Patent
Right

Date
Case number

May 26, 2023
2022 (Ne) 10046

Court

Intellectual Property
High Court, Special
Division- A case in which, concerning an invention of a system equipped with multiple
terminal devices connected to a server via a network, the court held that the act of
newly creating a system, which consists of a server existing outside Japan and user
terminals existing in Japan, is an act of working the above invention and falls under"production" as prescribed in Article 2, paragraph (3), item (i) of the Patent Act.
Case type: Injunction, etc.
Result: Partial modification of the prior instance judgment, Partial appeal dismissed
References: Article 2, paragraph (3), item (i) of the Patent Act
Related rights, etc.: Patent No. 6526304
Summary of the Judgment
1.

Background
The present case is one in which Appellant, who has the patent right (Patent

Right) for the patent registered as Patent No. 6526304 with the title for the invention,"Comment Delivery System" (Patent), argued that the systems (Defendant's Systems)
for online video delivery services with commentary (Defendant's Services), which areoperated by Appellee Y1, a US corporation, belong to the technical scope of theinvention claimed in the Patent, and that the act by Appellee Y1 of distributing, fromthe servers (Defendant's Servers) existing in the US for use for Defendant's Services,
the files (Defendant's Files) pertaining to Defendant's Services to the user terminals
existing in Japan, falls under "production" (Article 2, paragraph (3), item (i) of the
Patent Act) of Defendant's Systems and infringes on Patent Right, and also argued
that Appellee Y2 substantively engages in the above act jointly with Appellee Y1,
thereby demanding against Appellee, et al., pursuant to Article 100, paragraphs (1)and (2) of the Patent Act, for an injunction against the distribution of Defendant'sFiles to the user terminals existing in Japan, and for deletion of the programs for
Defendant's Servers, and for removal of Defendant's Servers, as well as for joint
payment of a sum of 10,000,000 yen along with delay charges as part of compensationon the ground of joint tort of patent infringement.
In the prior instance, the court dismissed Appellant's claims entirely bydetermining as follows: Defendant's Systems satisfy all constituent features of theinvention claimed by the Patent, and belong to the technical scope thereof; however,from the perspective of territorial principle, the court's interpretation is that in orderfor the "production" according to Article 2, paragraph (3), item (i) of the Patent Act to1

be applicable, a product which satisfies all constituent features of the patented
invention must be newly created in Japan; meanwhile, Defendant's Servers, which areconstituent features of Defendant's Systems, all exist in the United States, and it is
impossible for only the user terminals existing in Japan to satisfy all constituent
features of the invention claimed by the Patent; as such, it cannot be acknowledgedthat Appellee, et al. "produced" Defendant's Systems in Japan; in addition, it cannot
be acknowledged that Appellee Y2 was engaging in work related to Defendant'sServices; accordingly, the court cannot acknowledge that infringement of Patent Rightby Appellee, et al. took place.
Appellant, who was dissatisfied with the judgment of the prior instance, file d the
Appeal, in which Appellant enlarged its claims this time by changing the part thatconcerns compensation and seeking a sum of 1,000,000,000 yen along with delay
charges.
The main point of dispute in the present case is whether or not it can be said thatthe act performed by Appellee Y1 when Defendant's Systems were newly created falls
under "production" (Article 2, paragraph (3), item (i) of the Patent Act) as an act ofworking the inventions of Claims 1 and 2 (Inventions) in the scope of claims for the
Patent and infringes on the Patent Right.
In the present case, in connection with the point of dispute above, opinions ofthird parties were solicited for the first time as a process that was newly adopted after
the revision of the Patent Act in 2021 to gather evidence (Article 105-2-11 of the
Patent Act) concerning the "production" as an act of working an invention of a system
whose server exists outside Japan, and many opinions were submitted as evidence.
2.

