The ability to process data and
information and the development of the ability to connect anything electronic
to the Internet will more than likely continue to see rapid progression in the
future. This will create new business opportunities and offer new products and
services which will return new value to the companies providing these new
products and services. New partnerships will develop across disparate fields
which traditionally have operated independently and under different sets of
standards from each other.
This new utilization of data will require
numerous changes to the present means of categorizing inventions, etc., with
regards to the methods for performing and the protections involved in the
exchange of personal information between companies; how that data is processed
in accordance with the perceived desires of consumers from whom the data was
collected; the manner in which this new Internet of Things (IoT) connectivity
influences the manner in which international standards (for example, SEPs) are
to be harmonized, licensed and replaced by new technologies, how new inventions
produced by Artificial Intelligence (AI), as well as data for 3D and 4D
printing, are classified in regards to being inventions which may be protected
as intellectual property. These are just a few of the issues that will need to
be thoroughly addressed in order for businesses and consumers to achieve the
greatest benefits from advances in IoT, AI, and 3D and 4D printing.
This article will mainly focus on how the
Japanese government and businesses are/should be preparing for the numerous
changes that will unquestionably emerge as IoT, AI, and 3D and 4D printing
continue to develop as critical tools which will drive future commerce.
In the future, the full exploitation of
IoT will require that data utilization, R&D, Intellectual Property rights
(IPR) and other assets be managed simultaneously. At
present, Japan looks good in the areas of edge computing and the
decentralization and delegation of data processing to user terminals in order
to ensure the steady handling of the volumes of fresh data being produced.
I. Current State
of Affairs
1. Utilization
of Data
Japan has recently implemented two new
Acts stipulating how personal information must be handled in order to balance
the right to privacy of individuals and to ensure the proper distribution of
data and information so that business and competitiveness are strengthened.
The Basic Act on the Advancement of
Utilizing Public and Private Sector Data (the original Japanese and an English
translation of the Act can be found at http://www.japaneselawtranslation.go.jp/law/detail_main?re=02&vm=04&id=2975) was
promulgated in December 2016, and sets out a list of requirements detailing how
data and personal information held by the Japanese government, municipalities,
and businesses can be used and provided to other agencies and/or businesses
while maintaining safeguards in order to ensure the safety and the reliability
of the data and information, and establishes a future framework detailing the
issues which will need to be addressed as IoT technology continues to evolve in
the future.
The revision to the Act on Protection of
Personal Information, also known as the Personal Information Protection Act
(both acronyms “APPI” and “PIPA” are used in the literature, however, in this
document, APPI will be used exclusively) was fully implemented on May 30, 2017
and is similar to the EU’s General Data Protection Regulation (which entered
into effect on May 25, 2018), in that the APPI regulates the collection,
transfer and processing of personal information.
The APPI established new regulations and a
“sensitive personal information” category which demands that the handling of
such information be done so in a manner so as to not run the risk of the data
being misappropriated and used against the individual. Sensitive personal
information includes information regarding an individual’s race, gender,
religion, social status, medical and criminal histories, etc. The APPI is
applied to and protects information, such as that which might be collected in a
job application. The applicant/employee must consent to (opt-into) the use or
transfer of their sensitive personal information (unless it is for the
protection of health and safety, i.e., a medical emergency) and employers must
inform their employees, ahead of time, as to the reason(s) that the
applicant’s/employee’s sensitive personal information will be used and/or
disclosed to a third party. The applicant/employee may opt-out of this previously
agreed to consent.
The APPI also regulates the cross-border
(international) exchange of data and personal information being transferred out
of Japan. If the country or party receiving the data and personal
information is deemed to have PIPA-like standards with regards to the protection
of data and personal information, or both the transferring party and the
receiving party can ensure that the data and personal information will be
handled in a manner similar to that prescribed by the APPI, the data and
personal information may be transferred out of Japan. The transfer of data and
personal information to the from a Japanese subsidiary of, for example, an
American or European multinational corporation even to the main corporate
offices thereof is considered disclosure to a third party, and thus, requires
the consent of the individual prior to the data being transferred.
