JFTC Market Research on Know-How and IP subject to Abuse of Superior Bargaining Position under the Anti-Monopoly Act

White & Case LLP
Contact

White & Case LLPThe Japan Fair Trade Commission ("JFTC") periodically conducts market research to review and investigate business activities that may violate abuse of superior bargaining position ("ASBP") regulations. For the first time in its history, the JFTC has focused its market research on manufacturer "know-how" and intellectual property ("IP") after it received multiple complaints from manufacturers who claimed that their know-how and IP were exploited by parties in a superior bargaining position.

ASBP is a type of prohibited single firm conduct (e.g., private monopolization or unfair trade practices). These rules are not unique to Japan but they are unusual, and only a few jurisdictions (e.g., Germany and Korea) have similar prohibitions. ASBP is somewhat analogous to "abuse of a dominant position" but unlike prohibitions on behavior by dominant firms, ASBP does not require market power. ASBP exists when a party in a relative superior bargaining position – as opposed to a dominant position – engages in abusive conduct that runs the risk of being an "impediment to competition" (as this latter term is defined under Japanese law).

The JFTC's market research was comprised of a combination of (i) written inquiries and (ii) interviews. The JFTC sent written inquiries to 30,000 manufacturers and received 15,875 responses (the response rate was 52.9%). In addition, the JFTC conducted 122 interviews, including interviews with 101 manufacturers, 13 business organizations and 8 experts, including lawyers. The period covered by the research was October 2013 to September 2018. The JFTC issued their report ("Report") in June 2019.

The Report organized the research into eight broad categories of cases with a total of 30 examples. Summaries of these examples follow.

1. Coerced transactions (a) without a non-disclosure agreement ("NDA") or (b) without an agreement to prohibit an unintended use

  • Case 1: A metal ware manufacturer was coerced into continuing transactions with a business partner without an NDA, even though it repeatedly asked the business partner for an NDA.
  • Case 2: A manufacturer of machinery and business equipment was coerced into an agreement whereby the manufacturer was required to strictly maintain confidential information, while its business partner was free to use technical information from the manufacturer for various business purposes, without any compensation to the manufacturer.
  • Case 3: A manufacturer of production tooling was rejected in its efforts to enter into an NDA with its business partner. Further, the manufacturer was coerced into entering into an agreement whereunder its business partner was authorized to disclose technology to the business partner's affiliates and customers in its sole discretion.

2. Coerced into disclosing trade secrets

  • 2.1 Coerced to disclose confidential information, including technical information
    • Case 4: A food manufacturer was coerced into disclosing its national brand recipe by a retailer who outsourced the manufacturing of its private brand's food products to the manufacturer. The retailer ultimately used the food manufacturer's confidential information to improve its own private brand food products.
    • Case 5: A food manufacturer was coerced into disclosing its recipes and manufacturing processes in order to conclude a transaction with a new business partner.
    • Case 6: A textile manufacturer was coerced by a business partner into disclosing its know-how for a special textile. The textile manufacturer was forced to provide this information for free.
    • Case 7: A textile manufacturer was coerced by a business partner into disclosing trade secrets (specifically, technical information for dyeing chemicals) in addition to providing certain technical information as part of the terms and conditions of the transaction.
    • Case 8: A metal ware manufacturer was coerced by a business partner into divulging a trade secret (specifically know-how about processing) without compensation.
    • Case 9: A manufacturer of electrical machinery and equipment was coerced by a business partner into disclosing the source code for a control application (i.e., disclosing some of its know-how) without a justifiable reason (e.g., no problems with defects were found).
    • Case 10: A metal ware manufacturer was coerced by a business partner into accepting terms and conditions that included requiring the manufacturer to transfer all of its business secrets, including its production methods, to the business partner. The manufacturer was required to do so without any compensation when the contract was due to be terminated, even if such termination was at the request of the manufacturer's business partner.
    • Case 11: A chemical manufacturer was coerced into applying for a patent jointly with its business partner. The partner's intention was to make a defensive patent application. The application was made without adequate consultation with the manufacturer and despite the manufacturer's intention not to file a patent.
  • 2.2 Coerced to provide drawings, etc. for free that were not agreed in the contract
    • Case 12: A manufacturer of production tooling was coerced by a business partner to provide drawings for molds and other technical data for free. This was not agreed in the underlying contract.
  • 2.3 Coerced plant tour and/or photographing inside of the plant
    • Case 13: A metal ware manufacturer was coerced by a business partner to allow anyone to visit the manufacturer's plant at the business partner's sole discretion.
    • Case 14: A manufacturer of electronic components, devices and electronic circuits was coerced by a business partner to make a video of its manufacturing process (including any trade secrets that were part of the manufacturing process) and to provide that video to the business partner, even though the business partner has refused to enter into an NDA and/or an agreement to prohibit unintended use.

3. "Abuse of buying power" of drawings, etc. that contain know-how

  • Case 15: A metal ware manufacturer was prevented by its business partner from increasing the consideration after the terms and conditions of its contract with the business partner were amended. Under the revised terms and conditions, the manufacturer was to deliver technical materials, including drawings of molds (i.e., know-how), whereas under the previous terms and conditions, it was only required to deliver the molds themselves.

