Dwango v. FC2. Inc. et al.
Case 2022 (ne) No. 10046: lawsuit seeking injunction against patent infringement (IP High Court Grand Panel case)
 
The Grand Panel found that production of a system composed of a server located abroad and domestic user terminals constituted infringement of Japanese Patent No. 6526304, owned by Dwango, the appellant, the patent being directed to an invention of a system comprising a server and plural terminal devices connected by a network.
 
The case was an appeal case originating from the first instance, at which the appellant sued the appellee for infringement of the patent.  The following is an excerpt from claim 1 of the patent at issue.

•  
• 1. A comment distributing system comprising a server and a plurality of terminal devices that are connected with the server via a network, wherein:
• the server:
• receives a first comment and a second comment on a video given from a user who is watching the video transmitted from the server, and
• transmits the video and comment information to the terminal devices, wherein:
• by the server transmitting the video and the comment information to the terminal devices,
• the video, and
  the first and second comments, which move in a horizontal direction overlapping with at least a part of the video during a playback period of the video corresponding to a time at which the comments are made,
• are displayed on a display device of the terminal devices, such that the first comment and the second comment do not overlap each other.
•  

One of the appellees, FC2 Inc., is a US-based video distribution company that provides a system in which a server installed in the US transmits a video file and a comment file including comments on the video to a user terminal from which the comments were transmitted, whereby the video overlaid with the comments is displayed in the browser of the user terminal.  The system allows input and output in the Japanese language and is accessible from user terminals in Japan.
 
The first instance held that the "production" of a patented invention that constitutes infringement as set forth in Article 2(3)(i) of the Patent Law requires that a product that satisfies all the elements of the patented invention be newly produced in Japan, and that the act of the appellee does not satisfy this requirement since the server of the appellee was located outside of Japan.
 
However, in the second instance, the Grand Panel reached the foregoing conclusion, holding that it would be unreasonable and impede the proper protection of patent rights directed to system inventions if parties were able to avoid patent infringement merely by installing a server abroad.  The Grand Panel held that it is reasonable in the present case to regard the transmission and receipt of the files as having occurred in Japan, that the user terminals located in Japan constitute the main function of the system, and that the effect of enhancing entertainability is exhibited in Japan, concluding that the "production" of the appellee's system can be seen as being carried out in Japanese territory.  The Grand Panel also noted that their conclusion does not violate the principle of territorial jurisdiction since production of the appellee's system can be regarded as being carried out within the territory of Japan.
 
The decision finds in favor of patent holders that own system patents, in terms of whether Japanese patents are enforceable when a part of the patented system is located outside Japanese territory.  This case is also noteworthy in that the "system for seeking third parties' opinions" implemented in 2022 was applied for the first time, which system allows the courts to collect third party opinions regarding the application of laws and other issues in patent infringement litigations and the like, at the request of any party to the proceedings or when the court finds it necessary.  In response to the Grand Panel's invitation, multiple opinions were submitted as evidentiary materials.
 
The outcome of a further appeal at the Supreme Court remains to be seen.

 
Summary prepared by the International Information Group
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