Disputes over intellectual property licenses

The first thing to check is the nature of the deadline

When a notice is received, the first point to check is what the deadline stated in it actually is. What has to be done within the period differs depending on whether it is simply a deadline for a reply, a period of demand for performance, or a cure period provided for in the agreement. Replying within the period and carrying out the required performance or cure are two different things. Whether a right of termination arises, and whether termination takes effect, where the period passes without cure is checked against the contractual provisions and the requirements laid down by law.

1. Checking the contract and the conduct alleged

It is not unusual for a single agreement to cover patents, copyright, trademarks and know-how together. In that case, one option is to check the existence of the rights, the licensor's authority and the contractual obligations separately for each subject matter. The licensor may not be the owner of the right, or may be only one of several co-owners.

The scope of the license is checked not only in the main body of the agreement but also in schedules, specifications, subsequent amendment agreements and approval emails. A holder of an exclusive license has the exclusive right to work the patented invention as a business, within the scope specified in the act establishing the license. A holder of a non-exclusive license has the right to work the invention within the scope provided for by law or specified in the act establishing the license. A person licensed to use a copyrighted work may use it within the scope of the methods and conditions of use covered by the license. A holder of a non-exclusive right to use a trademark likewise has the right to use the trademark within the scope specified in the act establishing that right. How far "within the scope" extends is a question of interpretation of the agreement.

It is also necessary to distinguish whether the provision said to have been breached defines the scope within which use of the right is permitted, or instead lays down a separate contractual obligation. Conduct going beyond the former may amount to infringement of the right, whereas breach of the latter may remain a matter of non-performance of a contractual obligation. Late payment of royalties, or failure to comply with reporting obligations, does not necessarily mean that the license lapses immediately and that manufacturing and sales become an infringement.

2. Types of patent license, effect against third parties, and sublicensing

A patent may be licensed either as an exclusive license or as a non-exclusive license. The difference between the two can determine the outcome of a dispute.

The establishment of an exclusive license does not take effect unless it is registered. Even where the agreement states that an exclusive license is granted, if no registration has been made, no exclusive license has taken effect. That said, this concerns the effect of the arrangement as an exclusive license; how the use made up to that point is to be characterized under the agreement is a separate question of contractual interpretation.

As to a non-exclusive license, the law provides that it is effective against a person who, after the license arises, acquires the patent right or an exclusive license, or an exclusive license under that patent right. Registration is not required. A non-exclusive license can therefore be asserted against a new patent owner even where the patent has been assigned to a third party. Whether the rights and obligations under the license agreement pass to the new owner as a matter of course is a separate question, which is checked together with the terms of the agreement.

Where a patent right is co-owned, a co-owner may not establish an exclusive license or grant a non-exclusive license to another person without the consent of the other co-owners. Where the results of joint development are held in co-ownership, the other party's consent is required in order to license a third party. Working the invention itself, by contrast, may be done without the consent of the other co-owners, except where the contract provides otherwise.

For a holder of an exclusive license to grant a non-exclusive license to another person, the consent of the patent owner is required. Whether sublicensing is possible is checked both on this point and against the terms of the agreement.

3. Licenses of copyrighted works and trademarks, and quality control

As to copyrighted works, the right of use acquired by a licensee may not be transferred without the consent of the copyright owner. It should also be noted that the copyright owner and the author are not necessarily the same person. Obtaining a license under the copyright does not by itself dispose of questions concerning the author's moral rights, including the right to integrity, so use involving modification is checked separately. On the other hand, the right of use can be asserted against a person who acquires the copyright in the work and against other third parties.

A non-exclusive right to use a trademark, once registered, is effective against a person who subsequently acquires the trademark right or an exclusive right to use, or an exclusive right to use under that trademark right. Whereas the Patent Act does not require registration for a non-exclusive license to be effective against third parties, the Trademark Act makes registration a requirement for that purpose. The same phrase "effectiveness of a license against third parties" therefore covers different regimes, and the position has to be checked for each type of right. For older transactions, it is necessary to check not only when the right of use was acquired but also when the third party acquired its right, together with the transitional provisions of the amending legislation.

Trademark licenses commonly include obligations relating to quality control. These are contractual obligations and at the same time bear on the maintenance of the trademark registration. Where a holder of an exclusive right to use or a non-exclusive right to use uses the registered trademark, or a trademark similar to it, in relation to the designated goods or services or goods or services similar to them, in a manner that causes misleading representation as to the quality of the goods or services or confusion with the goods or services connected with another person's business, any person may file a request for a trial for cancellation of the trademark registration. This does not apply where the trademark owner did not know of the facts and exercised reasonable care. Such a request may not be filed after five years have passed since the date on which the facts ceased to exist.

