The Supreme Court of Japan has just issued landmark rulings in two patent infringement cases concerning the extraterritorial reach of Japanese Patent Act in March 2025. These cases clarify the applicability of Japanese patent rights to cross-border digital services and provide a legal framework for assessing infringement when digital content and software are transmitted from foreign servers to users in Japan.
Case 1: International Video Streaming and Patent Infringement
One case involved a U.S.-based video streaming service provider (FC2) that transmitted digital content, including user-generated comments, from servers located outside Japan to users within Japan. The plaintiff, a Japanese patent holder (Dwango), alleged that the streaming platform’s system infringed on its patent covering a “comment distribution system.”
The key legal issue was whether the act of transmitting digital files and enabling the functioning of a patented system within Japan constituted “production” under Japan’s Patent Act (Article 2(3)(i)). The Supreme Court affirmed the lower court’s decision, holding that even though part of the system’s infrastructure was located outside Japan, the system as a whole was constructed and operated within Japan’s borders through user engagement. The ruling underscores that a company can be liable for patent infringement if the practical effects of its services occur within Japan.
Case Law Report: Supreme Court Ruling (March 3, 2025) – Patent No. 6526304
Case: FC2 Inc., and K.K. Home Page System v. K.K. Dwango (FC2 & HPS v. Dwango);Reiwa 5 (ju) No. 2028
Court: Supreme Court, Second Petty Bench
Date of Judgment: March 3, 2025
Plaintiff (Patentee, Appellee): Japanese patent holder (Dwango)
Defendants (accused infringers, Appellants): U.S.-based software service provider (FC2) and its Japanese subsidiary (HPS)
Case 2: Software Distribution and Patent Infringement
The second case addressed a similar question in the context of software distribution. The defendants, including a U.S. company and its Japanese subsidiary, operated a platform where software necessary for a patented “display adjustment technology” was downloaded by users in Japan. The Supreme Court examined whether such distribution fell under “offering via telecommunication networks” (Patent Act Article 2(3)(i)) and “transfer” (Patent Act Article 101(i)).
The Court ruled that the transmission of the software from overseas servers to Japanese users effectively constituted an act of distribution within Japan. Since the software installation resulted in a system that practiced the patented invention, the defendants’ actions were deemed to infringe the Japanese patent. The ruling establishes a precedent that digital transmission of software can constitute an infringing act even if initiated outside Japan, as long as it results in domestic use of a patented technology.
Case Law Report: Supreme Court Ruling (March 3, 2025) – Patent No. 4734471
Case Number: FC2 Inc., and K.K. Home Page System v. K.K. Dwango (FC2 & HPS v. Dwango)Reiwa 5 (ju) Nos. 14 and 15
Court: Supreme Court, Second Petty Bench
Date of Judgment: March 3, 2025
Plaintiff (Patentee, Appellee): Japanese patent holder (Dwango)
Defendants (accused infringers, Appellants): U.S.-based software service provider (FC2) and its Japanese subsidiary (HPS)
Holding: The Court ruled that the transmission of software to Japanese users, even if originating outside Japan, constituted “offering via telecommunication networks” and “transfer,” thus infringing the patent.
In this regard, in both cases, the Court ruled recognizing the ease of cross-border information distribution via telecommunications, that Japan’s patent rights can apply even if part of a system is constructed from outside Japan or if a program is provided via telecommunications, as long as it qualifies as “production” or “provision” within Japan. The Court emphasized that merely transmitting from abroad does not negate patent rights, as doing so would contradict the Patent Act’s purpose of promoting industrial development. If the act, when viewed as a whole, is deemed to take place within Japan, the patent rights can be enforced accordingly.
Implications for Global Digital Businesses
These decisions have significant implications for international businesses offering digital services or software to Japanese consumers. Companies operating cloud-based or internet-driven services must assess whether their activities create a functional system in Japan that falls within the scope of Japanese patents. Additionally, software providers should be mindful of how their distribution methods may be classified under Japan’s patent law, especially concerning online downloads and remote server usage.
By reaffirming the territorial scope of Japanese patent rights in digital transactions, these Supreme Court rulings enhance patent protection for rights holders while challenging foreign entities to navigate Japan’s evolving IP landscape. Companies offering digital services should closely monitor these developments and consider patent risk assessments in their compliance strategies.
Conclusion
As cross-border digital services continue to evolve, the Supreme Court’s interpretation of Japan’s patent law will play a critical role in shaping enforcement strategies and compliance considerations. The recent rulings set a precedent for future cases involving extraterritorial digital patent infringement, reinforcing the importance of comprehensive patent due diligence for global businesses operating in Japan.