On July 17, 2018, following on the heels
of the passage of the EU - Japan Free Trade Agreement, the EU
and Japan recognized that each other’s data protection systems were
essentially “equivalent” to each other and hence, individual’s private data
could be shared therebetween. After separate final reviews
by Japan and the EU member states, the agreement of adequacy is
expected to be adopted and in force by the end of 2018.
Under the APPI, an individual’s consent is
not required prior to the transfer or processing of their private information,
as long as steps have been taken in order to make it practically impossible to
directly trace the information back to the individual. This may be done by
assigning users specific personal information to a target range, such as an age
range which would make it more difficult to concretely assign a collection of
data to an individual. Additionally, the APPI requires that companies maintain
records indicating how the personal information was obtained and to whom the
data was transferred as well as requiring that any personal information that is
deemed to be no longer relevant for the purpose(s) it was originally collected
be deleted.
The APPI was amended on June 12, 2020 in
order to
1)
Expand rights of a third party to demand deletion, discontinuation of
data processing or of transfers to third parties and the right to request
records of transfers of personal information to third parties. In addition,
short-term data (less than 6 months) is now considered to be “retained personal
data” and prior provisions apply thereto.
2)
Restrict cross-border transfers of data and permit the Personal Information
Protection Commission (PPC) to order foreign companies to report on their activities and take
measures to safeguard information.
3) Increase
financial penalties associated with violations of APPI are covered by the PPC,
which can levy criminal fines up to 1,000,000 yen ($9260*). A fine of up to
100,000,000 yen ($926,000*) may be levied for ignoring an order from the PPC or
the wrongful provision or utilization of a personal information database.
*Based on 108 yen to $1 USD (rate as of July 2020)
The Unfair Competition Prevention Act was amended
and revised in late 2015 in order to include the prohibition of use of
information obtained through illegal means. Both criminal and civil deterrents
covering infringement of trade secrets were bolstered. The revision encourages
the enhancement of data-encryption technology as a means for protecting data
being used in a manner which harms the public good.
These laws should serve as a foundation by
which an individual’s private information (i.e., medical records) remains
private and prevents such private information from being disclosed or offered
to third parties who may use an individual’s private information for unethical
reasons. Questions remain as to what other private information may be included
in an individual’s private information.
2. Use of the
Intellectual Property System
As more and more Japanese businesses
become service-based, the use of data and personal information will
unquestionably increase. By and large, the Japanese public distrusts the
collection and any laissez-faire utilization of their personal information and
many Japanese companies are very protective of their trade secrets. As stated
above, new safeguards have been installed in order to protect the personal
information of individuals and further safeguards will become necessary as the
technology of IoT continues to evolve.
The Japanese government has examined means
by which the promotion of data utilization can be balanced with IPR, including
future restrictions of copyright in order to enable technological innovation.
In the future, inventions using software which combine processing and
networking and inventions used in numerous technical fields (AI) will certainly
increase. This will increase the number of one product/one service patents
which has the potential to bring about numerous infringement cases, and new
standardization and licensing issues that will require novel solutions.
The number of users of Standard Essential
Patents (SEPs) will increase along with the expansion of IoT. This will
undoubtedly lead to numerous licensing and FRAND issues as well as an increase
in infringement cases.
At present, in Japan, there is a lack
of a cooperative framework between private industry and the public sector. IPR
may interfere with the distribution and utilization of data and information. A
balance between the protection of data and information (which encourages the
further utilization thereof) and the distribution of data and information is
essential so that the distribution of data and information is not hindered by
IPR. Establishing further protocols by which data can be traced (traceability)
may allow data and information to be distributed with without the fear that the
data and information may be misused and may avoid the need for complex
licensing or excessive IPR infringement cases.
