Saturday, November 25, 2017

Japan defers the introduction of SEP ADR system

As introduced in the previous article, Japan discusses the solution to dispute over standard essential patents (SEP); for example, the introduction of the Japan Patent Office (JPO) ADR system to determine appropriate license fee of SEP and the development of the SEP license negation guidelines.

However, the SEP ADR system is likely to be deferred. The document (available only in Japanese) distributed for the committee meeting to be held on November 27 2017 provides reasons for the deferment: for example, it cannot resolve dispute globally because the award system is applied to only Japanese patents, and the JPO is questioned about its ability to set out appropriate license conditions in individual cases. The government thinks introducing the SEP ADR system is difficult unless these problems are solved.

Instead, it suggests to extend the JPO’s advisory opinion service on the technical scope of a patented invention, referred to as ‘HANTEI’, to indicate whether or not a patent in question is a standard essential patent.

In addition, the SEP license negation guidelines for which the public opinions were requested worldwide is expected to be published in Spring 2018. However, it just organizes trend of legal precedent of the world on SEP dispute, and shows elements to consider in determining reasonable royalty rate to improve predictability, but not indicate specific royalty rate.

The outcome of the committee is going to be realistic but looks to be considerably toned down from the initial challenging goal. Now the interest will shift to the SEP guidelines which the European Commision is planning to release.

Sunday, November 12, 2017

AI becoming trendy in the Japanese IP industry

Recently media is crowded with the stories about products and services using artificial intelligence (AI) technologies. The use of AI technologies looks becoming hot equally in the IP industry.

On November 2 2017 Toshiba Digital Solutions (TDS), which was spun off from Toshiba Corporation in July 2017, announced that it has developed the image search technology which allows to identify similar logo, design, emblems and the like. The AI is used for similarity judgement. TDS proposes the use of this technology in the search of trademarks, designs, and copyright work. 

TDS exhibited this technology as a reference at Patent Information Fair & Conference held on November 8 - 10 2017. According to a representative in the booth, it is characterized by (i) extracting elements from the targeted image data object and searching them respectively (See the figure extracted from the TDS's press release, though it is in Japanese.) and (ii) identifying the element even if it is embedded in comparison image data. It might be a useful tool for searchers, since design search requires more effort than text search. It is expected to be available in 2018. On a side note, the Japan Patent Office (JPO) plans to start picture trademark search using AI on a trial basis in 2019, while AI design search is not yet in sight.

In the fair, several IP service companies were found which provide AI solutions for patent search, e.g. FRONTEO and It seems to be, as a whole impression, currently in the stage where the use of  AI itself calls attention to the market. In the next step, each company may be required to demonstrate precision of its AI solution. It’s just an idea, but how about holding a contest in the part of a project like ‘Peer-To-Patent’?

For patent licensing professionals, the EoU (Evidence of Use)  feature of XLPAT may be interesting, which is not a Japanese company’s solution though. It retrieves the Internet information to identify potential infringers based on input patent number and claims.

Any AI solution - If we are going to become more effective in our use of working time, it would be welcome.

Friday, November 3, 2017

Japan Supreme Court reverses taxation on DENSO’s subsidiary in tax haven

On October 24 2017, the Japan Supreme Court reversed the taxation based on the Anti-Tax Haven (or Controlled Foreign Company: CFC) rules imposed on the income of DENSO’s subsidiary in Singapore.

Under the CFC rules, income arising from a foreign subsidiary located in the state or territory with significantly lower tax rates is deemed to arise as the income of the parent company under certain conditions, for example when its ‘principal business’ is holding shares or bonds, licensing industrial property rights etc. However, the CFC rules is not applied when the subsidiary is a substantial independent company and it is economically rational for the subsidiary to conduct business in the state or territory. More specifically, the CFC is not applied when it meets all of the following conditions;

  1. Its principal business is not holding shares or bonds, licensing industrial property rights or any other rights concerning technology etc. (Business)
  2. Having an office, store, factory or any other fixed facility that is considered to be necessary for conducting its principal business in the state or territory where its head office or principal office is located. (Substance)
  3. Taking charge of managing, controlling and operating the business by itself. (Control)
  4. When its principal business is wholesale business, banking business, trust business, securities business, insurance business, water transportation business or air transportation business, it conducts business mainly with a person other than a predefined related party. (Non-related party); When its principal business is not above-mentioned business, it conducts a business mainly in the state or territory where its head office or principal office is located. (Business location)

The Supreme Court ruled that the ‘principal business’ should be determined based on its concrete and objective business activities in the fiscal year. And when it conducts multiple businesses, it should be comprehensively examined based on its revenue or income obtained by each business activity, the number of employees required for the business activities, the situation of offices, shops, factories and other fixed facilities etc.

In this case, the DENSO’s Singapore subsidiary manages subsidiaries or affiliates in ASEAN and other territories, and its sales of service to improve logistics in the territories amounted to 85% of its revenue, while 80-90% of the pretax income is from dividend on the shares of the subsidiaries and affiliates. 

The Supreme Court stated that the Singapore subsidiary, with reasonable size and substance, conducts a broad range of businesses including finance and logistics with economically rational purpose of streamlining its ASEAN operations, and then judged the taxation based on the CFC rules illegal.