On September 28, 2007, the Japan Fair Trade Commission (“JFTC”) published new “Guidelines Concerning the Use of Intellectual Property” (Chiteki Zaisan no Riyo ni Kansuru Dokusenkinshiho Jo no Shishin) (the “IP Guidelines”).

The IP Guidelines provide insight into how the JFTC views intellectual property licensing practices, and particularly provides insight into the circumstances under which certain types of licensing practices might run afoul of Japan’s Antimonopoly Act (the “AMA”). While the JFTC recognizes in

the IP Guidelines that intellectual property licenses and licensing practices are generally procompetitive, the IP Guidelines also contain cautionary language that potentially could have a significant impact on certain common licensing practices:

Refusal to License Intellectual Property & Excessive Royalties – The IP Guidelines equate a refusal to license intellectual property with a demand for an “excessive” royalty, and indicate that even a unilateral refusal to license intellectual property may give rise to issues under the AMA if the technology is in widespread use or it would be difficult for potential licensees to switch to a competing technology.

Agreements Not to Challenge Validity of Licensed IP – In a notable reversal from draft guidelines circulated months ago, the IP Guidelines preserve the JFTC’s historic and

relatively unusual skepticism of license provisions that prohibit the licensee from challenging the validity of the underlying intellectual property.

License Provisions Relating to “Platform Functionality” – The IP Guidelines suggest that licenses covering basic platform technologies (such as an operating system or

communications standard) may give rise to issues under the AMA if the license to the platform also covers enhanced additional functionality that many competitive firms seek to

provide.