The contracts established between Japanese
companies regarding the transfer of data and information are relatively unclear
and have yet to be seriously tested in a court of law. In Japan, there are
no standard “one-size-fits-all” contacts and/or standard non-disclosure
agreements. In addition, numerous Small and Medium-sized Enterprises (SMEs)
often do not employ standard contracts or licensing, as they are currently more
focused not on the development of products, but on the services which use
products. Basically, Japan is in dire need of contract
standardization in terms of how information is to be used and transferred.
Additionally, Japan has a dearth
of human resources (people) who are versed in international standardization.
While Japan’s industrial associations are designed based on the products
they produce and sell, and are largely limited to hardware, it is envisioned
that the advent of IoT will force this to change by bringing in both in-house
and external experts as well as those knowledgeable in terms of the target and
goals of standardization. The extent to which Japan participates and
drives international standardization in IoT, AI, and 3D and 4D printing will
have to be expanded in the future.
3. New
Technology and the Influence on IP Systems
Data deemed to merely be the presentation
of information is unpatentable under Japanese patent law, as no technical idea
was used in the creation of the data. Additionally, direct human involvement in
the creative activities leading to the invention is deemed to be essential in
order to receive IPR. The concept that an invention possessing AI wholly
creates an invention itself that would be patentable had a human being been
active in the creation of the invention will soon no longer be limited to the
realm of science fiction movies and novels.
At present, the UK, New
Zealand, India and other countries have begun to amend their
copyright laws to address the inevitability of an AI invention creating
something worthy of copyright protection. Most copyright laws and for that
matter, IP laws require that a human being play the key role in the creation
of, for example, a work of art or a photograph. Clearly, an AI invention is not
human, however the laws have been amended to provide the copyright (or other
suitable IP right) to the person who made the initial arrangements for the work
of art or the invention to be made. Essentially, the IP right will be granted
to the inventor or the user of the AI device which created the work of art or
the invention.
Aside from the changes to some copyright
laws, the concept that a new invention may be patentable if AI is solely/mainly
involved in the creation thereof will represent a new paradigm that will
definitely need to be addressed. As AI will undoubtedly produce numerous new
designs and trademarks prior to the creation of a potentially patentable
invention, modifications to the design and trademark laws to accommodate AI
will be seen as the first step in how much direct human involvement will remain
a necessity in determining whether an invention is patentable or not.
4. IoT Patent
Classification Category
In November 2016, the Japan Patent Office
(JPO) announced the formation of a new patent classification category designed
for IoT. At present, IoT is an amorphous concept and the direction(s) in which
it will radiate in the future cannot be accurately predicted. The JPO deemed
that the traditional IPC classification category would be wholly insufficient
to categorize IoT, as IoT will more than likely bridge numerous fields as it
develops.
In order to more accurately classify IoT
inventions, the JPO christened a new FACET indication with the somewhat
unfortunate 3-letter classification, ZIT. ZIT is the world’s first
classification category that will allow for a proper search of patent
applications related to IoT inventions using terms such as “for heath care” or
“for communication” to span several fields with the same general search
criteria. (Detailed information in both Japanese and English regarding the new
ZIT classification may also be found on the Ministry of Economy, Trade, and
Industry (METI) website).
https://www.wipo.int/edocs/mdocs/classifications/en/ipc_wk_ge_17/ipc_wk_ge_17_item2_3_jpo.pdf
It was announced on June 6, 2018, that
this new classification category would be greatly expanded and sub-divided as
necessitated by the advent of new technologies. This will allow more precise
searches to be conducted by restricting the search to IoT and the technology
sectors employing IoT. The new IoT-related search terms can be found on both
the Japanese and English versions of the J-Plat Pat website (https://www.j-platpat.inpit.go.jp). In July 2019, the IPC
classification code G06N was assigned to inventions deemed to be AI-core
inventions and a new IPC classification code G16Y for IoT-technology entered
into force in January 2020.
