Intellectual Property High Court (referred to as “the IP High Court”) recently remarked on the exception to the principle of territorial jurisdiction regarding a patent infringement. In the case, the IP High Court held that part of the act of exploiting the patented invention took place in a foreign country because it corresponded to partly “producing” as the infringing act under the Patent Act.

1. 1. Factual situation of the judgment

The appellant, whose registered office is in Japan, conducts the enterprise of web services (referred to as the “Appellant”) and has a patent relating to a comment distribution system, consisting of a server and user devices connected via a network.  In the patented system, the first and second comments given by a user watching a video transmitted from the server are displayed but do not overlap in a certain way (referred to as the “Patented Invention”).

The Appellee, whose registered office is in the U.S., runs the enterprise of a video distribution service.

The Appellant brought an action against the Appellee’s production system (referred to as the “Appellee’s System”) saying that it corresponded to an act of “producing” thereby infringing the Patented Invention under the Japan Patent Act.  However, the trial level court of the Tokyo District Court dismissed the Appellant’s claim, because the servers of the Appellee are all located in the U.S, and a user device located in Japan alone did not satisfy all the elements of the Patented invention’s claim requirement, and therefore, it did not correspond to an act of “producing” thereby infringing the Patented Invention in Japan.

1. 2. Did the IP Hight Court admit an extraterritorial application of the Patent Act?

In the Judgement of May 26th, 2023, The IP High Court decided that even the Appellee’s system can be considered to create an act of “producing” thereby infringing the Patent Invention of the Appellant under the Patent Act (DWANGO Co., Ltd. vs FC2, INC., Judgment of May 26, 2023, the IP H.Ct, [https://www.ip.courts.go.jp/vc-files/ip/2023/4n10046chizaisaishuu.pdf]; in Japanese).

The IP High Court said, in principle, that the principle of territorial jurisdiction shall apply to this case in Japan, however, in a case of network systems like the Appellee’s System, it can be deemed as a network system creating an act of partly “producing” in Japan by taking into account following factors:

(A) The Appellee’s System, in which the servers in the U.S send some digitized files to user devices in Japan and the user devices in Japan receive the files, require the user devices to be always located in Japan to receive the files, so it can be deemed as an act of sending and receiving the files on the Appellee’s System working in Japan.

(B) The user devices in Japan play an important role in the comment displaying function of the Patented Invention.

(C) The Patented Invention improves the entertainment value of communication through comment posting in Japan.

(D) The use of the Appellee’s System could affect the economic earnings that the Appellant could obtain from the domestic use of the Appellant’s system for its Patented Invention.

The IP High Court seems to have taken a step forward and been more flexible than before in the application of the territorial jurisdiction principle if foreign located servers can become an easy excuse for non-infringement in Japan.  Nevertheless, we should not interpret this as the IP High Court’s acknowledgement of the extraterritorial application of the Patent Act.

1. 3. Third Party Opinion Request System

The other point to note in this case, is that the IP High Court used the “Third Party Opinion Request System” (Art. 105, Para. 2-11, of the Patent Act) for the first time since the System was adopted on April 1st, 2022.

In this case, the Court asked third parties whether or not the argued situation can be considered to be an act of “producing” as an infringement with further explanation of the criteria to do so.

The request system is commonly named the “Japanese amicus brief system”, however, its requirement is stricter than the amicus brief system in the U.S., whereby any person may file an amicus brief with the consent of the litigant parties or with the permission of the court. On the other hand, in Japan, the “Japanese amicus brief system” requires a petition by the litigants and the court’s permission to accept the opinion.