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Santa Clara Law School Summer Program Public Regulation of International Trade in Japan (Revised Version: 2014) Mitsuo Matsushita 1. Constitutional framework of international trade regulation Articles 22 and 29 of the Constitution The COCOM Case [Exhibit 1] Mitsuo Matsushita, “The Constitution and the Freedom of Business Activities”, in Mitsuo Matsushita: International Trade and Competition Law in Japan (Oxford University Press, 1993), pp. 14-27 2. International trade agreements and domestic economic regulations Treaty-making powers Article 98-2 of the Constitution The Nishijin Necktie Case [Exhibit 2] Mitsuo Matsushita, “International Trade Agreements”, in Mitsuo Matsushita: International Trade and Competition Law in Japan (Oxford University Press, 1993), pp. 27-43 3. Forms of regulatory systems Basic laws Master plan by the government Utilization of private associations Licensing of business activities Administrative guidance [Exhibit 3] Mitsuo Matsushita, “Different Regulatory Methods”, “Administrative Guidance”, in Mitsuo Matsushita: International Trade and Competition Law in Japan

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(Oxford University Press, 1993), pp. 43-73 [Exhibit 3-1] Mitsuo Matsushita, “Re: ANA Antitrust Issues” (an affidavit) 4. Major laws relating to international trade regulation Export control laws Import control laws Foreign exchange and investment laws Antitrust laws Consumer protection laws Government procurement laws [Exhibit 4] Mitsuo Matsushita and Shintaro Watanabe, “Trade regulations and trade remedies”, The Asia-Pacific Antitrust & Trade Review 2006 (Global Competition Review), pp. 45-47 [Exhibit 5] Noboru Kashiwagi, “Foreign direct investment, public order and national security: Lessons from the case of J Power”, University of Tokyo Journal of Law and Politics, Vol. 6 (Spring 2009), pp. 45-55 [Exhibit 6] Mitsuo Matsushita, “An Overview of the Antimonopoly Law”, in Mitsuo Matsushita, International Trade and Competition Law in Japan (Oxford University Press, 1993), pp. 86-99 [Exhibit 7] Tokyo District Court Judgment, 22 March 1988 (Japan v. Toshiba Machinery Co.), in The Japanese Annual of International Law, No. 31, 1988, pp. 206-211 [Exhibit 8] Mitsuo Matsushita, An Overview of the Consumer Protection Law and Policy in Japan. [Exhibit 9] Mitsuo Matsushita, “Major WTO Dispute Cases Concerning Government Procurement, AJWH, Vol. 1, pp. 299-315. 5. Intellectual property rights and international trade

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Parallel importation of genuine trademarked goods The Parker Fountain Pen Case (trademark) The Fred Perry Case (trademark) The BBS Case (patent) The CONVERSE Trademark Infringement Case Antitrust implications of blocking parallel importation Patent and territorial principle [Exhibit 10] Mitsuo Matsushita, “Issues Regarding Parallel Importation of Trademarked and patented Products and Competition Policy in Japan”, in Petros Mavriodis & Thomas Cottier (ed): Intellectual Property, Trade, Competition and Sustainable Development (University of Michigan Press, 2003), pp. 189-198 [Exhibit 11] Judgment of February 27, 1970, Osaka District Court, in The Japanese Annual of International Law, No. 16, 1972, pp. 113-135 [Exhibit 12] Judgment of February 27, 2003, Supreme Court, in The Japanese Annual of International Law, No. 47, 2004, pp. 209-211 [Exhibit 13] Judgment of July 7, 1997, Supreme Court, (BBS, Inc. v. Racim Japan), in The Japanese Annual of International Law, No. 41, 1998, pp. 100-103 [Exhibit 13-1] Supplemental Teaching Materials (1), pp. 1-3 [Exhibit 13-2] Supplemental Teaching Materials (2), pp. 4-12 6. Interplay and conflict of U.S. and Japanese regulations Recognition and enforcement of U.S. decisions awarding multiple damage in

Japanese courts The U.S. 1916 Antidumping Act and Japanese blocking and clawback law Applicable law on employment contract

[Exhibit 14] Judgment of July 11, 1997, Supreme Court (Northcon v. Mansei Kogyo Co.), in The Japanese Annual of International Law, No. 41, 1998, pp. 104-109

