The Japan Patent Office’s ‘Guide to Licensing Negotiations Involving Standard Essential Patents’ (second edition)

The office’s updated guide contains major changes, explains Takanori Abe of Abe & Partners.

In June 2022, the Japan Patent Office (JPO) released the revision to “The Guide to Licensing Negotiations Involving Standard Essential Patents” (the guide 1st edition), which aims to prevent or quickly resolve disputes concerning the licensing of standard essential patents (SEPs) (the second edition). 

The first edition was formulated in 2018 to enhance transparency and predictability, facilitate negotiations between rights holders and implementers, and help prevent or quickly resolve disputes concerning the licensing of SEPs which are essential in implementing standards in the field of wireless communications and the like. 

Since then, the situation surrounding SEPs continues to change significantly, and since the summer of 2020, judgments have been issued concerning inter-industry disputes between the telecommunications industry and the automotive industry. In light of these latest global trends, it was decided to revise the guide first edition to ensure that the “appropriate information” provided by it is up to date.

In revising the first edition, the JPO conducted a “Research and Study on Standard Essential Patents and Exhaustion” in the 2021 financial year, and published the “Research and Study on Standard Essential Patents and Exhaustion - Current Status and Issues of Patents Related to Networks and Services (Standard Essential Patents)” (the report) in March 2022. The report contains details of the discussions on the revised content by the study group of experts. Subsequently, in May 2022, a draft revision of the first edition (the draft revision) was compiled.

Major changes in the draft revision are as follows:

• Recent developments in SEPs and the background to revision
• Reference to “Good Faith Negotiation Guidelines for Standard Essential Patent Licenses” (the Ministry of Economy, Trade and Industry (METI), Japan, 2022)
• Relationship between provision of claim charts and bad faith (Statements that provision of claim charts is common are maintained)
• Parties to negotiation in supply chain
• International jurisdiction

Subsequently, the JPO called for public comments on the draft revision, and established the second edition based on the public comments. It states that while “Good Faith Negotiation Guidelines for Standard Essential Patent Licenses” of METI are the norms of good faith negotiations provided by the Japanese government, the first edition and the second edition are documents that objectively summarise issues concerning licensing negotiations based on domestic and foreign facts, and are not intended to be prescriptive.

The direction of the revisions, and particularly in the key points of revisions to items in the first edition—“licensing negotiation offer from rights holder (patentee)”, “parties to negotiation in supply chain” and “international jurisdiction” —is as follows.

Licensing negotiation offer from patentee

In the first edition, five examples of actions by a patentee that may increase the likelihood of the patentee being perceived as acting in bad faith were listed, one of which was “Not disclosing its documents identifying the SEPs and documentation mapping SEP claims to the standards and/or products such as claim charts, when offering licensing negotiations to an implementer, such that the implementer can understand the rights holder’s claims”. 

In response, individual members of the study group of experts made the following comments.

• “In Sisvel v Haier, the German Federal Court of Justice held that claim charts are sufficient as material, but not mandatory. It shows that negotiations in good faith are judged on a case-by-case basis, rather than being/not being FRAND according to the fulfilment of the individual requirements of the criteria. The structure is such that if one side's level of negotiation is higher, its own actions are also subject to higher hurdles. It should be described in a way that a claim chart is one factor that is judged on a case-by-case basis and that does not mislead the reader into thinking that if he/she meets it, he/she will receive a safe harbour for the first of five steps.”
• “I consider that the description of claim charts should be deleted, citing Sisvel v Haier. This would be the consequence in relation to the judgment, as this part is not a statement on good faith but on elements that ‘may increase the likelihood of being perceived as acting in bad faith’.”
• “Sisvel v Haier is a judgment of one country’s court, while a claim chart is an important part of the rights holder’s negotiation offer. There is a concern that deleting the description could be perceived as an acceptance of judgment of the other country. Since a claim chart is described as an obligatory act of the rights holder in other parts, the deletion in this part is considered to be unbalanced.”
• “It is good to introduce Sisvel v Haier, but it seems that deleting the description is to perceive it not an act of bad faith in Japan according to judgments in Germany. Since no conclusion has been reached, the deletion seems to be a bit premature.”

