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Revision of Fees for Patents and Trademarks and Handling of Extensions for Office Actions

As part of the enforcement of the Amended Patent Act and Other Acts etc. of 2015, the official fees of the Japan Patent Office related to patents and trademarks were revised as of April 1, 2016 (the “Effective Date”). In addition, the handling of extensions of the responding period for Office Actions related to patent and trademark applications were also changed. We have highlighted the key revisions below.

 

I. Revision of Fees

(1) Patent-related fees

i) Filing fees

 

 

ii) Patent annual fees

a) Patents where the request for examination was filed on or after April 1, 2004

 

 

b) Patents where the request for examination was filed by March 31, 2004

(2) Trademarks

Trademark registration and renewal fees were reduced by approximately 25% and 20%, respectively.

Registration fees, renewal fees for Trademarks

Registration and renewal fees for trademarks

 

 

Individual fees for IR marks 

The revised fees apply to:

  • Registration fee payments (including for IR marks) where the due date had been extended, had become due on or after the Effective date of the law revision (April 1, 2016), and were to be made on or after the Effective Date;
  • Renewal applications (including for IR marks) that became due (i.e., where the valid period of trademark registrations expires) and were to be filed on or after the Effective Date; and
  • Renewal fee payments for the second term where the renewal applications had been filed (i.e., the first installment of the renewal fees has been paid) on or after the Effective Date.

 

In connection with the aforementioned revisions, we would also like to note that the previous fees still apply to:

  1. Registration fee payments (including those for which the due date has been extended) that became due before the Effective Date, or renewal applications that became due (i.e., the valid period of trademark registration has expired) before the Effective Date or were filed on or after the Effective Date with payment of double the ordinary renewal fees;
  2. Registration fee payments that were made before the Effective Date which were due on or after the Effective Date, or renewal applications made before the Effective Date which became due (i.e., the valid period of trademark registrations expires) on or after the Effective Date; and
  3. Renewal fee payments for the second term that became due on or after the Effective Date where the renewal applications have been filed (i.e., the payment of the first installment of the renewal fees has been made) before the Effective Date.

Requests for trademark registrations or renewal applications subject to the revised fees that have been received by our firm from January 19, 2016 (when the JPO announced the Effective Date) to March 31, 2016, will, in terms of cost efficiency, be carried out for payment or renewal procedures before the JPO on or after the Effective Date, unless otherwise requested by clients or there are special reasons not to do so.

 

(3) Fees applicable to individual cases

Please contact us if you have any questions or need clarification on actual fees applicable to individual cases.

 

II. Extensions of Response Periods to Notifications of Reasons for Refusal of Patent and Trademark Applications

1.       Patent applications

(1) Requesting an extension of time for a Notification of Reasons for Refusal
within the response period

Before April 1, 2016, extensions to response periods were allowable for a month per a request when there wass a justifiable reason for being unable to respond to a Notification of Reasons for Refusal within the time period. However, the extensions were changed as follows.

 

<For applicants residing abroad >

The response period may be extended for two months by submitting a first request, and may be further extended for another one month by submitting a second request (for a maximum time extension of three months). Both the first and second requests for extension may be submitted at the same time. Moreover, providing a justifiable reason for submitting a request will no longer be necessary.

 

(2) Requesting an extension of time for a Notification of Reasons for Refusal
whose response period has lapsed

After the Effective Date, an extension of time for a Notification of Reasons for Refusal whose response period has lapsed may be made if a request is submitted within an allowable time period (two months).  Regardless of whether the applicant resides in Japan or abroad, the response period may be extended for two months by submitting a request. Providing a justifiable reason for submitting a request is no longer necessary, and a fee (51,000 JPY) higher than the fee for an extension request (2,100 JPY) for (1) above is incurred when requesting this extension of time.

However, an extension under the lapsed response period cannot be requested when an extension of (1) above is granted; nor can it be requested when having responded within the original response period.

