7 Study on the Desirable Form of Rights
in the Pro-Patent Era
It is difficult to comprehend how the compulsory license system in Japan on patent rights or the like shall beapplied and utilized, because of respective relevant provisions in laws and regulations such as the Patent Law,
implementation guidelines of the compulsory license system, the TRIPS Agreement, and the agreement between
Japan and the U.S. Therefore, this study picked up “patents on pharmaceuticals,” “technical standards(including various issues under the Antimonopoly Act)” and “correction of unfair competition practice” asmajor examples, and examined whether the compulsory license system can be effectively applied with respect tothem. Furthermore, the structure of the compulsory license system was reviewed by making clear the consistencyof the legal system of Japan with treaties and international agreements (the TRIPS Agreement and theagreement between Japan and the U.S.) as well as the requirements for application of the compulsory license
system. Apart from whether or not any domestic legislative measures should be required to comply with such
related treaties and agreements, this study touched upon how the system should be considered from theviewpoints of industrial promotion measures and foreign policies of Japan.

Ⅰ Access to Pharmaceuticals andPatents
1

AIDS Drugs and Availability

In 1981, HIV (human immunodeficiency
virus: AIDS virus), a virus that causes death bydestroying the immune system, was found in the
U.S. It is thought that during the twenty years
since then, 60 million people have been infectedwith AIDS, and 22 million of them have died. As of
December 2000, 36 million people were infected,
including 25 million in sub-Saharan countries,
accounting for 70% of those worldwide.
AIDS drugs are very expensive and annual
expenses for treatment (including the cost of
medicine) per patient in the U.S. amount to ten
thousand U.S. dollars, and hence it is impossible topay for treatment required for the people ofsub-Saharan countries in which per capita annual
domestic income is only 340 U.S. dollars. Under
the circumstances, developing countries havereached the consensus that “AIDS drugs are
expensive because they are protected by patents.
To solve this problem, measures need to be takensuch as granting compulsory license or the like.”
2

Present Situation in Developing Countries
and Patents on Pharmaceuticals(1) Brazil
Since Brazil has positively coped with AIDS bytaking such measures as providing AIDS patientsand carriers with AIDS drugs free of charge, thenumber of dead and the ratio of infection is verysmall. However, since the enormous expenses forpurchasing medicines tightened financial conditions,
the Brazilian government had directly negotiatedwith AIDS drugs manufacturing companies in

IIP Bulletin 2002

industrialized countries to press them for reductionof prices against a background of imposition of thecompulsory license. At the end of August 2001, F.
Hoffman-La Roche Ltd. agreed to reduce the supply
price of the company’s drug “nelfinavir” by 40%,
and as a result, the Brazilian government withdrew
once announced enforcement of the compulsory
license (this resulted in a decrease in the costborne by the government from 885 thousand U.S.
dollars to 354 thousand U.S. dollars). Brazil had
been consistent in its policy not to grant patents on
pharmaceuticals, but revised the Patent Law tocomply with the TRIPS Agreement at the sametime when the World Trade Organization (WTO)
was established, and moreover in 1996 adopted thepipeline protection system (a system ofretroactively granting patent rights to patentapplications for medicines under the old law) under
the TRIPS Agreement-Plus. As a result, theintroduction of foreign capital from international
pharmaceutical businesses and their direct
investments have been promoted and employment
was increased.
(2) South Africa
In South Africa (hereafter referred to as “SA”),
AIDS is widespread, with a high rate of mortality.
The country’s per capita national income is only
3,160 U.S. dollars, and therefore, it is impossible topay for the treatment of AIDS. Hence, thegovernment of SA amended the Medicines Act in1997 to legalize the domestic production of genericpharmaceuticals and parallel importing, and as aresult, the Pharmaceutical Manufacturers Associationof South Africa and 39 pharmaceuticals businesses
in industrialized countries filed a lawsuit against the
government of SA alleging that the amended Act
was unconstitutional, and the governments of theindustrialized countries supported the lawsuit. In
April 2001, the lawsuit was withdrawn, whereupon● 68 ●

the government of SA announced a view that theplaintiff and the governments concerned had
understood the compliance of the amended
Medicines Act with the TRIPS Agreement. On theother hand, however, the plaintiff and thegovernments of the industrialized countries denied
that they had such an understanding.
At present, negotiations on gratuitous grants
and a reduction in price are under way between thegovernment of SA and pharmaceuticals businesses
in industrialized countries, and the import andparallel importing of patented medicines are being
conducted. Merck & Co., Inc. announced that it
would not exercise the patent rights concerning its
AIDS drugs for five years for Aspen Pharmacare,the largest pharmaceuticals manufacturer in SA,
which claimed public attention as voluntarymeasures that surpassed compulsory licensing. In
addition, GSK (GlaxoSmithKline) voluntarily
granted free licenses on the patent rights to three
types of AIDS drugs to Aspen Pharmacare.
Furthermore, Aspen Pharmacare concluded anagreement with GSK to supply 30% of its sales toNGOs for the education on the prevention andtreatment of AIDS in consideration of granting oflicenses.
(3) India
The present Patent Law handles manufacturingmethods only as the object of patenting for
medicines, and besides, the maximum period forsuch patents is only seven years. This period iseven shorter than that for the development of
medicines, so short that a patent will have expired
when a medicine is supplied to the market. For thisreason, there have been few applications andregistrations of patents on medicines, and there
was only one patent falling under the international
patent classification, A61K, in 1999, and there wasnone in 2000.
3

Compulsory
Licensing
Developing Countries

Systemin(1) Brazil
The compulsory licensing system in Brazil isof the TRIPS Agreement-compliant type.
Compulsory licensing is stipulated in Section 3,
Articles 68 through 74 of the Patent Law, and when
the patentee does not engage in local production(Article 68, Paragraph 1-a) and when the patentee
imports products (Article 68, Paragraph 4), a third
party is granted a compulsory license for parallel
importing.
(2) South Africa
The compulsory licensing system in SA is of
the Paris Convention-compliant type. Article 56 of

the Patent Act makes the local working
requirements compulsory (Paragraph b), and acompulsory license is granted when localization ishindered because no licensing based on anagreement has been made (Paragraph d) or when
the price of imports is higher than that in othercountries (Paragraph e).
(3) India
The compulsory licensing system of India is of
the Paris Convention-compliant type. Article 84 andArticle 85 of its Patent Law stipulate compulsory
licensing, and not only in the case of non-licensing
or insufficient licensing, but even when licensing issufficient, a compulsory license is also granted if
the price of the patentee’s product is not reasonable(Article 84, Paragraph 1). It should be noted thatthe country has provisions on the system of licenseof right (Article 86), and patents on medicines areautomatically subject to compulsory licensing on
the basis of the system (Article 87, Paragraph 1).
There were eight claims made based on this systemfor compulsory licenses concerning patents on
medicines from 1972 to 1980, three of which were
granted compulsory licenses (*1).
4

Views on Compulsory Licensing
Governments and Organizations
Various Countriesofin