Outline of Judgment(1) In the judgment of the present case (Judgment), [1] concerning the claim madeagainst Appellee Y1, the court acknowledged that there was infringement of Patent
Right by Appellee Y1, and ordered an injunction against the distribution, in
Defendant's Service 1, from Appellee Y1's server to the user terminals existing inJapan (hereinafter referred to as "Domestic User Terminals"), of video files andcommentary files in a way that enables the comments, which appear in a video on adisplay device of a user terminal to be displayed in a certain manner, and also
partially approved the claim within the extent of ordering for payment of a sum of
11,015,517 yen along with delay charges in compensation on the ground of tort, anddismissed the rest of the claim, and [2] concerning the claim made against Appellee
Y2, the court dismissed it entirely.
(2) In the Judgment, the court ruled that the act by Appellee Y1 in Defendant's
2Services falls under "production" (Article 2, paragraph (3), item (i) of the Patent Act)as an act of working the Inventions and thus the above act infringes on the Patent
Right.
Of the above, the determination as to whether or not the act by Appellee Y1 in the
FLASH version of Defendant's Service 1 falls under "production" as an act ofworking the Invention 1 is summarized below.
In the Judgment, the court ruled likewise for the "production" of systems in other
Defendant's Services pertaining to Invention 1, and also for the "production" ofsystems in Defendant's Services pertaining to Invention 2.
A. Meaning of "production" in network-type system
Invention 1 is an invention of a comment delivery system which is equipped withmultiple terminal devices connected to a server via network, and the invention type isa product invention.

The court's interpretation is that "production" of a product as anact of working the invention (Article 2, paragraph (3), item (i) of the Patent Act)refers to an act of newly creating a product which belongs to the technical scope of an
invention.
The court's interpretation is that "production" in an invention of a system(network-type system) which connects a server and terminals via the Internet or someother network, as in the case of Invention 1, and which performs a unified function asa whole, refers to an act wherein multiple elements, which singularly do not satisfy allof the constituent features of the invention, are organically related to one another via
network connection to possess a function that satisfies all of the constituent featuresof said invention as a whole, thereby newly creating said system.
B. "Act of newly creating" the system (Defendant's System 1) pertaining toDefendant's Service 1
In the FLASH version of Defendant's Service 1, when a user specifies a webpage
in Defendant's Service 1 in order to display a desired video on the browser of a user
terminal in Japan, the web server of Appellee Y1 sends the HTML file and SWF fileof the above webpage to the user terminal, and the files received by the user terminal
are stored in the cache of the browser, and later, when the user presses a play button
in said video on a webpage displayed on the browser on the user terminal, the browser
sends a request to the video delivery server and comment delivery server of Appellee
Y1 pursuant to the order stored in the above SWF file, and each of the above servers,
by following said request, respectively sends a video file and comment file to the user
terminal, and the user terminal which receives the above files will be able to overlay
comments on the video on the browser.

In this manner, at the point in time when a3user terminal receives the above files, Appellee Y1's above servers and the user
terminal are connected via network using the Internet, so that it becomes possible tooverlay comments on the video on the browser of the user terminal.

As such, it canbe said that Defendant's System 1, which is equipped with a function which satisfies
all of constituent features of Invention 1, is newly created as of the point in time when
the user terminal receives the above files (the above act of newly creating Defendant'sSystem 1 is hereinafter referred to as "Production 1-1").
C. Applicability of "act of newly creating" Defendant's System 1 (Production 1-1)
to "production" as prescribed in Article 2, paragraph (3), item (i) of the Patent Act(A) The territorial principle in relation to patent rights means that the patent rightof each country is prescribed by the law of such country in regard to the establishment,
transfer, and effect, etc. of the patent right, and that the patent right is protected onlyin the territory of the country concerned.

The court's interpretation is that the above

principle also applies to the Patent Act of Japan.
In regard to Production 1-1, the files are sent from a server existing in the UnitedStates to user terminals in Japan, so that the receipt of the files by user terminals takes
place across the United States and Japan.

