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K&P’sIntellectual Property High Court Decision Report in 2023
2023<Special News Flash>
LatestUpdated 19 JUN 2023
Grand Panel shows that regarding the invention of a system comprising a server and a plurality of terminal devices connected to the server through a network, an act of newly producing a system comprising the server existing outside Japan and user terminals existing in Japan falls under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act as a working act of the above invention.
DWANGO Co., Ltd. v. FC2, Inc., Homepage System, Inc., Case No. 2022 (Ne). 10046 (Decision rendered on May 26, 2023)
The Grand Panel1) of the Intellectual Property High Court (IPHC) shows that regarding the invention of the network-type system, as to whether an act of newly producing the system which is a suspected infringing article falls under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act, even when the server which is a part of elements constituting the system exists in the foreign country, when it can be admitted that the act was performed in the territory of Japan as a result of comprehensive consideration of the specific embodiment of the act, the function and role exerted in the invention by elements existing in the home country among the elements constituting the system, the place where the effect of the invention is obtained by using the system, an influence of the use of the system on the economic benefits of the patentee of the invention, etc., the act of newly producing the network-type system falls under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act.
The Appellant (Plaintiff in the 1st instance), DWANGO who is patentee of "comment distribution system" filed a patent infringement suit against FC2 (Appellee Y1) and Homepage System (Appellee Y2) (Defendant in the 1st instance) with Tokyo District Court in 2019. DWANGO asserted that that each system (Defendant's each system) according to a comment-attached video distribution service (Defendant's each service) on the Internet operated by Appellee Y1, a U.S. national corporation, belongs to the technical scope of the invention according to the present patent, and an act in which Appellee Y1 distributes a file (Defendant's each file) according to Defendant's each service to user terminals existing in Japan from a server (Defendant's each server) provided for Defendant's each service, the server existing in U.S., falls under "producing" of Defendant's each system (Article 2(3)(i) of the Patent Act) and infringes on the present patent right. The Tokyo District Court found that Defendant's each system satisfies all the elements of the invention according to the present patent and belongs to the technical scope thereof, but, in view of the principle of territoriality, it should be understood that a product satisfying all the elements of the patent invention needs to be newly produced in Japan to fall under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act; however, it is not admitted that the appellees "produce" Defendant's each system in Japan because Defendant's each server which is an element of Defendant's each system exists in U.S., and all the elements of the invention according to the present patent are not satisfied by only user terminals existing in Japan. Accordingly, the Tokyo District Court judged that the fact of the infringement of the present patent right by the appellees cannot be recognized, and dismissed all the DWANGO's claims.
Against the Tokyo District Court's decision, DWANGO filed an appeal with the IPHC in 2022.
The main disputed matter of this case is whether it can be said that an act performed by Appellee Y1 when Defendant's each system is newly produced falls under "producing" (Article 2(3)i of the Patent Act) as a working act of each invention (present each invention) according to claims 1 and 2 of the present patent and infringes on the present patent right.
The Grand Panel of the IPHC, in summary, decided as follows as to whether an act of Appellee Y1 in a FLASH version of Defendant's service 1 falls under "producing" as a working act of present invention 1.
(A) The meaning of "producing" of a network-type system
Present invention 1 is an invention of a comment distribution system comprising a server and a plurality of terminal devices connected to the server through a network, and the type of the invention is the invention of a product, in which it is understood that "producing" (Article 2(3)i of the Patent Act) of a product as a working act means an act of newly producing a product belonging to the technical scope of the invention.
Then, "producing" in the invention of the system (network-type system) exerting collective functions as a whole in which the server and the terminals are connected to each other through the network such as the Internet as in present invention 1 is construed as an act of newly producing the system in which a plurality of elements not satisfying independently all the elements of the invention have an organic relationship with each other by being connected through the network and have the functions satisfying all the elements of the invention as a whole.
