Archive for the ‘Japan’ Category

IP & Licensing Trends in Japan

Monday, August 9th, 2010

“It is often said that Japan wins at technology, but loses at business,” said Kimikazu Noumi, chairman of the Innovation Network Corp. of Japan (“INCJ”) at a recent press conference announcing INCJ’s initiative to monetize Japanese intellectual property assets in the life sciences.

This is a welcome reversal of a trend that we have previously noted, in which Japan has not effectively monetized its abundant intellectual property assets, through licensing and similar means.

INCJ is collecting billions of yen from Japanese public and private investors to launch the “Rising Sun Fund” to purchase dormant life sciences patents from universities and public research institutions, package them, and license them to domestic and foreign companies so they can develop new medicines and treatments without fear of infringement lawsuits. The initial areas of concentration will be embryonic stem cells; cancer; Alzheimer’s disease; and biomarkers.

According to the Japanese newspaper Asahi Shimbun, a main purchase target of the fund will be universities, because they use only an estimated 20% of their patents.

A Japanese version of the story from the same newspaper notes that the impetus for the fund was the 2007 arrival in Japan of the American bioventure fund, Intellectual Ventures, and its subsequent purchase of Japanese university research patents for relatively low license fees. The fund founders feared that the technologies would be developed overseas, and that Japan would not share in the fruits of medical innovations developed from patents developed at its own taxpayer-supported universities.

INCJ is expected to invest up to 1 billion yen (approximately $11.7 million), and several private companies, such as pharmaceutical heavyweight Takeda Pharmaceutical, are expected to invest millions of yen more.

On the other side of the coin, Japanese book publishers failure to license e-books has created a phenomenon known in Japan as 自炊 (jisui), or “cooking for oneself,” in which readers purchase hardcopy versions of books, slice out the pages with razor knives, and scan them into PDF form to read on their iPads. Japanese are avid book readers and big fans of compact technology, yet publishers have made only about 50,000 book titles available in e-book form, with few current best-sellers, compared to about 630,000 English language titles available for the Amazon Kindle.

How to Cook Your Own E-Books, Japanese Style

In fact, consumer demand is so great that new businesses have arisen to fill it– companies that will save readers the hassle of slicing and scanning by performing the service for about 200 yen per volume (approximately $2.38). The reader mails in the hard copy, the company e-mails back the digitized book. Between the service fee and the postage, the reader is probably paying a $4 or $5 premium (or 15 to 20 minutes of his time), over the hard copy price, to have his e-book.

It appears that the delay in making more e-book titles available through official channels is due to publishers’ fears that e-books will be sold at discounted prices relative to paper versions (as in the United States), thereby shrinking profits. But it appears that at least some Japanese readers want e-books so badly, they are willing to pay a premium over the hard copy price. It is a shame that publishers have not adapted their business model, and are leaving money on the table.

Update, 8/24/10: for a good survey of the jisui trend, see this article in the Mainichi Daily News (includes link to original Japanese article). It appears that competition in the jisui service bureau industry has pushed the price down to near 100 yen per volume.

Speaking of the iPad, the Washington Post recently ran an interesting article on how the iPad has become a hit with Japanese senior citizens who were not previously computer adept, because of its sleek design and intuitive, user friendly interface. The iPhone is also a smash hit in Japan– when I was in Osaka in late June, there were literally lines around the block of people waiting to purchase the iPhone 4. Many thought that Japanese would never become enthusiastic about a non-Japanese made electronic device, much less a smartphone, a product for which Japan has long had its own specialized, highly competitive market.

Why has Apple succeeded where so many others have failed? As noted in the link above, Japanese smartphones tend to be feature-centric, but somewhat clunky to navigate, while the Apple devices have been designed from the ground up to provide an elegant, seamless user interface among hardware, software, and abundant content. The usually compact size and sleek design of Apple devices also appeal to Japanese tastes.

License Drafting Rule No. 1: Don’t Say 専用使用権 Unless You Mean It

Thursday, June 3rd, 2010

Just like Alberto-Culver, we don't know what 専用使用権 means, but our hair looks great!


We have said it before, because it is true. Seemingly small differences in contract wording lead to major differences in real-world consequences.