Breach of a contractual quality control clause and the existence of this ground for cancellation are nevertheless separate questions. Partial failure to follow an inspection procedure set out in the agreement does not in itself constitute a ground for cancellation.

4. Disputes over royalties, reporting and audits

As to the calculation of royalties, one option is to check the range of sales covered, the items that may be deducted, transactions between affiliated companies, and the treatment of bundled sales and returns, against the calculation provisions and the actual transaction records. Disputes often begin with a divergence between the parties in their understanding of the method of calculation.

Where loss is caused by non-performance of obligations such as reporting obligations, damages may be claimed. This does not apply, however, where the non-performance is due to grounds not attributable to the obligor in light of the contract and other sources of the obligation and the common sense of the transaction concerned.

Late payment of royalties, on the other hand, is subject to special rules for monetary obligations. For delay damages, the obligee does not need to prove loss, and the obligor may not raise force majeure as a defense. The existence of the payment obligation, the due date, and any contractual provisions on delay damages and force majeure are checked as well.

Where there are reporting obligations or audit clauses, the materials to be provided, the subject matter of the review, the manner in which it is conducted, and the treatment of confidential information disclosed in the process are checked in line with the terms of the clause. There is no unlimited obligation to comply with audit requests.

Even where manufacturing and sales have stopped, obligations such as minimum royalties do not necessarily cease as a matter of course. It is necessary to check how the conditions for such obligations to arise are set out in the agreement.

5. Demands for cure and the requirements for termination

An agreement may come to an end through expiry of its term, refusal to renew, contractual termination, or termination under the law. The requirements, the manner of notice and the date on which the termination takes effect differ according to the ground, so each is checked separately. A right of termination is exercised by a declaration of intention to the other party.

As to termination under the law, a party may terminate the agreement where it has demanded performance, specifying a reasonable period, and performance is not made within that period. This does not apply where the non-performance at the time the period expires is minor in light of the contract and the common sense of the transaction concerned. Where performance of the whole of the obligation is impossible, or where the obligor has clearly manifested an intention to refuse performance of the whole of the obligation, the agreement may be terminated immediately without such a demand.

Where the non-performance is due to grounds attributable to the obligee, the obligee may not terminate the contract under these provisions. Where the reason the obligation could not be performed was that the other party's cooperation was not forthcoming, this point is also considered.

The above describes the position under the Civil Code as it now stands. In technology licensing, it is not unusual for agreements to have been in place since before the amendments to the Civil Code took effect. For termination under the law, agreements concluded before April 1, 2020 are, as a general rule, governed by the provisions as they stood before the amendments. The mere fact that the non-performance or the notice of termination came after that date does not mean that the current provisions apply, so the date the agreement was concluded and the history of renewals and amendments are checked.

It should also be noted that there is no general requirement, applicable to intellectual property license agreements as a class, that termination is available only where the relationship of trust has broken down. The nature of the agreement, the terms of the termination clause and the character of the breach are considered case by case.

6. Use after termination, handling of inventory, and exhaustion

Even where the agreement has come to an end, if an exclusive license has been established, it is necessary to check whether registration is required for it to be extinguished. Except where it is extinguished by merger of rights or by extinguishment of the patent right, registration is a requirement for the extinguishment of an exclusive license to take effect. Termination of the agreement and extinguishment of the exclusive license are distinct, so the ground of termination and the state of the register are checked separately. This does not mean that, so long as no registration of extinguishment has been made, the invention may continue to be worked in disregard of post-termination obligations under the agreement.

In practice, the treatment of inventory is a frequent source of dispute. It is necessary to avoid concluding, as a general proposition, that unsold inventory may be sold after termination simply because it was lawfully manufactured beforehand. Under the Patent Act, "working" an invention of a product includes not only producing the product but also transferring it. Whether the manufacture fell within the scope of the license and whether transfer after termination is permitted are separate questions. The first point to check is whether the agreement contains provisions on sales after termination.