 

2.       Trademark applications

Requesting an extension of time for a Notification of Reasons for Refusal
whose response period has lapsed

Similar to patents, on the Effective Date, an extension of time for a Notification of Reasons for Refusal for trademark applications whose response period has lapsed can now be made if a request is submitted within an allowable time period (two months) by paying 4,200 JPY.  Refer to paragraph II. 1.(2) above for details.

 

(The aforementioned also now applies to requests for extensions of time for Notifications of Provisional Refusal of international trademark registration applications.)

 

3.       Cases to which the new changes will be applied

Paragraphs 1. and 2. above are applied to cases in which the response periods of Notifications of Reasons for Refusal (including those issued prior to the Effective Date) lapse on or after the Effective Date, and requests to extend a response period were submitted on or after the Effective Date (in the above 1.(1), this will be for the first request if the applicant resides abroad).

However, from the Effective Date and onwards, there will be no change to the current response periods for:

(i) Notifications of Reasons for Refusal issued after Appeal Requests against Decisions of Refusals (including those in the Internal Reconsideration Examination stage), and
(ii) Notifications of Reasons for Refusal issued against an Application for Registration of Extension of the Duration of a Patent Right.

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Revision of the ‘Examination Guidelines for Patent and Utility Model in Japan’

As announced on 16 September 2015, the revised ‘Examination Guidelines for Patent and Utility Model in Japan’ (henceforth ‘Revised Examination Guidelines’) and the revised ‘Examination Handbook for Patent and Utility Model in Japan’ (henceforth ‘Revised Examination Handbook’) has been be applied to the examination of patents and utility models on or after 1st October 2015.

The ‘Revised Examination Guidelines’ are explained below.

The basic principles for this revision are:

  • Making descriptions in the Examination Guidelines clear and concise.
    • Ensuring suitable translation into foreign language.
  • Providing enough case examples and court precedents, in order to make the Examination Guidelines easier to understand.
  • Making the Examination Guidelines internationally acceptable.

 

So that case studies and court cases can be suitably added and updated, these have been moved to the ‘Revised Examination Handbook’, together with the former ‘Examination Guidelines for Specific Technical Fields’ (e.g. computer software, biological, and medical related fields).

Some of the major points of revision related to the examination proceedings in the ‘Revised Examination Guidelines’ are mentioned as follows.

  • Clarification of the basic principle of the examination:
  • Addition of a more ‘applicant-friendly’ examination procedure:
  • Clarification of the correlation between the Sufficiency of Disclosure Requirement and Support Requirement:

 

In relation to the Clarity of Claims Requirement:

  • Clarification of the examination manual for expressions which render the scope unidentified (e.g. expressions such as ‘about’, ‘roughly’, ‘approximately’, ‘substantially’ and ‘essentially’),
  • Clarification of the examination manual for a description which specifies an invention of a sub-combination specified by a feature of ‘another sub-combination’, and
  • Revision of the examination manual for descriptions which specify a product by a process.

 

In relation to Novelty and Inventive Step:

  • Clarification that the basic idea of determining an inventive step is the comprehensive assessment of factors which do not support an inventive step and factors which support an inventive step.
  • Clarification that an obstructive factor (i.e. a factor which teaches away from an inventive step) is taken into consideration as a factor which supports an inventive step
  • Clarification of matters to bear in mind in determining an inventive step in relation to hindsight, object of the primary prior art etc., secondary considerations; and
  • Clarification of the manuals for the determination of an invention and for the determination of the novelty thereof, when specifying the invention of a sub-combination by a feature relating to ‘another sub-combination’.

 

The aforementioned major points of revision are divided into three sections (which correspond to Part I, Part II and Part III in the Guidelines), which are further explained in detail as follows.

NB: Sonderhoff & Einsel Law and Patent Office have underlined as required the below sections of the ‘Revised Examination Guidelines’.

 

Part I   – Outline of Examination

The basic principle of examination has been clarified as: ‘On the premise that it is primarily the burden of the applicant, etc. to proceed with the prescribed procedures to obtain the patent right taking his/her own initiatives, the examiner should take into account the purport of establishment of high-quality patent right.’