(B) "Act of newly producing" system (Defendant's system 1) according to Defendant's service 1
In the FLASH version of Defendant's service 1, when a user specifies a webpage of Defendant's service 1 for displaying a desired video in the browser of the domestic user terminal, the web server of Appellee Y1 transmits an HTML file and an SWF file of the webpage to the user terminal, and these files received by the user terminal are stored in the cash of the browser, and then, when the user presses a reproduction button of the video in the webpage displayed on the browser in the user terminal, the browser issues a request to the video distribution server and the comment distribution server of Appellee Y1 according to an instruction stored in the above-described SWF file and each server described above transmits, to the user terminal, a video file and a comment file, respectively, in response to the above-described request, and upon receipt of each file described above, the user terminal uses the browser to enable the overlay display of the comment on the video. In this way, at a point of time when the user terminal receives each file described above, each server described above and the user terminal of Appellee Y1 are connected to each other through the network using the Internet, which enables the overlay display of the comment on the video in the browser of the user terminal, and therefore, it can be said that at a point of time when the user terminal receives each file described above, Defendant's system 1 having functions satisfying all the elements of present invention 1 has been newly produced (hereinafter, the above-described act of newly producing Defendant's system 1 is referred to as "present producing 1-1").
(C) Applicability of "producing" prescribed in the provisions of Article 2(3)i of the Patent Act regarding an "act of newly producing" (present producing 1-1) Defendant's system 1
In present producing 1-1, the acts that each file is transmitted from the server existing in U.S. to the domestic user terminal, and the user terminal receives these files are performed between U.S. and our country, and Defendant's system 1 newly produced exists across U.S. and our country. Then, in view of the principle of territoriality, there becomes a problem whether present producing 1-1 falls under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act of our country.
(b) In the network-type system, a server is currently generally installed outside Japan (foreign country), and in view of the fact that the difficulty of the use of the network-type system is not caused by which country the server exists in, if the terminals constituting the system exist in Japan (in the home country) even when the server constituting the network-type system which is a suspected infringing article exists in the foreign country, the system can be used using the terminals in the home country, and the use of the system can affect economic benefits which can be obtained by the patentee carrying out the invention in the home country.
Then, when the principle of territoriality is strictly interpreted and it is recognized that the invention of the network-type system does not uniformly fall under "work" prescribed in the provisions of Article 2(3) of the Patent Act of our country because the server which is a part of elements constituting the system exists in the foreign country, the invention can be easily avoided from the patent as long as the server is installed in the foreign country, which makes it impossible to sufficiently protect the patent right according to the invention of the system. Therefore, this is unreasonable.
On the other hand, when it is recognized that the invention of the network-type system uniformly falls under "work" prescribed in the provisions of Article 2(3) of the Patent Act because the terminals which are a part of elements constituting the system exist in the home country, the patent right is overprotected, which may cause difficulty in carrying out economic activities. Therefore, this is also unreasonable.
In light of the above, from the viewpoint of properly protecting the patent right according to the invention of the network-type system, as to whether an act of newly producing the network-type system falls under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act, it is reasonable to understand that even when the server which is a part of elements constituting the system exists in the foreign country, when it can be admitted that the act was performed in the territory of our country as a result of comprehensive consideration of the specific embodiment of the act, the function and role exerted in the invention by elements existing in the home country among the elements constituting the system, the place where the effect of the invention is obtained by using the system, an influence of the use of the system on the economic benefits of the patentee of the invention, etc., the act of newly producing the network-type system falls under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act.
In regard to present producing 1-1, the specific embodiment of present producing 1-1 are performed by transmitting each file from the server existing in U.S. to the domestic user terminal and receiving it by the domestic user terminal, and from the standpoint of completing Defendant's system 1 by performing altogether the transmission and reception and receiving each file by the domestic user terminal, it can be considered that the above-described transmission and reception have been performed in the home country.
Next, Defendant's system 1 comprises a server of Appellee Y1 existing in U.S., and a user terminal existing in the home country, and the above-described user terminal existing in the home country serves a function of a determination unit which is an element 1F required to display comments displayed on the video at a position where the comments do not overlap with each other and a function of a display position control unit which is an element 1G, the functions being the main functions of present invention 1.
Furthermore, Defendant's system 1 can be used in the home country through the above-described user terminal, the effect of present invention 1 of improving the entertainment in the communication using the comments is exhibited in the home country, and the use in the home country can affect economic benefits which can be obtained by the demandant using the system according to present invention 1 in the home country.
As a result of comprehensive consideration of the above-described circumstances, it can be recognized that present producing 1-1 has been performed in the territory of our country, and therefore it is admitted that present producing 1-1 falls under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act in relation to present invention 1.