Views differ depending on one’s position as towhether compulsory licensing is effective in termsof access to medicines. Different opinions wereexpressed in the special meeting of the TRIPS
Council held on June 20, 2001. They are given
below.
(1) Views of Developing Countries and More
Developed Countries
Zimbabwe, representing the African Group,
termed compulsory licensing “an indispensable tool
for the government to effectively implement its
public health policies.” Brazil emphasized thatcompulsory licensing is an essential element inundertaking price negotiations between the Brazilian
government and pharmaceutical manufacturers.
Thailand proposed a scheme in which a country that
does not have manufacturing capacities within the
country grants compulsory licenses (import rights)
to manufacturers in other countries, thereby
making medicines with affordable prices available
within its own country. Cuba stated that, under thesituation in which countries must depend on
expensive imported medicines, compulsory
licenses aiming at importing from countries capableof manufacturing them should be granted.
(2) Views of Industrialized Countries
The U.S. spent time interpreting Article 31 of(*1) See Mika Yamana “Hattentojoukoku niokeru Tokkyo no Kyousei Jisshi Seido (Compulsory Licensing System of Patents in
Developing Countries)”, Nihon Kogyo Shoyuukenhou Gakkai Nenpou (Annual Report of Japan Society for Industrial
Property Rights Laws) No. 24 (Yuhikaku, 2000).
● 69 ●IIP Bulletin 2002

the TRIPS Agreement from beginning to end, suchthat each country can adopt the flexibility of theAgreement and that it considers that AIDS falls
under the category of national state of emergency,
and the like, withholding any evaluation ofcompulsory licensing itself. In addition, the U.S.
merely termed compulsory licensing aimed atexporting “problematic.” Japan, like the U.S., did
not evaluate compulsory licensing itself, but statedthat it was ready to positively study justification of
measures to realize compulsory licensing in third
countries aimed at exporting, without prejudice to
Article 31, Subparagraph (f) of the TRIPS
Agreement. The European Union (EU) stated thatcompulsory licensing in a third country forexporting should be studied seriously without
prejudice.
(3) Views of the IFPMA (International
FederationofPharmaceutical
Manufacturers Association)
IFPMA expressed its view that “access to
medicines and patent rights are not directly
related, and access is hindered in developing
countries by institutional problems in thosecountries such as poverty, failure to improve
infrastructure, civil war, trade protectionism, andthat compulsory licensing could not be thesolution to the problem of access to medicines,
giving such reasons that: c price reduction or free
grant by the patentee ensures stable supply, rather
than compulsory licensing; d products supplied
through compulsory licensing are not guaranteedin quality, safety and efficacy; and e of the 306
essential drugs of WHO, only 15 are patented
medicines, and the majority of the rest are notrelated to compulsory licensing, while there is norecord showing that access to the latter is easy.
5

Anthrax Terrorism Case and Post-Doha(1) Anthrax Terrorism Case and Compulsory
Licensing
Subsequent to the terrorist attacks in New
York on September 11, 2001, anthrax terrorism
cases occurred at many locations somewhat
simultaneously within the U.S., whereupon theargument was raised in the U.S. Congress andwithin the U.S. government that Cipro(Ciprofloxacin preparation) of Bayer AG, which iseffective as a specific remedy against anthrax,
should be subject to compulsory licensing within
the U.S. Meanwhile, the FDA (the Food and Drug
Administration), the competent authorities of
medicines, stated that it was unable to address thematter unless companies other than Bayer AG
made applications for the sales of Cipro, thus paying
little attention to the enforcement of compulsory
licensing.
After the anthrax cases gradually subsided, theissue of compulsory licensing within the U.S. also

IIP Bulletin 2002

died down, but it is interesting that in the U.S.
amongst strong objections to the enforcement ofcompulsory licensing, the argument was raised, thecompulsory licensing should be enforced uponoccurrence of a state of emergency. If the U.S. had
enforced compulsory licensing, a precedent would
have been set, concerning: cunder what conditions
it can be done; d who the claimant should be; e
how the conditions of licensing should bedetermined; f the required procedure up to
granting licenses; and the like. Another discussion
remained unsettled and to be considered in the
future is that, in the case where an antimicrobial
preparation approved as a medicine against
infecting organism other than Bacillus anthracis isfound to be also effective against Bacillus anthracis,
whether or not the authorities in charge of thepharmaceutical business permit its uses other thanthat specified (namely, its application against
Bacillus anthracis).
(2) Post-Doha
On the last day of the WTO Ministerial
Conference, which was held from November 9through 14, 2001 in Doha, the United ArabEmirates (UAE), the “Ministerial Declaration on
the TRIPS Agreement and Public Health”(WT/MIN(01)/DEC/W/2) was announced, and thefollowing reference to the relation between accessto medicines and compulsory licensing isimportant.
c “We agree that the TRIPS Agreement does notand should not prevent Members from taking
measures to protect public health. ... we affirm
that the Agreement can and should be interpreted
and implemented in a manner supportive of WTO
Members’ right to ... promote access to medicines
for all.”d “Each Member has the right to determine
what constitutes a national emergency or othercircumstances of extreme urgency, it being
understood that public health crises, including
those relating to HIV ... can represent a national
emergency or other circumstances of extreme
urgency.”e “We recognize that Members with insufficient
or no manufacturing capacities in the pharmaceuticalsector could face difficulties in making effective
use of compulsory licensing under the TRIPS
Agreement.”f “We also agree that the least-developed
country Members will not be obliged ... toimplement or apply Sections 5 and 7 of Part II of the
TRIPS Agreement or to enforce rights provided forunder these Sections until 1 January 2016...”
The above Ministerial Declaration provided apartial solution to the issues regarding
interpretation of the TRIPS Agreement that had
been disputed between industrialized countries anddeveloping countries until in the middle of the year
2001, and this was a “complete victory” for● 70 ●

developing countries. This Ministerial Declaration
was a political announcement made by bearing in
mind the state of emergency - the spread of AIDS,
and is not directly binding on WTO member
countries, but it seems undeniable that developing
countries will quote this announcement to press
industrialized countries to implement theannouncement into practice.
6

Expected Mode of the Enforcement ofCompulsory Licensing and Interpretationof the TRIPS Agreement(1) Mode of the Enforcement of Compulsory
Licensing
As long as complying with the provisions ofeach subparagraph of Article 31 of the TRIPS
Agreement, each WTO member country canestablish the right of compulsory licensing,irrespective of the reasons therefor. In accordancewith the above f of the Ministerial Declaration, thecompulsory licensing system based on eachcountry’s respective legal system will be applied
until January 1, 2016, and until then, the purposesof access to medicines are roughly divided into: cdomestic manufacturing; and d import fromoverseas without domestic manufacturing (including
the case where no manufacturing capacity isavailable).
c Compulsory licensing for local manufacturing
The reasons for granting compulsory licensing
for local manufacturing include: (a) the patentee
does not work the patented invention or works it
insufficiently; (b) the patentee only imports the
products; (c) the price of the products made by thepatentee is high; (d) the patentee engages in local
manufacturing or importing, but there is need to
grant compulsory licensing unconditionally for
public welfare (old Canadian Patent Law); and so on.
However, (b) violates Article 27 of the TRIPS
Agreement, which reads: “patent rights enjoyable
without discrimination as to ... whether products
are imported or domestically produced,” as well as
Articles 28 and 30 of the Agreement; the “price ishigh” in (c) is arbitrary or subjective, being
ambiguous as the criteria for judgment, and hence
violates Articles 28 and 30 of the Agreement; and(d) is problematic in relation to Article 27 of theAgreement, and the like.
In either case of the above categories, if thepatentee does not agree to granting compulsory
licensing, then in accordance with Article 31,
Subparagraph (i) of the Agreement, a judicial
decision shall be sought in a court of law in the
country where compulsory licensing has been
granted, about the effectiveness of compulsory
licensing. If there is any objection to the system of
the granting country, the matter shall be settled in
the dispute settlement panel of WTO afternegotiations between the two countries concerned.

The final settlement can only be made by the panel.
d Compulsory licensing for import“Import” includes parallel importing. The
TRIPS Agreement does not consider parallel
importing (Article 6) and it is solely a matter ofinterpretation of domestic law, and therefore suchdomestic legislative measures can be taken as tomake parallel importing lawful, or grant compulsory
licensing for parallel importing, and the like.
Moreover, the Doha Declaration recognizes that
“The effect of the provisions in the TRIPS
Agreement that are relevant to the exhaustion of
intellectual property rights is to leave each Member
free to establish its own regime for such exhaustion
without challenge ...,” and so parallel importing can
be a powerful tool for access to medicines.
Usually, in the case of import from a third
country (Country B), whether or not the patentright exists in Country B is concerned. If there isno corresponding patent right in Country B, then it
is solely a problem of the country that intends toenforce compulsory licensing (Country A) for
obtaining medicines, but if there is a corresponding
patent right in Country B, then the problem of
infringement of patent right arises in the country.
Therefore, Country B may grant compulsory
licensing to a business that manufactures patented
medicines with a view to exporting them toCountry A, but in this case “predominantly” in
Article 31, Subparagraph (f) of the Agreement is
problematic. Compulsory licensing is a right
granted within the range of a patent right, and it
should not be established with a view to eliminate
inconvenience in other countries. Such a technique
is out of the question in which compulsory licensing
is enforced in Country B, and nominal “domestic”
sales are carried out in Country B to avoid the“predominantly,” thereby exporting most of the
products (to Country A). In the Doha Declaration,
this problem was sought to be solved mainly byinterpretation, however, it should be solved byrevision of the TRIPS Agreement.
(2) Problems to be Solved
Problems regarding access to medicines
involve multiple factors and are difficult to besolved. An attempt to easily solve these by granting
compulsory licensing may result in a decrease in
the level of protection of patent rights, which may
even hinder R&D investment into AIDS drugs.
The very fact that such withdrawal from theinvestment is occurring should be consideredmore worrisome. This problem is not onlyreflected in the number of registrations in India, it
has frequently occurred in Canada, which is one of
the G7 industrialized nations, after compulsory
licensing had been institutionalized until about ten
years ago.