This rule especially applies when the contractual wording is in a foreign language, as Alberto-Culver, the makers of Alberto VO5 hair care products, discovered when they lost an appeal of a breach of trademark license case which turned on a Japanese legal phrase that Alberto-Culver did not completely understand and was not otherwise defined at the time of drafting the license agreement.

With licensing increasingly utilized as a tool of expansion into international markets, the case is a good lesson in what NOT to do.

In 1980, for lump-sum royalty payments of $10 million, Alberto-Culver gave Sunstar a 99 year exclusive license to manufacture and sell hair care products in Japan under the VO5 trademarks, after which Sunstar would own the registrations. The license agreement had appendices showing which VO5 logos and marks Sunstar could use. The agreement said that Sunstar’s license would have the status of a “senyoushiyouken” (専用使用権), which translates literally from Japanese as “exclusive use right.” But the license did not include an English definition of “senyoushiyouken.” Under the Japanese Trademark Act, the “senyoushiyouken” is exclusive even against the trademark owner, and the holder has other rights nearly equal to the owner, including the right to sue infringers in its own name.

Sunstar clashed repeatedly with Alberto-Culver over its ability to modernize the VO5 logos for the Japanese market. Against Alberto-Culver’s wishes, Sunstar went ahead with updated logos once in 1989, which led to a negotiated settlement with payment of an additional $10 million by Sunstar. When it happened a second time 10 years later, Sunstar refused to negotiate, arguing that under Japanese law, a licensee with “senyoushiyouken” status is legally entitled to use a registered trademark with minor format changes. For example, Article 50.1 of the Japanese Trademark Act, which deals with rescission of unused registered trademarks, recognizes that holders of “senyoushiyouken” are authorized to use:


“…a registered trademark (including a trademark deemed identical from common sense perspective with the registered trademark, including a trademark consisting of characters identical with the registered trademark but in different fonts, a trademark that is written in different characters, hiragana characters, katakana characters, or Latin alphabetic characters, from the registered trademark but identical with the registered trademark in terms of pronunciation and concept, and a trademark consisting of figures that are considered identical in terms of appearance as those of the registered trademark…).”

This set up an interesting legal hall of mirrors for the lawsuit. Alberto-Culver argued that the only reason that the word “senyoushiyouken” was used in the contract was that in 1980 the negotiating parties wanted to give Sunstar language it could use to register the license with the Japanese trademark office. (Many foreign governments require trademark licenses to be registered to be effective.) Since the agreement provided that it was to be interpreted under Illinois law, the Japanese meaning of “senyoushiyouken” and any rights granted by it were irrelevant, said Alberto-Culver. Rather, the agreement should be interpreted as an exclusive license under Illinois law, which would require the licensee to attain prior consent to even minor format changes per explicit provisions in the license agreement.

Alberto-Culver won at trial, but that decision was forcefully overturned on appeal by the Seventh Circuit Court of Appeals in Sunstar, Inc. v. Alberto-Culver Co. (decision available here by entering case number 07-3288), where Judge Richard Posner wrote that when sophisticated parties use technical terms in a contract, they must be presumed to use and understand them in the technical sense. In so doing, the court followed a common rule of contract interpretation that whenever possible, courts should interpret contracts as a reasonable third party would by looking only at the words within the four corners of the contract, and without researching the history of the negotiations or other extrinsic evidence of the parties’ subjective intent. In other words, Alberto-Culver would be presumed to understand and consent to the meaning of any Japanese legal terms included in the license agreement, and therefore Sunstar was not in breach for using modernized VO5 marks.

Takeaway: in any license or other agreement regarding the disposition of valuable intellectual property rights, avoid vague letter agreements or memorandums of understanding, especially those that contain undefined technical words and other shorthand terminology. The contract should include a definitions section with detailed definitions for any technical terminology or terms of art. It will take a little bit longer to negotiate the contract, but 注意一秒、けが一生. [Translation: “An ounce of prevention is worth a pound of cure.”]

Sunstar VO5 commercials featuring 1989 version of updated logo, with song advising, “Don’t cry about split ends,” because the conditioner’s UHM Silicon will fix them.


