Disagreement with "American Standard" for Patent Business

Hiroshi KONNO (Professor, Chuo University)

Just about three years ago there was a patent boom for business models in Japan. That was a result of quick responses by corporations and journalists to a report titled "Financial business from the viewpoint of patents: Japan-U.S. differences in financial technology," published by the Japan Patent Office in April, 1999. Within a year or so since the publication of this report, corporations are said to have submitted patent applications for all possible business models that they could imagine.

Now the boom is gone, and we rarely see such news reports these days. That is because it has become clear that unlike in the U.S., where business methods themselves can be patented, only software and systems for business activity can be protected by patent law in Japan.

Needless to say, the U.S. has been demanding that Japan should provide patent protection for business methods. However, I am glad to see that the Japanese government so far has not yielded to this demand, as I have consistently been opposed to patent protection for software in general and for business models in particular.

Demerits of "Across-the-board Invalidation"

Nevertheless, patent protection for business models is much less harmful than that for business methods. In the latter case, all the businesses that use the same business method could be invalidated across the board, even if their software is different.

One such example is the mileage service offered by airline companies. In Japan, software and systems for such mileage service can be patented (if they are novel), but the method itself cannot. In the U.S., however, this method can be protected so that other airlines might have to pay patent fees or be denied for the use of that method, even if they use different software or systems.

Recently we often hear an argument that we should strengthen protection for intellectual property rights in order to revive industrial competitiveness. This kind of argument is correct in general. However, I am afraid that patent protection for abstract ideas such as software and business methods is rather detrimental to the development of industry and technology.

This has now become a minority view, but it is still shared by researchers and engineers who are developing software or business models in Japan as well as in the U.S. Also in Europe, more than 100,000 engineers are appealing to the EU congress not to yield to the U.S. demand for patent protection for software and business models.

Problem with Mutual Patent Recognition

It has recently been reported in a Japanese newspaper that, based on the U.S. demand, the Japanese and the U.S. governments have agreed to mutually recognize each other's patents, beginning in 2004.

If this is true, those patents that are granted by the U.S. patent authorities would automatically become protected in Japan. Of course, objections could be raised, but in that case one would have to argue with the U.S. patent authorities by hiring American lawyers for at least $5,000 per lawyer per day. As a result, patent protection for business models in the U.S. could become dominant in Japan.

There are a number of problems with such mutual patent recognition. The first problem is the institutional difference between Japan and the U.S., namely, the registration-oriented system in Japan vs. the invention-oriented system in the U.S. Although the Japan Patent Office seems to dismiss this problem, it is not easy to overcome such institutional difference.

Furthermore, there exists a vast difference between the low (too low) level of examination in the U.S. and the reasonable level of examination in Japan for patent approval. Probably, the U.S. standard might well prevail. It would be foolish to abandon a sovereign right in exchange for savings in time and costs for patent examination.

In any case, it would be a serious problem if such fundamental policy changes are determined by a small number of parties involved in patent businesses. More people should express their opinions in order to dispel the U.S. style of patent system that would only benefit the parties involved. In general, however, engineers would not be involved in legal issues, and neither social scientists like economists nor politicians are interested in the patent problem.

Therefore, I am pleased to see the "Japanese association for intellectual property rights" organized and inaugurated recently, where various specialists from different disciplines get together to discuss issues related to intellectual property rights in Japan. It is imperative that not only the parties involved but also lawyers and social scientists as well as engineers who are engaged in technological development express and exchange their opinions in order to handle properly such a fundamental problem for the nation.

(Translation of the original Japanese article that appeared in the July 9, 2002 issue of "Economist", published by Mainichi Newspaper Co.)