● 71 ●IIP Bulletin 2002

Ⅱ Technical Standards and the
System of Compulsory License
1

Problems in Technical Standardization

Standardization of technical specifications andstandards is important in products and services
such as telecommunications equipment, computer
software, etc. where utility arises when they areconnected with other users and other equipment.
IC cards, DVDs, next-generation TVs, mobile
phones, PC communication, etc. would be the mosttypical examples. Technical standards can roughly
be divided into the followings, according to theprocess of their standardization.
c Public
standards
devisedbypublicstandardization organizations;d Where technical specifications and standards ofspecific businesses become the technical standards
as a result of market competition;eTechnical standards devised by tradeassociations or through agreement among multiple
businesses.
c is called “de jure standard” and is devisedby public organizations such as ISO (International
Organization
forStandardization),
IEC(International Electrotechnical Commission), andthe like. d is called “de facto standard.” In addition,
recent activities aiming at technical standardization,
not through public standardization organizations, ororiginating from such a sphere, with multiple
businesses gathering together have been takenplace. This falls into the category of e above, andis called a forum or consortium (hereaftercollectively referred to as a “Forum”).
2

Patent Policies
LimitationsofForumsandits

The patent policies of Forums are not uniform.
They can be divided into those having no patent
policy at all, those complying with the rules of ISO,etc., or those having an original patent policy, or the
like. Forums having patent policies are concerned
about patentees’ powerful exertion of absolute
exclusive rights, and in order to propagate thestandards widely, make enormous efforts to limit
licensing fees paid by users within a reasonable
range, and at the same time to satisfy the profits of
the right-holders within a certain range, thereby
making a system to increase the number ofparticipants of the holders of essential patents asmuch as possible.
However, whatever patent policies areprovided for by various technical standardization
organizations including Forums, patent problems
have not been settled completely. For example, if apatentee of an essential patent for certain technicalstandards leaves a Forum, or the patentee has notparticipate in the Forum without intention to do sofrom the beginning, then a license needs to beobtained from such a patentee separately, and hence
the function of the Forum will not be fully realized.
Moreover, there have been unreasonable situations
where the license fees received by a patentee whodoes not participate in a patent pool organizationand has concluded licensing contracts on his/her
own are higher than the license fees received by apatentee who does participate in a patent poolorganization.
3

Possibility of Right of a Non-exclusive
License Granted by an Arbitration
Decision (Saitei Jisshiken)

It is also possible that a holder of an essential
patent proposes unreasonably high license fees to acompany, and the company can obtain no licensing
practically, or the license is rejected, thus being
unable to continue its business (Hold Out). If thisoccurs at the stage of devising specifications ofstandard technologies, there is room for selecting
technical standards that do not use the invention
related to such the patent, but if this occurs after
the adoption of standards, the propagation of thetechnical standards will be hindered. Some people
in the industrial sector who are concerned about
the possible occurrence of such a situation, strongly
support the effectiveness of the compulsory license
system(*2).
MPEG2 standards will be studied hereafter asa concrete example. As a precondition, it isassumed that Patentee, i.e., Company A that holds apatented invention essential for MPEG2 standards
and that does not participate in a patent pool, hasasserted its rights based on the patent rights
against Company B, a manufacturer of MPEG2
standards products (for example, a manufacturer of
TVs or DVD equipment) that pays license fees to a
MPEG2 patent pool.
(i) Article 93 of the Patent Law
If Company B makes a request for an
arbitration decision (Saitei) based on Article 93 of
the Patent Law, it must specify the requirement of“Working of a patented invention is particularly
necessary in the public interest.” In brief, it is amatter as to whether the manufacture and sale ofproducts complying with MPEG2 standards by
Company B are particularly necessary in the public
interest. Even when the MPEG2 standards
themselves are deemed to have public nature, there
is no public nature in “Company B’s” actions
themselves for the manufacture and sale of the
products. If Company A asserts its rights against all(*2) See Takashi Sawai “Melbourne Kokusai Soukai no Gidai ni taisuru Nihon Bukai no Iken (Opinions of Japan Sectional
Meeting to the Agenda of World Congress in Melbourne) (3)”, A.I.P.P.I. Vol. 45, No. 11, p. 25 et seq. (2000).

IIP Bulletin 2002

● 72 ●

the manufacturers of MPEG2 standards-compliant
products, and it is expected that the assertion will
be admitted, whereby ordinary consumers will not
be able to obtain the products, to be deprived of theopportunity to use high-quality moving pictures,
then the working of the patented invention that
Company A possesses by all the manufacturers
inclusive of Company B, can be evaluated as being“particularly necessary in the public interest.”
It should be noted here that the right of anon-exclusive license granted by an arbitration
decision under this article should not be applied to
all the problems of Hold Out that can occur withreference to technical standards in all the standards
and fields. That is to say, only when substantial
Hold Out occurs to the technical standards thathave already become a social infrastructure, or thatis expected to become a social infrastructure in the
future to a considerable extent, a right of anon-exclusive license by an arbitration decision
should be granted to a patent concerning thetechnical standards.
(ii) Article 83 of the Patent Law“Where a patented invention has not been
sufficiently and continuously worked during aperiod of three years or more in Japan” (and wherefour years have elapsed since the filing date of theapplication corresponding to the patented
invention), a request for a non-exclusive license by
an arbitration decision under this article may be
made, and so if Company A has not worked thepatented invention at all, and has not granted alicense to any other company, then there is room
for applying this article.
If Company A works the patented invention in
the manufacture and sale of MPEG2 standardscompliant products, then it is a precondition for
Company A to receive a license of a patent of the
MPEG2 patent pool. And then, in order for
Company A to become a licensee of a patent of the
MPEG2 patent pool, Company A must grant alicense of its patent essential for MPEG2 (grantback) to all the licensees of the MPEG2 patent pool(as stipulated in the MPEG2 License Policy), andtherefore such a situation cannot occur that
Company A asserts its rights against Company B in
connection with the essential patent.
(iii) Article 92 of the Patent Law
If Company B does not possess any patented
invention that has a relation of dependency with theinvention related to the essential patent possessedby Company A(“dependency” means that theformer invention shall utilizes the latter invention),then the provisions of this article shall not beapplied. In addition, even if Company B possesses apatented invention that has such a relation of
dependency, the provisions of this article shall not
be applied unless the dependent invention involves“an important technical advance of considerable
economic significance” of Article 31, Subparagraph

1 of the TRIPS Agreement.

