WINDS FROM JAPAN No.12

WINDS FROM JAPAN
Issue No. 12, September 2000
Licensing Executives Society Japan

LES Japan Enjoys its Summer Symposium in Tsumagoi, Shizuoka
By Jinzo Fujino

July 7 is special for many people in Japan. It is the day when Prince Hikoboshi (or Altair) meets with Princess Orihime (or Vega) on the Milky Way. According to a folktale, their meeting is allowed only once a year.

On this July 7, 2000, a total of 162 members of LES Japan and their spouses gathered in Tsumagoi, Shizuoka Prefecture, to enjoy the annual rendezvous at the summer symposium. Tsumagoi is famous as a place where an ancient poet travelling to the east made a one-night stay, and wrote a famous poem of love for his wife back in Kyoto. Tsumagoi, literally translated as "love for one's wife," is named after this story. With such a romantic historical background, Tsumagoi was the best place to meet with cherished acquaintances on this festive day of the year.

This year, we had the honor of welcoming special guests from LES Korea, including Messrs. Euy Man Hwang, Yong Shik Chang and his wife, Yong Soo Kim and Tae Bok Kwon. In the evening of the first day, following an address by Mr. Masataka Hashimoto, President of LES Japan, a reception was held, where attendees enjoyed renewing their bonds and making new friends.

Shortly before the reception, Mr. Mitsuya Okano, former LESI president (1977), offered a silent prayer for the late Mr. Dudley Smith, who was president of LESI (1978). All attendees paid a tribute to this individual who was so very special to LES Japan. Mr. Okano reminded us that Mr. Smith, as well as Mr. Mark Finnegan, played an important role in the establishment of LES Japan a quarter century ago, and in its smooth development thereafter. Without the support of these great friends, LES Japan would not be what it is today, Mr. Okano stated.

The second day, July 8, was spent listening to and discussing presentations on the theme, "Assignments in the 21st Century." Three distinguished speakers were invited this year. The first was Mr. Kenji Naemura, a professor at Keio University's post-graduate school of politics. He was followed by Dr. Yoshikazu Shizuri, Director of the Shimizu Laboratories, Marine Biotechnology Institute. Then spoke Mr. Yoshimi Suzuki, professor of Shizuoka University, Department of Physics.

Professor Naemura elaborated on issues arising from the intersection between information technology (IT) and intellectual property rights. He described the potential impact of IT on copyrights, patents and trademarks, among others. Regarding copyright aspects, based on a review of legislation in the USA and the EU, he discussed three models considered to be the most basic approaches under electronic rights management systems (ERMS). As for patents, Prof. Naemura focused on the implications of software-related inventions and business method inventions. Domain name issues were also discussed as keys to the protection of marks in this Era of the IT Revolution.

Dr. Shizuri, former professor at Nagoya University, started his presentation with the question, "What is marine biotechnology?" He expressed his concern regarding the poor patent portfolios of Japanese companies and research institutes. His analysis showed that 80% of the biotech business in Japan is based on patents owned by foreign entities. In the field of gene-manipulated agricultural products, for example, Dr. Shizuri observed that there are 29 products on the Japanese market, all of which are imported from abroad. Looking to the future, Dr. Shizuri emphasized that Japan should utilize her geographical advantage of being an island nation, and thereby is surrounded by sea. His company, a joint venture laboratory supported by 19 industrial companies in Japan, has focused on the study of a wide variety of marine plants as sources of useful compounds. So far, his researchers have made remarkable achievements in the development of kainic acid, tetrodotoxin (fugu toxin), carotenoid and astaxanthine.

Professor Suzuki focused on the relationship between the environment and world weather in view of, among other things, global warming and the carbon dioxide content in the atmosphere. While the general perception is that the CO2 content in the air has been the chief cause of global warming, Mr. Suzuki pointed out that scientific data does not necessarily support a specific causative link between increased CO2 content and global warming. According to Professor Suzuki, there are numerous natural mechanisms that cause a trade-off between temperature and increased CO2 content; thus CO2 alone cannot be blamed. For example, another important factor are water streams within deep seas. These streams function as reservoirs of CO2. In cycles of several hundred years, these streams rise up to the sea surface and release CO2 into the atmosphere. Thus, determining the causes of global warming requires a consideration of multiple and complex factors, including not only atmospheric CO2 content and rapidly shrinking tropical forests and coral reefs, but also the deep-sea streams.