Also, Defendant's System 1, which is

newly created, exists across the United States and Japan.

As such, whether or not

Production 1-1 falls under "production" according to Article 2, paragraph (3), item (i)of the Patent Act of Japan from the perspective of territorial principle is at issue.
(B) Today, in a network-type system, it is often commonly performed that theserver is installed in a location overseas (outside Japan).

The location of the server

does not cause obstruction to the use of a network-type system.

As such, even if aserver constituting a network-type system, which is the allegedly infringing property,
exists outside Japan, if the terminals constituting said system exist domestically (inJapan), it is possible to use the terminal to work the invention in Japan, and such use
would affect the economic interests which can be obtained by a patent holder fromworking the invention in Japan.
In that case, the interpretation concerning an invention of a network-type system
to the effect that the invention of a network-type system uniformly does not fall under"working" according to Article 2, paragraph (3) of the Patent Act in Japan, in strict
compliance with the territorial principle and based on the reason that the server,which is a part of the elements constituting said system, exists outside Japan, allows
for a situation wherein patent workaround becomes easily possible merely by
installing a server outside Japan, thereby causing the protection to be given over thepatent right pertaining to the invention of said system to be insufficient .
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Accordingly, such interpretation is not justified.
On the other hand, the interpretation that the "working" according to Article 2,paragraph (3) of the Patent Act is uniformly applicable based on the reason that theterminal, which is a part of the elements constituting said system, exists in Japan , is toprovide excessive protection over the patent right and may create a situation which
obstructs economic activities, so that such interpretation is not justified, either.
When the above circumstances are taken into consideration, it is reasonable tointerpret, concerning whether or not the act of newly creating a network-type systemfalls under "production" as prescribed in Article 2, paragraph (3), item (i) of the
Patent Act from the perspective of appropriately protecting the patent right pertaining
to the invention of a network-type system, that even in the case wherein the server,which is a part of the elements constituting said system, exists outside Japan, if said
act can be considered as having been performed in the territory of Japan, then said act
falls under "production" as prescribed in Article 2, paragraph (3), item (i) of the
Patent Act, by comprehensively taking into consideration factors such as the specificmanner of said act, the function and role played by the elements, which exist in J apan,
from among the elements constituting said system, and the place where the effect ofsaid invention can be obtained from the use of said system, and the effect of such use
to the economic interests of the patent holder of the invention.
When the above is considered with regard to Production 1-1, the specific mannerin which Production 1-1 takes place is such that the files are sent by a server existingin the United States to the user terminals in Japan, and the user terminals in Japan
receive said files.

As such, the transmission and receipt are performed as a package,and considering that Defendant's System 1 is completed when the user terminals inJapan receive the files, it can lead to the conception that the above transmission andreceipt are performed in Japan.
Next, Defendant's System 1 consists of Appellee Y1's server existing in the UnitedStates and the user terminals existing in Japan, and the above user terminals existingin Japan perform the main functions of Invention 1, which are Constituent Feature 1F,or the function of a judgment part required for displaying the comments in a mannerthat does not overlap with each other, and Constituent Feature 1G, or the function of adisplay position control part.
Furthermore, Defendant's System 1 can be accessed from Japan via the above user
terminal, so that the effect of Invention 1, which is to use commentary incommunication to make the invention more entertaining, is manifested in Japan, andthe use in Japan may affect the economic interests which can be obtained by5