 

Furthermore, the following procedures in relation to the examination, which are regarded to be more ‘applicant friendly’, have been added.

a) Regarding the subject of prior arts search:

‘The examiner takes into consideration the matters reasonably expected to be added to claims by an amendment as the subject of search, in view of the efficiency of the examination procedures until a decision to grant a patent is rendered.’ (Refer to 2.2 (2) in Section 2, Chapter 2, Part I); and

‘The examiner should give due consideration such that the least number of inventions are excluded from the subject of prior art search’ (Refer to 2.3 in Section 2, Chapter 2, Part I).

 

b) Regarding procedures when a reason for refusal has not been overcome:

In principle, a Decision of Refusal is issued.

However, ‘even when the notified reasons for refusal are unresolved, when it is determined that the examiner can show countermeasures available for the applicant to resolve the reasons for refusal and that it is likely to reach an agreement with the applicant for taking such countermeasures, the examiner shall communicate with the applicant and notify reasons for refusal if an agreement is reached. This notice of reasons for refusal shall be in principle issued as a “Final Notification of Reasons for Refusal”.’ (Refer to 3 in Section 5, Chapter 2, Part I).

It is explained that a ‘Final Notification of Reasons for Refusal’ could be issued also in the Internal Reconsideration Examination for similar cases (refer to 2. in Section 7, Chapter 2, Part I).

 

c) Regarding suggestions for amendments and divisional applications:

If the Examiner is able to indicate a way for the Applicant to respond in order to overcome the reasons for refusal, the Examiner shall proactively suggest to the Applicant any amendments or recommendation to file divisional applications etc.
(refer to 2.1 in Section 8, Chapter 2, Part I)

 

Part II  – Description and Claims

a) Regarding the Sufficiency of Disclosure Requirement and Support Requirement:

(1) The correlation between the Sufficiency of Disclosure Requirement and Support Requirement has been clarified.
‘Both requirements are different in their contents and also in gist thereof’ (refer to 4.1.2 in Section 1 in Chapter 1, Part II).

(2) When a reason for refusal is issued for not satisfying the Sufficiency of Disclosure Requirement or the Support Requirement, it has been set forth that it would not be appropriate for [the examiner] to ‘argue based only on a general argument such as “it is difficult make a prediction in the relevant technical field” without specific explanation of reasons, because this may make it difficult for the applicant to present effective counterarguments, or to understand the amendments to be made to overcome the reasons for refusal’ (refer to: 4.1.1 in Section 1, Chapter 1, Part II; and to 3.1.1 in Section 2, Chapter 2, Part II).

 

b) Regarding the Clarity of Claims Requirement:

(1) When there are expressions which render the scope unidentified:
It is explained [in these guidelines] that even if there are expressions which render the scope unidentified (e.g. expressions such as ‘about’, ‘roughly’, ‘approximately’, ‘substantially’ and ‘essentially’), it will not be immediately determined that the scope of an invention is unclear.

‘The examiner shall evaluate whether a person skilled in the art can understand the scope of a matter specifying the invention including the relevant expression by considering the description and drawings as well as the common general knowledge as of the filing.’ (refer to 2.2(5) in Section 3, Chapter 2, Part II).

 

(2) When an invention of a sub-combination is specified by a feature of ‘another sub-combination’:
Two types of unclear inventions are explained as follows.

(i) The case where the person skilled in the art cannot understand a feature of ‘another sub-combination’ based on the matter stated in a claim, even by considering the disclosure of the description and drawings, as well as the common general knowledge as of the filing, and as a result the invention is unclear.

(ii) The case where the person skilled in the art cannot clearly understand whether or how an invention of a sub-combination is specified by a feature of ‘another sub-combination’, even by considering the statements of the description and drawings as well as the common general knowledge as of the filing, and as a result the invention is unclear. (refer to 4.2 in Section 3, Chapter 2, Part II)

 

(3) When a process of production of a product is described in a claim for an invention of a product:

In light of the decisions of the Second Petty Bench of the Supreme Court of June 5, 2015 (case numbers 2012(ju)1204 and 2012(ju)2658) in the “pravastatin sodium” case, a revised procedure for [examining] the so-called product-by-process claim is explained [as follows in these guidelines].