Basic Training Course on Licensing
By Kiyohide Okamoto

Two full day programs are scheduled for licensing beginners in November this year. These programs are basic courses on licensing and will be held both in Tokyo and Osaka this fall.

So far, LES Japan has been holding monthly seminars in Tokyo (for the Kanto area) and Osaka (for the Kansai area). Subjects and speakers of these monthly seminars are selected by the committee members of the Kanto area and the Kansai area from various subjects that are thought to be of common interest for the majority of LES members. Such subjects include, among others, important court decisions, revision of related law and regulations, and other topicalities. Unfortunately, the number of attendees to these seminars has been declining recently, despite the increase in the number of new members. This is partly due to the current difficult economic environment.

In order to deal with this issue, the 1st Subcommittee of the Planning Committee which was set up in October last year, has studied how to improve the current training program, including the monthly seminars. In January this year, a survey regarding LES Japan's training program was conducted among its members. The survey showed, beside comments supporting the continuation of the monthly seminars, strong requests for a new training course targeted on licensing practitioners, that takes full advantage of LES Japan. In order to put the concept of a new basic course for beginner-level licensing practitioners into shape, Mr. Chozaburo Minagawa and Mr. Hiroyuki Hirayama both in charge of the Kanto area, and Mr. Akira Fukuda and myself in charge of the Kansai area were appointed to be the committee members responsible for the institution of the course in the both areas.

We are proud to announce our first special course on the subject "Basics of licensing in theory and practice.? with Mr. Kou Kunieda, PhD, Kuni Management Consultant, as lecturer. Dr. Kunieda has many years of experience in a wide-ranging areas, such as Intellectual Property Management, Licensing, Intellectual Property Litigation, Personnel Management, Marketing activities in both domestic and foreign companies. In addition, Dr. Kunieda has successfully conducted multi-national negotiations, such as environmental issues concerning the atmospheric ozone layer and at the Chemical Weapons Convention. We are confident that this course will benefit both the beginners and the experienced licensing managers.

The course is scheduled to be held on November 21 and 30 in Tokyo, and on November 9 and 17 in Osaka. We anticipate many LES Japan members to join this course. This is our first attempt of the basic training course on licensing, and we have high hopes that it will be successful. Based on the response to this year's course, we shall plan to launch advanced courses in the future.

Report on International Conference in Amsterdam
By Yoichiro Iwasaki

The LES 2000 Conference was held in Amsterdam from May 21 to 24 at the Hotel Krasnapolsky, located opposite the royal palace in the very center of the town. The attendees numbered more than 500, and very active discussions ensued. What is significant to note is that the number of Japanese attendees was the highest for any international conference, with 32 representatives and 16 spouses and family members. This great number may have been due to the fact that this year, Japan and The. Netherlands are celebrating their 400 anniversary of their friendship. The Conference coincided with the visit of the Emperor and Empress of Japan to Amsterdam, and the Japanese attendees enjoyed the rare privilege of greeting their royalty on foreign soil.

The 4 Plenary Sessions and 12 Workshops were filled with attendees from all corners of the world, and discussions were heated and questions penetrating. One Plenary Session that stood out was Session II-b, Scope of Protection of Trademarks- A Debate, at which the speakers from The Netherlands and England sparred with each other on the differences of law and cultures between their respective countries, interspersed with jokes and gentle ribbing.

Some of the workshops had Japanese panelists, which is a sign of LESJapan increasingly active participation in these international events.

On the lighter side, the canal boat dinner offered not only good food and wine, but also a cruise through this historical city, using its famous waterways. While intermittent rain was witnessed, it was light enough so the fun was not at all impeded.

Thanks to our hosts! We hope LESJ will live up to the excellent standards that were exhibited in Amsterdam.

