On January 28, 2022, the Intellectual Property Strategy Headquarters of the Cabinet Office published Ver. 1.0 of the Guidelines on Disclosure and Governance of Investment and Exploitation Strategies for Intellectual Property and Intangible Assets (hereinafter referred to as the “Guidelines”), reflecting the results of public comments. In response to the revision of the Corporate Governance Code, the Guidelines indicate how companies can be appropriately evaluated by investors and financial institutions if they work on the disclosure of investment and utilization strategies for IP and intangible assets and the establishment of governance. This is not intended to create a framework for mandatory legal disclosure, but to encourage voluntary disclosure that ensures corporate freedom.

In June 2021, the Corporate Governance Code was revised to include the stance that listed companies should take into consideration IP investment, and previously, (October 1, 2021), the following points as responses based on the revised Corporate Governance Code have been discussed in this column, including:

Disclosure of IP investments by listed companies (supplementary principle 3-1(3))

Effective supervision by the board of directors (Supplemental Principle 4-2②)

Effective supervision by the board of directors (supplementary principle 4-2②).

This time, we would like to introduce five principles described in these guidelines, which are divided into four principles for companies and one principle for investors and financial institutions.

1. Pricing power and game changing (for companies) can help 1) proactively develop business models that utilize intellectual property and intangible assets to avoid easy price cuts and instead, adopt pricing power to pursue high profit margins, as well as 2) change the competitive environment (game change) through innovation that involves a major shift in thinking.
   
   
2. Consider formation of assets rather than costs (companies), focusing on promoting bold investment in intellectual property and intangible assets. In the market creation period until a new market is established through innovation, future corporate value cannot be improved unless investment in IP and intangible assets is made, even if it means incurring losses to some extent.
   
   
3. Disclosure and dissemination of information as logic/story
   Development of a company-wide cross-sectional system and establishment of governance (on the corporate side)It is important to establish a company-wide cross-sectional system to manage a wide range of internal intellectual property and intangible assets on a company-wide basis and to develop strategies for investment and utilization of intellectual property and intangible assets, as well as establish governance that is monitored by the board of directors.
   
   
4. Development of a company-wide cross-sectional system and establishment of governance (on the corporate side)
   It is important to establish a company-wide cross-sectional system to manage a wide range of internal intellectual property and intangible assets on a company-wide basis and to develop strategies for investment and utilization of intellectual property and intangible assets, as well as establish governance that is monitored by the board of directors.
   
   
5. Evaluation and support for investment from a medium- to long-term perspective (on the part of investors and financial institutions)
   This guideline is intended to evaluate and support investments in intellectual property and intangible assets from the perspective of resolving medium- to long-term ESG (environmental, social, and governance) issues.
   
   

These Guidelines are intended to be used by directors and management teams of listed companies, mainly large companies, and departments that support corporate investment and utilization strategies for IP and intangible assets, as well as by small and medium-sized and start-up companies when engaging in dialogue with financial institutions. These guidelines would also benefit IP/intangible asset research/consulting companies, lawyers, patent attorneys, and accountants.