4. Coerced to provide technical training and/or prototypes for free

  • 4.1 Coerced by a competitor to provide a skilled worker's special technical skills for free
    • Case 16: A manufacturer of production tooling was coerced by a business partner, who outsourced production to a foreign manufacturer, to provide technical training by a skilled worker for free, because the foreign manufacturer was unable to properly manufacture the particular products in accordance with a provided drawing.
  • 4.2 Coerced to provide prototypes for free in a course of "continuous" transactions
    • Case 17: A manufacturer of transport equipment was instructed by a business partner with which it had an ongoing (so-called "continuous") transactional relationship, to research and study technical questions presented by the business partner. This responsibility was not included in the contract. The manufacturer was further repeatedly coerced to manufacture prototypes and to conduct experiments for the business partner, with costs to be borne by the manufacturer, in order for the manufacturer to continue its transactions with the business partner.

5. Coerced to enter into a "hollow" joint R&D contract

  • Case 18: A rubber manufacturer was coerced by its business partner to sign a contract whereby the business partner was to be given access to new technologies without any consideration, regardless of how little the business partner contributed to the invention, where the invention was the result of "hollow" joint R&D (i.e., R&D where the manufacturer provides its technology but the business partner provides neither funds nor know-how). Later, the business partner switched to manufacturing on its own, using the technology it gained as a result of the efforts of the rubber manufacturer.

6. Interference with a patent application

  • 6.1 Coerced to report and/or amend content of patent application
    • Case 19: A manufacturer was required by its business partner to report on the content of its patent application to the business partner, even though the application was irrelevant to its transaction with the business partner. The manufacturer was also forced to revise the patent application, without any benefit in return, when the manufacturer was so instructed.
  • 6.2 Coerced to make a joint application with a business partner for a project where the business partner was not a meaningful contributor
    • Case 20: A manufacturer of production tooling was coerced by a business partner to make a joint application for a patent, even though the business partner was not involved in the invention.
    • Case 21: A manufacturer of transport equipment was required by a business partner to make a joint application for a patent, even though the related technology was invented solely by the manufacturer. The manufacturer was also coerced to enter into a contract requiring that the manufacturer obtain the business partner's consent when the manufacturer gave a license to a third party.
    • Case 22: A chemical manufacturer was coerced by a business partner into changing the manufacturer's solo application for a patent into a joint application without any consideration in return, and the manufacturer was further restricted as to which customers it could sell those products that were manufactured using the patent.

7. Coerced to transfer IP for free or provide license for free

  • 7.1 Coerced to transfer IP for free
    • Case 23: A chemical manufacturer was coerced by a business partner to transfer half of its interest in the patent to the business partner without consideration. The chemical manufacturer was further coerced to enter into a contract that required the business partner's consent when the manufacturer licensed the patent to a third party.
    • Case 24: An electric equipment manufacturer was coerced to sign a contract, after it had already made delivery that required it to transfer all technologies created in the course of the transaction to the business partner without consideration.
  • 7.2 Coerced to provide license for free
    • Case 25: A manufacturer of petroleum products and coal products was coerced by a business partner to accept certain terms in a license agreement. Under these terms, the manufacturer's business partner was authorized to use the manufacturer's IP, which was to be provided to the business partner without consideration.
    • Case 26: A plastic manufacturer was coerced by a business partner to accept terms and conditions in a license agreement, including that all IP created solely by the manufacturer in the course of the transaction be transferred to the business partner.
    • Case 27: A manufacturer of pulp, paper and paper coating products was coerced by a business partner, despite its contrary intentions, to give a license to the manufacturer's competitor at only a minimal fee because the business partner wanted to be able to procure from multiple suppliers.
  • 7.3 Coerced to provide license at "most favored treatment"
    • Case 28: A metal ware manufacturer was coerced by a business partner to accept a contract that was beneficial to the business partner in a unilateral way, and to license it at "most favored treatment" for the business partner.

8. Transfer a risk of IP litigation

  • Case 29: A metal ware manufacturer was coerced by a business partner to accept terms and conditions whereby the manufacturer would be entirely responsible in the event that a legal case was filed with respect to the product, even though the manufacturer only processed the relevant products in accordance with the business partner's instructions.
  • Case 30: An information communication equipment manufacturer was coerced by a business partner to accept terms and conditions whereby the manufacturer was to be entirely responsible when a dispute with regards to IP arose, even when the business partner designed the product and outsourced its production to the manufacturer.

The Report indicates that in many of the reported cases there were contractual terms and conditions that could constitute ASBP violations. In addition, it suggests that there were complaints from both large companies and small-and-medium sized companies. The Report notes that an ASBP issue could arise even in a situation where a small-and-medium sized company in a superior bargaining position engaged in abusive conduct against a large company.

The JFTC continues to collect information about potential ASBP violations with regard to manufacturers' know-how and IP, and will use its enforcement authority when it finds a violation. The JFTC will disseminate the Report in cooperation with Japan's Ministry of Economy, Trade and Industry ("METI") and Japan Patent Office ("JPO") to encourage companies to comply with the law.

Click here to download PDF.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© White & Case LLP | Attorney Advertising

Written by:

White & Case LLP
Contact
more
less

White & Case LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.