Recent IP News from Japan
By Shoichi Okuyama

1. Supreme Court Opens Database for IP Decisions

The Supreme Court opened on August 17, 2000 its new database of IP decisions rendered by lower courts. This new service provides access to decisions published by the Supreme Court between 1969 to 1998 and major decisions between January and June 1998 as well as those shown on its website since July 1998. This searchable database contains 1700 IP-related decisions. A similar database covering Supreme Court decisions regardless of law areas will be put on its website in March 2001. Also, Supreme Court has announced to install network systems for managing court dockets at Japanese local courts. Such systems will be installed at several district courts this year. Currently, most local courts operate on a traditional notebook-based management system while Tokyo and Osaka courts have electronic systems.

2. Law Amendment to Prevent Domain Name Misuse

The Unfair Competition Prevention Law is to be amended next year to explicitly cover domain name misuses that would cause confusion among the public. The current Law covers such traditional commercial identifiers as trademarks, trade names, packaging, and other markings. However, it is not clear whether the Law covers domain names.

3. Japanese and French Versions of L'Air du Temps Found Similar

In a decision rendered on July 11, 2000, the Supreme Court reversed a Tokyo High Court decision which affirmed a Patent Office decision. Earlier the Tokyo High Court and the Patent Office found French trademark "L'Air du Temps" owned by a French corporation, Nina Ricci, for perfume dissimilar to the Japanese Katakana version of L'Air du Temps used for bags and accessories, noting that not too many Japanese would be able to pronounce the French trademark correctly and as the Katakana version reads. Interestingly, in reversing the Tokyo High Court decision and canceling the original Patent Office decision, the Supreme Court mentioned "free ride" and "dilution" which clearly do not have an established place in the Japanese jurisprudence and associated those imported concepts with Section 4(1)(xv) of the Trademark Law. Section 4(1)(xv) prohibits the registration of trademarks that cause confusion with goods or services associated with business of others.

4. Japanese Antitrust Law Is Amended

May 12, 2000, a bill amending the Antimonopoly Act (Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade) passed Diet and subsequently became a law. The new law allows private persons or corporations to sue entities that violate the Antimonopoly Act for injunctive relief and damages awards. From the inception of the Antimonopoly Act in 1947, only the Unfair Trade Commission could issue injunctive orders to stop unlawful monopolizing acts. Also, electric and gas supply businesses which used to enjoy certain exemptions under the Antimonopoly Act are no longer exempted. Power and gas companies can no longer have a special monopoly status in the recent movement toward deregulation although they are still protected by many other regulations.

5. JPNIC Sets Resolution Rules for Domain Name Disputes

JPNIC published its dispute resolution policy and rules that are localized versions of the ICANN counterparts. The Industrial Property Arbitration Center jointly organized by the Japan Patent Attorneys Association and the Japan Federation of Bar Associations will carry out arbitration according to the new rules. Arbitration decisions will be rendered in 22 days at the initial cost of 180,000 yen (about US$ 1,700). The new rules will take effect on October 19, 2000. JPNIC will also remove its very restrictive approach concerning domain name assignment, next year. Currently, for example, only corporations can register "co.jp," "or.jp," and "ne.jp" domain names. Since law firms cannot be incorporated under Japanese laws they cannot use these domain names. Also, each corporation can have only one domain name. JPNIC: http://www.nic.ad.jp/en/regist/dom/drp/press-20000719.html

6. The Summit Ends without Results

The G8 Summit in Okinawa did not produce tangible results in terms of issues related to patents on genome and sequences and on business methods. It appears that Europe is more concerned with internal reforms and the U.S. is more interested in going its own way than harmonization.

7. The End of the Concurrent Search Project Announced

The concurrent search project, which was announced May 1999 and is a part of efforts among JPO, EPO and USPTO toward "world patents," has ended due to limited use. The announcement issued by JPO can be found at: <http://www.jpo-miti.go.jp/saikine/tws/gen-5-1.htm>
. Also, the Trilateral Statistical Report for 1999 was made public on July 24, 2000
<http://www.jpo-miti.go.jp/saikine/tws/tsr99/tsr.htm>

8. EPO Makes an Announcement on Business Methods

As we await a new set of guidelines from the Japanese Patent Office, which were once said to be published in July, EPO made a clarification on the patentability of business methods. JPO is still expected to make its new guidelines on software patents public soon. Also, it is noted that a final draft for the amendment of the European Patent Convention was recently made public in preparation for a meeting to be held in November this year. It appears that the European Patent Convention will be amended within a year. Furthermore, a proposal for the Council Regulation for Community Patent was published on August 1, 2000.