(c) In contrast, the appellees asserts that (i) since according to the principle of territoriality, "the effect of a patent is recognized only in the territory of the relevant country", and therefore an act of producing in the foreign country does not fall under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act as a natural consequence, and according to all elements rule, working of the patent invention means that all the elements constituting the patent invention are implemented, when some of all the elements are produced in the foreign country, it should be said that the act does not fall under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act, and (ii) the fact that because the avoidance from the patent becomes a problem, a part of a product satisfying elements is produced in the home country to fall under "producing" is a leap of logic, rather, the interpretation that if a part of a product satisfying elements is produced in the home country, the effect of the Patent Act of our country is immediately extended involves more problems, and (iii) in a court case of our country, the principle of territoriality is strictly followed based on the judgement of the Supreme Court about the case of a card reader (the Supreme Court Heisei 12 (Ju) No. 580, September 26, 2002, Judgement of the First Petty Bench, Minshu Vol. 56, No. 7, at p. 1551), etc., and an adverse effect caused by providing the exception is apparently foreseen, and therefore the exception to the principle of territoriality should be provided by the legislation even if doing so.
However, regarding the item (i), in the invention of the network-type system, as to whether an act of newly producing the system which is a suspected infringing article falls under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act, even when the server which is a part of elements constituting the system exists in the foreign country, it should be said that the act falls under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act when as a result of comprehensive consideration of the above-described circumstances explained in the above-described (b), it can be recognized that the act has been performed in the territory of our country, and therefore the assertion of (i) cannot be accepted.
Regarding (ii), the above-described determination as to whether the act falls under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act does not immediately extend the effect of the Patent Act of our country if a part of a product satisfying elements is produced in the home country, and the assertion of (ii) lacks the precondition.
Regarding (iii), in view of that the principle of territoriality in relation to the patent rights means that a patent right registered with each country is to be governed by the laws of the relevant country with regard to establishment, transfer, validity and the like thereof and such patent right shall come into force only within the territory of the relevant country, even if it is interpreted the act falls under "producing" prescribed in the provisions of Article 2(3)i of the Patent Act when it can be recognized that the act has been performed in the territory of our country as described above, it should be said that it does not violate the principle of territoriality. In addition, it is understood that the judgement of the Supreme Court about the case of a card reader does not state that an act of newly producing a product satisfying all the elements of the patent invention needs to be completed within the territory of our country, to fall under "producing" as a natural consequence from the principle of territoriality. Furthermore, in view of that also regarding the treaty concluded by our country, the Patent Act, and the other laws, there is no provision indicating that an act of newly producing a product satisfying all the elements of the patent invention needs to be completed within the territory of our country, to fall under "producing" as the contents of the principle of territoriality, the assertion of (iii) cannot be accepted.
Accordingly, the above-described assertions of the appellees are groundless.
(D) Subject of "producing" of Defendant's system 1
Defendant's system 1 is newly produced through processes of the above-described (B), and Appellee Y1 installs and manages the web server, the video distribution server, and the comment distribution server according to Defendant's system 1, and these servers transmit an HTML file, an SWF file, a video file, and a comment file to the user terminal, and the user terminal can receive each file without through additional operation by the user, and automatically receive each file according to the descriptions of the programs uploaded on the servers by Appellee Y1. In view of this, it should be said that the subject "producing" Defendant's system 1 is Appellee Y1.
(E) Summary
According to the above, it is admitted that Appellee Y1 has "produced" (Article 2(3)i of the Patent Act) Defendant's system 1 by present producing 1-1 and has infringed the present patent right.
1) The grand panel is convened to hear cases where it is necessary to virtually unify court decisions, or cases involving important issues, which is somewhat similar to en banc in CAFC of the U.S.A. Since the founding of the IPHC in 2005, 16 cases including the above case have been heard by the Grand Panel.
K&P’s Comments
In this case, regarding "producing" as a working act of the invention of the system in which the server exists outside Japan, the proceeding for calling for third-party opinions (Article 105-2-11 of the Patent Act) which is one of the procedures for the collection of evidence was performed for the first time, and the judicial decision was attracting attention as cross-border IT businesses are increasing.
As with the Intellectual Property High Court's decision (Case No. 2018 (Ne). 10077) in July 2022, the flexible approach was applied that the effects of Japanese patent right can extend to the working act if, in comprehensive consideration of various circumstances, the working act is deemed to have been performed in Japan as a whole. The decision in July 2022 was for patents on a display device and a display program, but this time the patent is for the entire comment distribution system, so it can be said to have even greater impact.
