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2024 WIPO IP Judges Forum Informal Case Summary – Intellectual Property High Court of Japan, Special Division [2023]: DWANGO Co., Ltd. v FC2, Inc., Homepage System, Inc., Case No. 2022 (Ne). 10046

This is an informal case summary prepared for the purposes of facilitating exchange during the 2024 WIPO IP Judges Forum.

 

Session 8: Cross-border Proceedings

 

Intellectual Property High Court (Special Division), Case No. 2022(Ne)10046

 

Date of judgment: May 26, 2023

Issuing authority: Intellectual Property High Court of Japan

Level of the issuing authority: Appellate Instance

Type of procedure: Judicial (Civil)

Subject matter: Patents (Inventions)

Plaintiff: DWANGO Co., Ltd.  (Appellant)

Defendants: FC2, Inc. (Appellee Y1), Homepage System, Inc. (Appellee Y2)

Keywords: Principle of territoriality, Governing law, Injunction

 

Basic facts: The Patent Act provides that the patentee has the exclusive right to implement the patented invention in the course of trade (Article 68), and that “implementation” of an invention includes “producing” the products (Article 2, paragraph (3), item (i)).

 

The Appellant has the patent (Patent), which is registered in Japan (Patent No. 6526304 (Patent)).  The Patent is of an invention of a comment delivery system, equipped with multiple terminal devices connected to a server via network (a product invention).

 

The Appellant argued that the systems (Defendant's Systems) for online video delivery services with commentary (Defendant's Services), which are operated by Appellee Y1, belong to the technical scope of the invention claimed in the Patent;  and that the act by Appellee Y1 of distributing, from the servers (Defendant's Servers) existing in the US for use for Defendant’s Services, the files (Defendant's Files) pertaining to Defendant's Services to the user terminals existing in Japan, falls under "production" (Article 2, paragraph (3), item (i) of the Patent Act) of Defendant's Systems and infringes on the Appellant’s Patent.  The Appellant also argued that Appellee Y2 substantively engages in the above act jointly with Appellee Y1. 

 

Pursuant to Article 100, paragraphs (1) and (2) of the Patent Act, the Appellant demanded against Appellee, et al.,

‒         an injunction against the distribution of the Defendant’s Files to the user terminals existing in Japan, 

‒         deletion of the programs for Defendant's Servers,

‒         removal of Defendant's Servers, and

‒         joint payment of a sum of 10,000,000 yen (expanded to 1,000,000,000 yen at the appellate instance) along with delay charges as part of compensation on the ground of joint tort of patent infringement.

 

In the first instance, the court dismissed Appellant’s claims entirely, by determining as follows: Defendant’s Systems satisfy all constituent features of the invention claimed by the Patent, and belong to the technical scope thereof; however, from the perspective of the principle of territoriality, the court's interpretation is that in order for the “production” according to Article 2, paragraph (3), item (i) of the Patent Act to be applicable, a product which satisfies all constituent features of the patented invention must be newly created in Japan.  The Defendant's Servers, which are constituent features of Defendant’s Systems, all exist in the United States, and it is impossible for only the user terminals existing in Japan to satisfy all constituent features of the invention claimed by the Patent.  As such, the first instance court found that it cannot be acknowledged that the Appellee, et al. “produced” Defendant’s Systems in Japan.  In addition, the first instance court ruled that it cannot be acknowledged that Appellee Y2 was engaging in implementation related to Defendant’s Services.

 

Held: The IP High Court held that there was infringement of Patent Right by Appellee Y1, and ordered an injunction against the distribution, in Defendant’s Service 1, from Appellee Y1’s server to the user terminals existing in Japan, of video files and commentary files in a way that enables the comments, which appear in a video on a display device of a user terminal to be displayed in a certain manner.  The IP High Court also partially approved the damage claim on the ground of tort, and dismissed the rest of the claim against Appellee Y1.  The IP High Court entirely dismissed the claim made against Appellee Y2. Thus, the court partially modified the prior instance judgment, and partially dismissed the appeal.

 

Relevant holdings in relation to cross-border IP proceedings:

 

1.    Governing Law

 

The governing law of claims for the injunction and disposal on the ground of the Patent Right should be interpreted as a law of the country in which the patent right was registered.

 

The governing law of a claim for damages on the ground of patent infringement should be in compliance with Article 17 of the Act on General Rules and thus, it is the “law of the place where the wrongful act was committed”.  The laws of Japan shall be the governing law.

 

2.    “Production” of each of Defendant’s Systems by the Appellees

 

The IP High Court held that the act of newly creating a system, which consists of a server existing outside Japan and user terminals existing in Japan, is an act of implementing the above invention and falls under “production” as prescribed in Article 2, paragraph (3), item (i) of the Patent Act.

 

3.    Injunction

 

The IP High Court found that In order to prevent the infringement of the Patent by Production 1, it was necessary to injunct the delivery of the video file and the comment file from the server of Appellee Y1 to the user terminal existing in Japan (transmission of both files to the user terminal in the country and having them received by the user terminal in the country) in such a mode that the comments overlay-displayed on the video on the display device of the user terminal move in the horizontal direction and are displayed so as not to overlap each other. Deletion of the programs for Defendant’s Servers and removal of Defendant's Servers were found unnecessary.

 

Relevant legislation:

Article 17 of the Act on General Rules for Application of Laws of Japan

Article 2, paragraph (3), item (i), Article 68, Article 100, paragraphs (1) and paragraphs (2) of the Patent Act of Japan