, China has neither an
explicit provision nor an academic consensus on
this issue. In South Korea, such a pledge is
prohibited. Both China and South Korea requireregistration in order for a pledge to take effect.

of a pledge on the right to obtain a patent under
the current system has been a topic of academic
discussions. However, this prohibition is notnecessarily reasonable in the current state. For
example, it has been criticized that, since theright to obtain a patent is uncertain, when apledge is established on the right, the pledgee ora third party could suffer unexpected damage.
This criticism has no grounds for the following
reasons. In many precedents, the court permitted
the establishment of a pledge on future
receivables or other uncertain receivables as well.
Furthermore, pledgees were aware of theuncertainty of the pledges in terms of application
outcome, when they accepted the pledge.
There are sufficient needs and capacities forthe establishment of a pledge on the right toobtain a patent in view of the facts that theeconomic and proprietary values of the right toobtain a patent have been increasing as
exemplified in the creation of a tentative
exclusive license system, that the right to obtaina patent is transferable, and that there are needs
among companies for the use of the right toobtain a patent as security through establishmentof a pledge on the right.
Therefore, it would be reasonable to permit
the establishment of a pledge on the right toobtain a patent. Since it has been pointed out that
there is a difficulty in identifying the contents andscope of the right to obtain a patent for which an
application has not yet been filed, such a rightshould be excluded from the permission.
The newly created pledge system should
satisfy the following conditions: (1) A pledge
should be required to be registered not to takeeffect but to be perfected against a third party, (2)After a pledge is established on the right toobtain a patent, when the patent is registered, thepledge should remain effective in the registeredpatent, (3) After a pledge is established on theright to obtain a patent, the patent application
may be amended or divided without the consent
of the pledgee, and (4) After a pledge isestablished on the right to obtain a patent, thepatent application may not be abandoned orwithdrawn without the consent of the pledgee.
Similarly, with regard to a pledge established
on a patent, it would be reasonable to permit thepledge to take effect without registration but torequire registration to assert the pledge against athird party.

(4) Direction of the system
The purpose of prohibiting the establishment● 17 ●IIP Bulletin 20093(2) Due to the lack of the systems to registerand publicly notify the restrictions on thedisposal of the right to obtain a patent that iscurrently pending, if a debtor disposes ofsuch a right in violation of an injunction, an
attaching creditor has no means to assert its
right against a third party;(3) Due to the lack of the systems to registerand publicly notify the entrustment of theright to obtain a patent that is currently
pending, it is impossible to publicly notify toa third party that the right to obtain a patent
is a trust property; and(4) If the right to obtain a patent that iscurrently pending is permitted to become an
object of a pledge, it would be necessary toestablisharegistration
andpublicnotification system for such a pledge in order
to assert its effect against a third party.

Direction of the newly created registration
system for the right to obtain a patent(1) Outline of the current system(i) Registration of a change in a patent
Any change in a patent such as a patenttransfer needs to be registered in the Patent
Ledger at the Patent Office. The registration of achange in a patent must be made through joint
application filed by both parties involved in apatent transfer, etc.
With regard to a transfer, any change causedby entrustment, extinction, or restrictions on
disposal of a patent, registration is required forsuch changes to take effect.
(ii) Notification on a change in the right toobtain a patent
Concerning the right to obtain a patent,
there is no system to register and publicly notify
any change in the right.
Any person who is succeeding to the right toobtain a patent is not required to register but isrequired to notify the Commissioner of the Patent
Office to that effect. The information disclosed in
the notification will be recorded in a file kept at
the Patent Office.
While the Patent Act does not specify whoshould make such notification, either the assigneror the assignee may independently submit the
notification together with a certificate for thereason.
On the other hand, regarding a change in theright due to entrustment, restrictions on disposal,
and the establishment of a pledge, a notification
may not be submitted.
(2) Issues
In recent years, the economic andproprietary value of the right to obtain a patenthas been increasing. Consequently, the need forfurther exploitation of such a right has been
growing. However, there are no systems toregister and publicly notify a change in the rightto obtain a patent that is currently pending.
Regarding the lack of these systems, thefollowing issues have been pointed out:
(1) In the case of a transfer of the right to obtaina patent that is currently pending, either thetransferor or transferee may independently
submit a notification about the transfer.
Therefore, it is relatively easy for any
person who pretends to be a transferee tofalsify a certificate for the reason and submit
a notification about the transfer, for example;

IIP Bulletin 2009(3) Major systems of other countries
In the United States, Germany, France, andthe United Kingdom, any change in the right toobtain a patent may be registered or recordedwith their respective intellectual property offices.
Such registration or recording is required for
perfection of such a change against a third party.
In China, there is a system to register a change inthe right to obtain a patent that is currently
pending. Registration is required for such achange to take effect. As is the case with Japan,
South Korea does not have a system to register achange in the right to obtain a patent.
(4) Direction of the system
In order to solve the above-described
problems caused by the lack of the system toregister the right to obtain a patent that iscurrently pending and in order to harmonize theJapanese system with those of other countries, itwould be reasonable to establish a system toregister the right to obtain a patent that iscurrently pending.
The newly created system should satisfy thefollowing conditions: (1) if a change in the right toobtain a patent that is currently pending has beenregistered, when the patent is granted andregistered, said change in the right will remain
effective in the registered patent, (2) In a casewhere a change is made in the right to obtain apatent that is currently pending, if the change isregistered, any amendment or division of theright should be permissible without the consent
of the parties who have interests in the change inthe right, and (3) In a case where a change is● 18 ●

made in the right to obtain a patent that iscurrently pending, if the change is registered, theabolishment, withdrawal, etc., of the right shouldbe permissible only with the consent of theparties who have interests in the change in theright.
4

Direction of the system concerning theentitlement to exercise the right todemand compensation, etc.

The Patent Act permits a patent applicant todemand compensation only after the registrationof the patent.
Similarly, the current Patent Act and theprecedents permit the exclusive licensee and theholder of a monopolistic non-exclusive license ofa patent to demand damages from a third party
who has exploited the patented invention withoutauthorization. In view of these facts, it would bereasonable to permit the holder of a tentative
exclusive license of a pending patent to demandcompensation.
Meanwhile, under the current system, theholder of a pledge on a patent is permitted toextend security interest to the proceeds of thecollateral. Further study would be necessary to
determine whether compensation should be
subject to the security interest of a pledge
established on a patent or on the right to obtain apatent.
Also, further discussion would be necessary
to determine whether such a pledgee should beentitled to give a warning that is required before
exercising the right to demand compensation.

Ⅲ Study on the Systems Concerning
Utility Models, Designs, andTrademarks with the Focus on theAforementioned Points
With regard to the systems concerning
utility models, designs, and trademarks, further
study would be necessary with the focus on the
points addressed in Chapters I and II inconsideration of the characteristics of and actual
business practices under those systems.
(Researcher : Akira YASUTAKE)● 19 ●IIP Bulletin 2009