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Hush money: Japan to pay companies to keep sensitive patents secret

RIEKO MIKI and MASAYA KATO, Nikkei staff writers

 

TOKYO — The Japanese government will introduce legislation to keep patents with potential military applications secret, compensating companies and applicants for forgone licensing income, Nikkei has learned.

 

Patent filings for technology that can help develop nuclear weapons, such as uranium enrichment, and cutting-edge innovations, including quantum technology, will be reviewed under the proposed economic security legislation. Patents deemed a national security risk if made public will remain undisclosed, with applicants barred from filing overseas as well.

 

A panel drawn from the Defense Ministry, National Security Secretariat and other agencies will screen the applications for potential misuse by foreign actors, with disclosure restrictions expected to reach double digits. The government will compensate roughly 20 years worth of licensing income, based on comparable patents. Licensing fees typically come to 3-5% of sales.

 

Considering patents in Japan are generally made public 18 months after filing, they are accessible to foreign governments and companies, as well as terrorists.

 

In addition to creating a framework for keeping patents undisclosed, the legislation underpinning Prime Minister Fumio Kishida’s economic security agenda focuses on ensuring the safety and reliability of core infrastructure, strengthening the supply chain, and stepping up public-private cooperation on leading technologies.

 

The economic security legislation includes measures to review equipment purchases by large operators of core infrastructure including telecommunication networks and power grids, as well as financial companies. The government will require designated operators to submit plans when installing equipment and computer systems from third parties, as a safeguard against potential national security risks such as a cyberattack that paralyzes a key lifeline.

 

The ministry or agency overseeing a given industry will conduct the review to assess whether the supplier is influenced by foreign governments, an issue envisioned for some Chinese products. Equipment and computer systems deemed a threat to stable operations will be rejected.

 

The supply chain initiative covers materials needed to ensure the stable supply of semiconductors, pharmaceuticals, precious metal ores and large magnets. Companies in these sectors that submit qualifying plans will be eligible for government subsidies.

 

The legislative framework will be released as soon as next month, with cabinet approval slated for February. The measures are expected to go into effect in fiscal 2023.

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