Ⅲ Problems with Antimonopoly Act
regarding Technical Standards
1

Relation
betweentheIntellectual
Property and Antimonopoly Act

Article 21 of the Antimonopoly Act stipulates
that “the provisions of this Act (= AntimonopolyAct) shall not apply to such acts recognizable as theexercise of rights under the Copyright Act, thePatent Act, the Utility Model Act, the Design Act or
the Trademark Act.” It is commonly held that thisis a corroboration rule, of which application to suchactions as should be originally held to be illegal is
not to be excluded. Regarding this, there was a
dispute over what is the due exercise of patentrights and the like, while the Fair Trade
Commission (Kosei Torihiki Iinkai) expressed an
official opinion in the “Tokkyo Kow-how License
Keiyaku ni kansuru Dokusen Kinshi Hou jou no
Shishin (Guidelines for Patent and Know-how
Licensing Agreements under the AntimonopolyAct),” as was announced publicly on July 30, 1999.
In the policy, if the actions are not deemed to be the“acts recognizable as the exercise of rights,” thenthe Antimonopoly Act shall be applied thereto. It
mentions as the examples that are not evaluated as
being the “acts recognizable as the exercise ofrights,” (1) the case in which the actions are
deemed to, on the pretext of the exercise of rights,
be carried out as actions that form part of theunreasonable restraint of trade or privatemonopolization that violates the Antimonopoly Act,or be carried out as the means of these, or the like;and (2) where they are deemed to be against theaim or purpose of the system to protect
technologies when being seen from the purpose ormode of the actions, or from the gravity of theinfluence of the actions in question on the order ofcompetition in the market.
2

Problems with the Competition Policy

As the problems on the Antimonopoly Act or
the competition policy regarding technicalstandards, the following three examples are given
below.
(1) Rejection of Participation in the Work ofDevising Technical Standards
Unlike de facto standard that arises out ofcompetition, the technical standards resulting froma Forum have the danger of being devised andmaintained in an anti-competitive way. The
viewpoint under the Antimonopoly Act on thisproblem is explained in the “Kyoudou Kenkyu
Kaihatsu ni kansuru Dokusen Kinshi Hou jou no
Sishin (Guidelines under the Antimonopoly Act● 73 ●IIP Bulletin 2002

Concerning the Joint Research and Development),”
as was announced publicly in April 1993 by the Fair
Trade Commission. According to the Guidelines,
whether or not to make a person participate in the
joint research and development is left to his/her
free will as a general rule. In the joint research anddevelopment that aim at devising standards, theparticipation of specific entrepreneurs are
restricted, whereby the business activities are
difficult to be carried out, and may be excluded fromthe market, then it may violate the Antimonopoly
Act as an exceptional case. However, if thebusinesses of which participation has been rejected
are assured of their access to the results ofresearch and development, and if there is no danger
that their business activities will be made difficult,then it will not become problematic.
(2) Rejection of Licenses of TechnicalStandards
The Antimonopoly Act clearly distinguishes
the rejection of transactions by joint actions (joint
boycott) from the rejection by a single business,with reference to the illegality of the rejection oftransactions inclusive of the supply of licenses. The
rejection of transactions is highly illegal if it iscarried out by joint actions of multiple businesses(inclusive of actions by an association ofbusinesses), and if it restricts competition
substantially, then it constitutes the “unreasonable
restraint of trade,” and even when the degree ofrestraint of competition is low, it becomes illegal asan “unfair trade practices” (General Provision,
Section 1) as a general rule. Therefore, whether or
not there is cooperativeness becomes important,while the following explanations on the problems oflicense rejection with respect to techniques
employed in the standards are given in the “Gijutsu
Hyoujun to Kyousou Seisaku ni kansuru Kenkyu
Houkokusho (Report of the Meeting for the Studyof Technical Standards and Competition Policies)”of the Fair Trade Commission as was announced
publicly on July 25, 2001:(i) The rejection of licenses by a right holder
within a Forum violates the Antimonopoly Act
Such a rejection of licenses falls under the
category of a joint rejection of transactions, and is
not evaluated as being the exercise of rights under
the Patent Law, etc. Therefore if the businessactivities of the rejected business become difficult,whereby competition is substantially restricted,
then it constitutes the “unreasonable restraint oftrade” or “private monopolization.” The same
applies to the case of a rejection of licenses by one
right holder within a Forum, if it disables the use oftechnical standards, whereby the business activitiesof the rejected business become difficult to be
carried out.
(ii) In the case of a rejection of licenses by a rightholder outside of a Forum, its evaluation under the
Antimonopoly Act varies depending on whether or

IIP Bulletin 2002

not there is involvement in the work of devising thestandards. If the holder is unaware of theincorporation of his/her technologies into thestandards, or the holder expressed clearly his/her
intentions to be opposed thereto, it does not
become a problem under the Antimonopoly Act as a
general rule. Conversely, if the holder has madeefforts to make his/her own technologies
incorporated into the standards, or after thetechnologies of his/her own company have been
incorporated into the standards, he/she has
acknowledged tacitly that they are incorporated
into the standards by taking such an action as
granting a license thereof to other companies, orthe like, or otherwise if the holder has withdrawn
from a Forum after he/she once was involved in thework for standardization within the Forum, then it
may be a problem under the Antimonopoly Act.
Therefore, the rejection of licenses by a rightholder (a business or entrepreneur) with reference
to the patent rights, etc. possessed by itself is the“exercise of rights” as a general rule, and does not
violate the Antimonopoly Act. Such a rejection oflicenses constitutes the violation of the Antimonopoly
Act in such exceptional cases as: c being made byan entrepreneur that is market-dominant; d any
anti-competitive intentions or aims have been added;
e preventing the creation of new technologies orthe development of new products.
With reference to the above, the problem of
expensive license fees is also mentioned below.
The Antimonopoly Act is not to regulate the levelof the amount of license fees itself. However, if it isso expensive as to be regarded as being equal to therejection of licenses, then it is dealt with as aproblem of a rejection of transactions. In addition,such an act as not asserting the rights at first,
but demanding expensive license fees after
standardization, may be a problem under the
Antimonopoly Act. Moreover, the demand of
expensive license fees may fall under the categoryof the “abuse of a dominant status” (General
Provision, Section 10) when being seen from theprocess in which certain technologies have become
the technical standards. However, the provisions of
the abuse of a dominant status are abstract
provisions, which should not be frequently abused.
In this regard, the EU Competition Act has theprovisions of an abuse of a market-dominant status(Article 82 of the Treaty of Rome), which enables
the setting of high prices by a dominant
entrepreneur itself to be illegal.
(3) Problems of an Unfair Competition
Means to Acquire Technical Standards
There is a danger that an unfair competitionmeans is used to acquire technical standards. If thenumber of persons (businesses) that wish to work
patented inventions possessed by a businessincreases, then the inventions (technologies)
become the technical standards at an early stage,● 74 ●

and the business can obtain a dominant status in
the market, and also can expect to obtain theincome resulting from license fees. Included in theactions that become problems under the
Antimonopoly Act are: deceptive activities of
propaganda; transactions of tie-in sales; transactions
with exclusive conditions; sales at unjustly low
prices; and the like.
3

Elimination Measures against Actions in
Violation of the Antimonopoly Act

Granting compulsory licenses as the measures
to correct anti-competitive practices is allowedinternationally as well (Article 31 (k) of the TRIPS
Agreement and the agreement between Japan andthe U.S.). Meanwhile in Japan, measures tocorrect violation practices (hereafter referred to as
the “elimination measures”) are stipulated in
Article 7, Article 8-2 and Article 20 of the
Antimonopoly Act. Based on these elimination
measures, the Fair Trade Commission may orderthat the action to be ceased, a part of the businessbe transferred, the association of entrepreneurs be
dissolved, the clauses concerned be deleted fromthe contract and any other “measures necessary toeliminate ... acts in violation.” Hence, if intellectual
property rights are involved, it can be interpreted
that, as these concrete necessary measures, thecompulsion of the licenses of patent rights and thelike can also be ordered.
Included in the examples in which measuresrelated to intellectual property rights were orderedin the cases of the violation of the Antimonopoly
Act, are: (a) an example in which the supply of
manufacturing technologies in consideration ofreasonable license fees was ordered (the case of themerger of Yawata and Fuji: Trial Decision ofConsent on October 30, 1969, 1969 (Han) No. 2,
Shinketsushu (Collection of Trial Decisions), Vol. 6,
p. 46); (b) an example in which it was ordered toaccept even a proposal for licenses covering a partof the software only (the case of Microsoft Japan:
Trial Decision of Recommendation on December 14,
1998, 1998 (Kan) No. 21); (c) an example in which a
withdrawal of an application for trademark rights
was ordered (the case of The Hokkaido Shimbun
Company, Trial Decision of Consent on February 28,
2000, (Han) No. 2, Shinketsushu (Collection of Trial
Decisions), Vol. 46, p. 144, Tokuho (Special Report)
No. 1964). In addition, (d) the case of pachinko
machine patent pool (Trial Decision of
Recommendation on August 6, 1997, 1997 (Kan) No.
5, Shinketsushu (Collection of Trial Decisions), Vol.