Where, on the other hand, goods have been lawfully transferred by the rights holder or by a person licensed by the rights holder, their subsequent distribution raises the question of exhaustion. The Copyright Act provides that the right of transfer in respect of works other than cinematographic works does not apply to subsequent transfers of an original or a copy that has been transferred to the public by the rights holder or by a person licensed by the rights holder. There are also provisions excluding application in respect of items transferred to specific and small numbers of persons by the rights holder or a person with the rights holder's consent, and items transferred outside Japan under prescribed conditions. These rules concern the transfer of that original or copy, and do not permit new reproduction or public transmission. Cinematographic works, and works reproduced in cinematographic works where they are distributed by means of copies of the cinematographic work, are considered separately as a question of the right of distribution.

As to patents, the Supreme Court of Japan has ruled on exhaustion, and it is understood that, as a general rule, the patent right does not extend to the use or resale of a patented product that has been lawfully transferred within Japan. Exhaustion is, however, in principle a question concerning the particular product that was lawfully transferred. Where processing or the replacement of components is assessed as having produced a new patented product lacking identity with the original, or where a product transferred outside Japan is imported, the position is considered separately.

Even where claims based on infringement are limited by exhaustion, the validity of contractual restrictions on sales as between the parties, and liability for breach of them, are considered separately.

Know-how is not treated in the same way as patents or copyright. Whether production methods or technical information may continue to be used after the agreement has come to an end is checked by separating the purpose of use, the term and the post-termination obligations under the agreement from the requirements for trade secret infringement under the Unfair Competition Prevention Act. Termination of the agreement does not by itself establish unfair competition. Conversely, the expiry of a patent does not necessarily extinguish contractual obligations as a matter of course, so clauses on restrictions on use, return and deletion, and confidentiality are checked. Restrictions on the use of technology after the right has expired, and the allocation of payments in that period, are also considered from the perspective of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade, after identifying what the consideration covers and when it is payable. On whether information qualifies as a trade secret and the details of wrongful use, see the guide on responding to the misuse of trade secrets by a competitor.

7. Contractual claims and claims for infringement

A patent owner or a holder of an exclusive license may demand that a person who is infringing, or is likely to infringe, the patent right or the exclusive license stop or prevent the infringement. Corresponding provisions exist for trademark rights, design rights and copyright. Whether a holder of a non-exclusive license or of a non-exclusive right to use a trademark may bring such a claim in its own name requires separate consideration.

A claim for unpaid royalties and a claim for damages for breach of contract or for infringement differ both in their legal basis and in the range of loss they cover. Even where infringement is not established, there may be scope to consider claims based on contractual obligations.

The requirements for injunctive relief and for damages in tort are different. Injunctive relief does not require intent or negligence, whereas a claim for damages raises questions of intent or negligence, the occurrence of loss, and causation. There is a provision presuming negligence in the case of patent infringement, but this does not mean that the presumption cannot be rebutted.

In considering the scope of what can be claimed, in addition to the limitation periods applicable to each claim, it is necessary to check contractual provisions on deadlines for claims and notices, caps on liability, exclusions, and liquidated damages.

Conversely, it does not follow from termination of the agreement alone that all use already made becomes an infringement retrospectively. Whether termination has retrospective effect or operates only for the future is considered in light of the nature and the terms of the agreement. In relation to continuing licenses, there are court decisions that have given termination prospective effect only, taking into account the nature of the agreement and the state of sales to third parties. Questions of restitution and settlement of royalties, and the question whether individual acts of use before termination amounted to infringement, are also decided separately.

Where infringement of a patent is alleged, a defense that the patent should be invalidated is among the points to consider. For trademark rights and other rights, the analysis follows the relevant legislation. For a licensee, however, the position differs from that of a company that has simply received a warning letter, because the agreement may contain a clause under which the licensee agrees not to challenge the validity of the rights, or a clause making such a challenge a ground for termination. Before deciding whether to argue invalidity, the presence, scope and validity of such clauses are checked. On general defenses available to an alleged infringer, including on this point, see the guide on responding to a warning of intellectual property infringement.

8. Preserving evidence, negotiations, provisional dispositions and litigation

Where a dispute has arisen, one option is to preserve, in addition to the agreement and any amendment agreements, approval emails, records of actual use, sales reports, and materials showing when products were manufactured and transferred. Where circumstances exist that would make it difficult to use evidence unless it is examined in advance, court proceedings for the preservation of evidence, a procedure of the Japanese courts for examining evidence before the main action, may be considered.

In responding to an allegation of breach or a notice of termination, one option is to set out the provisions concerned, the conduct complained of, the cure demanded and the deadline, and then to state separately the facts that have been confirmed and the matters that are disputed.