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[Exhibit 15] Mitsuo Matsushita and Aya Iino, “The Blocking Legislation as a Countermeasure to the U.S. Anti-Dumping Act of 1916. A Comparative Analysis of the EC and Japanese damage Recovery Legislation”, Journal of World Trade, Vol. 40, No. 4, August 2006, pp. 753-776 [Exhibit 15-1] Private International Law-Labor Contract-Although personal services agreement between American pilot and American Air Service Company stipulates U.S. law, where services were rendered by employees in and employee was dismissed in Japan, as a matter of public policy the contract and the effect of dismissal will be interpreted according to Japanese law, The Japanese Annual of International Law, No. 10 (1966), pp. 1889-196 7. U.S./Japan antitrust disputes Matsushita Electric Industrial Company et al v. Zenith Radio Corp. The Tanner Crab Case The Daishowa Case The Fax Paper Case The TV Tubes Case The Empagran Case [Exhibit 16] Matsushita Electric Industrial Co., Ltd., et al v. Zenith Radio Corporation et al, 1986 Trade Cases P67, 004 See also Zenith Radio Corp. v. Matsushita Elec. Ind. Co., 505 F. Supp. 1125 (ED. Pa. 1980) [Exhibit 17] United States v. C. Itoh & Co., Ltd. et al, 1982-83 Trade Cases P 65-10 (U.S./D./C., WD. Washington (Oct. 20, 1982); Yusaf H. Akabar: Global Antitrust-Trade and Competition Linkages (Ashgate Publishing Co., 2003), pp. 39-74 [Exhibit 17-1] Mitsuo Matsushita, “Alaskan Tanner Crab Investigation” (An affidavit) [Exhibit 18] Cheryl R. Adler, “Daishowa International v. North Coast Export: An Alternative Approach in the Judicial Balancing of International Comity Considerations”, Law and Policy in International Business, Vol. 15, p. 613 et seq (1983)

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[Exhibit 19] Abbe Gluck “Preserving Per Se”, Yale Law Journal, Vol. 108, p. 915 et seq (1998-99). [Exhibit 19-1] Supplemental Teaching Materials (3), pp. 13-15 [Exhibit 19-2] Supplemental Teaching materials (4), pp. 16-29 8. U.S./Japan disputes at the WTO An overview of the WTO and its dispute settlement procedures Japan/Alcohol Japan/Film Japan/Apple I Japan/Apple II U.S./ 1916 Act U.S./ Byrd Amendment U.S./Facts Available: Arm’s Length Transactions U.S./Steel Safeguards U.S./Zeroing [Exhibit 20] Industrial Structure Council, METI, Japan: 2007 Report on Compliance by Major Trading Partners with Trade Agreements-WTO, FTA/EPA and BIT, pp. 247-258 [Exhibit 21] Japan-Taxes on Alcoholic Beverages [Exhibit 22] Japan-Measures Affecting Consumer Photographic Film and Paper [Exhibit 23] Japan-Measures Affecting Agricultural Products [Exhibit 24] Japan-Measures Affecting the Importation of Apples [Exhibit 25] United States-Anti-Dumping Act of 1916 [Exhibit 26] United States-Continued Dumping and Subsidy Offset Act of 2000

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[Exhibit 27] United States-Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan [Exhibit 28] United States-Definitive Safeguard Measures on Imports of Certain Steel Products [Exhibit 29] United States-Measures Relating to Zeroing and Sunset Reviews 8. Current Issues – U.S. and Japan in TPP Negotiations [Exhibit 30] Supplemental Teaching Materials (5), pp. 30-48

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Exhibit ３－１

Exhibit  13.1  

Supplemental Teaching Materials (1) [Exhibit13-1]

The CONVERSE Trademark Infringement Case

Tokyo District Court Decision 23 June 2009

Intellectual Property High Court Decision 27 April 2010 (Facts and issues involved)

A brief summary of the case is as follows. Converse, Ltd was a U.S. company engaged in manufacturing and sale of sport

goods such as shirts and shoes and owned a trademark ”CONVERSE”. This trademark was well-known not only in U.S. but also all over the world including Japan. In 2001, Converse Ltd. was declared bankrupt and its assents were taken over by a new company called New Convers, Ltd. (hereafter referred to as “New Converse”).

A Japanese trading company, C. Itoh was assigned the trademark CONVERSE in Japan. C. Itoh licensed it to two of its subsidiaries. Under the Japanese trademark law, a trademark can be transferred without transfer of business with it. In Japan, at the time of this law suit, it was only less than 10 years since the trademark CONVERSE was transferred to C. Itoh and this trademark was not associated with C. Itoh and its subsidiaries among the Japanese consumers. The majority of the Japanese population associated the trademark “CONVERSE” with either defunct Converse, Ltd. or New Converse, Ltd. but not with C. Itoh and its group.