The current expansion of search terms uses
the following letter combinations corresponding to an IoT-related technological
field.
|
CODE |
CATEGORY |
CODE |
CATEGORY |
|
ZIT |
Internet of Things (IoT) |
ZJM |
Services IoT |
|
ZJA |
Agriculture, Fisheries, and Mining IoT |
ZJP |
Health Care and Social Welfare Enterprise IoT |
|
ZJC |
Manufacturing IoT |
ZJR |
Logistics IoT |
|
ZJE |
Electricity, Gas, or Water Supply IoT |
ZJT |
Transportation IoT |
|
ZJG |
Home and Building/Home Appliances IoT |
ZJV |
Information and Communications IoT |
|
ZJI |
Construction IoT |
ZJX |
Amusement, Sports, and Gaming IoT |
|
ZJK |
Finance IoT |
5. International
Intellectual Property Infringement
The Internet era has seen the dawn of
servers located in one country being used to house and operate websites
generally frequented by customers in other countries. Servers housing Japanese
websites frequented by Japanese customers may not be located in Japan.
Additionally, as the systems by which payment is made for use or purchase of
the invention/service may also cross borders, how separate portions of the
invention being operating (internationally) in numerous geographical locations
may affect IPR infringement cases is far from cut and dry.
To date, there have been no legal
precedents in Japan regarding cross-border infringement for an
Internet-based invention. Japan operates under the Principle of
Territoriality (Tokyo District Court 2000 (Wa) 20503,
September 20, 2001) which states that the “main place of the act” or where the
substantial part of the patented invention is operated is the market venue.
This “venue of implementation” can also be interpreted to mean the market venue
where money is exchanged for the invention/service.
3D and 4D printing also present a litany
of potential problems for IP rights holders. As only the 3D data of a patented
invention is scanned or copied, the data is merely distributed, not the
patented inventions, thus, it is questionable as to whether someone who
distributed 3D data would be liable for infringement. If the 3D data or 4D data
(based on CAD/CAM systems) is a program which contains instructions, for
example, for operating a 3D or a 4D printer, then the 3D data would be
considered to be a product which would fall under the Patent Act.
However, analog blueprints are not
protected under existing IP laws, thus, as data alone is not considered a
program, there is a grey zone as to whether 3D data actually represents a program.
The Examination Handbook for Patent and Utility Model in Japan published by the
Japan Patent Office details numerous examples of when 3D data could be
considered a program and when it is a product (Annex B, Chapter 1, Computer
software related Inventions; retrievable at
https://www.jpo.go.jp/e/system/laws/rule/guideline/patent/handbook_shinsa/).
In the case of IoT, whether an invention
is novel would be determined based on whether the invention is a combination
(the invention of device which is a combination of two or more devices or a
manufacturing process with two or more steps) or a subcombination
and whether this subcombination is novel. The
determination of inventive step is clearly not as cut and dry as the following
would suggest, however, the case when it is judged that the invention produces
an advantageous effect compared to the prior art when the invention is
connected to the Internet would contribute to determining the presence of an
inventive step.
II. Preparing
for the Future
In April 2017, METI released a report
summarizing the initial steps that both the Japanese government and industry
should consider taking in order to better prepare for the new industrial
revolutions that will undoubtedly be brought about by developments in IoT, AI
and 3D and 4D printing.
The development of new data structures,
which are technological operating systems-in-development and/or systems which
have yet to be imagined will be the tools driving advances in IoT, AI and 3D
and 4D printing in the future (and vice versa) and will require intellectual
property protection, especially when a newly developed data structure becomes
the new standard through which a preponderance of new technologies are
operated.
The manner in which Standard Essential
Patents (SEPs), which cover inventions deemed critical to achieve the current
technical standards, relating to these burgeoning fields are to be managed will
clearly have to evolve to include new processes and laws governing how licenses
are issued and how disputes arising therefrom are resolved. The desire to move
away from expensive and time-consuming litigation will hopefully foster changes
in how infringement cases are handled. Potentially, governments could set
limits on licensing fees associated with SEPs which would limit the malignant
effect that non-practicing entities (i.e., patent trolls) have on the progress
of technological advancement. This expansion of FRAND would benefit Small and
Medium-sized Enterprises (SMEs) who cannot afford expensive lawsuits, but
desire easier access to SEPs. Additionally, private arbitration firms may be
used as a cheaper solution (Alternative Dispute Resolution (ADR)) to settle
licensing fee disputes. This would be of particular interest to SMEs and
start-ups which generally, do not have the financial resources to enter
protracted litigation with larger firms who have considerably deeper pockets.