44, p. 238) is a case of private monopolization by apatent pool management company, and while thetrial decision of this case was merely to make thepolicy to prevent new participation withdraw, ascholar criticized it by stating that competition
cannot be recovered unless the new participant
receives licenses, and so compulsory licensing withreasonable royalties should have been ordered(*3).
In the U.S., there is an example in which The
Federal Trade Commission ordered a monopoly
entrepreneur to grant compulsory licensing ofpatent rights and to supply technical information ofreasonable royalties(*4). In addition, in a case wherea merger becomes a problem under the
Antimonopoly Act, as measures to resolve theillegal state, compulsory licensing may be ordered,
which is thought to be more acceptable forbusinesses than the division of a business. In the
U.S., there is an example in which, as theconditions to permit the merger of Ciba-Geigy Ltd.
and Sandoz Ltd., granting licenses of the patents
that overlap between the two companies (patents inthe anticancer drugs market as an innovation
market) to other companies was ordered.
4

Relation between theCompulsory
License
Antimonopoly Act

System ofandtheAs a method by which the government ordersthat an entrepreneur rejecting granting licenses
should be subjected to compulsory licensing,
besides the measures based on the Antimonopoly
Act, the system of compulsory license based on the
Patent Law is employed. Even when not being inviolation of the Antimonopoly Act, from theviewpoint of the policy of intellectual property laws,
to give some examples: if the public interests aredamaged because of the excessive protection oftechnical standards by intellectual property rights,
then the right of a non-exclusive license granted byan arbitration decision as set forth in Article 93 of
the Patent Law shall be established; and if too broad
exclusive rights are given to the patented
inventions of prior technologies, then there is adanger that the working of improved patents that
“involve an important technical advance ofconsiderable economic significance” (Article 31 (l)of the TRIPS Agreement) will be hindered, andhence the right of a non-exclusive license grantedby an arbitration decision as set forth in Article 92of the Law shall be established. In short, it is amatter of comparison and consideration of relativeadvantages between the protection of intellectual(*3) Negishi et al., “Zadankai Saikin no Dokusen Kinshi Hou Ihan wo megutte (Round-table talk: Over the recent cases
violating the Antimonopoly Act)”, Kousei Torihiki (Fair Trade) No. 572 (1998), Masahiro Murakami “Pachinko Ki Patent
Pool Jiken Kankoku Shinketsu wo megutte (Ge)(Over the Trial Decision of Recommendation on the Case of Pachinko
Machine Patent Pool (II))”, Kousei Torihiki (Fair Trade) No. 570, p. 59 (1998).
(*4) See American Cyanamid Co. v. FTC, 363F, 2d 126 (6th Cir, 1971).
● 75 ●IIP Bulletin 2002

property rights and the protection of the public
interests by promoting competition. By consideringthat the elimination of anti-competitive actions andthe promotion of competition are the “public
interests,” these are the same as the criteria of
illegality standard of the Antimonopoly Act. Namely,
an entrepreneur to which granting licenses was
rejected takes judicial or administrative procedures
prior to the request for an arbitration decision, andis given the certification of the violation of the
Antimonopoly Act, to be then granted the right of anon-exclusive license by the Commissioner of the
Patent Office or the Minister of Economy, Tradeand Industry. (Article 92, Article 93 of the Patent
Law, Article 31 (k), (l) of the TRIPS Agreement,
Item e of the agreement between Japan and the
U.S., the foregoing to be described later.)

Ⅳ System of Compulsory License
and the TRIPS Agreement
1

Necessity to Secure Consistency with the
TRIPS Agreement

Each WTO Member country shall ensure theconformity of its laws, regulations and administrative
procedures with its obligations as provided in theannexed Agreements to the Marrakesh Agreement
Establishing the World Trade Organization(Agreement Establishing the WTO) (Article 16,
Paragraph 4 of the Agreement Establishing theWTO). The system and measures in violation of the
TRIPS Agreement (Annex 1C) may be subject tothe procedure of the settlement of disputes by the
Dispute Settlement Body (DSB) in accordance with
Article 64, Paragraph 1 of the TRIPS Agreement(Article 23 of GATT as applied therein) and the
Dispute Settlement Understanding (DSU). In cases
where there is a violation of the agreement, it ispresumed that there exists nullification or
impairment unless there is rebutting evidence(Article 3, Paragraph 8 of DSU), and therecommendations of DSB that call for theconsistency with the agreement are finally backed
by sanctions that cover all the fields of WTO, which
are called the cross-retaliation. Thus WTO has hadstrong mechanisms to have its Member countries
fulfill their obligations.
Under the circumstances, it should be ensured
that the system in Japan is consistent with various
agreements of WTO.
(1) Relation between Article 26 of the Patent
Law and the Treaty
Article 26 of the Patent Law stipulates that“where there are specific provisions relating topatents in a treaty, such provisions shall prevail.” Inaccordance with provisions of the Constitution ofJapan, it is construed that a treaty has domestic
effects and has priority over the laws, and it should
be construed that Article 26 of the Patent Law only
stipulates this in a corroborative and attentiveway(*5). However, the article is not to stipulate that
there is a possibility that the treaties related topatents have direct domestic adaptability. Namely,
the article is construed that not all the provisions ofa treaty are directly applied to the people, but thosewhich a nation is obligated or allowed to domesticate
by judging from the words and characters contained
therein, can only be utilized after they have been
incorporated into domestic laws(*6).
(2) Direct Domestic Adaptability of the
TRIPS Agreement(i) U.S.
The U.S. has completely denied the direct
domestic adaptability of WTO agreements. Namely,
the Uruguay Round Agreements Act stipulates thatc No provision of any of the WTO agreements thatis inconsistent with any law of the United Statesshall have effect (Section 102 (a)(1)); d Nothing inthis Act shall be construed to amend or modify any
law of the United States ((a)(2) of the Section); e
No State law may be declared invalid on the groundthat the provision or application is inconsistent withany of the WTO agreements, except in an action
brought by the United States for the purpose of
declaring such law or application invalid ((b)(2)(A)of the Section); f No private individual shall make,in process of litigation, any assertion based on anyof the WTO agreements, or may challenge any
measures taken by the United States, any State, or
any political subdivision of a State on the groundthat they are inconsistent with the various WTO
agreements ((c)(1) of the Section).
(ii) EC (European Community)
In the preamble of an EC Council Decision in1994 that approved the acceptance of theAgreement Establishing the WTO, it is clearlystated that the Agreement is not directly applied in
EC. In addition, the EC court (European Court ofJustice) ruled in 1972 that an individual cannot seek
the protection of his/her rights in a court based on
Article 11 of GATT, and denied the direct domestic
adaptability of GATT in relation to the EC law(International Fruit Company judgment - cases
21-24/72). In 1983 the direct domestic adaptabilityof GATT was denied in relation to the domestic
laws of EC member countries as well (SIOT
judgment - case 266/81). After the establishment
of WTO, because of the “judicialization” of the(*5) Yuji Iwasawa “Jouyaku no Kokunai Tekiyou Kanousei (Domestic Adaptability of Treaties)”, p. 331 (Yuhikaku, 1985),
Written and edited by Nobuhiro Nakayama “Chukai Tokkyo Hou Joukan (Annotations - Patent Law I)”, p. 204 (Nobuhiro
Nakayama)(Seirin Shoin, Third Edition, 2000).
(*6) Nakayama, ibid., Note 5, p. 204.

