Support to Establish IP Strategy of SMEs WIPO ASIA SUB-REGIONAL WORKSHOP Support to Establish IP Strategy of SMEs -Efforts of the SME Support Institutions- June 5, 2007 Lawyer, Patent Attorney Masahiro Samejima Supported by PPI Japan Patent Office Uchida Samejima Law Firm

Part.01 Intellectual Property Strategy and Business Competitiveness

IP Strategy and Business Competitiveness ▼ Strategic utilization of IP rights (patent rights, trademark rights, etc.) will strengthen business competitiveness. IP strategy and process of business growth Enhancement of business competitiveness Market control Technology development (1) Utilization (3) High-grade human resources Invention/patent IP strategy (2) (Source: “IP Strategy Manual for SMEs and Venture Businesses 2006” published by the JPO.)

IP Strategy and Market Control ▼ Utilization of IP rights will ensure large market shares and high profit margins. Market control through the use of IP rights (example of a case with patent rights) Patent owned by Company A Market Competing Company B Competing Company D Competing Company C Competing Company E - Patents will act as barriers to the entry of other companies, which will result in no price competitions and ensure high profit margins. Company A Product supply - R&D investment costs for competing companies will increase due to indirect technology development. (Source: “IP Strategy Manual for SMEs and Venture Businesses 2006” published by the JPO.)

Part.02 Japanese SMEs and IP Strategy

IP Management in Japanese SMEs ▼ 99% companies in Japan are SMEs with employees of 300 or less, accounting for 88% of total employment in Japan. ▼ Many of them possess valuable technology, of which at least 550 companies account for the largest share of the Japanese market and approximately 100 are world leaders. ▼ Under present circumstances, due to limits to management resources, many of them have not established appropriate IP management. Whether or not companies own IP rights or have ever filed IP applications ■ SMEs (with fewer than 300 employees) ■ ■ Large-scale companies (with over 300 employees) ■ * Figures are based on the results of a questionnaire survey conducted in Aichi Prefecture, which represents one of the biggest concentrations of small-and-medium-sized manufacturing businesses. (Source: “Questionnaire Survey Concerning Efforts for IP” conducted by Aichi Prefecture in 2003, “World’s Top SMEs” by Makoto Kurosaki, published by Kodansha Ltd. in 2003)

Part.03 IP Strategy Undertaken by the Japanese Government

Government Efforts Towards Establishing an Intellectual Property-Based Nation ▼ Through development of legal systems and financial support, the government is promoting Japanese companies’ IP strategy and thus encouraging their growth. Government efforts towards establishing an intellectual property-based nation (3) These efforts will enhance industrial competitiveness throughout the whole country Growth R&D Turning profits IP Strategy Growth R&D Turning profits Japanese government IP Strategy (1) Improvement in the legal systems, financial support, etc. (2) Strengthening of business competitiveness through the implementation of IP strategies

Institutional Reform Towards the Realization of an Intellectual Property-Based Nation ▼ Former Prime Minister Junichiro Koizumi, during his time of office in 2002, advocated the establishment of “an intellectual property-based nation,” a notion that rapidly gained ground through institutional reform beginning in 2003. Institutional reform by the government toward the realization of intellectual property-based nation Institutional Reform Enforcement Details Enactment of the Intellectual Property Basic Act 2003 Fundamental principles, establishment of intellectual property center, formulation of promotional programs, etc. Revision of the Customs Tariff Act, etc.(1) Suspension of import of patent-infringing products; addition of breeder’s right-infringing products to list of goods prohibited for import Revision of the Unfair Competition Prevention Act (2) 2004 Punishment for acts of wrongful acquisition, use or disclosure of trade secrets Revision of the Patent Law, etc. (3) Reduction of filing fee and annual patent fee; increase in examination request fee; and integration of opposition system and invalidation trial system Revision of the Copyright Act (4) Expansion of right of transmittability; establishment of moral rights of performer Enactment of the Act for Establishment of the Intellectual Property High Court 2005 Establishment of the Intellectual Property High Court Revision of the Bankruptcy Law Protection of status of IP licensees in the case of bankruptcy Revision of the Court Organization Law Increase and clarification of court probation officers’ authority in IP related cases; and enhanced protection of trade secrets Revision of the Trust Business Law IP right was newly included in the scope of assets on consignment, and the scope of actors for trust businesses was expanded to include general business corporations (1) Revisions were also made in 2004, 2005 and 2006: “Introduction of a system for notifying concerned parties of the names of importers/exporters” etc. (2) Revisions were also made in 2005: “Punishment for those who committed crimes outside Japan,” “Increased penalties” etc. (3) Revisions were also made in 2005 and 2006: “Acceleration of examination procedures,” “Further reduction of examination request fee,” etc. (4) Revisions were also made in 2005: “Introduction of music CD flowback prevention measures” etc. (Source: “IP Strategy Manual for SMEs and Venture Businesses 2006” published by the JPO, the chart on the previous page as well)

