No Challenge Clauses in the Pharmaceutical Industry in Japan

Abstract

<p> <span>This chapter focuses on the use and regulation of no challenge clauses in the pharmaceutical industry in Japan. Licensing activities are prevalent in this industry. Although no direct evidence has been found on the prevalence of no challenge clauses, there are reasons to believe that these clauses are common in the licensing agreements in the industry. This gives rise to the question of whether these clauses should be regulated under competition law, and if so, how. The chapter concludes that no challenge clauses should be subject to the purview of competition law due to their potential to inflict consumer harm. There are, however, two preconditions for such harm: that the underlying patent is invalid and that the patentee possesses market power over a patented technology or product. This result indicates that no challenge clauses should only be illegal when both preconditions are met. The Japan Fair Trade Commission’s approach to these clauses is largely consistent with these important theoretical insights.</span> <br></p>