A Japanese company, Loyal, Ltd., imported into Japan shoes manufactured by New Converse in U.S. with the trademark CONVERSE and sold them in the Japanese market. C. Itoh and its subsidiaries brought suits against Loyal, Ltd. in the Tokyo District Court and claimed that Loyal, Ltd. infringed the trademark of C. Itoh and its subsidiaries because the trademark CONVERSE has been registered in Japan by C. Itoh. C. Itoh and its subsidiaries sought an injunction to stop Loyal, Ltd. from selling products bearing the trademark CONVERSE in the Japanese market and also a damage award caused by imports of CONVERSE goods into the Japanese market by Loyal, Ltd.

Loyal, Ltd. argued that a parallel importation of genuine trademarked goods is regarded as not infringing a domestic trademark under the Parker and Fred Perry doctrines and Loyal, Ltd. is entitled to import goods bearing the trademark CONVERSE.

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Loyal, Ltd. further claimed that the conduct of C. Itoh and its subsidiaries is an illegal interference of business of Loyal, Ltd. and constituted an infringement of the Antimonopoly Law. (Decisions) The Tokyo District Court and Intellectual Property High Court held that the parallel importation of CONVERSE goods by Loyal, Ltd. constitutes an infringement of the Japanese trademark law and C. Itoh and its subsidiaries are entitled to an injunctive relief and damage award. The decisions are summarized below. Parallel importation of genuine trademarked goods is held not to infringe a domestic trademark if the following conditions are satisfied: (a) the trademark in question was duly affixed in a foreign country by the trademark owner or its licensee; (b) The trademark owner in the foreign country and the trademark owner in Japan are either the same person or are economically or legally a single entity; and (c) there is no substantial difference in quality of goods in question because the domestic trademark owner has control over the quality. The functions of a trademark are to identify the origin of goods and to guarantee the quality of goods and, as long as the above conditions are satisfied, a parallel importation of genuine trademarked goods does not cause harm to those functions, the interest of consumers is protected and business reputation of users of such a trademark is preserved. There is no mutual stock-ownership and interlocking directorate between C. Itoh (and its subsidiaries) and New Converse, Ltd. Nor is there any indication that those two companies are in substance combined together. Therefore, C. Itoh and New Converse are not the same person nor do they constitute a single economic entity. There is no evidence to show that C. Itoh can exercise quality control over shoes manufactured by New Converse. Loyal, Ltd. argues that the trademark CONVERSE is a world famous trademark and is widely associated with products of Converse, Ltd. or New Converse. Since C. Itoh and its subsidiaries have not established a reputation with respect to this trademark in Japan, a parallel importation of products bearing the trademark CONVERSE does not constitute an infringement of this trademark in Japan. The courts reply that the identification of the origin of goods simply means that products bearing the same trademark come from the same origin and, in this case, the origin indicated by the trademark should be regarded as C. Itoh which owns the trademark in Japan. As mentioned before, there is no relationship between C. Itoh and Converse,

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Ltd. or New Converse, Ltd. in terms of stock-ownership, interlocking directorate or in any other way and, therefore, C. Itoh and New Converse cannot be a single economic entity. For this reason, to import products bearing the trademark CONVERSE without authorization of C. Itoh constitutes an infringement of the trademark owned by C. Itoh in Japan. Even if, as argued by Loyal, Ltd., the trademark CONVERSE is a world famous trademark and the majority of consumers associate this trademark with New Converse, C. Itoh is entitled to protection under the Trademark Law in Japan as the owner of the trademark in Japan, because the use of trademark is not a requisite for registering the trademark (the registration principle) and the owner of a trademark which has registered it can claim infringement of it against a party which uses it without authorization. (Legal issues to be discussed) (a) Is this holding consistent with the rulings of the Parker and Fred Perry Cases? (b) Under this ruling, are consumers protected? (c) Should this decision be reversed? If reversed, what is the significance of trademark

registration? (d) If this decision is reversed and the parallel importation of products bearing the

trademark CONVERSE is held not to infringe the trademark owned and registered by C. Itoh in Japan, does the conduct of C. Itoh and its subsidiaries to block the parallel importation constitute a violation of the Antimonopoly Law?

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Supplemental Teaching Materials (2) [Exhibit 13-2]

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mt_matsushita

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Exhibit 15-1

mt_matsushita

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Exhibit 17-1