IIP Bulletin 2002

● 76 ●

procedure of the settlement of disputes, its
outcome became the focus of attention, and in the
Hermès judgment in 1998 (case C-53/96) the direct
domestic adaptability of Article 50 of the TRIPS
Agreement became an issue, but the court did notshow the decision on this issue(*7).
The most serious problem in affirming thedirect domestic adaptability of the WTO
agreements is that both of the member countries
that are important partners of negotiations (U.S.
and EC) deny the direct domestic adaptability of theagreements. That is to say, if only Japan affirms the
direct domestic adaptability of the agreements, it
may make Japan hold less bargaining power,
resulting in damage to national interests. This isbecause, countries in which the existing domestic
laws are given priority at all times even after theagreements have been concluded (U.S. and EC) are
unlikely to enter into negotiations, during theprocess of concluding the agreements, in an equalbargaining position with countries of whichdomestic laws that contravene the agreements loseeffects immediately after the agreements are
ratified. The reason that a judicial official ruled in
the case of Hermès that there is a serious
obstruction in acknowledging the direct effect of
the TRIPS Agreement in EC court also arises fromsuch mutuality among member countries.
2“Operational Instructions of the System
of Compulsory License)” of the Patent
Law (*8) and the TRIPS Agreement(1) Article 31 of the TRIPS Agreement
Article 31 of the TRIPS Agreement stipulates
the conditions and the like in the case where amember country permits the use of a patent
without the authorization of the right holder,
including granting compulsory licenses or use by
the government, etc.(*9) Matters that form thepoints at issue with respect to the consistency of
the Article with the Patent Law are outlined below.
(i) Subparagraph (b) (the case of a national
emergency or the like)
Article 31, Subparagraph (b) waives theobligations to enter into negotiations in the case ofa national emergency or in cases of public
non-commercial use. Meanwhile, in the system ofcompulsory license in the Patent Law, provisions in
the case of a national emergency are not set forth,and in cases of public non-commercial use as well,

it is required to follow the same procedures as
those in the other cases. Therefore, since Japan’ssystem of compulsory license provides substantial
protection more than the agreement for thepatentee, there occurs no problem under the
Agreement, which employs the minimum standard
principle (Article 1, Paragraph 1 of the Agreement).
(ii) Subparagraph (c) (the reason for granting
patents for semiconductors)
Subparagraph (c) permits granting compulsory
licenses for patents related to semiconductor
technology only in the cases: c of public noncommercial use; and d to remedy an anticompetitive practice. Japan’s Patent Law provides
for rights to request for an arbitration decision byreason of non-working (Article 83 of the Law),relation of dependency (Article 92 of the Law) andpublic interest (Article 93 of the Law) and therequirement for the enforcement of each of suchrights. However, the TRIPS Agreement does not
permit compulsory license at all concerning patents
related to semiconductor technology on the groundof Article 83 and Article 92 of the Patent Law, andthe compulsory license by reason of Article 93 of
the Law is not permitted except in the cases of cand d above. Since the Operational Instructions set
forth that an arbitration decision shall be made incompliance with the TRIPS Agreement, theCommissioner of the Patent Office or the Ministerof Economy, Trade and Industry are not likely toissue an arbitration decision that contravenes
Subparagraph (c).
The problem lies in such a case that,concerning patents related to semiconductors, arequest for an arbitration decision is made based on
the provisions of Article 93 of the Law except cand d above, and the Commissioner of the Patent
Office or the Minister of Economy, Trade andIndustry takes a measure to reject this request byreason of Subparagraph (c), and thereafter themeasure is disputed in administrative litigation. If
the direct domestic adaptability of Subparagraph (c)is affirmed, then Article 83, Article 92 and Article
93 of the Patent Law are not in effect as long as
they contravene Subparagraph (c), and so there
arises no problem of illegality when a measure istaken to reject the request . On the other hand,when being based on an opinion that denies the
direct domestic adaptability of Subparagraph (c),concerning patents related to semiconductors as
well, the provisions of the Patent Law that enable(*7) For details, refer to Iwasawa, ibid., Note 5, pp. 258 - 263, Yuji Iwasawa “WTO no Funsou Shori (WTO’s Settlement of
Disputes)” pp. 60 - 67 (Sanseido, 1995), Yuko Yamane “Kokusai Hou to EC Hou Chitsujo (Ge) Chokusetsu Kouka no
Jouken (International Law and the Order of EC Law (II), Conditions of Direct Effects)”, Toki No Horei, No. 1585, p. 65(Printing Bureau of the Ministry of Finance, 1999).
(*8) Industrial Property Council, Ministry of International Trade and Industry “Saitei no Unyou Youryou (Operational
Instructions of the System of Compulsory License)” (1975).
(*9) For detailed explanations of the contents of provisions of each subparagraph of Article 31 of the TRIPS Agreement, see
Akira Ojima “Chikujou Kaisetsu TRIPS Kyoutei (Explanations Article by Article of the TRIPS Agreement” (Nihon Kikai
Yushutsu Kumiai Japan Machinery Center for Trade and Investment, 1999).
● 77 ●IIP Bulletin 2002

the right of a non-exclusive license granted by anarbitration decision according to Article 83, Article
92 and Article 93 of the Law are still in effect, andSubparagraph (c) does not become a standard fortrial in a domestic court of law. Therefore,
concerning the request for an arbitration decision
based on the Patent Law, the measure to reject therequest based on Subparagraph (c) without
conducting any substantive examination is illegal.
From the foregoing, it would be required that,
under the present situation in which a decisive
judgment is difficult to be made about the direct
domestic adaptability of Subparagraph (c),requirements of the above c and d should beclearly stated in the law as limitative reasons thatenable an arbitration decision to be enforced
concerning patents related to semiconductors.
(iii) Subparagraph (k) (permission for the purposeof remedying anti-competitive practices)
Subparagraph (k) provides for conditions ofpermission in the case of aiming at the remedy
against anti-competitive practices. Such a purpose
falls under the category of “public interest” set
forth in Article 93 of the Patent Law, and so that the
Article is consistent with the TRIPS Agreement.
Note that whether or not provisions on anarbitration decision with a view to remedying
anti-competitive practices should be added to the
Patent Law is a matter of Japan’s policies on
industry and competition, and the contravention
with the Agreement does not cause any problem.
(iv) Subparagraph (1) (dependent invention)
Regarding the permission with reference tothe dependent invention as set forth in
Subparagraph (1)(i), it is required that the second
patent shall “involve an important technicaladvance of considerable economic significance,” butthis requirement is not provided for in Article 92 of
the Patent Law. Paragraph 5 of the Article
stipulates that, if the grant “would unduly injure”
the interests of the patentee or the like, then an
arbitration decision shall not be rendered, and the
Operational Instructions state that in such a case,“the contents of the patented invention of priorapplication and the like as well as patented
invention of later application” shall be taken into
account. Where, if the Commissioner of the Patent
Office undertakes an operation in accordance with
Subparagraph (1)(i) that no arbitration decision
shall be rendered if the above requirements are notsatisfied, then there arises no problem under the
Agreement. Even if the direct domestic adaptability
in Subparagraph (l)(i) has been denied, it is evident
that, determining the arbitration decision inconsideration of the above requirements is within
the range of discretion of the Commissioner of the
Patent Office, and there arises no problem ofillegality. Note that aside form this Subparagraph,
there also is the consistency of the agreement
between Japan and the U.S. with the Patent Law to

IIP Bulletin 2002

be considered, which will be described in the next
chapter.
(2) Article 27 of the TRIPS Agreement
There is a provision to prohibit comprehensive
discrimination in the second sentence of Article 27,
Paragraph 1 of the TRIPS Agreement. This article
is a provision intended mainly to prohibit “granting
compulsory licenses for the reason that, where thepatented object is only imported and not produced
domestically, the patent is regarded as not being
worked.”While Article 83 of the Patent Law is theprovisions on the arbitration decision in the case of
non-working patents, Article 2, Paragraph 3,
Subparagraph 1 of the Law clearly defines that
“importing” is one of the modes of “working.”
Meanwhile, the Operational Instructions explain
that, the “case in which only importation is madeand production is not carried out domestically” by
the patentee falls under the category of the case“where a patented invention has not been
sufficiently and continuously worked” in Article 83,
Paragraph 1 of the Law, but no such interpretation
holds true. Therefore, the Patent Law itself isconsistent with Article 27, Paragraph 1 of the
TRIPS Agreement, but the aforementioned part of
the Operational Instructions is not consistent withthe definition in the Patent Law and Article 27,
Paragraph 1 of the TRIPS Agreement, and besides,
it also contradicts Japan’s stance of negotiations in
the negotiations of TRIPS. Therefore it isconsidered appropriate that the part of the
Operational Instructions be deleted.
3

