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Introduction

In recent times, companies have often begun to provide their customers with computer programs through the Internet. These companies transmit their computer programs from a server to their customers’ computers. However, there has been controversy as to whether the transmission of a computer program from an overseas server to Japan constitutes an infringement of a Japanese patent. On July 20, 2022, the Intellectual Property High Court (the IPHC) rendered a decision ruling that a defendant’s transmission of a computer program from a server located in the U.S. to Japanese customers (the “transmission”) may constitute an infringement of a Japanese patent (Dwango Co., Ltd. v. FC2, Inc.; Heisei 30 (Ne) No. 10077). Although there were a wide range of issues relating to this case, the focus here is on whether or not the transmission in such a manner can be found to infringe upon a Japanese program patent.

Summary of Facts

Dwango is the patentee of JP Patent No. 4,734,471. Dwango’s patented invention relates to a computer program that enables a computer’s display device to display comments together with a video in a certain way. The IPHC found that FC2’s computer program fell within the technical scope of the patented invention and that FC2 was transmitting the program from a server located in the U.S. to Japanese customers.

Protection of Computer-Program-Related Inventions under the Japanese Patent Act

The Japanese Patent Act provides for the protection of “inventions.” An “invention” is categorized into three types: product, process, and process for producing a product. Conventionally, it had been debatable as to whether a computer program can be found to constitute patentable subject matter. However, in 2000, the Japan Patent Office revised the “Examination Guidelines for Patent and Utility Model in Japan” and initiated the operation of a system in which they treated the invention of a computer program as the invention of a product. Finally, the Patent Act was revised in 2002 and clarified that a computer program is patentable as an invention of a product. In the same revision, it was also clarified that “providing [a computer program] through a telecommunications line” may constitute a patent infringement.

Territoriality Doctrine

However, it has still been unclear as to whether or not the “provision” of a computer program includes the transmission of a computer program from an overseas server to Japan because the territoriality doctrine is employed in Japan, under which a Japanese patent right is effective only in the territory of Japan (see Supreme Court judgment of July 1, 1997 (Heisei 7 (1995) (O) No. 1988), and Supreme Court judgment of September 26, 2002 (Heisei 12 (2000) (Ju) No. 580)). In Dwango, since FC2’s server was located in the U.S., the issue was whether or not the transmission infringed upon Dwango’s Japanese patent even after considering the territoriality doctrine.

IP High Court Decision

In Dwango, the IPHC first pointed out that “from a formal and analytical viewpoint, it is impossible to deny the fact that some aspects of the Transmission may not be completed within Japan” but continued to state that “if it is deemed necessary for an alleged act of provision to be completed within Japan in its entirety even in a formal viewpoint in order for the provision to constitute an infringement of a patent right relating to an invention that can be transmitted through networks, [. . .] those who want to implement such an invention could easily be exempted from their liability for patent infringement by means of, for example, transferring part of the equipment, such as servers, to a location outside Japan. However, allowing such circumventing acts in the current digital society which exists with many useful network-related inventions, would clearly be contrary to justice. In the meantime, if an act that implements a patented invention is formally analyzed such that every element thereof is not completed within Japan, but if the act can be assessed as being performed within Japan from a substantial and comprehensive viewpoint, then allowing the effect of a Japanese patent right to extend to the act would not go against the territoriality doctrine.”

The IPHC then ruled that “an alleged act of provision should be analyzed in light of various circumstances, such as: whether the provision can clearly and easily be separated into portions performed in Japan and portions performed outside Japan; whether control of the provision is performed within Japan; whether the provision is directed to customers, etc. located in Japan; and whether the effect of the patented invention obtained through the provision is realized within Japan, and if the provision can be assessed as being performed within Japan from a substantial and comprehensive viewpoint, it is appropriate to determine that the act of provision corresponds to a ‘provision’ as specified in the Japanese Patent Act”.

In the application, the Court found that: “[t]he transmission starts and is also completed upon users who are located in Japan accessing a website related to [FC2’s] services [. . .] . ; it is difficult to clearly and easily distinguish portions of the transmission that are performed in Japan from portions performed outside Japan; the transmission is controlled by users located in Japan; the transmission is directed to users in Japan who want to see videos; and, only through the transmission, users located in Japan can see video with comments according to [the patented inventions at issue], and the effect of [those inventions] resulting from the transmission is realized within Japan. In light of these circumstances, it is appropriate to assess that the transmission, when viewed in a substantial and comprehensive manner, is performed within Japan even if some part of the transmission is performed outside Japan.”

Conclusion

As stated above, the IPHC has found that the transmission of a computer program from an overseas server to Japanese customers may constitute an infringement of a Japanese patent. Further, the IPHC has indicated the aforementioned factors to consider. Although these factors have been illustrated in accordance with the present case, they will be of great help in other future cases as well. This decision is important in practice under the circumstances in which transmissions of programs across national borders have become commonplace.

Lastly, another IPHC decision involving Dwango and FC2 was rendered on May 26, 2023 (2022 (Ne) 10046). In this case, the patented invention at issue was a system invention. The main issue was whether the transmission of computer files from an overseas server to Japanese customers “produce[s]” patented system. The IPHC ruled that “the ‘production’ in the invention of the system in which the server and the terminal are connected via a network such as the Internet and which exerts an integrated function as a whole (hereinafter, referred to as a ‘network-type system’) is interpreted to refer to such an act of newly creating the system in which a plurality of elements, each of which does not singularly satisfy all the constituent features of the invention, are connected via the network so as to have an organic relationship with one another and to have a function of satisfying all the constituent features of the Invention as a whole.” ^*1 The IPHC further ruled that “regarding whether or not the act of newly creating the network-type system falls under the ‘production’ in Article 2, paragraph (3), item (i) of the Patent Act, even if the server, which is a part of the elements constituting the system exists outside the country, by comprehensively considering a specific mode of the act, a function/role performed in the invention by those elements existing in the country among the elements constituting the system, a place where the effect of the invention can be obtained by use of the system, an influence that the use thereof exerts on the economic profits of the patentee of the invention and the like, it is reasonable to interpret that, when the act is found to be performed in the territory of our country, it falls under the ‘production’ in Article 2, paragraph (3), item (i) of the Patent Act.”^*2 Then, the IPHC found the FC2’s infringement because: (1) the transmission and the reception of files are performed as a unit, and thus, it can be conceived that such transmission/reception is performed in Japan; (2) the user terminal existing in Japan performs a function of an element of the invention at issue; and (3) “[the defendant's system] can be used from inside [Japan] via the aforementioned user terminal, and the effect of [the invention at issue] was exerted in [Japan], and the use thereof in [Japan] can influence the economic profits obtained by [Dwango] by using the system according to [the invention at issue in Japan]. ^*3

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*1 The English translation of the decision is available on the IPHC Website (https://www.ip.courts.go.jp/eng/vc-files/eng/2023/r4ne10046-f.pdf)
*2 Same as the above
*3 Same as the above