FSA Welcomes Japan METI Guidelines on SEP Negotiations

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The Fair Standards Alliance (FSA) welcomes the Japan Ministry of Economy, Trade and Industry (METI) guidelines on standard essential patent (SEP) licensing negotiations that seek to enhance transparency and predictability for the parties concerned.

On 31 March 2022, METI published the “Good Faith Negotiation Guidelines for Standard Essential Patent Licenses” to be followed by SEP holders and standards users involved in SEP licensing negotiations, including Japanese patents.

The guidelines set out a four-step negotiation process, clarifying what is expected of the parties during licensing negotiations so that they are undertaken in “good faith” and lead to fair, reasonable and non-discriminatory (FRAND) licenses.

The FSA commends METI for recognizing that “injunctive relief […] against implementers who are willing to obtain a license on FRAND terms in good faith is restricted.” As case law, including in the EU, acknowledges, the mere threat of injunctions in SEP licensing negotiations places a potential licensee at a significant disadvantage that may lead them to agree to licensing terms that are not indeed FRAND.

It is also encouraging that METI calls for more transparency in SEP licensing negotiations. For example, guidelines encourage the sharing of information amongst parties in the supply chain and discouraging the use of overly restrictive non-disclosure agreements.

The FSA also welcomes the clarification in the guidelines that when a potential licensee reserves the right to challenge the essentiality, validity, or infringement of the patents in the negotiation process, as appropriate, its “willingness to obtain a licence on FRAND terms in good faith is not denied.”

While the guidelines are not legally binding, METI expects that various parties, including “those in the negotiations and the judiciary” will use them.

“We have seen in recent years the devesting effects that injunctions can have on SEP licensing negotiations. The pressure that comes with injunctions tilts the balance completely enabling one party to dictate, rather than negotiate, the terms,” said Evelina Kurgonaite, Secretary General of the FSA. “It is therefore very encouraging to see METI acknowledge that the use of injunctions in SEP disputes must be restricted. Whereas METI’s commitment to transparency in licensing negotiations can improve an otherwise opaque process.”

With nearly 50 member companies from around the world at the forefront of innovation and technological development, the FSA remains committed to promoting a licensing framework that is fair, reasonable and non-discriminatory, so that business of all sizes can advance technological solutions of tomorrow.

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