Compulsory License on Patents Related
to Technical Standards, the Health of thePeople, and the Like

(1) Standpoint of the TRIPS Agreement
Article 31 of the TRIPS Agreement does notprove any limitation to the reason of granting
compulsory licenses and the like, except in
Subparagraph (c) related to semiconductor
technology and in Subparagraph (1) related todependent inventions. In the negotiations of TRIPS,
from the beginning, industrialized nations including
Japan entered into negotiations with a view toprohibiting granting compulsory licenses by reasonof “public interests” (granting compulsory licenses
for medicines was particularly held to be a problem).
Since it became difficult to be implemented, theapproach to limit the reasons of grant shifted to theapproach to make conditions stricter. Hence, no
discussions were made concerning granting
compulsory licenses related to the patents ontechnical standards and the like.
(2) Relation to the Dependent Invention(i) In the case of patents related to technicalstandards
If a person who intends to exploit some● 78 ●

technical standards is a mere licensee who does nothave the second patent contained in the technicalstandards, the person cannot make a request for an
arbitration decision set forth in Article 92 of the
Patent Law. Therefore, if a situation occurs inwhich a compulsory license is required, it will haveto be based on Article 93 of the Law. In this case,however, there arises a problem of an interpretationof the domestic laws as to whether it falls under the
category of the case in which to obtain licenses on
the patents possessed by the patentee “isparticularly necessary in the public interest.”
Likewise, even in the case in which the licensee
who possesses the second patent makes a request
for an arbitration decision for reasons of public
interests stated in Article 93 of the Patent Law, if
its substantial reason is that the standards cannot
be worked because the permission of the patenteeof the first patent is unable to be obtained, thenthere also arises a problem that the requirements in
Article 31, Subparagraph (1) of the TRIPS
Agreement may also have to be satisfied. Regarding
the authorization (the Subparagraph) “to permit the
exploitation of a patent (“the second patent”) whichcannot be exploited without infringing anotherpatent (“the first patent”),” Subparagraph (1) isapplied at all times, and so if an arbitration decision
is requested to obtain the licenses on the firstpatent in order to work technical standards, theneven an arbitration decision set forth in Article 93of the Law is naturally required to satisfy therequirements in Subparagraph (1).
(ii) In the case of patents related to the health ofthe people, and the likeIn the case of an arbitration decision set forthin Article 93 of the Patent Law related to the healthof the people, and the like, there also are two kindsof problems that are exactly the same as those in
the case of the dependent invention stated above.

Ⅴ Evaluation of the Agreement
between Japan and the U.S. in
August 1994 on the System ofCompulsory Licenses on the
Dependent Invention
1

Circumstances and Contents of theAgreement between Japan and the U.S.

As the results of the Working Group onIntellectual Property (held three times in total:
October, December 1993 and June 1994), which arepart of the negotiations of structural problems foreach sector in Japan-US comprehensive economic

negotiations, “Mutual Understanding on Intellectual
Property Rights between the Japanese Patent
Office and the U.S. Patent and Trademark Office”(meeting on January 20, 1994) and “Mutual
Understanding on Intellectual Property Rights”(exchange of notes on August 16, 1994) wereconcluded. In the latter (hereafter referred to as the“Japan-US Agreement”), it was confirmed that theJapanese Patent Office will take actions c to
introduce the opposition system after the grant of apatent; d to revise the accelerated examination
system; and e to improve the operation ofcompulsory licenses, and the US Patent andTrademark Office will take actions c to institute an
early publication system; d to revise reexamination
procedures; and e to improve the operation ofcompulsory licenses.
In the Japan-US Agreement, the item eregarding measures taken by the Japanese side
(hereafter referred to as “Item e of the Japan-US
Agreement” for short) stipulates that “other than toremedy a practice determined after judicial oradministrative process to be anti-competitive or topermit public noncommercial use, after July 1, 1995,
the JPO is not to render an arbitration decisionordering a dependent patent compulsory license to
be granted”(*10). Therefore, measures were taken to
add a revision that “3. Others/ In rendering acompulsory
license,the
AgreementonTrade-related Aspects of Intellectual Property
Rights and other international agreements shall becomplied with” to the end of the “Operational
Instructions of the System of Compulsory License.”2

Evaluation of the Japan-US Agreement(1) Legal Nature of the Japan-US Agreement
The Japan-US Agreement is an international
agreement between the then Ambassador of Japanto the U.S. and the then Secretary of Commerce
realized by exchanging notes. Since it is a treaty ina simplified form made by an exchange of
instruments constituting a treaty (Article 13 of theVienna Convention on the Law of Treaties), it hascome into effect under the international law, andthe party is obliged to perform the matters it
agreed with the other party. However, the Japan-US
Agreement did not obtain the approval of the Diet
as a treaty, and so whether or not it has effect inJapan depends on whether or not it was formed
legally under the domestic laws.
Under the Constitution of Japan, the “treaty”
that needs approval of the Diet (Article 73,
Subparagraph 3 of the Constitution) means,
irrespective of whether it is called a “treaty” or not,(*10) For the details of the other measures taken, see Shigeo Takakura “Chiteki Zaisan Housei to Kokusai Seisaku (Legislation
on Intellectual Property and International Policy)” p. 208 et seq. (Yuhikaku, 2001). Note that the full English text of thesecond agreement is quoted in Sumiko Kobayashi “Aratana Nichibei Tokkyo Goui ni okeru Ryuiten (Points to Be Noted in
the New Japan-US agreement on Patents)” Patent, Vol. 47, No. 12, p. 69 (1994).
● 79 ●IIP Bulletin 2002

a legal agreement in writing on the establishment
or change of the relations with a foreign country ofrights or obligations in the international law.
According to the opinion of the government clarified
by the (then) Minister of Foreign Affairs Ohira in
February 1974, included in those which do notneed to obtain approval of the Diet are: c “aninternational agreement that can be implemented
within the range of a treaty which has alreadybeen approved by the Diet”; d “an international
agreement that can be implemented within therange of a budget which has already been adopted
by the Diet”; and e “an international agreementthat can be implemented within the range ofdomestic laws.” Namely, according to the opinion of
the government, the point at issue is whether or
not the contents of the Japan-US Agreement can be
judged to be an international agreement that does
not need to obtain approval of the Diet.
Item c and Item d of the measures taken by
the Japanese side are already reflected in the Patent
Law by amendment, and so they do not seem toaffect the domestic effect of the entire Japan-US
Agreement. The problem lies in Item e of thesame. Article 92 of the Patent Law is construed
that, unless falling under the category of
exceptional matters fixed by law, the Commissionerof the Patent Office is obliged to order a license to
be granted, and such exceptional matters occur
when “the grant of a non-exclusive license would
unduly injure the interests of the other person ...”
(Paragraph 5 of the Article). Therefore, such aninterpretation was generated that the content of
Item e of the Japan-US Agreement is within therange of discretion given to the Commissioner of
the Patent Office to judge whether it falls under the
category of Article 92, Paragraph 5 of the Law.
(This interpretation is referred to as “InterpretationA”.) Meanwhile, if Item e of the Japan-US
Agreement is incorporated into Paragraph 5 of the
Article, granting a non-exclusive license on thedependent invention unduly injure the interests of
the other person, as a general rule, but in the case“to remedy a practice determined after judicial oradministrative process to be anti-competitive or topermit public non-commercial use,” exceptionally the
grant would not injure them at all, or not “unduly”
injure the same. That is to say, Paragraph 5 of the
Article is a provision in which a license is not to be
granted “as an exception,” whereas upon applying
Item e of the Japan-US Agreement thereto by theCommissioner of the Patent Office, it istransformed in nature into a provision in which alicense is not to be granted “as a general rule.”
Thus Item e of the Japan-US Agreement transforms
in nature the requirement to realize claim rights torequest for an arbitration decision, and at the sametime exceeds the range of discretion entrusted bylegislation, and therefore is construed to be a“treaty” that needs approval of the Diet as “an

