Antitrust Intervention in Intellectual Property Licensing and Unilateral Refusal to License: A Comparative Analysis of Japanese and U.S. Policies

• Author: Toshiaki Takigawa
• Published date: 01 December 2003
• Date: 01 December 2003
• DOI: http://doi.org/10.1177/0003603X0304800402
• Subject Matter: Symposium: Global Antitrust Law and PolicyPart V: Competition Policy and Intellectual Property around the Globe

The Antitrust BulietinlWinter 2003

Antitrust intervention in intellectual

property licensing and unilateral

refusal to license: a comparative

analysis

of

Japanese and U.S. policies

BY TOSHIAKI TAKIGAWA*

I.

Introduction

885

The accelerating importance

of

technology and information in indus-

tries has brought about an era in which the competitive advantages of

firms and nations are determined by supremacy in innovation. In

order to encourage innovation, governments should grant innovators

property rights for their novel ideas. Otherwise, the incentives for

innovation would be lost. Thus, intellectual property (IP) rights have

radically augmented their importance in advanced economies. This

phenomenon has spread worldwide by adoption at the World Trade

Organization (WTO) of the Agreement on the Trade-Related Aspects

of Intellectual Property (TRIPS).l

*Professor of Law, Faculty of Law, Kansai University, Osaka, Japan.

AUTHOR'S

NOTE: This

article

is a revision

of

my

paper

presented

at

Global Antitrust Law

and

Policy: A University

of

Minnesota Law School

Conference Honoring Dean E. Thomas Sullivan. September 20-21. 2002.

Iwould like to

thank

Professor

David

McGowan

and

Professor

Ruth

Okedijifor

their valuable comments.

Agreement

on

Trade-Related

Aspects

of

Intellectual

Property

Rights (TRIPS Agreement), Annex IC of the Marrakesh Agreement Estab-

©2004 by Federal Legal Publications. Inc.

886

The antitrust bulletin

The Japanese Government and Japanese industries, in particular,

have in recent years stressed the importance of IP. Asian economies

have caught up with the Japanese machinery industries, a traditional

stronghold

of

the

Japanese

economy.

Japan

needs

to

develop

industries of the so-called new economies, and to catch up with the

leading industries of the United States. New economies represented

by information and biotechnology industries are innovation-intensive

industries. Thus, the Japanese Government has been adopting "pro-

patent" policies (widening and strengthening IP rights), following the

policies of the U.S. administration and the Federal Circuit.

However,

blindly

pursued

pro-patent

policies

will

end

up

retarding, rather than promoting innovation since many innovations

come from the accumulation of follow-up inventions. Too wide (and

strong) IP rights hinder follow-up inventions, as they grant pioneer

patentees too much blocking power. Moreover, in network industries.'

e.g., operation system software, de facto standards, protected by IP

rights, have perpetuated monopolies.

What

we need now is not

blindly

pursued

pro-patent

policies

but

IP

rights

policies

and

competition (antitrust) policies that balance the needs of innovation

incentives with competition.

In the field of competition policy, proper intervention by antitrust

law (competition law) in IP licensing is of particular importance. This

is because high-technology industries, new-economy industries in

particular, need combinations of diverse IPs for firms to come up with

new

products.

Thus,

IP

licensing

has

markedly

augmented

its

importance in advanced countries. Moreover, IP licensing has become

a major instrument for technology transfer from developed countries

to developing countries.' IP licensing is a contract between an IP

lishing

the

World

Trade

Organization,

signed

on April 15, 1994, avail-

able at

http://www.wto.org/english/tratop_e/trips_e/cagmO_e.htm

(last

visited Jan. 10,2003).

They

are industries where consumption-led economies of scale are

almost

limitless.

See

KEITH

E.

MASKUS,

INTELLECTUAL

PROPERTY

RIGHTS

IN

THE

GLOBAL

ECONOMY

137 (2000) ("International technology transfer comes

through three channels: FDI,

joint

ventures,

and

licenses.").

Antitrust intervention 887

holder

(licensor)

and

a

licensee.

Licensing

contracts

usually

accompany restrictions on

licensees'

conduct,

and thus may be

anticompetitive. All contractual restrictions are subject to antitrust

law, and thusIP licensing belongs to the domain of antitrust law rather

than solely to the domain of the IP laws.

In view of the importance

of

IP licensing in today's economy,

section II endeavors to develop the proper antitrust standards for IP

licensing

through

a

comparative

analysis

of

Japanese

and

u.s.

antitrust policies. Section III deals with unilateral refusals to license.

The essential importance

of

IP licensing in innovation-intensive

industries has augmented the anticompetitive effects of refusals to

license

by

holders

of

pioneer

patents

(and

copyrights).

This

phenomenon demands renewed antitrust evaluation on unilateral

refusals to license.

II. How to apply antitrust law to IP licensing

In contrast to the application of antitrust law to unilateral refusals

to deal, there exists much less controversy regarding the application of

antitrust laws to IP licensing. This is because the conditions attached

to licensing emanate from contracts between licensors (lP holders)

and licensees. Contractual restrictions, different from unilateral

exploitations

of

IP, are subject to antitrust law. Antitrust authorities

need only take into consideration the characteristics

of

IP rights,

especially the ease

of

copying.

The

role

of

IP is basically the

same

in all advanced market

economies. It is to be expected that

Japanese

and U.S. antitrust

interventions in IP licensing should be fundamentally the same.

Indeed, they are in large part very similar. Still, in some important

respects, the Japanese antitrust law (Antimonopoly Law') standard for

IP licensing substantially differs from that

of

U.S. antitrust. I would

4

Act

Concerning

the

Prohibition

of

Private

Monopoly

and

Maintenance

of

Fair

Trade, Act No. 54

of

1947, reprinted in

HIROSHI

IVORI

&

AKINORI

UESUGI,

THE

ANTIMONOPOLV

LAWS

AND

POLICIES

OF

JAPAN

387 (1994) (app.

A),

available at

http://www.jftc.go.jp/e-page/acts/

index.html (last visited Jan.

10,2003)

[hereinafter Antimonopoly Law].