モノ作りと知恵作りとライセング, Part2

Sunday, February 28th, 2010

Making Things, Making Knowledge, and Licensing, Part 2>> English translation








「金融危機の影響がもっとも大きく出た日本。GDPはまもなく中国に抜かれ3位に転落するのは必至である。こうした中、日本はグローバル経済の中で、何を作り、何で稼いでいくべきなのか。世界最強のブランドと言われた“メイド・イン・ジャパン”が、出口を求めて必死にもがいている。いま日本の製造業が直面している世界の地殻変動、それは、猛スピードで技術が陳腐化し、製品の差別化が難しく、しかも製品の寿命が超短命に陥っていることだ。メイド・イン・ジャパ ンの代名詞だったテレビ業界では、特にその傾向は顕著で、どんなに高度で精密な薄型テレビを作り出しても瞬く間に韓国台湾などアジア勢の猛追を受ける。少しでも安いモノをと考える消費者にとって、ライバルがある程度の技術力を持てば、日本製品の優位性は一気に崩れるのだ。こうした中、いま一度日本国内工場 の存在意義を問う、「生き残りをかけた実験」が始まっている。東芝ではコストを度外視した超高機能テレビを作り技術力を極めようとする試みが佳境を迎えた。JVCケンウッドでは、自社生産にこだわらず、技術を中国メーカーに譲って製品を作らせ、そのライセンス料を企業収入にしていこうという動きも見られる。番組は、「日本は今後どうやって食べていくのか」、「日本人は何が得意なのか」と自問を繰り返す二つの電機メーカーの社運を賭けたプロジェクトに密着 し、メイド・イン・ジャパンの未来を見つめていく。」



番組によると、JVCケンウッドは、モノを作るだけでなく、魅力的なシステムをあみ出す知恵にこそ日本の活路があると思い至ったのです。堺屋氏はその考え方に賛同すると思います。 (more…)

Fashion Licensing Corner: Japanese Designers Need to Protect, Monetize Their Ideas

Sunday, January 31st, 2010


In the United States, we tend to think of Japan as a high-tech, exporting powerhouse.

That is certainly true in the automotive and consumer electronics industries, where company size and manufacturing prowess are indispensable.

It is not as true for small and medium sized companies, where ideas and creativity, not industrial manufacturing, are the predominant ingredients in the value added mix.

Exhibit A: an interesting New York Times article, which notes that Japan is home to some of the most creative, cutting edge fashion brands in the world, but those small companies do not have the know-how or infrastructure to export.  Rather, Western retail chains “buy up bagfuls of the latest hits. The designs are then whisked overseas to be reworked, resized, stitched together and sold under Western labels.”

Japan earned a mere $416 million from clothing and apparel related exports in 2008, compared to $3.68 billion for US apparel companies, and a staggering $113 billion for Chinese clothing exports.

According to experts quoted in the Times article, in order to turn the situation around, “Japan’s fashion industry needs…more concrete help in marketing and setting up shop overseas….The government could also play a larger role helping Japanese labels protect their intellectual property rights, they say.”

In my opinion, the most effective means for Japanese fashion labels to protect their IP would be to negotiate license and/or distribution agreements with partners in foreign countries.  Copyright law is usually not an effective means to protect against copying fashion designs, and trademark law would not help unless the labels were already selling in the foreign markets.

Exhibit B: a failure to protect intellectual property rights has had a severe economic impact on another field where Japan is a global creative leader—animation or “anime” (アニメ in Japanese).  Anime enjoys growing worldwide popularity for its complex, creative art and storytelling, but a combination of absurdly high prices for legitimate DVDs and a failure to challenge massive Internet piracy has had a devastating economic impact not only on foreign distributors of authorized anime, but on the Japanese anime studios as well.

Japan’s automotive and consumer electronics industries have thrived in part because they learned how to export and how to protect their intellectual property in foreign markets. (Japanese companies are the largest foreign filers of US patent applications.)  Small and medium Japanese IP companies can follow their example and prosper.

Coming soon: an article explaining how small and medium foreign businesses can start doing business in the United States.


Sunday, January 3rd, 2010

Making Things, Making Knowledge, and Licensing >> English translation