‘When a production process of a product is described in a claim for an invention of a product, the description of such a claim can be said to satisfy the requirement that “the invention must be clearly described” in the claim solely in cases in which there were circumstances under which it was impossible or utterly impractical to directly define the product by its structure or properties at the time of filing the application. Otherwise, said invention of a product will be determined to be unclear.

The following can be mentioned as the aforementioned circumstances:

(i) where an analysis of the structure or property of the product was technically impossible at the time of filing; or

(ii) where, in view of the necessity to quickly file due to the nature of a patent application etc., a remarkably huge expenditure or amount of time would have been required to identify the structure or property of the product.

The Applicant can provide an explanation in the Detailed Description of the Invention, Written Argument etc. about the existence of the aforementioned circumstances.’
(refer to 4.3 in Section 3, Chapter 2, Part II)

Specific examples which fall under the aforementioned product-by-process claim and aforementioned circumstance may be found on items 2204 to 2205 of the ‘Revised Examination Handbook’.

 

Part III – Requirements for Patentability

The major points of revision in relation to novelty and inventive step are as follows.

a) It has been clarified [in the guidelines] that the basic idea of determining an inventive step is the comprehensive assessment of factors which do not support an inventive step, and factors which do support an inventive step.

1) ‘The examiner determines whether it can be reasoned that a person skilled in the art could have easily arrived at the claimed invention based on the prior art (hereinafter referred to as ‘reasoning’ in this Chapter), by adopting other prior art (hereinafter referred to as ‘secondary prior art’ in this Chapter) or considering the common general knowledge, in light of the various factors which do not support an inventive step (such factors are shown in the left column in the following Figure).

2) If the examiner determines that this reasoning is impossible based on the above step (1), he/she determines that the claimed invention has an inventive step.

3) If the examiner determines that the reasoning is possible based on the above step (1), he/she determines whether the reasoning is still possible by comprehensively assessing various factors, which includes factors which support an inventive step (such factors are shown in the right column in the following Figure).

4) If the examiner determines that the reasoning is impossible based on the above step (3), he/she determines that the claimed invention has an inventive step. 

If the examiner determines that the reasoning is possible based on the above step (3), he/she determines that the claimed invention does not have an inventive step.’
(Refer to 3. in Section 2, Chapter 2, Part III).

Main_factors_for_reasoning_EN

b) It has been explained in these guidelines that the examiner will determine viewpoints for motivation as shown as (1)-(4) in the Figure by comprehensively consideration.

‘It is determined whether or not there is motivation for applying the secondary prior art to the primary prior art by comprehensively considering the viewpoints (1) to (4) in the above Figure: (1) Relation of technical fields; (2) Similarity of problems to be solved; (3) Similarity of operations or functions; and (4) Suggestions shown in the content of prior art. The examiner should note that it is not always possible to determine whether there is motivation by paying attention to only one of these viewpoints.’

It is particularly stated in regards to (1) ‘Relation of technical fields’, that in principle, ‘other viewpoints for motivation must be taken into consideration.’ (Refer to 3.1.1 in Section 2, Chapter 2, Part III).

 

c) It has been clarified [in the guidelines] that an obstructive factor is taken into consideration as a factor which supports an inventive step.

A factor which obstructs the application of the secondary prior art to the primary prior art (obstructive factor) supports the existence of an inventive step. However, if it is sufficiently reasoned that a person skilled in the art would easily conceive the claimed invention even after considering the obstructive factor, then the claimed invention does not have an inventive step. The following secondary prior art can be mentioned as examples of obstructive factors.

(i) secondary prior art which is applied to the primary prior art, whereupon the primary prior art cannot achieve its purpose

(ii) secondary prior art which is applied to the primary prior art, whereupon the primary prior art cannot function

(iii) secondary prior art which is considered to be excluded from the primary prior art, and unable to be adopted by the primary prior art

(iv) secondary prior art which a person skilled in the art would not apply due to a publication disclosing that the secondary prior art is inferior to the other embodiment with respect to operations and effects of the primary prior art’ (Refer to 3.2.2 in Section 2, Chapter 2, Part III).

