FRAND Commitment and Competition Law Limitations – for the Enforcement of Patent Rights in Japan

Abstract

Recently, the information and communications technology sector has become a more and more important part of the economy, and intellectual property lawsuits between multinational enterprises in this sector are increasing worldwide. One important case in Japan has been the Samsung vs. Apple case. The outcome and discussion of this case has had an impact both domestically and internationally. Based upon a comprehensive analysis in accordance with the law and the economic framework and the various opinions expressed in legal literature, this article mainly examines the issue whether a standard-essential patent (SEP) holder who has made a FRAND commitment should be limited to some extent in pursuing an injunction and damages based on the SEP. Additionally, this article analyses the globally known Samsung vs. Apple case in order to provide a deeper understanding of this specific issue.

In Section One (I.), this article gives a brief introduction of the nature of the information and communications technology (ICT) sector and the role of standard setting organizations (SSOs). There are innumerable patents in the ICT sector, which are adopted in various technical standards and owned by different patent holders. SSOs are organizations serving the ICT sector as standard developers and policy makers.

In Section Two (II.), a bargaining model is used to indicate the cause and consequence of the so-called “hold-up” problem which is a crucial issue in the process of licensing negotiations.

In Section Three (III.), this article discusses the relationship between intellectual property rights and the Japanese Antimonopoly Act (the AMA). It explains that, although the provisions of the AMA do not apply to conduct constituting an exercise of rights under intellectual property laws in Japan, there is still discussion about whether the court can refuse to grant an injunction under exceptional circumstances where filing for an injunction may constitute an abuse of rights.

Section Four to Six (IV. to VI.) focus on the Samsung vs. Apple case in Japan. In these sections, the present article analyses several aspects of the court decisions rendered by the Tōkyō District Court and the Intellectual Property High Court in detail, including the background, facts, and issues of the case. The analysis of the decisions is mainly centred on the court’s holdings on the issue of whether the appellant’s claim for an injunction and damages constitutes an abuse of rights, and on other issues involved in the claim for damages. In accordance with the Tōkyō District Court’s decision, the author suggests that, first, an injunction based on an SEP should not be granted. Second, the negotiation attitudes of both parties should be taken into consideration when determining whether to grant an injunction. Third, a patent holder should be awarded damages when its patent is found to be infringed. Last, the amount of damages awarded to a patent holder should be calculated based on ex ante negotiations prior to standard setting.

From the Intellectual Property High Court’s decision, on the other hand, the following criteria are to be applied to a claim for damages by a party that has made a FRAND declaration, including the appellant who made the FRAND Declaration in the case at issue. [i] A claim for damages exceeding the amount of the FRAND royalty should not be allowed. [ii] The claim for damages not exceeding the amount of the FRAND royalty should not be restricted even in the case of a standard-essential patent. In the Samsung vs. Apple case, no circumstances could be found which renders the appellant’s claim for damages up to the amount of the FRAND royalty extremely unfair, and no evidence was submitted to sufficiently prove the existence of such special circumstances. Therefore, the appellee’s allegation that the appellant’s claim for damages constituted an abuse of rights was acceptable only to the extent that the amount of damages claimed by the appellant exceeded the amount of the FRAND royalty. On the other hand, this allegation was unacceptable in respect of the amount of damages not exceeding the FRAND royalty.

The last section, Section Seven (VII.), is associated with the revised Guidelines for the Use of Intellectual Property under the AMA issued by the Japan Fair Trade Commission. In the draft of the revised guidelines, it is stated that a refusal to license under FRAND terms or an action for injunction against a willing licensee by a FRAND-encumbered SEP holder may generally constitute an exclusion of business activities of other entrepreneurs, and not allowing a willing licensee to take a license under FRAND terms should therefore be restricted. Moreover, a licensee can be deemed to be “willing” if the intention to determine license terms is indicated in court or arbitration proceedings. The draft raised significant criticism in regard of the mentioned criterion “willingness of a licensee”, as the European and Japanese authorities consider the willingness of the licensee as a crucial factor. However, the draft provides that a licensee can be deemed to be a willing one if the intention to determine the license terms is indicated in court or arbitration proceedings. Additionally, a confirmation not allowing a willing licensee to take a license under FRAND terms should be strictly limited. In addition, the draft states that bringing an action for an injunction based on a FRAND-encumbered patent is considered to be an unfair trade practice even if the act does not substantially restrict competition in the relevant market. The justification of a difficulty in R&D, producing or selling the products should also be applied to de facto standards. The draft is, further, considered to be based upon the decision of the Intellectual Property High Court. According to the decision, however, it can be inferred that it was the intention of the Intellectual Property High Court to refrain from a decision involving antimonopoly law issues. Thus, explaining the meaning of the AMA on the basis of such a decision may seem contradictory and strange.