Where an interim arrangement is agreed for continued use or for the sale of inventory, one option is to specify the subject matter, the time limit, the quantities, the consideration and the quality conditions, and to make clear how the arrangement relates to the eventual determination of liability.

A provisional disposition is a Japanese court procedure for interim relief pending a decision on the merits. If the other party applies for a provisional disposition, an order determining the provisional status of the parties in relation to a disputed legal relationship may be issued where this is necessary in order to avoid substantial damage or imminent danger to the applicant. In defending such an application, one option is to structure the arguments in two parts: arguments on the scope of the license, the validity of the termination and whether infringement is established, and arguments on the necessity of interim relief and the scope of the restraint sought. The effect on the business and any alternative measures are presented in line with that analysis.

As to protection where sales records or technical information have to be produced, the type of proceedings needs to be checked. The protective order under the Patent Act, a court order restricting the use and disclosure of trade secrets produced in the proceedings, is provided for in litigation concerning infringement of a patent right or an exclusive license. It is also applied, with the necessary modifications, to the exercise of the right to compensation and to litigation concerning infringement of a trademark right or an exclusive right to use. In litigation that concerns only contractual claims outside those categories, such as a claim for unpaid royalties, these provisions cannot be used as they stand. In that case, the range of materials to be produced, a confidentiality agreement between the parties, and restrictions on inspection of the case record by third parties are considered. The Copyright Act and the Unfair Competition Prevention Act each contain their own provisions on protective orders for litigation concerning copyright infringement and unfair competition. In every case, it is necessary to check whether the information concerned qualifies as a trade secret under the legislation, and whether restrictions on use or disclosure outside the proceedings are needed. Restricting inspection of the case record by third parties and restricting use or disclosure by the other party for purposes outside the proceedings are separate matters.

In considering litigation or an application for a provisional disposition, the jurisdiction of the courts is also checked according to the rights concerned and the relief sought. Different rules on jurisdiction apply to actions relating to patents, utility models, layout-design exploitation rights and computer program works, on the one hand, and actions relating to trademarks, designs and similar rights, on the other. Where the agreement contains a jurisdiction clause or an arbitration clause, its scope and validity are considered as well.

9. How we assist

• We compare the agreement with the conduct alleged, and set out the contractual questions and the infringement questions separately

• We consider the scope of the license, its effect against third parties, and the possibility of sublicensing, for each type of right

• We prepare responses to demands for cure and notices of termination, and develop the approach to negotiations

• We set out the terms to be agreed on the treatment of inventory, work in progress, data and confidential information on termination

• We act in provisional disposition proceedings and litigation, and make applications relating to the protection of trade secrets

Key legislation and official sources

English translations of legislation are provided for reference. The Japanese texts are authoritative.

Where it appears	Legislation	Source type
Types of patent license, effect against third parties, and sublicensing	Patent Act（特許法）	Japanese legislation / English translation
Licenses of copyrighted works; use after termination and exhaustion	Copyright Act（著作権法）	Japanese legislation / English translation
Trademark licenses, registration and quality control	Trademark Act（商標法）	Japanese legislation / English translation
Injunctive relief for design rights	Design Act（意匠法）	Japanese legislation / English translation
Damages for non-performance, delay damages, demands for cure and termination	Civil Code（民法）	Japanese legislation / English translation
Trade secrets and know-how after termination; protective orders	Unfair Competition Prevention Act（不正競争防止法）	Japanese legislation / English translation
Restrictions on the use of technology after a right has expired	Act on Prohibition of Private Monopolization and Maintenance of Fair Trade（私的独占の禁止及び公正取引の確保に関する法律）	Japanese legislation / English translation
Preservation of evidence; jurisdiction; inspection of case records	Code of Civil Procedure（民事訴訟法）	Japanese legislation / English translation
Provisional dispositions determining the provisional status of the parties	Civil Provisional Remedies Act（民事保全法）	Japanese legislation / English translation
Jurisdiction over actions relating to utility models	Utility Model Act（実用新案法）	Japanese legislation / English translation
Jurisdiction over actions relating to layout-design exploitation rights	Act on the Circuit Layout of a Semiconductor Integrated Circuits（半導体集積回路の回路配置に関する法律）	Japanese legislation / English translation
Exhaustion of patent rights	Supreme Court of Japan case law	Court decision

Legal information reviewed: 2026-09-18

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This article is provided for general informational purposes only and does not constitute legal advice on any specific matter. Please consult us regarding your specific situation. The content is based on the laws and regulations in effect as of the date of the last update.