 

d) Matters to bear in mind in determining an inventive step

Matters to bear in mind in relation to hindsight, object of the primary prior art etc., well-known technique, secondary considerations etc. have been clarified.

1) Regarding hindsight

The examiner should take note to avoid hindsight after acquiring knowledge of the claimed invention to determine an inventive step, such as in the following cases (i) or (ii).

(i) The examiner assumes that a person skilled in the art would have easily arrived at the claimed invention.

(ii) During determination of the cited invention, the examiner became influenced of the claimed invention.

 

2) Regarding the object etc. of the primary prior art:

‘The examiner will generally select the primary prior art which is same as or close to the claimed invention  from the aspect of technical field or problem to be solved.
The primary prior art of which technical field or problem to be solved is considerably different from that of the claimed invention is likely to make the reasoning difficult. In this case, it should be noted that the examiner is required to reason more deliberately whether or not a person skilled in the art would arrive at the claimed invention starting from the primary prior art.
Moreover, where the problem to be solved of the claimed invention is novel …, and usually inconceivable by a person skilled in the art, may be a factor in support of the existence of an inventive step.’

3) Regarding well-known technique:

‘The examiner should not fail to consider whether reasoning is possible (i.e. to consider whether there is a factor teaching away from applying the well-known technique), merely because a given technique is well-known.’

4) Regarding secondary considerations:

‘The examiner may consider circumstances such as commercial success and attainment of a long felt need as a secondary consideration for supporting an inventive step. However, the Examiner may take this circumstance into consideration only when the examiner is convinced by the Applicant’s arguments and evidence that those circumstances are attributed only to the technical features of the claimed invention according to, and not to other factors such as sales promotion or advertisements and the like.’ (3.3 in Section 3, Chapter 2, Part III).

 

e) Examination manual for the determination of an invention and for the determination of the novelty thereof, when a description specifies an invention of a sub-combination by a feature relating to ‘another sub-combination’:

In this case, when it is understood that a structure, function etc. of a claimed sub-combination invention is specified by a feature of ‘another sub-combination’, ‘the Examiner shall find that the claimed sub-combination invention comprises such a structure, function etc.’. Moreover, the Examiner shall determine that this invention of a sub-combination has novelty when there is a difference between the invention of a sub-combination and a cited invention. (Refer to 4. in Section 4, Chapter 2, Part III).

 

A PDF version of this article is available for download here

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Revision of the “Examination Guidelines for Patents and Utility Models in Japan”

As announced on 16 September 2015, the revised ‘Examination Guidelines for Patent and Utility Model in Japan’ (henceforth ‘Revised Examination Guidelines’) and the revised ‘Examination Handbook for Patent and Utility Model in Japan’ (henceforth ‘Revised Examination Handbook’) has been be applied to the examination of patents and utility models on or after 1st October 2015.

 

The ‘Revised Examination Guidelines’ are explained in more detail in this article in our info center.

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Supreme Court’s Opinion in Genentech v. JPO

Insight on Potential  Extension of Patent Term for Pharmaceutical Products

On 17 November, 2015, the Supreme Court of Japan released a key decision that highlighted certain criteria which would allow an owner of a pharmaceutical patent to extend the term of its patent based on the time taken to obtain approvals from the Ministry of Health, Labour and Welfare under the Pharmaceuticals and Medical Devices Act (formerly known as the Pharmaceutical Affairs Act) (“PMDA”).

Background:

A patent term under the Patent Act (“Act”) of Japan is maximum twenty years from the date of the patent application.  However, a patentee may request the Japan Patent Office (“JPO”) to extend such term for up to five years if the patentee is not working the patented invention for a certain period during the twenty-year term, because it needs to obtain government approval to work the patented invention (the JPO may reject such request if it finds that it is not necessary to obtain such approval to work such patented invention).