In response to these comments, the direction for the revision of the first edition was determined to “refer to that there is a judgment (Sisvel v Haier) which held that claim charts are not mandatory as materials to be presented by the rights holder”, etc. The draft revision described, “Not clarifying how SEPs are being infringed, such as documents identifying the SEPs and the standards, when offering licensing negotiations to an implementer (Note 27: In Sisvel v Haier the court held that presenting claim charts would not be mandatory. However, it must be noted that it was a court decision in Germany).” 

In response, the following comments were made in the invitation for public comments.

• “Restore the deleted description of the previous edition of the guide that “Not disclosing its documents identifying the SEPs and documentation mapping SEP claims to the standards and/or products such as claim charts, when offering licensing negotiations to an implementer, such that the implementer can understand the rights holder’s claims”.
• Cite in the footnotes “Good Faith Negotiation Guidelines for Standard Essential Patent Licenses” (2022) of METI showing a guideline that rights holders should disclose claim charts.
• There is a concern that the current description could be seen as an acceptance of the judgment of German Federal Court of Justice.
• As the above Good Faith Negotiation Guidelines are cited in other issues of the guide, not quoting it in this issue may give the wrong impression that METI and the JPO have different opinions, both inside and outside the country. Also, there is a contradiction in not citing the Good Faith Negotiation Guidelines as alternative guidelines while attracting attention to the fact that it is one of the judgments in Germany in footnote 29.”
• “Please add the following red text: Not disclosing its documents identifying the SEPs and documentation mapping SEP claims to the standards and/or products such as claim charts, when offering licensing negotiations to an implementer, such that the implementer can understand the rights holder’s claims.
• Because claim charts are important information that enhances transparency of licencing negotiations between SEP rights holders and SEP implementers and facilitates negotiations, I consider that the description of claim charts in the FY2018 edition should be maintained in the current revision.
• The description of claim charts has been deleted while referring to Sisvel v Haier (Germany, Federal Court of Justice, 2020) in footnote 27, but I consider it inappropriate to change the description of an issue that is often regarded as important based only on one foreign judgment.”

The JPO responded, “The description that may increase the likelihood of being perceived as acting in bad faith has been deleted since the Federal Court of Justice judged against such a possibility. The contents of the ‘Good Faith Negotiation Guidelines’ at issue has been cited in the main text of [048].”

In addition, in response to the comment: “the statement ‘However, it must be noted that it was a court decision in Germany’ in footnote 29 should be deleted”, the JPO responded, “The footnote at issue has been deleted since the matter is not specific to a particular judgment and a new footnote 3 has been established to that effect.”

As a result, in the second edition, while the description “Not clarifying how SEPs are being infringed, eg, providing documents identifying the SEPs and the standards, when offering licensing negotiations to an implementer” is maintained, the description “However, it must be noted that it was a court decision in Germany” was deleted from the corresponding footnote, only stating “Note 28: In Sisvel v Haier (Germany, Federal Court of Justice, 2020), the court held that presenting claim charts would not be mandatory,” As footnote 3, the following was added: “Although this Guide refers to judicial precedents in various countries, of course, a judgment in one country does not prejudice a decision in another”.

In this regard, “Good Faith Negotiation Guidelines for Standard Essential Patent Licenses” of METI (2022) provides as the norm to be followed by patentees and implementers, that when a patentee makes the licensing offer, the patentee should provide, either voluntarily or at the implementer’s request, information indicating that the implementer’s products correspond with the standard and claim charts mapping claims to that standards element-by-element (when there is a large number of the subject patents, the claim charts are made for representative patents.)

Parties to negotiation in supply chain

In the first edition, there were following descriptions.

• (Implementer Who Will be the Party to Licensing Negotiations) 
• “There are some end-product manufacturers that consider it discriminatory and contrary to FRAND commitments if the rights holder refuses to negotiate with the supplier manufacturing the component when it requests to be the party to the licensing negotiations. On the other hand, some consider it inappropriate for the end-product manufacturer to refuse all negotiations when the rights holder requests it to be the party to the licensing negotiations.”
• (Arguments from the Standpoint of Exhaustion and Double Earnings)
• “It is generally considered that when a product that is protected by a patent is placed legitimately on the market by a rights holder or a licensed implementer, the patent is exhausted, so the rights holder may not exercise its rights against someone who has purchased the product. In this connection, if a rights holder concludes licensing agreements with multiple suppliers within a single supply chain, some are concerned that it may become unclear which right has been exhausted, and could more readily lead to the issue of double earnings by the rights holder or underpayment to the rights holder. Others argue that such issues may be avoided by conducting licensing negotiations with the end-product manufacturer.”