Appellant by using the system, which pertains to Invention 1, in Japan.
When the above circumstances are comprehensively taken into consideration,
Production 1-1 can be regarded as taking place in the territory of Japan, so that it isacknowledged that, in relation to Invention 1, Production 1-1 falls under "production"
as prescribed in Article 2, paragraph (3), item (i) of the Patent Act.
(C) In response, Appellee, et al. state as follows: [1] Given that a "patent shall beprotected only in the territory of the country concerned" according to the territorial
principal, it is a natural consequence that an act of creation outside Japan does not fallunder "production" according to Article 2, paragraph (3), item (i) of the Patent Act,and given that, according to the all-elements rule, working of a patented invention
means working all of the elements constituting the patented invention; if even a partof the patented invention is created outside Japan, then it should be sa id that such act
does not fall under "production" as stipulated in Article 2, paragraph (3), item (i) of
the Patent Act; [2] There is a leap of logic in thinking that, in light of the risk ofpatent workaround, "production" should be applicable if even a part of a productwhich satisfies constituent features is created in Japan, and rather, what is more
problematic is the interpretation that if a part of a product which satisfies constituent
features is created in Japan, then such product shall immediately be protected by the
Patent Act of Japan; [3] In Japan, precedents such as a Supreme Court judgment on"Card Reader Case" (Supreme Court Judgment 2000 (Ju) No. 580 rendered by First
Petty Bench on September 26, 2002 / Minshu Vol. 56, No. 7, page 1551) have strictly
conformed to the territorial principle, and making an exception would clearly cause
adverse effect, and even if a case of exception to the territorial principle were to be
made, such exception should be made by a legislative process.
However, in regard to the argument of [1], concerning the invention of a network type system, whether or not the act of newly creating a system, which is an allegedly
infringing property, falls under "production" according to Article 2, paragraph (3),item (i) of the Patent Act should be interpreted as falling under "production"according to the same provision if said act can be regarded as having been performedin the territory of Japan, by comprehensively taking into consideration thecircumstances explained above (B), even if the server, which is a part of the elements
constituting said system, exists outside Japan.

As such, the argument of [1] cannot

be accepted.
In regard to the argument of [2], the aforementioned determination as to theapplicability of "production" according to Article 2, paragraph (3), item (i) of the
Patent Act does not mean that if a part of a product which satisfies the constituent
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features is created in Japan, then such product shall immediately be protected by the
Patent Act of Japan.

As such, the argument of [2] is lacking in its premise.

In regard to the argument of [3], the territorial principle for a patent right meansthat the patent right of each country is prescribed by the law of such country
concerning the establishment, transfer, and effect, etc. of the patent right, and that thepatent right is protected only in the territory of the country concerned.

In light of theforegoing, the interpretation to the effect that said act falls under "production"according to Article 2, paragraph (3), item (i) of the Patent Act when the act isregarded as having been done only in the territory of Japan as described above is notagainst the territorial principle.

In addition, the court's interpretation of the Supreme

Court judgment on the Card Reader Case, as mentioned by Appellee, et al., is that, inorder to fall under "production" as a natural consequence of the territorial rule, theSupreme Court's ruling does not require the act of newly creating a product which
satisfies all constituent features of the patented invention to have been completed in
the territory of Japan.

Furthermore, according to the treaties concluded by Japan,

and the Patent Act and other laws and regulations, the territorial principle does not
require that the act of newly creating a product which satisfies all constituent featuresof a patented invention be completed in the territory of Japan in order to fall under"production".

In light of the foregoing, the argument of [3] cannot be accepted.

Accordingly, the above claims by Appellee, et al. have no grounds.
D. Agent of "production" of Defendant's System 1
Defendant's System 1 was newly created after going through the process of theabove B.

Appellee Y1 installs and manages the web server, video delivery server,and comment delivery server pertaining to Defendant's System 1, and these servers
send HTML files, SWF files, video files, and comment files to user terminals, and thereceipt of these files by user terminals requires no separate operation by the user side
but is performed automatically pursuant to the description of the program uploaded byAppellee Y1 on the server.

In light of these circumstances, it should be said that theagent of "production" of Defendant's System 1 is Appellee Y1.
E. Conclusion
Based on the above, the court acknowledges that Appellee Y1, by Production 1 -1,
infringed on Patent Right by "producing" (Article 2, paragraph (3), item (i) of the
Patent Act) Defendant's System 1.

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