For pharmaceutical products, if a company intends to manufacture and sell them, it is required to obtain approval for the manufacture and sale of the product under the PMDA.  Such approval focuses on items concerning the product’s quality, effectiveness and safety such as the ingredients, quantity, dosage, administration, effects, and side effects.  Further, if the company intends to change these items, it is required to obtain additional approval for such change of the product.

In Genentech v. JPO, a U.S.-based pharmaceutical company (“Plaintiff”) applied for a patent (“Patent”) on 28 October, 1992 for a pharmaceutical product (genetic name: bevacizumab) (“Product”) and such Patent was registered on 14 February, 2003.  On 18 April, 2007, the Plaintiff obtained the manufacture and sales approval of the Product under the PMDA (“Prior Approval”).  In the Prior Approval, the Product’s dosage and administration for adults was to give an intravenous drip of 5 mg/kg of a patient’s body weight or 10 mg/kg of body weight and its dosage interval was two weeks or more.  Based on the Prior Approval, the JPO, upon the Plaintiff’s request, extended the term of the Patent by four years, two months, and three days – i.e., the time it took to obtain approval from MHLW after the patent was registered.

On 18 September, 2009, the Plaintiff obtained subsequent approval (the “Subsequent Approval”) from MHLW to add a new dosage and administration of the Product.  The new dosage and administration for adults was to give an intravenous drip of 7.5 mg/kg of patient and the amended dosage interval was three weeks or more.

On 17 December, 2009, the Plaintiff again applied to the JPO for an extension of the term of the Patent.  The Plaintiff asserted that they had not utilized the Patent to manufacture and sell the Product under the dosage and administration stated in the Subsequent Approval for a certain period.  The JPO, however, rejected the Plaintiff’s request on 6 January, 2011 on the ground that it was not necessary for the Plaintiff to obtain such Subsequent Approval since although the dosage and administration of the Prior Approval was different from that of the Subsequent Approval, the active ingredients and effects were identical, and therefore, the Plaintiff was able to use the Patent.  On 18 April, 2011, the Plaintiff made an objection to the JPO, but the JPO did not change its position.  The Plaintiff then appealed the JPO’s rejection to the Intellectual Property High Court (“IPHC”).

Intellectual Property High Court’s Decision:

On 30 May, 2014, the IPHC held in favor of the Plaintiff and determined that the purpose of the extension of a patent term under the Act is to prevent a patentee from suffering any disadvantages (e.g., the patentee would not likely be able to recoup any R&D expenses if the patent term was shortened due to the need of obtaining government approval).  Also, since the dosage and administration of the Prior Approval were different from that of the Subsequent Approval, the Plaintiff could not manufacture and sell the Product under the dosage and administration written in the Subsequent Approval until the Subsequent Approval was obtained, and therefore, the JPO should have extended the term of the Patent based on the Subsequent Approval.

Supreme Court’s Decision:

On 17 November, 2015, the Supreme Court affirmed the IPHC’s decision and focused on: 1) comparing the substantial identity of a pharmaceutical product in a prior approval versus the identity of the product in a subsequent approval, and if the substantial identity was different; 2) whether the manufacture and sale of a pharmaceutical product under a prior approval would cover the manufacture and sale of the product under a subsequent approval.

Here, the Supreme Court ruled that with respect to a product invention which focuses on a pharmaceutical ingredient, the substantial identity of such pharmaceutical product should be determined by its ingredients, quantity, dosage, administration, and efficacy.  The Supreme Court also found that the Product’s substantial identity was different (based on its dosage and administration) in the Prior Approval and Subsequent Approval, and since based on such difference the Product was not manufactured or sold during the period of trying to obtain the Subsequent Approval, the Supreme Court concluded that the request for extending the term of the Patent for the Subsequent Approval should be permitted.

In response to the Supreme Court decision, the JPO has announced that by spring 2016, it will consider revising their guidelines for the extension of a patent term.

