August 13, 2019
Unfair Competition News
On December 6, 2018, the Intellectual Property High Court ("the IP High Court") held that if no copyright infringement or no violation of Unfair Competition Prevention Act is found, the simple use of copyrighted materials shall not be judged to constitute a tort unless there are special circumstances.
SAPIX (the plaintiff in this case, Nippon Entrance Exam Co., Ltd.) is in the business of managing SAPIX, which is a famous preparatory school.
Entrance Exam Doctor Co., Ltd. (the "Defendant") obtained test questions made by SAPIX, published handbooks and provided commentaries on them for the students of SAPIX.
The Plaintiff, SAPIX filed a lawsuit against the Defendant seeking an injunction against the use of expressions which include "SAPIX" or "SAPIX in Katakana" and damages under Article 709 of the Civil Code, but the IP High Court rejected the SAPIX's claims.
Background
SAPIX is a preparatory school for entrance examination for junior high school and is one of the largest preparatory schools.
SAPIX's indication (the "Indication") shown below is an "Indication of goods" under Article 2(1)(i) of the Unfair Competition Prevention Act ("UCPA"). SAPIX uses the Indication as SAPIX's mark or abbreviation and uses it in its website, school building, advertising in magazines, brochure, publications and test questions.
Defendant provided the students of major preparatory schools including SAPIX with commentaries and review materials of tests conducted by those major preparatory schools.
Defendant used expressions such as "review materials for students of SAPIX" and "SAPIX monthly test in September" (Defendant's Expression) in its websites and videos distributed via the Internet.
SAPIX filed a lawsuit against Defendant seeking an injunction against the use of Defendant's Expressions ("primary claim") and damages under Article 709 of the Civil Code for tort ("secondary claim").
- As for the primary claim, SAPIX alleged that Defendant violated Article 2(1)(i) of UCPA by using Defendant's Expressions in its websites and videos distributed via the Internet. SAPIX argued that the use of Defendant's Expressions which are similar to the well-known Indications would cause confusion among consumers.
- As for the secondary claim, SAPIX alleged that the Defendant's activities to obtain test questions made by SAPIX, publish handbooks and provide commentaries on its websites constitute tort because the intention of these activities is to obstruct SAPIX's business and thus it constitutes an unfair competition act.
The Tokyo District Court rejected SAPIX's claims, stating as follows.
1. As for the primary claim
- As for the meaning of "use of an Indication" under Article 2(1)(i) of UCPA, while an activity would not be found to be "use of an Indication" under Article 2(1)(i) of UCPA in cases where the activity is just displaying an expression which is identical or similar to a well-known indication of goods used by another person, an activity would be found to be "use of an Indication" in cases where the expression indicated the origin of the goods and it distinguished one's own goods from another person's goods.
- In conclusion, the Tokyo District Court held that Defendant's Expression would not be found to be "use of an Indication" in Article 2(1)(i) of UCPA because the expression merely indicates the origin of the goods and rejected the primary claim.
2. As for the secondary claim
- As for the secondary claim, the Tokyo District Court held as follows;
"There is no sufficient evidence which shows Defendant's activities infringe SAPIX's copyrights. In cases where copyright infringement is not found, the use of a copyrighted material will not be tort unless there are special circumstances where the use infringes a legally protected interest which is different from the interest of the copyrighted material's use regulated by the Copyright Act (Supreme Court Case, judgement issued on December 8, 2011)."
"SAPIX claims that Defendant's activities to obtain test questions made by SAPIX and to provide live commentaries on them are free ride on SAPIX's know-how, however, a preparatory school's activities to provide supplemental study upon the request of students and parents are not acts of unfair competition and thus such business will not be found to be illegal."
"SAPIX claims that the intention of Defendant's activities are to obstruct SAPIX's business and taking away SAPIX's customers. ... The Defendant's service is provided on the premise that SAPIX's students continue to study in SAPIX, since the contents are for the purpose of improving grades in SAPIX. Even if the number of students of SAPIX's individual preparatory school decrease due to the Defendant's activities, that would be within free competition in the service field for major preparatory school's educational material and supplement study."
"There is no sufficient evidence which shows that the way to obtain test questions made by SAPIX and to distribute live commentaries obstruct SAPIX's business."
"In this case, there is no special circumstances where Defendant's activities are found to constitute a tort"
SAPIX appealed to the IP High Court as the decision rejected the secondary claim.
The Judgement of IP High Court
The IP High Court held as follows:
"SAPIX does not make claims on the ground of copyright infringement or unfair competition acts and therefore Defendant's activities are judged as tort only in cases where there are special circumstances where Defendant's activities infringed a legally protected interest which is different from the interest protected by Copyright Act or UCPA (Supreme Court Case, judgement issued on December 8, 2011). Defendants activities (Publication of handbooks and provision of live commentaries) do not infringe a legally protected interest which is different from the interest protected by Copyright Act or UCPA."
"There is no evidence which shows that Defendant's activities (obtaining SAPIX's test questions, publication of handbooks and providing live commentaries) obstructed SAPIX's business or such activities were malicious. Therefore, Defendant's activities do not constitute unfair competition acts which deviate from free competition."
"The major preparatory schools do not have the legal right to monopolize the business to provide commentaries on test questions which they made and therefore the activities to provide supplemental study upon the request of students and parents of the major preparatory schools are within free competition"
"SAPIX claims that Defendant truly intends to cause damage to SAPIX's reputation and to rob students who would enter SAPIX's "Privert" school (which provides supplemental studies for the students of SAPIX). However, even if the students of SAPIX choose Defendant's preparatory school and do not enter the "Privert", it is still within free competition activities. Thus SAPIX's claim is not acceptable."
Comments
The Tokyo District Court as well as the IP high Court quoted the Supreme Court Case judgement issued on December 8, 2011 ("North Korean Film Case") and held that in cases where no copyright infringement or no violation of UCPA is found, the use of copyrighted materials will not constitute a tort unless there are special circumstances where the activities infringe a legally protected interest which is different from the interest protected by Copyright Act or UCPA.
In the North Korean Film Case, use of copyrighted materials were not found to constitute a tort in light of special circumstances. Likewise, the IP high Court held that Defendant's use of test questions made by SAPIX do not deviate from free competition and there are no special circumstances where the activities infringe a legally protected interest which is different from the interest protected by Copyright Act or UCPA and thus Defendant's activities do not constitute a tort.
This case is interesting because the IP high Court issued a judgement regarding special circumstances on whether activities infringe a legally protected interest which is different from the interest protected by Copyright Act or UCPA.
Written by: Mr. Kazunari Horiuchi (Attorney-at-Law, Patent Attorney)