Executive Intellectual Property Bulletin

JAPANESE COURT UNDERMINES VALUE OF PATENTS IN JAPAN

Historically, it was possible for a holder of patents on the same product in more than one country to license and enforce the patents independently of one another. For instance, if a licensee was authorized to manufacture and sell in the U.S. under a U.S. patent, the products manufactured in the U.S. could not be sold into another country without a license under any corresponding patent in that country. Recently, however, a Japanese court permitted a product manufactured in Germany under a German patent to be sold into Japan without requiring the importer to obtain a license under the corresponding Japanese patent.

This extraterritorial application of the "first-sale doctrine," which allows a party to collect a royalty on the sale of a product only once, is thought to be unprecedented. If the decision is upheld on appeal, it could substantially reduce the value of a Japanese patent that has a counterpart licensed in one or more other countries. If you are currently involved in the international licensing of a patent portfolio containing one or more Japanese patents, you should keep an eye on this development and possibly devise a licensing strategy to minimize its impact on potential licensing revenue. U.S. trade representatives are likely to lobby the Japanese government to reverse the ruling.

If you would like further information on this topic, please contact any of the attorneys at Schwegman, Lundberg & Woessner, P.A. at 612-339-0331 or by facsimile at 612-339-3061.