Security Interests in Intellectual Property Licences under Japanese Law: A Comparative Analysis

Abstract

Intellectual property rights and licences are important economic assets that are increasingly used as security in order to obtain credit. The article analyses the use of intellectual property licences as security, highlighting the characteristics of Japanese law from the point of view of German law. First, a closer look is taken at the nature of the security, i.e. the nature of intellectual property licences. Japanese patent and trademark law provide for two types of licences. Special licences, which become effective only upon registration, grant the licencee a (quasi-)real right. Ordinary licences are in principle effective only against the licenser. If registered, they acquire some third-party effectiveness, in particular against a subsequent acquirer of the patent or trademark. The exclusive licencee also has a claim against infringers upon the licences. Under the Copyright Act, the right of publishing grants a (quasi-)real right that requires registration in order to become effective against third parties. Other copyright licences cannot be registered in the copyright register and are, therefore, not effective against third parties. However, an exclusive licencee is generally held to be entitled to bring a claim against an infringer unlawfully exploiting the copyrighted work. Japanese intellectual property laws, therefore, offer clear rules on the requirements for the creation of licences and their effects, while under German law the absence of explicit rules leads to the application of the provisions on the transfer of claims, which is not suitable in particular to (quasi-)real rights. Also, registration of licences is impaired by current provisions. Attention is drawn, however, to the practical problems regarding registration under Japanese law, which arise due to far-reaching disclosure requirements. 
Second, three different ways of using licences as security are proposed: the creation of a pledge in a licence, the transfer of a licence as security and the granting of a
licence as security. A pledge of special patent or trademark licences requires registration in order to become effective, while registration of a pledge of ordinary patent or trademark licences or of a right of publishing is only a prerequisite for third-party effectiveness. The pledge of a copyright licence follows the rules on the pledge of claims, which require notification of the debtor (licenser). The general provisions on transfer of licences apply to the transfer of a licence as security. Again, transfer of special patent or trademark licences requires registration for effectiveness as such, while for ordinary licences and the right of publishing, registration is only relevant in the context of thirdparty effectiveness. Both pledge and transfer as security require consent of the licenser. Licences as security are mostly granted by the intellectual property owner himself rather than a licencee, and they are a means to limit the security to certain exploitation methods or regions. German law, in comparison, again lacks explicit rules. Difficulties arise with regard to publicity of security rights, which cannot be registered in the patent or trademark registers. While a pledge only becomes effective upon notification of the debtor (licenser), there are currently no publicity requirements regarding the transfer of a licence as security.
Third, the rights and obligations of the parties to the security agreement are analysed. According to doctrine – and contrary to the rules for tangibles – the pledger remains entitled to exercise the licence. In the case of a transfer as security or a licence as security, the right of use of the grantor is ensured by granting him a sub-licence that terminates upon default. The grantor has a duty to preserve the licence in particular by fulfilling the terms of the licence agreement and by taking action against any infringers.
Finally, the issue of protection of licences in the insolvency of the licenser and the rights of the grantee in the insolvency of the grantor are examined. Due to the practical difficulties regarding registration and the lack of registration possibilities for copyright licences, some problems arise under Japanese law. In principle, however, licences provide safe and stable security that entitles the grantee to separate satisfaction in case of insolvency of the grantor.