IIP Bulletin 2002

international agreement containing legal matters.”
Accordingly at the present stage, the Japan-US
Agreement has not come into effect domestically(which interpretation is hereafter referred to as“Interpretation B”).
(2) Problems of the Japan-US Agreement
Where the Commissioner of the Patent Officehas rendered a arbitration decision to reject arequest for right of a non-exclusive license, basedon the provisions of the Operational Instructionsof the System of Compulsory License and Item eof the Japan-US Agreement, if a person having an
objection thereto files an administrative litigation
contending over the domestic effect of Item e of
the Japan-US Agreement, asserting the illegalityof the arbitration decision, then the plaintiff has
the possibility to win the case in accordance with
Interpretation B. This is because, Item e of theJapan-US Agreement, of which contents have been
introduced on newspapers or magazines only andhaving no specific contents stipulated as a domestic
law, is unlikely to become a jurisdictional norm.
On the other hand, if a non-exclusive license is
granted by an arbitration decision based on
Article 92 of the Patent Law, notwithstanding
the requirements in Item e of the Japan-US
Agreement are not satisfied, then there arises a
problem that it contravenes Item e of the Japan-US
Agreement and is in violation of the international
law.
Therefore under the present situation after theJapan-US Agreement, an amendment of the Patent
Law to realize the contents of Item e of theJapan-US Agreement should be made. However,before doing so, it should be determined as thepolicy judgment of Japan in consideration of therequirements of the industrial sector in Japan andother circumstances, whether or not Item e of theJapan-US Agreement should be maintained.
3

Influence in the Case of the Contents of
Item e of the Japan-US Agreement
Having Been Put into Practice in Japan

As part of the material for making policy
judgment as to whether the contents of Item e of
the Japan-US Agreement should be put into
practice in Japan hereafter, its influence at home
and abroad when it has been put into practice inJapan is studied below.
(1) Limitation of Granting a Non-Exclusive
License by an Arbitration Decision on the
Dependent Invention
As an example of “anti-competitive practices”
set forth in Item e of the Japan-US Agreement,such a case is assumed that, when the second
patentee makes a proposal for granting a licensewith the first patentee, the first patentee demands
the conditions of licensing that fall under an unfair
trade practice, or rejects licensing. In addition, it● 80 ●

is also required to meet the requirement of Article
31, Subparagraph (1)(i) of the TRIPS Agreement(the second patent shall involve an important
technical advance of considerable economic
significance in relation to the invention claimed in
the first patent). Examples that meet all of theserequirements are very limited.
(2) Relation to the Compulsory License
System for Public Interests
In the event that there arises a need ofgrantinga non-exclusive license on the first patentby an arbitration decision, even when lacking therequirements stipulated in Item e of the Japan- US
Agreement, if the requirements in Article 93 of the
Patent Law that reads “particularly necessary in
the public interest” (hereinafter, referred to as“requirement of the public interest”) are satisfied,then it is construed that a non-exclusive license canbe granted by an arbitration decision.
When interpreting the requirements of the
public interest, a theory on the constraint ofproperty rights that is interpreted by Article 29,
Paragraph 2 of the Constitution can serve as areference. Namely, it is presumed that there is little
objection to the interpretation that regulations forthe purpose of preventing harm to lives and health,which are called the intrinsic constraint, satisfy therequirements of the public interest as set forth in
Article 93 of the Patent Law(*11). In the meantime,different opinions would be given on thepolicy-related constraint.
The Article leaves the decision on suitability ofgranting a non-exclusive license based on an
abstract requirement called the public interest to
the discretion of the Minister of Economy, Tradeand Industry. Therefore, whether or not the request
in concern falls under the category of the public
interest depends on whether granting a
non-exclusive license by an arbitration decision isnecessary and at the same time reasonable, in orderto carry out the policy of patent administration
employed at the time of rendering the arbitration
decision, under the objectives stipulated in the
Patent Law. In addition, it is construed that thecontents of the public interest change according to
the administrative purpose. Therefore, acomprehensive study needs to be conducted, taking
into account the change in the industrial structureand diplomatic policy of Japan, as to whether aflexible interpretation of the requirements of the
public interests may be of advantage to Japan.
(3) Influence on Domestic Industries
By applying Item e of the Japan-US
Agreement, at the present time, those possessing

many patents of basic inventions in Japan haveadvantages in the Japanese market, which isdisadvantageous to those having improvement
inventions only. In this regard, the pharmaceuticals
industry, in particular, has pointed out that it isdisadvantageous to Japanese businesses. In addition,(a) improvement inventions are often greater indevelopment cost or economic value than basic
inventions; (b) under the Japanese Patent Law
which aims at the development of industries, suchan idea is fundamentally inappropriate as todeem the former to be in a superior position to
the latter; and (c) Japanese businesses areconventionally good at improvement inventions forindustrialization, and it has also been pointed outthat it is undesirable to deprive them of incentives
therefor by adopting Item e of the Japan-US
Agreement(*12). On the contrary, when turning oureyes into the future, it will be an incentive for thebusinesses to invest labor forces and research anddevelopment cost into fundamental research, with aview to obtaining patents of basic inventions
instead of improvement inventions, rather than to
conduct researches on putting basic inventions touse or on improvements.
Therefore, whether or not to execute theJapan-US Agreement is a matter as to which ofbasic inventions and improvement inventions/practical inventions should be put emphasis on, andthus controls the industrial and technologicalpolicies of Japan in the future.
(4) Influence on Foreign Policies
The result of the revisions of laws in the U.S.
based on the measures taken by the U.S. sideaccording to Items c and d in the Japan-US
Agreement is somewhat unsatisfactory to Japan.
Therefore, Japan needs to continue requesting its
improvements of the U.S. from now on. Besides, it
is not only to the advantage for Japanese businesses
but is the most important issue in terms of theharmonization of worldwide patent systems as well,that the U.S. will abandon its first-to-invent rule toshift to the first-to-file rule. Therefore, Japan is in
the stage of requesting the U.S. strongly to makeefforts for the harmonization of patent systems incoordination with Europe and other countries andregions, after having executed the Japan-US
Agreement in good faith.
In the meantime, the industrial sector would
also expect that Japan will request developing
countries to control the abuse of compulsory
licenses and to strengthen the protection of
intellectual property rights, with a view toprotecting its own industries as an industrialized(*11) Therefore, in such a case in which a minimum compulsory license is granted to supply medicines that are indispensablefor protecting the lives and health of the people, compulsory license based on Article 93 of the Patent Law would bejustified irrespective of whether there is any relation of dependent inventions.
(*12) Shoji Matsui “Wagakuni Riyou Hatsumei no Saitei Jisshiken Seido no Kenkyu to Heisei 6 Nen no Nichibei Goui Dai 3 Kouno Igi (A Study of the Compulsory License System of Dependent Inventions in Japan and the Significance of the Japan-US
Agreement in 1994)”, Chizai Kanri (Intellectual Property Management), Vol. 51, No. 11, p. 1603 (2001).
● 81 ●IIP Bulletin 2002

nation. It is difficult to request other countries not
to enforce compulsory licenses while positively
carrying out granting non-exclusive licenses by anarbitration decision in Japan. The range of litigationand operation in Japan should also be determined,
depending on to what extent Japan wishes to makerequests on developing countries, namely,
depending on whether it is construed as being
sufficient to request them to observe the provisionsof Article 31 of the TRIPS Agreement, or whether
Japan wishes to request them further to abide byeven the contents of the Item e of Japan-US
Agreement, and also depending on to what extent
non-exclusive licenses granted by an arbitration
decision for the purpose of public interests can bepermitted under Article 31 of the TRIPS
Agreement.
(Researcher: Takashi Kimura)

IIP Bulletin 2002

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