In response, the members of the study group of experts made the following comments.

• “The issue is likely to be a controversial matter in Germany given that the issue was submitted to CJEU, where conclusion was not reached due to the withdrawal of the litigation. I am concerned that by stepping in in the form of notes to components manufacturers and end-product manufacturers, there is a possibility of a lack of balance.”
• “With regard to the description: “There are some end-product manufacturers that consider it discriminatory and contrary to FRAND commitments if the rights holder refuses to negotiate with the supplier manufacturing the component when it requests to be the party to the licensing negotiations.”, the impression was that only the procedural aspect of “negotiation” was highlighted.”
• “In Sharp v Daimler, at the Regional Court in Munich, it was explained in relation to exhaustion that obtaining a licence of parts does not mean that all licences are granted and that in light of a portfolio it is favoured to license end-product manufacturers. In LG v TCL, at the District Court of Mannheim, a chip manufacturer was licensed and was assessed as being unwilling to enter into a licensing agreement because TCL included a clause in its counteroffer that the licence would be waived by exhaustion. These two judgments seem to be facts to be added.”

In response to these comments, the direction for the revision of the first edition was determined as “The description should be confined to objective facts in order to convey only the facts objectively. The judgments referred to are judgments in one country and only one case, and should therefore be described with overall care. Reference should also be made to the reported facts in the press etc. other than judgments. Reference should be made to the fact that there are judgments (Sharp v Daimler, LG v TCL) that held regarding the parties to negotiation in supply chain in relation to exhaustion.” etc.

International jurisdiction

In the first, there was no explicit description of Anti-Suit Injunction (ASI). 

In response, the members of the study group of experts made following comments.

• “The ASI issues are topics discussed in international justice or international comity independent of patent acts, contract laws and competition laws. The ASI issues include not only the issue of the geographical scope of patent enforcement, but also the issue of who should determine the global rate. At first glance, the ASI issues appear to be a rehash of old ones, but they are qualitatively different this time, because of the issue of the conflict of legal leadership between China and the other countries. The guide should avoid criticising the behaviour of particular countries and should substitute a well-written timeline of facts and judgments.”
• “This time it is notable that China is making a strong push, and it appears that China countered against the global rate judgment in Unwired Planet v Huawei at the UK Supreme Court, with ASI, and the Supreme People's Court of Beijing hit back in the Conversant v Huawei or Oppo v SHARP. This is not simply a story of country-specific patent act, but a story of international justice and international comity, which is likely to be a weighty story in the future.”
• “As a new movement, on July 6, 2021, the European Commission issued a request and a questionnaire to the Chinese government based on the TRIPS Agreement, to which the Chinese government responded on September 7 with a curt one-page paper that it was free to ask but the Chinese government was not obliged to answer it. It should be noted that there are movements on ASI among countries and governments in addition to the judgments.”

In response to these comments, the direction for the revision of the first edition was determined “to organise it as it relates to the item ‘the geographical scope of licensing agreements’; to consider reciting judgments in a timeline, taking into account that it should avoid criticising the behaviour of particular countries; to refer to movements among countries and governments in addition to the judgments." 

And in the second edition, the description was made as follows: “when the results of litigations and the enforcement of court rulings in foreign countries are recognised to have certain impacts on litigations in other countries, orders to prohibit launching and continuing litigations and enforcing judgments in foreign countries (ASI) are issued in some cases. 

However, there are some cases where an order is issued prohibiting ASI in the foreign country (anti-ASI), or where the court determines bad faith assertion made pursuant to an ASI claim. Regarding international jurisdiction, some argue that ASI could restrict the exercise by rights holders of their exclusive rights and create barriers to legitimate trade and early settlement is desirable.”

Takanori Abe is a partner at Abe & Partners. He is also guest professor, graduate School of Medicine, Osaka University. He can be contacted at: abe@abe-law.com