Support Measures for Promotion of SMEs’ IP Strategy (1) ▼ In order to encourage SMEs, which generally have less management resources than large-scale businesses, the government implements various support systems, such as the provision of a consultation services and annual patent fee reductions/exemptions. Major supportive measures implemented by the government (1) Purpose Title and outline Details Major authorities concerned General support Regional IP Advisory Counters (IP Promotion Program for SMEs etc.) Establishment of IP consultation service centers throughout Japan Chamber of Commerce and industry etc. Holding of IP seminars throughout Japan Support for acquisition of IP rights Provision of information to applicants to facilitate decision-making in regards to examination requests Support for prior art searches Patent Office (Ministry of Economy, Trade and Industry) etc. Implementation of accelerated examination in accordance with company’s or individual demands Implementation of accelerated examination Implementation of more accurate examinations Implementation of examinations based on visits and interviews with applicants, etc. Reduction of annual patent fee for SMEs Half-exemption of annual patent fee and examination request fee Ministry of Economy, Trade and Industry etc. Support for acquisition of IP rights by universities for their research achievements Provision of consultation for universities regarding IP right acquisition; support for the filing of international applications Japan Science and Technology agency etc. (Source: “2007 Guide to Supportive Measures Implemented by the Small and Medium Enterprise Agency - How to Utilize IP Rights-” published by the Small and Medium Enterprise Agency, JST website, etc.)

Support Measures for the Promotion of SMEs’ IP Strategy (2) ▼ The government, led by METI (the JPO and the Small and Medium Enterprise Agency) and MEXT, is implementing various supportive measures for businesses and universities. Major supportive measures implemented by the government (2) Purpose Title and outline Details Major authorities concerned Support for utilization of IP rights R&D assistance for practical utilization of technological seeds Subsidy for expenditures necessary for R&D on practical utilization Ministry of Economy, Trade and Industry, etc Consultation service for realization of plan Support for commercialization of technological seeds Various supports including those for IP right acquisition Organization for Small & Medium Enterprises and Regional Innovation, etc. Consultation service regarding commercialization activities Regional SMEs’ IP Strategy Support Program Dispatch of IP experts to SMEs Japan Patent Office (Ministry of Economy, Trade and Industry), etc. Continuous Expert Dispatch Program (charged) Long-term dispatch of IP experts to SMEs Japan Brand Promotion Program Developmental support for “regional band-name products “ Chamber of Commerce and Industry, etc. Support for market research and invitation of designers Establishment of consultation service center for transfer of technology Consultation service for universities regarding transfer of technology Japan Science and Technology Agency, etc. Disclosure of research achievements of universities/company searches Disclosure of database for R&D achievements by universities Introduction of R&D achievements by universities to companies Promotion of university-based venture business Provision of research funds to universities for commercialization activities Support for IP right protection in abroad 　　　　　　　　　　　　　　　(SMEs’ IP Protection Program) Support for investigation on IP right infringing products Japan External Trade Organization (Source: “2007 Guide to Supportive Measures Implemented by the Small and Medium Enterprise Agency - How to Utilize IP Rights-” published by the Small and Medium Enterprise Agency, JST website, etc.)

Examples of Measures: Regional SMEs’ IP Strategy Support Program ▼ This Support Program was implemented over a three-year period starting in 2004, aimed at helping SMEs introduce and promote IP strategy ▼ The government/JPO outsourced support services to private IP consulting companies. ▼ The IP consulting companies provided SMEs selected by the government with various support systems, such as “review of patent strategy,” “improvement of IP management system” and “development of IP human resources,” and reported the outcomes thereof to the government. Structure of the Regional SMEs’ IP Strategy Support Program Government/JPO IP consulting companies SMEs Selection/Payment Selection of businesses subject to support Support Consultation Reports ▼ The consulting companies report the outcome of their provision of support to the government, which also files information regarding methods of support. ▼ This program also helps growth of private IP consulting companies supporting SMEs.

