Recent Development in IP Practice in Japan

The Intellectual Property High Court (hereinafter “IPHC” in short) reversed a 2018 Tokyo district court ruling and that FC2, an Internet video streaming service based in the U.S., infringed Japanese Patent No. 4734471 and No. 4695583, owned by Dwango, a competing Internet video streaming service based in Japan.

In particular, IPHC found that although the internet video streaming service is provided from a server located outside Japan, such a service nonetheless infringes Japanese patent rights, and established criteria for ascertaining whether the distribution of the service would be considered as occurring in Japan.

The ‘471 and ‘583 patents owned by Dwango relate to an Internet video provider services that allow viewers to display real-time comments on videos being displayed.

FC2 similarly offers video streaming services in Japan, and also provided functionality similar to that covered by the ‘471 and ‘583 patents.  However, FC2’s services were provided using servers located in the United States.

Traditionally, under the doctrine of territoriality, Japanese courts would find no infringement unless all elements of communication were completed in Japan. Because FC2 provides services from a server located in the U.S., thus the communication is not completed in Japan. Persuaded by this argument, the district court ruled FC2 does not infringe Dwango’s patent rights.

However, IPHC determined that the enforcement of Japanese patent rights would not violate the aforementioned principle of territoriality from substantive and overall viewpoint, even if all the elements of a patented invention are not completed in Japan, if they can be regarded as being performed in Japan.

The IPHC established the following criteria to determine whether the distribution can be regarded as taking place substantially and as a whole within Japan.

• Whether the distribution can be clearly and easily distinguished between the part of the distribution that takes place outside Japan and the part that takes place inside Japan?
• Whether control of the distribution is exercised within Japan?
• Whether the distribution is directed to customers, etc. located in Japan?
• Whether the effect of the patented invention resulting from the distribution is manifested in Japan?

The IPHC applied the aforementioned criteria to the distribution in question, and evaluated FC2’s distribution in question as having taken place in Japan based on the following grounds:

• It is difficult to clearly and easily distinguish between the part of the distribution that takes place outside Japan and the part that takes place inside Japan, since the distribution is initiated and completed when a user located in Japan accesses the website of FC2’s service.
• The distribution is controlled by a user located in Japan
• the distribution is directed to the user located in Japan who desires to view the video.
• Only by the distribution, the user located in Japan is able to view and comment on the video. The effect of the invention obtained by the distribution is available in Japan.

The IPHC assessed damages for FC2’s infringement of Dwango’s patents in the amount of JPY 100 million, and ordered an injunction against the Internet service in question.

The IPHC’s decision will make it possible to more reliably enforce patent rights relating to similar internet services in Japan in Japan even if the service is provided from a server outside Japan.