http://www.european-patent-office.org/news/pressrel/2000_08_18_e.htm

http://www.epo.co.at/news/headlns/2000_08_17.htm

http://europa.eu.int/eur-lex/en/com/pdf/2000/com2000_0412en01.pdf

http://europa.eu.int/comm/internal_market/en/intprop/indprop/2k-714.htm

Summary Report from Monthly Seminars
By Yoichiro Iwasaki

[TOKYO SESSIONS]

May (5/16)

"On Business Model Patents" by Yoshiaki Aida, senior Examiner, The Patent Office

What are business model patents? Most of them are patents of business methods, which rely on the Internet to conduct their business. Since the advent of the Internet and computers now allow the virtual world to be transformed instantaneously into reality, the characteristics of these patents are as follows:

Whereas In earlier days, the Patents covered mostly the technical measures to realize such ideas, the sophistication of computers now enable the Ideas themselves to become the subject of Patents.
Since constraints by technical limitations no longer apply, the scope and types of ideas, which constitute the patent, have expanded dramatically, thus impacting society to an extent hitherto unimagined.
The Speaker mentioned possible problems associated with Business Model Patents, such as 1) since the need to define the specific technical measures to resolve the subject matter has been eliminated, the tendency is to rush to try claim a stake first. This frenzy rush may result in obstructing free competition.

2) Since many patents use only conventional technology, this may lead to a lack of impetus to develop novel technology, which is contrary to the spirit of the Patent Law.

The Speaker cited the 1998 decisions of CFIC on the suit of State Street Bank, which allowed Business Model patents as having "useful, concrete and tangible results". The Speaker cautions however that patents should not be granted for ideas, which do not contribute to the advancement of technology or are already in the public domain, just because they use computers or networks. Also, In view of the fact that the Internet has expanded business horizons to global dimensions and continues to accelerate such trend, one must keep close watch on global scene.

[OSAKA SESSIONS]

February (2/25)

"Current Status of IP Regulations in East Asian Countries" by Masashi KUROSE, Attorney at Law, Kyowa Patent Law Office

Developing countries in the WTO are required to amend their domestic laws and regulations by the First of January, so that they will comply with the TRIPS Treaty. The East Asia Working Group of LESJ conducted a questionnaire survey to grasp the current situation in these countries. Hereunder are the summarized results.

China: Until the "Regulations of the People's Republic of China on Technology Import and Export" comes into effect, the existing "Regulations of the People's Republic of China on Administration of Technology- Introduction Contracts ", which contains a considerable number of Articles that are unfavorable to the provider of technology, remains in effect.
Malaysia: Governmental approval is required for all technology transfer agreements. The policy is to limit the patent rights to 15 years, and to lift the non-disclosure obligations when the License Agreement expires.Indonesia: This country's IP related laws are the most advanced among the ASEAN nations. But their implementation and practice lags behind.Vietnam: The awareness of IP protection is low, and is not up to international levels.Thailand: The Law to protect trade secrets is scheduled to be issued by the end of this year.
Hong Kong: the influence by mainland China is gradually being felt.Korea and Taiwan: No noticeable problems exist. No government intervention on License Agreements.
During the 5 year preparation period, which ends this year, China, Korea and Taiwan have aggressively amended their internal laws and regulation in order to comply with the guidelines of TRIPS. However the same cannot be said about the rest of the ASEAN countries. So as a

result, Japanese companies will necessarily focus their business strategies on these three countries.

March (3/17)

"Legal Issues relating to Operating a Subsidiary in the USA" By Kanji Kawamura, Professor, Faculty of Law, Aoyama Gakuin University

Japanese companies are becoming increasingly more active in their investments abroad. However, due to their lack of understanding of the laws and customs of these foreign countries, we see a rise in frictions caused by such lack. A significant rise in lawsuits where a Japanese company is either a plaintiff or accused has occurred, from approximately 100 cases per year in the 1970s and 1980s to more than 500 per year in 1998. Could it be that Japanese companies have become a prey for such law suits?