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Amendment of Workers Dispatch Act Now in Effect

Impact on Companies

In 2012, the Workers Dispatch Act (“Act”) was amended to impose a new obligation on companies to directly hire dispatched workers under certain conditions when using temporary employment agencies (“Agency”).  The amendment provided a three year period to allow for companies to adjust their HR policies and infrastructure to comply with the future restrictions.

This amendment recently became effective on October 1, 2015.  The Act was also amended on September 11, 2015 (and enforced on September 30, 2015) to implement other new rules for the worker dispatch business, but this newsletter focuses on the issue of “fictitious” labor contracts (i.e., services agreements or gizou ukeoi) and its potential impact on firms which outsource services and the employers which receive them.

Newly Effective Amendment of the Act

Previous to the amendment of the Act, the Ministry of Health, Labour and Welfare (“MHLW”) had issued guidelines regarding classifications of the worker dispatch business (“Guidelines”) to help companies distinguish between legitimate outsourcing labor contracts and fictitious ones.  If the local labor bureau finds a fictitious labor contract due to non-compliance with the Guidelines (i.e., a company conducted the worker dispatch business without a license), the service provider can be sentenced up to one year in prison or be fined up to JPY1,000,000.  In addition, the client company can also be sentenced up to one year in prison or be fined up to JPY 1,000,000 under the Employment Security Law since it received illegal labor outsourcing services.  However, despite these penalties, there was criticism that the Act still could not ensure a stable working environment for dispatched workers.  Client companies could freely terminate the service provider’s services which would often result in the dispatched workers losing their jobs.  With the newly effective amendment of the Act, the client company could be obligated to hire the dispatched workers under certain circumstances in order to secure their employment.

Risks For Firms Which Outsource Services and For Their Company Clients

The potential risk of violating the newly amended Act arises from the fact that an Agency is required to comply with strict regulations under the Act and obtain a business license from the MHLW to be able to dispatch workers to employers.  As a licensed Agency, the Agency can dispatch its employees to companies and such companies can directly instruct and control the dispatched workers.  However, potential issues arise when a firm (which is not a licensed Agency) dispatches its employees to a client and the client directly instructs the dispatched worker on how to perform his work – e.g., where the dispatched worker cannot act in his discretion in performing the work set forth in the labor contract.

For example, when developing a company’s IT infrastructure, a company will often outsource the development portion of the project to a consulting firm, and the firm will dispatch its consultants to the client’s office to learn its needs and business flow and develop the IT system on site.  A common occurrence in these types of projects is that the company actively instructs and controls these consultants so that the IT system is customized for the company’s operations.  Unfortunately, however, such actions could cause the contract with the consulting firm to be deemed a “fictitious” contract if it is determined that the company is controlling the dispatched worker.  As a result, the consulting firm would have violated the Act as it would not have the required business license to dispatch temporary workers, and the client may be forced to hire the dispatched consultant should the consultant request such action from the client.

As these new regulations were enforced on October 1, 2015, we believe that the MHLW will strengthen their inspection and supervision of companies in relation to fictitious labor contracts, and therefore, firms which outsource services (e.g., consulting, accounting, architect, engineering, and of course, law firms) and their client companies face an increased risk of violating the Act.

What To Do?

While it is unclear how strictly the MHLW will enforce the newly effective amendment, it will be prudent for firms to conduct employee training for employees who work at the client’s site or have close contact with the client’s employees.  The MHLW’s Guidelines provides a few key practical pointers as to how a firm (that is not a licensed Agency) should conduct the provision of its employees to a client which include:

1) instructing the dispatched employee on how to proceed with his work duties;

2) managing the employee’s work hours (including overtime), break time, holidays, and days of leave;

3) providing evaluation of the employee’s performance; and

4) assuming responsibility to discipline the employee for any improper behavior.

The Guidelines also note that the services provided by a non-licensed firm should involve specialized skill and experience and suggest that dispatching workers who perform physical labor type work may run afoul of the Act.

 

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Public holidays – November 2015

Please note that Tuesday, Nov 3rd 2015 and Monday, Nov 23rd 2015 are public holidays in Japan. Our office will be closed on these days.

A list of all Japanese public holidays for the remaining year can be found on our contact page.

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