Since Japanese patent law was enacted in 1959, it has been revised several times, mainly for the purpose of international harmonization. Recently, the Japanese government has stressed the importance of pro-patent policies, i.e. strengthening intellectual property rights in order to stimulate business innovation and regain international competitiveness. This paper assesses the impact of a series of revisions of the Japanese patent system on firms' innovation activities by using statistical data, firm-level survey data and information from interviews with IP managers in IT and pharmaceutical firms. The number of patent applications dropped in the early 1990s, but picked up again after 1995. It has been found that increases in patent applications in the late 1990s can be attributed to a surge in IT and pharmaceutical patents. This trend is paralleled with an upward R&D trend in these sectors and with a gradual expansion of patent protection in areas such as software and biotechnology. Policy changes to expand patent subject matter may have contributed to an increase in patent applications, but it is difficult to separate their relative contribution from that of other factors such as increased technological opportunities. As regards policy changes to strengthen patent rights, such as improving settlement systems and raising the amount of compensation for damages in patent infringement litigation, firms have not perceived significant impacts on their innovation activities. In contrast, it is clear that IP sections within firms have started to play a more active role in the formulation of firms' innovation strategies in recent years, particularly in the pharma-ceuticals sector. Tremendous technological opportunities in IT and biotechnology have pushed firms to rely on external knowledge pools via licensing activities, and the co-ordination of in-house R&D with licensing activities to tap external technology sources has become more important. In this context, IP sections are heavily involved in R&D and product development processes within firms. Finally, it has been found that large firms in the IT and pharmaceuticals industries pay much more attention to the US patent system - which moves relatively quickly for new technology field patenting - than to the Japanese system. In this globalized world, it is important to increase efforts towards the international harmonization of IPR systems in order to ensure that firms can conduct innovation activities on a level playing field across countries.
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