Currently, there are 3 major areas where the legal aspects loom large. They are environmental issues, employment issues and product liability Issues.ó@

My advice is as follows: 1) Be ready for litigation; realize you are In a foreign country and utilize the services of experts In the field; 2) Make good use of outside lawyers; understand the law firm's strengths when selecting the lawyer; 3) Respect the role of the Legal Department of the parent company; but to do so, train and dispatch experienced lawyers

April (4/14)

"Damages Awarded in USA Law Suits and the 1999 Modification to US Patent Law" By David M. Schlitz & Platon N. Mandros

Recent cases of High Damages awardedIn settlements:
(1) University of California v. Genentech: $200 MM (Nov. '99)

(2) Rodime PLC v. Seagate technology: $45 MM (2000)

In court decisions
Viskase Cos. Inc. v. American National Can Co.: $164.9 MM (Jul.'99)Power Integrations Inc. v. Motorola Corp. : $32.3 MM (Oct.'99)Calculation of Damages as defined in Patent Law:

Lost Profit: Difficult to establish cause and effect. But In the epoch-making 1995 CAFC ruling on Rite-Hite v. Kelley Co. Inc, the definition of Lost Profits was expanded to Include loss of sales of Patentee's products, which are not covered by the patent but suffered reduced sales because of the infringer's products.Established Royalty: Not used much, because tends to be lower than Reasonable Royalty below.
Reasonable Royalty: Uses the 15 elements rule established In the Georgia Pacific Corp. v. USó@Plywood case.
Increased Damages: Used for Willful Infringement. To counter such charges, legal opinions of lawyers are required, but they are not almighty.Attorney's FeePrejudgment Interest The 1999 Modification to US Patent Law"

The major changes are as follows:

The New Earlier Inventor Defense: The amendment grants In the case of Business Model cases only the right to continued use If a person has used such model at least one year prior to Its first filing In any country and has used commercially In USA prior to such filing date, even when such Model Is covered by patents. But there must be "clear and convincing evidence "of such use, which Is more restrictive than " the preponderance of evidence" standard.
Domestic Publication of Patent Applications Published Abroad: this allows the applicant to request publication earlier than the mandated 18 months, or request no publication, unless It has been filed abroad.
Optional Inter-Parties Reexamination Procedure: This allows for interested parties to the patent may seek re-examination of a patent.Patent Term Guarantee: Since Jan. 1st, 1995, the life of a patent has been modified to 17 years after Issuance but not longer than 20 years from the date of filing. But In order to provide remedy to patents, which may have its life shortened to less than 17 years due to this amendment, the life has been guaranteed to certain patents, which were adversely affected.

May (5/25)

"Amendments to the Patent Law, focusing on the amount of Damages to be awarded" By Yoshiyuki TAMURA, Professor, Law Faculty, Hokkaido University

(See Tokyo Sessions January, 2000)

June (6/19)

The Business of International Licensing- Negotiating to Resolve Disputes? By Yoichiro Iwasaki, Consultant on International Affairs.

The speaker spoke from his long experience in licensing activities on the various ways to resolve disputes when negotiating Licenses with foreign companies. Certain actual cases were presented as examples, where by being creative and positive, the seemingly difficult situations were overcome. One key element is to remember that, unlike debates whose aim is to defeat the opponent, in License negotiations the adversary is in fact, your partner-to-be, with whom these negotiations are the first step of a long standing relationship.

Also, the art of communications (language) was stressed to be equal in importance to the contents to be discussed at the negotiating table.

Editors' Notes

We are pleased to announce that LES Japan has opened its own website. óihttp://www.lesjóÜorg Readers of this newsletter, "WINDS from Japan," are invited to visit the website from which certain back issues of this English newsletter are accessible. Future issues will be posted on the site. Make sure to pay a visit for an interesting experience.

This issue includes a notice of the forthcoming LESI Conference in Osaka. As is often introduced in this newsletter, LES Japan has been working on the preparation of the 2002 LESI Conference in Osaka. We shall keep announcing details of the forthcoming international conference in coming issues of WINDS from Japan.

Questions regarding any of the articles in this issue should be directed to the Editor-in-chief: //jfujino@ngb.co.jp//