Currently, the Japan Intellectual Property Arbitration Center exists for such
cases and while their role is anticipated to expand in the future, discussions
into implementing an ADR system have been halted at least for the meantime, and
are not included in the guidelines (published in June 2018, however, at present
the guidelines are only available in Japanese) regarding license negotiations
for SEPs.
The METI report also postulated that given
the eventual growth of IoT, AI and 3D and 4D printing, different industries
will eventually have to cooperate with each other in order to create and adopt
new standards, business practices and create further business opportunities in
the future. This will produce one substantially difficult problem for Japanese
industry to overcome, as traditionally, there have been few incentives which
encourage and foster cooperation between seemingly disparate industries, and
cooperation among various industries and the public in Japan has only recently
begun to be addressed. Clearly, any company which clings to the old business
models will find it difficult to adapt to a new global system that operates
based on the expansion of integrated services and rapid interconnectivity for
the sharing of data in order to respond to the demands of customers faster,
more economically, and with less waste of resources.
The promotion of cooperation and
collaboration between larger established companies and SMEs and/or start-ups
must also be encouraged, as such cooperation and collaboration will undoubtedly
lead to new research and development methods which allow for the faster
implementation and the promotion of new business models utilizing the new
technology and the promotion of international standardization.
On September 29, 2017, the Japanese
government held meetings with several Japanese business federations which
represent IoT-related industries for the purpose of discussing the future of
SEP licensing. The main topics covered in these meetings included
1) What actions
constitute appropriate negotiation practices, and
2) What constitutes
a reasonable royalty and/or licensing fee when licensing an SEP.
METI published a series of guidelines
detailing strategies for achieve the above in June 2018. These guidelines focus
on how licensing in the newly developing field of IoT would be handled at least
in the short-term with regard to SEPs. The guidelines are designed to provide a
framework by which companies may seek remedies in the case that licensing
negotiations were not being conducted in good faith and efficiently based on
the duration of the negotiations, how each party has behaved in prior
negotiations, etc.
The guidelines are designed to provide a
framework by which companies may determine reasonable royalty payments and will
attempt to provide some examples of the current market values and potential
costs associated with the licensing of the technology protected by an SEP.
These royalty rates and/or licensing fees are also designed based on the degree
to which the invention, as a standard, contributes to sales and to industry and
its development, as well as the cumulative value of the SEP to the applicant,
manufacturers, suppliers, etc., the cumulative royalty rates, the patent
portfolio strength including other SEPs held by the applicant, and other
aspects.
In addition, the guidelines request that
the owners of the SEP and the companies or manufacturers to which the SEPs are
being licensed have a complete understanding of the manner in which the
licensed SEP technology is to be used, including restrictions on the use
thereof. Lastly, the guidelines provide a framework through which the owners of
the SEP can provide concrete explanations as to how they arrived at the royalty
rate and/or licensing fees that they wish to receive in exchange for licensing
their SEP technology to another company or manufacturer.
The JPO realizes that as IoT, AI and 3D
and 4D printing are rapidly emerging technologies, the guidelines must also
evolve in accordance with future advances in these fields.
Japan’s manufacturing infrastructure and
high speed internet should be and undoubtedly will be used to improve R&D;
reduce the costs associated with the production and delivery of products and
services; increase the variety of products and services in accordance with
customer demands and as a reaction to evolving markets; bundle products and
services, and ultimately, reduce waste. With a plethora of data provided by the
new interconnectivity, decisions and the delivery of goods and services to
customers can be performed more rapidly. While Japan is technologically
ready for the rapid advances that will be brought about by IoT, AI and 3D and
4D printing, many aspects regarding how these advances will be handled in terms
of personal privacy, intellectual property, licensing, and international
standardization have only begun to be addressed.