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The Cross-sectional System Study Group for the Fourth Industrial Revolution Compiled a Report

As an effort towards bringing about the fourth industrial revolution, which was set as a goal in the Japan Revitalization Strategy 2016 and the Interim Report on the New Industrial Structure Vision, the Ministry of Economy, Trade and Industry (METI) established a Cross-sectional System Study Group for the Fourth Industrial Revolution, chaired by Dr. Hiroshi Ohashi, Professor, Faculty of Economics, the University of Tokyo. The study group held seven meetings between January and July of 2016 to discuss ideal approaches to establishing three cross-sectional policy systems: competition, utilization and protection of data, and intellectual property, and summarized and compiled the results of the discussion into a report.

1. Background

As digital and network technologies develop, new information property—ranging from works created by artificial intelligence (AI) to databases storing data accumulated by sensors or other devices—is rapidly being created, and this trend has been shifting the source of added value from traditional items to data. To address this situation, it is important for Japan to deal with issues in the intellectual property system aiming at the more effective utilization of such data.

Meanwhile, as business competitiveness in the digital market becomes more intense concerning issues surrounding data access or utilization, the market dominated by platformers (e.g., Google, Apple, Facebook, and Amazon, collectively referred to as “GAFA,”) has eclipsed traditional markets. This situation raises the concern that such platformers will have a fixed, competitive superiority and maintain dominant positions in the market.

To address this situation, METI established the Cross-sectional System Study Group in January of 2016 and the study group has been discussing ideal approaches to establishing three cross-sectional policy systems aiming to deal with the fourth industrial revolution: competition, utilization and protection of data, and intellectual property.

2. Outline of the report

The study group streamlined the current system and challenges, and compiled future actions into a report on September 15. The following is the summary of the report:

1) Competition policies that deal with the fourth industrial revolution

Concerning competition policies, the report describes the analysis of the characteristics of platformers (such as GAFA), and then introduces the current state of e-commerce and other transactions, including transactions involving digital content for smartphone applications, uncovered by the Interviews with Businesses Related to Actual Conditions of Online Businesses, which METI jointly conducted with the Japan Fair Trade Commission (JFTC).

Specifically, the report reveals eight specific business practices used by platformers in their transactions, showing that platformers provide their own means of payment to gain commissions from participating companies and prohibit them from using other means of payment and transferring unused, but purchased, virtual currency between multiple software applications despite being operated by the same company. Further, they conclude confidentiality agreements with participating companies so the latter are not able to disclose the details of such agreements to third parties.

The study group pointed out in their discussion that, out of the eight practices, restriction on forms of payment and non-transferability of virtual currencies may constitute violations of the Antimonopoly Act. In addition, the report pointed out that confidentiality agreements limit the scope of information METI and JFTC can collect during voluntary surveys.

To overcome these challenges, the report offers two temporary measures: [i] METI and JFTC should closely watch the current situation in an appropriate manner; and [ii] if JFTC discovers that any such platformer violates the Antimonopoly Act, it should enforce the law in a strict and precise manner.

The report continues to describe that, in regard to business transactions by platformers, the government should deal with the issue within the framework of existing laws and regulations. At the same time, discussions should proceed on the introduction of new systems without being overly concerned with the implications of the Antimonopoly Act from the viewpoint of first vitalizing industries, with the understanding that certain positive situations may be realized outside the scope of the existing laws and regulations.

2) Utilization and protection of data, and intellectual property

Concerning the issue of the utilization and protection of data and intellectual property, the report shows that creating new markets for data distribution should be advanced for the purpose of promoting data distribution since data is becoming a new source of added value. It is also important for business operators to streamline areas in which they can harmonize technology and systems and which are competitive and to foster visions of a common market which promotes data sharing and collaborative use of data, without being excessively concerned with disclosure of data to business competitors.

Furthermore, the report mentions that to smoothly facilitate data distribution, a good balance between data utilization and protection of privacy and clarification of powers, responsibilities and jurisdictions are also important. To this end, and as a critical first step, METI should ascertain the actual situation concerning how and where data is stored and what kind of agreements are concluded among companies.

Concerning the promotion of utilizing such new information property and the protection of intellectual property, the report also mentions the importance of establishing appropriate, well-balanced and flexible intellectual property systems. Specifically, it points out that from the viewpoint of the fourth industrial revolution, it is extremely important to determine how to advance inter-company collaboration in Japan and to create innovative services or technologies based on this collaboration.

The report continues with the assertion that in societies where the outcomes, e.g., AI or IoT, from the fourth industrial revolution are implemented and popularized, companies will share information and related technologies so as to fortify the capability to create new businesses and shore up competitiveness. To this end, METI will discuss ideal approaches to promoting harmonization in the utilization and protection of intellectual property in terms of systems or databases for industrial property rights. In addition, it is also necessary for Japan to protect such rights in an appropriate manner to securely incentivize investment in collection and analysis of data and R&D in related technologies, e.g., preventing abuse of the systems.

3. Future actions

Based on the discussion results of the study group, METI will further exchange views with experts and the business world by individual subject and endeavor to discuss issues toward the formulation of concrete policies.

Reference

Release date

September 15, 2016

Division in Charge

  • Corporate System Division, Economic and Industrial Policy Bureau
  • Concerning the information on:1) Competitive policies and 2) Utilization and protection of data and issues regarding intellectual property
Ministry of Economy, Trade and Industry1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8901, Japan Tel: +81-(0)3-3501-1511
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