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May 13, 2025

Patent News

The Supreme Court’s judgment found patent infringement even though an alleged infringer partially works a patented network-related invention outside Japan.

With respect to the established principle of territoriality, i.e., the principle that the effect of a Japanese patent extends only within the territory of Japan, there have been many controversies as to whether patent infringement can be found in the case where an alleged infringer (partially) works a patented invention outside Japan, in particular a network related invention. The Supreme Court recently held that patent infringement is not denied merely because an alleged infringer partially works a patent of a disputed network-related invention outside Japan (the Supreme Court’s judgment, March 3, 2025 (Case No. 2023 (ju) 14 and 15), the Supreme Court’s judgment, March 3, 2025 (Case No. 2023 (ju) 2028)). This article will mainly introduce the former case and give a brief explanation about the latter case in the [Comments] section below.

Background
Dwango is the patentee of Japanese Patent No. 4,734,471 (the "Patent"), which claims network related inventions. The Patent relates to a system in which comments written by users of video sharing services are displayed when the video is played. The Patent claims program inventions (the "Program Inventions") and display device inventions (the "Display Device Inventions") for adjusting the area of the video display and the area of the comment display, thereby reducing the difficulty for users to read the comments.

FC2, the alleged infringer, is a United States corporation organized under the laws of the State of Nevada. FC2 is engaged in the business of video distribution websites over the Internet and provides video sharing services (the "Services") to users in Japan over the Internet. More specifically, FC2 provides the Services by distributing programs which fall within the technical scope of the Program Inventions (the "Programs") from servers located in the United States to terminals such as smartphones and PCs of users in Japan via the Internet (the "Distribution"). As part of the Services, users in Japan access FC2's web pages to view videos related to the Services. When users access these web pages on their terminals, such as smartphones and PCs, the programs are distributed from servers located in the United States and installed on users' terminals in Japan.

Dwango filed a patent infringement lawsuit against FC2, arguing that FC2's distribution of the Programs constitutes patent infringement.

Since FC2 distributes the Programs from the services located outside Japan, Dwango and FC2 rigorously argued over the principle of territoriality as to whether the Distribution amounts to the "provision through telecommunication lines (in Japan)" of the Programs (Article 2, Paragraph 3, Item 1 of the Patent Act - direct infringement), which falls within the technical scope of the Program Inventions, and the "transfer (in Japan)" of the Programs, which are "articles used solely for production" of the display devices (i.e, the user's terminals on which the Programs are installed) (Article 101, Item 1 of the Patent Act - indirect infringement) falling within the technical scope of the Display Device Inventions.

In the first instance, the Tokyo District Court dismissed Dwango's claims (the Tokyo District Court's judgment of September 19, 2018 (Case No. 2016 (wa) 38565)). Dwango appealed to the Intellectual Property High Court (second instance), which found patent infringement and reversed the first instance judgment (the Intellectual Property High Court's judgment, July 20, 2022 (Case No. 2018 (ne) 10077)).

FC2 appealed to the Supreme Court, arguing that the Distribution by FC2 is done outside the territory of Japan, and therefore the effect of the Japanese patent does not extend to the Distribution, and therefore FC2 is not liable for patent infringement.

The Supreme Court’s judgment
The Supreme Court ruled as follows and dismissed FC2's appeal (Supreme Court Judgment of March 3, 2025 (Case No. 2023 (ju) 14 and 15).

  • The effect of Japanese patent rights is recognized only within Japan (the principle of territoriality) (the Supreme Court's judgment of July 1, 1997 (Case No. 1995 (o) 1988), the Supreme Court's judgment of September 26, 2002 (Case No. 2000 (ju) 580)).
  • However, in the modern era where the cross-border flow of information through telecommunications networks has become extremely easy, it would be inconsistent with the purpose of the Patent Act - to contribute to industrial development by protecting and encouraging inventions - to always deny the effect of Japanese patent rights solely on the ground that the transmission of programs, etc., was made from outside Japan through telecommunications networks.
  • In such cases, if the act in question is judged as a whole to constitute "provision through telecommunications lines" (Article 2, paragraph 1, item 3 of the Patent Act) within Japan, the effect of Japanese patent rights should be deemed to extend to such act.
  • In this case, the Distribution is carried out as part of the information processing process when providing the Service in Japan, and is intended to naturally produce the effect of the Program Inventions on the terminals of users in Japan. In relation to the production of such effects, the fact that FC2's servers are located outside Japan is of no particular significance.
  • Furthermore, in relation to Dwango's ownership of the Patent, it cannot be said that the Distribution does not have an economic impact on Dwango.
  • Therefore, FC2 is deemed to be providing the Program by the Distribution through telecommunications lines within Japan.
  • Consequently, FC2's distribution constitutes the "provision through telecommunications lines" of the Programs falling within the technical scope of the patented Program Inventions.
  • Similarly, the Distribution also constitutes the "transfer" of the programs that are used solely for the production of the display devices (users' terminals in Japan on which the Programs are installed) falling within the technical scope of the patented Display Device Invention.

Comments

  1. This judgment of the Supreme Court is remarkable in that it clarifies that patent infringement is not denied merely because (part of) a patented invention is worked outside Japan, regardless of the principle of territoriality.
  2. The Supreme Court provided the criteria for determining patent infringement in the case of (part of) the patent being worked outside Japan - whether the act in question is judged as a whole to constitute working (e.g., provision through telecommunication lines, transmission, production, use) of the patented invention within Japan. In addition, in this case, the Supreme Court also considered where the effect of the invention of the Patent occurs and whether the act in question can economically impact the patentee (Dwango). It can be said that the criteria and circumstances considered by the Supreme Court are not necessarily clear for determining whether or not a patent is infringed. Therefore, from a practical point of view, we need to determine patent infringement on a case-by-case basis. Here, it should be noted that, as the Supreme Court mentioned, "in the modern era where the cross-border flow of information through telecommunication networks has become extremely easy...", it can be said that this ruling is only applicable to cases involving network-related inventions. In other words, considering the principle of territoriality, in cases where an act of infringement of a patent not related to the network is (partially) found outside Japan, there will be almost no case of patent infringement.
  3. There was also another patent infringement lawsuit between Dwango and FC2. In this case, Dwango is the owner of the patent for a network-related system invention (Japanese patent No. 6,526,304) comprising a server and more than one terminal connected to the service via the network. As mentioned above, FC2 provides video services to users in Japan and distributes a file from a server located outside Japan to users' terminals in Japan. It was disputed whether the distribution of the file constituted the "production" (Article 2, paragraph 3, item 1 of the Patent Act) of the system, which falls within the technical scope of the patented system invention. On the same day as the above-mentioned Supreme Court ruling, the Supreme Court held that the distribution of the file by FC2 constituted the "production" of the patented system, even though the file was distributed from the server located outside Japan, for reasons quite similar to those mentioned above (Supreme Court ruling of March 3, 2025 (Case No. 2023 (ju) 2028)).
  4. The Japanese government is now discussing the revision of the Patent Act to clearly provide that patent infringement can be found even if part of the patented invention is worked outside Japan.


Written by: Mr. Masahito Imai (Attorney at Law, Patent Attorney)