2025 <Special News Flash2>｜News Letter

The Supreme Court ruled that FC2 infringed DWANGO's patent rights.

DWANGO Co., Ltd. (operator of the video sharing website "videos on Niconico") v. FC2, Inc., first case: Case Nos. 2023 (Jyu) 14, 15; second case: Case No. 2023 (Jyu) 2028 (Decision rendered on March 3, 2025)

The Supreme Court dismissed the final appeal by FC2, Inc. in final appellate courts. The dispute was over whether FC2's acts of providing a similar service on an overseas server constituted infringements of patent rights of DWANGO registered with Japan. As a result, DWANGO's victory was confirmed.

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Regarding two original judgment (first case: Case No. 2018 (Ne) 10077, second case: Case No. 2022 (Ne) 10046), please refer to our Newsletter dated June 19, 2023 (News Letter｜KAWAGUTI & PARTNERS).
In the first original judgment, the Intellectual Property High Court (IPHC) evaluated that the act of transmitting programs from a server located overseas to Japanese users is an act that takes place within Japan.
In the second original judgment, the Grand Panel of the IPHC evaluated that the act of FC2 (USA) "producing" a "comment distribution system" that includes a server located overseas is an act that takes place within Japan.

In both final appellate courts, the Supreme Court upheld the original judgments and ruled as follows:

Regarding the first case
Although a patent right registered with our country shall come into force only within the territory of our country, in the modern where distribution of information across the borders of countries through the telecommunication lines has become extremely easy, for a system comprising a server and terminals, when programs, etc. are provided within the territory of our country by being transmitted from outside the territory of our country through telecommunication lines, if the patent right with our country is always not effective due to the mere fact that it is transmitted from outside the territory of our country, and if such providing does not fall under "providing through telecommunication lines" (Article 2(3)(i) of the Patent Act), it does not comply with the purpose of the Patent Act of contributing to the development of the industry through the protection and promotion of the invention by, for example, letting a patentee have an exclusive right to work the patented invention in the course of business. Therefore, even in such a case, when the act in question is viewed as a whole, if the action is evaluated as substantially "providing through telecommunication lines" within the territory of our country, there is no reason to prevent the interpretation that such an act is subject to the effect of the patent right registered with our country. This principle is understood to be no different with regard to the "assigning, etc." prescribed in the provisions of Article 101(i) of the Patent Act.

Regarding the second case
Although a patent right registered with our country shall come into force only within the territory of our country, in the modern where distribution of information across the borders of countries through the telecommunication lines has become extremely easy, for a system comprising a server and terminals, when a part of the acts for constructing the system is performed outside the territory of our country via the telecommunication lines, and the server, which is a part of the configuration of the system, is located outside the territory of our country, if the patent right with our country is always not effective due to the fact that the acts and the configuration outside the territory of our country are involved, and if the acts of constructing the system do not fall under "producing" prescribed in the provisions of Article 2(3)(i) of the Patent Act, it does not comply with the purpose of the Patent Act of contributing to the development of the industry through the protection and promotion of the invention by, for example, letting a patentee have an exclusive right to work the patented invention in the course of business. Therefore, even in such a case, when the actions for constructing the system and the systems constructed thereby are viewed as a whole, if the actions are evaluated as essentially "producing" within the territory of our country, there is no reason to prevent the interpretation that this is subject to the effect of the patent right registered with our country.

Furthermore, for both cases, the Supreme Court pointed out that the acts in question occurred in the process of processing information while providing services domestically, and that "there is no particular meaning to the servers being located overseas." The Supreme Court also determined that FC's acts "were substantially carried out domestically," taking into account the possibility that they could have an economic impact on DWANGO, and concluded that they constituted an infringement.

K&P’s Comments The above ruling makes it clear that just because some of the components of a system, such as a server, are located outside of our country, it does not mean that the effects of patent rights registered with Japan do not immediately extend to such a system.

However, since the specific criteria as to whether an infringement has occurred seems to be unclear, there is a need to establish guidelines, etc.