Will LSIP do the trick?

Earlier this month Intellectual Property Strategy Network, Inc. (IPSN) and the Innovation Network Corporation of Japan (INCJ) announced the establishment of Japan’s first intellectual property fund, LSIP. As this acronym suggests, LSIP is to be a fund that invests in life-science-related intellectual property, focusing on biomarkers, ES/stem cells, cancer and Alzheimer’s disease.

The idea is that the fund will traverse the boundaries of universities, public research and other institutions to bundle together IP, add value to it, then license it so that the life-science sector may develop through the application of revolutionary new technologies and the creation of venture businesses. According to the announcement,

"To date, the utilization of patents by Japanese universities has mostly been carried out by the TLO (Technology License Organizations) at each university or by the intellectual property departments within universities. However, the TLOs face numerous financial difficulties and some are closing down. Two main reasons are cited for this: (1) Even though the companies seeking the patent licence from the university want a group of intellectual property that has been sorted and bundled to a certain extent, each university has tended to market its own patents without any coordination, making the patents much less attractive to the companies. (2) University patents tend to be made simply on research results and so the data backing the patent is insufficient, which reduces their value as intellectual property because peripheral patents are not filed. Not only are public research institutions in Japan faced with similar problems, it is also likely that some companies have dormant patents that cannot be put to practical use.

To overcome these problems, the LSIP will collect and bundle intellectual property from universities, the Japan Science and Technology Agency (JST) and other public research institutions, companies and other groups in the four areas described above. The LSIP will carry out supplementary research to fill the insufficiency of the data, and will acquired peripheral patents. This will lead to the formation of attractive bundles of intellectual property and will better enable intellectual property licensing to pharmaceutical and other companies, and the creation of venture business. Even within these four areas alone, it is estimated that there are some 3,000 patents in Japanese universities and research institutions that are worthy of consideration as candidates for inclusion in the fund. The LSIP will carefully study these, and either buy them or acquire the patent rights to use them. The JST, which owns some 5,700 patents, is considering working in partnership with INCJ and is expected to work together with the LSIP.

LSIP will be managed by Intellectual Property Strategy Network, Inc. (IPSN), whose core members have accumulated broad experience as specialists in the front line of the intellectual property strategies of major pharmaceutical companies. IPSN will manage the LSIP with the assistance of outside advisers with knowledge of life-science fields, intellectual property, patents, law, management and other areas. There will be a thorough review of LSIP business after three years of operation, at which point a decision concerning the future of the intellectual property fund will be made. Intellectual property funds are a new field that are only just beginning to emerge globally".

It will be interesting to see how this approach fares. In particular, do the solutions which are outlined in the second and third paragraphs above both address the problems identified in the first paragraph, and may the sheer volume of costly expertise lead to both further delay in implementing target technologies and the need to recover a larger quantity of overheads?

Franchisors may be obliged to give financial information to their franchisees, rules Japanese court

Earlier this year the Japanese Supreme Court rendered a highly significant judgment in a case concerning a business format franchise. Under the terms laid down by the franchisor, each franchisee ran its own store but was unaware of the details of the franchisor's payments to the vendors from which franchisees procured products for sale. In this action the franchisees filed suit against the franchisor, demanding that it disclose certain information, including details of the products purchased for sale, payment dates and amounts and the names of the parties that received such payments. The franchisees argued that the franchisor had a duty to disclose these payment details under the Civil Code. The Tokyo High Court found that no such duty existed. The Supreme Court has now reversed the decision and remitted the action to the High Court for further consideration.

The court held that the purchase of products was essential to the franchisees' operations and that it would not have been difficult for the franchisor to inform the franchisees of the details of its payments to recommended vendors. Accordingly, although the franchise agreement did not explicitly impose a duty on the franchisor to disclose such information to its franchisees, the agreement could be interpreted as imposing a mandatory duty to make disclosures to the franchisees at the latter's request. The court added that, in general, a franchisor is subject to a duty to report information to its franchisees, but it did not specify the information that may be withheld from franchisees.

[source: Kenichi Sadaka, Aoi Inoue and Taisuke Yamamoto (Anderson Mori & Tomotsune), writing for International Law Office].

Trust law provides fresh route in Japan

There's good news for anyone planning to securitise patents in Japan, according to an article on Intellectual Asset Management magazine's editor's blog. The article, "Securitising patents in the global credit crunch" by Yohei Iwasaki (Uchida & Samejima Law Firm), outlines the new Trust Law (Law 108/2006) which provides an alternative means for patent securitisation to the little-used Law Relating to the Securitisation of Assets. It enables investors to hold risk-manipulated beneficial interests that are related to the trustee, instead of bonds or shares. Moreover, entrusted patents are separated from the risk of an originator and/or a trustee going bankrupt. The author concludes that there is much optimism that securitisation transactions with innovative structures, using the new Trust Law, could become more common in future.