[Reference] Desired Support Systems for SMEs’ IP Strategy Development ▼ Method and process of providing support for SMEs modeled on the Regional SMEs’ IP Strategy Support Program Method and process of providing support for SMEs’ IP strategy development Step 1 “Analysis and grasp of current conditions” Effectiveness of mapping 1. Grasp of the company’s condition - It is highly effective for the IT, materials, and mechatronics industries. “Business hearings,” “review of IP rights,” etc. “Analysis/mapping” - For the pharmaceutical and biotechnology industries, mapping requires innovative ideas because the acquisition of only a small number of basic patents will determine the success of a company. 2. Research on other companies’ conditions “Prior art searches,” etc. Step 2 “Review of business/technology development strategies” “Direction of R&D” “Business development policies” Company size and IP consultation - It should be noted that depending on the size and growth stage of an organization, different systems are required. Step 3 “Formulation of IP strategies” “Study of IP management strategies’ compliance with business policies” - Companies with larger number of employees engaged in R&D and IP management are more likely to require system development. Step 4 “System development for IP management” “System area” “Plan formulation area” “Human resources area” (Source: “IP Strategy Manual for SMEs and Venture Businesses 2006” published by the JPO.) - Improvement of regulations - Allocation of budget/human resources - Creation of manuals - R&D planning - Holding of training programs, etc.

Part.04 IP Strategy Undertaken by Local Governments

Local Governments’ Efforts Towards Realization of Intellectual Property-Based Nation (1) ▼ Currently, 26 prefectures have already formulated IP strategies and 11 prefectures have begun steps toward the formulation thereof. Prefectures that has formulated IP strategy/policy plan Prefectures Hokkaido Aomori Akita Miyagi Fukushima Prefectures Aichi Mie Fukui Ishikawa Shiga Prefectures Osaka Tottori Shimane Tokushima Prefectures Tochigi Ibaraki Chiba Saitama Tokyo Kanagawa Gunma Yamanashi Prefectures Fukuoka Nagasaki Oita Okinawa (Source: Website of Intellectual Property Strategy Headquarters, Cabinet Secretariat as of May 4, 2007)

Efforts for IP strategy observed in some major cities Local Governments’ Efforts for Intellectual Property-based Nation (2) ▼ In order to support local businesses, cities that have large populations and industrial concentrations are implementing various unique measures. Efforts for IP strategy observed in some major cities Name of city Major measures Yokohama Formulation of “Yokohama IP Strategy Promotion Plan” Implementation of prior art search support program Establishment of a joint IP consulting company with the private sector Nagoya Assistance with filing of requests for examination Assistance with filing overseas applications Holding of training courses for SME employees in charge of IP Kyoto Holding of IP strategy-related seminars Holding of training programs concerning “legal work and IP” Dispatch of IP experts to SMEs Osaka Patent distribution promotion program Nagoya Kyoto Osaka Yokohama (Source: Websites of Kanto Intellectual Property Strategy Headquarters, Nagoya City, and Kansai Intellectual Property Strategy Headquarters)

Examples of Measures: Yokohama IP Strategy Support Program ▼ Yokohama is one of the biggest harbor cities in Japan, with a population of 3.6 million and a vast number of commercial and industrial businesses ▼ The city established an IP consulting company, IPMAX, through a joint capital investment with the private sector. ▼ The reasons that the city made it a joint stock company are as follows: (1) The company is scheduled for full privatization after a certain period so as to keep its administrative costs low; (2) The city is considering providing financial support, including IP trust, in the future; (3) This will allow it to provide support utilizing the know-how of private IP consulting companies. Yokohama City established a joint IP management support company with private sectors ▼ Yokohama City is implementing the SMEs’ IP Strategy Support Program. The city will outsource support services to IPMAX, and support the management of IPMAX for a certain period following its establishment. Yokohama City Support IPMAX (supporting company) SMEs IP consulting companies and other private sectors ▼ IP professionals are supporting SMEs. Human resources from the private sector are in charge of practical business. ▼ Implementation of prior art search support and Holding of IP seminars, etc.