March 31, 2008

To: Secretariat of Intellectual Property Strategy Headquarters, Cabinet Secretariat

Council for Intellectual Property Protection on Internet (CIPP)

CIPP Report for FY 2007

This is to report this fiscal year’s outcomes in the CIPP, which, since FY 2005, has beencommitted to the collaborative activities on the private-sector level by inviting the Secretariat ofIntellectual Property Strategy Headquarters, Cabinet Secretariat, National Police Agency, Ministry ofEconomy, Trade and Industry, Ministry of Internal Affairs and Communications, and Agency for
Cultural Affairs as observers in order to solve the problem of the distribution of intellectual propertyrights (IPR) infringing goods arising from Internet auctions.
We hope this report will help you plan IPR protection policies for this fiscal year as it represents
a consensus of right holders (individuals and organizations) and Internet auction operators.

[Outlines]
1.

Implemented certain measures based on the “Guidelines for Prevention of the Distribution ofIntellectual Property Rights Infringing Goods,” including appropriate voluntary patrols andremovals upon notice from right holders.

2.

Set up a website for “reporting activities” and “raising public awareness.”

3.

Carried out an effectiveness verification to measure overall effects of various efforts.

4.

Created associate membership to expand members.

5.

Appealed to the government for dissemination and expansion of the “Japanese Approach.”

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Background to the discussions and changes in actual conditions during FY 2007
This fiscal year’s activities involved the steady promotion of traditional measures centering on
removals as well as the implementation of an effectiveness verification to find outcomes from thepast efforts between auction operators and right holders. In addition, we logically derived remaining
problems from an analysis of the verification results and discussed measures for them.

(1) Voluntary removals
Proper operation was carried out mainly by three major companies in accordance with the“Guidelines for Prevention of the Distribution of Intellectual Property Rights Infringing Goods”
lately established (hereinafter referred to as the “Guidelines”). Actual achievements are as follows.

Trademark cases:

748,416 cases

Copyright cases:

187,909 cases(From January to December, 2007)(2) Collaborative awareness-raising activities by right holders and Internet auction operators
Setup of a website (http://www.cipp.jp/)
We set up a website for the CIPP on June 19 2007 and started reporting our activities.

Raising awareness of users
As in the previous fiscal year, part of right holders and the largest auction operators
collaboratively carried out an activity to raise awareness of those who bought IPR-infringing
goods. In addition to the activity, we conducted a three-month follow-up survey to find whatitems those buyers purchased through auctions. As the results of the follow-up survey showedthat none of them had subsequently traded IPR-infringing goods, we believe that theawareness-raising activity served as a deterrent against purchases of IPR-infringing goods. Itmay help the prevention of the distribution of IPR-infringing goods if we raise awareness andinvite attention of the buyers who felt guilt about purchasing the goods in addition to raisingawareness of malicious sellers. In terms of awareness-raising activities for the general public,
since right holders, auction operators and the government have already carried out their own
substantial programs on an ongoing basis, we saw no need in providing CIPP original contents
and decided to just offer links.

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(3) Effectiveness verification
Application of the Guideline by auction operators resulted in the voluntary removals asindicated in (1). Removal requests from right holders are as shown in the table below.

Trademark

Copyright

Design rightTotal

2005

81,491 cases

18,263 cases

2 cases

99,756 cases

2006

60,929 cases

3,557 cases

5 cases

64,491 cases

2007

30,907 cases

365 cases

2 cases

31,274 cases

Table:Changes in Removal Requests from Right Holders in Past Three Years

120,000

99,75680,000

64,49140,00031,27402005

Figure:

2006

2007

Changes in Removal Requests from Right Holders (By Year)

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We established an “Effectiveness Verification Committee” and carried out a verification by only
identifying, as infringing goods or infringement, the auctioned items which were judged asinfringement of a copyright or trademark based on their on-screen descriptions and images andwould allow right holders to make suspension requests to auction operators. Outlines of theimplemented verification are as indicated in the annex.

Verified cases
Copyright: 5,063 casesTrademark: 19,268 cases

As a result, it is impartially proved that percentages of auctioned copyright- or
trademark-infringing goods were extremely low. A low percentage was also indicated in theauctioned IPR-infringing goods which were difficult to identify. We accordingly found that it
was surely difficult to auction the goods of the right holders who had promoted relevant efforts
in cooperation with auction operators and had been active in enforcement. Please note that theeffectiveness verification did not cover the auctioned items which did not allow right holders
and operators to determine on the screen whether or not they were infringing goods, or whichwere not identifiable before actually buying the items. We will make a further study todetermine whether we should implement a more in-depth verification in the future with respect
to how items are auctioned and purchased by taking into consideration certain conditions
including actual damages and enforcement by right holders.

Percentage of auctioned IPR-infringing goods which were identifiable
Copyright: 0.51%

Trademark: 1.20%

Percentage of auctioned IPR-infringing goods which were difficult to identify(Those which did not allow auction operators to identify)
Copyright: 0.32%

Trademark: 0.13%(4) New members
We decided to establish observer membership to promote participation of both parties for ensuring ahigher degree of coverage. Currently an auction operator and a right holder (organization) areexpected to participate. Although there are no restrictions on where applicants are located,
qualification requirements include communication capability in Japanese, being an executive oremployee of a legal entity in the case of right holders (individuals and organizations), and that aproxy must be qualified as a lawyer in Japan for attendance by proxy.

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Conclusion
Participants now better understand each other as two years have passed since the establishment. As aresult, activities of the CIPP are properly rated in international conferences of right holders. Japan
adopted a unique problem solution through “collaborative efforts by both right holders and auction
operators to show successful results” (Japanese Approach). The CIPP wished that the effectivenessof the Japanese Approach would be demonstrated, and is now very satisfied with the fact that thewish is fulfilled. We will try to have further achievements by increasing, in a phased manner,operators and right holders who share prerequisite understanding.

We have heard that unfortunately in the United States which has the world’s largest Internet auctionindustry, the situation has not yet improved at all because of the conflict between auction operatorsand right holders in lawsuits. Accordingly the CIPP would be very happy if its outcomes could help
Japan demonstrate its advanced capability in the intellectual property area. We urge the government
to spread these outcomes which Japan can boast to the world and improve the status of the country in
the international society.

Principles of the Japanese Approach

1. Both parties shall be aware that they should fully respect each other’s positions and thenmake collaborative efforts in standing up against their common enemies, that is, infringers,
in order to protect not only their own interest but also interest of consumers among others.

2. Right holders shall be aware that they should enforce their own rights, which are notautomatically protected.

3. Auction operators shall be aware that they should make active efforts to protect intellectual
property rights for sound development of the Internet.

4. Both parties shall be aware in the course of the promotion of countermeasures that theyshould agree on the equal importance of the protection of intellectual property rights andthe securement of users’ freedom for business and secrecy of communication, and that theyshould take actions not to undermine values of both aspects.

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